1 TABLE OF CONTENTS

CHAPTER 8 ECONOMIC AND EMPLOYMENT IMPACTS ......... ..................................... 2
8.7 Climate Benefits ..............................

................................................... ..................................... 2
8.7.1 Climate Science and Climate Benefits ........

................................................... ..................... 2
8.7.2 Monetized Climate Benefits ..................

................................................... ......................... 27 8.8 Health and Air Quality Co-Benefits ............

................................................... ..................... 86 8.9 Reliable affordable electricity ...............

................................................... .......................... 132 8.9.1 Changes in operational capacity .............

................................................... ..................... 297
8.9.2 Reduction in excess reserves ................

................................................... ........................ 297 8.9.3 Changes in retirements ......................

................................................... ........................... 305 8.9.4 Changes in new capacity additions ...........

................................................... ................... 305
8.9.5 Reserve transfers ...........................

................................................... ................................ 308
8.9.6 Alternative case ............................

................................................... ................................. 308
8.9.7 Other .......................................

................................................... ....................................... 308
8.10 Other ........................................

................................................... ....................................... 3162 CHAPTER 8 ECONOMIC AND EMPLOYMENT IMPACTS

Part 2 - Sections 8.7 Through 8.10

8.7 CLIMATE BENEFITS

8.7.1 Climate Science and Climate Benefits

Comment 1: Several commenters expressed concern about ways in which climate change could lead to increased exposure to various pollutants. C ommenters discussed several major avenues in which this could occur, citing several peer-reviewe d studies. First, that climate-change induced damage to vegetation and biological soil crusts in Utah and Nevada would lead to soil disturbances which would increase dust-borne transp ort of the carcinogen erionite, potentially aggravated by desertification due to increased dema nd for water from Las Vegas. Second, the commenters had similar concerns regarding the poten tial for dust-borne radionuclides from Nevada’s nuclear testing sites. Third, the commente rs expressed concerns regarding several avenues by which there would be increased release o f mercury into the environment: that mercury currently trapped in Arctic ice would be re leased as the ice melts, that increasing numbers and intensity of wildfire would aerosolize mercury that had been deposited there, and that dropping lake levels due to increased heat and drought in Utah would expose mercury contaminated lake beds to windstorms. Fourth, the c ommenters expressed concern that desertification of the Great Basin due to heat, dro ught, and land use mismanagement would lead to creation of dust-bowl conditions, and noted that PM10 from dust has been associated with increased death rates from cardiac, respiratory, an d cerebrovascular causes. Fifth, the commenters expressed concern that hotter temperatur es and dust storms would provide conditions that would be advantageous for the sprea d of fungal spores, SARS, meningitis, influenza, and foot and mouth disease. Finally, the commenters stated that ecosystem collapse due to climate change could lead to future pandemic s of infectious diseases. Commenters stated that due to higher temperatures and more stagnant a ir masses, and given constant emissions, that climate change will lead to higher ozone concentrat ions in urban areas. The commenters noted

that increased ozone concentrations will lead to re duced air quality and public health issues related to pediatric respiratory health and some ma jor diseases.

In contrast, commenters stated that ozone levels ha ve declined dramatically in the last few decades because the ozone-precursor emissions have declined. The commenters said that ozone formation is becoming less and less sensitive to te mperature because there are fewer exceedances per hot day in recent years than there were in prev ious decades. The commenters said that ozone levels will continue declining regardless of climat e warming because EPA will eliminate most ozone-precursor emissions in the upcoming decades. The commenters stated that the studies that EPA is using to predict future ozone levels use unr ealistically high emissions of ozone precursors, which lead to an overestimate of future ozone levels and therefore the effects of3

climate warming on ozone. The commenters said that climate warming will have substantially

less effect on future ozone levels than what EPA cl aims.

Response 1: The EPA recognizes that there are a number of mecha nisms by which climate change can increase exposure to various kinds of po llutants. The scientific literature supports EPA’s conclusion that climate change will lead to i ncreased exposure to tropospheric ozone levels that will negatively impact human health, du e to increased temperatures and more frequent stagnant air conditions, among other factors. The n et impact of climate change on particulate matter is less clear, although a climate change dri ven increase in wildfires would lead to an increase in particulate emissions in areas impacted by such fires. The various effects of climate change on dust-related health impacts like the ones summarized by the commenters are active areas of research. As stated, in section II.A of th e preamble, the NCA3 indicates that human health in the United States will also be impacted b y "increased extreme weather events, wildfire, decreased air quality, threats to mental health, an d illnesses transmitted by food, water, and disease-carriers such as mosquitoes and ticks."

Commenters noted that ozone levels have declined hi storically and will continue to decline due to reductions in ozone precursor emissions. The EPA is aware of the decline in ozone concentrations due to the agency’s air quality regu lations. Regarding the historical and possible future decline in ozone concentrations, the EPA sta ted in the 2009 GHG Endangerment Finding that climate change is expected to increase ozone p ollutions "relative to air quality levels without climate change", not necessarily the absolute ozone levels. As noted in the 2009 GHG Endangerment Finding, the existence of a National A mbient Air Quality Standard (NAAQS) to prevent exceedances of ozone concentration threshol ds does not preclude the possibility of public health endangerment due to climate change (s ee the 2009 Endangerment Finding, p 66530, where it is noted that the effects of climat e on ozone are relevant to public health despite the existence of the NAAQS for several reasons: tha t the NAAQS takes effect only after exceedances are detected, that despite the NAAQS, t here are some regions where ozone exceedances still occur, and that even in regions i n attainment an increase in ozone may increase the risk to some individuals).

Comment 2: Commenters discussed the science of climate change , noting that CO2 has increased from 280 to 400 ppm, the highest in 800,0 00 years, and that methane concentrations are 2.5 times their concentration in the last 800,0 00 years. The commenters stated that it is clear that these increases are due to human activities, a nd that the elevated concentrations will lead to a warming of the planet.

Response 2: The EPA agrees and refers to the IPCC AR5, the NCA , and more scientific

assessments that conclude that CO2 and CH4 concentr ations are likely higher than they have been in at least 800,000 years, that these elevated concentrations are unambiguously due to human activities, and that these elevated concentra tions are leading to global warming and climate change. These conclusions are based on crit ical examination of the relevant assessment literature that was subject to rigorous and exactin g peer review by the expert community.4

Comment 3: A number of commenters argued that the proposal wi ll have minimal impact on climate change, or that EPA has not demonstrated th at there is a connection between the proposal and any particular impact. Several supporting argum ents are made.

One assertion is that the rule covers only a portio n of the power generation sector in a single country, and that therefore emission reductions mus t represent less than 5 percent of global GHG emissions. Comparing a reduction in CO2 of 555 mill ion tons (based on Option 1 State Compliance Approach. RIA at 3-20, Tbl. 3-5) to glob al anthropogenic emissions of GHGs estimated at 49 gigatons per year according to the IPCC AR5, the commenters argued that a reduction of 1 to 2 percent is not sufficient to si gnificantly impact climate change, and that the

rule should therefore be discarded. Commenters note d that the proposal does not directly reduce emissions in India or China, and discuss the rapid rate of growth of emissions in those nations.

Several commenters referenced an analysis of the pr oposal that used the MAGICC model and found that the temperature benefits of the rule in 2100 would be about 0.02 degrees C. The commenters stated that this magnitude of temperatur e change is undetectable and therefore inconsequential. Commenters stated the benefit woul d have been even smaller if they had used the climate sensitivity that the commenters preferr ed. Some commenters objected that the agency has not presented its own calculations of global te mperature change resulting from the rule and requested more detail.

Several commenters asserted global temperature redu ction will be negligible because the sensitivity of the climate to increased CO2 concent rations is small. Commenters cited recent papers and other sources to assert that the best es timate of transient climate sensitivity is 1.33 degrees C compared to 1.8 degrees C or higher in mo st climate models, and that the best estimate of equilibrium climate sensitivity is close to 2 de grees C, 40 percent lower than the climate

assessment best estimate. Commenters calculated the ir own value for equilibrium climate sensitivity, and finds that the equilibrium climate sensitivity for greenhouse gases should be 2.9 degrees C, but for CO2 should be only 1.8 degrees C

.

Commenters stated that future climate change will b e much smaller than projected, arguing that historical climate change projections from CEQ and Dr. Hansen have proved to be exaggerated and therefore the current projections are also like ly to be exaggerated. The commenters also argued that reduced solar activity may be leading t o a cooling trend, that solar impacts are underestimated, and that the medieval warm period w as warmer than today. Commenters

referenced Dr. Koonin who states that GHG emissions can affect the climate by only 1-2 percent, and therefore there is a high standard of proof to show that GHG reductions can have an impact.

Some commenters recognized that there will be an ef fect on climate change, but argued that the impact will be small compared to the costs of imple mentation.

Response 3: The Clean Power Plan will result in the largest red uctions of carbon dioxide emissions from a single regulatory action in U.S. h istory. However, EPA has been clear that, as stated in the 2009 GHG Endangerment Finding under S ection 202 of the CAA, "the global nature of the air pollution problem and the breadth of countries and sources emitting greenhouse gases means that no single country and no single so urce category dominate or are even close to dominating on a global scale." EGUs are the largest contributors of CO2 in the US, and the5

reductions achieved in this rule are an unprecedent ed and necessary first step towards slowing the rate of climate change.

A number of commenters also specifically suggested that the EPA was overestimating the climate sensitivity and that EPA is relying on exag gerated projections of future climate change.

The EPA relies on the best available science and do es not create its own estimate of climate sensitivity. Specifically for climate sensitivity, the EPA relies on the major assessment reports, including the recent IPCC 5th Assessment Report. Th ese assessment reports consider the entire literature in context, rather than a selection of a small number of individual studies. The likely range for the climate system response to a doubling of carbon dioxide concentrations (i.e., the climate sensitivity) described by the IPCC AR5 asse ssment of 1.5 to 4.5 degrees represents a sound interpretation of the literature, and EPA has determined is the appropriate range on which to base EPA’s decisions. Estimating climate sensiti vity is an area of ongoing research. Many of the studies cited by commenters are based on a meth od of using simple models and recent observed temperatures. It is important to also give appropriate weight to other methodologies, such as paleoclimate and theoretical approaches, as was in the IPCC assessment process. Many of the studies cited by the commenters were also co nsidered by the IPCC, and a number of

authors of the cited studies were also IPCC authors . Therefore, EPA finds the IPCC process appropriately accounted for the full spectrum of th e literature that relates to climate sensitivity estimation. The IPCC range does include the possibi lity that climate sensitivity is below 3 degrees C, but also acknowledges the possibility th at the climate sensitivity is higher than 3 degrees C. EPA previously responded to a number of similar comments in 2009, in Section 4.3 of the EPA’s Response to Comments on the 2009 Endan germent Finding. At that time, EPA also explained how the approach of the major assessments to determine the Earth’s climate sensitivity was sound, and considered the entire body of scienc e in context, rather than relying on individual studies that were often sensitive to a choice of sp ecific temperature dataset or single methodology. This approach has since been upheld by the Courts.

Some commenters criticized EPA for not quantifying the temperature impacts of the rule referenced a temperature analysis using the MAGICC model. While the MAGICC model is a reasonable tool to use to provide estimations of th e temperature impacts of mitigation scenarios, the analysis referenced by the commenters made seve ral assumptions regarding model inputs that results in lower benefits of mitigation compared to other reasonable assumptions. For example, the 0.02 degree number cited by most commenters is based on an emissions scenario where the U.S., in the absence of any climate policy, peaks i n CO2 emissions in 2010 and then declines. Assuming that the U.S. will reduce emissions in the absence of climate policy leads to a future in

which the emission reductions needed to meet the Cl ean Power plan target are smaller than they

would otherwise be. This makes the benefits of an e missions target appear smaller than they would be compared to a future where emissions conti nue to grow. While the EPA did not analyze the temperature benefits directly, the Soci al Cost of Carbon was used to determine the monetized benefits of the rule for reducing the rat e of climate change.

Therefore, EPA has considered these comments, and f inds that they do not provide credible evidence of flaws in the EPA’s approach of relying upon the best estimates of the major peer reviewed climate change assessments, or that the as sessments did not take into account the new literature, nor do the comments demonstrate that th e impacts of the regulation will be negligible.6

Comment 4: Several commenters argue that observed warming in the troposphere is lower than projected by climate models, and that therefore the proposal should be discarded.

Commenters stated that lower and middle troposphere warming trends over the time period 1958-2012 are indistinguishable from zero, and that the inconsistency with model trends is statistically significant. Including a correction t erm the commenters asserted that models are rejected at smaller significance levels. The commen ters also quoted a published review paper that states that a lack of tropospheric warming wou ld have fundamental implications for understanding of the climate system. Commenters als o cited the 1958-2012 tropospheric data, arguing that the only warming in the record was due to a step-change in the late 1970s due to the Pacific Climate Shift, which means that the histori cal CO2 influence was small and therefore future CO2 influence would also likely be small.

Commenters also critiqued a Santer et al (2008) pap er which they claimed was the science basis

of the EPA’s RIA. The commenters stated that Santer et al claims agreement/consistency between observed tropospheric temperature trends an d trend values derived from IPCC greenhouse models which they believe is inadequate. Commenters provided 3 critiques of Figure 7 of the Santer paper: that two of the observations fall outside the model range, that the 7

observational trends differ from each other and tha t 5 of the datasets might be flawed, and that if the modeled trends were adjusted to be consistent, the observed surface trend that any agreement with observations would disappear and that the widt h of the model uncertainty band is due more to model chaotic variability than to model differen ces.

Commenters plotted the results of all 102 RCP4.5 IP CC AR5 climate model runs available as of August 2014 for a layer of the tropical atmosphere, where according to the commenters, climate impacts should be the largest. The commenters then anchored the linear trends for 1979-2014 (observations through October 2014) for all models and for observations to the year 1979. The

commenters noted that the results demonstrate that the models do not yet have the ability to discern why a climate variation may have occurred s imply because they cannot even reproduce

what has occurred. The commenters claimed that this makes the models inadmissible according

to the Daubert Standard. The commenters claimed tha t therefore the proposal should be

withdrawn.

Commenters stated that the tropospheric temperature trends were irrefutable and invalidated the global surface temperature measurements, and theref ore disprove the contention that CO2 causes atmospheric temperatures to rise.

Response 4: The EPA has previously responded to arguments that observed temperature trends in the tropical troposphere differ too much from mo deled trends: Volume 1.2.1 of the Denial of the Petitions to Reconsider the Endangerment and Ca use or Contribute Findings (http://www.epa.gov/climatechange/endangerment/peti tions.html) and Response 3-7 in Volume 3 of the Response to Comments in the 2009 GHG Endan germent Finding (http://www.epa.gov/climatechange/endangerment/comm ents/volume3.html) both address these issues. In previous responses, EPA cited Karl et al . (2009) which stated that when uncertainties in models and observations are properly accounted f or, newer observational data sets are in7

agreement with climate model results. Commenters on this proposal restate points which were previously addressed, and for which the previous re sponses still hold.

The most recent discussion of this issue in the ass essment literature can be found in Chapter 9.4.1.4.2 of the IPCC Fifth Assessment Report (AR5) . The AR5 does find that most climate models show a larger warming in the tropical tropos phere than is found in the observational datasets, with some of the difference explained by models showing faster sea surface temperature warming than has been observed in that region. Howe ver, the IPCC AR5 also noted that appropriate treatment of uncertainty in the observa tional and model datasets leads to more agreement than was observed in some previous studie s. The IPCC also cautions that there is low confidence in the observed trends, and indeed, seve ral more recent studies have been published indicating that trends in the region may have been underestimated (Sherwood and Nisant, ERL, 2015, doi:10.1088/1748-9326/10/5/054007 and Po-Ched ley et al., Journal of Climate, 2015, DOI: 10.1175/JCLI-D-13-00767.1). Generally, model-o bservation agreement will be best for large regions and long time periods, because for sm all regions, natural variability and fewer

observations make trends more difficult to observe.

The EPA did not rely on a single paper (e.g., Sante r et al. 2008), nor do some differences between models and observations in a small region d isprove all results from all climate models. The IPCC finds that "[c]limate and Earth System mod els are based on physical principles, and they reproduce many important aspects of observed c limate. Both aspects contribute to our confidence in the models’ suitability for their app lication in detection and attribution studies and for quantitative future predictions and projections ." Therefore, EPA has considered these comments and determined that they do not provide cr edible evidence of flaws in the conclusions of the scientific assessment reports upon which EPA relies.

Comment 5: Several commenters stated that a lack of warming fo r the past 17-26 years despite rising CO2 levels indicated that there was no need to regulate CO2. Commenters further argued

that there has been no observed increase in the rat e of sea level rise, but that subsidence can give the appearance of sea level rise. Commenters cited 7 articles that conclude that any sea level rise has been overstated and is not linked to warming an d will not pose a threat. The commenters also noted a lack of warming below 1.24 miles in the oce ans, and also cited a study that shows that natural swing in temperature can explain temperatur e change in the Northeast Pacific from 1900

to 2012.

Response 5: Commenters provided a limited characterization of t he available scientific evidence. For example, commenters discussed a recen t 17 or 26 year pause in the rate of global surface temperature rise, but mischaracterize or do not consider a number of important factors that put this "pause" in context within observed, l ong term climatological trends. The first factor is that this is not actually a pause but rather a r eduction in the rate of surface temperature rise.

The second is that observations of the slower rate during this pause depends on which dataset is chosen, but, according to the IPCC, all global surf ace temperature datasets do exhibit a warming trend over the period 1998-2012. The third is that this reduction in rate is mostly evident only in atmospheric temperatures, and that ocean heat conte nt and sea level rise (which can be a proxy for ocean heat content) both continue to increase r apidly. Other measures of climate change, such8

as Arctic sea ice retreat, glacial melt, and reduct ions in snow cover similarly show no pause or even demonstrate an acceleration during this time p eriod. A final important factor is that trends based on short time periods such as one or two deca des often do not adequately reflect larger scale factors that are considered when evaluating l ong-term global change and climate-related

trends.

Regarding arguments that sea level rise is overstat ed, the IPCC found that recent rates of sea level rise have been at the upper end of the model projections (see Figure 13.7 in Chapter 13 of Working Group I of the IPCC Fifth Assessment AR5 Re port), and that recent rates of sea level rise have been higher than the rates over the past century. EPA has examined the papers submitted by the commenters, and found that some of the papers only concern small regions, and therefore are not evidence against global sea level rise, but that the other papers have all been considered by the IPCC in reaching its conclusions. For example, groundwater loss is a part of the IPCC sea level rise budget. Claims that some pa rt of the deep ocean has not warmed, or that some portion of temperature changes in one ocean re gion are related to natural variability are subject to argument. However, even if these claims were true, they do not contradict the conclusion that the oceans as a whole are warming d ue to the energy imbalance from elevated greenhouse gas concentrations.

The EPA has considered these comments, and finds th at the assessment literature has adequately explained variations in the rate of surface warming in the past few decades, has accurately portrayed the rate of sea level rise and related in creases in ocean heat content, and that the comments do not provide credible evidence of flaws in the assessment literature.

Comment 6: Several commenters argued that the climate is too c omplex for computer models or EPA to be able to predict the impact of greenhouse gas mitigation. Commenters argued that the complexity of the ocean system and the paucity of d ata older than a few decades (citing Dr. Koonin) imply that there is little understanding of the oceans, and that because the importance of the oceans in holding heat and influencing the atmo sphere, that therefore there is little understanding of the climate. The commenters also a rgued that natural feedback mechanisms like clouds and water vapor are too complex to mode l, because they can only be understood through observations not deductions from the laws o f chemistry and physics, and because key aspects occur at smaller resolutions than models ca n achieve.

Commenters argued that if IPCC models cannot hindca st yesterday accurately despite all the available data, how can they be expected to forecas t the future? Commenters also discussed discrepancies between hindcasts and observations, c iting precipitation in the tropics and subtropics, monsoons, and rainfall over China as ex amples of poor model performance. The commenters argued that the flaws in the models make them unfit for supporting decision making.

Response 6: The issues raised here are very similar to those pr eviously raised and addressed in detail by the Agency. Issues regarding climate mod els were responded to in Volume 1.2.3 of the

2010 Denial of the Petitions to Reconsider the Enda ngerment and Cause or Contribute Findings for Greenhouse Gases Under section 202(a) of the Cl ean Air Act as well as Volume 4.1 of the 2009 Response to Comments for the EPA Endangerment Finding. As stated in both the Denial of9

the Petitions (http://www.epa.gov/climatechange/end angerment/#petitions) and the Response to Comments (http://www.epa.gov/climatechange/endanger ment/#comments):

With respect to the issues commenters raised concer ning flaws in the models used for projections and attribution studies, it is well recognized that models are representations of complex systems and may not be able to perfectly represent all inte ractions in the system being modeled. For example, clouds are too difficult to model computat ionally because the physics involved in cloud

formation occurs at scales smaller than the resolut ion of most climate models. Although modelbased results are subject to some degree of inheren t uncertainty, as reflected in the assessment literature and in the TSD, these uncertainties are acknowledged; uncertainties do not mean that the models are fatally flawed or unreliable represe ntations of the climate system. Climate models have been demonstrated to successfully simulate a n umber of climatic properties, as documented in the IPCC, CCSP, NRC, and USGCRP reports on which the TSD primarily relies.

The Responses further quoted the IPCC, CCSP, and US GCRP reports to support this description. The most recent IPCC report evaluated climate model s in Chapter 9 of Working Group I, finding that "Climate and Earth System models are based on physical principles, and they reproduce many important aspects of observed climate. Both as pects contribute to our confidence in the models’ suitability for their application in detect ion and attribution studies and for quantitative future predictions and projections."

Therefore, the EPA has considered these comments, a nd finds that despite the complexity of the climate system and some differences between models and observations (which are well characterized in the scientific literature), models remain a useful tool for understanding the climate system. The understanding of the climate sy stem that arises from climate modeling supplements theory and evidence from historical obs ervations to support EPA’s continued reliance on the results of the major scientific ass essments which look across many models and address issues pertaining to uncertainty and the ch aracterization of the degree of certainty.

Comment 7: Several commenters expressed concern that the rule could lead to increased emissions of methane by encouraging increased use o f natural gas. These commenters were concerned that the methane impacts were being under estimated because the climate impacts of methane are greater than those accounted for by the EPA.

Commenters claiming that EPA is underestimating the impacts of methane focused on the use of a 100-year GWP of 25, stating this is based on an o utdated IPCC assessment. Some claim that EPA should be using the 100-yr GWP of 36 in IPCC's AR5, released in 2013, since it includes methodological improvements in the GWP calculation by accounting for carbon cycle feedbacks. Others expressed concern over the use of 100-year t imescale rather than the 20-year timescale, arguing that the next 20 years are critical to clim ate change, that key decadal impacts of shortlived climate forcers are lost when considering imp acts on a 100-year timescale, or that the

timescale used should be on the same timescale as t he rule implementation timescale (e.g., by 2030). Commenters noted that over 20 years, methane emissions are estimated to be 87 times more disruptive to the climate than carbon emission s. Commenters also noted that "[a]t the 20- year timescale, total global emissions of methane a re equivalent to over 80% of global carbon10

dioxide emissions. Several commenters cited a 2011 Cornell (Howarth, et al.) study that concludes that "[a] complete consideration of all e missions from using natural gas seems likely to make natural gas far less attractive than other fossil fuels in terms of the consequences for global warming", this study used a 20 year GWP of 1 05. Commenters added that another 2014 Howarth report concluded that "both shale gas and c onventional natural gas have a larger GHG footprint than do coal or oil, for any possible use of natural gas." Some commenters cited studies that show that GWPs are inconsistent with temperatu re targets.

Some commenters complimented EPA on updating the me thane GWP from the IPCC Second Assessment Report to the AR4 value, but still argue d that EPA should update to AR5 as well as present 20 year GWPs besides the 100 year GWPs. Com menters asserted that consistency with international reporting requirements under the UN F ramework Convention on Climate Change (UNFCC) to employ 100-year AR4 GWPs should not gove rn substantive, domestic rulemakings because they state that using values known to be in accurate is arbitrary and capricious.

Response 7: See the RIA, Chapter 3 and Appendix 3A, and Respon se to Comments section 8.2

for details about EPA’s estimates of methane emissi ons from natural gas systems. Here, we address the appropriate metric with which to compar e methane to carbon dioxide and other greenhouse gases. EPA believes that the rationale f or using a GWP of 25 for methane is valid, and thus that methane emissions are appropriately c haracterized.

EPA has chosen to use the IPCC Fourth Assessment Re port (AR4) 100-year GWP value of 25 for calculating methane inventories. This is consis tent with international reporting standards. More recent 100-year GWP values of 28-36 have been reported in the IPCC 5th Assessment Report (AR5). While there is no single optimal metr ic (see discussions in Chapter 2 of the IPCC AR5), the EPA considers the 100-year GWP a reasonab le measure of the relative importance of different greenhouse gases. Regarding the use of 20 -year GWPs or other short timeframes, the EPA disagrees that these are superior metrics to th e 100 year GWP, although they do provide additional perspectives. The 20-year GWP assigns no value to any forcing reductions more than 20 years in the future, whereas the 100-year GWP co nsiders both near-term and long-term impacts. Given that climate change is both a near-t erm and a long-term threat, a metric that captures both time periods is more appropriate than one that only acknowledges near-term impacts. The EPA also disagrees with commenters who advocate for discarding GWPs because GWPs are not designed for meeting any given tempera ture target. Metrics that are optimally designed for achieving a given temperature target a re an interesting academic problem, but are often not practical as they assume single global po licy structures with universal adoption, and their theoretical advantages are not clear.

Comment 8: Commenters believed the EPA is ignoring the benefi ts of increased atmospheric CO2. Commenters note that greenhouses keep CO2 leve ls at 2,000 ppm to enhance plant growth.

Commenters stated that increased CO2 levels have an d will continue to increase growth rates of crops and claims that greenhouse CO2 fertilization experiments have proven that crop yields increase under higher CO2 concentrations, when grow n under well-watered conditions with adequate nutrients and light. Commenters further st ated that previously unsuitable areas may become available for agriculture as a result of war mer temperatures, reduced incidence of frosts,11

and longer growing seasons, which would offset decl ines elsewhere. The commenters also noted that increased atmospheric CO2 would offset negativ e effects, even if precipitation decreased because of improved water usage by plants. The comm enters further commented that many models do not properly represent the relationship b etween plant growth, CO2 fertilization, and warming. The commenters believed recent studies sho w that the CO2 fertilization effect and changes in plant water use help explain why models have been incorrect, with plant absorption of CO2 being much higher than expected. Commenters sta ted that if CO2 concentrations were too low, life would not be able to exist, and therefore the higher the concentration the safer life on this planet will be.

Response 8: The EPA has never disputed that CO2 is a required i ngredient for plant growth and survival, or that CO2 can stimulate plant growth. T his comment was put forth previously and responded to in the Response to Public Comments Doc ument of the Endangerment Finding. The 2009 Endangerment Finding Technical Support Documen t (TSD) summarizes the scientific assessment literature on the stimulatory, or fertil ization effect of CO2 on plant growth and productivity. For example, Section 3 states that CO 2, "can have a stimulatory or fertilization effect on plant growth" and "studies have demonstra ted increases in CO2 affects water use and water use efficiency in plants" (EPA 2009). Section 9 focuses specifically on U.S. agriculture and shows that for grain and oilseed crops, increas ed CO2 and temperature will likely speed plant growth in the near-term future (USDA CCSP 200 8). The Endangerment Finding also indicated that elevated CO2 can improve water use e fficiency, stating "... elevated CO2 causes partial stomatal closure, which decreases conductan ce, and reduces loss of water vapor from leaves to the atmosphere."

However, the EPA considers the stimulatory effects or beneficial influences of elevated CO 2 on plants alongside other climate change impacts. Many aspects of climate change can negatively affect plant growth and crop yields and can outweig h the benefits of CO 2 fertilization. For instance, the USCGRP found that high temperatures, extreme weather events (i.e., heavy downpours, droughts), enhanced pest and weed growth , and ozone exposure can significantly limit the benefits of the direct stimulatory CO 2 response on plant growth. The UGCRP also concluded that as temperature rises beyond a certai n threshold in the future, grain and oilseed crops will increasingly begin to experience failure , especially if climate variability increases and precipitation lessens or becomes more variable. The IPCC (2007) concluded that the global price of cereals may decrease with warming below 2 o C, but above this temperature, prices could increase by 30%. Further, USGCRP concludes that the marketable yield of many horticultural crops (e.g., tomatoes, onions, fruits) is very like ly to be more sensitive to climate change than grain and oilseed crops. With respect to increases in vegetation biomass, the 2009 Endangerment Finding reiterates the IPCC (2007) that for North A merica, "Although recent climate trends have increased vegetation growth, continuing increases i n disturbances are likely to limit carbon storage, facilitate invasive species, and disrupt e cosystem services." More recent assessments released by the IPCC (AR5) in 2013, and the USGCRP in 2014, reaffirm these findings. For instance, the IPCC states, "based on many studies c overing a wide range of regions and crops, negative impacts of climate change on crop yields h ave been more common than positive impacts". The USGCRP states that "By mid-century, w hen temperature increases are projected to

be between 1.8 o F and 5.4 o F and precipitation extremes are further intensifie d, yields of major U.S. crops and farm profits are expected to decline ."12

With regard to the treatment of CO 2 fertilization in climate modeling, the EPA continu es to rely on the best available science presented in the asse ssment literature. These assessment reports consider the entire literature in context, rather t han selecting a small number of individual studies, as the commenters have done. The IPCC (201 3) notes that CO 2 fertilization already "plays a dominant role in terrestrial biogeochemica l models to explain the global land carbon sink". The IPCC’s conclusions regarding climate imp acts therefore incorporate estimates of CO2 fertilization, including accounting for associated uncertainties.

EPA has considered the comments regarding the effec ts of elevated CO 2 concentrations on plants, and determined that they do not provide cre dible evidence of flaws in the EPA’s approach of relying upon the conclusions of the assessment l iterature which already take into account these effects. In particular, the commenters did not reco gnize that EPA had already considered the

effects of CO 2 fertilization when originally finding that greenho use gases endanger public health and welfare, and had responded to a number of relat ed comments. The commenters generally rely on individual studies or news articles present ing benefits of elevated CO 2 in the absence of any other climate changes and do not present a comp rehensive picture of impacts of CO 2 on the agricultural sector specifically. In contrast, EPA relies on the assessment literature, which demonstrates that the net impacts of elevated GHG c oncentrations on agriculture will likely be negative, when considering relevant factors such as temperature, precipitation, weather variability, and ground level ozone, and that in th e broader context of all climate impacts, it is even more clear that climate change represents a th reat to public health and welfare.

Comment 9: Commenters argued that CO2 is not a pollutant becau se current levels of 400 ppm are much lower than safe levels as defined by eithe r the concentration that humans can tolerate (10,000-15,000 ppm) or levels previously seen in Ea rth’s history (6000 ppm), and that EPA has not provided scientific evidence of direct health e ffects of CO2 in order to justify the proposal.

Response 9: In 2009, the EPA Administrator found that the curre nt and projected concentrations of the six key well-mixed greenhouse gases (GHGs), including carbon dioxide (CO 2 ) – the GHG emitted in largest quantity – threaten the public h ealth and welfare of current and future generations. The 2009 Endangerment Finding clearly states that, "Current ambient air

concentrations of CO 2 and other GHGs remain well below published exposur e thresholds for any direct adverse health effects, such as respiratory or toxic effects." However, climate change resulting from current, and future human-driven inc reases in CO 2 and other GHG emissions fuel a broad range of adverse effects that directly impa ct human health and welfare.

The EPA evaluated and considered scientific informa tion on observed and projected health impacts during the development of the 2009 Endanger ment Finding. The specific health effects of climate change have been described in the scient ific assessments that the Agency relied upon in making the Endangerment Finding. These include e ffects such as exposure to increased temperatures, extreme weather events, higher levels of ozone pollution, and changes in climatesensitive diseases. For more specific information r egarding EPA’s consideration of these health effects, see Volume 5 of the Response to Comments d ocument supporting the 2009 Endangerment Finding. More recent assessments, incl uding the 2014 USGCRP National Climate13

Assessment and the 2013 IPCC reaffirm the findings that human health is affected by climate change.

Regarding the comment stating that higher CO 2 concentration were present in Earth’s history, the EPA does not dispute that CO 2 concentrations have been higher in the distant pas t. However, the Endangerment Finding considers the impacts of clima te change on human health and welfare under current and projected future atmospheric CO 2 concentrations and finds them to be considerable, irrespective of past CO 2 concentrations. Additionally, as noted in the sect ion II.A of the preamble, current CO2 concentrations are alr eady higher than they have been in at least 800,000 years, and that without a reduction in emis sions, may reach levels not seen for 30 million years by the end of the century. Further, t he rate of change may be one of the largest in Earth’s history.

Comment 10: Many commenters described numerous climate change i mpacts that threaten the health and welfare of individuals, communities, the United States, and the world, ranging from changes in weather and extremes, to ecological shif ts and environmental degradation, to economic and cultural losses and social disruptions . Several commenters noted the negative health impacts of climate change, particularly from heat waves and worsened air quality but also increases in vectorborne disease, water quality con cerns, and food insecurity. Commenters listed impacts encompassing all sectors of the American ec onomy, including damages from natural disasters, erosion and coastal/wetland destruction, losses in agriculture and fishing yields and jobs, property damage and insurance losses, threats to our energy, transportation, wastewater, and water resource infrastructure, lost tourism, hu manitarian relief costs, increased healthcare and energy costs, and slower economic growth.

The majority of the commenters stated that these cl imate change impacts, many of which the United States and other countries have already begu n to feel, are a direct consequence of the increasing concentrations of greenhouse gases in th e atmosphere. Commenters also stated that

the authors of the USGCRP's Third National Climate Assessment note 'continued warming and increased understanding of the U.S. temperature rec ord, as well as multiple other sources of evidence, have strengthened our confidence in the c onclusions that the warming trend is clear and primarily the result of human activities.' Com menters stated that continued emission of greenhouse gases, primarily CO 2 , will cause further warming and long-lasting chang es in all components of the climate system, increasing the li kelihood of severe, pervasive and irreversible impacts for people and ecosystems. These commenters noted that failure to make deep reductions in carbon emissions will greatly increas e the risk of serious economic, health, and environmental consequences of climate change. For t hese reasons, many commenters urged EPA to act now and to strengthen carbon emission standa rds and implement the CPP. Some commenters noted that limiting climate change requi res substantial and sustained reductions in greenhouse gas emissions which, together with adapt ation, can limit climate change risks. Commenters claimed that the Clean Air Act requires binding limits on any pollutant that threatens human health and welfare, making it an ap propriate means by which to reduce greenhouse gases and avoid climate impacts on healt h and welfare. Some commenters stated power plants are the largest single source of CO 2 emissions in the US, representing about 40 percent of the total, and that reducing emissions f rom the electric power sector is crucial to tackle14

climate change. Several commenters asserted the pro posal represents a historic opportunity for the U.S. to take meaningful action to address globa l climate change while simultaneously advancing a modernized and more efficient electrici ty grid. Additionally, many commenters requested EPA to do even more and do it faster to m ove this nation along the transition away from fossil fuels to clean, renewable energy.

Response 10: The EPA has not changed its view as articulated in the 2009 Endangerment Finding that climate change will have a negative im pact on human health and welfare.

The EPA continues to rely on the best technical and scientific information, primarily based upon the recent, major assessments by the U.S. Global Ch ange Research Program (USGCRP), the Intergovernmental Panel on Climate Change (IPCC), a nd the National Research Council (NRC) of the National Academies. These assessment reports consider the entire peer-reviewed literature

in context to draw conclusions based on the entire body of findings from the literature.

Section II.A of the preamble summarizes many new as sessment reports published since the 2009 Endangerment Finding, including the recent USGCRP’s 2014 Third National Climate Assessment (NCA3), the IPCC’s 2013-4 Fifth Assessme nt Report (AR5) and IPCC’s 2012 "Special Report on Managing the Risks of Extreme Ev ents and Disasters to Advance Climate Change Adaptation" (SREX). These new assessments pr ovide further evidence supporting the 2009 Endangerment Finding that climate change will have a negative impact on human health

and welfare.

A number of comments described observations of clim ate change. While local observed changes can be of great concern to individuals and communit ies, EPA cautions that they must be assessed in the context of the broader science, as it is mor e difficult to draw robust conclusions regarding climate change over short time scales and in small geographic regions.

EPA agrees that rising concentrations of GHGs curre ntly endanger human health and welfare, and will continue to do so in the future as atmosph eric concentrations continue to rise. Thus, EPA agrees that action should be taken to reduce GH G emissions.

Comment 11: Multiple commenters noted the observed and projecte d human health impacts of climate change in the United States, stating that c arbon pollution:

• Worsens air quality by increasing ground level ozon e, particulates from wildfires and dust storms, and allergens. Exposure to these p ollutants result in more hospitalizations; asthma attacks and allergic respo nses; diminished lung function, cardiovascular and respiratory complications, illne sses, and premature death. Several commenters also noted that climate change c an also make ozone attainment more difficult to manage for certain are as.

• Increases health threats from warmer temperatures a nd extreme heat. Hotter temperatures can increase the risk of heat stroke a nd heat exhaustion and can increase the risk of hospitalization for cardiovasc ular and respiratory diseases.15 • Expands exposure to vectorborne, waterborne, and fo odborne pathogens and contaminants, leading to great risk of short-term a nd chronic gastrointestinal and infectious diseases (e.g. Lyme disease, dengue, etc .).

• Results in more extreme weather events, such as dro ught, heat waves, wildfires, storms, heavy rainfall, and flooding which can caus e injuries and death during the event and also damage soil quality, agricultural yi elds, and food supplies and access; homes, schools, and energy, water, and tran sportation infrastructure; and

health infrastructure or access to healthcare servi ces.

• May lead to mental health issues, particularly rela ted to disasters, with increased risk of post-traumatic stress disorder; depression and anxiety; increases in violence; social maldevelopment; and stress due to relocation.

Commenters noted that certain populations, particul arly children, the elderly, people with preexisting health conditions, certain communities of color, low income communities, and certain occupational groups are at increased risk from heal th threats. Several commenters stated that carbon pollution will not only affect people’s heal th, but will be costly in terms of damages and

healthcare costs.

Response 11: The EPA has not changed its view, as articulated in the 2009 Endangerment Finding, that climate change will have a negative i mpact on human health and welfare.

EPA acknowledges the health effects listed by the c ommenters and recognizes the rapid emergence of research and published literature on h ealth effects associated with climate change. The EPA continues to rely on the best technical and scientific information, primarily based upon the recent, major assessments by the U.S. Global Ch ange Research Program (USGCRP), the Intergovernmental Panel on Climate Change (IPCC), a nd the National Research Council (NRC) of the National Academies. These assessment reports consider the entire peer-reviewed literature

in context to draw conclusions based on the entire body of findings from the literature. The Endangerment Finding TSD summarizes key conclusions of IPCC (2007), based on their review
of over 500 articles on the effects of heat and col d; wind, storms, and floods; drought, nutrition, and food security; food safety; water and disease; air quality and aeroallergens and disease; vector-borne, rodent-borne, and other infectious di seases; occupational health; and ultraviolet

radiation. The TSD also summarizes the conclusions of the USGCRP second National Climate Assessment (Karl et al., 2009), which describes glo bal climate change impacts for the United States. This report provides further evidence of th e scope and magnitude of health effects, both direct (e.g., increased morbidity from heat waves o r floods) and non-direct (e.g., increased or alteration in the spread and transmission rates of infectious diseases). As noted by the commenters, the literature shows poor countries and communities are likely to be disproportionately impacted by climate change healt h risks. For example, IPCC notes that adverse health impacts will be greatest in low-inco me countries and those at greatest risk include—in all countries—the urban poor, the elderl y and children, traditional societies, subsistence farmers, and coastal populations (high confidence, Confalonieri et al. 2007).

Section II.A of the preamble summarizes many new as sessment reports published since the 2009 Endangerment Finding, including the recent USGCRP’s 2014 Third National Climate16

Assessment (NCA3), the IPCC’s 2013-4 Fifth Assessme nt Report (AR5) and IPCC’s 2012 "Special Report on Managing the Risks of Extreme Ev ents and Disasters to Advance Climate Change Adaptation" (SREX). These new assessments pr ovide further evidence supporting the 2009 Endangerment Finding that climate change poses a risk to human health and welfare now

and in the future. A number of comments described o bservations of climate change; EPA agrees that these types of observations of climate change are consistent with and provide supporting evidence of the effects of climate change on human health and welfare. However, though local observed changes can be of great concern to individ uals and communities, EPA cautions that they must be assessed in the context of the broader science, as it is more difficult to draw robust conclusions regarding climate change over short tim e scales and in small geographic regions.

EPA agrees that rising GHGs currently endanger huma n health and welfare, and will continue to do so in the future as atmospheric concentrations c ontinue to rise. Thus, EPA agrees that action

should be taken to reduce GHG emissions.

Comment 12: Commenters stated that the proposed EPA standard on carbon emissions is a positive step toward both reducing the impacts of c limate change on agriculture and creating a dynamic where farmers use our land and know-how to develop clean energy-producing technologies and to develop practices that can pull increasing amounts of carbon out of the atmosphere. The commenters asserted American farmer s are not victims of climate change, but part of the solution because they can also play a h uge role in reducing emissions and actually putting carbon back in the ground. The commenters stated that farmers are developing cover crops, using no till, and buying higher efficiency equipment. The commenters also noted that farmers can also generate clean energy. As an examp le the commenters discussed that Pennsylvania and Iowa are leaders in wind energy; d airy farmers developing methane digesters, turning manure into electricity; and farmers that h ave developed the biofuels industry.

Commenters stated that the climate science that for ms the basis of the Endangerment Finding provides a legally sufficient and scientifically co mpelling justification for curbing greenhouse gas emissions from power plants. The commenters fur ther stated that global greenhouse gas emissions and atmospheric concentrations, as well a s the risk of catastrophic damage, have increased since EPA issued the Endangerment Finding , which supports the need for emission

controls.

Commenters stated the Clean Air Act requires the EP A to develop regulations for categories of sources which cause or significantly contribute to air pollution which may endanger the public health or welfare, and greenhouse gas emissions end anger the public health and welfare.

Response 12: EPA agrees with the commenters that climate change will have impacts on agriculture, as concluded in the 2009 Endangerment Finding that climate change will have a negative impact on human health and welfare. In the finding, the Administrator considered both adverse and beneficial effects of climate change on the current and future agricultural sector, over different regions of the United States stating :17

"There is a potential for a net benefit in the nea r term for certain crops, but there is significant uncertainty about whether this benefit will be achi eved given the various potential adverse impacts of climate change on crop yield, such as th e increasing risk of extreme weather events. Other aspects of this sector may be adversely affec ted by climate change, including livestock management and irrigation requirements, and there i s a risk of adverse effect on a large segment of the total crop market. For the near term, the co ncern over the potential for adverse effects in certain parts of the agriculture sector appears gen erally comparable to the potential for benefits for certain crops. However, the body of evidence po ints towards increasing risk of net adverse impacts on U.S. food production and agriculture ove r time, with the potential for significant disruptions and crop failure in the future."

Section II.A of the preamble summarizes new assessm ent reports published since the 2009 Endangerment Finding, including the recent USGCRP’s 2014 Third National Climate Assessment (NCA3), which provides further evidence supporting the 2009 Endangerment Finding that climate change will have a negative im pact on human health and welfare. The

NCA3 finds that:

"Climate disruptions to agriculture have increased. Many regions will experience declines in crop and livestock production from incr eased stress due to weeds, diseases, insect pests, and other climate change in duced stresses."

EPA also agrees with the commenters’ statement that American farmers are part of the climate solution. Many of the mitigation and adaptation mea sures mentioned in the comment are also outlined in the NCA3 chapter on agriculture. EPA’s own AgSTAR program is an outreach program designed to reduce methane emissions from l ivestock waste management operations by promoting the use of biogas recovery systems. Despi te advances towards reducing emissions and producing clean energy in the agriculture sectors, there is still more work to be done to avoid the most severe threats from climate change. NCA3 finds that:

"Agriculture has been able to adapt to recent chang es in climate; however,

increased innovation will be needed to ensure the r ate of adaptation of agriculture and the associated socioeconomic system can keep pa ce with climate change over

the next 25 years."

Comment 13: Commenters stated that as part of an endangerment a nalysis, the EPA must consider how the proposed standards will have a "de tectable, quantifiable, and meaningful effect" on the 30 indicators highlighted in the EPA report entitled, Climate Change Indicators in the United States. The commenters argued that the E PA uses these indicators for climate change assessment and as placeholders for the claimed dang ers of global warming in general. The commenters further argued that the 30 indicators ca nnot reasonably represent the dangers

attributable to new or modified/reconstructed EGUs subject to EPA jurisdiction without more analysis, and that because EPA failed to do such an analysis, those claimed dangers do not provide the statutorily required endangerment deter mination.18

Response 13: For information regarding the climate and health be nefits of the final rule, see the Regulatory Impact Analysis (RIA), which is availabl e in the docket for this action. In the RIA,

the EPA uses the social cost of carbon as its metho dological approach for calculating climate benefits. The EPA disagrees that he effect of the f inal rule on the thirty indicators in its report, Climate Change Indicators in the United States must be quantified.

The EPA’s climate change indicators are not intende d to serve as programmatic measures of the EPA’s efforts to address the climate change problem but rather to communicate the climate change problem in an easy to understand manner usin g long-term observed data trends. The EPA’s thirty climate change indicators depict obser ved trends over time; such trends are best understood over long time periods (e.g., multiple d ecades) and large geographic areas. The indicators show that the climate is changing and ef fects are already happening, here in the United

States. The scientific connection between each indi cator and climate change is strong.

Compiling and reporting these indicators helps info rm EPA, other organizations, and the public of the various observed changes and effects related to climate change, particularly in the United States. The fact that the effects of climate change are already being observed across the U.S. reinforces the need for continued, sensible steps t o address emissions of GHGs.

Comment 14: Commenters argued that climate change will have ben efits that outweigh the harm and that the Endangerment Finding is invalid. The commenters suggested the IPCC report implies that warming will not exceed 2 degrees unti l 2083, and that warming of less than 2 degrees will be beneficial. The commenters included examples of benefits in the agricultural

sector and in the number of deaths that occur in wi nter.

Response 14: The commenters incorrectly argued that the IPCC pro jections imply a 50/50 chance of not exceeding 2 degrees until 2083, and t hat warming of less than 2 degrees will be beneficial. The comment is based only on the lower bound of a range of likely temperature values which are based on a high level of global em issions reductions. It also appears that basic mathematical errors may have occurred when the comm enters represented the concept of climate sensitivity. These very same issues were previously addressed in depth in the 2009 Endangerment Response to Comment Volume 4. See spec ifically Comment 4-46 for more information on equilibrium climate sensitivity. See also NCA3 page 754 for more information on the difference between equilibrium climate sensitiv ity and transient climate response. EPA has considered the information provided by the commente rs and finds that it does not provide credible evidence of flaws in the EPA’s approach of relying upon the synthesis conclusions of the major assessments, nor does it demonstrate that the benefits of climate change will outweigh

the harm.

EPA’s consideration of net (adverse and beneficial) effects can be found in the 2009 Endangerment Finding response to comments (RTC) Vol ume 1, Section 1.4. Specific positive impacts of climate change (for example on warm-wate r fisheries, on the increased growth and survival of crops and forests through carbon fertil ization, and on fewer deaths from cold exposure) were discussed in the Endangerment Findin g (pages 66948, 66524, 66529 e.g.), sections 3, 7, 9, and 10 of the TSD, and throughout the RTC, but particularly in volumes 5 and 6.19

As stated in the Endangerment Finding (page 66947), "The Administrator is using her judgment, based on existing science, to weigh the threat for each of the identifiable risks, to weigh the potential benefits where relevant, and ultimately t o assess whether these risks and effects, when viewed in total, endanger public health or welfare. "

Impacts of a warming climate are well-documented in numerous vetted scientific documents including those from the National Academies of Scie nce. While limited short-term benefits may occur in certain regions and sectors in the U.S. (l ike increases in some agricultural crops), there is increasing risk of net adverse impacts in the lo ng-term. Concluding that climate change, even less than or equal to two degrees warming by 2083, is beneficial ignores the scientific consensus represented in the assessment literature. Thus, the information provided by the commenters does not alter the 2009 Endangerment Finding that climat e change will have a negative impact on

human health and welfare.

Section II.A of the preamble summarizes many new as sessment reports published since the 2009 Endangerment Finding, including the recent USGCRP’s 2014 Third National Climate Assessment (NCA3), which provides further evidence supporting the 2009 Endangerment Finding that climate change will have a negative im pact on human health and welfare. The NCA3 includes a Frequently Asked Question on whethe r there are benefits of climate change,

and finds that:

"Some climate changes currently have beneficial eff ects or specific sectors or regions. For example, current benefits of warming include longer growing seasons for agriculture and longer ice-free periods for shipping on the Great Lakes. A t the same time, however, longer growing seasons, along with higher temperatures and carbon dioxide, can increase pollen production, intensifying and lengthening the allergy season. Lo nger ice-free periods on the Great Lakes can

result in more lake-effect snowfalls.

Many analyses of this question have concluded that there will be more negative effects than positive ones. This is largely because our society and infrastructure have been built for the climate of the past, and any rapid change from that climate imposes difficulties and costs. For example, many major cities are located on the coast s where they are now vulnerable to sea level rise. And there has been rapid population growth in the U.S. Southwest, where increasing heat and drought threaten water supplies and cause incre ased wildfires. In addition, ecosystems that we rely on for our food and water are adapted to th e cooler climate that our planet has experienced over recent centuries."

Specifically in regards to agriculture, the NCA3 fi nds:

"Climate disruptions to agriculture have increased. Many regions will experience declines in crop and livestock production from incr eased stress due to weeds, diseases, insect pests, and other climate change in duced stresses."

In regards to reducing the number of deaths that oc cur in winter, the NCA3 agrees with EPA’s previous responses to this same comment, stating th at:20

"Milder winters resulting from a warming climate ca n reduce illness, injuries, and deaths associated with cold and snow. Vulnerability to win ter weather depends on many non-climate factors, including housing, age, and baseline healt h, while deaths and injuries related to extreme cold events are projected to decline due to climate change, these reductions are not expected to compensate for the increase in heat-related deaths. "

Comment 15: Commenters claimed that "humans would flourish in a warmer climate, and adaptation will increase the benefits even more", l isting several papers. Commenters specifically highlight declining trends in heat-related mortalit y across the U.S from 1987 to 2005.

Response 15: The EPA continues to rely on the best technical and scientific information, primarily based upon the recent, major assessments by the U.S. Global Change Research Program (USGCRP), the Intergovernmental Panel on Cl imate Change (IPCC), and the National Research Council (NRC) of the National Academies. T hese assessment reports consider the entire peer-reviewed literature in context to draw synthesis conclusions based on the body of findings from the literature. In contrast, the comm enters chose to highlight isolated points from a limited set of papers, and these papers often addre ss only individual cities, and mostly outside the United States. In addition, the commenters did not synthesize the literature that they provided nor did they show how this literature contradicts t he assessments which already take into account issues such as adaptation.

Section II.A of the preamble summarizes many new as sessment reports published since the 2009 Endangerment Finding, including the recent USGCRP’s 2014 Third National Climate Assessment (NCA3), the IPCC’s 2013-4 Fifth Assessme nt Report (AR5) and IPCC’s 2012 "Special Report on Managing the Risks of Extreme Ev ents and Disasters to Advance Climate Change Adaptation" (SREX). These new assessments pr ovide additional evidence consistent with the 2009 Endangerment Finding that climate cha nge will have a negative impact on human health and welfare, including reaffirming the linka ges between climate change and extreme temperatures. The NCA3 states:

Some of the risks of heat-related sickness and deat h have diminished in recent decades, possibly due to better forecasting, heat-health early warnin g systems, and/or increased access to air conditioning for the U.S. population. However, extr eme heat events remain a cause of preventable death nationwide.

As noted in EPA’s 2009 Endangerment Finding RTC, Vo lume 5 (comments 5-5, 5-7 and 5-36), risks to human health can be reduced by technology and adaptive measures, but heat presently causes substantial mortality in the Unites States a nd adaptive measures do not eliminate risk. In fact, decreased sensitivity or decline in heat-rela ted mortality may not be as pronounced in the future since access to air conditioning is already high in most regions (Ebi et al., 2008) (see also RTC 5-45, 5-48, 5-51). The major scientific assessm ents on which EPA relies, including the NCA3, IPCC AR5, and the IPCC SREX, all project nega tive impacts of climate change, and the subsequent increase in frequency or severity of ext reme events, on human health. EPA has considered the comment and finds that it does not p rovide credible evidence of flaws in the EPA’s approach of relying upon the synthesis conclu sions of the major assessments.21

Comment 16: Commenters suggested warming seas result in flouris hing ocean vegetation, which acts as a carbon sink and that studies of imp acts of acidification and warming on ocean life show adaptability and resilience.

Response 16: The EPA continues to rely on the best technical and scientific information, primarily based upon the recent, major assessments by the U.S. Global Change Research Program (USGCRP), the Intergovernmental Panel on Cl imate Change (IPCC), and the National Research Council (NRC) of the National Academies. T hese assessment reports consider the entire peer-reviewed literature in context to draw synthesis conclusions based on the body of findings from the literature. In contrast, the comm enters do not cite any specific scientific evidence or studies to support his/her argument.

Section II.A of the preamble summarizes many new as sessment reports published since the 2009 Endangerment Finding, including the recent USGCRP’s 2014 Third National Climate Assessment (NCA3), the IPCC’s 2013-4 Fifth Assessme nt Report (AR5) and IPCC’s 2012 "Special Report on Managing the Risks of Extreme Ev ents and Disasters to Advance Climate Change Adaptation" (SREX). These new assessments pr ovide additional evidence consistent with the 2009 Endangerment Finding that climate cha nge will have a negative impact on human health and welfare, including reaffirming the linka ges between rising CO2 levels, ocean acidification, and impacts to ocean ecosystems.

The major scientific assessments on which EPA relie s, including the NCA3, IPCC AR5, and the IPCC SREX, all project net negative impacts of ocea n acidification. EPA has considered the comment and finds that it does not provide credible evidence of flaws in the EPA’s approach of relying upon the synthesis conclusions of the major assessments.

Comment 17: Several commenters stated that EPA’s concerns regar ding the impacts of rising CO2 levels and climate change are not merited becau se the scientific literature does not support arguments that extreme weather is increasing or bei ng affected by increased CO2. The commenters argued that extreme weather is not incre asing.

Response 17: The EPA continues to rely on the best technical and scientific information, primarily based upon the recent, major assessments by the U.S. Global Change Research Program (USGCRP), the Intergovernmental Panel on Cl imate Change (IPCC), and the National Research Council (NRC) of the National Academies. T hese assessment reports consider the entire peer-reviewed literature, including literatu re referred to in the comments received, in context to draw synthesis conclusions based on the body of findings from the literature.

Section II.A of the preamble summarizes many new as sessment reports published since the 2009 Endangerment Finding, including the recent USGCRP’s 2014 Third National Climate Assessment (NCA3), the IPCC’s 2013-4 Fifth Assessme nt Report (AR5) and IPCC’s 2012 "Special Report on Managing the Risks of Extreme Ev ents and Disasters to Advance Climate Change Adaptation" (SREX). These new assessments pr ovide additional evidence consistent with the 2009 Endangerment Finding that climate cha nge will have a negative impact on human health and welfare, including reaffirming the linka ges between climate change and extreme weather, while acknowledging the uncertainties invo lved in projections of complex phenomena.22

The NCA3 concludes that "Certain types of extreme w eather events with links to climate change have become more frequent and/or intense, including prolonged periods of heat, heavy downpours, and, in some regions, floods and drought s". In contrast to the commenters’ argument regarding lack of observational evidence o f extreme weather trends, additional findings

of the NCA3 state:

Some extreme weather and climate events have increa sed in recent decades, and new and stronger evidence confirms that some of these incre ases are related to human activities.

Changes in extreme weather events are the primary w ay that most people experience climate change. Human-induced climate change has already in creased the number and strength of some of these extreme events. Over the last 50 years, mu ch of the United States has seen an increase in prolonged periods of excessively high temperatures, more heavy downpours, and in some regions, more severe droughts (NCA3 pg 24).

The IPCC also finds observed changes in climate ext remes related to temperature, precipitation, tropical cyclones, and sea level. As noted in the T SD for the 2009 Endangerment Finding, these changes "apply generally to all parts of the globe, including the United States, although there are some regional and local exceptions due to patterns of natural climate variability". The IPCC SREX assessment report (IPCC 2012) further supports the Administrator’s finding regarding

extreme weather and climate events:

A changing climate leads to changes in the frequenc y, intensity, spatial extent, duration, and timing of extreme weather and climate events, and c an result in unprecedented extreme weather and climate events. [...] There is evidence that some extremes have changed as a result of anthropogenic influences, including increases in at mospheric concentrations of greenhouse gases. [...] Extreme events will have greater impacts on sectors with closer links to climate, such as water, agriculture and food security, forestry, health, and tourism.

In light of these conclusions, EPA has considered t he information provided by the commenters and found that it does not provide credible evidenc e of flaws in the EPA’s approach of relying upon the synthesis conclusions of the major assessm ents, nor does it demonstrate that no observational evidence exists to support a global i ncrease in extreme weather events.

Comment 18: Several commenters expressed concern over the impa ct of climate change on

Indian Tribes and Alaska Natives. Commenters cited a May 2013 NTAA Status of Tribal Air Report and listed many types of climate-related cha nges that are associated with tribal impacts: increased aridity, droughts, temperature, acid rain , dust storms, flooding, forest fires, and pests; and changes in precipitation, crop changes, wildlif e, ocean acidification, etc.

Other commenters discussed adverse effects on tradi tional food supplies and health, traditional cultures, tribal economies, and tribal treaty right s. Specifically, commenters noted that many tribal cultural identities are deeply rooted in the natural environment. Commenters stated that as climate change disrupts biological communities, the survival of some tribes as distinct cultures may be at risk; the loss of traditional cultural pr actices, due to climate-driven die-off or range23

shift of culturally significant plant and animal sp ecies, may prove to be too much for some tribal cultures to withstand on top of other external pres sures. Commenters stated that some tribes are finding that the animals and/or plants on which the y depend for their cultural practices and identity have either migrated to lands not under th eir control or have disappeared altogether. Commenters stated that many tribal communities are heavily dependent on the use of fish, wildlife, and native plants, and may face threats t o food supplies from climate change. Commenters stated that even where tribes are integr ated into the national economy, climatedriven disruption of biological communities is also having a considerable effect on the treaty rights which preserve hunting, fishing, and gatheri ng rights for tribes on their lands and in the

usual and accustomed areas. Commenters also noted t hat some tribal communities may face difficulty relocating due to tribal land limitation s.

Regarding climate impacts to Alaska Natives, commen ters noted adverse effects on traditional food supplies and infrastructure (due to erosion) i n Alaska Native Villages, which has already resulted in the relocation of several villages away from the eroding coastline. Specifically, commenters noted that Alaska Natives may suffer sho rtages of fresh water and the food they have historically hunted or fished, and that food s ecurity is threatened as underground food cellars thaw. Commenters cited a May 2013 NTAA Stat us of Tribal Air Report and a 2003 U.S. General Accountability Office study as evidence tha t coastal erosion and thawing permafrost threatens civil infrastructure in remote villages. The commenters noted that more than 200 Alaska Native Villages are affected to some degree by flooding and erosion, 31 villages facing imminent threats that are compelling them to consid er permanent relocation, and at least 12 of the 31 threatened villages have decided to relocate —in part or entirely—or to explore relocation options. The commenters stated that Alaska Native V illages are unique because they face firsthand the effects of climate change.

Response 18: The EPA continues to rely on the best technical and scientific information, primarily based upon the recent, major assessments by the U.S. Global Change Research Program (USGCRP), the Intergovernmental Panel on Cl imate Change (IPCC), and the National Research Council (NRC) of the National Academies. T hese assessment reports consider the entire peer-reviewed literature in context to draw synthesis conclusions based on the body of findings from the literature.

Section II.A of the preamble summarizes many new as sessment reports published since the 2009 Endangerment Finding, including the recent USGCRP’s 2014 Third National Climate Assessment (NCA3), the IPCC’s 2013-4 Fifth Assessme nt Report (AR5) and IPCC’s 2012 "Special Report on Managing the Risks of Extreme Ev ents and Disasters to Advance Climate Change Adaptation" (SREX). These new assessments pr ovide additional evidence consistent with the 2009 Endangerment Finding that climate cha nge will have a negative impact on human health and welfare, including reaffirming the linka ges between climate change and impacts on Native American Tribes, including Alaska Natives.

EPA has considered the information provided by the commenters and finds that it is generally

consistent with the conclusions of the assessment l iterature. The USGCRP NCA3 finds climate change impacts such as the rapid pace of temperatur e rise, coastal erosion and inundation related to sea level rise and storms, ice and snow melt, an d permafrost thaw are affecting indigenous people in the United States. The NCA3 also conclude d that climate change, in addition to24

chronic stresses such as extreme poverty, is affect ing indigenous peoples’ health in the United States through impacts such as reduced access to tr aditional foods, decreased water quality, and increasing exposure to health and safety hazards. T he IPCC AR5 notes, "Climate-related hazards exacerbate other stressors, often with negative out comes for livelihoods, especially for people living in poverty (high confidence). Climate-relate d hazards affect poor people’s lives directly through impacts on livelihoods, reductions in crop yields, or destruction of homes and indirectly through, for example, increased food prices and foo d insecurity."

The NCA3 notes that particularly in Alaska, critica l infrastructure and traditional livelihoods are threatened by climate change and, "[i]n parts of Al aska, Louisiana, the Pacific Islands, and other coastal locations, climate change impacts (through erosion and inundation) are so severe that some communities are already relocating from histor ical homelands to which their traditions and
cultural identities are tied." The IPCC AR5 finds t hat climate change-induced warming in the Arctic and resultant changes in environment (e.g., permafrost thaw, effects on traditional food sources) have significant observed and projected im pacts on the health and well-being of Arctic residents, especially indigenous peoples. Small, re mote, predominantly-indigenous communities are especially vulnerable given their "strong depen dence on the environment for food, culture, and way of life; their political and economic margi nalization; existing social, health, and poverty disparities; as well as their frequent close proxim ity to exposed locations along ocean, lake, or

river shorelines." 1 In addition, increasing temperatures and loss of A rctic sea ice increases the risk of drowning for those engaged in traditional h unting and fishing.

Overall, the EPA finds that the information provide d by the commenters are generally consistent with and does not alter the 2009 Endangerment Findi ng that climate change will have a negative impact on human health and welfare.

Comment 19: Commenters cited 28 articles claiming that any Arct ic and Antarctic impacts (including ice and non-arctic glaciers) have been o verstated and are not linked to warming.

Response 19: There is clear evidence of climate change impacts i n the Arctic and Antarctic. EPA has described these impacts previously in the 2009 Endangerment Finding, and more recent impacts are described in Section II.A of the preamb le of this rule based on more recent climate

1 IPCC, 2014: Climate Change 2014: Impacts, Adaptatio n, and Vulnerability. Part B: Regional Aspects. Contribution of Working Group II to the Fi fth Assessment Report of the Intergovernmental Panel on Climate Change [Barros, V.R., C.B. Field, D.J. Dokken, M.D. Mastrandrea, K.J. Mach, T.E. Bilir, M. Chatterjee, K.L. Ebi, Y.O. Estrada, R.C. Genova, B. Girma, E.S. Kissel, A.N. Levy, S. MacCracken, P.R. Mastrandrea, and L.L. White (eds.)]. Cambridge University Press, Cambridge, p. 1581.25

change assessment reports. Notable impacts in these regions discussed in the preamble include an accelerating rate of ice loss from the Greenland and Antarctic ice sheets (since 2002, 215 gigatons per year and 147 gigatons per year respect ively, contributing to global sea level rise), continued decline of Arctic sea ice (3.5 to 4.1 per cent per decade, including a record low extent in 2012 at 40 percent below the 1979-2000 median), increasing permafrost temperatures in most regions including Alaska, and decreasing annually-a veraged Northern Hemisphere snow cover extent. These observations are not in dispute in th e scientific community. These trends are strong evidence of warming in these regions, which is furt her confirmed by surface, ocean, and satellite based temperature measures. Articles provided by t he commenters generally addressed small regions such as the Karkoram glaciers rather than g lobal glacier trends, address individual

mechanisms such as the surface mass balance of an i ce sheet rather than the net change in ice

sheet mass which is the result of the sum of all re levant mechanisms, or are irrelevant to detecting and attributing trends or making projecti ons. Additionally, the articles provided by the commenters have been considered in the process of d eveloping the conclusions presented in the

assessment literature.

Comment 20: Several commenters criticized the EPA’s approach of relying on the major scientific assessments, arguing that the IPCC and t he USGCRP assessments are deeply flawed. Commenters recommended withdrawing the rule until t he EPA can make a new scientific assessment of the impacts of climate change. Allege d flaws in the IPCC that were highlighted by the commenters included the argument that the IPCC does not present a complete picture of the scientific understanding of climate change or the a bility of the environment and humans to adapt to changes, that the IPCC has retracted findings, a rguments that the IPCC process is not scientifically rigorous and may be biased, and quot es from IPCC authors that expressed concern over the politicized nature of the IPCC. Regarding the USGCRP, commenters stated that during the public comment period for the National Climate Assessment they had submitted overwhelming evidence that the USGCRP report was bi ased and incomplete, especially regarding the ability of Americans to adapt to clim ate change. Therefore, the commenters argued that the NCA should not be relied upon by the EPA.

Response 20: The major scientific assessments of the USGCRP, IPC C, and the NRC are comprehensive in their coverage of GHG and climate change issues, have gone through rigorous and exacting peer review by the expert community, a nd have gone through rigorous levels of U.S. government review. Therefore, it is appropriat e for the EPA and the Administrator to rely on these assessments to provide the technical and s cientific information that informs the Administrator’s judgment regarding the question of whether GHGs endanger public health and

welfare.

The EPA has previously responded at length to criti ques of the IPCC and the reliance upon the assessments in both the Response to Comments for th e 2009 Endangerment Finding (Volume 1 in particular) and the 2010 Response to Petitions ( Volumes 2 and 3). The EPA has reviewed alleged errors in the IPCC assessments and found th at the limited examples of documented errors from the Fourth Assessment Report did not call into question the fundamental and broad evidence on which the Endangerment Finding rests. M ultiple independent reviews of the IPCC by external organizations found no evidence that th e scientific conclusions of the IPCC were26

flawed. The USGCRP assessments go through a formal peer review by the National Research Council of the National Academies of Science, a pub lic comment review process and interagency review. The National Climate Assessment appropriately addressed public comments received, adhering to transparency requirements for a major assessment document and the EPA finds that the final product is an accurate and unb iased synthesis of the scientific literature.

In 2009, the EPA described the review and developme nt processes that each of the assessments go through, and the numerous levels of review that these assessments undergo make them appropriate sources of scientific information. The approach taken by the EPA of relying on these assessments was validated in 2012 by the U.S. Court of Appeals for the D.C. Circuit (684 F.3d 102).

Since the 2012 decision, several new assessments ha ve been released which improve understanding of the climate system, projected clim ate change impacts, and the significant human contribution to climate change. The new asses sments strengthen the case that GHGs endanger public health and welfare both for current and future generations, as summarized in Section II.A of the preamble. The agreement between assessments developed by three different national and international scientific organizations is further evidence for the strength of the science upon which the EPA relies.

The commenters have raised no arguments different f rom those already considered and rejected previously. Therefore, the EPA will continue to rel y on the major scientific assessments to support its scientific determinations.

Comment 21: Several commenters called attention to the role of CPP in meeting global climate targets, expressed as either global average tempera ture thresholds or atmospheric concentration levels; in particular, these commenters questioned whether CPP goes far enough given what may be needed, globally, to achieve targets that have e ither been identified in the scientific literature or in international negotiations.

Different commenters cited different targets that t hey argue need to be met. Several commenters discussed the 2 degree target based on the 2009 Cop enhagen Accord and other sources. Other commenters cited a 450 ppm CO2 target (some of whom state that this concentration is consistent with the 2 degree target). Some commente rs argued for a tighter target of 350 ppm CO2 and, related, a 1 degree long-term temperature rise. These commenters argued that a failure to meet the appropriate temperature or concentratio n targets will lead to exceeding safe temperature levels with potentially catastrophic co nsequences. Commenters stated that a World Bank study concluded that humans might not be able to adapt to a 4 degree temperature increase.

The commenters then discussed which emissions pathw ays the globe would need to meet in order to achieve the targets, with several commente rs citing an 80 percent decrease in CO2 emissions from industrialized nations by 2050 or a 40-70 percent decrease globally. Commenters

also noted that emission levels near zero would be necessary by 2100. Commenters discussed the importance of the power sector in terms of its cont ributions to CO2 emissions. Commenters requested that the EPA compare the CPP to these emi ssions trajectories, and some commenters27

urged the agency to strengthen the CPP in order to align the future emissions trajectories with

some of these stabilization scenarios.

Response 21: EPA agrees that the climate change problem is globa l in nature, very serious, and that actions on the part of the United States and o ther countries around the world are needed to avoid the most serious and long-term risks associat ed with human-induced climate change. EPA also thinks that the CPP is a major, but not the on ly, component of what the United States must do to do its part to tackle global climate change. The CPP is addressing the largest source of U.S.

CO 2 emissions. In fact, EPA views the CPP as a major e lement of the U.S. domestic strategy that

will in turn make the U.S. a credible world leader in addressing climate change.

We disagree with some of comments, however, that ju dge the CPP as inadequate by measuring its ambition level against what we view as an unfai r yardstick – global-scale climate targets. We are of course aware of the global 2 degree Celsius goal that has been put forward under the UNFCCC negotiations. However, the CPP falls under a specific section, 111(d), of the Clean Air Act and therefore meets requirements of that sectio n. As such, CPP addresses the electric power sector of the U.S. Commenters failed to note requir ements of the Act and any additional actions that EPA is already undertaking to reduce GHG emiss ions in other important source sectors of the U.S. (e.g., stronger fuel economy standards for cars and trucks, and actions to reduce HFC and methane emissions). Furthermore, commenters fai led to acknowledge the broader U.S. Government’s role in tackling climate change (see, for example, the President’s Climate Change Action Plan), including efforts to achieve a robust international agreement under the UNFCCC in Paris at the end of this year.

EPA does not - and is not required to, under the Cl ean Air Act - hold a position on what specific level of atmospheric CO 2 concentrations represents a specific threshold or safe versus unsafe levels. Similar questions and comments arose in res ponse to EPA’s proposed GHG endangerment finding under Section 202 of the Act i n 2009. EPA stated then that the Agency does not need to define a specific level below whic h there is not endangerment – the issue before EPA for that finding was to judge whether the curre nt and projected future air pollution of elevated concentrations of GHGs endangers. EPA did so and made the endangerment finding in 2009 under Section 202 of the Act. Here, tying CPP to specific global atmospheric CO 2 targets is not germane or required.

8.7.2 Monetized Climate Benefits

Comment 1: Many commenters discussed the methodology used to develop the SCC estimates, in particular the integrated assessment modes (IAMs ) used to estimate the SCC, and provided a wide range of perspectives and technical input on h ow to further refine the SCC estimates. In particular, some commenters recommended improvement s to the existing IAMs and their damage functions, which monetize the damages associ ated with the physical impacts of climate change.

Choice of IAMs used to estimate the SCC28

Some commenters were generally supportive of the ch oice of the three IAMs used in developing the SCC. For example, a letter signed by several co mmenters noted that these IAMs are "reasonably based on current scientific and economi c knowledge" and are "widely cited and accepted in the academic community." Some commenter s said the models reflect "the best available, peer-reviewed science to tally the benef its and costs of specific regulations with impacts on CO2 emissions. The IAMs include benefits and costs that have been quantified to

date." Other commenters stated that the three IAMs used to estimate the SCC "represent the best tools currently available for determining an approp riate SCC."

Commenters voiced concern that the economic damages estimated by the IAMs are too uncertain to be useful for policy analysis. Several of these commenters included quotations from Pindyck (2013) and argued that the current IAMs and their d amage functions lack sufficient theoretical or empirical foundations, and concluded that the damag e functions are arbitrary. Commenters suggested that one or more of the models should be rejected.

Finally, a few commenters suggested that other IAMs should be considered for any future SCC updates, specifically the Environmental Impact and Sustainability Applie d General Equilibrium (ENVISAGE) model and also the Climate and Regional Economics of Development (CRED)

model.

Recommendations for improving the IAMs or damage fu nctions

Commenters suggested improvements to one or more of the models, including the models’ damage functions, before future SCC updates. In par ticular, commenters believed that the current SCC estimates underestimate the damages and that th e potential benefits of the rulemaking should be higher. These commenters attributed the underestimation to incomplete or missing treatment of a number of damage categories in the I AMs. Commenters added suggestions for additional damage categories include: ocean acidifi cation, spillover effects from displaced persons, increased variability in weather patterns, wildfires, "catastrophic" damages stemming from exceedance of various "tipping points," loss o f species and habitat diversity, cultural impacts, health effects from increased air pollutio n, and impacts on global security, among

others.

Commenters recommended re-evaluating the specific f unctional form assumptions in IAMs, for example, the assumption of substitutability across economic sectors rather than limited substitutability.

Commenters further noted that "The damage function used in the modeling platforms calculates the loss of GDP as a quadratic function of increase d global surface temperature but does not properly account for economic damages that are like ly to intensify at a much faster rate once the global surface temperature increases past approxima tely 3 degrees Celsius above pre-industrial

levels."

Commenters stated, "It is also important to recogni ze that many climate change impacts are difficult or impossible to quantify in a meaningful way, and it is critical that future estimates

account for the non-monetizeable costs of CO2 emiss ions." As an example, the commenters cited IPCC research indicating dramatic decline in global biodiversity and states "This would not29

only have dire economic consequences by drastically disrupting the food supply, but would also have immense non-monetizable consequences to our na tural world and ecological heritage."

Commenters, however, stated that the SCC estimates do not accurately characterize the damage

functions included in the models and that the model ing does not provide an acceptable range of accuracy for use in policymaking. For example, comm enters submitted a joint letter that stated the modeling overestimates the probability of extre me events.

Commenters stated that the results from the IAMs ar e highly sensitive not only to the model input parameters but also to how the models have be en developed and what processes they try to include. Commenters also referenced a study that c oncluded IAMs and SCC cannot account for threshold effects or nonlinear changes that might b e ascribed to additional emissions or emission reductions. These commenters disagreed with EPA’s u se of the SCC estimates.

Commenters discussed a recent EPRI report titled ‘U nderstanding the Social Cost of Carbon: A

Technical Assessment’. The commenters stated that t he USG SCC estimates are difficult to interpret and evaluate because the USG SCC estimate s are the result of significant aggregation of global socioeconomic, climate, and damage modeling over 300 years and aggregation of results across three models (DICE, FUND, PAGE), over time, across scenarios, and across impact categories and regions. The commenters discussed ho w the EPRI report has evaluated each component of the SCC modeling causal chain as well as the overall experimental design, and how it aims to improve understanding of SCC modelin g and estimates to inform public discussion and facilitate improved SCC analyses and climate change research broadly. The commenters provided the following recommendations:

• Development of a new framework given the challenges associated with a multimodel approach, including inconsistencies, comparab ility, and independence.

• External peer review of the modeling, uncertainties , results aggregation, and other elements to improve methods and provide the public with greater confidence in the resulting estimates.

• Explicit peer review of the individual models, as i s commonly done for other models used for regulatory processes.

Evaluation of the robustness of the USG SCC estimat es to alternatives to establish confidence in

the final estimates.

Response 1: The comments mirror those submitted to the Office of Management and Budget’s separate comment solicitation on the SCC (78 FR 705 86; November 26, 2013). As a member of the interagency working group (IWG) on SC-CO 2 , EPA has carefully examined and evaluated comments submitted to OMB’s separate solicitation. EPA has also carefully examined and evaluated all comments received regarding SC-CO 2 through this rulemaking process and determined that the IWG responses to the comments o n the OMB solicitation address the

comments on the SC-CO 2 methodology, including the models used to estimate the SC-CO 2

. Specifically, EPA concurs with the IWG’s response t o these comments and hereby incorporates30

them by reference. 2 The remainder of this section elaborates on these comments in the context of this rulemaking.

EPA appreciates the commenters’ recommendations for potential opportunities to improve the

SC-CO 2 estimates and has considered each one in the conte xt of this rulemaking. EPA and other

members of the IWG have reconfirmed their commitmen t to periodic review and update of the methodology and estimates to ensure that they conti nue to reflect the best available science and economics. Furthermore, EPA has determined that the SC-CO 2 methodological recommendations require additional research, review , and public comment before it can apply them to a rulemaking context.

To help synthesize the technical information and in put reflected in the comments, and to add additional rigor to the next update of the SC-CO 2 , the EPA and all of the other IWG members plan to seek independent expert advice on technical opportunities to improve the SC-CO 2 estimates, including the approaches suggested by co mmenters and summarized in this document. Specifically, EPA and all of the other IWG members plan to ask the National Academies of Sciences, Engineering, and Medicine (Academies) to examine the technical merits and challenges of potential approaches to improving the SC-CO 2 estimates in future updates. Input from the Academies, informed by the comments submit ted to this rulemaking and the peerreviewed literature, will help to ensure that the S C-CO 2 estimates used by EPA continue to reflect the best available science and methodologie s.

After careful evaluation of the full range of comme nts and associated technical issues described in section 8.7.2, EPA has determined that it will c ontinue to use the current SC-CO 2 estimates until further updates can be made to reflect forthc oming guidance from the Academies. EPA believes that the current estimates continue to rep resent the best scientific information on the impacts of climate change available in a form appro priate for incorporating the damages from

incremental CO 2 emissions changes into regulatory analysis. There fore, EPA has presented the

current SC-CO 2 estimates in this rulemaking. 3 EPA will continue to consider these comments

and will share the recommendations with the IWG as it moves forward with the Academies

process.

The remainder of this section provides more detaile d responses to the comments and

recommendations.

2 Referred to as the "OMB Response to Comments on SC -CO2." In particular, see pgs 6 to 11 at https://www.whitehouse.gov/sites/default/files/omb/ inforeg/scc-response-to-comments-finaljuly-2015.pdf

.

3 See https://www.whitehouse.gov/sites/default/files /omb/inforeg/scc-tsd-final-july-2015.pdf31

Choice of IAMs used to estimate the SC-CO 2

.

EPA agrees with the commenters who regard the selec tion of the three IAMs—DICE, FUND, and PAGE—as the most appropriate for the purpose of estimating the SC-CO 2 . EPA and all of

the other IWG members made this determination when they began developing the SCC estimates in 2009-2010. DICE, FUND, and PAGE are the most wid ely used and widely cited models in the economic literature that link physical impacts to e conomic damages for the purposes of estimating the SCC. As stated in the 2010 TSD:

These models are frequently cited in the peer-revie wed literature and used in the IPCC assessment. ... These models are useful because they combine climate processes, economic growth, and feedbacks between the climate and the global economy into a single modeling framework. ... Other IAMs may better reflect the complexity of the science in their modeling frameworks but do not lin k physical impacts to economic damages. 4

In addition, the National Academies of Science (NAS ) identified these three models as "the most widely used impact assessment models" in a 2010 rep ort (NAS, 2010). Furthermore, in a comprehensive literature review and meta-analysis c onducted in 2008, the vast majority of the independent impact estimates that appeared in the p eer-reviewed literature were derived from FUND, DICE, or PAGE (Tol, 2008).

While the development of the DICE, FUND and PAGE mo dels necessarily involved assumptions and judgments on the part of the modele rs, the damage functions are not simply arbitrary representations of the modelers’ opinions about climate damages. Rather they are based on a review by the modelers of the currently availa ble literature on the effects of climate change on society. The conclusions that the modelers draw from the literature, and the bases for these conclusions are documented, and all three models ar e continually updated as new information becomes available. While EPA recognizes that there are limitations with these models, including some of those discussed in Pindyck (2013), nonethel ess IAMs provide valuable information for regulatory impact analysis. In a recent article in the peer-reviewed literature, Weyant (2014)

addressed this issue as follows:

While Pindyck’s observations about the empirical we aknesses of IAMs or calculations of the SCC are worthy of careful study, the conclusion that IAMs are therefore useless fundamentally misconceives the enterprise. IAMs and the [SC-CO 2 ] are conceptual frameworks for dealing with highly complex, non-lin ear, dynamic, and uncertain systems. The human mind is incapable of solving all the equations simultaneously, and

4 See https://www.whitehouse.gov/sites/default/files/ omb/inforeg/for-agencies/Social-Cost-ofCarbon-for-RIA.pdf32

modeling allows making "If..., then... " analyses of the impacts of different factors. The models have provided important insights into many a spects of climate-change policy.

EPA thus believes that it was appropriate for the I WG to base the SC-CO 2 estimates on the DICE, FUND and PAGE models. Moving forward, EPA wil l continue to follow and evaluate the latest peer reviewed literature applying IAMs. As p reviously noted, EPA and all of the other IWG members will seek external expert advice on the technical merits and challenges of using additional models (e.g., CRED, ENVISAGE) to estimat e the SC-CO 2 and/or removing existing models from the ensemble (DICE, FUND, and PAGE) use d to estimate the SCC.

Improving the IAMs or damage functions

To date, EPA and the other members of the IWG have accepted the models as currently constituted, and omitted any damages or beneficial effects that the model developers themselves do not include. EPA recognizes that none of the thr ee IAMs fully incorporates all climate change impacts, either positive or negative. Some of the e ffects referenced by commenters (e.g., "catastrophic" effects, disease, and CO 2 fertilization) are explicitly modeled in the damag e functions of one or more of the current models (alt hough the treatment may not be complete), and the model developers continue to update their m odels as new research becomes available. In fact, EPA and all of the other IWG members undertoo k the 2013 revision because of updates to the models, which include new or enhanced represent ation of certain impacts, such as sea level rise damages. In addition, some of the categories m entioned by commenters are currently speculative or cannot be incorporated into the dama ge function for lack of appropriate data. Using an ensemble of three different models was int ended to, at least partially, address the fact that no single model includes all of the impacts. E PA recognizes that there may be effects that none of the three selected models addresses (e.g., impacts from ocean acidification) or that are likely not fully captured (e.g. catastrophic effect s).

EPA agrees that it is important to update the SC-CO 2 periodically to incorporate improvements in the understanding of greenhouse gas emissions im pacts and will continue to follow and evaluate the latest science on impact categories th at are omitted or not fully addressed in the IAMs. Also, EPA and all of the other IWG members wi ll seek external expert advice on the technical merits and challenges of potential approa ches to update the damage functions in future

revisions to the SC-CO 2 estimates.

For EPA’s more detailed response to comments on tre atment of CO 2 fertilization in the IAMs, see 8.7.2, comment 6.

For EPA’s more detailed response to comments on pee r review, see 8.7.2, comment 5.

For EPA’s more detailed response to comments on agg regation issues, see 8.7.2, comment 8.

Recommendations and comments regarding socioeconomi c scenarios.

The rationale for using the EMF-22 scenarios is exp lained in the 2010 TSD. In addition to the fact that they were recent, peer-reviewed, and publ icly available, they had the key advantage that GDP, population, and emissions trajectories are int ernally consistent for each model and scenario33

evaluated. As noted in the 2010 TSD, the scenarios used "span a wide range, from the more optimistic (e.g. abundant low-cost, low-carbon ener gy) to more pessimistic (e.g. constraints on the availability of nuclear and renewables)."

Regarding the inclusion of a scenario associated wi th stabilization of atmospheric concentrations of GHGs at 550 ppm CO 2 -e, the 2010 TSD clearly notes that this is "not de rived from an assessment of what policy is optimal from a benefit -cost standpoint. Rather, it is indicative of one possible future outcome." As noted above, OMB g uidance in Circular A-4 states that the correct baseline for regulatory impact analysis is an agency’s best assessment of the state of the world without the regulation, and specifically stat es that this may include the potential for new domestic and foreign policies that would occur abse nt the regulation. Including a scenario representative of future mitigation actions is cons istent with this guidance, as long as those future policy actions are expected to occur with or withou t the regulation under examination. As explained in the 2010 TSD, the IWG aimed to select scenarios that span most of the plausible range of outcomes for the socioeconomic variables. Given the level of uncertainty in these trajectories, the IWG felt that it was appropriate to consider a trajectory with significant global mitigation, assuming that this is a distinct possib ility even in the absence of U.S. actions. Because there were five scenarios, and each receive d equal weighting, the stabilization scenario received 20% of the total probability weight.

Regarding potential inconsistencies between scenari os and IAMs, given the nature of estimating

the SC-CO 2 and available data/resources, a full harmonization along all possible dimensions of

the three IAMs used to estimate the SC-CO 2 with the four models used to develop the scenarios was not possible. Therefore, the IWG chose to harmo nize the models with respect to the scenario

variables to which SC-CO 2 estimates are most sensitive (GDP, population, and emissions) using common techniques in the literature. The scenarios used were developed by highly respected international modeling groups and published in the peer-reviewed literature. In terms of potential inconsistencies across scenario variables past 2100 , an effort was made to account for some basic correlations among scenario variables in the post-2 100 extrapolation. For example, extrapolations were based on GDP per capita growth, which implicitly correlates population and GDP growth, rather than GDP levels or growth alone. Similarly, extrapolations were based on

CO 2 emissions intensity with respect to GDP, which cor relates emissions and GDP growth,

rather than CO 2 emissions levels or growth alone.

Consistent with historical observations, it is expe cted that growth rates of rapidly developing economies will exceed those of already developed ec onomies in the near term. Scenarios with projections of global economic growth that exceed r ecent trends in developed economies are consistent with this expectation.

The chosen scenarios capture a wide range of potent ial future states of the world, but were not intended to represent a comprehensive accounting of the full range of uncertainty, and therefore it is possible that future outcomes will fall outsi de of this range. EPA and the members of the IWG have acknowledged that the projection of the sc enarios beyond 2100 has greater uncertainty than shorter-term projections and will continue to monitor the literature, including the development of extended RCP/SSP scenarios, for ways to improve the estimated trajectories and improve internal consistency.34

Comment 2: Most of the comments on the climate science compon ents of the SC-CO 2 modeling addressed the specification of the equilibrium clim ate sensitivity parameter though some others discussed the formulation and parameterization of o ther physical science components in the IAMs. In addition, a number of the commenters gener ally encouraged continued updating of the

SC-CO 2 to maintain the best scientific understanding of t he relevant earth system processes as new findings emerge. Some commenters stated that EP A did not use the latest climate science findings from the IPCC as part of its assessment of the proposal’s benefits and costs and, in one commenter’s view, there are significant differences between AR5 and AR5 related to climate impacts. In particular, these commenters stated tha t "AR5 moderates many of the key findings of AR4 which drives the damage functions used in the i ntegrated assessment models" and presents excerpts from AR5 and AR4 about five findings (anth ropogenic global warming, rate of warming extreme temperatures, equilibrium climate s ensitivity, and tropical cyclone activity).

Climate sensitivity. The equilibrium climate sensitivity (ECS) parameter is a measure of the climate’s responsiveness to increased concentration s of greenhouse gases in the atmosphere. Specifically, the ECS is the long-term increase in the annual global-average surface temperature from a sustained doubling of the atmospheric CO2 co ncentration relative to pre-industrial levels. Commenters supported the Interagency Working Group (IWG) approach of calibrating the distribution of Roe and Baker (2007) to the IPCC (2 007) Fourth Assessment Report (AR4) consensus statement on the ECS. However, commenters suggested updating this modeling input. Commenters suggested incorporating new research pub lished since the 2010 TSD was released. Commenters noted that in its Fifth Assessment Repor t the IPCC has revised its discussion of the likely range of climate sensitivity compared to AR4 (IPCC 2013). Commenters said that use of the ECS from AR4 does not satisfy EO 12866 requirem ents for proposed rules to be based on the best science available. Commenters pointed to indi vidual papers, such as Otto et al. (2013), which present lower and more constrained probabilit y density functions (pdfs) than either the AR4 or AR5 consensus statements, in support of the commenters’ suggestion that the pdf used by the IWG was biased high. Several commenters note d in a joint letter that the treatment of climate sensitivity was appropriate but that the IW G could go further in highlighting the costs of

fundamental uncertainties.

Commenters voiced general criticisms of the IWG app roach to the ECS due to the uncertainty about the shape of the climate sensitivity distribu tion and the sensitivity of the SCC estimates to the specification of the ECS distribution. Commente rs suggested that the IPCC has not made progress in reducing uncertainty about climate sens itivity and therefore the IPCC consensus should not be used. Commenters objected to the IWG use of the Roe and Baker (2007) distribution for the ECS. Commenters cited Pindyck (2013), stating that feedback loops within the climate system are largely unknown and therefor e the shape of the distribution is unknown. Commenters suggested that Roe and Baker’s assumptio n of a normally distributed climate feedback factor may not be theoretically correct, a nd suggested the use of alternative distributions. The commenters were particularly con cerned that the use of a right-skewed

distribution for the ECS would lead to an overestim ate of the mean SCC if the ECS distribution would be more appropriately modeled as symmetric, t hough some commenters suggested that the Roe and Baker approach correctly captured the r ight-skewed nature of the distribution.35

Commenters expressed concern about uncertainty and ECS stated that OMB and the IWG should

reconsider the substance of its social cost of carb on TSDs as a whole and to take a closer look at the transparency, methodology, and assumptions that these commenters believe create a high level of uncertainty in the resulting estimates of the social cost of carbon.

Other physical science components of the integrated assessment models. We define the physical science components of the models to include the mod eling of physical impacts, such as changes in mean global temperature or sea level rise. This definition excludes the functions in the models that translate those physical endpoints into econom ic damages, which is addressed in the discussion of damage functions in 8.7.2, comment #1 . Commenters expressed approval of the physical science components of the models but other s criticized specific components as being overly simplified or incomplete. For example, some commenters suggested that the version of the DICE model used may overestimate sea level rise relative to AR5 projections or estimates projected by the MAGICC climate model because of DI CE’s reliance on an outdated semiempirical methodology that uses models of reduced c omplexity in conjunction with statistical relationships between sea level and climate forcing

. 5 Commenters therefore concluded that the

DICE overestimates the SCC. The commenters did not investigate the sea level rise projections from the FUND or the PAGE model, but suggested that such an analysis be carried out prior to making any judgments about the SCC estimates from t hose models.

A group of commenters noted the need for more expli cit representation of the potential for lowprobability, high impact "catastrophes," calling fo r better modeling of multiple "tipping points" at the climatic thresholds indicated by the most re cent scientific literature.

Response 2: All of the comments on the climate science compone nts of the modeling underlying

the SC-CO 2 estimates mirror those submitted to the Office of Management and Budget’s separate comment solicitation on the SCC (78 FR 705 86; November 26, 2013). As a member of the interagency working group (IWG) on SC-CO 2 , EPA has carefully examined and evaluated comments submitted to OMB’s separate solicitation. EPA has also carefully examined and evaluated all comments received regarding SC-CO 2 through this rulemaking process and determined that the IWG responses to the comments o n the OMB solicitation address the comments on the climate science components of the m odeling underlying the SC-CO 2

. Specifically, EPA concurs with the IWG’s response t o these comments and hereby incorporates

5 MAGICC is the Model for the Assessment of Greenhous e Gas Induced Climate Change. For more information see Meinshausen et al. (2011).36

them by reference. 6 The remainder of this section elaborates on these comments in the context of this rulemaking.

EPA appreciates the commenters’ recommendations for potential opportunities to improve the

SC-CO 2 estimates and has considered each one in the conte xt of this rulemaking. EPA and other

members of the IWG have reconfirmed their commitmen t to periodic review and update of the methodology and estimates to ensure that they conti nue to reflect the best available science and economics. Furthermore, EPA and the other members o f the IWG have determined that the SCCO 2 methodological recommendations require additional research, review, and public comment before it can apply them to a rulemaking context.

To help synthesize the technical information and in put reflected in the comments, and to add additional rigor to the next update of the SC-CO 2 , the EPA and all of the other IWG members plan to seek independent expert advice on technical opportunities to improve the SC-CO 2 estimates, including the approaches suggested by co mmenters and summarized in this document. Specifically, EPA and all of the other IWG members plan to ask the National Academies of Sciences, Engineering, and Medicine (Academies) to examine the technical merits and challenges of potential approaches to improving the SC-CO 2 estimates in future updates. Input from the Academies, informed by the comments submit ted to this rulemaking and the peerreviewed literature, will help to ensure that the S C-CO 2 estimates used by EPA continue to reflect the best available science and methodologie s.

After careful evaluation of the full range of comme nts and associated technical issues described in section 8.7.2, EPA has determined that it will c ontinue to use the current SC-CO 2 estimates until further updates can be made to reflect forthc oming guidance from the Academies. EPA believes that the current estimates continue to rep resent the best scientific information on the impacts of climate change available in a form appro priate for incorporating the damages from

incremental CO 2 emissions changes into regulatory analysis. There fore, EPA has presented the

current SC-CO 2 estimates in this rulemaking. 7 EPA will continue to consider these comments

and will share the recommendations with the IWG as it moves forward with the Academies

process.

The remainder of this section provides more detaile d responses to the comments and

recommendations.

6 Referred to as the "OMB Response to Comments on SC- CO2." See pgs 11 to 17 at https://www.whitehouse.gov/sites/default/files/omb/ inforeg/scc-response-to-comments-finaljuly-2015.pdf

.

7 See https://www.whitehouse.gov/sites/default/files/ omb/inforeg/scc-tsd-final-july-2015.pdf37

Regarding comments on equilibrium climate sensitivi ty (ECS), the EPA is aware that this is an active area of research and as stated in OMB’s Resp onse to Comments on the SC-CO 2 , the IWG remains committed to updating the SC-CO 2 estimates to incorporate new scientific informatio n and accurately reflect the current state of scienti fic uncertainty regarding the ECS. While EPA agrees with commenters that the ECS distribution, a long with other climate modeling inputs to the SCC calculation, should be updated periodically to reflect the latest scientific consensus, care must be exercised in selecting an appropriate range of estimates for this important parameter. Many studies estimating climate sensitivity have be en published, based on a variety of approaches (instrumental record, paleoclimate obser vations, models, etc.). These individual studies report differing values and provide differe nt information. Picking a single study from the high or low end of the range, or even in the middle , will exclude relevant information. A valid representation of uncertainty regarding climate sen sitivity should be obtained from a synthesis exercise such as that done by the IPCC that conside rs the full range of relevant studies.

At the time the 2013 SC-CO 2 update was released, the most authoritative statem ent about ECS appeared in the IPCC’s AR4. Since that time, as sev eral commenters noted, the IPCC issued a Fifth Assessment Report that updated its discussion of the likely range of climate sensitivity compared to AR4. The new assessment reduced the low end of the assessed likely range (high confidence) from 2°C to 1.5°C, but retained the hig h end of the range at 4.5°C. Unlike in AR4, the new assessment refrained from indicating a cent ral estimate of ECS. This assessment is based on a comprehensive review of the scientific literat ure and reflects improved understanding, the extended temperature record for the atmosphere and oceans, and new estimates of radiative forcing.

Several of the post-AR4 studies highlighted by some commenters were cited in the AR5 assessment. In particular, both Aldrin et al. (2012 ) and Otto et al. (2013) were cited in both Chapter 10 and Chapter 12 of the AR5 Working Group I assessment. Eight of the authors of Otto et al. (2013), including the lead author, were auth ors of Chapter 12 for AR5’s Working Group I and one was a lead author for the chapter. Hence it is clear that the IPCC considered Otto et al. (2013) in its synthesis of literature on the ECS. M ore broadly, the AR5 climate sensitivity distribution likely incorporates much of the litera ture identified by the commenters. EPA will

continue to follow and evaluate the latest science on the equilibrium climate sensitivity. Furthermore, EPA and the other members of the IWG a re seeking external expert advice on the technical merits and challenges of potential approa ches prior to updating the ECS distribution in

future revisions to the SC-CO 2 estimates, including (but not limited to) using th e AR5 climate sensitivity distribution for the next update of the SC-CO2. 8

8 The IWG announced plans to seek independent expert advice from National Academies of Sciences, Engineering, and Medicine in July 2015,38

As discussed in Section II.A of the preamble, RTC s ection 8.7.1, the 2009 Endangerment Finding, and in the OMB RTC, among other resources, the links between CO 2 and temperature are established beyond question by laboratory measu rements, physical theory, paleoclimate observations, instrumental observations, and observ ations of other planets. Climate change and its impacts, such as sea level rise, have been exha ustively documented, and synthesized internationally by the IPCC and domestically by the U.S. National Climate Assessment. Based on the wide acceptance of these conclusions in the scientific community, EPA believes that: (1) anthropogenic emissions of greenhouse gases are cau sing atmospheric levels of greenhouse gases in our atmosphere to rise to levels unprecede nted in human history; (2) the accumulation of greenhouse gases in our atmosphere is exerting a wa rming effect on the global climate; (3) there are multiple lines of evidence, including increasin g average global surface temperatures, rising ocean temperatures and sea levels, and shrinking ic e in glaciers, ice sheets, and the Arctic, all showing that climate change is occurring, and that the rate of climate change in the past few decades has been unusual in the context of the past 1000 years; (4) there is compelling evidence that anthropogenic emissions of greenhouse gases ar e the primary driver of recent observed increases in average global temperature; (5) atmosp heric levels of most greenhouse gases are expected to continue to rise for the foreseeable fu ture; and (6) risks and impacts to public health and welfare are expected to grow as climate change continues, and that climate change over this century is expected to be greater compared to obser ved climate change over the past century.

While there are inherent uncertainties associated w ith modeling climate systems over long time spans, the general circulation models (GCMs) upon w hich estimates of ECS and other climate science research are based have been extensively ev aluated. For example, since 1989 the DOE has had a large program (The Program for Climate Mo del Diagnosis and Intercomparison) dedicated to evaluating these models.

The ECS parameter is a useful parameter for summari zing the strength of the climate system’s response to accumulating GHG concentrations in the atmosphere. However, it is influenced by many highly complex and uncertain natural processes , some of which adjust over very long periods of time. Therefore, persistent uncertainty about the ECS is not surprising. Furthermore, persistent uncertainty does not suggest an absence of useful information. However, EPA does not agree that progress has not been made in reducing t his uncertainty. Over the last 30 years the scientific community has elucidated many aspects of the climate system’s response to GHGs accumulating in the atmosphere. While the AR5 "like ly" range is slightly larger than that of AR4, the assessment presented greater confidence in the tails. AR5 found that climate sensitivity is very unlikely to be greater than 6°C, whereas AR 4 stated that the "lack of strong constraints

https://www.whitehouse.gov/blog/2015/07/02/estimati ng-benefits-carbon-dioxide-emissionsreductions.39

limiting high climate sensitivities prevents the sp ecification of a 95 th percentile bound." Similarly, while the AR5 and the IPCC’s (2001) Thir d Assessment Report (TAR) bounds look similar, the TAR bounds were presented as a range w ithout estimated probabilities.

In response to the commenters citing Pindyck on cli mate feedbacks and the shape of the ECS distribution, we agree that potential climate feedb acks and their strength are uncertain. However, the IWG chose a distribution from the peer-reviewed literature based on its evaluation of the scientific literature and the relationship between this distribution and IPCC range of the ECS. Regarding the skewness of the calibrated ECS distri bution, this characteristic is common among the many approaches that have been used to study th e ECS distribution and is not unique to the theoretical approach used by Roe and Baker to defin e the functional form of their distribution. Consistent with the AR4 discussion on limiting the distribution to a range considered possible by experts, such as from 0°C to 10°C, the IWG truncate d the distribution at 10 o C (Hegerl 2007, p 719).

EPA disagrees with the comment that "AR5 moderates many of the key findings of AR4." This response (8.7.2, comment 2) has already discussed i n detail EPA’s assessment of the AR5 findings on climate sensitivity and the implication s for the SC-CO2 estimates. The other examples given by the commenters—anthropogenic warm ing, rate of warming, extreme temperatures, and tropical cyclone activity—are not findings that have been moderated in AR5. In fact, AR5 strengthened the conclusions about att ribution of anthropogenic global warming by accounting for pollutants with a cooling effect and by strengthening the likelihood of warming ("very likely" in AR4 to "extremely likely" in AR5) . Similarly, the AR5 findings on tropical cyclone activity strengthened from "suggestions" in AR4 to "virtually certain" increases in frequency and intensity of the strongest tropical c yclones in the North Atlantic basin. The remaining two examples given by the commenters high light historical information, not projections. EPA further notes that the commenters have not identified or discussed whether and how these particular AR5 findings would affect the SC-CO 2 estimates.

In addition, EPA notes that Section II of the pream ble discusses many new assessment reports published since the 2009 Endangerment Finding, incl uding the recent USGCRP’s 2014 Third National Climate Assessment (NCA3), the IPCC’s 2013 -4 Fifth Assessment Report (AR5) and IPCC’s 2012 "Special Report on Managing the Risks o f Extreme Events and Disasters to Advance Climate Change Adaptation" (SREX). Section II of the preamble highlights changes, such as sea level rise, and cites the confidence in human attribution. The preamble concludes that the "findings of the recent scientific assessm ents confirm and strengthen the conclusion that greenhouse gases endanger public health, now and in the future." See also section 8.7.1, comment 3, of this RTC for EPA’s response to commen ts about use of the latest climate science, including AR5 findings, in analyses separate from t he IWG SC-CO 2 estimates. Section 8.7.2, comment 1, provides a detailed response to comments on the methodology, including the damage functions in the integrated assessment model s, used to estimate the SC-CO 2 . Section 8.7.2, comment 5 provides a detailed response to co mments regarding the transparency of the

SC-CO 2 process.

Other physical science components of the integrated assessment models.40

A key objective of the IWG was to draw from the ins ights of the three models while respecting the different approaches to linking GHG emissions a nd monetized damages taken by modelers in the published literature. After conducting an exten sive literature review, the interagency group selected three sets of input parameters (climate se nsitivity, socioeconomic and emissions trajectories, and discount rates) to use consistent ly in each model. All other model features were left unchanged, relying on the model developers’ be st estimates and judgments, as informed by the then-current literature. While the IAMs are per iodically updated, the rapid pace of research in the area of climate science means that at any given time there may be new research that has not yet been incorporated into one or more models. Thus , while a given model may not always reflect the most recent research regarding any give n climate subsystem, the IWG concluded that, at the time, the IAMs collectively represented the state of the science by bringing all these systems together into a single framework. 9

A benefit of using an ensemble of three models is t hat they cover a range of potential outcomes as expressed in the literature. For example the thr ee models used collectively span a range of carbon cycle and climate change responsiveness that reflects the uncertainty in the literature.

With regards to comments on the temperature respons e function, the past 15 years of observed atmospheric temperatures cannot be compared directl y to climate model simulations because (1) observed temperatures were influenced by volcanic e ruptions that were not included in simulations because the timing and spatial distribu tion of eruptions are not known in advance; and (2) the last 15 years of atmospheric temperatur es have been strongly influenced by natural climate variability due to oceanic fluctuations, su ch as the El Niño Southern-Oscillation; models include this variability, but no attempt is made to synchronize the models’ timing of this variability with observed variability. In other wor ds, while the models incorporate variability around a trend over time, they cannot predict how t hat variability affects measured temperatures in a specific year.

Regarding the criticisms by commenters of the sea l evel rise projections in DICE, EPA recognizes that sea level rise projections are also an area of ongoing research. One key issue involves projections of melt from the Greenland and West Antarctic ice sheets. The IPCC AR5 report notes there is a possibility of sea level ri se "substantially above" their best estimate of a likely range because of uncertainties regarding the response of the Antarctic ice sheet (AR5 Working Group I, Chapter 13). In AR5 the IPCC also discusses semi-empirical methods, stating a low confidence in projections based on such metho ds, which calibrate a mathematical model

9 As previously noted, EPA is a member of the IWG and has reviewed the IWG modeling decisions in the context of this rulemaking. EPA co ncurs with the IWG’s conclusion that it is reasonable, and scientifically appropriate, to use the current SC-CO2 estimates for purposes of regulatory impact analysis, including for this proc eeding.41

against observations rather than projecting individ ual processes. However, the IPCC did not entirely discount these methods. Further supporting the use of semi-empirical methods, the U.S. National Climate Assessment uses an average of the high end of semi-empirical projections in order to define their "Intermediate-High" Scenario (Parris et al., 2012). Therefore, it is reasonable for one out of three models used by the IWG to include some reliance upon semiempirical methods.

EPA is aware that more sophisticated yet still rela tively simplified climate models, such as MAGICC, could be used to replace the highly simplif ied climate science components of the three IAMs. However, given the range of climate mod els available and the technical issues associated with such a change, replacing the climat e modules or other structural features of the IAMs requires additional investigation before it ca n be applied to SCC estimation. EPA will

continue to follow and evaluate the latest science on climate modeling and, along with other members of the IWG, is seeking external expert advi ce on the technical merits and challenges of potential approaches to updating this component of the IAMs in future revisions to the SCC

estimates.

We agree with the commenters who suggested the IAMs do not fully capture the impacts associated with changes in climate variability and weather extremes. For example, as discussed in the 2010 TSD, the calibrations in FUND and DICE do not account for increases in climate variability that may occur and would affect the agr icultural sector. Similarly, we agree that the models’ functional forms may not adequately capture potentially discontinuous "tipping point" behavior in Earth systems. In fact, large-scale ear th system feedback effects (e.g., Arctic sea ice loss, melting permafrost, large scale forest diebac k, changing ocean circulation patterns) are not modeled at all in one IAM, and are imperfectly capt ured in the others. This limitation of the three IAMs is discussed extensively in the 2010 TSD, and again in the 2013 update. The SC-CO 2 estimate associated with the 95 th percentile of the distribution based on the 3 perc ent discount rate is included in the recommended range partly to address this concern. EPA and the other

members of the IWG will continue to follow and eval uate the latest science on climate variability and potential tipping points, and seek external expert advice on the technical merits and challenges of potential approaches to improve t he representation of these components of the modeling in future revisions.

Comment 3: Many commenters discussed the scope of the SCC est imates, specifically whether damages experienced outside U.S. borders should be considered in domestic regulatory analysis. Commenters that supported use of global SCC estimat es explained that climate change is a global commons problem because carbon pollution doe s not remain within one country's borders, and that the use of global damages in the SCC is co nsistent with the economic theory of the

commons. These commenters further stated that if da mage estimates are limited to only those within each country's borders, any actions based on those estimates would lead to a collective failure to optimally mitigate GHG emissions. Commen ters referred to the importance of this effect by stating that the consideration of global damages in domestic rulemaking can be based on an expectation of reciprocity from other countri es. Commenters stressed the importance of the use of global SCC estimates as a tool in internatio nal negotiations. Finally, commenters offered other reasons for considering damages in regions ou tside of the United States, including liability,42

national security concerns, trade-related "spillove r effects," and the principle in international environmental law of reducing cross-border harm.

In addition, commenters interpreted use of a global SCC as consistent with Clean Air Act 115.

Commenters stated "The U.S. National Environmental Policy Act recognizes 'the worldwide and long-range character of environmental problems' and requires federal agencies to include reasonably foreseeable transboundary effects in the ir environmental impact statements." "Section 115 of the CAA directs EPA and the states to mitiga te U.S. emissions that endanger foreign health and welfare. The global perspective on clima te costs and benefits required by that provision should inform all regulatory actions deve loped under the CAA."

Commenters, however, disagreed with the use of a gl obal SCC estimate and stated that domestic damage estimates should be used instead. Some comm enters stated that use of a global SCC to compare international benefits and domestic costs w as arbitrary and capricious and contrary to law and federal policy. Commenters stated they "do not believe EPA has the authority to regulate GHG emissions outside the fenceline." Som e commenters presented assumptions about the U.S. fraction of a global SCC estimate (e.g., U .S. SCC as 7 percent of the global SCC) and used those assumptions to recalculate the climate b enefits of the proposal.

Several commenters stated that use of the global SC C violated section 115 of the Clean Air Act. For example, commenters stated that Section 115(a) specifically requires that when the

Administrator of the EPA "has reason to believe tha t any air pollutant or pollutants emitted in the U.S. cause or contribute to air pollution which may be reasonably anticipated to endanger public health or welfare in a foreign country or whenever the Secretary of State requests him to do so with respect to pollution which the Secretary of St ate alleges is of such a nature, the Administrator shall give formal notification thereo f to the Governors of the State in which such emissions originate." "Without such actions, EPA is forbidden from counting these harms or benefits in its analysis."

Similarly, other commenters stated that Section 115 of the Clean Air Act outlines EPA's required steps for addressing U.S. -originated pollution for the purpose of mitigating impact on public health and welfare in foreign countries. The commen ters said that Section 115 clearly states that EPA must formally notify the Governors of the offen ding States to submit a plan under section

110. The commenters said that in order for EPA to c ount international benefits under 111(d) and thus justify its rulemaking, the plain language of Act requires EPA to first list CO2 (and/or other GHGs) as a criteria pollutant, establish a limit an d then direct States to develop plans and that no such steps have been taken by EPA. The commenters c larified that as per Section 115, EPA may only proceed with mitigating impacts on countries w ith which the U.S. has established reciprocity agreements.

In addition, commenters stated that domestic SCC es timates must be used in RIAs to ensure consistency with OMB Circular A-4 requirements.

Additional excerpts from commenters that disagreed with use of a global SCC:

Commenters also stated "In a statutory purpose stat ement accompanying the subchapter of which CAA Section 111(d) is a part, Congress made clear t hat its purpose is to benefit the national43

environment - not the world at large." The commente rs also stated "EPA's reliance on global climate change effects to justify its rule is incon sistent with the agency's former acknowledgment that for rulemaking under the CAA, foreign effects are not relevant in themselves but only insofar as they impact the U.S."

Commenters also stated "EPA attempts to justify its reliance on foreign benefits by the observation that 'we expect other governments to co nsider the global consequences of their greenhouse gas emissions when setting their own dom estic policies.' But of course EPA has no power to control whether foreign countries regulate greenhouse gases at all, much less how they calculate the benefits of their own regulation." "I n the absence of... reciprocal action by other nations... the global benefits of SCC cannot be reg arded as a legitimate entry in the benefit-cost ledger."

Response 3: The comments regarding the scope of the SC-CO 2 estimates mirror those submitted to the Office of Management and Budget’s separate c omment solicitation on the SC-CO 2 (78 FR 70586; November 26, 2013). As a member of the inte ragency working group (IWG) on SC-CO 2 , EPA has carefully examined and evaluated comments s ubmitted to OMB’s separate solicitation. EPA has also carefully examined and evaluated all c omments received regarding SC-CO 2 through this rulemaking process and determined that the IWG responses to the comments on the OMB solicitation address the comments on the scope of SC-CO 2 estimates and use of the estimates in this RIA. Specifically, EPA concurs w ith the IWG’s response to these comments and hereby incorporates them by reference. 10

After careful evaluation of the full range of comme nts and associated technical issues described in section 8.7.2, EPA has determined that it will c ontinue to use the current SC-CO 2 estimates until further updates can be made to reflect forthc oming guidance from the Academies. EPA believes that the current estimates continue to rep resent the best scientific information on the impacts of climate change available in a form appro priate for incorporating the damages from

incremental CO 2 emissions changes into regulatory analysis. There fore, EPA has presented the

current SC-CO 2 estimates in this rulemaking. 11

In addition, the comments regarding consistency wit h OMB Circular A-4 are addressed in 8.7.2,
comment 5. The remainder of this section elaborates on these comments in the context of this rulemaking.

10 Referred to as the "OMB Response to Comments on SC- CO2." In particular, see pgs 30 to 32 at https://www.whitehouse.gov/sites/default/files/o mb/inforeg/scc-response-to-comments-finaljuly-2015.pdf .

11 See https://www.whitehouse.gov/sites/default/files/ omb/inforeg/scc-tsd-final-july-2015.pdf44

EPA agrees with the commenters stating that a focus on global SC-CO 2 estimates in RIAs is appropriate. As discussed in the 2010 TSD, the IWG determined that a global measure of SCCO 2 is appropriate in this context because emissions of most greenhouse gases contribute to damages around the world and the world’s economies are now highly interconnected. To reflect the global nature of the problem, the SC-CO 2 incorporates the full damages caused by CO 2 emissions and other governments are expected to con sider the global consequences of their greenhouse gas emissions when setting their own dom estic policies.

As stated in the OMB Response to Comments on SC-CO 2 , if all countries acted independently to set policies based only on the domestic costs and b enefits of carbon emissions, it would lead to an economically inefficient level of emissions redu ctions which could be harmful to all countries, including the United States, because eac h country would be underestimating the full value of its own reductions. This is a classic publ ic goods problem because each country’s reductions benefit everyone else and no country can be excluded from enjoying the benefits of other countries’ reductions, even if it provides no reductions itself. In this situation, the only way to achieve an economically efficient level of emiss ions reductions is for countries to cooperate in providing mutually beneficial reductions beyond the level that would be justified only by their own domestic benefits. By adopting a global estimat e of the SC-CO 2 , the U.S. government can signal its leadership in this effort. In reference to the public good nature of mitigation and its rol e in foreign relations, thirteen prominent academics noted that these "are compelling reasons to focus on a global [SC-CO 2 ]" in a recent article on the SC-CO 2 (Pizer et al., 2014). In addition, as noted by commenters, there is no bright line betwee n domestic and global damages. Adverse impacts on other countries can have spillover effec ts on the United States, particularly in the areas of national security, international trade, pu blic health and humanitarian concerns.

GHG emissions in the United States will have impact s abroad, some of which may, in turn, affect the United States. For this reason, a purely domestic measure is likely to understate actual impacts to the United States. Also, as stated above , the EPA and the other members of IWG believes that accounting for global benefits can en courage reciprocal action by other nations, leading ultimately to international cooperation tha t increases both global and U.S. net benefits

relative to what could be achieved if each nation c onsidered only its own domestic costs and benefits when determining its climate policies.

Further, as explained in the 2010 TSD, from a techn ical perspective, the development of a

domestic SC-CO 2 was greatly complicated by the relatively few regi on- or country-specific

estimates of the SC-CO 2 in the literature, and impacts beyond our borders have spillover effects on the United States, particularly in the areas of national security, international trade, and public health. As a result, it was only possible to includ e an "approximate, provisional, and highly speculative" range of 7 to 23 percent for the share of domestic benefits in the 2010 TSD. This range was based on two strands of evidence: direct domestic estimates resulting from the FUND model, and an alternative approach under which the fraction of GDP lost due to climate change

is assumed to be similar across countries.

Regarding the comments on Clean Air Act Section 115 and the implications for use of a global

SC-CO 2 , EPA notes that these commenters read into section 115 limitations and requirements that do not appear in the statutory text.45

Section 115(a) of the Clean Air Act requires the Ad ministrator to give formal notification to the Governor of a State in a very specific and limited circumstances. Specifically, the provision provides: "Whenever the Administrator, upon receipt of reports, surveys or studies from any duly constituted international agency has reason to beli eve that any air pollutant or pollutants emitted in the United States cause or contribute to air pol lution which may reasonably be anticipated to endanger public health or welfare in a foreign coun try or whenever the Secretary of State requests [her] to do so with respect to such pollut ion which the Secretary of State alleges is of such a nature, the Administrator shall give formal notification thereof to the Governor of the State in which such emissions originate." Section 115(b) further provides that notices issued under 115(a) are deemed to be findings under sectio n 110(a)(2)(H)(ii) of the Clean Air Act and thus any state receiving such a notice must revise its state implementation plan to address the offending emissions.

Section 115(c), in turn, provides that the section only applies "to a foreign country which the Administrator determines has given the United State s essentially the same rights with respect to the prevention or control of air pollution occurrin g in that country as is given that country by this section." In other words, unless the Administrator determines a foreign country has given the United States the same rights section 115 gives to foreign countries, the Administrator is not required issue any notification that would otherwis e be required under 115(a). Contrary to the commenters’ assertion, section 115 does not mention or refer to "reciprocity agreements." Moreover, section 115(c) does not in any way limit the Administrator’s discretion to act under other statutory provisions. It simply limits the r each of 115(a) by defining which countries are covered by the requirement for the Administrator to give formal notification under that section regarding pollution originating in the United State s that affects health and welfare in a foreign
country.

There is also no support in section 115 or any prov ision of the Clean Air Act for the

commenters’ assertion that EPA is forbidden from co unting harms or benefits occurring in other countries without first taking action under section 115. Section 115 requires the Administrator to

issue a formal notification in the limited set of s pecific circumstances outlined above and identifies the obligations that flow from the issua nce of such notifications. It does not, as the commenters suggest, include language prohibiting th e EPA from considering the impact of U.S. emissions on foreign countries in other contexts. Indeed, the United States has a long history of working together with other countries to address ai r quality issues. As explained above, the reciprocity provision in section 115(c) merely defi nes the applicability of section 115. Nothing

in the text of the section addresses the extent to which EPA may consider or address the impacts beyond its borders that are related to air pollutio n originating in the United States, or suggests that action under section 115 is a prerequisite to counting international harms and benefits in any analysis.

Finally, there is no support for the assertion that section 115 requires EPA to list CO 2 and/or other GHGs as criteria pollutants and notify state Governors to submit plans under section 110 before taking any action to mitigate the impact of U.S. emissions on public health and welfare in foreign countries or counting international benefit s in other rulemaking contexts. Not only does the limitation commenters identify simply not appea r in the statutory text, but section 115(d) explicitly retains certain prior recommendations wi th respect to pollutants for which NAAQS46

have not been established. It would be absurd to in terpret a section that explicitly retains recommendations relating to the impact of non-NAAQS pollutants on foreign countries as prohibiting the Administrator from considering such impacts unless a NAAQS has been established for the pollutant.

Regarding the comment that EPA lacks authority to r egulate GHG emissions outside the fenceline, EPA notes that application of the SC-CO 2 to estimate the social benefits of emission reductions is entirely separate from regulating emi ssions. Conducting an economic analysis does not confer any legal or regulatory obligations. See the preamble, including section IV, for discussion about the scope of the final rule and th e legal justification.

As stated in the OMB Response to Comments on SC-CO2 , the IWG concluded that the only way

to achieve an efficient allocation of resources for emissions reduction on a global basis is for all countries to base their policies on global estimate s of damages. The IWG has therefore continued to recommend the use of global SC-CO 2 estimates in regulatory impact analyses. EPA agrees with the IWG conclusion and has used the glo bal SC-CO 2 estimates in the RIA for this rulemaking.

Comment 4: EPA received comments on the analyses and presenta tion of uncertainty in the TSD as well as comments regarding the implications of uncertainty for the use of SC-CO 2 estimates in the RIA.

• Commenters stated "The [SC-CO2] is an important and accepted tool for regulatory policy-making based on well-established law and fundamental economics." "The legal and analytic basis for using the [SC-CO2] is clear and

well-established. As a matter of law and economics , uncertainty in the benefits estimates does not mean they should be excluded fro m regulatory impact analyses."

• Commenters stated that the SC-CO2 estimates reflect an inadequate treatment of uncertainty and that the modeling does not provide an acceptable range of accuracy for use in policymaking.

• Commenters recommended re-considering the approach used to treat uncertainty

in the estimation of the SC-CO 2 , and referred to the EPRI report, Understanding the Social Cost of Carbon: A Technical Assessment, for details. The report highlights concerns with the treatment of uncertain ties standardized across models (socioeconomic and emissions scenarios, equilibrium climate sensitivity) as well as treatment of model structure uncertainty via use of multiple models and the analysis of model-specific parameteric uncertaintie s. Regarding model structure uncertainty, the commenters found "significant diff erences in responses across models (e.g., climate change, climate damages, and response sensitivity) that need to be further evaluated to establish that they are legitimate reflections of uncertainty". For model specific parametric uncerta inties, the report finds substantial inconsistency in the climate change and damage uncertainties47 considered across models. The models explore very d ifferent parametric uncertainty in both components and therefore repres ent different uncertainty spaces. The USG modeling uses the means from these uncertainties, yet these means do not appear to come from the same statistic al population, which is required for averaging." The commenters stated that the report finds that there are also additional categories of uncertainty to consid er in the modeling (e.g., socioeconomic structure, alternative climate modeli ng, alternative specifications for 2013 revisions, and alternative 2300 extrapolat ions).

• Commenters recommended a robustness evaluation to t est the sensitivity of modeling results to alternatives, develop an experi mental design that produces results that are robust to alternatives, and to pro vide the public with greater

confidence in final SCC estimates. The commenters s tated that they have

identified reasonable alternatives to the current m odeling and that robustness was

not evaluated in the USG SCC exercise.

• The wide range of SC-CO2 values that EPA and the ot her IWG members developed is too broad to be useful, but still does not reflect the full range of uncertainty associated with measuring the impacts ( both positive and negative) of climate change; and

• There are serious questions regarding the usefulnes s of a single dollar amount to represent the asserted climate benefits of rulemaki ngs, particularly given the

severe limitations of climate science and the assoc iated uncertainties with estimating the future costs and benefits of a regul ation's impact on climate change."

Response 4: The comments regarding the consideration of uncert ainty in SC-CO 2 estimates mirror those submitted to the Office of Management and Budget’s separate comment solicitation on the SC-CO2 (78 FR 70586; November 26, 2013). As a member of the interagency working group (IWG) on SC-CO 2 , EPA has carefully examined and evaluated comments submitted to OMB’s separate solicitation. EPA has also carefull y examined and evaluated all comments received regarding SC-CO 2 through this rulemaking process and determined tha t the IWG responses to the comments on the OMB solicitation a ddress the process comments summarized in this section. Specifically, EPA concurs with the IWG’s response to these comments and hereby incorporates them by reference. 12

12 Referred to as the "OMB Response to Comments on SC- CO2." In particular, see pgs 28 to 30 at https://www.whitehouse.gov/sites/default/files/o mb/inforeg/scc-response-to-comments-finaljuly-2015.pdf .48

After careful evaluation of the full range of comme nts and associated technical issues described in section 8.7.2, EPA has determined that it will c ontinue to use the current SC-CO2 estimates until further updates can be made to reflect forthc oming guidance from the Academies. EPA believes that the current estimates continue to rep resent the best scientific information on the impacts of climate change available in a form appro priate for incorporating the damages from incremental CO2 emissions changes into regulatory a nalysis. Therefore, EPA has presented the current SC-CO2 estimates in this rulemaking. 13 EPA will continue to consider these comments

and will share the recommendations with the IWG as it moves forward with the Academies

process.

The remainder of this section elaborates on the unc ertainty comments in the context of this rulemaking.

EPA agrees with the comments that supported the rig or of its uncertainty analysis. Uncertainty is inherent in all regulatory impact analysis. It is e specially salient in regards to the SC-CO2 estimates because of their broad spatial and tempor al dimensions. In addition to conducting Monte Carlo analysis for a subset of key parameters , the EPA and the other members of the IWG included extensive discussion of uncertainty in the TSDs, and the documentation for the

individual IAMs themselves contains additional disc ussion of the assumptions and uncertainties in the models. The 2010 TSD and the updated 2013 TS D provided visual depictions of the

distributions of the SC-CO2 estimates in addition t o detailed statistics including percentiles and higher order moments. In addition to the extensive information provided in the TSDs, EPA has provided the full range of model results to outside researchers upon request and will continue to

do so.

Regarding comments on uncertainty in the context of the socioeconomic-emission scenarios, see 8.7.2, comment 1.

The 2010 TSD reports SC-CO2 estimates out to one de cimal place (i.e., at least two significant digits) and the current TSD reports to the nearest dollar (i.e., two or three significant digits, depending on the year and discount rate/statistic). EPA and the other members of the IWG chose not to use decimal places in the 2013 TSD to avoid the impression of artificial precision but will also explore presentation with a consistent number of significant digits. EPA and the other IWG members welcome the recommendations to strengthen t he characterization of uncertainty and plan to seek external expert advice on the technica l merits and challenges of potential approaches to improve the characterization and analysis of unc ertainty in future updates.

13 See https://www.whitehouse.gov/sites/default/files/ omb/inforeg/scc-tsd-final-july-2015.pdf49

Regarding comments on the modeling of uncertainty i n the SC-CO 2 analysis, including the uncertainty explicitly represented in the IAMs and whether it captures the full range of uncertainty of the "true" value of the SC-CO 2 , see section 8.7.2, comment 8.

EPA disagrees with the comments stating that the SC -CO 2 is neither useful nor appropriate because of uncertainty, the broad range of estimate s. EPA also disagrees that it is inappropriate to try to value the impacts of reductions in CO 2 emissions. EPA notes that in 2007, the Ninth Circuit Court remanded a fuel economy rule to DOT f or failing to monetize the benefits of the CO2 emissions reductions in its regulatory impact a nalysis, noting that "the value of carbon emissions reduction is certainly not zero."

All regulatory impact analysis involves uncertainty . EPA acknowledges uncertainty in the SCCO 2 estimates but disagrees that the uncertainty is so great as to undermine use of the SC-CO 2 estimates in regulatory impact analysis. The uncert ainty in the SC-CO 2 estimates is fully acknowledged and comprehensively discussed in the T SDs and supporting academic literature. While uncertainty must be acknowledged and addresse d in regulatory impact analyses, even an uncertain analysis provides useful information to d ecision makers and the public. For example, if an analysis shows that benefits of a policy option consistently do (or do not) justify costs even over a broad range of estimates, this may increase confidence in the robustness of this conclusion. Conversely, if choices among parameter estimates within a plausible range significantly affect the conclusions of the analysi s, this is an important consideration in deciding how to weigh the analytical results in the decision making process. The presence of uncertainty

is thus not a reason to exclude the best available estimates of quantified/monetized benefits, as long as it is appropriately characterized. Rather, good regulatory practice requires that agencies use the best available scientific, technical and ec onomic information to derive the best estimates of costs and benefits that they can, and then commu nicate to the public the limitations and uncertainties of the analyses. The RIA for this rul emaking and the SC-CO 2 TSDs clearly discuss the limitations and uncertainties of the analysis. As noted in the RIA and TSDs, EPA is committed to periodic updates in the estimates to r eflect ongoing developments in our understanding of the science and economics of clima te change, including the treatment of uncertainty.

Comment 5: Commenters either voiced support for or criticized particular aspects of the interagency process used to develop the SC-CO2 esti mates. Process issues raised included legal/statutory authority for issuing the estimates and consistency with applicable OMB guidance documents, transparency, opportunity for public com ment. The commenters that criticized the50

process used to develop the SC-CO2 estimates incorp orated by reference the SC-CO2 comments it had submitted to OMB in response to the OMB SC-C O 2 comment solicitation. 14

Legal/statutory authority for issuing the SC-CO2 es timates

• Commenters stated that the SCC is an "agency action " as defined by 5 USC 551(13) of the APA and by itself can be considered a "rule" as defined by 5 USC 551(4).

• Commenters stated that given EPA's usage of the SCC , the commenter recommended that the new Congress use procedural me chanisms of the Congressional Review Act (CRA) to enable effective oversight of the SC-CO2.

• Commenters noted that the CRA explicitly establishe s that it is the Congress that determines the scope of its provisions to rules, no t EPA, and that it may do so

without interference from the Executive or the Judi ciary. Commenters noted that the CRA can enable deliberation by both Houses of C ongress and floor votes on identifiable rules by way of joint resolutions of d isapproval and that filibusters in the Senate may be avoided. Commenters also noted th at while such resolutions may be approved or vetoed by the President, the res pective floor votes may be used by the Congress in its deliberations over what appropriations may or may not be used by corresponding agency actions to administ er and enforce the respective

rule.

Consistency with applicable OMB guidance documents, transparency, opportunity for public

comment

• Commenters stated "The analytic work of the IWG has been transparent. The

2010 TSD set out in detail the IWG's decision-makin g process with respect to how it assessed and employed the models." "The 2013 TSD also establishes that

the increase in the SCC estimate from 2010 to 2013 resulted solely from updates to three underlying IAMs." "Furthermore, the GAO fo und that 'the working group's processes and methods reflected the followi ng three principles: Used consensus-based decision making, Relied on existing academic literature and models, and Took steps to disclose limitations and incorporate new information." "The OMB last year created a further opportunity fo r public comments and transparent review specifically on the SCC."

14 See OMB-2013-0007-009151 • Other commenters objected to EPA's use of SCC estim ates to justify regulation because of the nontransparent manner and methodolog y as well as the inconclusive results of the analysis. The commenter s stated that the choice of nonreviewed IAMs and associated input assumptions used to develop the SCC are arbitrary, and that discount rates were also applie d inconsistently. The commenters, in conjunction with other entities, ide ntified the following issues

with the SCC estimates:

− "The estimates were derived from a closed and nontr ansparent process;

− The process deviated from established OMB guideline s by not analyzing a seven percent discount rate and by not providing do mestic SCC values;

− The government's choice of inputs to the IAMs, and the choice of IAMs themselves, that were used to derive the SCC estima tes did not undergo peer review or public comment and are highly uncertain. Commenters stated that EPA's use of the 2013 Technical support Document fo r the Social Cost of Carbon for Regulatory Impact Analysis (SCC) under E .O. 12866 is foundational and unacceptably flawed.

• Commenters stated that stakeholder engagement has b een absent at critical definitional stages, such as initial modeling param eters and assumptions used to develop SCC values, and that must allow stakeholder s the opportunity to provide public comments during the entire development of SC C values.

• Commenters stated "The EPA's cost benefit analysis is also problematic because it is based in part upon SCC estimates which have not gone through a rulemaking process or been subject to the rigors of notice, pu blic comment, and peer review."

• Commenters stated that "the proposed rule is a viol ation of federal law and is counter to the public's interest" because "Executiv e Order 12866 clearly states, that among other things, agencies should assess all costs and benefits." "First, EPA has incorporated OMB draft estimates of the SCC for use in the CPP but they have yet to go through either public or peer r eview."

• Commenters stated "EPA must forego use of the SCC u ntil there is full peer review and an opportunity for public comment on all aspects of the SCC." "Throughout the 2009-2013 process, the IWG repeated ly notes the tremendous uncertainties involved with trying to assess future damages from climate change

and how to assess the true environmental costs in o rder to assign a value to the SCC to address potential future damages. Yet, the IWG proceeded without reaching out for greater public and stakeholder inp ut on how to appropriately address these great uncertainties."

• "Second, in terms of practical implementation, use of the SCC has lacked transparency and has violated long-standing OMB gui delines."52 • Commenters stated the reliance on SCC to estimate t he benefits of reducing CO2 emissions "is arbitrary and capricious due to multi ple flaws in OMB's analysis. Among the flaws in the [SCC] are the government's o paque process and lack of transparency in formulating the [SCC] estimates, re liance upon modeling with inputs that lacked peer review, the failure to disc lose and quantify key uncertainties involved in the modeling, the failure to incorporate benefits associated with increased temperature, the reliance on low discount rates that inflate benefits compared to the 7-10% discount rat es at which many business decisions are made, the failure to apply present va lue adjustments to future costs and benefits, and the sue of a global benefit estim ate that severely limits the SCC's utility to determining possible costs to the United States."

• Commenters expressed concern that this modeling ana lysis lacks transparency and grossly overstates the benefit of this action o n the global environment."

• Commenters stated "Further, the SCC is predicated u pon as assumptions of global rather than domestic benefits, which a recent GAO r eport indicated was contrary to guidance requiring domestic estimates."

• Commenters stated that "EPA's SCC estimates fail in terms of process and transparency. EPA's SCC estimates fail to comply w ith guidance for developing influential policy-relevant information under the I QA. EPA's SCC estimates are the product of an opaque process and any pretension s to their supposed accuracy (and therefore usefulness in policy-making) are uns upportable."

• Commenters stated "EPA personnel made the SCC estim ates modeling runs and it is the EPA that is reviewing and compiling the comm ents while shielding itself behind an ad hoc IWG being resourced almost entirel y by EPA." "EPA deprives the IWG, OMB and the other executive rulemaking age ncies of the benefit of any public input on the critical decisions, inputs, and assumptions that form the basis

of the SCC estimates." "The SCC estimates are incon sistent with the Administration's stated goals for transparency in s cientific information."

• Commenters stated, "The need for external peer revi ew is even more compelling
due to EPA's use of its own unsubstantiated methodo logy in the SCC estimates." The IAM damage functions, which drive the estimates , are entirely speculative. It is not clear which model EPA prefers and why it is preferable." "EPA's process of selecting the models and input assumptions, includi ng much of the basic information underlying these decisions, has been sh ielded from public scrutiny." "Because it is a highly influential scientific docu ment, EPA's SCC estimates are subject to the highest standards under its own peer review handbook under the IQA. Further, EPA combined three separate IAMs int o a distinct methodology in its SCC estimates. EPA should comply with the IQA and President Obama's Scientific Integrity directive by submitting its SC C estimates and inputs and assumptions for external and independent peer revie w."53 • Commenters stated "EPA inappropriately relied on qu estionable SCC estimates to justify the proposal. The estimates were derived t hrough an opaque process and used IAMs that were not peer reviewed or subject to public comment."

• Commenters stated "The EPA's cost-benefit analysis is also problematic because it is based in part upon SCC estimates which have n ot gone through a rulemaking process or been subject to the rigors of notice, pu blic comment, and peer review. The lack of transparency and data quality surroundi ng the SCC estimates should automatically disqualify them from use in any rulem aking process until these problems can be addressed."

• Commenters claimed "EPA overestimates the climate b enefits of the proposed ESPS regulation" and provided the following critici sm of the SCC estimates: (1) Lack of transparency and peer review in the process by which the estimates were generated and (2) IWG should provide all data, mode ls, assumptions, and analysis

relied on to arrive at the SCC estimates.

Response 5: The comments regarding the process issues mirror t hose submitted to the Office of Management and Budget’s separate comment solicitati on on the SC-CO 2 (78 FR 70586; November 26, 2013). As a member of the interagency working group (IWG) on SC-CO 2 , EPA has carefully examined and evaluated comments submi tted to OMB’s separate solicitation. EPA has also carefully examined and evaluated all comme nts received regarding SC-CO 2 through this rulemaking process and determined that the IWG resp onses to the comments on the OMB solicitation address the process comments summarize d in this section. Specifically, EPA concurs with the IWG’s response to these comments and hereb y incorporates them by reference. 15

After careful evaluation of the full range of comme nts and associated technical issues described in section 8.7.2, EPA has determined that it will c ontinue to use the current SC-CO 2 estimates until further updates can be made to reflect forthc oming guidance from the Academies. EPA believes that the current estimates continue to rep resent the best scientific information on the impacts of climate change available in a form appro priate for incorporating the damages from

incremental CO 2 emissions changes into regulatory analysis. There fore, EPA has presented the

current SC-CO 2 estimates in this rulemaking. 16 EPA will continue to consider these comments

and will share the recommendations with the IWG as it moves forward with the Academies

process.

15 Referred to as the "OMB Response to Comments on SC -CO2." In particular, see pgs 34 to 41 at https://www.whitehouse.gov/sites/default/files/o mb/inforeg/scc-response-to-comments-finaljuly-2015.pdf

.

16 See https://www.whitehouse.gov/sites/default/files /omb/inforeg/scc-tsd-final-july-2015.pdf54

See section 8.7.2, comment 3, for EPA’s detailed re sponse to comments on the use of a global versus domestic SCC. See section 8.7.2, comment 7, for EPA’s detailed response to comments

about the selection of the discount rate. See also EPA’s detailed response to comments on the IAMs and damage functions in 8.7.2, comment 1, EPA’ s response to comments on uncertainty in 8.7.2, comment 4, and EPA’s response to comments re garding the application of the SC-CO2 estimates to this rulemaking in 8.7.2, comment 8.

The remainder of this section elaborates on the pro cess comments in the context of this rulemaking.

Legal/statutory authority for issuing the SC-CO2 es timates

EPA agrees with commenters who believe that federal agencies have legal authority to develop these estimates, and notes that the IWG was cogniza nt of the Ninth Circuit decision referenced by these commenters when it decided to do so. EPA d oes not agree that the IWG’s issuance of the SC-CO2 estimates constituted an APA rulemaking. As noted in the OMB Response to Comments on SC-CO2, the IWG did not agree with comm ents that issuance of the SCC estimates constitutes an APA rule making (page 34). The APA definition of a rule is "an agency statement of general or particular applicability an d future effect designed to implement, interpret, or prescribe law or policy." The SCC estimates are not designed to implement, interpret, or prescribe law or policy. Rather they are intended t o provide guidance to agencies on a sciencebased methodology for estimating the benefits of CO 2 reductions in regulatory impact analysis.

EPA notes that OMB has long-established authority t o oversee the regulatory review process, including preparation of regulatory impact analyses . OMB’s authority in this area is contained in Executive Orders 12866 and 13563, among others, and has been acknowledged by Congress in a series of statutes, including the Small Business Re gulatory Enforcement and Fairness Act, the Congressional Review Act, the Information Quality A ct, and the Regulatory Right to Know Act. It is fully consistent with this authority for OMB to offer guidance to agencies on best practices for conducting regulatory impact analysis, as it di d, for example, in issuing Circular A-4. In the case of the SC-CO2 estimates and underlying TSDs, O MB determined that it was appropriate to exercise this authority through a consensus-based p rocess involving a broad range of agencies that may issue rules affecting CO2 emissions.

The TSDs explain in detail the factual and policy b asis for all of the various methodological choices involved in developing the SCC estimates. T he IAMs are documented in the scientific literature. In addition, EPA has assisted intereste d members of the public in obtaining additional information on the workings of the models. It has a lso provided full technical details of its own use of the models, including output of model runs, to interested parties upon request. However,

because the SC-CO 2 estimates are not a rule, as a legal matter they a re not subject to the arbitrary and capricious standard of the APA.

Consistency with applicable OMB guidance documents, transparency, opportunity for public

comment

EPA agrees with the commenters that concluded the a nalytic work of the IWG has been transparent and provided clear examples in support of this conclusion. As discussed below, EPA55

disagrees with the comments that (1) the process to develop the SC-CO2 was non-transparent and (2) that this process was inconsistent with the Administration’s goals for transparency in

scientific information.

Furthermore, EPA strongly disagrees with the claim that the Agency has not provided information necessary to understand the SC-CO2 esti mates and that it "deprives the IWG, OMB and other executive rulemaking agencies of the bene fit of any public input on the critical decisions, inputs, and assumptions that form the ba sis of the SCC estimates." First, EPA notes that the estimates and supporting TSDs are develope d and issued through a consensus based process involving the entire working group. Second, EPA has assisted individual requestors in obtaining more detailed information about the model ing. For example, one requestor noted publically that the EPA "modelers have been very op en, collegial, and helpful." 17 EPA has also responded to numerous letters from members of Congr ess regarding the SC-CO2 estimates as well as requests under FOIA. 18

In particular, EPA believes that the process was in clusive, transparent, and appropriately considered public input. The TSDs fully document th e methodology used to develop the

estimates and the considerations that led the IWG t o adopt this methodology. While the details of the IWG’s internal processes were not discussed in the TSDs, this is common for most government (and non-government) documents. Such det ails were not considered germane to the public’s understanding of the SC-CO2 estimates and the methodology used to produce them, but a general overview is provided here.

In developing the 2010 estimates, the EPA and other members of the IWG met frequently in the year preceding the release of the February 2010 TSD . For the 2013 update, only a few meetings were needed because the group decided to make no ch anges beyond incorporating the most recent versions of the IAMs. IWG members, in partic ular professional economic staff with modeling expertise oversaw the primary modeling and calculations for both the 2010 and 2013 SCC estimates using the most recent versions of the three IAMs available at the time. To develop the 2010 estimates, the staff members ran two of th e three models and contracted with the developer of the third model to perform those runs. The contractor did not participate in any of the interagency meetings but rather received instru ctions for how to conduct the model runs (e.g., specification of the three sets of input assumption s as determined by the working group). The staff members ran all three models to develop the 2 013 estimates. Decision making for both the 2010 and 2013 processes was by consensus of IWG mem bers. The details of internal discussions

17 See http://dailysignal.com/2013/11/06/white-house- reopens-the-scc/

18 For example, January 16, 2014 letter from Joel Beau vais, Associate Administrator, to Senator Vitter. EPA also responded to FOIA requests submitt ed by Sidley and Austin (EPA-HQ-2013- 009517, EPA-HQ-2013-009518, EPA-HQ-2013-009523).56

are deliberative, but the discussions were generall y technical in nature and the issues discussed

and conclusions reached are well documented in the TSDs. Regarding the transparency of the underlying models themselves, the IWG notes that th ey are well documented in the academic

literature.

The Government Accountability Office (GAO) also com pleted a review of the process used to develop the SCC estimates. In its 2014 report, GAO concluded that according to IWG participants, all major issues discussed were docum ented in the TSDs, which is consistent with Federal standards for internal control, and the pro cesses and methods used were based on the principles of (1) consensus-based decision-making, (2) reliance on existing academic literature and modeling, and (3) disclosure of limitations and incorporation of new information through consideration of public comments and revision of th e estimates as updated research became

available. 19 Furthermore, the level of documentation for this interagency exercise was not found to be unique to this working group. The GAO report confirms that interagency working groups use a variety of mechanisms to implement interagenc y collaborative efforts, including temporary working groups, and that not all collaborative arra ngements, particularly those that are informal, need to be documented through written guidance and agreements.

Regarding the explanation in the TSD for the 2013 r evisions, no changes were made to the input assumptions developed by the IWG between the 2010 a nd 2013 estimates. The only changes were those made by the model developers themselves to the underlying models, which are

documented in the academic literature. To assist th e public in understanding these changes, the 2013 TSD provides a summary of the most important o nes, as well as references to the relevant

literature where more detailed information can be f ound. As with the 2010 TSD, the IWG did not attempt to evaluate the modeling choices made by th e modelers. Rather, by selecting the three "most widely used impact assessment models" (NAS, 2 010), the IWG intended to reflect a reasonable range of modeling choices and approaches that collectively reflect the current literature on the estimation of damages from CO2 em issions. As explained in the 2010 TSD:

The parameters and assumptions embedded in the thre e models vary widely. A key objective of the interagency process was to enable a consistent exploration of the three models while respecting the different approaches to quantifying damages taken by the key modelers in the field. An extensive review of t he literature was conducted to select three sets of input parameters for these models: cl imate sensitivity, socio-economic and emissions trajectories, and discount rates...All othe r model features were left unchanged, relying on the model developers’ best estimates and judgments...The sensitivity of the results to other aspects of the models (e.g. the ca rbon cycle or damage function) is also

19 See http://www.gao.gov/products/GAO-14-663.57

important to explore in the context of future revis ions to the SCC but has not been incorporated into these estimates.

Accordingly, the IWG did not attempt to explain in detail how the damage functions in the models were constructed or their strengths and weak nesses, either for the earlier model versions used in the 2010 estimates or for the updated versi ons used for the 2013 estimates. Rather,

stakeholders who are interested in these details ar e encouraged to consult the model

documentation and the related academic literature r eferenced in the TSDs, as well as the model developers themselves. As noted in the OMB Response to Comments on SC-CO2, the IWG accepts the point that clearer citations to specifi c model versions and revisions would be helpful and will attempt to address this in the next update of the TSD.

Regarding opportunities for public comment, EPA not es that such opportunities have been provided on all aspects of the SCC estimates in the interim estimates (2009) selected by the IWG and in the numerous proposed rules, including the p roposal for this rulemaking, issued by EPA since February 2010 that made use of the estimates. As a general practice, EPA requests comments on all aspects of the regulatory impact an alysis, thereby providing ample opportunity for the public to comment on SC-CO2 estimates used in these analyses. These comments helped inform the development of the 2013 revised estimate s. In addition, OMB provided a stand-alone comment period on the 2013 estimates.

Regarding the adequacy of the information provided to the public as a basis for comment, the TSDs provide a complete record of the methodology a nd assumptions used to develop the SCC estimates, including references to the academic lit erature. As previously noted, independent analysts have sought and received information from EPA allowing them to implement the IWG’s SC-CO2 approach and modify it further if they choos e. Additional documentation is available in

the academic literature on the IAMs themselves.

With regard to peer review, the assumptions and mod els employed in generating the SC-CO2 estimates are all drawn from the peer-reviewed acad emic literature. To further strengthen the robustness of the SCC estimate, EPA and the other m embers of the IWG plan to seek external expert advice on technical opportunities to improve the SCC estimates in future updates, including many of the approaches suggested by comme nters and peer-reviewed literature, and

summarized in this document.

Regarding comments that the estimates not be used u ntil a future update that corrects the commenters’ perceived flaws is completed, EPA does not feel that it is appropriate to withdraw the current estimates. As previously noted, EPA ha s carefully examined and evaluated the full range of comments and associated technical issues d escribed in section 8.7.2, and determined

that it will continue to use the current SC-CO2 est imates until further updates can be made to reflect forthcoming guidance from the Academies. E PA believes that the current estimates continue to represent the best scientific informati on on the impacts of climate change available in a form appropriate for incorporating the damages fr om incremental CO2 emissions changes into regulatory analysis. EPA will continue to consider these comments and will share the

recommendations with the IWG as it moves forward wi th the Academies process.58

EPA disagrees that the TSDs and SC-CO2 estimates ar e inconsistent with OMB and EPA guidance, including OMB Circular A-4 and guidelines under the Information Quality Act. To ensure that the SC-CO2 methodology is transparent, the TSDs are comprehensive and technically rigorous in explaining the sources of d ata, the assumptions employed, the analytic methods applied, and the statistical assumptions em ployed. To ensure that the results are reproducible, EPA and other IWG members have provid ed technical assistance and modeling results to external stakeholders upon request.

Circular A-4 is a living document, which may be upd ated as appropriate to reflect new developments and unforeseen issues. OMB was fully i nvolved in the development of the SCCO2 estimates as a working group co-chair and suppo rts the recommendations regarding the discount rate and the focus on global damages. The departure from the standard discount rate recommendations in Circular A-4 is explained in det ail in the TSDs and in Section 8.7.2, comment 7, of this document. Briefly, the use of 7 percent is not considered appropriate for intergenerational discounting. There is wide suppor t for this view in the academic literature, and it is recognized in Circular A-4 itself. The emphas is on global rather than domestic damages is also explained in detail in the TSDs. Beyond the fa ct that good methodologies for estimating domestic damages do not currently exist, basing dec isions on only the domestic damages from

carbon emissions will lead to an inefficient alloca tion of resources to reducing them, especially if all countries adopt a similarly short-sighted appro ach. An efficient outcome can only be achieved

if all countries consider the full costs and benefi ts of their actions; the United States continues to be a leader in working to establish such a regime i nternationally.

In addition, consistent EPA-wide implementation of its peer review and information quality act guidelines has been an agency priority for many yea rs. The most recent document describing this EPA guidance, Guidance for Evaluating and Documenting the Quality of Existing Scientific and Technical Information , was issued in December 2012 as an addendum to a 2 003 EPA guidance document entitled, A Summary of General Assessment Factors for Evaluat ing the Quality of Scientific and Technical Information . The December 2012 addendum does not create new standards for assessing and accepting data from other organizations – the Agency’s existing information quality guidance continues to be applie d to previous and future actions. Rather, the December 2012 addendum references EPA’s comprehensi ve existing information quality guidance and creates a consistent Agency-wide appro ach for reviewing and documenting the use of existing scientific and technical information fr om other organizations.

The 2010 TSD for the SC-CO2 estimates provides docu mentation of the interagency decisions and the 2013 TSD documents the technical update. Co nsistent with EPA’s 2003 data quality guidance document and the December 2012 addendum re ferenced above, the 2010 and 2013 TSDs for the SC-CO2 estimates describe the type and quality of information used to estimate the

social cost of carbon as well as the sources for th e information used (documentation of modeling inputs—e.g., climate sensitivity and socioeconomic scenarios—in the peer reviewed literature). The 2010 and 2013 TSDs also provide exhaustive docu mentation of how the IWG’s review identified, evaluated, and adopted the data, assump tions, and analytical framework used to develop the SC-CO2 estimates. Furthermore, the IAM s used to develop the IWG SC-CO2 estimates are documented within the peer reviewed l iterature and source code is available on the model developers’ websites or upon request from the relevant developer.59

Finally, commenters significantly misstate the law regarding both the rights afforded under the Data Quality Act and the nature of guidance impleme nting it. First, Prime Time Int’l Inc. v. Vilsack, 599 F.3d 678, 685 (D.C. Cir. 2010) does no t stand for the proposition that IQA claims are judicially reviewable, contrary to commenters’ assertions. The case makes no such statement, and the D.C. Circuit has indicated other wise by its citation, in State of Mississippi, of Salt Institute’s holding that such claims are not r eviewable (see text above). See also Mississippi Comm’n on Environmental Quality v. EPA, No. 12-1309 at n. 29, 2015 WL 3461262, (D.C. Cir. June 2, 2015) noting that Prime Time dismissed an I QA challenge "without addressing argument that the statute creates no legal rights in third p arties", and, as quoted above, stated that "almost every court that has addressed an Information Quali ty Act challenge has held that the statute ‘creates no legal rights in any third parties’"(quo ting Salt Institute)). The commenters also fail to acknowledge all of the other cases uniformly reject ing this claim, and indeed, fail to acknowledge the text of the IQA itself. See Styren e Info. & Research Ctr., Inc. v. Sebelius, 944 F. Supp. 2d 71, at 82 (D.D.C. 2013) (concluding "th at the IQA and OMB guidelines do not provide judicially manageable standards); Harkonen v. U.S. Dept. of Justice, 2012 U.S. Dist. LEXIS 171415, at **30–36 (N.D. Cal. 2012) (dismissi ng argument that D.C. Circuit reached the merits of an IQA claim in Prime Time); Family Farm Alliance v. Salazar, 749 F. Supp. 2d 1083, 1096–1100 (E.D. Cal. 2010) (rejecting argument that D.C. Circuit in Prime Time found an implicit right of action under the IQA).

The commenters also read Prime Time as holding that the OMB Guidelines are binding legislative rules. Guidelines are just that: they provide assistance and are not binding. Describing these OMB Guidelines, the D.C. Circuit n oted that the Guidelines provide "‘policy and procedural guidance’", are meant to be "flexibl e" and are to be implemented differently by different agencies accounting for circumstances. S tate of Mississippi, 744 F.3d at 1347; see Styrene Info. & Research Ctr, Inc., 944 F. Supp. 2d at 82. State of Mississippi antedates Prime Time. EPA consequently believes that the OMB Guide lines are not binding legislative rules.

Nor are EPA’s Peer Review guidelines binding legisl ative rules. EPA first issued its Peer Review Policy in 1993, and in 1998 issued its Peer Review Handbook to provide non-binding guidance for implementation of the Peer Review Poli cy. In 2004, OMB issued its Final Information Quality Bulletin for Peer Review (OMB B ulletin) to provide government-wide guidance to enhance the practice of peer review. EP A subsequently updated its Peer Review Policy and Peer Review Handbook to incorporate the provisions of the OMB Bulletin. EPA’s IQGs, Peer Review Policy, and Peer Review Handbook do not bind the Agency, but instead guide EPA’s exercise of discretion when making deci sions about information quality and peer review. API v. EPA, 684 F. 3d 1342, 1348 (D.C. Cir. 2012) (chastising industry petitioners for characterizing the EPA peer review guidance as bind ing ("perhaps the API should have had its brief peer-reviewed"); State of Mississippi v. EPA, 744 F.3d at 1347 (D.C. Cir. 2013). The suggestion in the comments that EPA’s Inspector Gen eral has decreed that the Peer Review guidance is binding both mischaracterizes the IG’s statements and that Office’s function. It does not determine the legal status of agency documents, much less countermand the holding of the D.C. Circuit just cited.60

Comment 6: Commenters disagreed about whether the integrated assessment models

overestimate or underestimate CO 2 fertilization effects in the agriculture and fores try sectors. For example, commenters wrote "only one of the three IA Ms used by the IWG has any substantial impact from CO 2 fertilization, and the one that does, underestimat es the effect by approximately 2-3 times," referencing Idso (2013). However, other commenters argued that "the models do not reflect recent research on agricultural changes, wh ich suggests that CO 2 fertilization is overestimated, particularly in the FUND model, and that much, if not all, of the fertilization benefits may be cancelled out by negative impacts o n agriculture."

Some commenters also stated that the SCC severely u nderestimates the "greening" effect and that only one of the three models included in the S CC even addresses it.

Response 6: The comments regarding CO 2 fertilization effects in the agriculture and fores try sectors and "greening effect" issues mirror those s ubmitted to the Office of Management and Budget’s separate comment solicitation on the SC-CO 2 (78 FR 70586; November 26, 2013). As a member of the interagency working group (IWG) on SC-CO 2 , EPA has carefully examined and evaluated comments submitted to OMB’s separate soli citation. EPA has also carefully examined and evaluated all comments received regarding SC-CO 2 through this rulemaking process and determined that the IWG responses to the comments o n the OMB solicitation address the CO 2 fertilization effects in the agriculture and forest ry sectors and "greening effect" issues summarized in this section. Specifically, EPA concu rs with the IWG’s interagency working group’s response to these comments and hereby incor porates them by reference. 20

After careful evaluation of the full range of comme nts and associated technical issues described in section 8.7.2, EPA has determined that it will c ontinue to use the current SC-CO 2 estimates until further updates can be made to reflect forthc oming guidance from the Academies. EPA believes that the current estimates continue to rep resent the best scientific information on the impacts of climate change available in a form appro priate for incorporating the damages from

incremental CO 2 emissions changes into regulatory analysis. There fore, EPA has presented the

current SC-CO 2 estimates in this rulemaking. 21 EPA will continue to consider these comments

and will share the recommendations with the IWG as it moves forward with the Academies

process.

The remainder of this section elaborates on the com ments in the context of this rulemaking.

20 Referred to as the "OMB Response to Comments on SC -CO2." In particular, see pgs 7-11 at https://www.whitehouse.gov/sites/default/files/omb/ inforeg/scc-response-to-comments-finaljuly-2015.pdf.

21 See https://www.whitehouse.gov/sites/default/files /omb/inforeg/scc-tsd-final-july-2015.pdf61

As noted in the OMB Response to Comments on SC-CO2, to date, the IWG has accepted the models as currently constituted, and omitted any da mages or beneficial effects that the model developers themselves do not include. The IWG recog nizes that none of the three IAMs fully incorporates all climate change impacts, either pos itive or negative. Some of the effects referenced by commenters (e.g., "catastrophic" effe cts, disease, and CO2 fertilization) are explicitly modeled in the damage functions of one o r more of the current models (although the treatment may not be complete), and the model devel opers continue to update their models as new research becomes available. In fact, the IWG un dertook the 2013 revision because of updates to the models, which include new or enhance d representation of certain impacts, such as sea level rise damages. In addition, some of the ca tegories mentioned by commenters are currently speculative or cannot be incorporated int o the damage function for lack of appropriate data. Using an ensemble of three different models w as intended to, at least partially, address the fact that no single model includes all of the impac ts. We recognize that there may be effects that none of the three selected models addresses (e.g., impacts from ocean acidification) or that are likely not fully captured (e.g. catastrophic effect s).

EPA also recognizes that the impacts of climate cha nge on agriculture is an area of active research and that methodological and data challenge s persist. As a result there is uncertainty as to the magnitude of these impacts and the role of inte ractions between changes in the climate and other factors, such as CO 2 fertilization, temperature, precipitation, ozone, pests, etc. Additionally, these effects are likely to vary wide ly across regions and crops. However, with high confidence the IPCC (2013) stated in its Fifth Assessment Report (AR5) that "[b]ased on many studies covering a wide range of regions and c rops, negative impacts of climate change on crop yields have been more common than positive imp acts." As noted above, the IWG’s approach to date has been to rely on the damage fun ctions included in the three IAMs by their developers.

EPA agrees that it is important to update the SC-CO 2 periodically to incorporate improvements in the understanding of greenhouse gas emissions im pacts and will continue to follow and evaluate the latest science on impact categories th at are omitted or not fully addressed in the IAMs. Also, EPA and the other members of the IWG wi ll seek external expert advice on the technical merits and challenges of potential approa ches to update the damage functions in future

revisions to the SC-CO2 estimates.

See also 8.7.1, comment 8, for EPA’s response to co mments about carbon fertilization, including EPA’s general treatment of the impact of increased CO2 on plant growth and about treatment of

CO2 fertilization in models.

Comment 7: Numerous commenters discussed the discount rates u sed to estimate the SC-CO2. Some commenters stated that it would be appropriate to include a 7 percent discount rate in the range used to estimate the SCC while others stated that the central SC-CO2 estimate should be based on a discount rate lower than 3 percent or on a rate that declines over time.

Recommendations for a 7 percent discount rate62

Most commenters who made this comment cited OMB’s C ircular A-4, which identifies 3 percent and 7 percent as appropriate discount rates for reg ulatory impact analysis conducted pursuant to
Executive Order 12866. A few commenters offered mor e specific rationales for using a higher

discount rate. Some commenters noted that in the Un ited States market interest rates of around 7 percent per year have typically been associated wit h per capita GDP growth rates of around 1.5 percent per year, and the socio-economic scenarios used in estimating the SCC assume per capita GDP growth rates at least this high. Other commente rs noted that low discount rates place relatively more weight on outcomes further in the f uture, which are more uncertain than near

term outcomes. Several commenters indicated that a 7 percent discount rate is appropriate because it represents a better estimate of the oppo rtunity cost of capital investments that would be displaced under compliance with a potential regu lation to mitigate CO2 emissions.

A couple of commenters claimed that EPA presents cl imate benefits figures in the preamble at only the 3 percent discount rate rather than at all four discount rates, including the 5 percent rate, recommended by the IWG.

Recommendations for lower discount rates

Some commenters recommended a declining discount ra te; they emphasized discount rate uncertainty and cited research by Weitzman (2001), Newell and Pizer (2003), and Arrow et al. (2013) on this topic, noting that these studies sho w that under persistent uncertainty about the discount rate, and/or economic growth, the maximiza tion of expected net present value implies a

discount rate that declines over time.

Commenter also stated "the discount rates used in t he modeling platforms minimize the SCC estimates, as they do not accord a sufficient measu re of equity between current and future generations. Rather, presume a constant measure of positive economic growth even though the models predict significant GDP losses due to climat e change."

Several commenters noted that uncertainty about fut ure economic growth rates implies that

future benefits and costs should be discounted to t he present at a rate lower than what would be appropriate in the absence of uncertainty.

Other discounting comments

Some commenters disagreed with applying different d iscount rates to benefit estimates for CO2

emission reductions than to the estimates for other emissions, concluding that this treatment causes a bias in the economic analysis.

Response 7: The comments regarding discount rates applied to th e SC-CO2 estimates mirror those submitted to the Office of Management and Bud get’s separate comment solicitation on the SCC (78 FR 70586; November 26, 2013). As a member of the interagency working group (IWG) on SC-CO2, EPA has carefully examined and eva luated comments submitted to OMB’s separate solicitation. EPA has also carefully exam ined and evaluated all comments received regarding SC-CO2 through this rulemaking process an d determined that the IWG responses to

the comments on the OMB solicitation address the co mments on the discount rates applied to the SC-CO2 estimates. Specifically, EPA concurs with t he IWG’s response to these comments and63

hereby incorporates them by reference. 22 The remainder of this section elaborates on these comments in the context of this rulemaking.

EPA and other members of the IWG have reconfirmed t heir commitment to periodic review and update of the methodology and estimates to ensure t hat they continue to reflect the best available science and economics. Furthermore, EPA has determi ned that the SCC methodological recommendations require additional research, review , and public comment before it can apply them to a rulemaking context.

To help synthesize the technical information and in put reflected in the comments, and to add additional rigor to the next update of the SC-CO2, the EPA and all of the other IWG members plan to seek independent expert advice on technical opportunities to improve the SC-CO2 estimates, including the approaches suggested by co mmenters and summarized in this document. Specifically, EPA and all of the other IWG members plan to ask the National Academies of Sciences, Engineering, and Medicine (Academies) to examine the technical merits and challenges of potential approaches to improving the SCC estimates in future updates. Input from the Academies, informed by the comments submitted t o this rulemaking and the peer-reviewed literature, will help to ensure that the SCC estima tes used by EPA continue to reflect the best available science and methodologies.

After careful evaluation of the full range of comme nts and associated technical issues described in section 8.7.2, EPA has determined that it will c ontinue to use the current SC-CO2 estimates until further updates can be made to reflect forthc oming guidance from the Academies. EPA believes that the current estimates continue to rep resent the best scientific information on the impacts of climate change available in a form appro priate for incorporating the damages from incremental CO2 emissions changes into regulatory a nalysis. Therefore, EPA has presented the current SC-CO2 estimates in this rulemaking. 23 EPA will continue to consider these comments

and will share the recommendations with the IWG as it moves forward with the Academies

process.

The remainder of this section provides more detaile d responses to the comments and

recommendations.

Recommendations to use a 7 percent discount rate

22 Referred to as the "OMB Response to Comments on SC -CO2." In particular, see pgs 20 to 25 at https://www.whitehouse.gov/sites/default/files/o mb/inforeg/scc-response-to-comments-finaljuly-2015.pdf .

23 See https://www.whitehouse.gov/sites/default/files /omb/inforeg/scc-tsd-final-july-2015.pdf64

OMB guidance in Circular A-4 recommends that discou nt rates of 3 percent and 7 percent be used in regulatory impact analysis. The 7 percent r ate is an estimate of the average before-tax real rate of return to private capital in the U.S. economy. It is a broad measure that reflects the returns to real estate and small business and corpo rate capital and is meant to approximate the opportunity cost of capital in the United States. T he 3 percent rate is an estimate of the real rate at which consumers discount future consumption flow s to their present value, often referred to as the social rate of time preference or the consumpti on rate of interest. As stated in the 2010 TSD, in a market with no distortions, the return to savi ngs would equal the private return on investment, and the market rate of interest would b e the appropriate choice for the social discount rate. In the real world, however, risk, ta xes, and other market imperfections drive a wedge between the risk-free rate of return on capit al and the consumption rate of interest.

While most regulatory impact analysis is conducted over a time frame in the range of 20 to 50 years, OMB guidance in Circular A-4 recognizes that special ethical considerations arise when comparing benefits and costs across generations. Al though most people demonstrate time preference in their own consumption behavior, it ma y not be appropriate for society to demonstrate a similar preference when deciding betw een the well-being of current and future generations. Future citizens who are affected by su ch choices cannot take part in making them, and today's society must act with some consideratio n of their interest. Even in an intergenerational context, however, it would still be correct to discount future costs and benefits generally (though perhaps at a lower rate than for intragenerational analysis), due to the expectation that future generations will be wealthi er and thus will value a marginal dollar of benefits or costs less than the current generation. Therefore, it is appropriate to discount future

benefits and costs relative to current benefits and costs, even if the welfare of future generations is not being discounted. Estimates of the discount rate appropriate in this case, from the 1990s, ranged from 1 to 3 percent. After reviewing those c onsiderations, Circular A-4 states that if a rule will have important intergenerational benefits or costs, agencies should consider a further sensitivity analysis using a lower but positive dis count rate in addition to calculating net benefits using discount rates of 3 and 7 percent.

EPA and the other members of the IWG examined the e conomics literature and concluded that the consumption rate of interest is the correct con cept to use in evaluating the net social costs of a marginal change in CO2 emissions, as the impacts of climate change are measured in consumption-equivalent units in the three IAMs used to estimate the SCC. This is consistent with OMB’s guidance in Circular A-4, which states that w hen a regulation is expected to primarily affect private consumption—for instance, via higher prices for goods and services--it is appropriate to use the consumption rate of interest to reflect how private individuals trade-off current and future consumption.

As explained in the 2010 TSD, after a thorough revi ew of the discounting literature, the IWG chose to use three discount rates to span a plausib le range of constant discount rates: 2.5, 3, and 5 percent per year. The central value, 3 percent, is consistent with estimates provided in the economics literature and OMB’s Circular A-4 guidanc e for the consumption rate of interest. The upper value of 5 percent represents the possibility that climate damages are positively correlated with market returns, which would suggest a rate hig her than the risk-free rate of 3 percent. Additionally, this discount rate may be justified b y the high interest rates that many consumers65

use to smooth consumption across periods. The low v alue, 2.5 percent, is included to incorporate the concern that interest rates are highly uncertai n over time. It represents the average rate after adjusting for uncertainty using a mean-reverting an d random walk approach as described in Newell and Pizer (2003), starting at a discount rat e of 3 percent. Further, a rate below the riskless rate would be justified if climate investments are negatively correlated with the overall market rate of return. Use of this lower value also respon ds to the ethical concerns discussed above regarding intergenerational discounting.

EPA recognizes that disagreement remains in the aca demic literature over the appropriate discount rate to use for regulatory analysis of act ions with significant intergenerational impacts, such as CO2 emissions changes that affect the globa l climate on long time scales. EPA and the

members of the IWG will continue to follow and eval uate the latest science on intergenerational discounting and seek external expert advice on issu es related to discounting in the context of climate change.

EPA notes that the comment that EPA only presents c limate benefits figures in the preamble at only the 3 percent discount rate rather than at all four discount rates recommended by the IWG is incorrect. The tables clearly present climate bene fits based on all 4 recommended SC-CO2 estimates; see, for example, Tables 12 and 13 at 79 FR 34936; June 18, 2014. The summary tables presented in the beginning of the preamble u se the central SC-CO2 estimate and clearly

note that additional SC-CO2 estimates were consider ed and presented in the RIA.

Recommendations for lower discount rates or a decli ning rate

As noted above, the EPA and the other members of th e IWG selected a range of discount rates from 2.5 to 5 percent; a review of the literature a nd the reasoning that led to the selection of this range are discussed in detail in the 2010 TSD. Seve ral of the issues raised by commenters were explicitly considered and were part of the rational e for the selected range.

The TSD discusses both descriptive and prescriptive approaches to selecting discount rates. A descriptive approach reflects a positive (non-norma tive) perspective based on observations of people’s actual choices (e.g., savings versus consu mption and allocation of savings over more and less risky investments). The prescriptive appro ach adds a normative component and incorporates judgments that decision makers believe should be reflected in the policy choices

that the discount rate is intended to inform. For e xample, some have argued on ethical grounds that in the Ramsey formula—which dissects market ra tes into three components, the pure rate of time preference ( ρ ), growth rate of per-capita consumption (g), and c oefficient of relative risk aversion ( η )—the ρ component should be set to zero so that the welfar e of all generations is valued equally. After considering a range of plausi ble values from the literature for g and η , the IWG concluded that setting a very low ρ (e.g., 0.1 percent per year) could yield rates in the range of 1.4 to 3.1 percent.

The TSD also discussed uncertainty and its effects on discount rates. The certainty equivalent values of the future benefits of reducing current C O2 emissions will be lower than the expected value if the benefits and future consumption are po sitively correlated, assuming people are risk averse on average. This in turn implies that when d iscounting expected future benefits a discount66

rate that accounts for uncertainty should exceed a riskless rate. As explained in the TSD, this consideration was part of the logic for setting the upper end of the selected range at 5 percent.

EPA and other members of the IWG also considered th e issue of "climate catastrophes." To the extent that such outcomes may not be adequately rep resented in the IAMs, the central tendency estimates from these models may not capture the ful l range of potential damages from CO2 emissions. For this reason, in addition to the thre e mean SCC estimates using discount rates of 2.5, 3 and 5 percent, EPA and other members of the IWG recommended including a rate based on the 95th percentile damage estimate (with a 3 pe rcent discount rate) for the upper end of the range of plausible SC-CO2 estimates.

With respect to declining discount rates, EPA and o ther members of the IWG agrees that this is an important area of emerging research. However, no widely-accepted declining discount rate schedule has yet been developed. Some key technical issues warrant careful consideration before adopting a declining discount rate schedule, such a s determining how to update the discount rate schedule as uncertainty is resolved over time and e nsuring that the use of declining discount rates does not lead to the possibility of time-inconsiste nt choices. A recent workshop sponsored by the federal government resulted in a paper in Science a uthored by thirteen prominent economists who concluded that a declining discount rate would be appropriate to analyze impacts that occur far into the future (Arrow et al., 2014). However, additional research and analysis is still needed to develop a methodology for implementing a declini ng discount rate and to understand the implications of applying these theoretical lessons in practice. The EPA and other members of the

IWG will continue to follow and evaluate the latest science on the use of declining discount rates in intergenerational contexts and seek external exp ert advice on issues related to discounting in the context of climate change.

Finally, regarding the comment about the consistenc y of discount rates applied to the climate benefits versus other monetized impacts: while EPA continues to find the discount rates applied to the SC-CO2 estimates to be appropriate, it recog nizes that different discount rates are applied to other impacts. The workshop mentioned in the pr eceding paragraph discussed how to apply discounting in a regulation where some costs and be nefits accrue intra-generationally while others accrue inter-generationally. The experts no ted that one solution to this problem is to apply a declining discount rate schedule to all regulatio ns. 24 As previously noted, additional research and analysis is needed to develop a methodology for implementing a declining discount rate.

The EPA and other members of the IWG will continue to follow and evaluate the latest science on the use of declining discount rates in intergene rational contexts and seek external expert advice on issues related to discounting in the cont ext of climate change.

24 See http://rff.org/Documents/Events/Workshops%20an d%20Conferences/110922- Discounting/Main_Points.pdf67

Comment 8: Commenters discussed the aggregation of IAM result s and the selection of the final range of SCC estimates as well as the application o f the SCC estimates to proposed rulemaking.

Aggregation and selection of SCC estimates

Some commenters were concerned that pooling the SCC estimates across scenarios and models ignores variability and uncertainties in the estima tes and inappropriately implies that the "true" value of the SCC falls within the range of estimate s calculated by the three models. Other commenters argued that pooling the results across m odels and scenarios should be abandoned given the uncertainty around the factors that drive the estimates. A few commenters suggested

that the median of the distribution of SCC estimate s rather than the mean, as used by the IWG, would be a more appropriate measure of the central tendency of the SCC estimates.

Commenters stated that the SCC estimates are diffic ult to interpret and evaluate because they are the result of significant aggregation of global soc ioeconomic, climate, and damage modeling over 300 years and aggregation of results across th ree models (DICE, FUND, PAGE), over time, across scenarios, and across impact categories and regions. The commenters provided the following recommendations:

• A detailed review of modeling differences, alternat ives, and uncertainties represented would be beneficial to resolve or justi fy differences, improve comparability and uncertainties represented, and en hance robustness.

• Estimates of global CO2 changes associated with the rule for proper use of the
SCC for CO2 reduction benefits calculations.

• Resolution of inconsistencies in the estimated comp liance costs and CO2 benefits for proper comparison.

• Guidance regarding use of the four USG SCC estimate s.

Application to the Clean Power Plan RIA

Commenters supported the application of SCC to esti mate the benefits of the rulemaking, though

some offered recommendations.

• Commenters stated, "The SCC provides an important, if conservative, estimate of the costs of climate change and the benefits of red ucing carbon pollution." "In the context of agency rulemakings, the SCC provides the best available means to factor those costs into benefit-cost analyses."

• Some commenters stated that "In the final Clean Pow er Plan and the final regulatory impact analysis, EPA should detail all s ignificant, unquantified climate68 effects, as consistent with administration-wide pol icy, the IWG's instructions, EPA's best practices, and best economic practices."

Commenters stated that the IWG's "efforts pass lega l muster from a standpoint of federal regulatory law and policy. Moreover, the IWG's most recently updated estimates utilized accepted science, economics, and technical modeling . EPA's reliance on those estimates in support of the proposed rule was therefore reasonab le and justified."

• Other commenters stated that EPA does not fully det ail all of the qualitative
climate benefits from carbon dioxide reductions tha t are not currently included in

the monetized estimate of the social cost of carbon . The commenters said that in the final CPP and the final regulatory impact analy sis, EPA should detail all significant, unquantified climate effects, as consi stent with administration-wide policy, the Interagency Working Group's instruction s, EPA's past practices, and best economic practices.

Other commenters disagreed with application of the SCC to the Clean Power Plan RIA stating that EPA's reliance on SCC is arbitrary and caprici ous and that the SCC overstates the benefits associated with reducing CO2 emissions from electri c generating units ("EGUs"). Many of these commenters disagreed with the use of a global SCC e stimate and with the selection of discount rates, and therefore concluded that they should not form the basis of the rulemaking’s benefit

estimates. Ccommenters also stated that EPA must f irst appropriately review all public comments related to the federal government's SCC va lues prior to using them in a rulemaking, which were submitted in early 2014. Excerpts from t he commenters that disagreed with the use of SCC in this rulemaking are as follows:

• Commenters noted that SCC is meant to analyze impac ts of regulations with a marginal effect on CO2 emissions. Commenters conclu ded that while the proposal would have a marginal effect on emissions, it would have a large effect on the industry and competitiveness, and therefore should not use the SCC as

basis. Commenters also stated that the SCC should "go through a rigorous public notice process with appropriate revisions made base d on public comment" before being used as the basis for a proposed rule.

• Commenters stated SCC values are "speculative, sele ctive, based on untested and inconsistent economic models, based on climate mode ls that grossly over-predict, and are not tied to domestic policy and results." Commenters also stated, "If the benefits of the proposed guidelines are properly ch aracterized - that is, which inappropriately claiming benefits from the U.S. Gov ernment's SCC estimates and the benefits of reducing pollutants that are regula ted to protective levels by other rules, there are no benefits to weigh against the e xorbitant costs. Therefore, the proposed guidelines cannot be justified and are unl awful."

• Commenters stated "The CPP's climate benefits are i llusory." The commenters cite three primary reasons: 1) The SCC is a "guesti mate" and "an unknown quantity, discernible in neither physical nor econo mic data." By fiddling with non-validated climate parameters, made-up damage fu nctions, and below-market69 discounts rates, SCC analysts can get almost any re sult they desire. 2) "EPA uses global rather than domestic SCC values to calculate climate benefits. 3) "Most importantly, the rule's climate benefits are not ac tually an estimate of the damages avoided in 2030." The climate benefits are the prod uct of CO2 avoided and estimates of the present value of all cumulative da mages caused by each

incremental ton of CO2 emission over an immense tim e span - from 2010 to 2300. "In other words, none of the rule's alleged climate benefits will be discernible in 2030 and likely not even in 2100."

• Commenters stated the "alleged benefits are wholly unsubstantiated," and that
some have stated the benefits of avoided climate ch ange (as calculated by SCC) are "both unpredictable and unpriceable." Commente rs also stated that SCC values are not trusted because "they have increased dramatically in recent years" due in part to the many assumptions required for ca lculating SCC. Commenters also believe SCC values are easily manipulated.

• Commenters stated that "The EPA has not provided a single quantifiable climate benefit of the proposed rule. The EPA's purported climate benefits of the rule are based solely on the Office of Management and Budget 's Social Cost of Carbon (SCC). Furthermore, the EPA used the global SCC ye t did not consider the potential global impacts of the rule or other inter national changes in CO2

emissions."

• Commenters stated "The RIA for the proposed rule st ates that the impact of
'reduced climate effects' has been 'monetized' but not 'quantified.' In other words, EPA does not claim that the Proposed Rule would aff ect the climate.

Commenters stated, "EPA cites its recently updated SCC document as a foundational basis for assessing the costs and benefits associated with GH G emissions reductions. This is a document that is significantly flawed and was/is subject to opposition by GCLC, its members, and many others. It should not be used in any rulemaking, i ncluding this Rule Proposal."

Commenters stated that analyses performed by NERA i ndicate the maximum temperature increase avoided by the CPP is about 0.003 degrees C which occurs several decades after the CPP's emission reductions. Commenters stated, "Thi s is about a 0.2% change in the baseline temperature increase projected by that time. This sort of very small deviation from baseline temperature change must be viewed as a very tenuous basis for any projected amount of global damage."

• Commenters stated "Our research team found that the SCC calculation process, as

well as input data assumptions for the process, and resulting published values for SCC, are obviously biased to yield high values of S CC.

• "Our investigation of the SCC calculation process r eveals that it violates several provisions of EPA's own document No. EPA/260R-02-00 8. Certainly using the results of un-validated and obviously inaccurate co mplex computer models on70 which the IPCC ECS uncertainty range is based, cann ot be claimed to be consistent with the intent of these guidelines."

• Commenters concluded with "All proposed rulemaking related to CO2 emissions
should be halted until such time as the current SCC calculation process can be reviewed by an independent scientific review team a nd critical scientific flaws in the current SCC computation process are corrected."

Several commenters discussed concerns about emissio ns leakage in the context of SCC.

• Commenters stated that the RIA estimates CO2 benefi ts by multiplying the USG SCC values by estimated CO2 reductions within the p ower sector only, which is problematic because the SCC should only be applied to estimated net changes in global CO2 emissions. The commenters stated that th e RIA applications should be sure to estimate changes in net global emissions as sociated with a proposed rule, or justify why it is unnecessary and that emission reduction effects beyond the boundaries of the power sector should be accounted for to properly estimate CO2

benefits.

• "...the SCC failed to include any consideration of in dustrial GHG leakage" that could result in movement of production facilities o ffshore. "

• Commenter stated the CO2 reduction benefits have no t been adjusted for the increased emissions from new exempt fossil fueled s ources that will be built due to the proposal.

Commenters stated that "The proposed rule's base ca se is inconsistent with the

socioeconomic/emissions scenarios used in the SCC c alculations. Specifically, the U.S. CO2 emissions, energy system, and economic condition un derlying the estimated CO2 reductions and compliance costs are inconsistent with the socioeco nomic and emissions futures underlying the USG SCC estimates used to value the proposed rules CO2 reduction benefits. The SCC estimates are computed using five alternative global socioeco nomic and GHG emissions futures designed to span a range of possible global futures, with ea ch future considered equally likely. Compliance costs and CO2 reductions in the RIA, on the other hand, assume a single, U.S. power sector projection (based on the AEO 2013 Refe rence Case). This is an issue because the underlying USG modeling shows that SCC values vary across socioeconomic and emissions assumptions (USG, 2014). Therefore, one would want the same reference case assumptions for the SCC, CO2 reductions, and compliance costs, or a n argument for why it is unnecessary."

Commenters found that when comparing the USG SCC an d AEO2013 Reference Case socioeconomic and emissions projections, "the AEO20 13 projections do not compare well with any of the USG SCC input scenarios, with lower proj ected U.S. energy sector CO2 emissions and higher GDP that are based on much lower assumpt ions regarding the emissions and energy intensity of output (CO2/GDP and Btu/GDP respective ly)".

Commenters stated that "USG SCC technical documenta tion recommends using all four of the USG time profiles of SCC values. The four have mean ingful differences in discounting and what71

they represent probabilistically. However, there is no USG guidance on how agencies should apply the different SCC values jointly and consiste ntly in rulemaking." Commenters stated that "EPA overestimates the climate benefits of the prop osed ESPS regulation" and that the SCC estimates are projected for excessively long model time horizons. Commenters stated, "Global warming (now climate change) is an artifact of mode ling and SCC is therefore a model of

models."

Commenters stated "the SCC's models make assumption s about the vulnerability of society to climate change, which is primarily driven by levels of economic development. Ironically, the economic damage inflicted by the Proposed Rule woul d increase society's vulnerability to the very impacts that EPA claims it wishes to avoid."

Commenter stated "the estimates of the SCC have no connection to the real world, nor do the Global Circulation Models. Physics may tell us that increasing greenhouse gases will increase global temperature but it tells us nothing at this point in our knowledge about what that increase will do to global temperatures and climate."

Commenters stated that EPA's assessment of the cost s of the Proposed Rule is arbitrary as it fails to accurately account for the benefits of greenhous e gas reduction by understating the climate

costs of fossil methane combustion and the social c ost of carbon, and omitting any calculation of the consequences of the rule's proposed compliance delay.

Commenters cited the study by Bobb et al., 2014, wh ich examined the trends in heat-related mortality across the U.S. using data from 1987 thro ugh 2005. The commenters said the study provides strong evidence that acute (e.g., same-day ) heat-related mortality risk has declined over time in the US, even in more recent years. The comm enters also cited different studies with similar results on community-specific mortality rat es in the U.S., using earlier data from 1960s through mid-1990s (e.g. Davis et al. 2003a; Davis e t al. 2003b). The commenters also cited European studies that found temporal declines in he at-related mortality risk (Carson et al. 2006; Donaldson et al. 2003; Kysely and Plavcova 2011; Sc hifano et al. 2012). The commenters added these studies support the hypothesis that the popul ation is continually adapting to heat, despite the rise in temperature leading to an increased mag nitude and frequency of heat events. The commenters said that sensitivity to heat is declini ng and the cause for this is likely found in a collection of adaptations including increased acces s to air-conditioning, better medical care, community response programs, heat watch/warning sys tems, and biophysical changes. The

commenters said that there is no reason to think th at such response measures won't continue to exist and be improved upon into the future. The com menters concluded stating that through the collective adaptive response, climate change not on ly does not result in negative human health outcomes, but may, in fact, spur positive ones. The commenters said these findings render the EPA's contention to the contrary to be shallow and misleading and unfit to justify this regulation.

Response 8: The comments regarding the aggregation of the SC-CO 2 estimates and general application in a rulemaking context mirror those su bmitted to the Office of Management and Budget’s separate comment solicitation on the SC-CO 2 (78 FR 70586; November 26, 2013). As a member of the interagency working group (IWG) on SC-CO2, EPA has carefully examined and evaluated comments submitted to OMB’s separate solicitation. EPA has also carefully examined and evaluated all comments received regard ing SC-CO2 through this rulemaking72

process and determined that the IWG responses to th e comments on the OMB solicitation address the comments on the aggregation of SC-CO2 e stimates and use of the estimates in this RIA. Specifically, EPA concurs with the IWG’s resp onse to these comments and hereby incorporates them by reference. 25 The remainder of this section elaborates on these comments in the context of this rulemaking.

EPA and other members of the IWG have reconfirmed t heir commitment to periodic review and update of the methodology and estimates to ensure t hat they continue to reflect the best available science and economics. Furthermore, EPA has determi ned that the SC-CO2 methodological recommendations require additional research, review , and public comment before it can apply them to a rulemaking context.

To help synthesize the technical information and in put reflected in the comments, and to add additional rigor to the next update of the SC-CO2, the EPA and all of the other IWG members plan to seek independent expert advice on technical opportunities to improve the SC-CO2 estimates, including the approaches suggested by co mmenters and summarized in this document. Specifically, EPA and all of the other IWG members plan to ask the National Academies of Sciences, Engineering, and Medicine (Academies) to examine the technical merits and challenges of potential approaches to improving the SC-CO2 estimates in future updates. Input from the Academies, informed by the comments submit ted to this rulemaking and the peerreviewed literature, will help to ensure that the S C-CO2 estimates used by EPA continue to reflect the best available science and methodologie s.

After careful evaluation of the full range of comme nts and associated technical issues described in section 8.7.2, EPA has determined that it will c ontinue to use the current SC-CO2 estimates until further updates can be made to reflect forthc oming guidance from the Academies. EPA believes that the current estimates continue to rep resent the best scientific information on the impacts of climate change available in a form appro priate for incorporating the damages from incremental CO2 emissions changes into regulatory a nalysis. Therefore, EPA has presented the current SC-CO2 estimates in this rulemaking. 26 EPA will continue to consider these comments

and will share the recommendations with the IWG as it moves forward with the Academies

process.

The remainder of this section provides more detaile d responses to the comments and

recommendations.

25 Referred to as the "OMB Response to Comments on SC -CO2." In particular, see pgs 25 to 28, 40-41 at https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc-response-to-commentsfinal-july-2015.pdf .

26 See https://www.whitehouse.gov/sites/default/files /omb/inforeg/scc-tsd-final-july-2015.pdf73

Aggregation and selection of SC-CO2 estimates

Some comments discussed the aggregation of model re sults and the selection of the final range

of SC-CO 2 estimates. Both the 2010 TSD and the current TSD p resent information about the full

distribution of SC-CO 2 estimates within and across possible combinations of the three models and five socioeconomic-emissions scenarios, for eac h of three discount rates (45 combinations in total) (see tables A2-A4 in Appendix A of the TSDs) . Additional summary statistics for the

distributions of the SC-CO 2 estimates are also provided for each of the three models (see Table A5 in Appendix A). EPA believes that the informatio n presented in the TSDs is sufficiently disaggregated to reflect the variability of the SC- CO 2 estimates across models, input assumptions, and discount rates. In addition, EPA h as provided the full set of Monte Carlo modeling results (10,000 model runs for each combin ation, for a total of 450,000 observations per emissions year) to outside researchers upon req uest and will continue to do so.

As discussed in the 2010 TSD, using the full distri bution of the SC-CO 2 estimates from the 45 scenarios would be impractical in a regulatory impa ct analysis. To produce a range of plausible estimates that still reflects the uncertainty about the SCC estimates, the results from the various model and scenario combinations (150,000 observatio ns per emissions year for each of the three discount rates) were pooled to produce three separa te probability distributions for the SC-CO 2 for emissions in a given year, one for each assumed discount rate (2.5, 3 and 5 percent). Three point estimates were then derived from these pooled distributions representing the mean at each discount rate. EPA considers this approach for pres enting expected SC-CO 2 values across a range of discount rates to be appropriate for repre senting the central tendency of the SC-CO 2 estimates across scenarios. The fourth value, the 9 5 th percentile of the pooled distribution using a 3 percent discount rate, is included to represent h igher-than-expected economic impacts from climate change further out in the tail of the SC-CO 2 distribution - i.e., impacts that may have lower probability of occurring but relatively high damages. For purposes of representing the uncertainties involved, the TSDs emphasized the imp ortance of considering and presenting the full range of these four estimates in regulatory im pact analysis.

EPA agrees that the modeling of uncertainty in our analysis, including the uncertainty explicitly represented in the IAMs, may not capture the full r ange of uncertainty of the "true" value of the SC-CO2. This concern is common to most quantitative assessments of uncertainty. By definition, the modeling of uncertainty requires a model, and t herefore cannot capture the uncertainty associated with model selection. However, EPA does not agree that pooling results across models implies that the estimates capture the full range of uncertainty, nor is such a claim made in the TSDs or the rulemaking’s supporting document s. Rather, EPA attempted to capture a reasonable range of uncertainty using information a vailable in the peer-reviewed literature and the uncertainty analysis built into the models them selves. Using three models rather than one helps address, but does not eliminate, uncertainty associated with model choice.74

Along with the four selected SC-CO 2 estimates for each emissions year, the IWG present ed more

detailed information about the full distribution of SC-CO 2 estimates for emissions in the year 2020. Specifically, the 2013 TSD reports informatio n on the full distribution of the SCC estimates for emissions in year 2020 for each model , scenario, and discount rate combination , including the low-end percentiles (i.e., 1 st , 5 th and 10 th percentiles). 27 In addition, as noted above, complete distributions for all emissions years are available upon request. While the TSDs did not present a summary 5 th percentile estimate (i.e., pooling results across the models and scenarios) for use in regulatory impact analysis, for reasons discussed below, the model and scenario specific statistics for 2020 provide a general sens e of how the 5 th percentile relates to the mean. Furthermore, as we note above, EPA has provided the full set of Monte Carlo modeling results to outside researchers upon request and will continue to do so. This information may be used to
calculate a full set of 5 th percentile summary statistics that are comparable to the 95 th percentile estimates provided in the TSDs.

As the 2010 TSD discusses, the SC-CO 2 estimates derived from the three integrated assess ment models have several significant limitations that co uld lead to a substantial underestimation of the

SC-CO 2 . These limitations include the incomplete treatmen t and monetization of noncatastrophic damages, the incomplete treatment of p otential "catastrophic" damages, and uncertainty in extrapolation of damages to high tem peratures. The IPCC Fourth Assessment Report, which was the most current IPCC assessment available at the time of the IWG’s 2009- 2010 review, discussed these limitations and conclu ded that it was "very likely that [SCC] underestimates" climate change damages. Based on th e current scientific understanding of climate change and its impacts, and on the limitati ons of the IAMs in quantifying and monetizing the full array of potential "catastrophic" and non- catastrophic damages, EPA and the other

members of the IWG concluded that the distribution of SCC estimates may be biased downwards. Since then, the peer-reviewed literature has continued to support this conclusion. For example, the IPCC Fifth Assessment report obser ved that SC-CO 2 estimates continue to omit various impacts that would likely increase damages. The 95 th percentile estimate was included in the recommended range for regulatory impact analysi s to address these concerns.

In addition, as acknowledged in the 2010 TSD, the S C-CO 2 estimates derived from the three IAMs did not take into consideration the possibilit y of risk aversion. That is, individuals may have a higher willingness-to-pay to reduce the like lihood of low-probability, high-impact damages than they do to reduce the likelihood of hi gher-probability, lower-impact damages with the same expected cost. The inclusion of the 95 th percentile estimate in the SC-CO 2 values was also motivated by this concern. In contrast, EPA is not aware of systematic upward biases in the

27 The 2010 TSD including information on the full dis tribution of SCC estimates for the emission year 2010, however the 2013 TSD presented this info rmation for the 2020 emissions year as 2010 was then a historical year.75

estimates comparable to the downward biases discuss ed above. For this reason, while EPA and other members of the IWG have been fully transparen t regarding the entire range of uncertainty reflected in the probability distributions, EPA did not include a 5 th percentile estimate in the selected range for regulatory impact analysis.

The choice of the mean or the median as a measure o f central tendency depends on the context. In skewed distributions, such as for the SC-CO 2 estimates, the median will often give a more "typical" outcome, while the mean will give full we ight to the tails of the distribution. In some cases, the typical outcome is of most interest. For example, in describing household incomes the

median is most often used because the focus is on u nderstanding the income of the typical household, and using the mean might distort this pi cture by giving undue weight to a small number of very wealthy households. In the climate c hange context, however, sound decisionmaking requires consideration of not only the typic al or most likely outcomes, but also less likely outcomes that could have very large (or small, or e ven negative) damages (the tails of the distribution). Use of the median to represent the S C-CO 2 in a regulatory impact analysis would not necessarily lead to the most efficient policy c hoice that uses resources wisely to mitigate potential climate impacts (e.g., maximize the expec ted net benefits). In this case, EPA believes that the mean is the appropriate measure of central tendency.

Application to the Clean Power Plan

EPA agrees with those supportive of the application of the estimates. Commenters who stated

that the benefits do not exceed the costs based thi s conclusion on use of a domestic estimate and different discount rates. See section 8.7.2, comme nt 3, for EPA’s detailed response to comments on the use of a global versus domestic SC-CO 2 . See section 8.7.2, comment 7, for EPA’s detailed response to comments about the selection o f the discount rate. See also EPA’s detailed response to comments on the IAMs and damage functio ns in 8.7.2, comment 1, and EPA’s response to comments regarding peer review and othe r process-related issues for SC-CO 2 , including the documentation discussing SC-CO2 metho dology, in 8.7.2, comment 5. See section 8.7.2, comment 11, for EPA’s response to comments r egarding the time horizon included in the benefits analysis.

Regarding the recommendation to detail the signific ant and unquantified climate effects in the RIA, i.e. the impacts currently omitted from the IA Ms used to estimate the SC-CO 2 , EPA has updated the RIA discussion to reference several pub lications that identify and discuss some of the important, unquantified climate effects. EPA n otes, however, that it is not possible at this time to provide a precise list of each model’s trea tment (i.e., included, excluded) of climate impacts. Instead, the TSDs present a robust discus sion of this key analytical issue, e.g., how each model estimates climate impacts, the known par ameters and assumptions underlying those models, and the implications of incomplete treatmen t of impacts (catastrophic and noncatastrophic) for the SC-CO 2 estimates. Moreover, the discussion in the SC-CO 2 TSD underscores the difficulty in accurately distilling the models’ treatment of impacts in table-form. Most notably, the use of aggregate damage functions —which consolidate information about impacts from multiple studies—in two of the models poses a challenge in listing included impacts. For example, within the broad agricultural impacts category, some of the sub-grouped impacts are not explicitly modeled but are highly c orrelated to other subcategories that are explicitly modeled. EPA agrees that it is important to update the SC-CO 2 periodically to76

incorporate improvements in the understanding of gr eenhouse gas emissions impacts and will

continue to follow and evaluate the latest science on impact categories that are omitted or not fully addressed in the IAMs. As previously noted, E PA and the other IWG members will seek external expert advice on the technical merits and challenges of potential approaches to update the damage functions in future revisions to the SCC estimates. Finally, the RIA also continues to discuss climate change impacts, specifically an ove rview of the 2009 Endangerment Finding and climate science assessments released since then (se e RIA, Chapter 4).

EPA disagrees with the comment that EPA should not apply the SC-CO 2 to marginal emission impacts because of the rulemaking’s potential impac t on industry and competitiveness, and notes

that the commenters have misunderstood the discussi on about the applicability of SC-CO 2 estimates. The SC-CO 2 is an estimate of the marginal benefit of a net on e-ton reduction in CO 2 emissions. The SC-CO 2 estimates are multiplied by estimates of net CO 2 emissions changes in a given year to calculate the value of the benefits a ssociated with the policy action that achieves

the emissions reductions. Given that the definition of marginal in this context relates to the change in CO 2 emissions relative to the global level of CO 2 emissions, the SC-CO 2 is the appropriate metric to use in estimating the benefit s of emissions changes as a result of this rulemaking. The applicability of the SC-CO 2 to monetizing the benefits of an emissions change is not related to rulemaking’s costs or economic im pacts. These factors are independent of the

SC-CO 2 estimates and are therefore not related to the app licability of the SC-CO 2 . The estimation of the social benefits of avoiding or re ducing CO 2 emissions is a separate and independent calculation from the analysis of the po licy’s compliance costs and impacts on industry competitiveness. See section V of the fina l rule preamble for a discussion of the costs of the final guidelines and RIA Chapter 3 for a discus sion of the cost estimates of the rulemaking for illustrative compliance scenarios and Chapter 5 and RTC section 8.7.6 for a discussion of secondary market impacts.

EPA disagrees with the comments that characterize t he SC-CO 2 as an illusory or otherwise unsupportable metric. EPA acknowledges uncertainty in the SC-CO2 estimates but disagrees that the uncertainty is so great as to undermine use of the SC-CO2 estimates in regulatory impact analysis. The uncertainty in the SC-CO2 estimates i s fully acknowledged and comprehensively discussed in the TSDs and supporting academic liter ature. While uncertainty must be acknowledged and addressed in regulatory impact ana lyses, even an uncertain analysis provides useful information to decision makers and the publi c. For example, if an analysis shows that benefits of a policy option consistently do (or do not) justify costs even over a broad range of estimates, this may increase confidence in the robu stness of this conclusion. Conversely, if choices among parameter estimates within a plausibl e range significantly affect the conclusions of the analysis, this is an important consideration in deciding how to weigh the analytical results in the decision making process. The presence of unc ertainty is thus not a reason to exclude the best available estimates of quantified/monetized be nefits, as long as it is appropriately characterized. Rather, good regulatory practice req uires that agencies use the best available scientific, technical and economic information to d erive the best estimates of costs and benefits that they can, and then communicate to the public t he limitations and uncertainties of the analyses. This is what EPA and all of the members o f the IWG have attempted to do in developing and discussing the SC-CO2 estimates. As noted in the SC-CO2 TSDs, the EPA and the other IWG members are committed to periodic upd ates in the estimates to reflect ongoing77

developments in our understanding of the science an d economics of climate change, including the treatment of uncertainty. Moreover, as previous ly stated, EPA has determined that the current SC-CO2 estimates continue to represent the best sci entific information on the impacts of climate change available in a form appropriate for incorpor ating the damages from incremental CO2 emissions changes into regulatory analyses. See als o Coalition for Responsible Regulation v. EPA, No. 09-1322 (D.C. Cir. June 26, 2012) slip op. p. 27 ("State and Industry Petitioners assert that EPA ‘delegated’ its judgment to the IPCC, USGC RP, and NRC by relying on these assessments of clime-change science. This argument is little more than a semantic trick....EPA simply did here what it and other decision-makers o ften must do to make a science-based judgment: it sought out and reviewed existing scien tific evidence to determine whether a particular finding was warranted. It makes no diff erence that much of the scientific evidence in large part consisted of ‘syntheses’ of individual s tudies and research. Even individual studies and research papers often synthesize past work in a n area and then build upon it. This is how science works. EPA is not required to re-prove the existence of the atom every time it approaches a scientific question.")

EPA disagrees with the comment that SC-CO2 values a re not trusted because "they have increased dramatically in recent years" due in part to the many assumptions required for calculating SC-CO2. Commenters also believe SC-CO2 values are easily manipulated. EPA and other federal agencies had received multiple public comments urging them to update the estimates. In response to these comments and consis tent with the 2010 commitment to periodically revise the SC-CO2 estimates, in 2013 t he IWG released an update to the SC-CO2 estimates that maintained the same methodology unde rpinning the previous estimates, but applied the most current versions of the three IAMs . The science underlying the assessment and valuation of climate change impacts is constantly e volving. Since the publication of the initial

SC-CO 2 estimates in 2010, the representation of the scien ce and economic consequences of climate change in the three IAMs has improved. The 2013 SC-CO 2 technical update allowed the

SC-CO 2 estimates to reflect these improvements. Some of t he model revisions tended to increase

the value of SC-CO 2 while others tended decreased it. The updated val ues reflected the net effect of all of those changes. None of interagency working group’s 2010 modeling decisions were revisited as a part of the 2013 update. The 20 13 update used the same approach and assumptions as the 2010 analysis, but with the late st version of each of the three models available. In addition, the TSDs fully discuss the sensitivities of the SC-CO 2 and how the interagency working group explored those sensitivit ies. See also 8.7.2, comment 4 for discussion about treatment of uncertainty.

EPA strongly disagrees with the comment that climat e change is an artifact of modeling, Global

Circulation Models have no connection to the real w orld, and SCC is therefore a model of models. See 8.7.2, comment 1, for detailed response to comments criticizing the IAMs and section 8.7.1, comment 6 for response to comments a rguing that climate is too complex for computer models or EPA to be able to predict the im pact of GHG mitigation.

Regarding the comments about quantification versus monetization of the climate benefits and the comment that the Agency has not provided a single q uantifiable climate benefit of the proposed rule, EPA disagrees and notes that it has in fact p rovided the estimated value of climate benefits.

The climate benefits estimates have been calculated using the estimated values of marginal78

climate impacts, known as the social cost of carbon (SC-CO2), presented in the Technical Support Document: Technical Update of the Social Co st of Carbon for Regulatory Impact Analysis under Executive Order 12866. The SC-CO2 is a metric that estimates the monetary value of impacts associated with marginal changes i n CO2 emissions in a given year. It includes a wide range of anticipated climate impacts, such a s 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 cos ts for air conditioning. It is typically used to assess the avoided damages as a result of regulator y actions (i.e., benefits of rulemakings that have an incremental impact on cumulative global CO2 emissions). In order to calculate the dollar value for emission reductions, the SC-CO2 estimate for each emissions year is applied to changes in CO2 emissions for that year, and then di scounted back to the analysis year using the

same discount rate used to estimate the SC-CO2. Wh ile the impacts of CO2 emissions changes, such as sea level rise, are estimated within each i ntegrated assessment model as part of the calculation of the SC-CO2, it is the resulting mone tized damages that are relevant for conducting the benefit-cost analysis. As such, it is the SC-C O2 estimates that are used in the RIA to estimate the welfare effects of quantified changes in CO2 emissions.

Regarding the comments on leakage, specifically tha t multiplying the SC-CO 2 values by estimated CO2 reductions within the power sector on ly is problematic because the SC-CO 2 should only be applied to estimated net changes in global CO2 emissions, EPA notes that it has applied the SC-CO2 estimates to the best available estimate of the net emissions impact and

includes emissions from the new fossil fuel sources subject to the final 111(b) standard (see RIA Chapter 3 and the final rule for 111(b)). As discu ssed in RIA Chapter 5, EPA has not quantified the emissions leakage, if any, that may result from secondary market impacts. The final 111(d) emission guidelines cover existing fossil fuel-fire d EGUs, and the EPA does not see evidence that notable changes would result from secondary ma rkets, including industry, given the relatively modest changes in electricity prices; se e also the RTC, Section 8.6, comment 18. EPA recognizes that this is an important issue for anal ysts to consider in determining the net CO2

reductions to be valued in an RIA but notes that it does not affect the calculation of the SC-CO 2 itself, which is an estimate of the marginal benefi t of a net one-ton reduction in CO2 emissions.

The SC-CO 2 estimates are multiplied by estimates of net GHG e missions changes to calculate the value of benefits associated with a policy acti on in a given year. It is in the estimation of net GHG emissions, and not the SC-CO 2 , that any leakage should be accounted for.

Regarding the comment about inconsistencies in the scenarios underlying the rulemaking’s base case (AEO) and the SCC estimates (EMF-22), and spec ifically the recommendation to use the

same scenarios in the calculation of the SC-CO 2 , EPA has determined that updating the scenarios underlying the SC-CO 2 estimates requires additional research. The select ion and harmonization of scenario variables among the IAMs used to estima te the SC-CO 2 involved extensive discussion and analysis by EPA and other members of the IWG. Given the time and resources required to run the IAMs in addition to the difficu lty in incorporating new scenarios to the IAMs, it is not feasible to change the scenarios and re-e stimate the SC-CO 2 for every rulemaking at every agency. The EMF-22 scenarios were peer-review ed, and publicly available, they had the key advantage that GDP, population, and emissions t rajectories are internally consistent for each

model and scenario evaluated. As noted in the 2010 TSD, the scenarios used "span a wide range, from the more optimistic (e.g. abundant low-cost, l ow-carbon energy) to more pessimistic (e.g.79

constraints on the availability of nuclear and rene wables)." EPA will continue to follow and

evaluate the latest science on socioeconomic-emissi ons scenarios and along with all the members of the IWG, is seeking external expert advice on th e technical merits and challenges of potential approaches to update these scenarios in future revi sions to the SC-CO 2 estimates. See the OMB Response to Comments document on SC-CO2 for a full discussion about the EMF-22 scenarios and consideration of potential inconsistencies betw een the scenarios and IAMs. 28

Regarding the recommendation for USG guidance on th e application of the SC-CO 2 , specifically guidance that would clarify the TSD’s recommendatio n to use all four SC-CO2 estimates in rulemaking analyses, EPA first notes that it has fo llowed the current guidance to consider all four values in regulatory impact analysis. EPA agrees t hat consistent and appropriate application of the SC-CO2 estimates is important. EPA will inform OMB of this comment requesting additional guidance of the application of the SC-CO 2 to regulatory impact analysis.

EPA disagrees with the comment that the rulemaking would increase society’s vulnerability to climate change. See RIA for complete discussion of the rulemakings estimated benefits and costs for illustrative implementation scenarios and section XI.D of the final rule preamble for discussion of the costs of the emission guidelines. See RTC section 8.7.2, comment 1, for additional responses to comments about the IAMs.

EPA disagrees with the comment that the Agency has not accurately accounted for greenhouse gas impacts by "understating the climate costs of f ossil methane combustion and the social cost of carbon, and omitting any calculation of the cons equences of the rule's proposed compliance delay." See the following sections:

• Fossil methane combustion: EPA has analyzed the pot ential changes in upstream methane emissions from the natural gas and coal pro duction sectors that may result from the illustrative approaches examined in the RIA. See RIA, Chapter 3 and Appendix 3A, and Response to Comments section 8 .2, comment 18, for

details about EPA’s estimates of methane emissions from natural gas systems.

• Social cost of carbon: regarding the treatment of c limate change impacts consideration from CO2 emissions, see 8.7.2, commen t 1, for broad discussion about the integrated assessment models’ treatment o f climate change impacts and 8.7.2, comment 6, for discussion specific to the in tegrated assessment models’ treatment of carbon fertilization in the agricultur e and forestry sectors.

28 See the OMB Response to Comments, pgs 17-20, at https://www.whitehouse.gov/sites/default/files/omb/ inforeg/scc-response-to-comments-finaljuly-2015.pdf80 • Proposed compliance delay: EPA disagrees with the commenters’ conclusion that the RIA should have calculated the impact of a "pro posed compliance delay" because there is no delay relative to the baseline scenario, i.e., a world without the proposed rulemaking. Rather, the final rulemaking e stablishes an 8-year interim compliance period that begins in 2022 with a glide path for meeting interim CO2 emission performance rates separated into three ste ps: 2022-2024, 2025-2027,
and 2028-2029. This results in interim and final st atewide goal values unique to

each state’s historical blend of fossil steam and s tationary combustion turbine generation. States and tribes with one or more aff ected EGUs will be required to develop and implement plans to ensure that their af fected EGUs, individually, in aggregate, or in combination with other measures un dertaken by the state, achieve the equivalent of the final CO 2 emission performance rates by 2030. See preamble section VIII.B, "Timeline for state plan performanc e and Provisions to Encourage Early Action" for detailed discussion about the tim ing of achieving the emission guidelines and state plan performance periods. Con sistent with EPA’s economic guidelines and OMB’s guidance for RIAs, EPA analyze d the potential benefits and costs of approaches states may take to achieve the interim and final CO2 emission performance rates and compared them to a b aseline that reflects the world without this rulemaking. Given the flexibilit ies afforded states in complying with the emission guidelines, the benefit s, cost and economic impacts reported in this RIA are not definitive estimates. The impact estimates are instead illustrative of approaches that states may take; se e RIA Chapter 3 for details about

the baseline and illustrative scenarios. See sectio n V of the preamble for a discussion of the costs of the final guidelines.

For comments regarding the studies on heat-related mortality, see RTC 8.7.1, comment 15.

Comment 9: Value of goods and services whose production is as sociated with CO2 emissions

Some commenters felt that the SC-CO 2 estimates should include the value to society of t he goods and services whose production is associated w ith CO2 emissions. Many of these commenters mentioned goods produced using fossil fu els, such as "plastics, chemicals, nitrogen fertilizer, steel, aluminum, synthetic rubber for t ires, glass, pharmaceuticals, and paper." Some commenters argued for including the benefits to "re gions that depend on employment from energy intensive industry, regions dependent on fos sil fuels for heating, cooling, food production and other components associated with preserving the ir standard of living and regions that are in

need of low cost fossil fuels to enable the economi c development improving their standard of living." Similarly, other commenters focused on the negative consequences of regulating CO2 emissions, such as the potential effect on energy p rices, economic growth, or international competitiveness. Commenters suggested the inclusion of "... the social costs and economic

dislocations that could result from carbon reductio n policies that would eliminate fuel options such as coal, the social costs associated with high er electricity prices, and the economic and security risks associated with electric reliability problems."81

Response 9: Rigorous evaluation of benefits and costs is a cor e tenet of the rulemaking process. EPA agrees that these are important issues that may be relevant to assessing the impacts of policies that reduce CO 2 emissions. However, these issues are not relevant to the SC-CO 2 itself.

The SC-CO 2 is an estimate of the net economic damages resulti ng from CO2 emissions, and

therefore is used to estimate the benefit of reduci ng those emissions.

A rule that affects CO2 emissions may also affect t he production or consumption of goods and services, in which case it could create costs and b enefits for businesses and households that either produce or use those goods and services. The se costs and benefits are important to include in an analysis of the rule’s impacts, but are not a result of changes in CO 2 emissions. The SCCO 2 is not a measure of social welfare from the consum ption of goods and services whose production results in CO 2 emissions, or other positive or negative externali ties associated with the production of those goods and services. In oth er words, the SC-CO 2 is just one component of a larger analysis that includes consideration of ma ny other potential impacts, including labor market changes, energy security, electricity reliab ility, and changes in emissions of other pollutants, among others.

Comment 10: Commenters stated general agreement that the costs and benefits associated with coal-fired power plants and climate change (social or otherwise) are real. Commenters provided the following citations and statements:

Some commenters cited the National Climatic Data Ce nter which reported the U.S. experienced

nine climate or weather disasters that each caused more than a billion dollars of damage in 2013.

Other commenter stated "The cost of doing nothing i s huge. Arguments that the EPA regulations will be too costly today ignore the future economic costs of climate change. Sea level rise, changes in temperature, and increases in hurricanes and other extreme events will wreak havoc on the economies across the country, and even worke r productivity. Climate and weather disasters in 2012 alone cost the American economy m ore than $100 billion."

Other commenters stated, "Over the last decade, the winter tourism industry has lost an estimated $1 billion and as many as 27,000 jobs."

Other commenters stated "The costs of climate chang e are already proving to be staggering. In 2012, global costs from natural catastrophes were $ 160 billion. Domestically, studies have found that over the last 30 years weather-related l oss events in North America have quintupled. In the U.S., 11 weather events costing more than $1 billion each occurred in 2012 with the cost of Superstorm Sandy alone exceeding $60 billion and the drought which afflicted half the country costing $11 billion. These costs are expec ted to rise as climate change continues."

Other commenters cited several climate-related impa ct projections from a study by Dr. Katherine Hayhoe of Texas Tech University and goes on to stat e the "Cost of inaction exceeds the cost of action." "In the future, agriculture around the Sa n Antonio Texas Edwards Aquifer region is likely to suffer enormously because of climate chan ge induced water shortages and extreme heat. The regional impact may reach losses for $3.6 to $6 .5 billion by 2030. Meanwhile, with even a82

small increase of carbon, health care costs in Texa s could increase from $79 million to $1.7 billion annually because of subsequent rise in all kinds of heat-related illnesses, medical conditions, and diseases."

Other commenters stated "Climate change is projecte d to cause tremendous harm as a matter of economic cost alone. A 2008 analysis estimating th e U.S. costs of climate change... found costs ranging from $271 billion in 2025 to $1.9 trillion in 2100. A 2014 analysis projects costs of $525 billion of the next 15 years just from damage to co astal property and infrastructure. It also projects at 10% decline in crop yield in some Midwe stern and Southern counties over the next 5 to 25 years and up to $300 billion in costs over th e same period for new electric generation to meet increased demand for cooling."

Commenters stated that the rulemaking’s benefits an alysis showed that the "benefits of EPA's CPP proposal are substantial and far exceed its cos ts."

Commenters voiced general agreement with the climat e benefits of the proposed rule and stated "For Virginia to avoid the spiraling consequences o f climate change, carbon emissions must be reduced significantly." The commenters noted "Risi ng sea levels have already forced the Navy to implement a $60 million replacement of 14 piers in Norfolk, to protect the Navy's ship repair facilities." Also, the commenters stated "Rising se a levels and increased storm surges attributed to climate change have caused increasingly severe a nd widespread property damage nationally. In 2012 alone, insured losses in the U.S. totaled $ 58 billion. The effects of climate change have been felt strongly in Virginia, particularly in the Virginia Beach/Norfolk/Hampton Roads region." Commenters also stated "EPA determined the carbon reduction benefits of the CPP by using its SCC which measures these benefits on a gl obal, rather than state-specific scale." "We applied EPA's SCC assumptions to the Virginia-speci fic carbon reductions to calculate the carbon reduction benefits of the proposal."

Commenters stated that "Climate change poses immens e risks to public health, infrastructure, and economic vitality of New York City." "The high winds and unprecedented storm surge that accompanied Sandy left 45 people dead in the City w ith countless others injured, with at least $19 billion in damages and lost economic activity i n New York City alone."

Commenter referenced a study by the faculty of Harv ard Medical School in 2011 which quantified social costs incurred in the U.S. by usi ng coal to generate electricity. The commenters stated that study "estimates that the life cycle ef fects of coal and the waste stream generated are costing the American public from one-third to over one-half of a trillion dollars annually. The cost of complying with EPA's proposed standard is t rivial in comparison." Commenters also stated "The Harvard study conservatively estimates that if all of the external costs of coal were accounted for, they would double or triple the pric e of coal."

Some commenters cited recent studies from Lawrence Berkeley National Laboratory, the

National Institute of Environmental Health Sciences and the University of Washington that indicate that emission reductions from plant effici ency improvements, building infrastructure improvements, and substitutions for lower carbon en ergy sources will generate between $6 and $30 billion in economic benefits due to reduced exp osure to harmful emissions, equivalent to $40 and $198 per metric ton of CO2 generated. The c ommenters also cited a 2013 IWG on the83

Social Cost of Carbon report which provided updated values on the cost of each metric ton of CO2 at $12, $43, $65, and $129 for the year 2020. T he commenters stated that while these figures may underestimate the true cost of carbon, the reports to illustrate the potential impact of carbon emissions and highlight the urgency to act t o protect public health and welfare from climate change.

Response 10: EPA thanks the commenters for submitting this infor mation and agrees that the public health and climate benefits of the rulemakin g far outweigh the estimated annual costs of meeting the standards. Implementing the standards w ill generate climate benefits by reducing CO2 emissions. Carbon pollution leads to long-lasti ng changes in our climate, such as rising global temperatures; rising sea level; and changes in weather and precipitation patterns. These impacts lead to changes in net agricultural product ivity, human health, property damages from increased flood risk, and the value of ecosystem se rvices, among other effects. The RIA presents a complete and detailed analysis of the final rulem aking’s benefits and costs of illustrative implementation scenarios. See section V of the fina l rule preamble for a discussion of the costs of the final guidelines.

Comment 11: Some commenters discussed the comparison of costs and benefits and concluded that the RIA has incorrectly compared annualized co sts to climate benefits. These commenters recommended comparing the present value of costs to the present value of benefits.

• Some commenters stated that "The RIA compares level ized (or annualized) compliance costs to annual CO2 benefits. This is an inconsistent comparison with no practical meaning. The proper comparison is a co mparison of the net present value streams of fixed and variable compliance cost s and estimated benefits (both for CO2 and air pollution reductions)."

• Commenters stated that the tons of reduction that a re achieved in the three annualized years in the RIA (2020, 2025 and 2030) r esult from the full expenditure of the capital investments that enable those reductions, and that capital spending occurs entirely in the years befor e, not after, the emissions

reductions can be achieved. The commenters therefor e stated that the values do not reflect the spending in the years in which the society actually makes those investments of capital and labor. The commenters pr esented an alternative comparison of the costs and benefits that omits the stream of benefits occurring beyond the year 2030. The commenters stated this a lternative analysis showed smaller benefits relative to those presented in EPA ’s RIA. Commenters stated that "the RIA's cost analysis indicates that the U.S. wi ll have spent approximately $182 billion to comply with the CPP through 2030, y et the that will have globally accumulated by that time are estimated to be only $ 3.5 to 4.6 billion. The commenters concluded that any RIA that involves lar ge upfront spending with delayed benefits should report the temporal pattern s in the estimated benefits and

costs in this manner.84 • Other commenters stated that readers may incorrectl y assume the benefits presented for the years 2020, 2025, and 2030 will a ctually be experienced in those

years.

Commenters stated that SC-CO 2 estimates are projected for excessively long model time

horizons.

Commenters reiterated that the SCC is an estimate o f the total benefits through 2300 of a ton of

avoided incremental CO 2 emissions in any given year, stated as a present v alue in the year of emission. The commenters described a few "aspects o f the IAM calculations that cause most of that present value to be associated with benefits f ar in the future."

Commenters discussed the distributional impacts of the proposed rule's costs and benefits, stating that the RIA should discuss a "distributional quest ion of who pays and who gains from the regulation from an income distribution perspective. " Commenters also disagreed with use of the global SC-CO 2

.

Response 11: EPA disagrees with the comment that there is "no pr actical meaning" in the comparison between the levelized compliance costs a nd year-specific benefit estimates. RIA, Chapter 3, discusses the basis for using levelized costs, stating that the power sector modeling and analysis reflect the EPA’s best assessment of l ikely impacts of the Clean Power Plan (CPP) under a range of approaches that states may adopt, but due to uncertainty over the ultimate approaches adopted by states are "intended to be il lustrative in nature". The modeling is designed to reflect the rule’s requirements, including the t iming, applicability to sources, and flexibilities across the power system as accurately as possible t o represent the nature and scope of the CPP. The analysis is a reasonable expectation of the inc remental effects of the rule and cost to the power sector (inclusive of the cost of demand-side energy efficiency), and is consistent with past EPA analyses of power sector regulatory requirement s (and estimates of the costs and benefits)." The RIA, Chapter 3, concludes that "Although the an alysis of the CPP does not include estimates of the costs and benefits of the CPP across each ye ar of the rule in a year-by-year manner, the EPA has reflected the structure of the rule, includ ing the interim and the final state goals of the CPP, in a manner that is consistent with the regula tory requirements." Chapter 4 of the RIA likewise provides a robust discussion of the SC-CO2 estimates used to estimate the benefits. Furthermore, it is not feasible to develop a stream of the benefits estimates for reductions in nonCO2 pollutant emissions as would be required for a net present value calculation given that emissions reductions for non-CO2 pollutants are onl y available for certain years; thus quantified benefits from reductions of non-CO2 pollutants are only available for those years. It is not appropriate to interpolate the benefits of reductio ns in non-CO2 pollutant emissions between the years analyzed because regional power sector non-CO 2 emissions vary non-systematically between years, making linear interpolation methods invalid.

EPA disagrees with the alternative benefit-cost com parison presented by the commenters that truncated benefits to the year 2030. EPA likewise disagrees with comments that the rule's climate benefits do not represent an estimate of th e damages avoided and with comments that the time horizon modeled is excessively long. The comme nters have misunderstood the basis for the benefit calculation and the nature of damages resul ting from CO 2 emissions. The SC-CO 2 estimate for the year 2030 represents the estimated present value of additional damages expected85

to be borne by society from the year 2030 through t he year 2300 as a result of an incremental ton being emitted in 2030, not additional damages from the year 2010 to 2300 as incorrectly stated by some commenters. Consistent with standard econom ic theory and practice, the SC-CO 2 represents the present value of the stream of damag es associated with forgone emissions in a given year, accounting for the long-lived nature of greenhouse gases. The damages that result

from a ton of CO 2 emitted in the year 2030, for example, accrue over time, and focusing only on the year of the CO 2 emissions change—or the subset of years covered by the rulemaking 29

— would be inconsistent with standard economic theory and practice as it would fail to account for a substantial portion of the benefits associated wi th the emissions reduction. The 2010 TSD explains that each IAM was run through 2300 because of the long atmospheric lifetime of CO 2 ; using too short a time horizon could miss a signifi cant fraction of damages under certain assumptions about the growth of marginal damages.

Regarding the comment that readers may not understa nd how to interpret present values, EPA notes that the preamble impacts discussion (Section XI) clearly defines the benefit estimates and references the RIA, which provides a detailed expla nation to enhance readers’ understanding.

See section 8.7.2, comment 1, for additional discus sion about the integrated assessment models (IAMs) used to estimate the SC-CO 2 ; section 8.7.2, comment 2 for discussion about the climate science components of the IAMs; section 8.7.2, comm ent 3 for discussion about the use of a global SC-CO 2 rather than a domestic SC-CO 2 ; and section 8.7.2, comment 8 for discussion about the application of the SC-CO 2 estimates to the Clean Power Plan RIA.

See section V of the final rule preamble for discus sion of costs of the emission guidelines and RIA Chapter 3 and RTC section 8.5 for discussion of the costs of the illustrative implementation scenarios analyzed by EPA.

See section 8.6, comments 2 and 9, for discussion a bout distributional impacts.

Comment 12: Commenter stated that IAMs do not recognize the pos sibility that we will adapt to climate change, or that a reduction in GHG emiss ions in the United States might result in an increase in GHG emissions elsewhere and it is not p ossible to accurately measure the contribution of a regulation to climate change in i solation because other emissions and change

factors are not held constant.

29 Note that this refers to SC-CO2, i.e., the damages associated with an incremental change in emissions. The total benefits, i.e., the monetized value of all emission changes attributed to this rulemaking, are calculated based on emissions chang es within the rulemaking time period, which in this case is through the year 2030.86

Response 12: EPA disagrees with the comment that the IAMs used to estimate the SC-CO 2 do not recognize the possibility of adaptation to clim ate change. The 2010 TSD clearly states that each of the three IAMs assumes a certain degree of low or no-cost adaptation (page 31) and the current TSD discusses updates to treatment of adapt ation in one of the models (page 11). 30 The 2010 TSD, however, acknowledges that the treatment of adaptation in the three models is incomplete. EPA and other members of the IWG have reconfirmed their commitment to periodic review and update of the SC-CO 2 methodology and estimates to ensure that they

continue to reflect the best available science and economics. To help synthesize the technical information and input reflected in SC-CO 2 comments, including those on treatment of adaptati on in the IAMs, and to add additional rigor to the nex t update of the SC-CO 2 , the EPA and all of the other IWG members plan to seek independent expert a dvice on technical opportunities to improve the SC-CO 2 estimates, including the approaches suggested by c ommenters and summarized in this document. Specifically, EPA and all of the other IWG members plan to ask the National Academies of Sciences, Engineering, an d Medicine (Academies) to examine the technical merits and challenges of potential approa ches to improving the SC-CO 2 estimates in future updates. Input from the Academies, informed by the comments submitted to this rulemaking and the peer-reviewed literature, will h elp to ensure that the SC-CO 2 estimates used by EPA continue to reflect the best available scien ce and methodologies.

8.8 HEALTH AND AIR QUALITY CO-BENEFITS

Comment 1: General Health Co-Benefits

Commenters in this summary discussed the health ben efits purported by the rule by avoiding

illnesses and death.

Commenters stated support for the rule and the limi ts proposed for the reduction of carbon and other air pollutants emitted by power plants. The commenters said that the emissions reductions of toxic air pollutants will prevent risk of hospit alization and emergency room visits, reduce health risks, premature deaths, and avoid diseases and missing school/work days.

Commenters stated that according to the American Lu ng Association, nearly half of Americans live in counties that have unhealthy levels of dirt y air. The commenters said that dirty air caused by carbon pollution disproportionately affects low- income communities, children, seniors and those who work or play outdoors. The commenters add ed dirty air can also lead to hundreds of missed work and low activity days.

30 See https://www.whitehouse.gov/omb/oira/social-cos t-of-carbon for both TSDs

.87

Commenters stated that the proposed rule will reduc e the pollution that leads to soot and smog (ground-level ozone) by more than 25%. The commente rs said that pollution reductions in 2030 are projected to avoid thousands of premature death s, heart attacks and hospital admissions, up to 150,000 asthma attacks in children, and almost 500, 000 missed school and work days.

Commenters stated that lifesaving benefits to publi c health can begin immediately, explaining that in addition to reducing the longer-term risks from climate change, steps to cut carbon pollution will cut other toxic emissions as well. C ommenters offered estimated reductions that include: 54,000 to 56,000 tons of PM 2.5 ; 424,000 to 471,000 tons of sulfur dioxide; and 40 7,000 to 428,000 tons of nitrogen dioxide. Those pollutan ts directly form particulate matter and ozone that cause widespread harm and premature death as d escribed earlier. Commenters stated that based on those reductions, EPA estimated that imple menting the Clean Power Plan could avoid 2,700 to 6,600 premature deaths in 2030. In 2030, c hildren would suffer 140,000 to 150,000 fewer asthma attacks. People with cardiovascular di sease would have 340 to 3,300 fewer heart attacks, and hospital admissions for cardiovascular and respiratory conditions would drop, with 2,700 to 2,800 fewer admissions in 2030. Commenters noted that it is important to recognize that the modeling actually minimizes the real-world bene fits of these reductions, explaining that the EPA's use of established BenMAP modeling is appropr iate to make these estimates, but the predictions focus on findings from certain studies looking at specific outcomes. Commenters noted that the BenMAP model cannot estimate the imp act on other, also demonstrated, benefits; for example, although the World Health Organization has determined that particulate matter causes lung cancer, science currently lacks appropr iate modeling to estimate how many fewer cases of lung cancer would occur in 2030 with the r eductions in particulate matter.

Commenters stated that combustion from fossil fuels , particularly from coal, emits numerous air pollutants into the atmosphere that have serious ra mifications for public health and well-being, including SO 2 and NOx. The commenters said that coal plants are the leading source of SO 2 and NOx emissions in the United States, with an average controlled unit emitting between 7,000 and 3,000 tons per year, respectively; while if uncontr olled, the unit can emit an average of 14,000 and 10,000 tons per year, respectively. The commen ters also said that once emitted into the atmosphere, SO 2 forms PM 2.5 , or soot, which can cause asthma attacks, chronic obstructive pulmonary disease (COPD), stunted lung development, lung cancer, stroke, heart attack, and congestive heart failure. The commenters said that fossil plants also emit PM 2.5 and PM 2.5 precursors directly into the atmosphere, and while control technologies exist to limit these emissions, substantial emissions still result from the operation of well-controlled units. The commenters said that NOx compounds interact with vo latile organic compounds (VOCs) in the presence of sunlight to form ground-level ozone, a highly toxic and reactive pollutant and that at times ozone can also interact with other atmospheri c matter to form a smoky fog of deadly pollutants known as smog.

Commenters stated that until the U.S. can get a han dle on the dirty air, exacerbated by the climate change caused by carbon pollution, we will continue to see thousands of premature deaths, respiratory disease, and a higher risk of a sthma attacks.

Commenters stated that the benefits of reducing car bon emissions will not only be to ameliorate climate change but also to improve public health as we clean up our air and water.88

Commenters cited statistics by American Lung Associ ation that 47% of Americans "live where pollution levels are too often dangerous to breathe " and that ozone was much worse in 2010 and 2012 due potentially to warmer temperatures. The co mmenters said the proposed rule is a critical piece in reducing dangerous pollution levels.

Commenters similarly stated that standards limiting carbon dioxide (CO 2 ) emissions from existing power plants can also decrease emissions o f non-carbon pollutants (co-pollutants) from the electric utility sector such as sulfur dioxide (SO 2 ), nitrogen oxides (NOx), and directly emitted particulate matter (PM). The commenters s aid that as a result, the standards can contribute to improved air quality, public health c o-benefits, and environmental improvements.

Commenters stated that fine particles and ground-le vel ozone are serious health pollutants. The commenters provided a list of respiratory diseases as a result of breathing ground-level ozone.

Commenters stated that the projected electric power price increase of 6-7% by the proposal is a paltry price to pay, especially when considering th e existential threat from GHG. The

commenters added that the health co-benefits are la rger than the costs.

Commenters stated concerns with regard to higher te mperatures and harmful air pollution in public health. The commenters said that we need to have a strong CPP in place to cut carbon pollution and lessen the burdens on the health of m illions of Americans. The commenters urged EPA to adopt standards that will ensure we do as mu ch as we can to fight these threats and protect public health.

Commenters stated that by cleaning up and modernizi ng power plants we will begin to clean up our air and curb climate disruption. The commenter s said that by reducing carbon pollution from power plants we will save billions of dollars each year.

Commenters stated that re-dispatching from less eff icient EGUs (presumably older) to more efficient EGUs (presumably newer) would also result in less emissions of other pollutants, as the newer units are likely to have greater and more eff ective pollution controls. The commenters added that any reduction in the use of coal-fired E GUs or improvement in the efficiency of coalfired EGUs has significant and quantifiable impacts on environmental and public health.

Commenters stated that based on EPA's estimates the proposed rule will have a real and measureable positive impact on air quality and publ ic health across the nation. The commenters further stated that if EPA strengthens the state ta rgets, the health benefits, in terms of the number of lives saved and asthma attacks avoided, will inc rease markedly.

Commenters stated that EPA's proposed limits on car bon pollution from power plants will lead to significant health benefits, including "prevent up to 4,000 premature deaths and 100,000 asthma attacks in the first year they are in place, and prevent up to 6,600 premature deaths and 150,000 asthma attacks in 2030" as stated by Harold Wimmer, National President and CEO of the American Lung Association. Commenters said that when some of the big polluters try to persuade EPA to weaken the standards so they can co ntinue to profit while putting the health of all Missourians at risk, they hope EPA will stand s trong and require them do their part to make our state a safer place to live and breathe.89

Commenters stated that the financial benefits of th is rule are undeniable. The commenters said

that climate and health benefits are estimated to b e $55 billion to $93 billion by 2030 and that these monetary benefits outweigh annual costs of th e plan, which are estimated to be $7.3 billion to $8.8 billion in 2030. The commenters said that t he rule is also expected to reduce electricity costs, and that by 2030 electricity bills are expec ted to be roughly 8% lower than would be the case under "business as usual," and this will save Americans about $8.00 on an average monthly residential electricity bill.

Commenters stated that based on soot and smog reduc tions alone (25% by 2030 as projected by EPA), for every dollar invested to comply with the proposed regulations, American families will see up to $7 in health benefits.

Commenters stated that reducing carbon pollution wi ll result in less illness and less days lost at work and school, less disability, fewer deaths, red uced hospitalizations, and other related healthcare costs which all equate to a savings to o ur economy of over $1.3 trillion or 9.6% of

GDP.

Commenters urged the states and national leaders to respond positively to the proposed carbon rules with investments in greater energy efficiency to move to a carbon free and toxin free energy development program. The commenters said tha t we need to move swiftly to approve this Clean Power Plan, to slow down our carbon pollution and to make sure dirty energy does not cause physical harm to more generations of American s.

Commenters stated that they would like to see the E PA demonstrate how each of their proposed

methods for carbon reduction in the Clean Power Pla n protects human health. The commenters

said the Clean Power Plan does not address all thes e environmental impacts to human health and externalities of the whole fuel-cycle as the basis for decision-making, and as such, it is assumed that human costs are acceptable even though alterna tives exist that will not expose people to

harm.

Commenters stated combusting fossil fuels -- partic ularly coal -- not only drives global climate change, but also emits numerous air pollutants into the atmosphere that have serious ramifications for public health and well-being. Th e commenters said that as components of the

overall PM 2.5 mix, emissions of fine nitrate and sulfate particle s cause significant pulmonary and

cardiovascular ailments and lead to increased rates of missed work, hospitalization, and premature death. The commenters added that coal-fi red EGUs are responsible for more than half of the human-made emissions of mercury. The comment ers also said that coal-fired plants that are not properly controlled can emit significant qu antities of other hazardous air pollutants, including toxic heavy metals such as lead and cadmi um, carbon monoxide, volatile organic compounds, and arsenic. The commenters said that po llution from coal plants causes tens of thousands of premature deaths, emergency room visit s, and heart attacks each year, and hundreds of thousands of asthma attacks, which amounts to ov er $100 billion in annual health care costs. The commenters said that EPA has issued regulations to reduce these emissions, but until we transition to genuinely clean energy, the lives and health of countless Americans remain at risk.

Commenters also stated that Alpine Geophysics, LLC and ENVIRON International Corporation analyzed ambient air quality data on regional and s tate geographic scales. The commenters said90

that the report, which tracked the trends of PM 2.5 and ozone emissions, found that emissions have significantly decreased and air quality is signific antly improved as a result of recently adopted regulations, and is expected to continue to improve as existing regulations are fully implemented in the upcoming years.

Commenters said that other recent proposed and fina l federal rule-makings will act in concert with the proposed rule to reduce air pollution, and provided examples of other recent EPA rules that will improve air quality. The commenters reque sted that EPA finalize health standards for ozone at 60 parts per billion in its 2015 NAAQS rev iew and draft a future transport rule to

address the 2011 PM 2.5 NAAQS and 2008 ozone NAAQS.

Commenters stated that EE and RE have multi-polluta nt benefits, and as EE and RE programs reduce demand for fossil fuel-fired generation, sta tes can achieve emissions reductions of GHGs, criteria air pollutants and hazardous air pollutant s. The commenters said that this is particularly true on high energy demand days, which often coinci de with poor air quality.

Response 1: The EPA agrees that poor air quality results in neg ative health effects and that reducing levels of fine particles and ozone will le ad to significant human health benefits. EPA estimates the benefits of reductions in of SO2, NOx , and fine particles using methods based on the best available peer-reviewed science that have been reviewed by the EPA’s independent Science Advisory Board and the National Academy of Sciences (NRC, 2002). These benefits

estimates indicate that the Clean Power Plan will r esult in substantial health benefits beyond those expected to result from other EPA regulations

.

National Research Council (NRC). 2002. Estimating t he Public Health Benefits of Proposed Air Pollution Regulations. Washington, DC: The National Academies Press. Washington, DC.

Comment 2: Including Co-Benefits

Commenters in this summary raised issues related to assumptions and methods used for the determination of health benefits associated with th e rule.

Commenters argued against the comments that state t hat EPA's consideration of indirect and qualitative benefits from the rule is inappropriate . The commenters stated that EPA's treatment of these co-benefits and qualitative benefits is we ll-justified based upon agency practice and Office of Management and Budget (OMB) guidance stre tching back decades. The commenters said that if anything, EPA should give even more co nsideration to qualitative benefits in its final rule and regulatory impact analysis.

Commenters stated that EPA's cost-benefit analysis for this proposed regulation is troublesome. The commenters said that EPA continues to justify a regulation with benefits that are derived not from the pollutant that EPA cites as the justificat ion for promulgating the regulation (carbon dioxide), but from pollutants incidentally reduced by the primary regulatory requirements (ozone and particulate matter).91

Commenters also argued that the new rule is promulg ated to solve many problems such as fine particles pollution. The commenters said that accor ding to EPA, PM 2.5 levels have decreased nationally by 34% since 2000, and raised the questi on of why additional regulations on this pollutant are necessary.

Commenters stated that including co-benefits obscur es the impact of the rule on the targeted pollutant (CO 2 ) and hinders both the public's ability to understa nd the agency's policies and to hold the agency accountable for those policies. The commenters said this also hinders EPA's own ability to improve the analysis underlying its regu latory initiatives.

Commenters stated that EPA's justification for doub le-regulation with regard to criteria pollutants is not sufficient because the agency is also working on tightening standards on current rules, so therefore, they are not static like this proposed rule implies. The commenters said that EPA fails to explain whether further emissions redu ctions are desirable or feasible and that EPA should justify the proposed rule based on climate b enefits alone.

Commenters stated that EPA has improperly included co-benefits from reductions of pollutants

other than CO 2 (e.g. fine particulates, ozone, sulfur dioxide and nitrogen oxides) that are regulated to levels protective of public health und er other regulations. Commenters said that EPA's estimate of as much as $62 billion in 2030 in "air pollution" co-benefits is irrelevant, inappropriate, and should not be included.

Commenters stated, "The EPA should not be claiming co-benefits from reductions in other pollutants such as sulfur dioxide (SO 2 ) and nitrogen oxides (NOx) from the proposed rule. " "Not only are criteria pollutants not the purpose of the proposed rule, the EPA’s claimed co-benefits from the proposed rule are likely overestimated." "It is in appropriate for the EPA to claim a benefit from reducing a criteria pollutant in a non attainment area for this proposed rule when that reduction is already required to occur under separa te CAA obligations regardless of whether the EPA adopts the proposed carbon pollution emission g uidelines for existing power plants."

Commenters stated that EPA’s reliance on co-benefit s from simultaneous reductions in pollutants other than GHGs is misplaced and must be revised to more appropriately reflect the health benefits that would actually be attributable to this proposed rule.

Commenters stated that including criteria pollutant s, SOx, NOx and particulate matter (PM), already regulated by a variety of regulations, doub le counts those benefits attributed to CPP. The commenters added that if the existing regulations a re effective at protecting human health to the standards established by the EPA, then it is not cl ear that further reductions would provide

additional health benefits. The commenters added th at in the case that the existing regulations are not sufficient to protect human health, then, there may be a case for the EPA to consider costeffective measures that will further reduce the pol lutants without the need for measures targeting

reductions in carbon dioxide. The commenters stated that the inclusion of "co-benefits" in the

RIA results in massive overestimation of the benefi ts of the CPP. The commenters said that if co-benefits are removed, it is most unlikely that t he benefits of the CPP would exceed the costs.

Commenters stated that the inclusion of co-benefits exposes two structural deficiencies in the RIA: 1) inclusion of global benefits compared to do mestic costs, and 2) the use of different time92

horizons for estimated costs and for estimated bene fits. The commenters said that both are conflicting with OMB direction, and further distort the cost and benefit calculations in the RIA.

Commenters said that nearly 40% of EPA's assumed be nefits are international carbon benefits,
and 60% are health co-benefits from reductions of o ther emissions, not CO 2 . The commenters added that over 90% of these assumed global carbon benefits accrue outside the U.S., while the costs are borne only in the U.S. The commenters sa id that these perceived co-benefits are not related to carbon dioxide removal, and their claime d value, reliable or not, result from other EPA rules that address those emissions directly.

Commenters stated that EPA uses a cost/benefit anal ysis in justification of the rule that improperly calculates the rule's expected benefits and fails to account for the global nature of climate change. The commenters also stated that the cost/benefits analysis is flawed since on average 60% of the claimed monetary benefit used in EPA's cost/benefit analysis for this rule

relies on non-GHG emissions-related health claims. The commenters said that it is unsupportable and bordering on disingenuous for EPA to make its claims for the health benefits of the 111(d) rule using this "double-counting" met hod.

Commenters stated that EPA is double-counting benef its of the proposed rule because reducing particulates is governed by other regulations. The commenters stated that the technique skews the cost-benefits and imposes unnecessary costs whi ch have impacts on human health due to higher electricity prices and economic constraints on the U.S. economy that have not been addressed and weighed against the speculative benef it conclusions presented by EPA.

Commenters suggested that EPA should focus on calcu lating the benefits of reduced carbon emissions because the proposed rule regulates carbo n and that the proposed rule should not be used as a catch all for a desired air quality schem e. The commenters remarked that there is no relationship between reduced carbon emissions and i mproved human health aside from the

indirect effect on climate. The commenters added th at experts at the Harvard School for Public Health have estimated that expensive environmental rules save 100 times fewer lives than when the federal government redeployed those assets to a ddress higher risks and stated that EPA should not be so cavalier in its benefits analysis.

Commenters stated that EPA is mistaken in asserting that this rule would result in net benefits from avoided negative health effects. The commente rs said that based on CDC data more people are dying each year, but stated that this is becaus e of an increase in the population and people getting older. The commenters said that when the in crease in the population size and age is factored into the death rate, the overall trend is that the death rate is declining. The commenters said that anthropogenic climate change does not see m have slowed the decline of the death rate, but may have actually increased the speed of the de cline.

Commenters argued EPA estimates that in order to ac hieve their building blocks, concurrent reductions in criteria pollutants will occur, but t he rule contains no enforceable standards for criteria pollutants. Commenters stated if complianc e with the rule does not need to follow EPA's building block approach, EPA cannot claim the concu rrent reductions of an estimated path to a building block that they will not enforce. In other words, the rule claims a side-benefit that won't necessarily occur.93

Commenters stated that EPA's reliance on co-benefit s violated the CAA. The commenters said the majority of the alleged net benefits of the rul e proposal are derived from co-benefits of reducing non-GHG pollutants, primarily PM 2.5 and ozone. The commenters said this approach is flawed because: 1) there is no basis in CAA Section 111(d) to include the co-benefits of emissions reductions from pollutants not targeted b y the rule, 2) any inclusion of co-benefits effectively double-counts the benefits of these red uctions that are already regulated by other rules, 3) EPA is counting the benefits of these red uctions in criteria pollutants in areas that have already achieved attainment with NAAQS and these ar eas are not shown to receive any additional benefits, and 4) calculation of the bene fits uses a no-threshold linear-regression-tozero model design, which counts the benefits of eve n the smallest reduction in PM 2.5 . The commenters said this contradicts all standard proce dures for health analysis, by not establishing a

threshold-cut off to determine benefits of reductio ns.

Commenters stated that emission trading mechanisms such as the Regional Greenhouse Gas Initiative (RGGI) have proven very successful at co st-effectively reducing carbon dioxide emissions and simultaneously generating funds can b e used to promote renewable energy and energy efficiency. Commenters stated that, however, to the extent they allow coal-fired power plants to continue operating at full capacity and p urchase emissions credits, such trading programs ignore the co-benefits that occur when a p ower plant actually reduces its carbon

dioxide emissions. Commenters stated that these co- benefits include reductions in emissions of heavy metals and smog-creating air pollution. Comme nters stated that the EPA should be cognizant of the problem and strive to generate a r ule that not only addresses climate change but also ensures that communities near power plants act ually breathe cleaner air.

Commenters stated that efforts for carbon emissions reductions also cut emissions of nitrogen oxide, sulfur dioxide and mercury, which affect pub lic health.

Commenters stated that the rule will have the subst antial co-benefit of bringing about significant additional reductions in other air pollutants that are subject to NAAQS. The commenters said there will be significant reductions in sulfur diox ide, nitrogen oxides, and fine particulate matter (PM 2.5 ) pollution, and that mercury emissions will probab ly also be reduced. The commenters said that overall it is expected there will be a 25 % reduction in soot and smog (ozone) pollution.

Commenters stated that private sector-delivered ene rgy efficiency projects produce significant non-GHG air quality benefits by reducing the level of needed electric generation and, therefore, the associated emissions of criteria pollutants. Th e commenters said EPA has identified energy efficiency as an eligible tool to be used in SIPs t o comply with NAAQS. The commenters said that as NAAQS are tightened in future years, and mo re areas are placed in nonattainment, the cobenefit of reducing criteria pollutants through ene rgy efficiency will be highly valued. The commenters added that whether projects are pursued for cost savings, GHG reductions, or energy savings, the benefits of reducing criteria pollutan ts are always present.

Commenters stated that the benefits identified by E PA are derived from the reductions of criteria pollutants and not CO 2 reductions, and that depending on the discount rat e that is applied, these co-benefits can be as much as an order of magnitude greater than the benefits associated with reducing CO 2 emissions alone. The commenters said that it is ar bitrary, capricious, and unreasonable for EPA to justify the rule based on a ncillary or unintended benefits. The94

commenters said that if EPA seeks to regulate a pol lutant under Section 111, it must demonstrate

that health and environmental benefits from reducin g emissions of that pollutant will be costeffective. The commenters also added that EPA's re liance on co-benefits from reducing emissions of criteria pollutants is particularly pr oblematic because EPA is barred from directly regulating criteria pollutants under Section 111(d) . The commenters said that EPA's approach here would allow it to indirectly regulate criteria pollutants from a source category by finding a surrogate air pollutant that can be regulated under Section 111(d), and added that if EPA moves forward with this rule, it must justify it solely o n the domestic benefits of reducing CO 2 emissions, a standard that EPA is unlikely to meet.

Commenters stated that EPA inappropriately relies o n the benefits of reductions in criteria pollutant levels for economic justification of the proposed rule. The commenters said that in evaluating the economic benefits of the proposed ru le, EPA not only quantified the climate

benefits from reduced emissions of CO 2 but also added in the health co-benefits from redu ced exposure to fine particulate matter (PM 2.5 ) and ozone. The commenters said that between 45-
69% of all of the benefits said to be related to th is proposal are in the form of co-benefits related

to health-based standards.

Commenters argued EPA's statement with regard to "t he net climate and health benefits of $48 billion to $82 billion" of the rule, stating that i n order for EPA to assert that this rule will resul t in America expanding its economy by billions of dollar s, the benefits must be real, must be attributable to the requirements of this rule only, and must be enforceable. The commenters said that since the vast majority of EPA's calculated "b enefit" is based on estimated health benefits from other rules such as CSAPR, it urges the EPA to assign true co-benefit from the rule for an appropriate evaluation of the regulatory benefit. T he commenters said that not only should EPA refrain from double-counting co-benefits, the healt h benefit can only be attributed to a rule that will enforce the claimed criteria pollutant reducti ons.

Commenters stated that EPA has provided no legal ba sis for relying on "health co-benefits" and that EPA has provided little quantitative evidence to support these values. Commenters stated that NAAQS should be properly set to achieve and ma intain public health so there should not be

a substantial number of avoidable deaths and illnes ses attributable to the proposed rule. The

commenters further stated that the exorbitant costs of the proposal and unproven benefits mandate withdrawal of the proposed rule.

Commenters stated that the majority of the alleged net benefits of the rule proposal are derived from co-benefits of reducing non-GHG pollutants, pr imarily PM2.5 and ozone. The commenters stated that is flawed and provided arguments for th is as follows. The commenters said that there is no basis in CAA Section 111(d) to include the co -benefits of emissions reductions from pollutants not targeted by the rule. The commenters said that there is certainly no endangerment finding related to these co-benefit pollutants and that the listed NAAQS criteria pollutants are specifically excluded from Section 111(d) rulemakin g; therefore, these pollutants have no basis to be considered in the cost-benefit analysis in th is rulemaking. The commenters also stated that any inclusion of co-benefits effectively double-cou nts the benefits of these reductions. The

commenters said that co-benefits from the reduction of ozone, and particularly PM2.5, are already counted in numerous other rules. The commen ters also stated that EPA is counting the benefits of these reductions in criteria pollutants in areas that have already achieved attainment95

with the relevant NAAQS; therefore, these areas are not shown to, statutorily, receive any

additional benefit from reductions in those attainm ent areas.

Commenters stated that attempting to overhaul the e ntire electricity market to address the same acute health impacts already more thoroughly regula ted as criteria pollutants is the wrong approach. The commenters said that by justifying th is rule based almost entirely on secondary criteria pollutant reductions of pollutants already regulated, U.S. EPA has overstepped logical regulatory authority. U.S. EPA cannot ride the coat tails of reductions applicable under other Clean Air Act (CAA) programs as justification for a proposal to reduce CO2 emissions.

Response 2: The EPA agrees with the commenters that it is appro priate to evaluate all of the direct and indirect benefits of the proposed rule, including the air quality co-benefits resulting from anticipated reductions in SO2, NOx, and fine p article emissions. The EPA disagrees that it is double-counting the benefits of this proposal. A ll of the estimated health benefits are

attributable to the emissions reductions associated with this rule. The estimated health benefits

are incremental to a baseline that includes existin g regulations. Consistent with OMB (OMB, 2003) and EPA guidance (U.S. EPA, 2010a) the EPA es timates all of the anticipated costs and benefits associated with a regulatory action, to th e extent feasible, for the purpose of determining the likely impacts, not to justify an action. Acco unting for ancillary benefits is standard practice in benefit-cost analysis, regardless of the rule’s intended purpose. The EPA disagrees with the
commenters that PM2.5 health co-benefits should be excluded in estimating the health benefits anticipated by this proposal. As a direct result o f the actions needed to meet the CO2 requirements of the proposed rule, the proposed rul e is expected to achieve substantial PM2.5 health benefits resulting from primary PM and SO2 e missions reductions, and these co-benefits are an important and real benefit to quantify.

Considering ancillary benefits in benefit-cost anal ysis is directed by OMB Circular A-4 (OMB 2003, p. 26) -- "Your analysis should look beyond t he direct benefits and direct costs of your rulemaking and consider any important ancillary ben efits and countervailing risks. An ancillary benefit is a favorable impact of the rule that is t ypically unrelated or secondary to the statutory purpose of the rulemaking (e.g., reduced refinery e missions due to more stringent fuel economy standards for light trucks) while a countervailing risk is an adverse economic, health, safety, or environmental consequence that occurs due to a rule and is not already accounted for in the direct cost of the rule (e.g., adverse safety impac ts from more stringent fuel-economy standards for light trucks)." Considering ancillary benefits is also directed by the EPA’s Guidelines for Preparation of Economic Analyses (U.S. EPA, 2010ap. 11-2) -- "An economic analysis of regulatory or policy options should present all ide ntifiable costs and benefits that are incremental to the regulation or policy under consideration. Th ese should include directly intended effects and associated costs, as well as ancillary (or co-) benefits and costs."

EPA also disagrees with the commenters that it is i nappropriate to use a log-linear no-threshold model in calculating the benefits of PM2.5 reductio ns. The most recent review of the PM.25 scientific literature contained in the peer-reviewe d Integrated Science Assessment for PM2.5 (U.S. EPA, 2009) concluded that " Overall, the studies evaluated further support the use of a nothreshold log-linear model."96

In addition, the EPA disagrees with the commenters that the benefits of the proposed rule do not exceed the costs. The benefits of this proposed rul e include the benefits of CO 2 reductions and the co-benefits to human health achieved by PM 2.5 and ozone precursor emissions reductions. As the analyses presented in the RIA indicate for the illustrative implementation scenarios analyzed, the benefits outweigh the costs by a large margin. We further note that we were unable to monetize other important benefits, including additi onal health benefits of reductions in ozone

and PM 2.5 , direct health benefits associated with reducing N Ox and SO 2 emissions, and benefits of reducing mercury emissions. If we were able to fully monetize these benefits, the benefits would exceed the costs by an even greater margin.

Office of Management and Budget (OMB). 2003. Circul ar A-4: Regulatory Analysis. Washington, DC. Available on the Internet at http://www.whitehouse.gov/omb/circulars/a004/a4.html.

U.S. Environmental Protection Agency (U.S. EPA). 20 10a. Guidelines for Preparing Economic Analyses. EPA 240-R-10-001. National Center for Env ironmental Economics, Office of Policy Economics and Innovation. Washington, DC. December. Available on the Internet at http://yosemite.epa.gov/ee/epa/eerm.nsf/vwAN/EE-056 8-50.pdf/$file/EE-0568- 50.pdf.

Comment 3: Relation to NAAQS and Effects at Low Concentration s

Commenters in this summary discussed the overlap be tween the benefits attributed to the proposed rule and the pollutant reductions related to NAAQS.

Commenters stated that nearly all of the health ben efits that EPA claims are from reductions in ozone and particulate matter emissions, which are a lready a result of regulations under NAAQS and other recent stringent regulatory actions. The commenters said that further reducing carbon dioxide emissions does not prevent asthma or reduce incidents of heart attacks, but these are the health benefits pedaled to the public.

Commenters stated "Section 111(d) excludes regulati on of NAAQS pollutants like PM 2.5 and ozone." "Although the proposed rule does not purpo rt to regulate PM 2.5 and ozone directly, a significant majority of projected benefits of the p roposed rule come from reducing those NAAQS pollutants." "Counting PM 2.5 and ozone reductions as benefits of the rule violat es the statutory prohibition on regulating NAAQS pollutant s through Section 111(d)."

The commenters said that currently historically low levels of ozone are not a significant concern for human health, and future levels will be even lo wer. The commenters said that EPA uses

selective characterization of evidence. The comment ers added that laboratory studies with human

volunteers indicate that an 8-hour ozone standard o f 85 ppb is protective of human health with
room to spare.

Commenters stated that EPA counts the benefits asso ciated with reductions in criteria pollutants in locations that attain the NAAQS, when EPA has no t shown that the emissions reductions that will flow from this rule are necessary to achieve a ny NAAQS.97

Commenters stated that in addition to counting bene fits from PM 2.5 and ozone reductions already mandated by the relevant NAAQS, the proposed rule c ounts benefits of reducing emissions of these pollutants even below the level required by t he NAAQS. The commenters said that specifically, the RIA asserts that its benefits "es timates include health co-benefits from reducing fine particles in areas that are in attainment with the PM 2.5 NAAQS, down to the lowest modeled concentrations." The commenters said that including these benefits is contrary to the NAAQS regulations' premise that these "benefits" are inco nsequential.

Commenters stated that it is improper for the propo sed rule to count PM 2.5 and ozone reductions below the NAAQS as benefits, because the NAAQS repr esent the level of pollution control EPA deems "requisite to protect the public health" with "an adequate margin of safety."

Commenters cited a statement by a former Chairman o f the Texas Commission on Environmental Quality which stated that "If reducin g particulate matter had the enormous benefits that EPA's analysis claims, it has a legal responsibility to lower the national ambient standard to a level that is actually protective of human health. The fact that it has not done so suggests that the EPA does not really believe its o wn numbers. The EPA set the new NAAQS for

annual PM 2.5 at 12 ug/m 3 , an ambient level still far above the lowest measu red levels (LMLs) that the EPA used to identify risk of death in cost-bene fit analyses... This...gives a misleading picture of the relative costs and benefits of EPA regulatio ns". Kathleen Hartnett White & Josiah Neeley,

WHO REGULATES THE REGULATOR?: COST-EFFECTIVENESS AN ALYSIS IN TEXAS STATE AGENCY RULEMAKING, 14 Tex. Tech. Admin. L.J. 401, 412 (2013).

Commenters added that to avoid the implication that the proposed rule is claiming benefits from reducing emissions of pollutants below the levels a t which they have a significant effect on human health, the RIA improperly jettisons the assu mptions and models on which EPA relied in setting the NAAQS. The commenters said the RIA expl icitly "assume[s] that the health impact function for fine particles is log-linear without a threshold in this analysis." The commenters said that this assumption violates the best available sc ience on which EPA relied when it updated the

PM 2.5 NAAQS in 2013. The commenters said that in that rul emaking, the agency selected a threshold of 12.0 ug/m 3 because "it was somewhat below the lowest long-ter m mean concentration shown by certain key epidemiologic st udies to cause adverse health effects." Nat'l Ass'n of Mfrs. v. EPA, 750 F.3d 921, 924 (D.C. Cir. 2014). The commenters said that by counting PM 2.5 reductions in areas that are already in attainment with the NAAQS, "down to the lowest modeled concentrations," the proposed rule a ssigns mortality-avoidance benefits to reducing PM 2.5 below the level at which that pollutant has a meas urable effect on mortality.

Commenters stated that the proposed rule contradict s the 2013 PM 2.5 NAAQS rule's

determination that "an annual standard level of 12 ug/m 3 would be requisite to protect the public health with an adequate margin of safety from effec ts associated with long- and short-term PM 2.5 exposures," because that level is "somewhat below t he lowest long-term mean concentration in

the full set of studies considered." The commenters said that in the PM 2.5 NAAQS rule, EPA explicitly considered and rejected proposals to man date lower levels of PM 2.5 , because such a standard is not necessary to adequately protect hum an health. The commenters said that the proposed rule ignores these conclusions and treats all emissions reductions alike, whether or not they occur below the NAAQS level.98

Commenters stated that EPA provides no adequate exp lanation for its decision to count PM 2.5 mortality benefits all the way down to the lowest m easured level (LML). The commenters added

that decision contradicts the PM 2.5 NAAQS rule's conclusion that the limited evidence o f PM 2.5 's
contribution to adverse health effects at low conce ntrations "does not justify" a more stringent

standard.

Commenters proposed several reasons why the co-bene fit estimates are overstated and should also not be included in the RIA. First, the comment ers stated that many of the estimated benefits

are associated with PM 2.5 and ozone reductions that are already at levels bel ow the Federal health standards for those pollutants that are set at a le vel that protects the public health with an adequate margin of safety. The commenters discussed the review process used to set and accept confident and protective NAAQS standards by EPA and the District Court, and the uncertainties

associated with levels below the set standard. Ther efore, the commenters stated that the RIA is only able to generate large co-benefits estimates b y assuming that EPA has full confidence in the

existence of the health effects associations all th e way to zero ambient concentrations, but benefits may be de minimis. The commenters noted t hat these reductions may be enforced without the proposed rule by implementation of othe r regulations, and these benefits have nothing to do with climate change.

Commenters recommended counting only exposure above the scientifically established National Ambient Air Quality Standard when calculating reduc ed premature deaths, which drops the health benefits from $62 billion to $3 billion. The commenters said that the rationale for this is that the scientifically established National Ambien t Air Quality Standards are set to a level that will not cause harm in even sensitive groups, such as asthmatics. The commenters also said that $59 billion of the $62 billion, or 95%, in estimate d annualized health cost savings is based on the misguided assumption that exposure to fine particle pollution (PM 2.5 ) levels below the Air Quality Standard is harmful.

Commenters stated that the EPA estimated health co- benefits are based almost entirely (greater than 98%) on premature deaths avoided by reducing P M 2.5 emissions. The commenters said that since the average PM 2.5 levels in the US are 25% below the National Ambient Air Quality Standard (NAAQS), there should be no premature deat hs avoided due to reduced ambient levels

of PM 2.5 . The commenters also said that they believe the ES PS costs ($8.8 billion annually in 2030) will likely greatly exceed the monetized bene fits (between $27 billion to $62 billion annually) as estimated by EPA.

Commenters stated that EPA does not reflect the inc reasing uncertainty in claiming mortality

benefits from reductions in PM 2.5 at lower ambient concentrations, where much of EPA' s claimed mortality benefits occur. The commenters said that OMB Circular A-4 requires a quantitative analysis of uncertainty for rules as costly as the proposed ESPS regulation and that in the RIA, EPA adds the highly uncertain mortality benefits ca lculated by applying the concentrationresponse functions (CRFs) at lower ambient concentr ations to the less uncertain benefits calculated by applying the same CRFs at higher leve ls. The commenters expressed concerns in applying the selected CRFs at "lower levels" in eit her of two ways: 1) At levels lower than the primary NAAQS for PM 2.5 , which presumably establishes an ambient concentra tion below which exposures are "safe;" and 2) At levels lower than m ost of those considered in the epidemiology studies underlying the CRFs; at these lower levels the CRFs estimated in the studies become99

highly uncertain. The commenters said EPA has not e stimated in this RIA the fraction of PM 2.5 mortalities avoided due to the proposed rule that w ill occur among individuals exposed at less than the current NAAQS, but assumed that this fract ion is high. The commenters added that one

would think that EPA would somehow reflect in the b enefits analysis the uncertainty of benefits
estimates at lower ambient concentrations if 65-95% of EPA's total calculated benefits accrue to individuals who are exposed at levels deemed to be "safe".

Commenters stated that there is another sort of unc ertainty when EPA calculates mortality

benefits at ambient PM 2.5 concentrations approaching the lower extreme of the concentrations analyzed in the epidemiological studies from which EPA selected the CRFs. The commenters said the statistical uncertainty of a slope relatio nship (e.g., a CRF) estimated from a scatter of data points will typically widen substantially as o ne moves toward the extremes of the underlying data. The commenters said that uncertai nty about the magnitude of the CRFs

estimated in the two selected studies increases as one approaches the lowest measured levels (LMLs) of ambient average PM 2.5 concentrations that prevailed in the cities compris ing the datasets analyzed in the two studies. The commente rs said the confidence interval may even widen sufficiently so that the estimated CRF is not statistically significantly different from zero at or near the LML, even though the average slope o ver the full range of the underlying data is statistically significant. The commenters added th at the agency does nothing in any quantitative way in the benefits analysis in the ESPS RIA to ref lect this increasing uncertainty at lower

concentration levels.

Commenters added that EPA calculated that 89% of th e U.S. population modeled in the ESPS RIA is exposed at PM 2.5 concentrations below 1 standard deviation below the mean air quality in the Krewski et al (ACS) data set. The commenters s aid that based on Lepeule et al (2012), they estimated that 93% of the population considered in the ESPS RIA is exposed at levels below 1

standard deviation below the mean for this extended cohort. The commenters added that based on this their conclusion is nearly identical for bo th of the two epidemiological studies that EPA chooses to provide the lower and upper benefits est imates for avoided PM 2.5 mortality, and added that the vast majority (89-93%) of PM 2.5 exposures that will be affected by the proposed ESP S regulation occur at concentrations below the levels at which EPA has "appreciably less confidence in the associations observed in the epid emiological studies." The commenters added that neither the Krewski et al (2006) nor Lepeule e t al (2012) studies can be used confidently to

assess risks at PM 2.5 concentrations of less than about 12 ug/m 3 , and virtually all of the air quality improvements projected as resulting from the propos ed ESPS regulation will occur at these

lower concentrations. The commenters said EPA shou ld acknowledge in the RIA this large source of uncertainty, and should consider alternat ive risk assessment approaches that might yield more confident risk estimates at the lower am bient concentrations that are at issue for this regulation.

Commenters presented concerns with EPA's assumption s on causal relationship and the use of

the no-threshold linear model between PM 2.5 and mortality rates, and stated that the literature

demonstrates these are inaccurate. The commenters s aid that the linear no-threshold model is faulty and unreliable, and presents the hormesis mo del as an alternative. The commenters said that hormesis model is superior as a representation of these toxicological concentration-response functions, and that recent research demonstrates th at an observable hormetic dose-response100

relationship exists specifically between fine parti culate matter (PM2.5) and mortality (http://www.ncbi.nlm.nih.gov/pmc/articles/PMC129920 3/).

Commenters stated that the benefits due to reductio ns in pollutants other than CO 2 are independently regulated under the NAAQS program and cannot be attributed to or doublecounted by the proposed rule. The commenters furthe r stated that the NAAQS reflects a level of air pollution deemed by EPA to protect public healt h and welfare. Commenters noted that the Clean Air Scientific Advisory Committee and EPA "(a ) has yet to identify a discernible PM 2.5 threshold and (b) indicates significant increases i n uncertainty of the dose-response at lower

concentrations".

Commenters stated that the EPA estimated health co- benefits are based almost entirely (97% plus) on premature deaths avoided by reducing PM 2.5 emissions, but since the average PM 2.5 levels in the U.S. are 25% below the National Ambie nt Air Quality Standard (NAAQS), there should be no premature deaths avoided due to reduce d ambient levels PM 2.5 . The commenters

stated that while EPA estimates that the CPP will c ost $8.8 billion annually in 2030, the

monetized benefits in 2030 are estimated to be betw een $27 billion to $62 billion annually.

Commenters added that it is disingenuous for EPA at tribute public health benefits to reducing concentrations of these pollutants below levels for which EPA recently determined the uncertainty of health risks were too great to warra nt regulation, especially when these highly uncertain benefits are used to justify a rule targe ting a different pollutant altogether. Commenters stated that EPA should either address any issues wi th NAAQS not sufficiently protecting public health through NAAQS, not through the back door via CO 2 regulations.

Commenters stated that most of the health co-benefi ts are attributable to exposures to pollutants at levels below those EPA has found protective of p ublic health, and even those fictional benefits are largely due to emissions reductions that will o ccur even in the absence of the proposed guidelines.

Commenters cited comments by EPRI, which stated tha t EPA essentially double counts benefits of pollution reductions resulting from the rule. Th e commenters added that EPRI points out that EPA's own data in the RIA demonstrates that approxi mately 95% of the U.S. population experiences fine particulate matter levels that are already at or below the National Ambient Air Quality Standard of 12 ug/m 3 before implementation of the proposed rule. Howeve r, commenters added, these same populations are included in EPA's benefits calculations for the proposed rule. The commenters said that it is not appropriate for health benefits to accrue at levels of particulate matter that are already deemed to be protective of human health.

Commenters stated that EPA improperly attributes pu blic health benefits to the proposed rule in two main ways: 1) by crediting the proposed rule wi th public health benefits from reductions in

PM 2.5 and ozone (O3) already mandated by existing regulat ory programs, including NAAQS; and 2) by attributing public health benefits to the rul e that stem from reductions in concentrations of

PM 2.5 and O3 below what is already required under the NAA QS. The commenters said that EPA already set the NAAQS at levels that the agency det ermined are protective of public health, and which incorporate an adequate margin of safety. The commenters said that the agency cannot fairly credit the proposed rule with the health ben efits of emissions reductions that will occur101

regardless of the implementation of EPA's Section 1 11(d) proposal. The commenters said that it is improper for the agency to credit health benefit s to the proposed rule based on exposure to

PM 2.5 and O3 at levels below the thresholds that EPA has already deemed protective of public

health.

Commenters stated that Clean Air Act expressly excl udes NAAQS pollutants from those that can be regulated under section 111(d) and the benefits of reducing emissions from PM 2.5 and ozone have already been quantified and used to justify EP A's costly NAAQS regulations. The

commenters said that EPA's RIA asserted that its be nefits calculation "include[s] health cobenefits from reducing fine particles in areas with varied concentrations of PM 2.5 , including areas

that do not meet" the PM 2.5 NAAQS. The commenters said that the extent of this problem is unclear, because EPA fails to estimate the portion of the projected emissions reductions that will

occur in nonattainment areas. The commenters said t hat to whatever extent the proposed rule counts in its cost-benefit analysis the effects of reducing PM 2.5 and ozone to the levels already required by their respective NAAQS, the agency is i mproperly double-counting those benefits to justify two sets of regulations. The commenters sai d that the benefits of achieving the NAAQS standards cannot rationally be counted as benefits of other rules.

Commenters stated that EPA inflates the benefits of the proposal by including reductions in fine particulate matter and ozone that cannot be attribu ted to the proposal, these reductions are already required and projected to be attained under the NAAQS program and other rules. The commenters said that since the NAAQS are already se t at levels that are supposed to be protective of public health, it is not clear how EP A can assert that reducing emissions below levels that are protective of public health actuall y benefits public health. The commenters added that under a proper, un-inflated cost-benefit analy sis, the costs of the proposal outweigh the benefits, thus the proposal is unjustified and shou ld be withdrawn.

Commenters stated that EPA cannot take credit for e missions reductions in this rule that Congress specifically defined EPA could not regulat e under Section 111(d). The commenters

said that the reason for this exclusion is that Con gress already requires regulation of criteria pollutants from these sources in other areas of the Clean Air Act. The commenters added that EPA has already promulgated regulations to this eff ect, and taken credit for the estimated health benefits through those separate rules. The commente rs added that the EPA uses quantification for health co-benefits that consider none of the requir ed reductions from other rules, nor does it compare to the health-based thresholds that serve a s the foundation of the Clean Air Act: the NAAQS. The commenters said the EPA is required to e stablish the NAAQS at a level that protects public health without consideration of cos t and that the entire state of Florida is designated attainment/unclassifiable for both PM 2.5 and ozone. The commenters then said that as such, there are no possible health co-benefits that can be quantified in Florida from the Clean Power Plan as the state is already meeting the prot ective thresholds. The commenters said that if the EPA quantifies health co-benefits in Florida an d other attaining areas, they undermine the protective level of the NAAQS they defend in court. The commenters added that if the EPA claims that reductions in Florida from the proposed rule lead to significant reductions in out-ofstate nonattainment areas, then they undermine the effectiveness of CSAPR to already achieve the necessary reductions, and admit to duplicative regulation.102

Commenters also stated that in order to avoid these contradictory claims, EPA develop a proposed GHG rule that rests on the merits of its m eaningful GHG reductions alone, and allow the regulations required by other sections of the C lean Air Act to work as intended for criteria pollutant reductions.

Commenters stated that most of the co-benefits in t he RIA would be attributed to changes in the criteria pollutants in areas already in compliance with the health-based NAAQS. The

commenters said that those co-benefits must be view ed as overstated and potentially nonexistent, and that the question should be what shou ld be done with co-benefits in areas that the baseline regulatory scenario does not find to be at taining the NAAQS. The commenters said that although the RIA does not provide the requisite dat a, this must be an exceedingly small portion of the co-benefits, if any, because the baseline fo r the CPP contains all existing regulations. The commenters stated that only a few areas in Californ ia would not attain that NAAQS by 2020, and cited analyses by Smith (2014b) which showed that o nly a very small geographic portion of those areas would actually be above the NAAQS level . The commenters said that the small quantity of the co-benefits that the RIA attributes to the CPP are associated with changes in areas not already attaining each NAAQS and that those red uctions are going to occur even if the CPP were not to be implemented. The commenters added th at state implementation plans (SIPs) will be required and enforced in those areas during the same time period, whether or not the CPP

exists. The commenters also said that even if indi viduals other than the EPA Administrator were

to have confidence in the continued existence of su ch substantial health effects associations for

PM 2.5 and ozone, to let a climate-related regulation take credit for those reductions is a recipe for unnecessary regulations that result in economically inefficient management of the public health.

Commenters stated the benefits that EPA asserts are produced at ambient air concentrations that are lower than the NAAQS, even though EPA set the N AAQS at a level it deemed requisite to protect the public health with an adequate margin o f safety and without considering compliance

costs.

Commenters stated that EPA relies on a series of co njectures that infer rises in ozone and PM 2.5 concentrations, as a result of increased heat waves and drought. However, ozone and PM 2.5 are criteria pollutants regulated through the establish ment of NAAQS under CAA Section 110. The

commenters said that these health-based standards m ust, by law, adequately protect human health, including that of sensitive populations; th erefore, it is inappropriate for EPA to consider further reductions in criteria pollutants as a just ification for additional GHG regulation in this

situation. The commenters said that EPA has not ide ntified any GHG as a criteria pollutant nor has the agency established a related primary NAAQS which is associated with human health.

The commenters said that EPA has failed to make a d irect correlation to specific concentrations of GHG, including CO 2 , that would directly affect ground-level ozone or PM 2.5 concentrations and that otherwise, EPA would be compelled to consi der these substances as pollutant precursors and regulate them under a NAAQS.

Commenters stated that NOx and SO 2 are currently regulated by the EPA. The commenters said that as of October 2012, no area of the country has been found to be out of compliance for NOx and that since 1980, SO 2 concentrations have decreased by 71%. The commente rs questioned why is the EPA touting any increased air quality be nefits now, when these gases are already being adequately regulated.103

Commenters stated that the methodology EPA uses to calculate benefits, particularly from PM 2.5 reductions, is fundamentally flawed. The commenters said that EPA uses a no-threshold linearregression-to-zero model design; which counts the b enefits of even the smallest reduction in

PM 2.5 . The commenters said that this contradicts all sta ndard procedures for health analysis, by not establishing a threshold-cut off to determine b enefits of reductions.

Response 3: The proposed rule is not based on the estimates of air quality co-benefits provided in the RIA. The benefit-cost analysis included in the RIA accompanying the proposed rule was conducted in compliance with Executive Order 12866, which requires a cost-benefit analysis for major regulations with an expected impact of greate r than $100 million annually. Consistent with OMB (OMB, 2003) and EPA guidance (U.S. EPA, 20 10a), when conducting a cost-benefit analysis to meet the requirements of EO 12866, the EPA estimates all of the anticipated costs and benefits associated with a regulatory action to the extent feasible, including benefits anticipated to occur from reducing air pollution to below the NAAQS levels. As EPA has consistently stated, the NAAQS are not risk free, a nd as a result, consistent with scientific evidence and CASAC review, EPA includes benefits of reductions in air pollution at levels below the NAAQS and in areas that attain the NAAQS, even if there is potentially reduced confidence in the specific magnitude or those benef its. The most recent Integrated Science Assessments (ISA) for ozone and PM 2.5 indicate that the science supports use of log-line ar nothreshold concentration-response functions for both ozone and PM 2.5 (U.S. EPA, 2009, 2013). Our use of no-threshold models directly follows thi s science. The EPA disagrees with commenters who suggest it is inappropriate to use n o-threshold models, and disagree that these models are not reliable. The EPA also disagrees wi th the commenters who suggested use of a

Hormesis based model. The scientific literature fo r PM 2.5 does not support this type of model, and the literature cited by the commenters is not d irectly relevant to air pollution exposures or

PM 2.5 and ozone specifically.

The EPA believes that the best estimate of benefits includes benefits both above and below the levels of the NAAQS and maintains it is not double- counting benefits simply because the magnitude of the health benefits that occur at lowe r concentrations are more uncertain.

The EPA’s standard practice for its rules is to est imate, to the extent data and time allow, all benefits of the emissions reductions achieved by a rule beyond control requirements for other rules, i.e., establish a baseline . While it can be difficult to account for concurre nt rulemakings in a baseline, the EPA clearly identifies what is and what is not in the baseline for each analysis. If this proposed rule was duplicative of other rules, then there would be no additional costs or benefits attributable to this proposed rule. Prior to estimating the health benefits of this proposed rule (and any other rule), we simulated what PM 2.5 concentrations would be in the future to account for the air quality benefits that would occ ur due to other regulations (e.g., MATS) or economic factors in this baseline. Any emissions ch anges expected as a result of this proposed rule are additional emissions reductions beyond the other regulations included in the baseline (e.g., MATS). Therefore, the benefits from particle reductions are not double-counted – they are

real health benefits from emissions reductions anti cipated to be achieved by this proposed rule.

Further, the PM 2.5 and ozone health co-benefits expected from this pr oposed rule are not doublecounted with benefits estimated in the NAAQS RIAs. NAAQS RIAs illustrate, but do not predict, the emissions reductions strategies that S tates may choose to enact when implementing a104

revised NAAQS. Subsequent Federal and State implem entation rules will be reflected in future baselines for PM and ozone NAAQS reviews. Also, bec ause it is not possible to accurately account for rules that have not yet been promulgate d, RIAs prepared for a future rulemaking will likely include any additional rulemakings in the ba seline. For example, the baseline in this RIA reflects many recently promulgated rulemakings, inc luding MATS, CSAPR, and CCR.

Office of Management and Budget (OMB). 2003. Circular A-4: Regulatory Analysis. Washington, DC. Available on the Internet at http://www.whitehouse.gov/omb/circulars/a004/a4.html.

U.S. Environmental Protection Agency (U.S. EPA). 20 10a. Guidelines for Preparing Economic Analyses . EPA 240-R-10-001. National Center for Environment al Economics, Office of Policy Economics and Innovation. Washington, DC. December. Available on the Internet at <http://yosemite.epa.gov/ee/epa/eerm.nsf/vwAN/EE-05 68-50.pdf/$file/EE-0568- 50.pdf>.

U.S. EPA. 2009 Final Report: Integrated Science Ass essment for Particulate Matter. U.S. Environmental Protection Agency, Washington, DC, EP A/600/R-08/139F, 2009.

U.S. EPA. 2013 Final Report: Integrated Science Ass essment of Ozone and Related

Photochemical Oxidants. U.S. Environmental Protecti on Agency, Washington, DC, EPA/600/R10/076F, 2013.

Comment 4: Epi Studies and Burden Analysis

Commenters stated that the estimates that attribute 90% of the health benefits in 2030 (estimated $23 billion to $59 billion) to the reduction in pre mature fatalities as a result of reducing ozone and fine particulate (PM 2.5 ) pollution are erroneous. The commenters argued th at EPA claims that the propose rule can avoid thousands of Americ an deaths due to PM 2.5 pollution are based on "cherry-picked studies". The commenters said that t hese claims also conflict with toxicological

studies that show that PM 2.5 concentration in U.S. cities are too low to cause s ignificant disease

or death. The commenters also said that the rule's purported health benefits for ozone reduction and asthma are less plausible, since according to t he EPA, ozone concentrations have declined by 25%, while asthma rates have increased since 1980.

Commenters stated that EPA should use the study by Cao et al. (2012) to replace the epidemiologic population study from Harvard Six Cit ies (Lepuele et al. 2012) used to determine the health impacts of PM2.5, especially mortality r ates. The commenters said that the Cao el al. study performed in Xi'an, China covered 1,000 times more people, and Xi'an is the second most polluted city on earth where exposure to PM2.5 rang ed up to 25 times higher than the Six Cities study. The commenters said the study used the same methodology as the Six Cities and ACS studies, but that EPA ignored anomalies in both stu dies that show a relationship between pollution and premature deaths for people with an e ducation of high school or less but not for people with education above high school. The commen ters said the studies concluded that a 14% (Six City), and 7% (ACS) increase in death rates wo uld occur linearly for each 10 ug/m3 of105

added PM2.5 exposure, while the Cao et al. study fo und a 0.27% increase in death rates for each 10 ug/m3, and a lower threshold for pre-mature deat hs for each 25 ug/m3.

Commenters stated that EPA's estimate of annual ben efits associated with public health from $55 to $93 billion is totally unsupported by clinical s tudies or toxicological data. The commenters said the EPA admits in its regulatory impact analys is that such benefits are not possible to quantify or monetize, and stated that CO2 emissions , which we cause by exhaling, have no direct impact on human health. The commenters said EPA did not follow all of the required steps to prepare an adequate scientific assessment of allege d health benefits. The commenters stated that the EPA's methodology is in violation of the Federa l Data Quality Act.

Commenters stated that in the benefits analysis, EP A ignores the significant share of long-term PM2.5 mortality studies that find either no statist ically significant increase in mortality with increasing PM2.5 concentrations or an inverse relat ionship. The commenters said EPA should reflect this uncertainty about whether long-term PM 2.5 exposure increases mortality by adopting a lower estimate for PM2.5 mortality benefits that assumes no causal relationship between PM2.5 exposure and mortality. The commenters said that EPA's chosen lower and upper estimates for the PM2.5 concentration-response func tion both appear to be too high to fairly characterize the range of findings across most long -term mortality studies in the U.S.

Commenters cited the study by Fann, Gilmore and Wal ker (2013), a recent quantitative metaanalysis that pooled the results of recent epidemio logical studies through 2012 for each of the 12 U.S. cohorts. The analysis examined the relationshi p between long-term exposure to PM2.5 and the risk of premature mortality among adults. The c ommenters said that the study did not find a statistically significant positive relationship bet ween PM2.5 concentration and mortality. The commenters also said that these negative findings a re sufficiently frequent (42% of the twelve studies/cohorts) as to warrant a lower estimate in the RIA to the effect that there is no causal relationship between long-term PM2.5 exposure and i ncreased mortality. The commenters said that in the ESPS RIA, EPA has established a lower m ortality benefits estimate by applying the concentration-response relationship estimated in Kr ewski et al. (2009) (ACS cohort) of 6% per 10 ug/m3. The commenters said that four of the ten cohorts (excluding ACS and Harvard Six Cities) included in the meta-analysis obtain estima tes that are at or below the agency's lower estimate. The commenters said in the RIA, EPA has established an upper mortality benefits estimate by applying the concentration-response est imate derived in Lepeule et al. (2012) (H6C cohort) of 14% per 10 ug/m3. The commenters said t hat nine of the ten cohorts (again excluding ACS and H6C) considered in the meta-analysis obtain estimates that are approximately at or below the agency's upper estimate. The commenters said that both EPA's chosen lower estimate and upper estimate are too high to fairly represent the range of findings across most of the studies. The commenters added that the pooled estim ate from the meta-analysis, obtained after considering both the sample size and uncertainty of the individual studies, appeared to be about 7% per 10 ug/m3 of PM2.5. This is very close to th e 6% estimate obtained by Krewski et al. (2009) and posed by EPA as the lower estimate.

Commenters stated that EPA has chosen concentration -response functions for PM2.5 and ozone mortality that result in estimates of total excess deaths from exposure to these pollutants that are implausibly large when compared against aggregate n ational mortality statistics and other

reference information. The commenters said that in order to show that EPA's chosen106

concentration-response functions for these pollutan ts yield mortality estimates that are unreasonably large, they made two sets of compariso ns between EPA's estimates of mortality attributable to PM2.5 and ozone and other figures. The commenters also said that in the first of these sets of comparisons, they compared an EPA est imate of mortality due to these pollutants against nationwide data on deaths and cause of deat h as reported for the year 2005 in the Centers for Disease Control and Prevention's (CDC's) Nation al Vital Statistics reports.

Commenters cited a study by Fann, et al (2012), whi ch developed estimates, using nearly identical CRFs as those that EPA has applied in est imating ESPS co-benefits, for the national public health burden associated with exposure to am bient PM2.5 and ozone at their 2005 concentrations. The commenters said that this study found that PM2.5 alone is responsible for 97.8% of premature mortalities, in comparison to oz one. The commenters said that using the results by Fann et al. (2010), they compared only t he PM2.5 mortality based on EPA's chosen CRFs and aggregate mortality figures from the CDC f or the identical population. The commenters stated that several of these comparisons suggested that EPA's estimate for the number of premature fatalities due to PM2.5 is too high and provided a detailed discussion on
the effects of PM2.5 on cancer and cardiovascular d eaths, as well as accidental and intentional

fatalities.

Commenters stated that synergistic effects of a mix ture of pollutants are not being considered during the EPA's estimated of health benefits for t he rule. The commenters cited epidemiologic studies in Europe and a project called Euroheat, wh ich looked at health impacts of air pollution

in combination with heat waves. The commenters sai d that toxic interactions can have significant effects on public health and that there is evidence of high temperatures enhancing particulate matter toxicity, and for PM enhancing o zone toxicity. The commenters said they have not modeled the three-way interaction nor the four- way combination that includes stress and questioned the inclusion of interactions in the dos e-response model. The commenters urged EPA to take interaction of pollutants into consideratio n for health benefits analyses.

Commenters cited the work by Cox (2013) which addre ssed the assumption of causal relationship between PM 2.5 and mortality rates. T he commenters noted that the study found that after the application of different statistical techniques and tests to the data supporting this assumption, the seemingly causal relationship betwe en PM2.5 exposure and mortality disappears, and other factors, most notably tempera ture, emerge as the likely causes of increased mortality. (http://www.ncbi.nlm.nih.gov/pmc/article s/PMC3748846/#!po=1.72414). The
commenters said that in all the scenarios with 5% c limate benefit future discount rate, net benefits range from around one to two billion dolla rs in net costs (negative benefits) to less than a half billion dollars in net benefits, and stated that more rigorous review is necessary before

finalization of these rules. The commenters said th at at the very least, presentation and serious consideration of alternatives, if not abandonment o f the log linear no-threshold model and adoption of a superior hormetic model altogether, i s crucial.

Commenters stated that EPA's assumptions to generat e the premature deaths avoided used to

monetize the health co-benefits are unreasonable an d unsuitable for justifying a rule with such far-reaching impacts on the U.S. economy. The comme nters discussed the three assumptions, and stated that EPA's assumptions have a tendency t o overestimate the health co-benefits of the ESPS rule. The commenters said that the agency fir st assumed that all fine particles, regardless107

of their chemical composition, are equally potent i n causing premature mortality. The

commenters said that the scientific evidence is not yet sufficient to allow differentiation of the effects estimated by particle type. The commenters said that the agency also assumes that the health impact function for fine particulates is log -linear without a threshold in this analysis. The

commenters said the estimates include health co-ben efits from reducing fine particulates in areas with varied concentrations of PM2.5, including both areas that do not meet the fine particulate standard and those areas that are in attainment, do wn to the lowest model concentrations. Finally, the commenters said that the agency also assumes that there is a "cessation" lag between the change in PM exposures and the total realization of changes in mortality effects. The commenters said that specif ically, the agency assumes that some of the incidents of premature mortality related to PM2.5 e xposures occur in a distributed fashion over the 20 years following the exposure based on the ad vice of the SAB-HES, which affects the valuation of the mortality co-benefits at different discount rates. The commenters said that the assumption that health impact function for fine par ticulates is log-linear without a threshold in this analysis, has the greatest impact in that the vast majority of the U.S. population is exposed to PM levels well below the National Ambient Air Quali ty Standards (NAAQS).

Response 4: The U.S. EPA follows a highly structured, transpare nt and peer-reviewed process for estimating the human health impacts attributabl e to poor air quality. As a first step, the Agency identifies the health endpoints to quantify by consulting the Integrated Science Assessment, a systematic review of the clinical, to xicological and epidemiological literature. This document is reviewed by the independent Clean Air Scientific Advisory Committee. The Agency quantifies those endpoints classified by the ISA as being causal or likely causal, selecting concentration-response relationships from studies that satisfy a host of criteria—most notably whether the population characteristics matc h those affected by the regulation, thus excluding studies performed outside of the U.S. and Canada. The Agency’s approach for characterizing the benefits of air quality changes has been extensively reviewed by independent scientific bodies including the National Academies of Sciences and the U.S. EPA Science Advisory Board (SAB). The EPA represents the uncert ainty in the magnitude of the benefits of reducing PM 2.5 concentrations by including a range of estimates r eflecting the most appropriate available scientific studies, and by including addi tional ranges based on the statistical uncertainty in each of those studies, as well as estimates base d on the results of an expert elicitation conducted by the EPA. The U.S. EPA SAB has consist ently advised the EPA to base its benefits estimates on application of the concentration-respo nse functions derived from the two highest quality, most representative U.S. cohorts, the Amer ican Cancer Society cohort and the Harvard 6-cities cohort. EPA has implemented this advice i n all recent RIAs, presenting a range of primary estimates using concentration-response func tions based on the most recent analysis of the American Cancer Society cohort provided in Krew ski et al, 2009, and the most recent analysis of the Harvard 6-cities cohort provided in Lepeule et al, 2012. The EPA notes that the study by Fann, Gilmore, and Walker (2013) cited by commenters is unpublished, and thus is not appropriate to inform the RIA, and even if it were published, has not been subjected to review by the Science Advisory Board and thus would not be in cluded as part of regulatory impact analyses.

Consistent with the findings of the PM ISA, which f ound that the log-linear no-threshold model best estimates PM-related premature death, the Agen cy quantifies PM impacts resulting from108

changes in ambient concentrations at all levels. T he RIA provides information on the

distribution of PM 2.5 concentrations across the populations for the air quality modeling used to support the benefits estimates to allow readers to better understand how benefits are distributed across the range of PM 2.5 concentrations. The RIA acknowledges that there i s reduced

confidence in benefits that occur due to reductions at lower PM 2.5 concentration levels.

Comment 5: Asthma

Commenters in this summary discussed the contributi on of power plants to air pollution, and how this has an effect on asthma. They also discuss ed economic impacts associated with asthma and how the rule can improve conditions for people suffering from asthma. Commenters raise questions about the link between ozone and asthma.

Commenters cited some statistics that stated the pr oportion of people with asthma in the United States has grown by nearly 15% in the last decade, and that the mortality rate of asthma sufferers is about nine lives lost each day. The commenters s aid that even one death related to environmental causes is unacceptable, and that with climate change, we can expect an increase in air contaminant triggers, which will impact environ mental justice communities disproportionately.

Commenters stated that coal-fired power plants are the largest sources of carbon emissions in the nation. The commenters said that warmer temperature s can lead to ozone formation, which is a trigger for asthma and poor air quality. The commen ters said asthma is one of the leading chronic illnesses among children and adolescents in the U.S., and it is one of the leading causes

of school absenteeism. The commenters also said ch ildren who regularly breathe in ozone pollution may face reduced lung function in adultho od, and a reduction in lung function increases the risk of respiratory disease later in life.

Commenters stated that Kentucky has some of the hig hest rates of asthma in the nation, and that according to the CDC, an estimated 312,561 adults i n Kentucky had asthma in 2008. The commenters said that adult lifetime asthma prevalen ce was 14.7% and adult current asthma prevalence was 9.7% compared with U.S. rates of 13. 3% and 8.5%, respectively.

Commenters stated that any increase in ozone will l ead to more childhood asthma attacks and complications for those with lung diseases.

Commenters stated that coal-fired power plant pollu tion is affecting the quality of life of children

with asthma and their families.

Commenters stated that asthma in children can be th e result of respiratory infections, often caused by exposure to harmful air pollutants in the regions in which they live. The commenters said this exposure is especially problematic when i ssues of environmental justice arise, where socioeconomically diverse and disadvantaged childre n are living and/or playing in close proximity to polluting power plants.109

Commenters stated their experience as a family with a child who suffers asthma and how this condition affected school and work attendance, and therefore, their economy.

Commenters stated that targeting fossil-fuel fired power plants will benefit the health and safety of our most vulnerable populations and drive a 25% cut in soot and smog causing pollution. The commenters said asthma is especially prevalent in N ew York, with an estimated 1.7 million people suffering from the disease. The commenters c ited that according to the New York State Comptroller, the state's asthma-related Medicaid ex penditures rose more than 26% in the last five years adding up to $1.3 billion in health care costs and lost workforce productivity.

Commenters stated that over 25 million Americans li ve with asthma and that almost 1.9 million asthma attacks make up the approximately one-fourth of all emergency room visits. The commenters said that U.S. spends almost $56 billion on asthma annually. The commenters said

no one should have to sacrifice their health for di rty energy.

Commenters stated that it is estimated that by lowe ring of the coal-fired power plant emissions, there will be lowering of deaths from asthma and re spiratory illnesses.

Commenters stated that the proposed Clean Power Pla n provides an opportunity for us to improve public health such as these threats from ch ildhood asthma (exposure to ozone and particulate matter), by cleaning up the region's ai r and helping to address climate disruption.

Commenters stated that 40% of carbon dioxide emissi ons come from the smoke stacks of coal burning power stations and it is essential to regul ate these pollutants. The commenters said that until EPA establishes these regulations and begins to require compliance, untold numbers of children and adults will suffer needlessly from ast hma.

Commenters stated that ozone pollution on the delic ate lining of the lungs is analogous to the

effects of sunburn on the skin. The commenters sai d ozone aggravates respiratory diseases like asthma, and impairs lung function in the population . The commenters cited a study led by Brigham Young University's Arden Pope which demonst rated that ozone exposure increases rates of respiratory death by about 25% along the W asatch Front, Utah's Uinta Basin. The

commenters said other studies have established that ground-level ozone negatively impacts lung function across all segments of the population, inc luding young, healthy adults, even at levels below current national ambient air quality standard s.

Commenters also argued the purported benefit that t he rule will also reduce ozone levels and prevent asthma attacks, and stated that it is extre mely unclear about the exact nature of the relationship between ozone and asthma. The commente rs cited that the Texas Commission on Environmental Quality (TCEQ) recently reviewed EPA' s Health Risk and Exposure Assessment (HREA) for the Ozone NAAQs and pointed out that EPA 's own Clean Air Scientific Advisory Committee (CASAC) has "repeatedly indicated that th e limited evidence on new-onset asthma should not contribute greatly to the consideration of the strength of evidence for respiratoryrelated effects." The commenters added that ozone l evels have declined by 25% between 1980 and 2012 (according to EPA itself), but that asthma levels have been increasing. The commenters questioned, "If ozone worsens asthma, then why do t he data run in opposite directions?" The commenters also said that until EPA can clearly poi nt to a causal relationship between its110

rulemakings and reductions in the number of people suffering from asthma, it is inappropriate for the agency to claim this as a benefit.

Response 5: We agree that poor air quality aggravates asthma, a nd that reducing levels of fine particles and ozone will benefit asthmatic populati ons. We disagree with the conclusion of commenters that increased overall asthma during a p eriod of ozone declines is evidence of no

association between ozone and asthma. A number of environmental and genetic factors contribute to the development of asthma and these a re well characterized in the medical literature. Improved air quality over the past sev eral decades has directly benefited asthmatic populations, but factors unrelated to poor air qual ity have contributed to the growth in the measured prevalence of the size of this population. Epidemiologic and toxicological studies reviewed as part of the most recent ozone Integrate d Science Assessment (U.S. EPA, 2013) provide scientific evidence that exposure to ozone is likely to cause respiratory effects, and

studies include associations between ozone and new onset of asthma. In addition, ozone is

linked with asthma exacerbations in children who al ready have asthma, and reducing ozone is expected to reduce symptoms, including emergency ro om visits, in these asthmatic childre n

.

Comment 6: State-Specific

Commenters in this summary discussed the public hea lth effects from power plant emissions in specific states.

Commenters stated that health impacts alone are a p owerful reason for advancing the EPA's

Clean Power Plan in Missouri. The commenters said t hat the White House estimated that 7,700 asthma related hospital visits occurred in Missouri in 2011 alone, and although it is nearly impossible to quantify the number of these visits t hat occurred as a direct result of air pollution from burning fossil fuels, we do know that asthma a ttacks are higher when chemical particulates caused by burning coal and other fossil fuels (spec ifically particulate matter, ground-level ozone, sulfur dioxide, and nitrogen oxide) are more concen trated in the air. The commenters said that reducing the pollution in our air will surely mean lessening the severity of respiratory issues for

thousands of Missourians who will then be more free to live their lives how they see fit.

Commenters stated that any attempt to mitigate the asthma-related hospital visits will have far reaching impacts on Missouri communities. The comme nters said that each hospital visit costs an average of $14,300 according to the White House's s tudy, totaling $110 million and that a portion of that $110 million would never have occur red if Missouri wasn't so heavily dependent upon coal-fired energy. The commenters said that as the cost of health care continues to rise, the amount of money that carbon-based energy is costing Missouri in health care will become an ever larger drag on our economy. The commenters add ed that from a purely economic standpoint, the impact that the Clean Power Plan wi ll have on Missourians' healthcare is

dramatic. The commenters cited the Harvard School o f Public Health and the estimate that over 1,200 Missourians would be spared from a premature death between now and 2030 due to the

Clean Power Plan. The commenters stated that even i f this estimate is overstated and only 600 lives are spared by moving towards clean energy by 2030, Missouri would still have more than enough reason to move forward.111

Commenters indicated that the state of Colorado has done significant changes to limit carbon emission and has achieved dramatic multi-pollutant emissions reductions; however, even with these efforts, the air pollution from coal-fired po wer plants contributes to 53 deaths, 81 heart attacks, over 1,000 asthma attacks, and over $400 m illion in health care costs every year.

Commenters stated that Kentucky is a state that has elevated asthma rates and cardiovascular disease, both of which are linked to carbon polluti on. The commenters said the Clean Power Plan does not address all these environmental impacts to human health within its decision-making process, and that EPA's proposed clean air standard s for industrial carbon pollution from power plants could protect our citizens more by reducing the smog that triggers asthma attacks and

other health threats. The commenters added the stat e's history with coal as a singular source of energy has resulted in an environment where state s tandards that protect human health from coal pollution are not strongly enforced.

Commenters stated that Kentucky has high levels of small-particulates pollution both from vehicle emissions and from power plant emissions.

Commenters cited a report by Kentucky Environmental Foundation called a "Health Impact Assessment of Coal and Clean Energy Options in Kent ucky," which outlined sources of data showing the relationships between the extraction, p rocessing, transportation, burning, and disposal of coal combustion waste and health. The c ommenters said the report outlines the wide range of health impacts that coal-based energy can create while also outlining the health benefits of cleaner energy sources.

Commenters also cited the report by Kentucky Enviro nmental Foundation called a "Health Impact Assessment of Coal and Clean Energy Options in Kentucky", which outlined the wide range of health impacts that coal based energy can create while also outlining the health benefits of cleaner energy sources. The commenters also cit ed their own report on the Shawnee Health Impact Assessment, which outlined the more imminent challenges of continuing to support the aging, carbon-based power system at the expense of human health instead of transitioning to cleaner power sources.

Commenters also stated that air pollution can affec t cardiovascular diseases, and that Kentuckians have significantly higher rates of dise ases affecting the heart and circulatory system than other states across the country. The commente rs said that according to Kentucky's Cabinet for Health and Family Services, cardiovascular dise ase accounted for 30% (12,547) of all deaths in Kentucky in 2009 and Kentucky ranked 8th out of 50 states for death rates due to

cardiovascular disease. The commenters stated that EPA's proposed clean air standards for industrial carbon pollution from power plants could protect our citizens more by reducing the smog that triggers asthma attacks and other health threats, but that efforts by our state regulators

and state enforcement efforts still leave Kentuckia ns near the bottom of every indicator compared to what is actually possible, or being ach ieved in other states.

Commenters stated that by reducing the need for fos sil-fuel generation, the Clean Power Plan will benefit the health and welfare of people acros s North Carolina. Cleaner air and cleaner water

will result in lower incidences of illness and dise ase and fewer deaths from pollution-related illnesses. The commenters said that the proposal en couragement for energy efficiency and112

renewable energy will have many additional co-benef its. The commenters said that EPA's expectation that the rule would avoid 2,700-6,600 p remature deaths and 140,000-150,000 asthma attacks every year, translate to North Carolina's b enefits of 1,300 lives saved from 2020 to 2030, as well as hundreds of avoided hospitalizations and heart attacks.

Commenters stated that smog in the District of Colu mbia impacts the health and welfare of over 600,000 residents, up to half a million commuters, and millions of tourists on an annual basis.

Commenters stated that the proposed rule could have significant benefits for the District of Columbia's air quality and the magnitude of those b enefits will depend on the stringency of the emissions goals established by EPA and the approach taken by states to meet them. The commenters said that the air quality in the Distric t, including concentrations of particulate pollution and ground-level ozone precursors, is hea vily influenced by emissions from power plants in upwind states. The commenters cited the H arvard School of Public Health study, which highlights the particular air quality benefits to t he region surrounding the District when regulating carbon pollution from existing power pla nts. The commenters added that this study also found that the magnitude and extent of the hea lth and air quality co-benefits of the proposed rule will depend on critical policy decisions in th e final standards and state plans; and that an approach similar to what is proposed by EPA, will r esult in the greatest co-benefits.

Commenters stated that Georgia's air quality is poo r and how this affects the life style of people

that love the outdoors.

Commenters also stated that the rule could also hel p the District of Columbia to attain Federal air quality standards and protect public health. The co mmenters said that this is especially important in light of recommendations from EPA's Clean Air Sc ientific Advisory Committee (CASAC)

that the ozone standard be lowered from the current level of 75 parts per billion to 60 to 70 parts per billion.

Commenters stated that Wisconsin recognizes that EP A's proposal will likely result in cobenefits for criteria pollutant emissions such as N Ox, VOCs, and SO 2 . The commenters said that based on this EPA should ensure that any reductions in these emissions as a result from the rule can be counted by states towards meeting their stat utory and regulatory requirements for criteria pollutants.

Commenters stated that the proposed rule provides o nly incidental benefits and ignores the effects of cross-state air pollution. The commenter s said that targeting all air pollutant emissions would produce much greater environmental and public health benefits than a focus on CO 2 emissions alone. The commenters said that EPA has f ailed to adequately address nitrogen oxide emissions from other states, resulting in violation s of the ozone health standard in New Jersey. The commenters said the proposed rule continues the inequity by approving less stringent CO 2 goals for some of the very states that remain the s ource of high nitrogen oxide emissions, and, consequently, the source of serious health issues, both in New Jersey and within their own state.

Commenters stated that EPA should measure the benef its of emissions reductions from PM 2.5 , NOx, SO 2 and ozone on a regional, rather than state-specifi c scale.113

Commenters felt being considered a sacrifice becaus e of where he lives because of dealing with emissions that create the energy to supply some of the major cities in the Four Corner states, including Phoenix but has to deal with the sufferin g of those emissions directly. Commenters

stated that EPA's mission is to ensure that all Ame ricans are protected from significant risks to human health and the environment where they live, l earn, and work, and as a human and American, wished to be treated equally.

Commenters understood the industries are conducting an environment impact statement, but these studies do not include impact on the health o f the people or the impact on the water. Commenters stated that there has been no health imp act study on the Navajo -- on Navajo land. Commenters stated that a recent survey conducted by the Navajo Nation states that asthma and respiratory illness on the Navajo land is almost at the same rate as the United States and with the high rate of respiratory illness on Navajo land, ma ny are in poor health already with little resources to address the rising health costs. Comme nters stated that the emissions from coal power plants must also include other pollutant, not just carbon. Commenters stated that coal plants add millions of tons of pollutant to the air that we breathe every day and we deserve nothing less than the same eco-protection that's be ing granted to every American across the Country.

Response 6: The EPA agrees that poor air quality results in neg ative health effects and that reducing levels of fine particles, ozone, and other emissions will lead to significant human health benefits and improvements in quality of life. The broad reductions in air pollution emissions expected to result from implementing the proposed r ule are expected to improve air quality across the U.S., and improve health and environment al quality for the U.S. population.

Comment 7: Benefit-Per-Ton and Air Quality Modeling

Commenters stated that EPA has relied on very simpl istic dollar per ton estimates for the criteria pollutant precursor emissions, which don’t account for the levels of criteria pollutant in the areas

where emissions are reduced and that EPA has not de veloped a baseline projection for PM 2.5 and ozone levels to compare with precursor emissions. T he commenters cited Smith and Gans (2014) and stated that these issues create large uncertain ties.

Commenters stated that the EPA use of a "benefit-pe r-ton" approach for PM 2.5 when calculating the health benefits of the proposed rule is irrecon cilable with its recently-promulgated rule reducing the annual PM 2.5 NAAQS to 12.0 ug/m 3 and that the available evidence does not justify a standard level set below 12 ug/m 3 as necessary to protect public health with an adeq uate margin of safety. The commenters stated that EPA mu st reassess the health benefits of the proposed rule.

Commenters stated that EPA's "benefit-per-ton" figu res were estimated based on a particular inventory of precursor emissions from EGUs and use of "source apportionment" techniques to identify the air quality impacts of this emissions inventory at receptor points. The commenters said the inventory of changes in EGU precursor emis sions expected from the proposed ESPS114

regulation will likely differ in ways that EPA has not examined from the inventory underlying the benefit-per-ton estimates.

Commenters stated that the application of the benef it-per-ton estimate derived from one inventory of EGU precursor emissions should not be applied to an inventory of EGU precursor

emissions or emissions reductions that is substanti ally different from the first inventory. The commenters added that this will lead to inaccuracy in using the benefit-per-ton approach for estimating benefits rather than conducting new, pol icy-specific air quality modeling. The commenters said that as one would not want to apply a benefit-per-ton estimate developed for EGU precursor emissions in the southeast to a polic y situation where precursor emissions would be reduced in the northeast, one might also not wan t to apply an estimate developed for precursors from a mix of coal- and gas-fired EGUs t o a set of emissions reductions from coalfired EGUs only. The commenters stated that EPA us ed inventories that were either national or regional inventories, and applied these to a much s maller set of projected precursor emissions reductions from only some of these EGUs, and that t he agency assumed these inventories were similar. The commenters argued these inventories di ffer in important ways such as: 1) the distribution of precursor emissions reductions acro ss individual states will likely be substantially

different from the distribution of inventoried base line precursor emissions across states, and 2) the proposed ESPS regulation will likely elicit red uctions in precursor emissions mostly from older, coal-fired units, while the inventory for wh ich the benefit-per-ton figures were derived consists of emissions from many newer and/or gas-fi red units. The commenters said that EPA

should examine this issue in order to determine if these differences are sufficient to result in meaningful revisions to the co-benefits estimates. The commenters added that other attributes of the inventory can be important, in addition to loca tion, such as:

1. The release characteristics of the EGUs (e.g., stac k height, exit velocity) -- this affects the mix of air quality impacts that the inventoried emissions will cause and whether the resulting air quality impacts will tend to be m ore local or more distant.

2. The meteorologies around the inventoried EGUs.

3. The distances of the inventoried EGUs from populati on centers -- this will determine whether the share of these EGUs' precursor emission s that have more local impacts will affect sparsely populated areas or more densel y populated areas.

4. The air quality and concentrations of air pollutant s from other sources currently surrounding the particular EGUs likely to be affect ed by the ESPS regulation.

Commenters stated that the source apportionment app roach evidently introduces increased inaccuracy when the relevant atmospheric chemistry involves nonlinear processes and/or multiple pollutant species. The commenters stated t hat EPA assumed that there are no significant non-linearities or cross-pollutant interactions in the atmospheric chemistry whereby precursor emissions (consisting in this analysis of direct PM 2.5 of several sorts, SO 2 , and NOx) eventually

become concentrations of PM 2.5 and ozone that may cause the alleged health damages . The commenters said that they suspect that the non-line arities and cross-pollutant interactions involving NOx in particular will result in lesser r eductions in ozone and PM 2.5 concentrations in115

practice than those that EPA projected based on the benefit-per-ton approach (source apportionment followed by something akin to assumed proportional rollback).

Commenters also stated that for a regulation as cos tly and important as the ESPS, EPA should consider simulating the geographic distribution of emissions reductions, atmospheric processes and population exposures using policy-specific, de novo atmospheric modeling, not the "shortcut" benefit-per-ton approach. The commenters said EPA introduced needless inaccuracy and apparently some upward bias to the Agency's benefit s estimates by relying on the benefit-per-ton approach.

Commenters stated EPA has failed to estimate the "b enefit-per-ton" to the extent that precursor

emissions from sources other than EGUs will increas e as a result of the proposed rule

Commenters stated that in the proposed rule, EPA th rows out a controlling premise of the 2013

PM 2.5 NAAQS and asserts that the agency is "unable to es timate the percentage of premature mortality associated with the emission reductions a t each PM 2.5 concentration, as we have done for previous rules with air quality modeling." The commenters added that EPA offers no explanation for why it lacks the modeling data it u sed in the 2013 NAAQS rule, but this omission has an enormous benefit-inflating effect. The commenters said that in a major understatement, the agency admits that it is "less confident in the risk we estimate from

simulated PM 2.5 concentrations that fall below the bulk of the obse rved data in the relevant studies," and acknowledges that "these results are not consistent with results from RIAs that had air quality modeling." The commenters said because the agency lacks "the necessary air quality modeling input and/or monitoring data to run the be nefits model," the proposed rule's RIA also lacks "the type of detailed uncertainty assessment found in the PM 2.5 and ozone NAAQS."

Response 7: The EPA disagrees that the benefit-per-ton approach is inappropriate. The methodology used for the proposal analysis for esti mating the health benefits associated with reducing PM2.5 and ozone precursor emissions is bas ed on peer-reviewed publications (see Fann et al., 2012). For the final rule, EPA has provided a more representative benefits analysis that relies on air quality modeling of the proposed rule . EPA generated updated benefit-per-ton estimates based on modeling ozone and PM2.5 respons es to reductions in NOx, SO2, and directly emitted fine particles estimated for the p roposed Clean Power Plan (see Appendix 4A of the final RIA). These updated benefits-per-ton ref lect the proposed rule, and are appropriate for modeling the benefits of the final rule. National a verage benefit-per-ton estimates are inherently more uncertain than benefits directly derived from air quality modeling. EPA has generated regional (east, west, California) benefit per ton e stimates to reduce this uncertainty, and EPA has high confidence in the magnitude of total monetized benefits at the national and regional level. EPA notes that the benefits for specific locations may vary, and thus there would be substantially more uncertainty regarding state level benefits. E PA has not generated state-level benefits

estimates.

Comment 8: Enstrom116

Commenters challenged the public health basis for t he June 2, 2014 EPA Clean Power Plan, particularly the validity of the EPA Fact Sheet cla im that "Americans will see billions of dollars in public health and climate benefits, now and for future generations. The Clean Power Plan will

lead to climate and health benefits worth an estima ted $55 billion to $93 billion in 2030, including avoiding 2,700 to 6,600 premature deaths and 140,000 to 150,000 asthma attacks in children." The commenters cited sections 4.3.1.1 (M ortality Concentration-Response Function for PM2.5) and 4.3.2 (Economic Valuation for Health Co-benefits) of the June 2, 2014 EPA "Regulatory Impact Analysis for the Proposed Carbon Pollution Guidelines for Existing Power

Plants and Emission Standards for Modified and Reco nstructed Power Plants" and stated that they have assembled overwhelming evidence that chal lenges the validity of the relationship between PM2.5 and total mortality ("premature death s") as described in publications based on the American Cancer Society (ACS) Cancer Prevention Study II (CPS II) cohort, such as, Krewski et al., 2009. The commenters also said tha t this evidence is detailed in their attached November 15, 2013 critique "Scientific Misconduct i n Fine Particulate Matter Epidemiology by Dr. C. Arden Pope, III, in Collaboration with Drs. Daniel Krewski, Michael Jerrett, and Richard Burnett, with the Complete Cooperation of the Ameri can Cancer Society", and that can be found on the following link (http://www.scientificintegri tyinstitute.org/Pope111513.pdf).

Commenters added this critique is supported by the attached November 7, 2013 email request to Dr. Alpa V. Patel of ACS Epidemiology describing th eir serious concerns about the use of CPS II data for examining PM2.5 and mortality (http://www.scientificintegrityinstitute.org/Patel1 10713.pdf). The commenters said that the critique is further supported by the 50 attached pa ges of January 6, 2010 to May 17, 2011 correspondence between an Ad Hoc Group of Californi a businessmen and the University of California President Mark G. Yudof regarding U.C. B erkeley Professor Michael Jerrett and his unethical use of ACS CPS II data in the analysis an d characterization of the relationship between PM2.5 and mortality in California during 1982-2000 (http://calcontrk.org/Jerrett051711.pdf).

Response 8: The EPA strongly disagrees with the commenters' int erpretation of evidence related to the impact of PM2.5 on mortality. EPA completed a comprehensive, highly peer-reviewed
assessment of the scientific evidence on PM2.5 and health in 2009, and an updated provisional review of new information published between 2009 an d 2012, prior to issuing updated National Ambient Air Quality Standards in 2012. EPA conclud ed that the full body of evidence supports a determination that long-term exposure to PM2.5 ca uses mortality (U.S. EPA, 2009, 2012). Numerous scientific bodies, including the American Heart Association (Brook et al, 2010), and the World Health Organization (WHO/Europe, 2013), h ave affirmed this finding of a causal relationship. Further, EPA's approach to estimatin g the mortality benefits of reducing PM2.5 concentrations has been extensively reviewed by the National Research Council and EPA's independent Advisory Council on Clean Air Complianc e Analysis, and the consensus conclusion of that panel was that the studies (those using the American Cancer Society and Harvard 6-city cohorts) used by EPA to estimate mortality benefits are "good foundations for the health benefits estimates for PM and these studies are sup ported by other recent studies and expert evidence gathered by the EPA project team." EPA pr ovided information on studies published since 2009 in the 2012 PM NAAQS RIA, including summ arizing risk results presented in
Enstrom 2005.117

References:

Enstrom JE 2005. "Fine particulate air pollution an d total mortality among elderly Californians,
1973-2002." Inhal Toxicol 17: 803-816.

U.S. Environmental Protection Agency (U.S. EPA). 20 09. Integrated Science Assessment for Particulate Matter (Final Report) . EPA-600-R-08-139F. National Center for Environmen tal

Assessment—RTP Division. December. Available on the Internet at <http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?dei d=216546>.

U.S. Environmental Protection Agency (U.S. EPA). 20 12. Provisional Assessment of Recent Studies on Health Effects of Particulate Matter Exp osure. EPA/600/R-12/056A. National Center

for Environmental Assessment—RTP Division. December

.

U.S. Environmental Protection Agency (U.S. EPA). 20 12. Integrated Science Assessment for

Particulate Ozone and Related Photochemical Oxidant s (Third External Review Draft).
EPA/600/R-10/076C. National Center for Environmenta l Assessment—RTP Division. June. Available on the Internet at <http://cfpub.epa.gov/ ncea/isa/recordisplay.cfm?deid=242490>.

Comment 9 : BenMAP

Commenters in this summary expressed opposition to the rule with regard to public health and its purported benefits.

Commenters discussion focused on two topics: (1) ap propriateness of calculating benefits of pollutant reductions in populations already meeting the NAAQS for PM 2.5 and ozone and (2)

limitations of BenMAP. The commenters stated that i t is not appropriate for health benefits to accrue at PM levels that are already deemed to be p rotective of human health, and that there are inconsistencies between how NAAQS standards have be en set at a level below which uncertainty becomes too large and how the RIA has assumed a 100 % certainty for the elevated risk for all ambient pollutant exposure concentrations below the NAAQS. The commenters referred EPA to the Smith 2014 research which discusses this type o f inconsistency in greater detail, but

summarized that "due to inclusion of risks calculat ed in areas in attainment with the NAAQS, the benefits estimates in RIAs the expected value that can be inferred from the rationale for the NAAQS. This upward bias is even larger for PM 2.5 co-benefits in RIAs for non-PM 2.5 regulations".

Commenters discussed BenMAP and its "concentration- response function" and stated that the limitations of BenMAP should be recognized. The com menters stated that some of the embedded options are limited and inconsistent with the liter ature, such as the three PM-mortality concentration-response functions which do not refle ct the totality of the literature. The commenters cited a recent analysis by Smith and Gan s that identified 22 studies containing valid concentration-response functions and identified 59 appropriate risk estimates from these studies. The commenters said that BenMAP includes only one r isk coefficient (0.0058) whereas studies may include several coefficients, which gives the i mpression of much more precise conclusions118

from that study than is the case. The commenters al so said that if the range of risk coefficients identified by Smith and Gans is used, the same anal ysis produces risk estimates ranging from 0 to 516,000 deaths, which is not only much wider but also reveals a chance there is no risk at all.

Commenters also stated that BenMAP's benefit ranges only reflect the range of the two concentration-response functions used and does not consider any other sources of uncertainty. The commenters added that sensitivity analyses are limited because alternatives not embedded within BenMAP are not easily considered and there i s no clear way to consider the impacts of simultaneously varying more than one input or assum ption into BenMAP at a time. The commenters concluded that because of these issues, BenMAP can give a misleading impression about the uncertainty ranges that are biased toward suggesting less uncertainty than there probably is. The commenters said that "EPRI is curr ently supporting research to develop an integrated uncertainty analysis that is expected to illustrate the greater policy insights that can be obtained using this approach rather than a set of d eterministic calculations as currently exists

within BenMAP".

Commenters stated that BenMAP offers no provision f or considering different species or components of PM 2.5 despite increasing evidence that some components of PM 2.5 may be more highly associated with adverse health effects. The commenters cited a Rohr and Wyzga literature review that concluded that more scrutiny needs to b e given to elemental and organic carbon components of PM.

Response 9: The environmental Benefits Mapping and Analysis Pro gram—Community Edition (BenMAP-CE) is an open-source PC-based software pro gram that estimates the incidence and economic value of air quality changes. Users can qu antify impacts by applying the concentration-response and economic valuation funct ions that U.S. EPA applies in its Regulatory Impact Analysis, or users can specify their own fun ctions from the epidemiology and economics literature. When selecting among concentration-resp onse functions to use in BenMAP-CE, the U.S. EPA selects among those health endpoints whose relationship with air pollution the Clean Air Scientific Advisory Committee (CASAC) has deter mined to be "causal" or "likely causal." U.S. EPA quantifies long-term PM 2.5 -related premature deaths using concentration-respo nse relationships recommended by CASAC. If users prefe r instead to supply their own concentration-response and economic value functions , they may use the built-in health impact function or economic value function editor. Finally , the development team is exploring new features that will allow analysts to characterize t he uncertainty associated with reducing two or more pollutants (e.g., PM 2.5 and ozone) or two or more pollutants and stressors (e.g., temperature and ozone).

In addition, EPA has include in the RIA a number of additional uncertainty and sensitivity analyses, including showing how mortality benefits are affected by the use of concentrationresponse functions based on the results of an exper t elicitation which evaluated the scientific uncertainties in the relationship between PM2.5 and premature mortality. EPA provides estimates based on the responses of 12 different ex perts to demonstrate the range of uncertainty. As discussed in the RIA for the proposed rule, beca use the experts relied upon the American Cancer Society and Harvard Six Cities cohort studie s to inform their concentration-response functions, the benefits estimates derived from the expert responses generally fall between results derived from these studies, and thus the range of b enefits provided by EPA in the RIA is largely119

representative of the broader range of uncertainty. BenMAP includes all of the concentrationresponse functions based on the expert elicitation.

Comment 10: Differential Toxicity

Commenters discussed EPA's assumptions regarding th e composition and potency of each component of PM 2.5 . The commenters cited Smith and Gans (2014) and Fr aas and Lutter (2013) to state that the equal potency assumption likely o verstates risks from PM 2.5 changes, perhaps up to 100%, especially because such a very large porti on of the co-benefits is derived from sulfate as a component of PM 2.5

.

Commenters recommended EPA eliminate the fine parti cles of ammonium sulfate from the health benefit calculations as they have been shown to be non-toxic. The commenters said that three quarters of the health benefit calculation is based on ammonium sulfate reduction, which drops health benefits from $62 billion to $15.5 bil lion. The commenters added that most of the fine particulate matter from coal-fired power plant s comes indirectly from sulfur dioxide emissions forming particulate ammonium sulfate and that studies show no link between

ammonium sulfate and health issues. The commenters also said ammonium sulfate has been

used as an inert control material in studies of hea lth impacts of aerosols.

Response 10: While the EPA agrees that there is some uncertainty regarding the assumption of equal toxicity of PM species, the EPA disagrees tha t there is no link between sulfate exposure

and adverse health effects. The PM ISA concluded th at "many constituents of PM 2.5 can be linked with multiple health effects, and the eviden ce is not yet sufficient to allow differentiation

of those constituents or sources that are more clos ely related to specific outcomes" (U.S. EPA, 2009). While some particles may have higher or lowe r toxicity than the average for all fine particles, the body of scientific evidence supports the conclusion that reducing fine particles will result in substantial public health benefits.

We therefore follow the advice of the EPA’s Clean A ir Scientific Advisory Committee (Hammitt et al. 2010, available at: http://yosemite.epa.gov/sab/sabproduct.nsf/fedrgstr _activites/2nd%20Prospective%20812%20St udy!OpenDocument&TableRow=2.3#2), which concluded t hat "Although the possibility of differential toxicity among PM 2.5 components could be an important issue, the Council concludes that the state of the knowledge does not permit a u seful sensitivity analysis at this time" (p. 6).

Comment 11: Valuation and VSL

Commenters stated that 98% of EPA's estimated co-be nefits involve avoided premature mortality. The commenters said that these mortalit y benefits would decline sharply, if the agency were to improve the analysis by estimating a nd valuing "statistical life-years gained"

rather than "statistical lives saved". The commente rs drew attention to the population assessed during the studies from which EPA drew the estimate d value of a statistical life (VSL). The120

commenters said the population assessed during thos e studies should have been older with many fewer average years of life expectancy remaining. T he commenters stated that it is inappropriate

for EPA to value the statistical lives at risk from PM 2.5 air pollution -- for populations for whom the potential loss in life expectancy is usually sm all -- by reference to studies on wholly different populations where deaths involve much greater loss in life expectancy.

Commenters stated that in the benefit-per-ton calcu lations for estimating co-benefits, EPA estimated the value of avoided mortality by multipl ying the projected number of statistical deaths avoided due to the proposed rule by the wrongly cho sen VSL. The commenters said a better approach for monetizing the benefits of avoiding pr emature mortality would be for EPA to estimate the number of life-years gained as a resul t of the regulation and then multiply by the value of a statistical life-year (VSLY). The comme nters added that depending on the particular VSLY that is chosen, this different approach to val uation would reduce the monetized benefits that EPA estimates for the proposed ESPS regulation by between 47% and 95%.

Commenters also stated that to estimate the total m onetized benefits, EPA might alternatively have estimated the monetized value of the agency's projected reduction in risk of premature mortality by calculating the number of life-years t hat would be saved or extended rather than the number of premature deaths avoided, and then multip lying by the value of a statistical life-year (VSLY) rather than by the value of a statistical li fe (VSL). The commenters said the VSLY approach would yield lower, and perhaps much lower, estimated benefits for the proposed rule than the VSL approach that EPA has applied. The com menters provided comments with regard to the use of VSL or VSLY as the preferred metric t o valuate health benefits. The commenters said that: 1) EPA did not follow the suggestion by OMB that agencies should present benefits estimates showing both statistical lives saved and statistical life-years saved and 2) it is inappropriate for EPA to value the premature deaths avoided by this proposed regulation at the

same VSL as has been derived from a set of studies where each avoided premature death involves many more years of life expectancy. The c ommenters said that OMB suggests that "when there are significant differences between the effect on life expectancy for the population affected by a particular health risk and the popula tions studied in the labor market studies, it is preferable to adopt a VSLY approach to reflect thos e differences. You should consider providing estimates of both VSL and VSLY..." The co mmenters provided a list of several estimated VSLY, and stated that if EPA were to use them it would lead to lower estimates of

PM 2.5 mortality benefits than those EPA calculated in the ESPS RIA.

Commenters also recommended EPA use lost earnings p otential instead of willing-to-pay surveys to determine the value of one year of added life. The commenters said the willingnessto-pay survey is 100 times the rate of the lost ear nings calculation; it drops health benefits from $62 billion to $0.6 billion. The commenters said th at the estimated number of expected premature deaths is multiplied by $10.1 million/pre mature death. The commenters said that this is based on "Willingness-to-Pay" surveys and that t his is an exaggerated measure. The commenters said that the American Lung Association estimates the total cost of all COPD premature deaths at $12.4 billion but the cost was spread over 134,000 deaths for an average cost of about $93,000/premature death. The commenters co mpared this value to the $62 billion EPA estimate for 6,200 premature deaths. The commenters said that the cost covers lost potential121

earnings with a 3% discount factor, and is reasonab le as most of the premature COPD deaths (85%) occurred in people over 65 years old.

Commenters stated that EPA's estimates of the healt h and economic benefits of reducing ambient PM2.5 and ozone appear similarly implausible when t he reductions are carried forward to the year 2020, the first year for which the ESPS RIA es timates costs and benefits. The commenters
said that a 50% reduction in ambient levels of PM2. 5 cannot have as much public health impact as completely eliminating active smoking in the U.S . population. The commenters also argued the EPA's projected economic value of mortality red uctions stating that: 1) EPA's central
estimate of the economic benefits of PM2.5 reductio ns would exceed the projected GDPs of all but 10 countries in the world, 2) EPA's high estima te of the economic benefits of PM2.5

reductions would exceed the total GDPs of all count ries except the U.S. and China; and 3) EPA's
estimate of the economic benefits of PM2.5 reductio ns is equal to 10-28% of the total projected U.S. GDP in the year 2020.

Commenters said that when measuring costs and benef its to children under this proposal, we must take into account that we are considering heal th effects to children that will occur over a number of years and across generations. The commen ters also said that traditional cost-benefit analyses and discounting methods systemically reduc e the value of long-term benefits such as preventing a health effect in the future and that t his is not correct or acceptable in measuring the true value of this proposal.

Response 11: The EPA’s approach for monetizing benefits from red uctions in mortality risk (including sources of estimates and methods for adj ustment over time) is based on standard welfare economics, is appropriate for use in these economic analyses and has been peer reviewed by the Agency’s Science Advisory Board (SAB). Spec ifically, the SAB noted that, in this context, "the value of a reduction in mortality ris k (e.g., in the probability of dying over a stated period) is what a person is willing to pay for it" (U.S.EPA SAB 2000). The EPA uses estimates of the willingness to pay for small reductions in i ndividual mortality risks drawn from the peerreviewed literature and published in its peer-revie wed Guidelines for Preparing Economic Analyses (U.S. EPA 2010). When applied to the popu lation affected by a regulation, these risk reductions are reported as statistical lives and th e associated value, the "value of a statistical lif e."

Regarding the application of a Value of Statistical Life Year (VSLY) approach, Circular A-4 (OMB, 2003) suggests that agencies consider providing the benefits of reduced mortality risk i n these terms, but does not require an agency to do s o. The EPA has since explored the issue of remaining life expectancy and its potential effect on WTP and has received guidance from the SAB on the matter (U.S. EPA-SAB, 2007). To summariz e, the SAB concluded that, while age and health status would likely have an effect on wi llingness to pay for mortality risk reductions, economic theory is ambiguous on how people’s willin gness to pay to reduce mortality risks should change over their lifetime leaving it, there fore, as an empirical matter (U.S. EPA-SAB, 2007). The judgment of the SAB, however, is that th e empirical literature is not advanced enough to provide clear guidance on how age and hea lth status affect willingness to pay to reduce mortality risks and that "...the use of a cons tant Value of a Statistical Life Year (VSLY), which assumes that the VSL is strictly proportional to remaining life expectancy, is unwarranted" (U.S. EPA, 2007, p. ii). Instead, the SAB recommended that EPA use an ageindependent valuation of mortality risk reductions.122

This position was upheld by the National Research C ouncil of the National Academies in their 2008 report on Estimating Mortality Risk Reduction and Economic Be nefits from Controlling
Ozone Air Pollution. In this report, the NRC stated the following:

"Unless future research produces empirical support for the assumptions that underlie a constant VSLY, EPA should not attempt to make valua tion adjustments for changes in remaining life expectancy by estimating life years saved and applying a constant VSLY"

These recommendations are reflected in EPA’s Guidelines for Preparing Economic Analys es (USEPA 2010) and applied in this RIA.

Office of Management and Budget (OMB). 2003. Circul ar A-4: Regulatory Analysis. Washington, DC. Available on the Internet at http://www.whitehouse.gov/omb/circulars/a004/a4.html.

U.S. Environmental Protection Agency—Science Adviso ry Board (U.S. EPA-SAB). 2000. An SAB Report on EPA’s White Paper Valuing the Benefit s of Fatal Cancer Risk Reduction. EPASAB-EEAC-00-013. July. Available on the Internet at <http://yosemite.epa.gov/sab%5CSABPRODUCT.NSF/41334 524148BCCD6852571A70051649 8/$File/eeacf013.pdf>.

U.S. Environmental Protection Agency—Science Adviso ry Board (U.S. EPA-SAB). 2007. SAB Advisory on EPA's Issues in Valuing Mortality Risk Reduction . EPA-SAB-08-001. October.

Available on the Internet at <http://yosemite.epa.gov/sab/sabproduct.nsf/02ad90b 136fc21ef85256eba00436459/4128007E78 76B8F0852573760058A978/$File/sab-08-001.pdf>.

National Research Council of the National Academies . 2008. Estimating Mortality Risk Reduction and Economic Benefits from Controlling Oz one Air Pollution. The National Academies Press: Washington, DC.

U.S EPA 2010. Guidelines for Preparing Economic Analyses. EPA 240-R-10-001. December. Available at: http://yosemite.epa.gov/ee/epa/eed.ns f/webpages/Guidelines.html

Comment 12: Other Estimates of CPP Co-Benefits -- Harvard/Syrac use, Schwartz, NRDC

Commenters in this summary discussed the economic b enefits that implementing the rule will provide to public health and to projected effects o f climate change.

Commenters cited the results from the Driscoll et a l. 2014 and Schwartz et al. 2014 studies, which indicated that the magnitude of these air qua lity and health co-benefits can vary substantially and depend on the design of the final standards. The commenters added that their results suggest that carbon standards that have str ingent CO 2 emissions reductions targets but have high compliance flexibility and promote substa ntial investments in demand-side energy efficiency have the greatest estimated air quality and health co-benefits in both absolute terms and on unitized basis of per-ton-of-CO 2 reduced. The commenters also added the studies als o123

showed that carbon standards focused strictly on po wer plant retrofits could increase emissions

with little to no health co-benefits nationwide. Th e commenters said the results underscore that the design of power plant carbon standards strongly influences the magnitude and distribution of air quality improvements and health co-benefits tha t accrue to states and to local communities. The commenters added that quantifying and valuing l ocal benefits could be an important additional motivator for taking action on climate c hange. The commenters said that given the vast difference in air quality and health results a nd the potential for increased emissions and adverse effects under some options, the final rule and subsequent state implementation plans should include an estimate of changes in emissions of co-pollutants (e.g., SO 2 , NOx, PM, and Hg) and potential consequences for air quality, atm ospheric deposition and health effects in the

affected and downwind states.

Commenters cited a recent study by Driscoll et al. (2014) that modeled policy approaches, one of which was closely approximated to the proposed rule by considering state-based CO 2 emissions targets, flexible compliance options, and significa nt program investments in new end-user energy efficiency, and resulted in the greatest air pollut ion reductions out of all modeled scenarios. The

commenters stated that the results indicate that th e CPP may affect a 35% decrease in carbon emissions, as well as decreases in NOx, SOx, SO 2 , ozone, and PM 2.5 . The commenters said the study estimated that the scenario similar to the pr oposed rule would result in "3,500 premature deaths avoided, 1,000 hospital admissions avoided f rom heart and lung disease, [and] 220 heart attacks prevented each year," with all states recei ving benefits from the standards. No negative health endpoints were observed by the researchers f or the scenario, while other scenarios less similar to the proposed rule indicated some negativ e health endpoints from different policy choices. The commenters stated that based on this, EPA and states must guard against negative health endpoints when developing plans.

Commenters stated that strong limits on carbon poll ution from existing power plants could improve air quality and prevent an estimated 3,500 (780 to 6,100, 95% CI) premature deaths in 2020 along with other significant benefits to human health, according to an analysis released in September by researchers from Harvard University, S yracuse University, and Boston University. The commenters said that the report evaluated alter native approaches for reducing carbon pollution from power plants, and showed that a stro ng, enforceable and flexible approach to reducing carbon pollution would reduce emissions of sulfur dioxide and nitrogen oxides by about 775,000 tons each year. The commenters said that th e report stated that in addition to reducing premature deaths, the strongest options avoided 530 to 1,500 hospital admissions for cardiovascular and respiratory diseases in 2020; an d that as a result of lower emissions, all of the lower 48 U.S. states would experience cleaner air.

Commenters cited a study by scientists at Syracuse and Harvard, which showed that cleaning up carbon pollution will clean up other forms of pollu tion. The commenters said that effective limits on carbon pollution are estimated to reduce about 775,000 tons annually of coal pollutants like sulfur dioxide, nitrogen oxide and mercury, an d to decrease ozone and particulate matter,

which are serious health hazards that increase the risk for asthma attacks, affect fetal development and contribute to premature death. The commenters urged the EPA to move forward with strong limits on carbon pollution to p revent diseases and premature deaths.124

Commenters cited the study by Harvard School for Pu blic Health and indicated that the results of this study show that carbon standards for existing power plants that are aimed at addressing the long-term issue of global climate change can bring substantial near-term state and local health

co-benefits. The commenters also said that the stud y also demonstrated that the specific policy design choices for power plant carbon standards hav e a critical influence on the magnitude and

distribution of the health co-benefits that occur.

Commenters cited the Harvard School of Public Healt h, Syracuse University, and Boston University's research, which found that significant investment in energy efficiency and giving states flexibility for implementation similar to th e Clean Power Plan yielded greater health benefits than other strategies for carbon pollution reductions. The commenters stated that like EPA's analysis, the research found reductions in pr emature deaths, heart attacks, and hospital admissions. The commenters said the study found tha t the health co-benefits were achieved in states such as Pennsylvania, Ohio, and Texas that h ave historically borne the brunt of coal power plant pollution.

Commenters argued the claims that CPP will lead to increases in the price of energy and job

losses and stated that the electric bill is the lea st of our worries. The commenters cited Harvard

Medical School estimates that coal costs the U.S. e conomy $150 to $250 billion a year mostly in adverse health impacts. The commenters stated that even at the lower estimate it would double the cost of coal if these costs, which are disingen uously described as hidden, were taken into

account. The commenters added that American familie s are paying for these expenses and suffer the consequences. The commenters also pointed out t he costs of wildfires and the costs of fighting those fires. The commenters cited the cost of Colorado's 2013 September flood, which was estimated to top $2 billion and stated that tha t is the cost of climate change in only one state. The commenters also addressed the ecosystem costs t hat could be potentially far more catastrophic but harder to define: "And here are ju st a few: The billion trees, what's the cost of that and who will pay? What is the cost of rapidly worsening ocean acidification which threatens the collapse of entire ocean ecosystems? What would be the cost of losing insects that pollinate our food crops or the cost of hand pollinating? And finally, to me one of the saddest statistics of all and the most frightening, many scientists have estimated we will lose between a quarter and a third of the earth's species by 2050 due to the com bined impact of global warming and habitat

loss. This cost is incalculable."

Commenters stated that by 2030 under the CPP, not o nly do the climate benefits alone from CO 2 reductions amount to about $30 billion annually, bu t the corresponding health co-benefits are valuated at up to twice as much as the climate bene fit portion. The commenters said that those annual total benefits accrue to a range between six and twelve times the accompanying compliance costs. The commenters cited the Syracuse and Harvard University's co-benefits report, which showed air quality improvements in we stern Pennsylvania projected to occur under this rule to be among the largest in the country.

Commenters cited a study by Schwartz et al. 2014, w hich implemented three policy scenarios to determine the effectiveness and efficiency of each scenario for establishing power plant carbon standards and their subsequent co-benefits. The com menters said, the scenario which resembled what EPA outlines in the CPP (Electricity Sector Im provements (incorporating moderate stringency, high flexibility, and high user efficie ncy)), provided the most co-benefits of the125

scenarios analyzed as it would result in larger CO 2 and co-pollutant (NOx, SO 2 , and Hg)

emissions reductions than the other two scenarios.

Commenters cited the Clean Air Task Force report, w hich determined that presently coal-fired emissions cause or contribute to premature deaths o f over 13,000 people annually, and estimated that the U.S. societal cost annually in health care and lost work days due to sicknesses is over $100 million. The commenters stated that due to the Obamacare, it is the public's burden to carry the insurance for everybody, thus, pollution is an economic cost that should be placed on the generation of any power plant. The commenters argue d the investment to make coal power plants more efficient (e.g., scrubbers) may not ach ieve the goal; however, encouraged the use of wind power and stated that wind power had the same cost as mass coal power.

Commenters stated that the NRDC's study (Lashof et el., 2014) was designed prior to and strongly resembles the CPP. The commenters said tha t the study proposed six policy cases to mitigate carbon pollution, each with varying degree s of regulation (i.e., Moderate, Full Efficiency case; Moderate Constrained Efficiency; A mbitious, Full Efficiency; Ambitious, Constrained Efficiency; and Ambitious, Constrained Efficiency, Product Tax Credit (for wind power)). The commenters said these cases were compa red to a reference case, and that each case was analyzed using ICF's Integrated Planning Model (IPM) and NRDC's assumptions, which were based on fuel prices, expected policies, and e nergy demand, to determine CO 2 reductions by 2020. The commenters said the IPM model showed s ubstantial reductions in each case, with a 21% drop from 2012 levels (using the Moderate, Cons trained Efficiency case) to 31% (using the Ambitious, Constrained Efficiency, Product Tax Cred it case). The commenters said that IPM also showed the economic impetus for pursuing NRDC' s suggestions as the benefits outweighed costs by at least $21 billion in each case. The com menters also said the scale of environmental and health benefits these cases could bring as CO 2 reductions would mitigate climate change and cuts in co-pollutants would "prevent more than 17,0 00 asthma attacks annually, avoid more than 1,000 emergency room visits and hospital admissions per year, and prevent thousands of premature deaths, among other benefits."

Response 12: The EPA agrees that it is important to estimate all of the benefits associated with implementation of the alternative options for the C lean Power Plan, including benefits from

reductions in CO2 emissions and co-benefits from re ductions in emissions of NOx, SO2, and directly emitted PM2.5. As we did in the RIA for t he proposed rule, we estimate the health benefits from improvements in air quality resulting from the Clean Power Plan, which includes reductions in mortality and morbidity associated wi th ambient concentrations of ozone and PM2.5. We agree that these benefits are substantia l and are an important component of the overall monetized benefits of the proposed rule.

Comment 13: Ecosystem Effects and Non-criteria Pollutants

Commenters in this summary discussed the benefits o f the rule on environmental quality and how this will help the health of the public and the env ironment.126

Commenters stated that the reduction of coal ash wa ste disposal is a major side benefit of the proposed rule and that this action will reduce the toxicity of citizens' land, air, and water over

and above smokestack emissions reductions.

Commenters also stated that coal burning power plan ts are the major source of atmospheric mercury pollution in the State of Montana and throu gh the deposition of mercury to land and

water surfaces this lead to contamination of local fish and aquatic ecosystems.

Commenters also stated "The rule would also provide several benefits that the researches did not quantify, such as reducing asthma symptoms, prevent ing unquantified damage to ecosystems and agriculture, and reducing the accumulation of toxic mercury in fish. The agency quantifies and monetizes only a portion of the CPP's non-climate-r elated health benefits, but they are still massive." "For all these reasons, we strongly suppo rt the CPP."

Commenters also stated that acid rain is caused by burning of sulfur-bearing coal.

Commenters stated that they support wind energy as a practice to reduce emissions of nitrogen oxide, mercury, and sulfur oxide, and conserve wate r. The commenters said that 11 states had already achieved a 10% reduction in carbon emission s using wind energy.

Commenters stated that federal and state government s make the assumption that most poisons, including those in ambient air, are harmless below a certain threshold concentration, and the public policy task is to find that threshold and ke ep the poisonous substance below it. The commenters said that this precept has been shown to be false by a wealth of more recent studies that show that the principal fossil fuel pollutants (lead, mercury, fine particulates, and ozone) harm human health at every level of concentration. The commenters cited a survey of recent research by the WHO which concluded that "new epide miological studies, conducted over the last decade, using sensitive designs and methods of analysis, have identified adverse health effects caused by combustion-derived air pollution even at the low ambient concentrations that now generally prevail in cities in North America an d western Europe" (Health Effects Institute 2001). The commenters added that many studies show that these pollutants not only cause significant damage at very low concentrations, but that the damage is proportionally the greatest (on a parts per billion basis) at the lowest concen trations. The commenters described in detail the effects of lead and mercury, sourced by coal-fi red power plants, on public health.

Commenters stated that curtailing burning of coal a s rapidly as possible is the best for humankind. The commenters said that coal mining res ults in miner's death and illnesses, and air pollutants from burning coal cause or contribute to asthma and other respiratory illnesses. The commenters said that mercury from burning coal has resulted in almost all areas in the U.S. having fish with mercury levels that make it unsafe for at-risk populations to consume more than a limited amount of many fish species. The commente rs also said that coal ash ponds create a tremendous risk to people and their rivers, as alre ady demonstrated more than once in the Southeast, and added that coal ash contains a witch ’s brew of toxic heavy metals and arsenic which appears to be responsible for cancer around c oal facilities.

Commenters stated that CDC conceded in 2012 that th ere is no blood lead level that is small enough to be considered "safe", and that as a resul t CDC cut its tolerance level for blood-level127

lead from 10.0 ug/dL to 5.0 ug/dL. The commenters s aid that even a level of 5.0 ug/dL is 25 times too high, according to the most recent resear ch. The commenters cited a study that found that the I.Q. of Italian teenagers is reduced in pr oportion to their lead exposure, no matter how small their lead exposure is. The commenters added the study demonstrated that every 0.19 micrograms per deciliter in an adolescent's blood i s accompanied by a one-point reduction in his/her I.Q. The commenters said the study results imply that the I.Q. of preschoolers in the United States has been reduced by 7 points, on aver age, due to their exposure to lead pollution (average in U.S. is 1.3ug/dL). The commenters said that lead exposure has three main sources: lead paint, leaded gasoline, and coal-fired power p lants; and since exposure to paint and gasoline is mostly under control, coal-burning power plants are the primary sources. The commenters said that the harm to public health from lead pollu tion from coal-fired power plants is modest compared to the harm caused by mercury pollution.

Commenters stated that coal-fired power plants are the largest environmental source of mercury in the U.S. (65%). The commenters said a typical co al-fired power plant without modern pollution controls emits 170 pounds of mercury each year, and that in 2009, coal-fired power plants in the U.S. injected 134,365 pounds (more th an 67 tons) of mercury into the environment. The commenters said that 90% of this mercury could have been removed by using activated carbon injection (ACI) technology combined with bag -houses, but that as of 2011, only 8% of coal-fired power plants were equipped with this tec hnology. The commenters said that according to WHO, exposure to methylmercury damages not just the nervous system, but the digestive, respiratory, and immune systems as well. The commen ters said that in 47 of the 50 states, wild fish cannot be eaten because their methyl mercury e xceeds safe levels. The commenters also said the estimated safe blood level of a mother bearing a child is 0.58ug/dL, and stated that the neurotoxicity of methylmercury is much higher than that of lead, therefore, the definition of a safe blood level of methylmercury (if there were on e) should be well below that of lead (0.5ug/dL).

Commenters stated that renewable resources and ener gy efficiency also protect water quality and

save water. The commenters said that renewable reso urces like solar PV and wind turbines operate using no water, unlike steam cycle thermal power plants such as fossil and nuclear plants. The commenters said that renewable resource s and efficiency also eliminate the many risks to public health and the environment posed by fossil and nuclear plants, including contamination of ground and surface water by coal a sh pits, catastrophic failure of coal ash dams and nuclear plants, thermal discharges (i.e., heat pollution) by plants that lack closed-loop cooling systems, discharges of pollutants to surfac e waters, and loss of fish and other aquatic life that are impinged and entrained in power plant cool ing systems.

Commenters stated that fossil fuel power plants, pa rticularly those fueled by coal, are one of the chief sources of toxic and other pollutants into ou r waters and air. The commenters said that these other pollutants have immense impacts on wild life, killing and poisoning fish and other species, reducing the enjoyment of wildlife-related outdoor activities, and making fish in many lakes, streams and rivers unsafe to eat. The commen ters said that the CPP promises to make our air and waters cleaner, our wildlife healthier, and help allow us to enjoy wildlife-based activities with less pollution and health risks. The commenter s added that an even stronger final plan will128

have greater additional benefits for wildlife and h uman health by further reducing dangerous pollutants associated with fossil fuel-derived elec tric generation.

Commenters stated that the proposed rule can reduce mercury and water pollution. The commenters said that pollutants such as mercury, ar senic, chromium and nickel, reach the environment as a result of coal-fired power generat ion processes (atmospheric deposition and direct discharge). Commenters said that cleaner po wer sources, especially renewables, do not pose waste disposal problems, in comparison to the fossil fuel power plants, which contribute 50- 60% of all toxic pollutants discharged in the natio n's surface waters. Commenters said EPA estimates that the CPP will remove 3,400 to 4,200 p ounds of mercury from the environment, and stated that a quicker transition to clean energy wo uld remove even more mercury and make fish

safer to eat.

Commenters stated that the rule will be protecting wildlife from water intake systems used during fossil fuel power generation. The commenters said that process results in mortality of aquatic life, including threatened and endangered s pecies. The commenters said that by spurring the transition to a clean energy economy, the CPP w ill help reduce the need for these cooling water intake systems and thus reduce wildlife casua lties.

Commenters also stated that the rule will help redu ce acid rain, mostly formed by sulfur dioxide and nitrogen oxides emissions from coal plants. The commenters said that EPA estimates that CPP will remove between 424,000 to 471,000 tons of sulfur dioxide and 407,000 to 428,000 ton of nitrogen oxides, which will mean less acid rain in the streams and lakes downwind of power plants. The commenters said that a strengthened rul e will achieve even further reductions of these many harmful pollutants associated with fossi l fuel power plant electricity generation.

Commenters stated that different air pollutants (su lfur dioxide, nitrogen oxide, mercury, lead and particulate matter) as a result of burning coal hav e significant effects on human and

environmental health. The commenters said that toxi c level of acid deposition are inflicting damage on trees and aquatic life, and stated that E PA need to fulfill its mission to protect our environment and significantly slow and reduce the a mount of coal being burned, and restrict its

use as an energy source.

Commenters stated that the CPP will result in reduc ing not only CO 2 but also other harmful pollutants, including sulfur dioxide, nitrogen oxid es and particulate matter. The commenters said that these "co-benefits" are projected to include t he reduction of hundreds of thousands of tons of

non-CO 2 pollutants, benefiting public health invaluably an d improving the air quality in our national parks and wilderness areas. The commenters said that there are extensive studies identifying specific national parks, species and ec osystems impacted by pollutants released by coal burning power plants. The commenters added tha t as EPA moves to finalize the CPP we strongly support the agency taking into account the co-benefits that CO 2 reductions will have on our national parks and the Appalachian Mountains.

Commenters stated that EPA is not protecting the he alth of the Deni people, the Hopi people and the ecosystems that they depend on. Commenters sta ted that, when you're looking at climate change the impact is going to be on the frontline c ommunities, and those are the people that live129

right there. Commenters stated that a lot of studie s coming out look at the cost benefits, but are not looking at the health of the communities and th e ecosystems.

Response 13: The EPA agrees that there are environmental effects from various aspects of electricity generation, including fossil fuel extra ction, transportation, combustion, and waste management. These effects reach different mediums, including air, water, and land and impact human health and ecosystem health. The EPA agrees that reducing CO 2 emissions from the power sector under the Clean Power Plan proposal wo uld provide both human health and ecosystem health co-benefits by reducing non-CO 2 environmental risks, including risks associated with mercury and acid rain. Consistent with OMB (OMB, 2003) and EPA guidance (U.S. EPA, 2010) the EPA estimates all of the antic ipated costs and benefits associated with a regulatory action, to the extent feasible, for the purpose of determining the likely impacts. We also include a list of unquantified benefit categor ies in the RIA of Clean Power Plan proposal which identifies reductions in exposure to methyl m ercury and related health and environmental effects, reductions in other air toxics exposures, improved visibility in parks and urban areas, reductions in acid and toxics deposition and associ ated environmental damages, and reduction in nutrient enrichment as important unquantified benef its of the Clean Power Plan proposal.

U.S. Office of Management and Budget. Circular A-4 . September 17, 2003.

U.S EPA 2010. Guidelines for Preparing Economic An alyses. EPA 240-R-10-001. December. Available at: http://yosemite.epa.gov/ee/epa/eed.ns f/webpages/Guidelines.html

Comment 14: Other

Commenters in this summary discussed the role of po wer plants on impacts to public health.

Commenters stated that we are treating the electric ity industry very different to the way we treat

other industries in America. The commenters said th at for some reason it seems to be a hurdle in the public's mind that we could force a public heal th and safety upgrade during the life of a plant, when the usual practice is take action not only to protect health and safety of the public, but also to mitigate the costs associated with that issue.

Commenters stated that we cannot simply replace coa l with natural gas, or replace coal burned in dirtier plants with that same coal burned in slight ly cleaner plants, without considering the climate change and public health costs of the full production cycle of these fuels, not simply the

cost of their combustion.

Commenters stated that EPA needs to make sure these carbon rules are as stringent as possible to offer much needed relief to people living within th e dirty coal cycle like my community. Commenters cited in southwestern Pennsylvania many coal field areas are exploding with shale gas extraction, so without a plan that focuses on r enewables, these same communities will see shale gas drilling increase even more as power plan ts convert to gas. Commenters stated this will not alleviate the negative health impacts alre ady seen from the coal cycle, because the gas extraction has serious health impacts as well in ma ssive methane emissions that would increase130

climate change damages. Commenters closed, stating that these new regulations will create significant changes to front line communities, and the EPA is responsible for making sure the regulations are just and equitable.

Commenters cited a study called ARIES, conducted by EPRI, that showed a direct correlation between high pollutant concentrations and emergency health department visits and mortality. The commenters stated that even though there is evi dence, the power companies are not required to pay the hospital, the insurance companies, or th e patients for the billions of dollars of costs caused by their emissions.

Commenters stated that although carbon doesn't dire ctly cause health effects, its potency as a greenhouse gas traps other pollutants (e.g., mercur y, arsenic, lead, dioxins) that come from power plants.

Response 14 : The EPA agrees that there are additional impacts from various aspects of electricity generation, including fossil fuel extra ction, transportation, combustion, and waste management. These effects reach different mediums, including air, water, and land and impact human health and ecosystem health. The EPA has qua ntified the co-benefits from reductions in other non-CO2 air pollution emissions, but agrees t hat there are other important beneficial impacts of the proposed rule which we were not able to quantify. The proposed Clean Power Plan uses the EPA’s Clean Air Act authority to addr ess power sector CO2 emissions. While EPA did not directly address these other unquantifi ed effects in the proposal, there may be also other laws, regulations, and voluntary programs at the federal, state, and local level that address these additional effects. EPA’s analysis of the em issions impacts and benefits of the proposed Clean Power Plan evaluated the full power sector im pacts of the rule, which includes changes in fuels, changes in levels of power generation, and u se of renewable and traditional fossil fuels, not just the impacts of emissions control devices.

Comment 15: Concerns about EPA air quality co-benefit estimates

Commenters stated that EPA is trying to conflate ad dressing CO 2 emissions with addressing air pollution in its proposed rule. The commenters said that messages such as the President's statements that by addressing "dangerous carbon pol lution," this rule will also "cut down on...smog, and soot that threaten the health of the most vulnerable Americans" and "In just the first year that these standards go into effect, up to 100,000 asthma attacks and 2,100 heart attacks will be avoided" are causing public confusion, and making the public believe that CO 2 emissions

are somehow linked with asthma and heart disease wh en they are not.

Commenters stated that EPA should carefully conside r whether the benefits are worth the costs of the proposed rule. The commenters added that the current course of CO2 emission reductions will likely produce similar positive results as wou ld the proposed regulations over the same time as technology improves and replacement capacity com es on line.131

Commenters argued the opposition statements of the fossil fuel industry towards the rule (i.e., energy cost increases and job losses), and question ed the costs of estimated effects of climate change, and health impacts, including job loss prod uctivity and death as consequence of inaction.

Commenters stated that scenarios that assume lower discount rates for costs and/or benefits, show costs for the proposed regulation exceed the c limate benefits for the U.S., and climate benefits exceed the costs of the rule only if clima te benefits are added for the non-U.S. world population. (For a response to this comment, pleas e see 8.7.2, comment 7 for information about the selection of discount rates applied to the SC-C O2. The response to 8.7.2, comment 3, addresses why EPA uses a global rather than domesti c SC-CO2.

The commenters said that positive net benefits for the rule depend on the large estimated criteria pollutant co-benefits and that the proposed regulat ion would show negative net benefits if criteria pollutant co-benefits were not included. The commen ters also said that criteria pollutant cobenefits account for more than 90% of U.S. benefits , with PM2.5 accounting for 95% of cobenefits and ozone 5%. The commenters said that avo ided mortality accounts for 98% of cobenefits and morbidity 2%.

Commenters stated concerns with the EPA's statement "At this time, we don't have any estimates regarding the benefits and costs of this action, bu t we do expect it to be a significant regulatory action with annual effects on the economy exceeding $100 million." The commenters noted that EPA projects that net climate and health benef its are $48 billion to $82 billion by 2030. The commenters said that in the overview, the benefits climb to $55 billion to $93 billion in 2030, including avoiding 2,700 to 6,600 deaths and 140,00 0 to 150,000 asthma attacks in children. The commenters stated these numbers are important to co nsider because the nation deserves a credible approach that yields tangible results, and as taxpayers, people deserve justification of

the financial costs and claimed benefits of the rul e. The commenters noted that EPA has highlighted the dramatic improvements in air qualit y over the past 30 years to support using this

action to reduce climate attacks and fatalities des pite the increase in population, the state of the economy, and vehicle miles traveled.

Response 15: The actions taken by states and emissions sources t o meet the Clean Power Plan requirements will have broad impacts on both CO2 an d co-emissions of many other pollutants, including SO2, NOx, fine particles, and mercury. F ollowing best economic practices and consistent with many previous rulemakings, EPA has appropriately included both the direct benefits of CO2 reductions through reductions in cl imate impacts, and the co-benefits of
reductions in ambient concentrations of PM2.5 and o zone. Consistent with OMB (OMB, 2003) and EPA guidance (U.S. EPA, 2010a) the EPA estimate s all of the anticipated costs and benefits associated with a regulatory action, to the extent feasible, for the purpose of determining the likely impacts. Further, the EPA’s methods for qua ntifying the human health benefits of

emissions reductions are based on the best availabl e peer-reviewed science and methods that have withstood scrutiny from the EPA’s independent Science Advisory Board (SAB), the National Academy of Sciences (NRC, 2002), and conti nuous interagency review.

Office of Management and Budget (OMB). 2003. Circul ar A-4: Regulatory Analysis. Washington, DC. Available on the Internet at http://www.whitehouse.gov/omb/circulars/a004/a4.html.132

U.S. Environmental Protection Agency (U.S. EPA). 20 10a. Guidelines for Preparing Economic Analyses. EPA 240-R-10-001. National Center for Env ironmental Economics, Office of Policy Economics and Innovation. Washington, DC. December. Available on the Internet at <http://yosemite.epa.gov/ee/epa/eerm.nsf/vwAN/EE-05 68-50.pdf/$file/EE-0568- 50.pdf>.

National Research Council (NRC). 2002. Estimating the Public Health Benefits of Proposed A ir Pollution Regulations . Washington, DC: The National Academies Press. Was hington, DC.

8.9 RELIABLE AFFORDABLE ELECTRICITY

Comment 1: Commenters discuss FERC response to CPP.

Commenters cited FERC's criticism of the rule with regard to reliability. The commenters said FERC can and should help the EPA understand the imp lications that such regulations may have on electric reliability and support utility complia nce with those regulations where necessary and to the extent possible. The commenters said it spea ks volumes about EPA's proposal when the leadership of the executive agency currently charge d with developing and implementing national energy policy expresses such grave concerns about t he Proposed Rule.

Response 1: FERC staff and Commissioners have been very helpful to EPA as EPA has developed the final rule. EPA staff and managers h ave met with FERC staff and all of the Commissioners to get advice regarding the CPP. In addition FERC held several Technical Conferences about reliability and the CPP and EPA m anagement participated in all of them. EPA is very grateful to FERC for their engagement i n developing the final rule.

Comment 2: Commenters stated that coal use has benefits for re liability.

Commenters stated that coal has been the anchor for generation when drought reduced hydropower output, fuel oil prices became subject t o extreme volatility, natural gas was feared to be in short supply, and more recently, when Mother Nature does not cooperate with intermittent

renewable sources. The commenters stated that as co al-fired generation has increased 158 percent since 1970, there has been a 91 percent red uction in sulfur dioxide emission, 84 percent reduction in nitrogen oxide, and 89 percent reducti on in particulate matter. The commenters stated that the EPA's proposed regulations will dra stically limit the options utilities have to provide low-cost and reliable power, with dire cons equences for our nation's electric grid, consumers, and the U.S. economy.

Commenters stated that the interpretation of BSER i s problematic because it is sufficiently broad to include actions and restrictions that go beyond the fence line of existing power plants and may vary widely from state to state. The commenters sta ted that the proposed rule for existing power plants will force coal-fired units to retire becaus e the installation of controls such as carboncapture systems to reduce emissions is not viable, and the incentives in these proposed rules to133

eliminate coal-fired units will disrupt current ene rgy grid reliability and will significantly increase energy costs for U.S. manufacturing operat ions.

Commenters stated that residential rates are projec ted to increase by 20 percent to 36 percent as a

result of the Clean Power Plan and industrial rates are expected to increase 22 percent. The commenters stated that preliminary modeling demonst rates that the rule would leave Utah's electric reliability jurisdiction only 0.53 percent above the region's 15 percent target for reserve margin, which means that adequate supply would tigh ten dramatically.

Commenters operated 4,890 miles of distribution lin e in three retail transmission organizations ("RTOs"). The commenters operated on the seam acros s ERCOT, MISO and SPP. The commenters stated that many companies operate and c oordinate with multiple RTOs. However, the commenters noted that most companies serve more than 4 meters per mile. The commenters stated that due to the low density of consumers and the geographic location relative to multiple RTO's, there has been minimal transmission investme nt in the commenters' service area. The commenters further stated that the proposed dispatc h of combine cycle gas units and running gas units at a higher capacity factor only works if the transmission infrastructure supports the delivery of electricity from the units, and the com menters noted that the transmission infrastructure supplying power to their area cannot support the aggressive targets outlined in the Clean Power Plan. Commenters added our reliability will suffer.

Commenters indicated that the Clean Power Plan can potentially raise our electrical rates by as

much as 30%. Commenters stated a 30% increase in el ectrical power cost would have a significant impact on the rates we charge our custo mers, both residential and industrial.

Commenters stated that according to the Energy Info rmation Administration, in 2010, nearly 48 percent of Illinois' electricity came from nuclear power while 47% of the state's electric power was generated by coal. The commenters noted that th e second targeted block of the Clean Power Plan relies on moving to increased use of existing natural gas fired power plants. The commenters stated that since Illinois' energy portf olio includes a limited amount of natural gas fired generation, this requirement would jeopardize our state's ability to meet the requirement, and compliance would be extremely expensive leading to significant increases in cost and decreases in reliability for energy customers.

Commenters first cited the following (three) estima tes of the Clean Power Plan's impact on the cost of energy supplies in the United States: (1) T he US Department of Energy estimates that the

EPA's Clean Power Plan could close several hundred coal-based electricity plants across the country leading to electricity price spike estimate d to reach up to $2,000/Mwh in some parts of the country ( Electricity Grid Reliability: Close to the Edge. Na tional Mining Association, 2014 ); (2) Reduction in generation capacity due to closure of coal fueled EGU's could lead to natural gas prices to increase from $5 per million Btu to $ 123 per million Btu ( NMA 2014 ); (3) Wholesale electricity prices will increase 27%-55% across the nation with the closure of power plants over the next two years ( NMA 2014 ). The commenters stated that the combination of significantly increased energy costs, increasing en ergy demand from an expanding population and lack of transmission capacity would place a sus tainable strain on our nation's power grid in the years to come, likely leading to prolonged brow n-outs across the country. The commenters also stated that the consequences of these "blank s pots" in our electricity supply would not only134

create immediate problems such as loss of power to our homes, businesses, hospitals etc., but also cause great uncertainty for business looking t o invest in expansion and improvements of their operation.

Commenters stated that compliance with the proposed emissions guidelines would likely raise serious concerns with the electric system reliabili ty due to the shutdown of coal-fired generating units in the state. Commenters stated that replacem ent of coal generation with another type of generation (such as natural gas combined cycle), po ssibly at a different location, could result in potential outages or voltage collapse since Florida 's transmission system was not designed and built to accommodate these types of drastic changes . Commenters stated that if, for example, many coal units are forced to retire and the replac ement power has to come through Central Florida, this could create serious issues and hards hip for us as our transmission system is very sensitive to generation dispatch pattern outside of our territory.

Commenters stated that rapid early retirement of coal units in the region could lead to thermal overloads, low voltage and collapsed voltage on the transmission system. Commenters stated that for potential impacts of the Proposal on reliabilit y, please see the comments of the North American Electric Reliability Corporation (NERC) an d MISO. Commenters stated that the EPA's reliability assessment fails to adequately ad dress regional concerns and the need to keep units operational until suitable base load capable replacements can be brought on line or transmission mitigation projects can be implemented

.

Commenters stated that EPA fails to consider the co mpetitive impacts of its Proposed Rule. Commenters stated that many utilities have a far gr eater dependence on coal-fired plants than natural gas plants. Commenters stated that utilitie s that would be required to prematurely close viable coal plants with years of remaining operatin g life, and given the limited time period for redispatch, would be forced to purchase energy from o ther utilities. Commenters stated that ratepayers of such utilities would lose the use and benefit of investments made in capital intensive coal plants and, be forced to pay for new transmission lines and pipelines to other utilities to buy electricity from gas generation pl ants they do not own while paying down the debt on their own stranded investments as they sit idle.

Commenters stated that recent extreme weather resul ted in a loss of 22% of generation capacity (including 13,700 MW of coal generation) and severe ly stressed PJM reserve capability. Commenters stated that it is noteworth y that coal generation has the ability to store backup supply on site whereas gas-fired generation does not have onsite storage capability which led to at least some of the reliability issues.

Commenters stated that they have concerns over the impacts of BB1 on the remaining PJM coal generation and the threats it poses to future relia bility. Commenters stated that the import of the EPA BB1 proposal will be the inevitable premature r etirement of coal generation facilities, including facilities wherein significant environmen tal compliance investment has already occurred with the simultaneous reduction in both ge neration portfolio diversity and system reliability.

Commenters stated that in the face of the complexit y of addressing nationwide reliability, the Proposal wrongly presumes that an air regulator in any given state can impose controls on its135

state's piece of the BES that will dramatically red uce its emission levels in 2020, without impairing or damaging the system's ability to remai n within all these other critical constraints.

Commenters stated that ignoring or inadequately eva luating these system constraints can cause significant long-run problems. Commenters stated th at this is because a big enough short-run impact, e.g., re-dispatch or displacement of suffic ient energy production from existing coal plants, will render them uneconomic to keep operati ng. Commenters stated that IPM modeling demonstrates that a price on carbon or administrati ve control that is stringent enough to achieve the emission reductions required by the Proposal's interim goals and ten-year-averaging constraint would also render a significant number o f coal plants uneconomic to operate at the very start of the 2020 compliance period - practica lly overnight, especially in light of the uncertain legal challenges the Proposal faces. Comm enters stated that substantially more plants than these modeling exercises indicate may retire d ue to the rule. Commenters stated that while both regulated and merchant plants are at risk, rap id retirement is particularly likely for the 42% of the country's generation fleet comprised of merc hant generating units that depend on market revenues for covering operating costs.

Response 2: EPA disagrees with these comments. While EPA recog nizes that there will be impacts from this rule, EPA believes these comments to be seriously overstated. EPA has conducted a thorough analysis to the impact of the rule and has concluded that the impact on generation changes and costs will be modest. For d etails of this analysis, see Chapter 3 of the Regulatory Impact Analysis. EPA also believes that concerns about reliability are misplaced, because reliability has been carefully considered i n the development of the rule, through flexible provisions and through being built into the state p lanning process; in the unlikely event that the rules will lead to further impacts under well-desig ned state plans, EPA has provided a Reliability Safety Valve mechanism that ensures reliability can be maintained.

Comment 3: Commenters discussed the function of Intercompany Interchange Contract.

Commenters discussed the function of the Intercompa ny Interchange Contract in allowing member companies to provide reliable affordable ele ctricity and stated that if member companies must alter their operations to meet the proposed ru le, they will not be able to achieve expectations of member companies under the IIC. The commenters posited that if IIC expectations are not met, each member company will have to take independent actions that they deem necessary in order to protect themselves accor dingly and the IIC membership would be diminished, if not eliminated altogether.

Response 3: EPA does not believe that the Intercompany Interch ange Contract, or any similar provisions for coordination of operations among uti lity operating companies, will be diminished by this rule. The rule provides for flexible state implementation, and does not prescribe the methods that states must use to ensure compliance, not does it limit that ability of states to work with neighboring states to ensure efficient impleme ntation. The rule permits continued operations through current approaches, such as secu rity constrained economic dispatch and reserve sharing agreements, and there is no reason to believe these will not continue. Multi-state companies have a long history of working successful ly to continue to coordinate the load and136

generation functions of their operating companies, while continuing to comply with both environmental and state PUC regulation. Nothing i n this rule will impede continued success.

Comment 4: EPA should work with DOE to ensure grid reliabilit y.

Commenters stated that EPA and the United States mu st ensure that DOE uses its statutory authority to make sure that EPA rules don't endange r grid reliability. The commenters also supported tax incentives for efficiency upgrades at existing plants. The commenters stated that the current rules prohibiting advanced fossil fuel programs from receiving federal grants and loan guarantees need to be removed along with the r egulatory impediments that delay or discourage efficiency projects.

Response 4: T he EPA will be working closely with DOE to monitor implementation of the final Clean Power Plan, as we have in the past. In addit ion DOE has agreed to provide technical assistance to states and tribes to help them develo p state and regional plans. DOE’s expertise will be a valuable asset in this process. EPA recommend s that the commenters posed additional comments to the agencies that can address them.

Comment 5: Commenters stated that the CPP does not provide en ough time to implement cost effectively and described consequences of tight dea dlines for interim and final compliance.

Commenters stated that the proposed rule does not p rovide enough time to implement the most

cost effective solutions.

Commenters noted "concerns regarding the need for a dditional time to mitigate the impacts of the carbon regulation. The proposed timeline does n ot provide enough time to develop sufficient resources to ensure continued reliable operation of the electric grid by 2020. To attempt to do so would increase the use of controlled load shedding and potential for wide-scale, uncontrolled outages."

Commenters stated that the investments required to transform its fleet to meet the proposed standard may cost $7 billion in capital investments , which it will seek to recover through electric

rate increases. The commenters recommended that EPA consider comments related to the aggressive timeframe and its potential impacts on e lectricity prices and develop a more workable timeline that minimizes unreasonable impacts on ele ctricity prices.

Commenters stated that increasing utility rates to pay for the CSAPR regulation alone will have a devastating effect on OUC customers and the Central Florida economy, and that the impacts of the Clean Power Plan and UMACT exacerbate these imp acts. The commenters stated that its position is not to challenge the Rule, but to demon strate the need for more time to reach the emission requirements identified.

Commenters stated that the EPA completely fails to analyze the regulatory, time, and cost impacts triggered by Building Blocks Two and Three, which would require major changes to the137

regional energy market, involving more infrastructu re, including pipelines and transmission

lines. The commenters stated that transmission line construction involves negotiations with landowners for easements and possible eminent domai n proceedings, in addition to permitting and engineering, which would add significant time a nd costs to the timeline and implementation of the Proposed Rule.

Commenters stated that any compliance costs borne b y ratepayers through higher rates will be magnified if utilities do not have sufficient lead time for the development of new or increased demand side programs, construction of new generatio n, and/or extensive upgrades to existing coal-fired generation. The commenters stated that c ompliance timelines must not prevent state regulators from having an adequate opportunity to r eview utility compliance plans to assure that ratepayers are being provided reliable service at t he lowest reasonable cost. The commenters stated that compliance timelines must take into acc ount the impact of rate increases that can result as utilities seek recovery from customers.

Commenters stated that electric utilities need more time to build replacement generation and make significant investments in transmission and ot her mitigation to maintain reliability. The

commenters recalled when our overall environment wa s nowhere near the quality we have now, and the soot in the air represented progress. The c ommenters also recalled that back then, thoughts of the long term ramifications were not pa ramount, that we are now much smarter, and we have made great strides in cleaning up our emiss ions. However, the commenters noted that

now is not the time to make these draconian demands on our country's energy infrastructure. The commenters stated that the loss of jobs, coupled wi th the drastic increases in electricity rates, will create a huge burden on our citizens. Both commente rs felt that we should strive to continue the technological advances that have already provided u s with a much cleaner environment; however, arbitrary deadlines and unproven benefits will only harm our still fragile economy.

Commenters stated that EPA assumed that all emissio n rate reductions from Building Blocks 1 and 2 could be achieved at the start of the ten-yea r interim compliance period, thus for many states, almost all of the emission rate reductions that the Proposed Rule ultimately requires must be achieved in the first year of the ten-year inter im compliance period. The commenters stated that Pennsylvania is left with little or no flexibi lity to determine a different compliance path to avoid the 2020 compliance cliff. The commenters sta ted that EPA intends to finalize the Proposed Rule in mid-2015, which means that the ear liest state implementation plans would be approved by EPA is mid-2017. The commenters stated that this schedule leaves 2-and-a-half years for electric generating companies to achieve aggressive emission reductions and states to make sweeping changes to their existing regulations and electric generation, transmission, and distribution systems. The commenters stated that th e proposed implementation schedule will force states to rely on coal unit closures to achie ve compliance and the constricted timeline will prevent states from cushioning economic impacts fro m retirements.

Commenters expressed the belief that the proposals in the Clean Power Plan would take more time to be implemented by Arkansas than allotted un der the proposed rule. The commenters

stated that we must be smart about how we make chan ges to our electricity sector, and rushing to meet arbitrary, self-imposed deadlines does not giv e states like Arkansas sufficient time to explore innovative ways to reduce its GHG emissions without requiring the closure of useful baseload power plants and the associated increase i n electricity rates.138

Commenters stated that in proposing the state emiss ion rate goals and compliance periods, EPA did not assess the interconnected power system's re liability requirements, nor what effect the Building Blocks had on each other or on the bulk po wer system when simultaneously undertaken at the levels EPA proposed are achievable. Commente rs stated that because the goals and compliance periods proposed do not reflect the reli ability implications of the changes to the interconnected power system that will be required t o implement the BSER Building Blocks, they do not fully depict the changes the system may have to implement (or the time that will take).

Commenters stated that States need glide path flexi bility to address concerns about price volatility, they also need flexibility to ensure on -going system reliability. Commenters stated that time will be needed to upgrade the electric transmi ssion grid and natural gas distribution systems

to accommodate a resource mix that meets Clean Powe r Plan targets. Commenters stated that these upgrades will require regional coordination a nd compliance with other federal laws designed to ensure reliability.

Commenters stated that, according to the EPA's Regu latory Impact Assessment, generation capacity would be reduced by between 108 and 134 GW by 2020. Commenters stated that constructing suitable replacement generation resour ces to maintain adequate planning reserve margins would be a challenge given the constrained time frame that the states were given. Commenters stated that in addition, in order to acc ommodate the greater use of natural-gas fired generation, gas pipeline expansion would be necessa ry to maintain a reliable source of fuel, particularly during the peak winter heating season. Commenters stated that anticipated changes in resource mix and new dispatching protocols will necessitate comprehensive reliability assessments to identify changes in power flow and d evelop new operating procedures to maintain reliability. Commenters stated system oper ators and ISO/RTOs need to develop appropriate processes, tools, and operating practic es to adequately address operational changes on the system. Commenters stated that more time mus t be given to understand the implications of the CPP and to accommodate reliability enhanceme nts.

Commenters stated that he proposed rule states that "the U.S. economy depends on this sector [electric energy] for a reliable supply of power at a reasonable cost." 79 Fed. Reg. at 34,844. Commenters stated that the quick shift to natural gas, coupled with intermittent resources, puts that reliability at risk by failing to have sufficient time frames for transmission, generation, and gas infrastructure build-out. Comm enters stated that it also threatens reliability by shifting away from coal to heavy reliance on gas without significant modeling and infrastructure build-out or planning which puts the grid at risk. Commenters stated that in order to maintain even minimal reliability, the rule push es utilities and states to look beyond what may constitute "reasonable cost," to invest quickly in expensive transmission and natural gas infrastructure and the quick build-up on additional NGCC to meet peak, base load, voltage support, renewable support and dispatchable reserve resource demands.

Commenters stated that the quick shift to natural g as, coupled with intermittent resources, puts that reliability at risk by failing to have suffici ent time frames for transmission, generation, and gas infrastructure build-out. Commenters stated th at it also threatens reliability by shifting away from coal to heavy reliance on gas without signific ant modeling and infrastructure build-out or planning which puts the grid at risk. Commenters s tated that in order to maintain even minimal reliability, the rule pushes utilities and states t o look beyond what may constitute "reasonable139

cost," to invest quickly in expensive transmission and natural gas infrastructure and the quick build-up on additional NGCC to meet peak, base load , voltage support, renewable support and dispatchable reserve resource demands.

Commenters stated that there is a profound disconne ct between the early emission reductions that would be required under the Proposal and emiss ion reduction trajectories that could be realistically achieved by states, without stranding assets needed for reliability. Commenters

stated that these immediate results would destabili ze and distort markets by driving the supply of power well below the levels needed by the BES to me et demand and ensure grid reliability.

Commenters stated that the implementation of the pr oposed Clean Power Plan will have a significant impact on the planning and operation of the ERCOT grid. Commenters stated the proposed CO2 emissions limitations will result in s ignificant retirement of coal generation capacity, could result in transmission reliability issues due to the loss of fossil fuel-fired generation resources in and around major urban cent ers, and will strain ERCOT's ability to integrate new intermittent renewable generation res ources.

Commenters stated that SPP's Assessment makes it ve ry clear that new generation and transmission expansion will be necessary to maintai n reliability during summer peak conditions if EPA's projected generator retirements occur. Com menters stated that even the scenario that assumes optimal resource expansion using new natura l gas fired resources could be problematic during extreme winter load conditions with gas supp ly and delivery challenges "Unprecedented coordination and cooperation beyond regional planni ng efforts will be necessary."

Commenters stated that compliance with the interim performance requirements will force actions to be taken by 2020. Commenters stated that MISO's initial analysis indicates that up to 25 percent of the remaining coal capacity in MISO - wh ich equates to 14 gigawatts - could potentially retire in order to comply with the prop osed rule. Commenters stated that this impact is in addition to the 10 to 12 gigawatts of retirem ents expected due to MATS. Commenters stated that to avoid reliability and resource adequacy iss ues, retiring capacity will need to be replaced at

the time it comes offline. Commenters stated that t o comply with the interim performance requirements, a significant amount of retirements - approximately 11 gigawatts - would need to

occur in the 2020 timeframe. Commenters stated that this is well before sufficient replacement capacity can be placed into service; new combined-c ycle natural gas generation is the most probable option to replace retiring coal-fired plan ts and comply with the proposed rule.

Commenters stated that the potential reliability im pacts associated with the transition from the these traditional high-inertia resources (and relat ed loss of essential reliability services such as frequency and voltage support) to other forms of ge neration need to be studied to ensure that proposed state compliance plans do not reduce the r eliability of the BES.

Commenters stated that this proposal raises reliabi lity concerns. Commenters stated that the

amount of down time that will be necessitated in or der to make HRI upgrades in such a short

amount of time is unknown due to this national aver aging approach in lieu of unit-by-unit capabilities analysis. Commenters stated that obtai ning NSR permits in some cases will take additional time, and there is just not enough time under this proposal, especially considering HRI improvements is the very building block U.S. EPA as sumes can be achieved the quickest.140

Commenters stated that based upon study results, re tired generation identified due to the proposed EPA Plan will require system modifications . Commenters stated that additional requests for commenters to secure firm ATC may be r equired. Commenters stated that significant BPS modifications will likely result in system upgrades that potentially cannot be achieved based upon the time requirements proposed in the EPA's plan. Commenters stated that reliability assurance mechanisms should be in place to allow for sufficient planning and construction of projects for the most feasible opti ons with compliance dates dependent upon system study results and requirements with projecte d in service dates and lead times. Commenters stated that each facility change should be evaluated on specific system identifications as listed in the NERC Report Potent ial Reliability Impacts of EPA's Proposed Clean Power Plan as guidance.

Response 5: Numerous commenters have suggested that the time al lowed states to develop state plans and to come into compliance with the interim deadline of 2020 was inadequate. Although the proposal provided flexibility in the timing wit h which emission reductions could be made over the course of the 2020-2029 period in order to achieve compliance with the emission limitations applicable to that interim period, many commenters perceived the start of the period as too soon and stated that it provided insufficien t time for planning and investments necessary for sources to begin complying while maintaining re liable electricity supplies. The EPA has

considered these comments and in the final rule has established an interim compliance period of 2022-2029, providing two final rule’s requirements in an orderly manner while maintaining reliability of electricity supplies. See section VI I.G.2 of the final preamble to the CPP for discussion of reliability issues.

The final rule provides sufficient time to ensure s ystem reliability and a phase-in that allows for additional time to complete potential infrastructur e improvements (e.g., natural gas pipeline expansion or transmission improvements) that might be needed to support more use of existing natural gas-fired generation, and provides states w ith increased ability coordinate actions taken under building block additional years for planning and investment before the start of compliance. We are persuaded by comments and by our own further analysis that this timeframe is appropriate given the nature and magnitude of plann ing and investment activities that will be necessary to begin compliance with the actions take n under building block 3 (operation of new renewable capacity). Additionally, this phase-in in creases the flexibility provided to states to address capital investment concerns regarding indiv idual sources when scheduling compliance actions over the course of the interim and final pe riods.

Comment 6: Commenters requested adjustable timing including s afety valve.

Commenters requested that EPA include a safety valv e provision in the final rule that would include mechanisms to adjust timing and possibly st ate goals given extraordinary conditions that would affect the economy, public safety or reliabil ity.

Commenters stated that without certainty of the com pliance timeline under the proposed rule, OMU must wait until the SIP is approved by EPA befo re finalizing compliance plans, but OMU must make definitive decisions regarding participat ion in the RPM market each May for a three-141

year forward obligation. The commenters stated that the loss of RPM revenues would require

OMU to raise rates to its customers. The commenters stated that based upon the most recent clearing price of the RPM, where OMU to not partici pate, electric rates would have to rise by 7% to make up for the lost capacity revenues. The comm enters stated that these adverse impacts could be significantly reduced were the final rule to eliminate the interim compliance date and allow OMU to work with the Division of Air Quality to implement compliance measures by

2030.

Commenters stated that if the flexibility measures in EPA's proposed rule prove unworkable, or are limited by judicial decisions, higher rate impa cts could result.

Commenters stated that the EPA should create an aff ordability safety valve mechanism within

the final rule if cumulative rate increases exceed a certain threshold established in the rule.

Multiple commenters discussed the time and effort n eeded to implement the proposed rule and meet reliability needs.

Commenters stated that it is necessary that enough time, flexibility and support to invest, plan, permit, design and build what will be almost an ent irely new infrastructure of power generation, transmission systems and CCS. The commenters also s tated that it is absolutely vital that the emissions reduction be implemented in a manner that is balanced with the equally compelling needs for a reliable power supply, reasonable cost controls to protect consumers, development of an adequate generation capacity using zero-and low- emitting sources.

Commenters remarked that that the grid is ill equip ped to meet the expansion and connection needs as a result of the new renewable generation c apacities needed to fulfill CPP obligations.

The commenters stated that this infrastructure will require significant time to plan, permit, site,

and construct. The commenters cited a recent renewa ble integration study that indicated the need for "at least $3.7 billion in transmission upgrades to support a 14% regional RPS, and this figure could reach $13.7 billion under higher penetration scenarios", in addition to the costs of implementing the CPP upgrades required to mitigate reliability impacts of coal unit retirements.

Commenters cited NERC conclusions that "the propose d timeline does not provide enough time to develop sufficient resources to ensure continued reliable operation of the electric grid by 2020. To attempt to do so would increase the use of contr olled load shedding and potential for widescale, uncontrolled outages." The commenters stated that EPA must consider reliability constraints in determining emission reductions achi evable through the four building blocks to ensure that reliability concerns not addressed by e x post analysis employed for the CPP are truly

addressed.

Commenters stated that the proposed state goals and compliance period do not adequately account for the complexity of power grid operations or how the need to maintain reliability affects the pace and timing of implementing such ch anges. The commenters also stated that EPA's limited analysis focused primarily upon resou rce adequacy as measured by generation reserve margins and assumed that the state plan dev elopment process provides adequate opportunity to address other reliability issues. Th e commenters further stated that "while EPA does not have the expertise to assess fully the imp lications of the proposed guidelines on the142

interconnected power system that does not mean that the Agency can ignore the complexity of the electric system when developing state-specific emission rate goals and compliance

timelines." The commenters added that the reliabili ty studies and information that EPA should use to assess the significant changes that will be required to achieve the interim and 2030 goals will not be available before EPA finalizes the prop osed guidelines or even before states are required to submit compliance plans for EPA approva l. The commenters stated that states, electric utilities, system operators and other regu lators will need sufficient time to assess the changes that will be required to implement the stat e plans and will need the time required to make the system changes and develop the infrastruct ure needed to implement the state plans and maintain reliability and meet the 2030 goals.

Commenters stated that state and regional plans mus t be approved by the EPA, which is anticipated to require up to one year, leaving as l ittle as six months to two years to implement the approved plan. The commenters stated that areas tha t experience a large shift in their resource mix are expected to require transmission enhancemen ts to maintain reliability, and that constructing the resource additions, as well as the expected transmission enhancements, may represent a significant reliability challenge given the constrained time period for implementation.

Commenters stated that because of the long complian ce period (12 years or more under the CPP to achieve the final 2030 compliance deadline) and range of resources available to achieve compliance, states and grid operators will have suf ficient time to identify and avoid reliability

issues associated with the CPP. The commenters stat ed that States can scale up energy efficiency, coal-to-gas conversions and re-dispatch , and other actions achievable in the next five years, and that states and grid operators can begin the process of identifying longer lead-time resources such as new transmission needed for expan sion of wind and solar power.

Commenters stated concerns with the time constraint s associated with proposed rule given the time needed to make complicated bulk power system d ecisions, complete research needed to clarify the regional and national impacts the CPP m ay have on the generation mix, infrastructure needs, and electric reliability, and complete the p roposal, acceptance, planning, investment and implementation process for SIPs. The commenters sta ted that although it is possible to achieve environmental goals and keep our power supply diver se, reliable, and inexpensive, the current EPA proposal will not achieve these goals.

Commenters stated that EPA has not taken into accou nt the time needed to construct renewable energy, transmission infrastructure and reliability enhancements needed. Commenters added that high voltage lines can take five to 15 years depend ing on the voltage class to construct and stated that EPA must consider reliability concerns and the timeline associated with ensuring reliability. Commenters added that the siting process can includ e real estate negotiations, environmental permitting, public opposition, and regulatory appro val from various entities that can be costly and take up to three years for simple projects or u p to ten years for complicated projects where large energy projects can affect federal, state, tr ibal, and private lands simultaneously.

Commenters stated that integration of large amounts of renewables must be done over a reasonable time period to preserve grid reliability . The commenters added that EPA proposal gives no consideration to the price and price polic y implications which arise from the adoption of143

renewable energy goals, such as the fate of price c ontainment policies in which states pay new renewable generation at lower rates when certain go als are achieved.

Commenters stated the Proposed Rule does not provid e companies sufficient time to evaluate potential compliance options and, if necessary, con struct new generating resources and

transmission facilities. The commenters further sta ted to ensure grid stability and reliability, EPA must provide electric generation companies with suf ficient time to evaluate and implement potential compliance options.

Commenters stated timelines must provide sufficient time and flexibility to maintain the integrity and reliability of the existing electrical system g iven the following:

• it is anticipated that the nation's utilities will have to retrofit existing generation plants, close older coal-fired electric generation plants and develop new supply

and/or demand-side resources over the next three to five years;

• the goal of state ratemaking, integrated resource p lanning and other regulatory proceedings will be to determine the most cost-effe ctive means to comply with the EPA regulations and to determine the just and r easonable costs of any supply side and demand side resources to replace the capac ity and energy currently supplied by older coal-fired generation plants;

• the development of demand-side resources, building new generation and/or making extensive upgrades to existing coal plants r equires adequate lead time for engineering, procurement, construction and regulato ry review;

• utility ratepayers in many states are already facin g substantial rate increases due to a variety of factors, in addition to any costs r elated to complying with the EPA regulations;

• any compliance costs borne by ratepayers through hi gher rates will be magnified

if utilities do not have sufficient lead time for t he development of new or increased demand side programs, construction of new generation, and/or extensive upgrades to existing coal-fired generatio n;

• compliance timelines that do not account for supply chain constraints could unnecessarily raise prices; and

• compliance timelines must not prevent state regulat ors from having an adequate opportunity to review utility compliance plans to a ssure that ratepayers are being provided reliable service at the lowest reasonable cost.

Commenters stated while natural gas, nuclear altern ative, and renewable electricity generation have become a much more important part of the fuel mix over the last several decades, and are certainly capable of increasing their contributions to the grid, developing additional capacity from these sources and the necessary infrastructure to realize these expansions will take time and likely come with significant costs to consumers.144

Commenters stated that studies of their actual regi onal grid have found that combinations of solar, wind and electro chemical storage can power the grid with up to 99.9 percent reliability. The commenters further stated that th is measure alone won't reverse global warming, but it is a good step in the right direction, and b y pushing the required renewable technologies now, the Unites States can gain a competitive advan tage, true energy independence and substantially enhance national security.

Commenters stated that the plan is about making the power supply as reliable and efficient as possible. The commenters stated further the Clean Power Plan will promote innovative ways to upgrade and invest in our electric grid and overall infrastructure. Commenters added that it's imperative that we make these investments to preven t infrastructure failures like the 2003

blackout.

Commenters stated the rule prolongs this addiction to coal at a time when alternatives are more

reliable and affordable than ever. The commenters urged the EPA not to tie the future of our economy to a dirty and unreliable fuel, and instead keep the path clear for renewable energy and energy efficiency.

Commenters stated that a key building block, reduce generation at coal-fired power plants and re-dispatch natural gas fired plants at a 70 percen t capacity factor, makes assumptions regarding the availability and cost of natural gas fired gene ration to replace coal-fired generation. The commenters also questioned EPA's assumption regardi ng the availability of natural gas

infrastructure in sufficient time to meet demand du e to the proposed rule and EPA does not consider whether new pipelines or generating facili ties can be operational by 2020.

Commenters referenced NERC's reliability concerns r aised in the November 2014 assessment of the proposed rule and that they support NERC's reco mmendation that a reliability back-stop or safety valve be implemented for reliability assuran ce. The commenters urged EPA to reconsider the targeted timeline of the proposed rule, conside r the need for new natural gas infrastructure, and include flexibility for reliable operation of t he electric system.

Response 6: The final rule features overall flexibility, a long planning and implementation horizon, and the widest possible range of options f or states and affected EGUs to achieve the

CO 2 emissions goal, and an opportunity to trade credit s or allowances. This design reflects, among other things, the EPA’s commitment to ensurin g that the final rule does not interfere with the industry’s ability to maintain the reliability of the nation’s electricity supply. Given this, it is highly unlikely that there will be a situation wher e an effected EGU cannot meet its requirements under a state plan.

While some have pointed out severe weather or other short-term events as potentially conflicting with state plans, we note that most of those events are of short duration and would not require major adjustments to emission standards on affected EGUs or state plans. However, should such a situation develop the ability to use ERCs and all owances in effect provides a safety valve.

EPA recognizes however that some states may choose to place inflexible requirements on individual plants as part of their state plans and not authorize the use of credits and allowances.

Those states will be more vulnerable to an unantici pated catastrophic event that could create a145

conflict that would interfere with reliability. To address this possibility, EPA is providing a safety valve in the nature of a short term modifica tion to the state plan. See section VIII. G.2.e. of the final preamble to the CPP for more informati on.

Comment 7: Commenters expressed reliability concerns relating to CPP. Multiple commenters noted that reliability is threatened by the rule.

Commenters listed the following reliability concern s: "1) the loss of production from member company facilities due to supply shortages or trans mission outages 2) the potential damage to equipment caused by unplanned outages, and 3) envir onmental releases caused from unplanned outages."

Commenters stated, "The effects of EPA's policies w ill vary dramatically and hinge on a wide variety of issues including everything from existin g power resources and access to low cost

alternatives to infrastructure constraints and ener gy demands." Commenters stated, "Americans

deserve the bottom line: what does it cost and what will we get for the money?"

Commenters noted that another reliability issue is "the impacts of the distribution of generating resources that support regional operations."

Commenters cited the Polar Vortex of late 2013 and early 2014 as a demonstration of reliability concerns. Commenters noted that the unusually cold weather caused much of the United States

to be at risk of blackouts and further retirements of coal-fired units could make blackouts a recurring danger.

Commenters stated, "On January 7, 2014, available p ower totaled slightly more than 142 GW" and "Demand peaked that day at 141 GW, meaning the grid was very close to failure." Commenters questioned whether "the grid will be in a position to deal with the scenario we faced this past January."

Commenters stated, "the lights almost went out duri ng the Polar Vortex, but that was with many tens of thousands of MWs of coal-fired capacity tha t will not be there in the future if this rule is finalized in its present form." Commenters stated t hat "the implementation of EPA's proposed environmental dispatch scheme appears to be premise d on assumptions about the existence of infrastructure, market forces, and market incentive s that either are not correct or cannot be effectively implemented to accommodate mandatory en vironmental dispatch without compromising electric reliability."

Commenters stated that "almost every coal-fired ele ctric generation unit slated for closure in the next few years due to EPA regulations was required to operate this past winter 'simply to keep the electric grid functioning.'"

Many commenters cited the NERC study as supporting evidence for reliability concerns.146

Commenters stated "The Proposed Regulation, if not amended, could subject customers to the very outages that Congress sought to avoid when it directed, less than 10 years ago, the establishment of mandatory reliability standards by NERC." According to commenters, "NERC's concerns cannot be taken lightly as NERC is certifi ed under federal law as the organization with the reliability expertise to establish mandatory el ectric reliability standards for the bulk power system in Virginia and throughout the United States ."

Commenters noted a study conducted by NERA Economic Consulting [NERA Economic Consulting, Potential Energy Impacts of the EPA Proposed Clean Power Plan , October 2014, http://americaspower.org/sites/default/files/NERA_C PP%20Report_Final_Oct%202014.pdf

Commenters stated, "NERA's analysis tested two sepa rate scenarios for compliance - one

'unconstrained' scenario in which states had all fo ur building blocks as viable options and one

'constrained' scenario in which states were limited by available resources to only two building blocks." According to commenters, "In the constrain ed scenario, over 200 GW of coal-fired power would be set to retire by 2029, while in the unconstrained scenario, almost 100 GW would retire. According to commenters, "NERA's report als o estimates that between 18 and 68 percent of coal capacity could by retired across the U.S. b y 2031." According to commenters, "the Southeast, the South Central, and the Northeast reg ions stand to lose the greatest percentage of coal-fired capacity by 2031."

Commenters cited a reliability analysis conducted b y Southwest Power Pool (SPP) [ SPP Reliability Assessment of EPA 111(d) Clean Power Pl an Rule , SPP (Aug. 19, 2014), http://www.spp.org/publications/SPC%20Materials%200 81914.pdf.]

Commenters noted " The SPP warns that the proposal will result in casc ading outages and voltage collapse in six of the eight states where i t operates the electric grid."

Commenters cited a reliability analysis conducted b y the Electric Reliability Council of Texas (ERCOT)

Commenters stated they are very concerned about the impact of the Clean Power Plan on their ability to adequately meet their customers' power s upply needs, especially in the short timeframe proposed. The commenters further stated that the r eduction in fossil-fueled generation as well as the manner in which the remaining generating units are dispatched will impose significant adverse consequences on the electric industry gener ally and the ETCs specifically, the commenters noted that NERC has stated more power pl ants will likely retire than EPA estimates, leaving many regions of the country without adequat e resources to meet their power supply requirements and that the compliance timelines prop osed by EPA, especially the proposed interim deadline of 2020, do not provide sufficient time for utilities to either develop new, cleaner power resources or construct transmission t o access alternative supplies.

Commenters noted reliability concerns of several RT Os, including SPP, MISO, and SWEPCO:

• SPP found that "the generating-unit retirements exp ected as a result of the [Clean Power Plan] will cause significant reactive power d eficiencies and numerous

overloaded facilities."147 • MISO concluded that the Clean Power Plan, as curren tly proposed, would place approximately 14,000 MW of coal-fueled generating c apacity at risk of retirement, exacerbating existing resource adequacy concerns unless new generation is constructed

• SWEPCO stated the proposal makes no accommodation f or the strength -- or lack of strength -- of Southwest Power Pool's current tr ansmission system, nor does it recognize the conflict between state implementation plans and multiple RTOs within a state and that the CPP, provides no recogn ition that loss of local, base load generation requires significant investments in both new capacity and new transmission, and the proposed timeline gives no re cognition to the planning, approval, permitting and siting time needed to appr ove and install new generation

and transmission.

Commenters noted that they will experience many of the resource adequacy concerns identified by NERC, SPP, MISO, and SWEPCO, threatening their a bility to provide reliable service to their

customers.

Commenters stated that by EPA's own estimate, four of the eleven power plants in which they hold ownership interests will be forced to retire a s a result of the CPP and that they will lose 294 MWs of capacity, or 22.5% of the total generation c apacity they own seriously hindering their flexibility to adjust their generation portfolio to respond to system emergencies, plant outages and peak loads. The commenters further noted that t he harm may be even worse if the majority owner of another power plant decides the final requ irements of the Clean Power Plan are

unachievable.

Commenters stated that The Proposed Rule will negat ively impact the reliability of the supply of electricity, particularly in the ERCOT region and t hat an analysis by ERCOT estimated that between 3,300 and 5,700 MW of coal-fired generation could be retired as a result of just this

rule. The commenters stated that EPA's IPM results projected that almost 6,500 MW of coalfired generation must be retired in Texas and such large potential retirements of coal-fired generation pose reliability risks, with one concern being the potential for system inertial support to be degraded.

Commenters stated that proposed changes could impac t reliability of electric sources.

Commenters stated that the economic vitality of ind ustrial operations depends on reliable as well as reasonably priced energy supplies. Commenters st ated that many manufacturers operate around the clock, with consistent energy needs at a ll times. Commenters stated that in the event of supply constraints or system emergencies, indust rial consumers are subject to service

curtailment in advance of residential and human nee ds customers. Commenters stated that the risk of any impairment to reliability, consequently , falls earlier and harder on industrials. Commenters stated that at the same time, service in terruptions impose serious hardship on such operations, halting production, idling workers, dis rupting downstream processes and potentially damaging product and equipment.148

Commenters continued with: regulations that signifi cantly alter the generation and supply of essential energy resources, accordingly, should be implemented with due care to mitigate the potential disruption and economic impact of any deg radation in reliability. Commenters stated that as indicated by a recent report by the North A merican Electric Reliability Corporation (NERC), there is substantial reason for concern tha t the proposed regulations may impair the reliability of electricity service in the United St ates.

Commenters stated that reducing electric and gas re liability could result in the temporary or permanent shutdown of manufacturing facilities whic h could result in costs starting from tens of millions of dollars to $100 million per day.

Commenters stated that nationwide, 132 gigawatts of generating capacity is projected to retire between 2016 and 2020, of which 68 GW is directly a ttributable to the Clean Power Plan, according to EPA modeling. Reliability watchdog Nor th American Reliability Corporation has warned that "essential reliability services may be strained by the proposed Clean Power Plan."

Commenters stated that the Edison Electric Institut e cautioned that, "The dynamics of compliance, under circumstances of any unexpected s hortfall in the non-emitting resources required for compliance, creates the risk of multi- state compliance failures that would disrupt interstate power flows."

Commenters stated that in their state, EPA modeling predicts that 3,425 megawatts of fossil fuel electric generating capacity would retire as a resu lt of the rule. It is unclear if their state, and neighboring states similarly impacted, can afford t o lose this much capacity. The resulting threat of rolling blackouts is very real.

Commenters stated that the Western Electricity Coor dinating Council, a non-profit corporation that exists to assure a reliable bulk electric syst em in a 10-State region in the west, shows that the loss of generating capacity leaves the Northwest WE CC region only 0.53 percent above the region's 15 percent target for reserve margin.

Commenters stated that FERC Commissioner Philip Moe ller told Congress that the rule threatened the 15-State Midcontinent Independent Se rvice Operator footprint with "widespread rotating blackouts." Commenters stated that in a N ovember interview with Bloomberg, Thomas Fanning, the CEO of Southern Company, which service s a four state region in the southeast, said that "I don't think we have the ability to maintain a reliable system" and also comply with EPA' s Section 111(d) rule. Commenters stated that a relia bility analysis performed by ERCOT, the independent service operator that maintains Texas's grid, warned the rule "could result in transmission reliability issues due to the loss of generation resources in and around major urban

centers."

Commenters stated that the impact of the CPP on the existing electric generation fleet raises significant reliability concerns. Commenters stated that prior to the release of the CPP, the DOE had modeled 60GW of coal plant closures by 2020. Co mmenters stated that EPA anticipates an
additional retirement of close to 50GW of coal base d generation as a result of the CPP. Private parties have suggested even more closures. Commente rs stated that the loss of at least 110GW of capacity from the electric sector raises red flags for the industry and additional assessment of the149

reliability of the grid under the CPP is warranted. Commenters stated that such additional assessments are called for by numerous electric rel iability organizations including the NERC.

Commenters stated that FERC Commissioner Moeller st ated "[t]here are profound reliability implications of the Clean Power Plan that need to b e thoroughly discussed and studied to assure the continued reliability of the nation's bulk powe r system."

Commenters stated that climate impacts will be mini mal but adverse reliability impacts will be significant.

Response 7: EPA does not agree that the Clean Power Plan will c ause unplanned outages, or voltage collapse. It also does not mandate or even contemplate environmental dispatch. Very much to the contrary, the CPP features overall flex ibility, a long planning and implementation horizon, and the widest possible range of options f or states and affected EGUs to achieve the

CO 2 emissions goal. This design reflects, among other things, the EPA’s commitment to ensuring that the final rule does not interfere wit h the industry’s ability to maintain the reliabilit y of the nation’s electricity supply. As further desc ribed in the preamble to the final rule, states can develop plans to meet the CO 2 emission performance rates or state CO 2 emission goals by choosing from a variety of state plan types and app roaches that afford states and affected EGUs appropriate flexibility. EE and other non-BSER appr oaches can strengthen a state’s ability to establish a plan to meet the CO 2 emission performance rates or state CO 2 emission goals by providing a considerable amount of headroom above t he levels of the rates and goals. EE especially, because it reduces load, can provide as surance that reliability can and will be maintained. Additionally, the final rule offers opp ortunities for trading among affected EGUs within and between states, and other multi-state co mpliance approaches that will further support electric system reliability.

In addition states can, if problems arise revise th eir state plans and in the unlikely event that a very rigidly designed state plan conflicts with wha t must be done to respond to an emergency, the state can use a short term "reliability safety valve".

EPA is aware that some parties have published studi es that predict that the CPP will result in resource adequacy and other problems. EPA’s own an alysis does not confirm this finding. Many of these studies assume that states, rather than de veloping state plans that make use of the wide latitude in the final rule to develop plans that ar e consistent with that state’s energy sector and policies, that every state simply implement the bui lding blocks in cookie cutter fashion the building blocks are how the level of the standard i s set. It isn’t how the states are to develop their plans. There are several other common mistake s made in these studies. Please see section VIII.G of the final preamble to the CPP for a discu ssion of reliability studies.

Comment 8: Commenters supplied reliability-related reasons th at climate change should be

addressed in the near future.

Commenters noted the following reasons why "Address ing climate change is an essential part of maintaining reliable and affordable power:"150 • impact of unmitigated climate change in the Southwe st will be a hotter and drier climate with more frequent and severe droughts

• Current water shortages have already decreased hydr oelectric generation in the
southwest

• future unmitigated climate change will warm rivers and lakes, reducing the capacity of thermal power plants, especially so in the summer when demand peaks

• projected increase in electric cooling demand, prim arily driven by increased use of air conditioning

Commenters stated that an important aspect of the i mpacts this rule could have on reliability of the electric energy supply system not considered by EPA is the vulnerabilities and challenges the system is facing from climate change and extreme we ather events. The commenters cited DOE's July 2013 report on vulnerability of the energy sec tor to climate change:

"Increasing temperatures, decreasing water availabi lity, more intense storm events, and sea level rise will each independently, and in some cases in combination, affect the ability of the United States to produce and transmit electricity from fos sil, nuclear, and existing and emerging renewable energy sources. These changes are also pr ojected to affect the nation's demand for energy. An assessment of impacts - both positive an d negative - is necessary to inform forwardlooking efforts to enhance energy security."

Commenters summarized several findings from the DOE report on electric power generation facilities, energy infrastructure, renewable energy resources, electric transmission and distribution, fuel transport, and increased electri city demand resulting from climate change.

Commenters stated that while EPA made a high level assessment of impacts to the electric supply system from power plant retirements and the shift to different electric supply sources using EPA's IPM Modeling, it did not take into cons ideration scenarios incorporating the risks the electric system is facing from ever increasing risks from climate change and extreme weather events. The commenters concluded that reliability of the electric system to yesterday's system demands is not adequate for determining reliability of an energy system that also needs to operate effectively to a changing climate.

Commenters reviewed the effort of the National Clim ate Assessment Development Committee to create a set of physical, ecological, and societal indicators that would inform decision-makers and the public about our nation's changing climate. The commenters urged EPA to identify appropriate climate change and extreme weather even t frequency scenarios and to consider the potential impacts of these scenarios on electric sy stem reliability in concert with expected unit retirements, load pockets, and greater reliance on interruptible sources of energy. The

commenters stated that these considerations exacerb ate the difficulties caused by the interim, and even the final, state emission rate standards.

Commenters identified and presented three comparati ve load forecasts.151

Commenters noted that they analyzed the feasibility of complying with the 2020 interim standards in a different way, without regard to EPA 's IPM results, using its own transmission constrained dispatch models to estimate how much co al-to-gas redispatch it could achieve while maintaining reliable service. The commenters then noted that they then calculated the gap

between the emissions rate reduction achieved throu gh maximum redispatch and EPA's assumed improvement in coal heat rates (which is not a real istic assumption) and the 2020 standards (using a range of assumptions about how the state s tandards would be "allocated"). The gap, which presumably would have to be achieved through additional use of renewables and through energy efficiency, was larger than the total potent ial assumed by EPA for those Building Blocks

in several of the states served.

Commenters stated that renewable energy projects mu st balance all environmental impacts including state and local community considerations and believe the CPP can play a significant role in advancing the amount of energy that renewab les can contribute to our overall energy

needs. The commenters stated that at the same time the CPP should not advance policies that disproportionately contribute to other environmenta l impacts from energy projects beyond climate change.

Response 8: EPA agrees with commenters that the impacts of clim ate change are a threat to electricity reliability. Storms create threats to the distribution system that many Americans are

familiar with. Trees and tree limbs fall on wires a nd cause losses of power. Water shortages are reducing the capacity of hydroelectric plants in th e southwest 31 . Warming of rivers, lakes and coastal waters are limiting their ability to coal t hermal power plants. 32

Comment 9: Commenters expressed the importance of including re liability experts.

Multiple commenters made statements concerning the importance of including reliability experts in this rulemaking. These include FERC, NERC, ISOs, RTOs, industry stakeholders, states, DOE, WECC, electric industry, gas industry, etc. Co mmenters offered specific guidance on ways to include the reliability experts in this rulemaki ng.

Commenters asked that EPA use a "series of technica l conferences jointly sponsored by FERC and the EPA" to discuss the "impacts of the propose d CPP on power system reliability, impacts on regional markets, and how to move forward in a c oordinated fashion that best facilitates accomplishment of both EPA and FERC objectives."

31 http://www.eia.gov/todayinenergy/detail.cfm?id=1491 1

32 http://green.blogs.nytimes.com/2012/08/13/heat-shut s-down-a-coastal-reactor/152

Commenters stated the following solution to improvi ng regional energy planning by developing "a memorandum of understanding (MOU) between EPA an d FERC that cross references the

EPA rule with the FERC 1000 rule." Commenters asked that the agencies "collaborate with states and regional transmission authorities to mak e sure both greenhouse gas reduction and energy reliability needs are addressed nationally a nd locally."

Commenters asked that EPA "sink up its rules with r equirements for state energy plans and improved regional coordination with FERC." Commente rs noted that "A strong tie to long-term energy planning is necessary for the EPA Clean Powe r Plan to be successful." To make environmental and energy policy more consistent, co mmenters recommended that EPA develop a "memorandum of understanding (MOU) with the Depar tment of Energy and the Federal Regulatory Energy Commission" and "work closely wit h state Public Utility Commissions and regional entities such as the Regional Transmission Organizations (RTO) and Independent System Operator (ISO)." According to commenters, "T he RTO and ISO are similar in that both are responsible for coordination of regional transm ission systems and reliability of the electric
system.

Commenters offered the following example of the nee d for interagency coordination. According to commenters, "managing the necessary infrastructu re build out for an aging electric energy grid and gas pipeline system across the U.S." is a key a rea for coordination because "containing

utilities desire to over build infrastructure to su pport their legacy electrical system" must be tempered with knowledge of "the growth of distribut ed energy resources (DERs) in a changing system." According to commenters, FERC landmark Ord er 1000 rule requires the "utilities and others responsible for our high voltage transmissio n grid to participate in a regional planning process, eliminate certain provisions that give inc umbent utilities a competitive edge in transmission planning, establish methods to clarify who will pay for the costs of transmission projects, and include procedures to consider how pu blic policies like federal carbon pollution standards and state clean energy policies impact th e grid." The FERC authority was upheld in the D.C. Circuit Court of Appeals in August 2014, with the order forcing utilities to consider renewable energy in their transmission planning. Ac cording to commenters, the following trends in the U.S. energy market could cause regulatory co nflict and require coordination between

FERC and EPA:

• the current low natural gas prices causing existing aging coal plant closures,

• some nuclear plant closures such as Wisconsin's Kew aunee plant, and

• the ability to replace this generation capacity.

• "whose regulating authority [FERC or EPA] trumps th e other over the issue of reliability or carbon reduction?"

• "There could be problems with the state-by-state na ture of EPA carbon emission regulations and the regional energy planning."

Commenters suggested a requirement that DOE work wi th FERC and EPA to develop a new national energy plan for the transition from the le gacy carbon economy to the new clean energy153

economy. According to commenters, "The DOE invests in energy research, programs like APRA-E, and could shape the necessary energy techno logy innovation system advances to continue providing critical GHG reduction." Therefo re, commenters suggested that one dimension of the plan include an energy technology roadmap. Commenters continued that "input

is needed from DOE and FERC on critical infrastruct ure investments such as the electric expansion or natural gas pipeline upgrade and expan sion" because the increased integration of renewable energy will dramatically re-shape energy infrastructure needs as well as require changes in the electric energy utility business mod el. According to commenters, "Planning documents can help make this a smooth transition ve rsus disruptive change." Commenters suggested that "the energy vision, goals and metric s document should be produced by January of 2016" and states using integrated resource planning and regional transmission plans through FERC 1000 could be used to continually feed into an d update the federal plan document.

Commenters noted that there may be an opportunity f or EPA and FERC to coordinate with the states through the requirements for regional transm ission planning under the FERC 1000 rule. According to commenters, the FERC rule required con sideration of non-transmission alternatives (NTAs) during regional transmission planning and NT As can replace the need for additional transmission through energy efficiency, demand resp onse, distributed generation, or centralized generation sited near load.

Commenters noted that NTAs have the following addit ional benefits:

• avoided energy costs,

• reduced wholesale electricity costs,

• reduced air pollution

• reduced water usage, and

• avoided land use and siting costs.

Commenters suggested a "memorandum of understanding between EPA and FERC with a linkage to language in the final rules for the Clea n Power Plan" to "simultaneously address gaps in grid reliability issues, regional energy plannin g (specifically transmission planning under FERC 1000)" and "add a requirement to develop a cal culation of costs and environmental benefits of reduced air pollution (including greenh ouse gas reductions) and reduced water usage from the greater use of NTAs, and some requirement for participation of public utility commissions and state air and water quality regulat ors to participate in mutual planning processes."

Commenters noted that NTAs and the proposed rule co mplement each other in the following

ways:

• energy efficiency,

• demand response, and154 • increasing distributed generation

• advancing microgrids and energy storage

Commenters suggested that EPA "strongly consider ad ditional coordination with states, NERC, the Federal Energy Regulatory Commission ("FERC"), and Independent System Operators to develop mechanisms that allow for greater flexibili ty to maintain compliance and ensure reliability."

Commenters also stated that "the need for coordinat ion between U.S. EPA and FERC regarding the feasibility of compliance with the proposed rul e cannot be understated."

Commenters noted that the "Colstrip Plant in Montan a is in 5 separate BAs [balancing areas] because the generation from Colstrip is used for se rving load centers in several states." According to commenters, "As this example illustrat es the Clean Power Plan compliance plans in one state can and will impact several states, hi ghlighting the need for the EPA to work with WECC and all stakeholders to analyze and model the complex interaction of proposed state compliance plans."

Commenters stated that "The electric and gas indust ry should be invited to provide electric and gas system modeling and expertise regarding the imp act to reliability of proposed implementation. Without such modeling, stakeholders cannot appropriately evaluate the proposal and the complex interactions between states and reg ions."

Commenters stated that recent grid operator comment s mistakenly suggest that the CPP's deadlines are too onerous and risk triggering relia bility issues underscore that reliability cannot be viewed in a vacuum; instead, grid operators are obligated and empowered under Order 1000 to use their planning tools to support state implem entation of the CPP. Commenters stated that FERC-jurisdictional grid operators should provide w hatever technical and analytical support the states require to help develop their plans and that acting under Orders 890, 1000, and other FERC authorities, they regularly assess how state p ublic policy requirements (e.g., state renewable energy and energy efficiency standards, t he forthcoming CPP) will affect system needs. The commenters stated that grid operators w ill provide the necessary information and guidance to states to allow them to determine how t heir state-jurisdictional CPP compliance solutions could better meet grid reliability needs and avoid or minimize the need to continue to run plants otherwise slated for retirement.

Commenters stated that FERC orders require every gr id planner (including both individual public utility transmission providers and the regio nal grid planners) to participate in a regional system planning process, create processes and forum s for all stakeholders, including states, to consider such public policies as the CPP, and evalu ate both transmission and non-wires solutions to meet system needs. The commenters stated that t he planning process helps link the system's physical/electrical needs to both transmission and "non-wires solutions" - which include onsite generation, demand response, and energy efficiency - that can identify and resolve reliability needs, and that from the states' perspective, the r egional planning process can help states develop and implement a cost-effective and on-time state pl an for the CPP.155

Commenters stated that FERC's grid planning rules c reate a forum for states to craft and implement effective and reliable CPP state plans an d that FERC orders have evolved to reflect changes in the generation and delivery over time. The commenters stated that the regional planning process required by FERC can help states d evelop and implement a cost-effective and on-time state plan for the CPP.

Commenters stated that one of FERC's critical respo nsibilities is to review and approve grid planning and operating standards created by the NER C, none of which would change under the

Clean Power Plan. The commenters stated that all re gions plan to have capacity above expected demand to accommodate unplanned power plant outages , transmission failures, unexpectedly high demand, or other contingencies and that most r egions maintain minimum target reserve margins of about 15 percent above their forecast de mand. The commenters stated that this would

continue to be the case under the Clean Power Plan and that states that exercise traditional regulation over vertically integrated electric comp anies often use integrated resource planning processes to ensure that electric distribution comp anies have sufficient resources available to meet projected load and reserve requirements at lea st cost.

Commenters reiterated the request for a formal role for FERC with the EPA as it relates especially to the reliability implications of the p roposal. The commenters recommended convening the appropriate reliability experts to ex amine the reliability implications necessary to avoid additional unintended consequences. The comme nters noted that it's the details of calculating proper reserve margins and specific loa d pockets that matter from a reliability perspective and that although a specific generating plant may not contribute significant power to the grid, its other outputs such as voltage support or "inertia" qualities may contribute significantly to grid stability.

Commenters also stated that the details of how rese rve margins are calculated can have a significant impact on the ability of excess capacit y in one load pocket to transfer power to another load pocket that is short, but these challe nges can be addressed. The commenters stated further that infrastructure improvement sometimes c annot be implemented within the deadlines of specific rules.

Commenters stated that getting the electricity reli ability experts together in a public and transparent forum to address these questions and de velop answers is the responsible approach to publicly discuss the extent of reliability challeng es under the proposal and potential solutions to these challenges. The commenters continued that th e responsibility to formally address the reliability implications should be promoted by the EPA with their involvement, must be open and transparent, and cannot be merely a private and paperless discussion between government employees.

Response 9: The EPA agrees that consideration of reliability is an important part of developing a sound plan to reduce CO2 emissions from power plant s. EPA consulted often with DOE, FERC, the ISO/RTO Council, other planning authorities, re liability organizations and other stakeholders in developing the CPP. T he EPA is requiring that each state demonstrate as part of its state plan submission that it has considered reliability issue s while developing its plan in order to ensure that standards of performance can be implemented an d enforced.156

A number of commenters, notably ISOs and RTOs, poin ted out that planning and anticipation of change are among the essential ingredients of ensur ing the ongoing reliability of the electricity system. To that end, they recommended that as state s are developing state plans, their activity include the consideration of the reliability needs of the region in which affected EGUs operate and of the potential impact of actions to be taken in compliance with state plans. Therefore, we are requiring that each state demonstrate in its fi nal state plan submittal that it has considered reliability issues in developing its plan. One part icularly effective way in which a state can make this demonstration is by consulting with the releva nt ISOs/RTOs or other planning authorities as they develop their plans and documenting this consu ltation process in their state plan

submissions. If a state chooses to consider reliabi lity through consultation with the ISO/RTO or other planning authority, the state should request that the planning authority review the state plan at least once during the plan development stage and provide its assessment of any reliability implications of the plan. While following the recom mendations of the planning authority would not be mandatory, the state should document its con sultation process, any response and recommendations from the planning authority, and th e state’s response to those recommendations in its state plan submittal to the EPA. This consultation is designed to inform how the state might adjust its plan for meeting the CO 2 reduction goal required under this guideline; the consultation is not a basis for rela xing that goal. While we consider this process to be an effective way for a state to demonstrate that it considered reliability in developing its state plan, a state may provide other comparable support for a demonstration that it has considered reliability during the state plan development proce ss. The EPA believes that this requirement to demonstrate consideration of reliability will provi de an essential reliability evaluation in the state plan development process. It should further help st ates avoid any conflicts between state plans and the maintenance of reliability during implement ation of the state plan and associated

emission standards.

In addition, the EPA, DOE, and FERC have agreed to coordinate efforts to help ensure continued reliable electricity generation and transmission du ring the implementation of the final rule. The three agencies have set out a memorandum that refle cts their joint understanding of how they will work together to monitor final rule implementa tion, share information, and resolve any difficulties that may be encountered. This effort i s based on the successful working relationship that the three agencies established in their joint effort to work together to monitor reliability during MATS implementation.

Comment 10: Multiple commenters stated that the rule does not threaten grid reliability.

Commenters stated, "We believe strengthening and en ergetically pursuing this proposal will protect public health and address climate change wh ile ensuring reliable, clean power and that new clean energy technology will create a new gener ation of green jobs."

Commenters stated, "for anyone saying that this thr eatens grid reliability, that's a laughable statement." According to commenters, "In the record heat in Texas in August 2011, multiple coal plants that needed maintenance ended up shutting do wn, but it was the onshore wind farms, along the Texas Gulf Coast, south of Corpus Christi , that kept the lights and the air conditioners running during those first three days of August 201 1."157

Commenters stated, "While the retirement of fossil generating units poses a hypothetical challenge to the reliability of the electric grid, the adoption of proper policies, technologies, and procedures will allow the grid to evolve and meet t he challenge of a changing generation mix, ultimately ensuring that frequently-voiced reliabil ity concerns never materialize."

Commenters noted the following:

• "a well-balanced mix of low-carbon and renewable re sources, including natural gas, biomass, solar, wind, geothermal, hydropower, and other distributed resources like fuel cells, can replace retired gene rating units with electricity that is

both clean and reliable."

• "advanced grid technologies can help integrate vari able renewable generation, increasing the output from these non-emitting sourc es and amplifying their contribution to resource adequacy. These technologi es include energy storage, advanced metering infrastructure, demand response, distribution automation, microgrids, high voltage direct current transmissio n, and smart grid management technologies."

• "demand-side management technologies such as energy efficiency and demand response reduce peak demand, thus lowering the nece ssary reserve capacity and improving resource adequacy," adding that." Lawrenc e Berkley National Laboratory (LBNL) cites load shifting, energy effic iency, and renewable energy as viable strategies to address resource adequacy a nd thereby improve overall grid reliability."

Commenters stated that the guidelines will improve the reliability of electricity in the United States by "diversifying the electric generation por tfolio and by improving energy efficiency measures that reduce peak demand."

Commenters noted the following features of the prop osed rule that will preserve reliability:

• allows states flexibility to meet their carbon poll ution goals through a variety of
low- carbon resources.

• provides great flexibility as to how states may dem onstrate compliance - allowing states, among other things, to average their emissi ons over the period from 2020 to 2029; average the emissions of multiple EGUs whe n determining fleet-wide emission rates; and utilize market-based mechanisms , including credit trading systems that build on frameworks already in place i n many states, to show that carbon pollution goals are being met.

• provides a multi-year period for developing state p lans as well as for demonstrating compliance. The relatively extended period for implementing these guidelines allows sufficient time for stakeho lders to plan for future resource needs, and develop and deploy any infrastructure th at may be needed to maintain reliability while reducing emissions from existing EGUs.158

Commenters noted that the analyses from SPP and ERC OT contained incorrect assumptions that undermine the determinations that reliability is th reatened by the proposed rule. Specific criticisms are mostly contained in the commenters' arguments against the inclusion of a safety or reliability valve.

Commenters stated that there is no valid reason to doubt that system operators will be able to maintain system reliability as the Clean Power Plan is implemented. The commenters stated that there is a strong federal and state structure in pl ace to plan for and achieve adequate system reliability, and maintaining reliability under the Clean Power Plan will be facilitated by the significant flexibility provided by the multi-year compliance period and the system-based compliance options.

Commenters provided the following examples: "plants needed for reliability may continue to operate as long as needed under a credit-based comp liance program simply by obtaining a sufficient supply of low-emission credits from rene wable energy, energy-efficiency or other lower emitting generation. Similarly, multi-year av eraging compliance will allow a plant essential for maintenance of reliability to continu e to operate even if there are not adequate credits available in a particular year so long as t he average emission rate is met over the multiyear period."

Commenters refuted commenters that stated that incr easing the share of overall generation served by natural gas will reduce fuel diversity an d threaten the reliability of the electric grid. The commenters stated that data shows that poor gen erator performance at the beginning of the Polar Vortex was more an issue of lack of preparedn ess and impaired generator availability than natural gas supply availability. For example, the c ommenters cited data that indicated that during the Polar Vortex' peak demand hour, 22% of PJM's ge neration capacity was reportedly out of service, not due to lack of gas availability, but d ue to weather-related forced outages, a rate that is two to three times higher than the normal peak w inter outage rate of around 7-10%. The commenters added that issues will likely be allevia ted by the continued build-out of natural gas pipeline infrastructure, and that decreased relianc e on existing coal-fired power plants will increase fuel diversity in the electric generating fleet.

Commenters stated that a study was conducted by PJM , the regional grid operator, found that there would be no significant reliability issues fr om phasing in this level of renewable energy, even with current technology.

Commenters stated that we should strive to have mor e of all forms of energy and not simply pick one energy resource against another.

Commenters cited the E3 Study, NREL and NERC to not e that reliability concerns can be addressed by CSP while satisfying emission reductio n goals and the need for a cost-effective, reliable energy supply. The commenters requested th at EPA incorporate a requirement within BSER to evaluate and address grid integration and r eliability issues and help ensure that renewable energy assets will have a positive impact , decrease the risk that they will be curtailed,

and increase their effectiveness and decrease their costs. Additionally, commenters supported the flexibility that the Proposed Rule would offer to t he States in developing their State Plans but recommends that EPA require that grid integration a nd reliability issues be evaluated and159

addressed in addition to the cost of State Plans, e conomic benefits, jobs, and benefits of CSP+ TES and other technologies in designing State Plans

.

Commenters queried how does the EPA proposes that w e obtain our national energy supply if we cut carbon but do not move as quickly as possible t o sustainable, renewable replacement sources such as wind, solar, geothermal and efficiency.

Commenters stated that recent comments submitted by the Kentucky Energy and Environment Cabinet raise the issue, repeated by many, of "grid reliability," with many citing a recent report by the North American Electric Reliability Corp (NE RC). Commenters stated that this report

fails to consider several factors. The Union of Con cerned Scientists challenge that the NERC report fails to include additional renewable genera tion. Commenters stated that UCS particularly cites the MISO market, where renewables are increas ing substantially. Commenters stated that parts of their state (Kentucky) fall within the MIS O region.

Commenters stated that EPA should recognize Texas's role as a leader in maintaining system reliability. Commenters stated that concerns about reliability are largely overstated. Commenters stated that industry groups have often raised conce rns about potential electric system reliability impacts from major new EPA regulations affecting po wer plants, but the implementation of new environmental rules has never actually produced any reliability problems. Commenters stated that this is, in large part, due to the fact that t he industry has proven itself capable of responding effectively to such regulations. Commenters stated that electric utilities, ERCOT, other grid operators, federal and state regulators, and others , have taken a wide variety of steps to ensure reliability in the face of previously promulgated e nvironmental regulations.

Commenters stated that there have been recent devel opments in transmission line construction and best practices in renewable energy dispatch tha t are helping to address any reliability concerns with respect to wind energy.

Commenters stated that energy storage services can also provide additional reliability, and have a critical role to play in preserving the stability o f the grid. Commenters stated the PUC has approved new rules and ERCOT has approved new proto cols establishing some basic rules for energy storage facilities in Texas. Commenters add ed battery systems have been added by AEP near Presidio, Texas and at a wind farm in West Tex as by Duke Energy.

Commenters stated that Oncor Electric Delivery, own er of the largest power-line network in Texas announced a proposed plan to spend more than $2 billion on up to 5000 MW of storage to address the problem of fluctuating wind and solar o utput, subject to needed rule changes at the

PUC.

Commenters stated that they do not agree with ERCOT or NERC that distributed generation represents a serious reliability concern in the nea r-term future, to give one example, the 9 to 13.5 GW of new solar capacity ERCOT's model anticipates over the next fifteen years is entirely utility-scale generation, but to the extent some ma rket changes are needed, we note again that grid operators are already examining the various ch anges that may be required.160

Response 10: The EPA generally agrees with the commenters that e lectricity system is well positioned to respond to the final rule while maint aining reliability. The changes made to the rule since proposal especially bolter the ability o f the industry to maintain electric reliability. EPA agrees in large part with these commenters rega rding a reliability safety valve. While we have offered a reliability safety valve, it would o nly be of use in states that do not make use of the opportunity offered to develop a plan that avoi ds inflexible requirements on individual plants. Our own analysis does not point to any problems reg arding resource adequacy throughout the compliance period. Please see section VIII of the final rule preamble and the Resource Adequacy Technical Support Document. For more infor mation.

Comment 11: Commenters discussed the potential for including a safety value or reliability

mechanism in the CPP.

Commenters discussed the potential inclusion of a s afety or reliability mechanism in the rule. According to the commenters, the provisions would a llow units that are critical to grid reliability to continue operation.

Commenters referred to the "reliability safety valv e" that was proposed by the ISO/RTO Council. Commenters referenced the safety valve con cept proposed by PJM. Commenters cited an idea set forth by the FERC Commissioner. Comment ers referenced the one-year compliance

extension in the MATS Rule.

Commenters stated "States should also be granted a structured exemption to allow emissions in excess of their target levels for a declared emerge ncy period."

Commenters asked that FERC, NERC, or possibly state utility commissions "should be authorized to review the operation of the overall e lectric grid and identify any units that are 'necessary for grid stability and reliability' as e xempt from redispatch requirements under BB2 as well as state goal-setting."

Commenters stated, "The final rule should include b uilt-in mechanisms for suspending or modifying plans to address unforeseen reliability e mergencies." For example, commenters stated, "EPA provides flexibility in the operation of emerg ency generators at 40 CFR section 60.4211(f)(2)(ii) and (iii) and EPA provides a mode l rule for flexibility in the use of solid waste incinerators in emergencies at section 60.3061."

Commenters stated "Additional flexibility for state s in implementing compliance plans is necessary. As plans are implemented, there will be unexpected and unintended consequences and EPA must allow states to address these by revising their compliance plans as necessary. States should not be locked in to a particular approach as there are simply too many variables associated with the interconnected power system and the proposed Clean Power Plan."

Commenters asked that EPA include a safety valve. C ommenters asked that it be triggered "when the Plan is determined to be resulting in uni t retirements that would harm reliability and/or have other unacceptable impacts that outweig h the benefit of further emission reductions" and "targeted to units that are needed for reliabil ity and in the hours in which those units are161

needed for reliability." Commenters asked that the safety valve not "interfere with the provision of an accurate market price signal for the value of CO2 emission reductions."

Commenters suggested that the provision would permi t a state, "if it had concerns about the reliability implications of its or another state's plan, to cause the plan to be submitted to the "local transmission operator or operators, or to th e regional transmission planning body that is
constituted under Orders 890 and 1000 of the Federa l Energy Regulatory Commission, or to the local ERO or RTO." According to commenters "The sel ection of the appropriate body to submit the plan to would depend both on the geographic sco pe of the body and its willingness to undertake the analysis." According to commenters, " If the plan was found by the relevant body not to result in reliable operations of the grid, t hen the plan would be suspended and the state would be required to submit a revision to the plan to ensure reliability."

Commenters asked that EPA "allow [state] plans to b e studied in tandem and for their effects on the reliability of the region."

Commenters noted that "Additionally, states should be authorized to provide reliability exemptions or minimum exempt run periods for smalle r units that are necessary for local voltage support or to provide the needed peak load support during high load months." Commenters noted that "This could be accomplished through a subcateg ory or through operational limitations that allow for exemptions from the program." commenters cited as an example, the "EPA's RICE

Rules which allow for a certain number of reliabili ty run hours from uncontrolled diesel engines or even in the application of reformulated gasoline standards that allow for certain fuels to be sold during certain times of the year."

Commenters stated that the proposed rule does not a ddress how or even whether the proposed

emissions standards could or should be relaxed or t emporarily waived in the event of electric grid emergencies, including natural disasters, terr orist attacks, and forced outages, which would leave utilities potentially vulnerable to private c itizen lawsuits for non-compliance with a CAA requirement even if states exercise enforcement dis cretion. The commenters stated that it has presented a reliability safety valve proposal to EP A and urges EPA to adopt the proposal in order to ensure that rules and SIPs assess and mitigate r eliability impacts and stated that NERC also supports a reliability backstop.

Commenters quoted NERC's Reliability Impact Review which states that strict compliance with the proposed timelines will impact reliability. The commenters recommended that EPA work with NERC and the industry to develop and adopt a r eliability assurance mechanism in the final rule. The commenters further suggested that transmi ssion planners and planning coordinators be used to analyze the impact of resource changes due to implementation of the proposed rule, and that annual evaluations by the planners will antici pate negative reliability effects due to changes in generation resources. The commenters stated that if a reliability issue is identified that cannot be mitigated over the planning horizon, then a reli ability back-stop mechanism will be needed to preserve BPS reliability and allow operators to com ply within NERC limits. The commenters quoted the NERC reliability standard and discussed the effects of changes in load, such as possible sharp declines in generation which may lea d to operating conditions close to NERC reliability limits and give operators few options d uring emergencies. The commenters stated that the backstop must incorporate grid modeling conduct ed by qualified personnel who understand162

BPS operations and also allow adequate time for BPS modifications based on the modeling

conclusions.

Commenters supported the inclusion of a reliability safety valve (RSV) in the EPA's proposed rule to provide flexibility in the event that relia bility is adversely impacted by meeting state goals within the required time frame. The commenters quot ed the ISO/RTO Council's proposed review process, plan and benefits regarding the reliabilit y safety valve. However, the commenters stated that they do not necessarily endorse the specific R SV plan, rather that an RSV plan is essential to provide flexibility to address any unforeseen relia bility impacts in various state or regional planning strategies and to address the associated m arket risks and uncertainty. The commenters provided an example of a situation where an RSV may be needed, such as if compliance plans entail a significant increase in variable renewable resources without sufficient flexible ramping capability in conjunction with the retirement of ba seload resources in order to meet compliance goals. The commenters also noted that RTO regions w ith mandatory capacity markets present significant impediments to the construction of new resources, adding risk and uncertainty. The commenters stated that reliability safeguards and f lexibility measures that allow for interim solutions are necessary to guard against adverse im pacts to reliability, such as if planned

resources are not built or cannot obtain affordable financing because of market risk. The commenters concluded that incorporating flexibility measure such as an RSV into the Proposal will allow for more sustainable implementation stra tegies and is superior to an immediate approach that restricts the states to shorter-term options that sacrifice reliability in exchange for full compliance.

Commenters recommended adopting an RSV process appl icable during State Plan implementation to address unanticipated grid reliab ility impacts resulting from the administration

of the State Plan. The commenters also stated that the RSV process and relief should be separate

from the enforcement function.

Similarly, commenters stated that EPA's final guide lines should not exclude states from providing compliance exemptions during reliability- critical situations.

Commenters also stated that relatively long impleme ntation periods could create disconnects between actual system conditions during those perio ds and system topology assumptions utilized during the Final Rule and State Plan development st ages, and that these disconnects could create reliability issues. The commenters recommended, to mitigate potential grid reliability impacts that arise over time due to changing grid condition s and/or other unforeseen circumstances that the Final Rule include a procedural mechanism (like the RSV) to identify and respond to reliability challenges. The commenters stated that consideration of grid reliability should be incorporated in the Final Rule to: (1) formalize th e requirement to consider grid reliability; (2)

minimize administrative burdens and/or difficulties for both States and EPA, (3) ensure their effectiveness in mitigating impacts to grid reliabi lity; and (4) minimize impacts to the achievement of the objectives of the Final Rule.

Commenters stated that the Final Rule should provid e for adequate mitigation of unforeseen grid reliability impacts that may arise during the imple mentation of State Plans and which cannot be addressed within the extended compliance time frame s. The commenters recommended an RSV process that provides relief from compliance schedu les, proposed State Plan activities, or163

performance expectations should be employed, where necessary, to preserve grid reliability. The commenters stated that to address state, multi-stat e, and/or regional grid reliability issues arising at that time, the Final Rule should include a mecha nism that: (1) is available without initiation of enforcement processes and (2) allows for course cor rections when State Plan implementation strategies cause negative impacts to state, multi-s tate, and/or regional grid reliability and the identified mitigation strategies would not allow th e state to return to compliance with the existing compliance schedule and/or State Plan goals or perf ormance expectations.

Commenters recommended that EPA include in its Clea n Power Plan a "safety-valve" in the event that natural gas prices rise rapidly due to s ome type of market disruption (for example, a large natural disaster or a significant national se curity issue may cause a temporary price spike in natural gas prices, or a sharp curtailment in the a vailability of natural gas at any price). The commenters noted inaccuracies in predictions of fut ure gas prices.

Commenters stated that EPA must consider a reliabil ity safety valve. The commenters appended a document outlining reliability concerns as a resu lt of unforeseen events, such as a turbine loss at a nuclear plant that could last up to a year, an d possible solutions to accommodating reliability issues, including adjusting the single year CO2 rat e or the normal averaging time. The commenters added that if the averaging time were le ngthened, it would be necessary to adjust over a period of five or more years to accommodate reaching the normalized state goal to keep generation resources critical to maintain reliabili ty on the system until transmission solutions can be implemented to ensure retirements or curtailment s do not create reliability constraints. The commenters stated that periodic state reporting cou ld explain and verify the event, correction, and demonstrate the achievement of the goal over th e allowed period.

Commenters stated that based on the existing market -based approach in Michigan, jurisdictional issues may arise between the state regulators overs eeing implementation of the proposed rule and the RTOs managing the economic-based dispatch of al l generation, including NGCC units. The commenters noted that a fundamental change in this system would be necessary in order to account for re-dispatch of NGCC units and suggested that EPA strongly consider a reliability safety valve for purposes of meeting electric deman d in RTOs. The commenters stated that a safety valve will keep generation resources critica l to maintain reliability on the system until transmission solutions can be implemented to ensure retirements or curtailments do not create reliability problems. The commenters added that EPA must consider that some of these units are on interruptible gas supplies and will not be able to operate if a shortage occurs.

Commenters cited FERC, Western Electricity Coordina ting Council, Southwest Power Pool, Mid Continent System Operator statements and explanatio ns of reliability concerns, the need for additional reliability assessments, and the need fo r a reliability safety valve that would allow for the suspension of the program should the electric g rid be put at risk by implementation of the

Rule. The commenters stated that in lieu of "a rati onal Rule that accounts for the myriad of risks imposed on the electric system, [the commenters] st rongly argue that this Rule must include some sort of failsafe to prevent the economic and p hysical harm that will accrue to US citizens should it be implemented as proposed."

Commenters also stated that a safety valve is neede d which aligns with MISO procedures and defines levels of progressive action necessary to e nsure reliability, safety and security during164

abnormal operating conditions or emergency situatio ns. The commenters further stated that the inclusion of a safety valve during the transition p eriod as the system adapts to changing generation and transmission infrastructure will pro vide a critical buffer enabling the resolution of reliability issues with minimal power disruption or unnecessary costs. The commenters noted the importance of understanding and recognizing local r eliability events and stated that the ability for electric utilities to support and restore power during emergency situations should also be recognized by EPA due to the unpredictable nature a nd timing of these events.

Commenters stated that EPA fails to consider the lo cation of existing units necessary for grid stability in the proposed rule and requested EPA ac count for the generation of the volt-ampere reactive power when determining the state-specific goals by subtracting this generation from the goal computation. The commenters explained that as units are retired, the operation of the remaining existing units will be necessary to provi de voltage support and will emit without actually generating megawatts for sale while servin g as voltage regulators. Commenters also recommended that EPA implement a safety valve mecha nism that deducts emissions associated with energy generation required in must-run conditi ons due to transmission constraints. The commenters stated concerns that the proposed rule w ill affect the ability to transmit electricity from the generating units to the load areas, especi ally during the timeframe between when the proposed rule is final and when the transmission sy stem can be updated to comply with the final

rule.

Commenters recommended that an RSV that provides a process for undertaking timely reliability assessments at various stages in the process as wel l as the requisite compliance and/or enforcement flexibility to implement any identified reliability solutions. The commenters stated that an RSV can help to ensure outcomes that addres s reliability issues without affecting the core policies underlying the 111(d) rule compliance desi gn.

Commenters also recommended that the proposed rule include an RSV that provides alternative compliance options, including deferred timelines fo r both EGUs and states in circumstances where grid reliability is threatened. The commenter s added that the safety valve should protect states and utilities from penalties/fines and civil lawsuits in the event that the emission targets

cannot be met due to the need to maintain reliable operations. The commenters suggested that one way to effectuate a safety valve would be to en sure that no state, federal, or regional implementation plan shall take effect until such ti me as FERC certifies that the implementation plan will not have a detrimental effect on bulk ele ctric system reliability.

Commenters strongly encouraged EPA to heed warnings in NERC's November 2014 Initial Reliability Review and incorporate a "safety valve" or reliability assurance mechanism to keep strategically important units online to maintain ad equate power supplies to support vulnerable sections of the grid. The commenters also recommen ded that EPA adopt some type of grid reliability consultation and protection mechanism t hat will take into account the incredibly challenging prospect of merging individual state im plementation plans and regional approaches into competitive markets for dispatching power gene ration.

Commenters stated that EPA should incorporate a saf ety valve in the final rule to mitigate reliability impacts.165

Commenters stated that the ISO/RTO Council has offe red to work with EPA to develop a "Reliability Safety Valve" in establishing "process es to assess and, as relevant, to mitigate electric system reliability impacts" from the propo sed rule as well as other EPA rules. The commenters stated that NERC reliability review conc ludes that "essential reliability services may be strained by the and "more time for implementatio n may be needed to accommodate reliability enhancements." The commenters encouraged EPA to wo rk with these organizations to ensure that the electric system continues to be able to re liably supply homes, businesses and industry with the essential energy they need.

Commenters stated that it is imperative that EPA in corporate a safety valve in the final rule and that the safety valve should mitigate significant r eliability impacts due to transmission line and natural gas pipeline limitations, recognizing that lengthy permitting, design and construction will be necessary. The commenters stated further that no t only must EPA provide a mechanism for keeping some baseload coal plants online for reliab ility purposes, EPA must allow utilities to use those plants without risk of punitive measures when they are running to fill key capacity during

times such as cold weather.

Commenters requested EPA consider allowing states t o adopt an emergency provision or "safety

valve" that would allow carbon-intensive sources to operate beyond permitted emission limits in the event that grid reliability is compromised with in a region. The commenters stated that without natural gas units to provide reliable, base -load, lower-emitting CO2 generation, electricity providers will have to rely on higher-e mitting coal-fired units in extreme cold weather events in the future but doing so could subject the company to prosecution under the CAA.

Commenters stated that the assumption that coal gen eration can be one-for-one diverted to existing NGCC units is inaccurate, and the magnitud e and timing would make the Arizona's electric supply unreliable. The commenters stated the NERC report on the CPP cites the need for a 10 to 15 year outlook for planning transmissi on development due to the time required for engineering, contracting, siting and permitting, as well as the various federal, state, provincial, and municipal approvals required. The commenters s tated the CPP interim goals would allow for less than a 5 year outlook. The commenters sta ted that the timing of the final state plan approval and the typical five-year timeframe to sit e and construct new power plants would result in real reserve margin declines. The commenters st ated that Arizona will need to seek relief from the CPP's interim goals in order to maintain g rid reliability and security and that EPA should include a reliability safety valve mechanism in the final rule.

Commenters submitted, as an attachment to their com ment, an RSV administrative process recommended for incorporation into the Final Rule. The commenters’ recommendation would limit the scope of entities that are eligible to submit RSV petitions to EPA to those entities that have responsibility for grid reliability. In addition, the commenters recommended establishing rules related to the reliability asses sment to be performed in support of the petition, the entities qualified to perform that assessment, the process for submission of such petitions to EPA, and the role of relevant regulatory authoritie s, including the FERC. The commenters recommended that the petition be required to identi fy the reliability issue, provide verification of the reliability issue, provide an explanation regar ding why the grid reliability issue (state, multistate, and/or regional) cannot be addressed through a State Plan modification, include grid reliability assessment, a mitigation strategy, and supporting material.166

Commenters stated that a "reliability safety valve" should allow the extension of time to address the reliability issue. Commenters stated the "relia bility safety valve" would also allow generating

units to be excluded from the rule if it can be dem onstrated that there is not a cost-effective alternative to retiring the unit, and that the gene rator is needed for reliability. The commenters stated further, because FERC and NERC have authorit y and responsibility to assure reliability, they should be allowed to grant the time extension or exception, and EPA should defer to their bulk-power system regulatory and reliability expert ise in making its decision.

Commenters stated that Brownouts or blackouts are n ot acceptable to the public. Commenters stated that for this reason, the EPA should include a process to support effective management of electric system reliability issues that may arise d ue to the implementation of the CPP.

Commenters stated that states should have the flexi bility to request a compliance extension deadline if they can make the case that reliability is threatened.

Commenters stated that dangers could be avoided by including a safety valve in its plan, a point echoed by officials at the PJM Interconnection regi onal transmission organization and the North American Electric Reliability Corporation. The comm enters stated dangers could also be avoided if EPA did not require states to make dramatic cuts in GHG emissions by 2020, which is less than six years away, front-loading compliance burde ns through a rapidly approaching date that does not provide adequate time for states to make t he major planning decisions necessary to comply.

Commenters stated that it is of crucial importance that EPA study and take into account the potential effect of the proposed rule on the reliab ility of the electric system and the overall impact on residential, commercial and industrial cu stomers. Commenters stated that a Reliability Safety Valve (RSV) is an appropriate measure that s hould be included in the rule as a means of avoiding potential reliability events in Kansas and the Midwest.

Commenters stated that Kansas is heavily reliant up on coal-fired generation to provide the baseload power and ancillary services, such as reac tive power, voltage control, and ramping capability are necessary to reliably and economical ly provide electricity. Commenters stated that should the owner/operator of a coal-fired power pla nt choose to comply with the proposed rule by simply retiring a unit or units, system reliabil ity issues could be triggered in certain areas.

Commenters stated that they support adding a provision that will eliminate compliance penalties and allow for revisions to implementation plans in circumstances where reliability needs require continued operation of fossil units otherwise sched uled for retirement or reduced operation.

Commenters stated that there should be an exemption in the rule to use carbon generating sources if RE or nuclear sources go off line. Comme nters stated that EPA's schedule is

unrealistic and as a result creates serious risks t o the reliability of the electrical system.

Commenters stated that NERC supports policies that include a reliability assurance mechanism to manage emerging and impending risks to the BPS, and urges policy makers and the EPA to ensure that a flexible and effective reliability as surance mechanism is included in the rule's implementation.167

Response 11: EPA understands the concerns of these commenters bu t we feel that we have addressed them in ways that do not undermine achiev ement of the goals of the CPP. There are numerous features of the final rule, some of which were added to address concerns like these. But first we note that there are multiple features in the electricity system that ensure that electric system reliability will be maintained. Electric sys tem reliability is continually being considered and planned for. There are also numerous remedies that are routinely employed when there is a specific local or regional reliability issue. These include transmission system upgrades, installation of new generating capacity, calling on demand response, and other demand-side

actions.

Many aspects of the final rule’s design are intende d to support system reliability, especially the long compliance period and the basic design that al lows states flexibility to include a large variety of approaches and measures to achieve the e nvironmental goals in a way that is tailored to each state’s energy resources and policies. Inde ed, as with numerous prior CAA regulations affecting the electric power sector, environmental requirements for this industry are accommodated within the existing extensive framewor k established by federal and state law to ensure that electricity production and delivery are balanced on an ongoing basis and planned sufficiently to ensure reliability and affordabilit y into the future. Changes that the EPA is making in this final rule respond directly to the comments and the suggestions that we received on these issues and provide further assurance that implement ation of the final rule will not create reliability concerns.

First, the final rule allows significant flexibilit y in how the applicable CO 2 emission performance

rates or the statewide CO 2 goals are met. Given the differing characteristics of the electric grid within each state and region, there are many paths to meeting the final rule’s requirements that can be taken while continuing to maintain a reliabl e electricity supply. States can develop plans

to meet the CO 2 emission performance rates or state CO 2 emission goals by choosing from a variety of state plan types and approaches that aff ord states and affected EGUs appropriate flexibility. EE and other non-BSER approaches can s trengthen a state’s ability to establish a plan

to meet the CO 2 emission performance rates or state CO 2 emission goals by providing a

considerable amount of headroom above the levels of the rates and goals. EE especially, because it reduces load, can provide assurance that reliabi lity can and will be maintained. Additionally, the final rule offers opportunities for trading amo ng affected EGUs within and between states, and other multi-state compliance approaches that wi ll further support electric system reliability.

Second, the final rule provides sufficient time to ensure system reliability. The final rule retains the 2030 date for the final period, which commenter s largely supported as reasonable and not a concern for reliability, and addresses one of the k ey issues that commenters pointed to as a reliability-related concern by both moving the star t of the interim period from 2020 to 2022 and adjusting the interim goals to provide a less drama tic initial reduction requirement and a more gradual glide path to the final 2030 goals. Both FE RC’s May 15, 2015 letter and the comment record made it clear that providing sufficient time for planning and implementation was essential to ensuring electric system reliability. The EPA ha s responded by provided additional time to allow for planning and implementation of the final rule requirements.

As a result of these changes, the states themselves will have a meaningful opportunity to determine the timing, cadence and sequence of actio ns needed for states and sources to meet168

final rule requirements while accommodating the ong oing activity needed to ensure system reliability. The final rule provides more than six years before reductions are required and an eight-year period from 2022 to 2029 to meet interim goals. Moreover, while the final rule requires each state to submit a plan by August 31, 2016, we recognize that some states may need more than one year to complete all of the actions n eeded for their final state plans, including consultation with reliability entities. Therefore, the EPA is allowing an optional two-phased submittal process for state plans. If the state nee ds additional time to submit a final plan, then the state may submit an initial plan by August 31, 2016 , that documents the reasons that the state

needs more time and includes commitments to concret e steps that will ensure that the state will submit a final plan by August 31, 2018.

Third, we are including in the final rule a require ment that each state demonstrate in its state plan submittal that it has considered reliability issues in developing its plan. This was suggested by a number of commenters, and we agree that it is a use ful element to state plan development.

Fourth, the final rule provides a mechanism for a s tate to seek a revision to its plan in order to address changes in circumstances that could have re liability impacts if not accommodated in the plan. The long compliance timeframe, with several i nterim steps, naturally provides opportunities for states, working with their utilit ies and reliability entities, to assess how implementation is proceeding, identify unforeseen c hanges that may warrant plan revisions, and work with the EPA to make necessary revisions.

Finally, in response to a variety of comments, we a re providing a reliability safety mechanism that provides a path for a state to come to the EPA during an immediate unforeseen, emergency situation that threatens reliability to inform the EPA that an affected EGU or EGUs may need to temporarily comply with modified emission standards to respond to this kind of reliability concern. See section VIII of the preamble for a dis cussion of the safety valve.

Commenters stated that NERC supports policies that include a reliability assurance mechanism to manage emerging and impending risks to the BPS, and urges policy makers and the EPA to ensure that a flexible and effective reliability as surance mechanism is included in the rule's implementation. Commenters stated that plan should have reliability assurances built into it similar to MATS. Commenters stated that EPA recogn ized that overly aggressive schedules for implementation could undermine the reliability of t he electric utility sector, and wisely provided for a reliability safety valve. Commenters stated t hat EPA should recognize that this rule also poses significant risks to reliability.

Comment 12: Commenters stated that a reliability safety valve is not needed for the CPP.

Commenters specifically referenced an analysis from Southwest Power Pool (SPP) [SPP Reliability Assessment of EPA 111(d) Clean Power Pl an Rule, SPP (Aug. 19, 2014), http://www.spp.org/publications/SPC%20Materials%200 81914.pdf.] wherein SPP stated that the rule "would shrink the region's 'reserve margin' (t he percent by which generating capacity exceeds expected demand) from 13.6 to 4.7 percent b y 2020, and to -4.0 percent in 2024." Commenters noted one issue with the analysis in tha t "it assumed that almost 15 percent of the169

region's power supply would retire without replacin g it with any new power sources or demandside management." Commenters stated that "Those con clusions are not, however, based in the reality of what CPP is expected to accomplish or ho w resource planning unfolds: the CPP objectives will be reached only if states invest in renewable resources, demand-side management strategies, and other new, low-carbon emitting gene ration." According to commenters, "Nothing in the rule requires that any of the coal-burning c apacity in SPP retire, much less prior to other generation coming online."

Commenters further stated that "SPP is well-positio ned to transition under the Clean Power Plan, given that it achieved a reserve margin of 47 perce nt in 2013 and has not had a margin below 32 percent in the last six years at least (both number s are far above its 13.6 percent requirement),

and that it is located in the heart of our nation's strongest potential regions for wind power production." Assuming the SPP and its member states plan for the transition, commenters noted that "it should have no difficulties ensuring resou rce adequacy."

Commenters also referenced an analysis from Electri c Reliability Council of Texas (ERCOT) [ERCOT Analysis of the Impacts of the Clean Power P lan, ERCOT (Nov. 17, 2014), http://www.ercot.com/content/news/presentations/201 4/ERCOTAnalysisImpactsCleanPowerPlan.pdf] wherein ERCOT "predicts retirement of between 5.7 and 7.8 GW of electricity generation capacity between now and 2029 under the CPP (compared to a baseline of 2.8 GW of retirements), and addition of 16.9 to 19.3 GW of new generation, about 90 percent from wind and solar alone (compared to baseline of 14.5 GW of new generation, about twothirds from wind and solar)." Commenters noted that "ERCOT's model does predict a capacity constraint sometime between 2018 and 2022, when coa l plants are trying to retire and renewables have not yet been fully built out" but " ERCOT's concerns are unfounded because the CPP provides enough flexibility that, if necessary, coal plants can continue operating early in the compliance period." Commenters also noted that ERCO T "can and should supplement alreadyplanned major transmission line improvements with a dditional projects serving load centers in the state, and as a last-resort (as ERCOT acknowled ges), it can keep coal plants operating using reliability-must-run contracts to cover identified shortfalls, or shift generation from existing coal to gas units."

Commenters also noted the following flaws in the ER COT modeling assumptions:

• "ERCOT assumed, without any apparent basis for this assumption, that Texas would enact a flat price on greenhouse gas emission s to meet its obligations under

the CPP."

• "the third scenario applied CPP limits in the most cost-effective way possible, supposedly to determine the ideal compliance option , but that study requires ERCOT to meet the applicable emission rate goal eve ry year, thereby failing to take advantage of the 2020-2029 compliance averagin g, which is one of the CPP's key flexibility mechanisms."

• "ERCOT also dismisses that scenario as unrealistic because it may not be achievable 'within the current electricity market d esign in ERCOT'" but "there is no requirement that the current market design remai n in place: ERCOT can170 clearly redesign its market to accommodate faster m arket changes, and in fact already is looking into redesigning its ancillary s ervices market to accommodate distributed generation (and demand response resourc es)."

• "ERCOT also assumes efficiency gains of just over h alf EPA's projections by relying on historical trends instead of considering future potential; and it assumes the current Production Tax Credit (which has incent ivized huge wind build-out in the state) will expire with no replacement, even th ough that would be an easy way to continue the current rate of wind generation con struction."

• "And finally, ERCOT's model does not include any "n egawatts" for demand response services, which could be a huge contributo r to the reliability of Texas's power grid."

Commenters referenced the PJM reliability analysis [PJM Reliability Review] and noted that "PJM apparently believes that six states (Ohio, Pen nsylvania, New Jersey, Kentucky, Virginia, and Maryland) will meet their 2020 interim targets simply by following through on planned coal retirements in their states." Although commenters d isagreed with this analysis because "we believe PJM used a higher mass cap on emissions tha n will be allowed under the CPP," commenters stated that the "analysis nonetheless de monstrates, at least in the PJM region, that the CPP will not impose any insurmountable burden o n those states' power grids, and belies PJM's contention in public forums that policy prote ctions are needed to ensure grid reliability."

Commenters stated that a safety valve is not necess ary in this rule and noted the following:

• it would seriously impact greenhouse gas emissions by allowing old, dirty plants to continue operating well past when they would oth erwise retire.

• it would reduce motivation for regional and state g rid operators to actively prepare for changes in customer demand, and related power needs and supplies of

the future"

• significant advanced planning, and coordination wit h states in designing their plans, will be required to ensure power grids are e quipped to manage our changing resource structures. "A safety valve provi sion would undermine those conversations by removing a base level of accountab ility, and would therefore leave us less prepared in the long term."

• "the provision proposed by IRC would impose a huge administrative cost on EPA, states, and grid operators, all of which would be r equired to go through a reliability determination and approval process at s everal stages throughout the plan approval process."

• Each additional administrative decision could be su bject to challenge by industry or environmental groups, which could make the CPP i mplementation process even more difficult than the plan approval process already can be.171 • While supportive of state coordination with the ISO /RTO and neighboring states,
commenters did not believe that the "formalized vet o process proposed by the

IRC will be constructive."

• "The ISO/RTOs already have mechanisms such as relia bility-must-run requirements as a final measure to ensure system re liability."

• "none of the justifications leading EPA to limit it s enforcement of MATS obligations come into play here

Commenters stated that State plans should require t hat emissions from plants needed for grid reliability purposes are offset with emissions cred its elsewhere. The commenters supported RTO and other planning regions' overriding interest and mandate to preserve and enhance grid reliability; however, commenters stated that the re liability safety valve as proposed by the ISO/RTO council is unnecessary. The commenters stat ed that the CPP essentially has three "reliability safety valves" already embedded in the structure of the rule: i) flexibility to take advantage of a broad array of system resources, inc luding both supply-side and demand-side resources; ii) an extended compliance period spanni ng at least 10 years and multi-year averaging; and iii) compliance flexibility, includi ng emissions trading and averaging to avoid mandating reductions at any individual plant, or at any specific period of time.

Response 12: EPA agrees that it is highly unlikely, given the m any features of the electricity industry that safeguard reliability and the many flexible op tions in the final rule, that there could be a conflict between maintaining reliability and o perations under the requirements of a state plan. But among the flexibilities given the states is the option to design a plan that places very rigid and inflexible requirements on specific affec ted EGUs. If a plan has such requirements it is possible that a severe, unanticipated event could p ut such a requirement on a specific affected

EGU in conflict with what needs to be done to maint ain reliability. In that case, if certain conditions are met, the affected EGU can operate fo r 90 days only, above the level called for in the state plan. The state however must meet its goa l. If the problem reoccurs the state must revise its plan to avoid such conflicts.

Comment 13: Multiple commenters stated that a complete and pro per grid reliability analysis

was not conducted.

Commenters noted "The current electric power grid h as evolved incrementally over the last 40- plus years to provide a reliable supply of power in support of the current mix of generation assets." Commenters stated, "The changes being prop osed by the EPA in the proposed timeframe will dramatically change use of the current system and will need to be thoroughly evaluated, modified as necessary, and implemented in a timely and responsible manner to avoid imposition of unnecessarily high costs and reliability risks t o customers."

Commenters stated, "The extensive work by states to implement the carbon rule requires that each generator and the entire system be evaluated" making this "an ideal opportunity to assess potential climate vulnerabilities and needed resili ence measures to protect the electric system."172

Commenters stated that "EPA has not demonstrated th at reliability constraints permit redispatch.

Commenters asked that EPA consider "whether state's NGCC fleets can reliably operate at a 70% capacity factor. Commenters noted that "A 70% c apacity factor would change the purpose and design of the nation's NGCC fleet at large, and EPA must consider whether fleets by state or NERC reliability zones can operate reliably at such a capacity factor."

Commenters asked that "a detailed unit commitment d ispatch analysis should be conducted to ensure reliable operation of the system with increa sed renewable generation."

Commenters stated that "EPA's purported grid reliab ility analysis is made obsolete by the D.C. Circuit's decision in Electric Power Supply Ass'n v . FERC, 753 F. 3d 216 (D.C. Cir. 2014), in which the Court struck down FERC's authority to imp lement mandatory demand-response measures" which have become a "major part of the wa y grid operators ensure that reserve margins are met." Commenters further noted that "th e court's decision will have a very significant effect on the ability of grid regulator s to maintain adequate reserves."

Commenters stated "the EPA has not given sufficient consideration to the impacts its proposal will have on organized electricity markets and the challenges that the proposal presents to system reliability and the economy."

Response 13: The final rule requires that every state consider r eliability as a part of its development of a state plan. We have suggested tha t a very good way of doing that is to consult with the grid operator. In addition please see the Technical Support Document on resource adequacy in the docket for this rulemaking. Regard ing concerns about whether the NGCC fleets can reliably operate at a 70% capacity factor the p reamble to the final rule has a full description of the basis for Building Block 2 which is a gradua l shifting of generation from existing fossil steam to existing NGCC within each region up to a m aximum NGCC utilization of 75% on a net

summer basis. In that section EPA discusses the te chnical basis for using this as a part of BSER, taking into account important factors such as relia bility of the electric system, natural gas infrastructure, natural gas production potential, t ransmission planning and cost considerations. Please see Chapter V.D. of the preamble. In additio n there is a Technical Support Document, entitled GHG Mitigation Measures Technical Support. This Technical Support Document also discusses renewable energy feasibility. The Preamb le to the rule addresses considerations for feasibility of the 2030 level of RE deployment, and the rate of progress during the interim period in getting to that level, in section V.E on buildin g block three of the preamble to the final rule. RE feasibility is addressed in more detail in the G HG Abatement Measures technical support document. EPA found that these levels were supporte d by comments received, DOE analysis, and external studies evaluating the costs of and po tential for higher levels of RE penetration. Finally, commenters are most likely aware that the US Supreme Court has agreed

to review the D.C. Circuit's decision in Electric Power Supply Ass'n v. FERC, 753 F. 3d 216 (D.C. Cir. 2014),173

Comment 14: Multiple commenters stated that the reliability an alysis conducted by EPA and the use of the Integrated Planning Model (IPM) to deter mine reliability is not appropriate and the analysis is flawed.

Commenters stated that the analysis is flawed "beca use it does not consider potential subregional supply deficits below the 64-subregion lev el provided by the IPM model, and assumes large-scale reductions in electric demand resulting from the rule's energy efficiency building block. These reductions may not occur either becaus e states do not pursue them, or efficiency goals are not met due to economic growth or other f actors."

Commenters noted that the NERC study stated that "E PA's modeling of its proposed rule assumptions is not a detailed system evaluation. Ac cording to commenters, the IPM "lacks the granularity and realism capable of identifying the real risk of the proposed ESPS at the operational level." Commenters stated, "The necess ary details to assess reliability are simply missing from EPA's model." Commenters noted the fo llowing areas where the IPM analysis was

insufficient:

• IPM dispatches on a seasonal basis using load durat ion curves and regional load shapes, which is a "gross generalization of actual real-time dispatch practices."

• IPM does not effectively model individual power pla nts,

• does not model the random intermittency of wind and solar,

• relies on an "unrealistic, simplified industry stru cture (i.e., 64 model regions in lower 48 States as proxies for the actual utilities and transmission operators),"

• relies on an even more "simplified 'model" of natur al gas supply and demand."

Commenters noted that "The EPA's parsed IPM results for 2025 indicate that many NGCC units do not retire, but are projected to have zero gener ation." Commenters asked how zero generation is "different from retirement?" and why are these u nits are "not modeled as retiring?"

Commenters stated that "The models used by the RTOs , ISOs, and NERC are more appropriate for assessing electric system reliability than is t he EPA's Integrated Planning Model (IPM), and these organizations also have planning expertise th at could promote a more robust analysis."

Commenters stated that the Resource Adequacy and Re liability Analysis TSD contains "broad, unsubstantiated generalizations about the existing transmission system to imply that the proposal will have little impact on system reliability." Acc ording to commenters, "Experts and key stakeholders disagree with this approach, its concl usion, and with statements from EPA Administrator Gina McCarthy such as 'nothing we do can threaten reliability.'"

Commenters stated, "EPA's use of the Integrated Pla nning Model does not assess the impact of the proposed rule on system reliability because the model is not capable of incorporating operating reserve requirements, actual transmission system constraints, or variable resources with sufficient granularity."174

Commenters also noted that the IPM does not "adequa tely model transmission constraints or system reliability that may be associated with reti ring and adding generation resources." According to commenters, IPM recognizes known trans mission capacity constraints by "limit[ing] the ability to transfer power between r egions to certain values for each transfer path" but "because the actual transmission system is not modeled, simulation results from the IPM cannot predict the performance of the transmission system itself."

Commenters also noted that the IPM is "insufficient to address reliability issues associated with

increased wind and other variable resources." Accor ding to commenters, "Generation may only be added if it does not compromise the stability or reliability of the transmission system" which requires "detailed system impact and facilities stu dies." Commenters noted that "the hourly outputs of variable resources are typically modeled in production cost programs using a variety

of simulation methods" and "the outcomes of these s imulations are used to assess the range and probabilities of possible impacts." According to co mmenters, "variable resources are represented in IPM in one or more simulations where their outpu t is modeled as an average expected value" and "does not accurately simulate transfers across constrained paths because constraints are expected to occur at the resources' respective maxi mum outputs."

Commenters noted that EPA's IPM analysis results in the Birchwood plant shutting down or idling for multiple years under three of the four s cenarios. Commenters stated that two of the options have the Birchwood plant idling for multipl e years and then being reactivated for multiple years. Commenters noted the following conc erns with this result:

• "Birchwood would continue to have substantial fixed and variable costs, including its loan payments, ongoing maintenance, and its sta ffing needs. It is quite unlikely that the Birchwood plant could remain viable for lo ng if it is not earning revenues

sufficient to meet its fixed and variable O&M costs ."

• "Moreover, idling a facility, even temporarily, ope ns up a host of issues regarding the plant's permitting status, including whether th e air permit remains in full force

and effect."

• "Finally, PJM rules require a plant that has been m othballed for three years to surrender its interconnection rights. To re-connect , the plant is considered as new generation and would likely incur significant costs to upgrade the PJM grid if it wanted to begin generating power after that time."

• "It is quite likely that if the Birchwood plant is idled for the periods indicated in the IPM modeling, it will not return to service."

Commenters stated that there were "flawed assumptio ns used by the EPA when it evaluated the re-dispatch of coal-fired generation to NGCC." Acco rding to commenters, "The most likely outcome of the proposed policy is that the state's utilities will be left with the difficult decision of whether to jeopardize electric reliability in Arizo na, risk noncompliance with the proposed carbon reduction goals, or spend exorbitant amounts of money to offset flawed assumptions."175

Commenters stated, "EPA's assumptions about reduced coal usage in Montana are infeasible

because 'the reduction that EPA assumes relative to Big Stone[, for example,] would result in the plant operating at 23 percent of its capacity" whil e "its minimum run level is 40 percent.'"

Commenters stated that the IPM analysis consists of "inconsistent assumptions concerning the loss of investments, the number and timing of unit retirements, and the number and timing of

new construction."

Commenters noted that several studies on the impact of renewables on power system operating requirements have been conducted during the past de cade. According to commenters, "These studies show that requiring an increased operating reserve is one of the major operating impacts due to higher-level penetration of wind generation. " Commenters stated that EPA has not "analyzed these studies or conducted any additional study to support the feasibility of the substantial increase of wind generation." Commenter s asked that a "detailed model mimicking a system's actual scheduling, dispatch, and regulatio n processes and timelines is needed to study the impact of renewables on operating reserve requi rements." Commenters noted that "Minuteto-minute variations and statistical interactions o f the system parameters involved in these processes need to be depicted with sufficient detai ls to provide a robust and accurate assessment of the additional operating reserve requirements ca used by higher penetration of renewable resources." Commenters stated, "In addition, a deta iled model that more accurately represents the time lags in the dispatch system and in generator r esponse to dispatch commands is needed to capture the variation of increased operating reserv e requirements with the season, month, and

hour."

Commenters noted "To avoid system overloads and vio lations of mandatory reliability standards required and approved under federal law, system ope rators must continually monitor thermal, reactive, and stability limits on the transmission system." Commenters added that "System planners must also consider such limits when evalua ting, through the use of power flow models,

where and when new transmission facilities are need ed." Commenters noted that the IPM analysis ignores such constraints.

Commenters stated that the IPM analysis "ignores re al-world barriers to resource development" and that "system dispatch is subject to localized c onstraints that impede the flow of electricity across broad regions, including intra-regional tran smission constraints, particularly around metropolitan areas." According to commenters, "Thes e constraints create transmission-congested 'load pockets' with limited access to remote resour ces" meaning that "certain local, primarily coal, units cannot be retired because they are need ed to maintain voltage levels and to assure 'black start' capability (to bring generation on li ne quickly in the event of a system emergency)."

Commenters stated that "EPA's modeling replaces the 2,851 MW of fossil-fuel generation it projects will retire in the Dominion transmission z one by 2020 with only 351 MW of intermittent

onshore wind." Commenters stated "It is not clear h ow EPA concludes (if indeed it has) that reliability could be maintained in the Dominion tra nsmission zone."

Commenters stated, "IPM fails because the model bui lds as many new natural gas units as are necessary to meet reserve requirements" but "the co nstruction of new natural gas units may be176

constrained by numerous factors, including the need to obtain sites and regulatory approvals and to bid into capacity markets where applicable."

Commenters noted, "EPA's use of a generation resour ce adequacy model to determine whether the transmission grid will operate reliably is arbi trary and capricious. Sierra Club v. Costle , 657 F.2d 298, 333 (D.C. Cir. 1981), rev 'd on other grounds , 463 U.S. 680 (1983) (A model may not be used for purposes that 'exceed the bounds of its usefulness.')." According to commenters, this is no small matter because 'local' grid reliability impacts can have cascading effects over a broad region."

Commenters noted modeling shows that there are seve ral units operating at low revenues and/or low capacity factors that would likely be retired, especially when other non-modeled factors are

taken into account.

According to commenters, "Based on a review of capa city factors and operating revenues for the remaining coal units, ERCOT anticipates the retirem ent of an additional 2,000 MW of coal capacity and the seasonal mothball of 1,000 MW of c oal capacity beyond what is specified in the model output."

Commenters noted "The EPA's assumptions regarding c osts and resource adequacy are deeply flawed, and the Proposed Rule generally ignores the extreme reliability challenges created by the rapid, unrealistic transition envisioned by the Pro posed

Commenters stated that EPA's reliability analyses w ere inadequate because they did not consider potential electricity supply deficits below the 64- subregion level of the IPM model, and erroneously assume large-scale reductions in electr ic demand resulting from the rule's energy efficiency building block. The commenters also stat ed that EPA's assumption that, within each model region, adequate transmission capacity exists in in contrast to the latest NERC Long Term Reliability Assessment which projects that many ele ctric supply regions will fail to meet reference reserve margin levels in 2023.

Commenters stated that the CPP is not based on any detailed reliability analysis and would force the electric system to evolve without considering a ctivities such as planning and analysis that must precede such changes. The commenters stated th at the transmission grid is not prepared to accommodate the sweeping changes in the generation portfolio that would result from the coal

retirements and addition of substantial new renewab le generation associated with the CPP.

Commenters stated that EPA has provided no analysis to validate the claim that local grid reliability issues can be managed using the flexibl e resource option and timeframes in the rule, and that developing the transmission necessary to a ddress reliability in time to achieve building blocks 1 and 2 reductions by 2020 is not achievable

.

Commenters stated that EPA's goals do not consider reliability issues of the interconnected power system or the interaction between building bl ocks, and thus the costs and time required to meet the goals have not been accurately estimated.177

Commenters stated that EPA failed to conduct an ade quate reliability analysis to determine the extent of potential improvements needed in order to maintain reliability with the implementation of the proposed rule. The commenters cited EPA-HQ-O AR-2013-0602-24030 A3; Attachment ID 2501, pg 76-98, which "indicates up to $2 billio n in potential improvements may be necessary on the AEP transmission system alone as a result of the proposed rule". The commenters stated that EPA must thoroughly evaluate and weigh costs a ssociated with transmission upgrades in the RIA for the proposed rule.

Commenters stated that EPA has failed to evaluate t he impact that Building Block 2 will have on grid reliability.

Similarly, commenters stated that a more robust ana lysis of the impacts the CPP will have on energy consumption and infrastructure must occur be fore this rule is adopted due to reliability and electricity price concerns.

Commenters stated that EPA has proposed this rule w ithout due regard to its effect on reliable operation of the electric grid and EPA's reliabilit y analysis is wholly inadequate. The

commenters further stated that EPA has failed to su bstantively engage FERC and NERC, which was not engaged to study, model and simulate the ef fects of the proposal. The commenters also noted that RTOs have raised questions and that unti l such time as NERC has validated the reliability of the proposed rule, it must be delaye d pending such validation by NERC.

Commenters stated that EPA needs to balance concern for the environment with reliability and cost. The proposed rule contains virtually no discu ssion of its impact on electric system reliability and cost to consumers. The commenters added that the proposed rule does not take into account increased costs to consumers, as utili ties pass on potential higher operating costs due to increased reliance on natural gas and the ne ed to invest in new, potentially higher cost technology to comply with the rule, nor does it tak e into account the potential cost to society that may result from reduced reliability. The commenter s further noted that the environmental

benefits of the rule could well be counterbalanced by reduced reliability and substantial cost

increases to residential consumers and businesses.

Commenters stated that concerns about grid reliabil ity are incomplete, stating the NERC report fails to consider several factors such including ad ditional renewable generation.

Commenters stated reliability and cost modeling ana lysis does not adequately address the reliability implications of the proposed rule which predicts that Arizona would take a significantly different approach to meet the CO2 go als than EPA assumed in setting those goals. The commenters said both approaches are unrealistic and do not accurately reflect the path that Arizona would likely follow to meet EPA's stringent CO2 goals. The commenters said EPA's Reliability and Cost Modeling Analysis is premised on an inappropriate reliance on out-of-state imports, erroneous assumptions about power plant ow nership, and overly aggressive energy efficiency assumptions, and both the target setting and compliance analyses are flawed and fail to properly reflect how the rule will affect reliab ility of energy availability in Arizona.

Commenters stated an assessment performed by PACE G lobal concluded EPA's interim goals would generate the following reliability concerns i n Arizona:178 • All non-tribal coal in Arizona would need to be ret ired by 2020, implying a stranded investment of more than $3 billion.

• Coal retirements would result in the need for at le ast 2.4 GW of incremental natural gas capacity within a 3-year period at a co st of around $2 billion to maintain reserve margins.

• Additional electric transmission infrastructure wou ld be required to ensure electric reliability and deliverability since most coal generation is in the eastern part of Arizona and most of the existing natural ga s generation is in western

Arizona.

• Additional natural gas pipeline infrastructure woul d be required to support the two existing main natural gas pipelines serving Ari zona since one is already near capacity throughout the year and both are near capa city during peak periods.

Commenters stated that changes to the mix of genera tion resources require a full assessment of the capabilities of the transmission grid from util ities, cooperatives, balancing authorities, and many others, and that EPA has failed to complete an adequate reliability analysis. The commenters noted that during implementation of the MATS rule, regional transmission authorities played a critical role in protecting th e grid from the unintended consequences of generator retirements by working with state authori ties and generators review compliance plans and identify the activities and construction projec ts necessary to maintain reliability in those new configurations. The commenters stated that the MATS assessments indicated the need for additional time, and states worked with generators to provide the needed flexibility in scheduling.

Commenters stated that assessments by individual RT Os, the NERC, and others indicate that new generation and transmission expansion will be n ecessary to maintain regional reliability standards and avoid widespread reliability concerns as an estimated 46 and 49 GW of baseload generation is retired. The commenters remarked that EPA has failed to meet their obligation to adequately evaluate reliability impacts that may ha ve significant impacts on public health and welfare, rendering the proposal arbitrary and capri cious.

Commenters added that a reliability analysis studie s to evaluate the impacts of both retiring generation and integration of new generation resour ces must be performed by RTOs and other regional entities because any modifications to elec tric generation or transmission in one state will inevitably impact surrounding states due to the int erconnectedness of the electric power system. The commenters requested that, under the guidance o f NERC, regional and interregional comprehensive assessments of reliability be mandate d because it will be impossible for states that have facilities in multiple RTOs to develop a compliance plan without interregional

coordination.

Commenters discussed the proposed rule's impacts on generation resources and stated that if implemented as proposed, the propose rule will caus e a realignment of the BPS transmission system to new gas fired generation and/or non-emitt ing energy resources. The commenters stated that the realignment must be studied for the reliab ility impact to the whole system. The179

commenters provided the loss of inertial mass on th e BPS system as one example impact, which provides stability during a fault or loss of a majo r generating unit. The commenters stated that the loss of inertial mass may cause a cascade in fa ults and blackouts.

Commenters stated concern that proposed rule will n ot preserve the reliability of the bulk power system unless significantly modified. The commenter s discussed the history and intent of the NERC reliability standards and supports NERC's stat ement that "industry stakeholders and regulators will need to develop an approach that ac commodates the time required for infrastructure deployments, market enhancements, an d reliability needs if the environmental objectives of the proposed rule are to be achieved" . The commenters encouraged EPA to incorporate a detailed and thorough BPS reliability analysis into the final rule to inform the reliable integration of new resources and decommiss ioning of old resources, assure that all flows of electricity are balanced and help system operato rs respond to unexpected loss of equipment to prevent a blackout, cascade or uncontrolled separat ion of equipment.

Commenters listed the many types of local and regio nal reliability assessments required to demonstrate reliability. Commenters provided recomm endations to: NERC in order to continue to assess the reliability implications of the propo sed CPP and provide independent evaluations to stakeholders and policy makers; to regional and mul ti-regional industry planning and analysis groups to perform reliability assessments and coord inate with states to ensure SIPs are aligned with what is technically achievable within the know n time constraints, and to policy makers and EPA to make timing adjustments and to grant extensi ons in order to address reliability concerns and infrastructure deployments. Commenters stated t hat the final rule must take into account the complexity of reliable BPS operation and that furth er study to plan for changing loads, to operate within system performance standards.

Commenters quoted the following four primary impact recommendations identified by NERC:

• "Fossil-Fired Retirements and Accelerated Declines in Reserve Margins" The Regions, ISO/RTOs, and states should perform furthe r analyses to examine potential resource adequacy concerns.

• Transmission Planning and Timing Constraints. EPA a nd states, along with industry, should consider the time required to inte grate potential transmission enhancements and additions necessary to address imp acts to reliability from the Proposed Rule. EPA and policy makers should recogni ze the complexity of the reliability challenges posed by the rule and ensure it provides sufficient time for the industry to take the steps needed to significan tly change the country's resource mix and operations without negatively affecting BPS reliability.

• Regional Reliability Assessment of the Proposed CPP . Other ISO/RTOs, states, and Regions should prepare for the potential impact s to grid reliability, taking into consideration the time required to plan and build t ransmission infrastructure.

• Reliability Assurance. EPA, FERC, DOE, and state ut ility regulators should employ the array of tools and their regulatory auth ority to develop a reliability assurance mechanism, such as a "reliability back-st op." These mechanisms180 include timing adjustments and granting extensions where there is a demonstrated reliability need.

The commenters stated that they support NERC's init ial reliability review and recommended that

EPA take into account the issues identified as well as NERC's anticipated 2015 Special Reliability Assessment prior to developing the fina l rule and implementation timelines.

Commenters discussed the importance of ancillary se rvices and stated that "even the seemingly simple decision to close a single fossil base load unit and replace it with a renewable generator requires consideration of, at least, the availabili ty of sufficient generation to meet demand, the need for ramping and back-up power, the availabilit y of natural gas supplies and the infrastructure to deliver it, the impact on the tra nsmission system and the need to maintain inertia, frequency and voltage control." The commen ters stated that a simultaneous feasibility study, which is both time and resource intensive, m ust be done to determine whether the electricity actually can be moved from the point of production to other points on the transmission system. Commenters stated that the results of the s tudy determine whether transmission upgrades or expansions are needed to accommodate the increas ed generation. Commenters stated managing these considerations requires a significan t amount of rigorous and time-intensive study

and coordination.

Commenters stated that that the proposed guidelines will require major changes to the way the interconnected power system is planned and operated in order to ensure reliability while achieving emission reductions, and that given the i nterconnected nature of the system, specific reliability impacts and necessary system changes ca nnot be assessed and coordinated until after all state compliance plans are finalized and approv ed, which will not be until 2017 at the earliest. The commenters stated that as a practical matter, t his schedule does not allow adequate time for the needed reliability assessments and system chang es to be accomplished before 2020. The commenters stated that changes to the interconnecte d power system require close management to ensure continued reliability. The commenters state d that retiring a coal based EGU reduces the ability to arrest and stabilize system frequency fo llowing a grid disturbance or the loss of a large generator, even if the capacity is replaced with re newables. The commenters stated that replacing the coal-based units with increased gener ation from an existing NGCC unit may be feasible, but this requires other assessments to de termine if the transmission system can accept this increased generation or if transmission or int erconnection modifications first will need to be made. The commenters further noted the importance o f ensuring that increased amounts of solar photovoltaic generation do not lead to decreased sy stem inertia and frequency response capabilities that are critical for maintaining reli ability, and that voltage support concerns also

must be addressed. The commenters also stated that in order for electric utilities, states and other regulators to fully realize the potential benefits of increased DSM and EE measures, there must be close coordination between entities responsible for DSM and EE to ensure appropriate capacity values are estimated and that assuring ade quate measurement and verification of the load response, will require advanced metering, load curtailment technologies and two-way

customer communications.

Commenters stated that the anticipated changes in t he resource mix and new dispatching protocols will require comprehensive reliability as sessments to identify changes in power flows and Essential Reliability Services including (1) lo ad and resource balance; (2) voltage support;181

and (3) frequency support. The commenters stated th at more transmission and new operating procedures may be needed to maintain reliability.

Commenters stated that as the EPA is scheduled to f inalize its rule by June 2015, NERC will develop a specific reliability assessment in early 2015 that will focus on evaluating generation and transmission adequacy and reliability impacts. The commenters stated that after the EPA rule is finalized, the states, either individually or in multi-state groups, are required to develop their SIPs by 2016 and 2018, respectively and NERC plans to provide a more specific and comprehensive reliability assessment before SIPs ar e submitted to the EPA. The commenters further stated that a Phase III approach is tentati vely planned for December 2016, which will examine (generation and transmission adequacy and r eliability in light of) finalized SIPs.

Commenters stated that NERC has issued an initial r eliability review of EPA's Proposed

Guidelines that has identified numerous serious con cerns. The commenters stated that NERC is planning to conduct three more special assessments between now and December 2016 to evaluate more comprehensively the impact of EPA's P roposed Guidelines and of the state plans that will be submitted if the Proposed Guidelines a re not withdrawn. The commenters recommended that EPA pause and reconsider the feasi bility of the Proposed Guidelines.

Commenters cited concerns of NERC and RTOs that if possible, the guidelines would take longer to implement than EPA envisions due to requi red approval time, and time for construction of generation and transmission capacity. The comme nters cited RTO concerns that the proposed schedule would result in decreased reliability and increased costs.

Commenters stated that curtailment of coal plants w ill result in localized voltage sag and other operational issues and will require reliability stu dies to assess voltage/reactive power control issues; how to replace frequency response, inertial support, and ramping capability provided by retiring units; and the necessity of potential tran smission upgrades.

Commenters stated EPA should perform state-specific analysis of transmission and grid capability to ensure that renewable goals set for s tates are not established at levels that pose threats to transmission capacity and grid reliabili ty. The commenters stated the ability to construct new wind energy facilities in Montana and neighboring Western states is limited by transmission system constraints and grid reliabilit y referencing studies performed by the WECC in which the path constraints of the transmission l ines from Montana to the Northwest were pushed to the limit, resulting in energy generated but not transmitted nearly half of the time. The commenters stated EPA's proposed regulation has fai led to identify the monetary costs and timeline delays associated with constructing or upg rading transmission lines and building sufficient generators to ensure the provision of an cillary services to renewable generators.

Commenters stated that the changes being proposed b y the EPA in the proposed timeframe will dramatically change use of the current system and w ill need to be thoroughly evaluated, modified as necessary, and implemented in a timely and responsible manner to avoid imposition of unnecessarily high costs and reliability risks t o customers. The commenters noted that other parties have documented that the costs to consumers due to the Clean Power Plan proposal will increase significantly. The commenters stated that they continue to advocate that the EPA work closely with the regions, the states and all intere sted parties to ensure that any final CO2 rule182

maintains bulk electric system reliability compatib le with a reliable, efficient market dispatch of available generation.

Similarly, commenters noted that the installation o f new capacity is likely to approach and potentially exceed 20% of the total installed base, which could jeopardize the ability of the changing resource mix to adequately fulfill peak de mands over the course of a year. The commenters stated that improved modeling will be re quired to determine the capability of the changed resource mix to reliably serve load. The co mmenters supported the "development of probabilistic planning tools to assist in scenario- based studies that determine likely on-peak availability of the variable energy resources as we ll as hydro generation, and natural gas deliverability."

Commenters stated that models such as IPM are inade quate for identifying future reliability issues, and do not address critical issues such as balancing supply with demand while maintaining voltage, frequency, and other criteria. The commenters stated that detailed transmission reliability studies are required to id entify these issues and determine the supply and transmission changes required to meet FERC requirem ents to maintain Bulk Electric System (BES) reliability, and until such studies are compl eted, the costs and schedules for measures required to maintain BES reliability cannot be accu rately determined.

Commenters stated that preliminary evaluations of t he CPP's proposed standards have limited value and do not realistically model contributions from energy efficiency, demand response, and renewable energy in achieving compliance and mainta ining grid reliability. The commenters stated that in some cases they force implementation of the EPA BSER building blocks rather than achieving the state goal at least cost. The c ommenters cited the Southwest Power Pool's reliability-only assessment which unrealistically a ssumed the closure of thousands of megawatts of coal plants by 2020 but considered none of the r eplacement power resources which would occur during CPP implementation. The commenters quo ted the report, "due to time constraints [SPP] did not evaluate the viability or reliability impacts of any of the building blocks used to establish [the CPP's] proposed goals." The comment ers cited errors (ignoring averaging flexibility, ignoring new generation and ignoring e fficiency improvements).

Commenters stated that IPM is not suited to analyzi ng reliability and is not a substitute for load power flow or stability studies because IPM assumes that there will be no impact to the transmission grid inside the regions, despite drama tically altering the generation resources within them, and does not consider NERC standards. The com menters discussed how IPM is structured

and added that it does not take into consideration the voltage/reactive power requirements of the transmission grid or the full range of possible con tingency events and only considers a small number of outage events. Commenters further stated that the changes contemplated as part of the proposed presents a multitude of uncertainties and complications that increase the risk of extensive disruptions to the grid and stated that t his is supported by NERC's preliminary review of the proposed rule. The commenters discussed mode ls maintained by RTOs and ISOs to assess reliability and factors such as load forecasts, exp ected service dates of new transmission facilities, reactive resource capabilities, and gen eration additions, retirements, or other dispatch scenarios. The commenters stated that the proposed rule will require NERC, transmission planners, and planning coordinators to perform shor t-term and long-term analyses to determine183

the reliability impact of the proposal because the proposed rule will have a tremendous effect on

one or more of these factors.

Commenters stated the application of the four build ing blocks contained within the proposed Best System of Emissions Reductions (BSER) has not been subjected to modeling that meaningfully studies its impact on system reliabili ty for which the changes pose a significant threat to grid reliability in the West. The comment ers stated that no reliability analysis of EPA's proposed BSER has been conducted for the Western In terconnection, which spans 14 states, two Canadian provinces, and Mexico's Baja California, a nd it is inaccurate for EPA to assert that its BSER is adequately demonstrated absent a transmissi on modeling study that concludes that EPA's building block approach would result in a sys tem as reliable as the one we have today.

The commenters stated the IPM model does not model the operations of the transmission grid and whether resources that exist in a particular re gion can be delivered to the consumer location of demand; rather, the model focuses on whether, in a particular region, there are an adequate amount of electric supply resources to meet consume r demand. The commenters referenced the Western Electricity Coordinating Council (WECC), th e Electric Reliability Organization (ERO) empowered by Section 215 of the Federal Power Act f or establishing reliability standards in the Western Interconnection, and a preliminary technica l analysis of the BSER's application to the

interconnection. The commenters also discussed Deer Creek and Big Stone, South Dakota as an example of how the proposed EPA rule does not compo rt with transmission realities.

Commenters stated EPA has not conducted an adequate analysis of the impact its proposal will have on grid reliability. The commenters said EPA c onducted what it inaccurately called a grid reliability analysis by running the Integrated Plan ning Model (IPM), but IPM grid simulations are not true reliability analyses because they prov ide a much simpler "resource adequacy" analysis, examining only whether the total amount o f electric capacity that will be forced to retire within broad regions will cause capacity levels to fall below regional reserve requirements. The commenters said IPM "assumes that adequate transmis sion capacity exists to deliver any resources located in, or transferred to, the region ." The commenters also referenced the WECC's Phase I Technical Summary Report that focused on fr equency response in the grid from increased renewable generation which concluded need s further monitoring and review.

Commenters also stated they are particularly concer ned about grid stability across northern Nevada which is a rural area with numerous mining o perations and high industrial load demands. The commenters said power generation in the area co nsisted of three coal-fired EGUs which would all be closed by 2020 under the proposed rule

.

Commenters stated that a modeling assessment showed Arizona complying with EPA's interim and final goals but the results shown in this analy sis are not achievable given the real world timeframes needed to construct new generation, tran smission and gas pipeline infrastructure.

Commenters stated the proposal, and the modeling us ed to support it, misrepresents the "interconnected" grid as a single open market; that its implementation would jeopardize the utility's ability to continue to meet state regulat ory expectations. The commenters stated that the proposal would effectively reduce the utility's dir ect control over its generation and transmission assets, in favor of shifting Arizona's generation r esource reliance to merchant-based resources.184

Commenters stated EPA's insistence that the rule is achievable appears to be based on modeling that it conducted using the IPM, however, IPM is no t equipped to perform detailed technical studies that include stability analysis. The commen ters stated that they believe the model is being misapplied, and should at the very least be accompa nied by comprehensive production cost and detailed power flow/stability analyses. The comment ers stated that as a result of the proposed rule, WECC has performed preliminary analyses in or der to provide a starting point for

additional discussions and more detailed assessment s. The commenters stated they agree with WECC's two key recommendations: 1) allow additional time following the filing of state compliance plans for the NERC, WECC, and other reli ability entities to concurrently evaluate the potential reliability impacts of those plans; a nd 2) creating a process within the proposed Clean Power Plan that considers timing adjustments or the granting of extensions if there is a demonstrable reliability need identified.

Commenters stated both parts of the TSIA (Transmiss ion System Impact Analysis) identified significant reliability issues.

Commenters stated the power flow analysis performed in Part 1 of the TSIA showed SPP network was so severely stressed by large reactive deficiencies that the software used in the analysis was unable to produce meaningful results, which is generally indicative of voltage collapse and blackout conditions. The commenters st ated further that the analysis indicates approximately 5,200 MVAR of reactive deficiencies i n the SPP footprint during system intact conditions resulted from modeled EPA generator reti rements.

Commenters stated Part 2 of the TSIA utilized the l atest optimal generation resource plans available to SPP as well as existing wind resources to mitigate generation shortfalls within SPP.

The commenters stated that an N-1 assessment reveal ed 38 overloaded elements in portions of six states and that cascading outages and voltage c ollapse would occur.

Commenters stated that EPA concludes that, based on the results of the IPM model, implementation of the proposed rule can be achieved without undermining resource adequacy or reliability. The commenters stated that the model effectively assumes that states will implement programs in response to this rule that do not impai r resource adequacy and reliability.

Commenters stated that because of the flexibility p rovided to states under the proposed regulation, there is no way to predict how individu al or groups of states will choose to comply with GHG targets. The commenters stated that inter action of multiple different state implementation plans within the same interconnectio n could exacerbate any impacts on system reliability or resource availability and is highlig hted by the Western Electricity Coordinating Council in a preliminary technical report evaluatin g the potential reliability impacts on the western electrical grid.

Commenters stated that a thorough assessment of the potential reliability risks of the CPP would help ensure its successful implementation by enabli ng EPA and the states to avoid reliability impacts and make better choices in the design of im plementation plans.

Commenters stated that the modeling analysis indica tes that significantly more analysis by the EPA must be done to assess the impacts on electric reliability and costs for upgraded electric and185

gas infrastructure. The commenters stated that the modeling does not assess feasible schedules for installing this capacity or necessary work to t he natural gas infrastructure nor does the modeling assess the electric reliability implicatio ns of retiring coal capacity. The commenters

also stated that the cost of additional infrastruct ure installation costs is excluded.

Commenters stated that EPA's assessment of impacts on reliability is flawed. Commenters stated that the loss of 30 GW capacity, as called f or by the rule, is not fully or accurately defined. Commenters stated that the impacts from the retirem ents on the reliability of the grid must be studied by transmission operators and reliability o rganizations to determine what specific impacts will be created by these changes in supply. Commenters stated that planning, permitting and construction of bulk electric system transmissi on lines can take 8 to 10 years. Commenters stated that with State plan approvals by the EPA (e ither individual or regional) not completed until as late as 2018 or 2019 with extensions, is w ill not be possible to place such facilities in

service before later in the next decade. Commenters stated that it is also not clear how or if IPM (EPA's predictive model) addresses RTO/ISO seams is sues, which affect the deliverability of power even when there is a surplus of generation. C ommenters stated that further, IPM's regions do not align with the planning regions used by the RTOs/ISOs. As EPA notes, IPM also does not address intra-regional transmissions constraints. C ommenters stated that these limits impact EPA's ability to address local reliability concerns

.

Commenters stated that EPA's use of a generation re source adequacy model to determine whether the transmission grid will operate reliably is not rationally based. Sierra Club v. Costle

, 657 F.2d 298, 333 (D.C. Cir. 1981), rev'd on other grounds, 463 U.S. 680 (1983) (A model may not be used for purposes that "exceed the bounds of its usefulness."). Commenters stated that this is no small matter because "local" grid reliability impacts can have cascading effects over a broad region. Commenters stated that in the absence of any reasoned explanation to justify EPA's confidence that the real-world grid can accommodate the near-term impacts of its Proposed Rule, the proposal lacks a rational justification.

Response 14: EPA disagrees with these comments. IPM is the best available modeling tool for assessing power sector/environmental impacts of pol icy initiatives. IPM is a multi-regional, dynamic, deterministic linear programming model of the U.S. electric power sector. It provides forecasts of least cost capacity expansion, electri city dispatch, and emission control strategies while meeting energy demand and environmental, tran smission, dispatch, and reliability constraints. The model is designed to reflect elect ricity markets as accurately as possible. The

EPA uses the best available information from utilit ies, industry experts, gas and coal market experts, financial institutions, and government sta tistics as the basis for the detailed power sector modeling in IPM. The model documentation provides additional information on the assumptions discussed here as well as all other model assumptio ns and inputs. Detailed information and documentation of EPA’s Base Case using IPM (v5.15), including all the underlying assumptions, data sources, and architecture parameters can be fo und on EPA’s website at: http://www.epa.gov/powersectormodeling/BaseCasev513 .html

Regarding the commenters’ view that the use of a ge neration resource adequacy model to determine whether the grid will operate reliably is arbitrary and capricious, EPA recognizes that local reliability conditions can be critical. EPA addresses resource adequacy and reliability considerations only insofar as these concerns can b e assessed at a general level at this time. The186

modeling examines those potential implications that can be studied at the stage of the rulemaking process, that is, the broad changes in transmission generation patterns and transmission flows that are projected in modeling the impacts of the r ule. Any realistic appraisal of reliability cannot be conducted until the CPP planning and impl ementation process provides the necessary information for reliability authorities to conduct the necessary analysis. EPA fully addresses this process in the rule, first by providing the flexibi lity to states to develop plans that will not raise reliability concerns, and also by ensuring the reli ability is addressed in state plans and by including a reliability safety valve mechanism in t he rule.

Comment 15: Commenters noted that relying on natural gas as a replacement for coal-fired generation has negative consequences.

Commenters noted the following issues:

• natural gas is a price-volatile fuel and low prices are unlikely to continue

• natural gas cannot be stored on site as easily as c oal

• natural gas is more difficult to transport than coa l

• natural gas availability is limited by natural gas transmission pipelines, which are near capacity

• competition for natural gas supplies due to increas ed demand

• costs to increase natural gas transmission infrastr ucture and storage capacity will result in higher costs for natural gas

Commenters stated that "maximum annual NGCC capacit y can be limited by natural gas curtailments, transmission constraints, and/or air permit requirements."

Commenters noted that switching from coal to NGCC i s only a short-term solution. According to commenters, "In order to achieve an 80 percent redu ction by 2050 compared to 2012 emission levels, even though NGCC technology is required in the near-term to meet the year 2030 targets, such technology cannot meet the 2050 GHG target, ma king NGCC investments obsolete longterm." Commenters also noted that utilities will be "forced to make costly long-term decisions that will produce only short- or medium term result s" which will result in "accelerated depreciation and other stranded costs that result f rom retiring generation resources well ahead of

their economic or useful lives."

Commenters noted that "It will take dramatic increa ses in energy technology innovation to meet long-term greenhouse gas reduction goals and the EP A rule as written does not adequately take into account how the rule drives private market inv estment." Commenters asked, "What are some complementary steps the EPA, DOE and FERC might tak e in a coordinated fashion to advance the Energy Technology Innovation System in the U.S. ?"187

Commenters noted the following concerns:

• "The desirability of and need for firm natural gas supply and pipeline capacity contracts by generators"

• "The interruption protocols for natural gas deliver y during cold weather events and the ability of pipelines to provide very short- term-supply flexibility (pack and draft)"

• "The ability of the gas transmission industry to ma ke timely infrastructure
investments."

According to commenters, "Coal fired plants have on average a thirty-day supply of energy onsite, whereas natural gas fired plants typically ha ve no fuel storage capability." Citing the Polar Vortex of 2014, commenters noted that "There was si mply not enough natural gas transportation capacity available to satisfy the home heating and power generation needs."

Commenters cited a NERC study that found that durin g the 2013-2014 Polar Vortex, "natural gas units represented over 55 percent of the total outa ges during the Polar Vortex, twice the rate of

coal units".

Commenters stated "Natural gas supplies can be temp orarily strained, particularly in regions where there is insufficient pipeline capacity to me et the spike in demand." Commenters also commented on increasing demand for natural gas: "Du ring the 2014 polar vortex, some regions of the country experienced demand for natural gas i n excess of supply, which would have led to interruptions of electricity service if other gener ating resources - particular those powered by

coal - were not there."

Commenters noted that "increased reliance on NGCCs for electric generation also renders the electric system and its customers more vulnerable t o natural gas shortages and delivery congestion."

Commenters noted that siting new NGCC generation at all existing coal generation locations could be difficult "because of the altitude impact on NGCC output and because gas transmission pipelines do not run near these locations."

Commenters stated "Re-dispatching coal generation t o NGCCs may increase operation of Combustion Turbines (CT) during peak loads" and "Ad ditional renewable energy, such as wind or solar generation, will require greater variabili ty in the amount of fossil generation and potentially increase peaking CT generation."

Commenters noted the following potential issues of converting to NGCC units:

• permit limits,

• electric transmission constraints, and188 • natural gas delivery constraints

Commenters stated that "an important distinction be tween the use of coal and natural gas is the ability of coal to be stored in inventory at power plants, which allows for quick response to changes in generation demand." According to comment ers, "there is no such buffer for natural gas plants so the effects of a supply disruption to plant operations, and thus dispatch availability,

are immediate."

Commenters stated that as reliance increases more o n natural gas for both baseload and on-peak capacity, it is important to examine potential risk s associated with reduced diversity and increased dependence on a single fuel type. The com menters stated that currently, natural-gasfired resources account for large portions of both the total and on-peak resource mix in several assessment areas when considering both existing cap acity and planned additions. The

commenters stated that with this shift toward more natural gas consumption in the power sector, the power industry will become increasingly vulnera ble to natural gas supply and transportation risks, and that extreme conditions, although rare, must be studied and integrated in planning. The commenters stated that overdependence on a single f uel type increases the risk of common-mode or area-wide conditions and disruptions, especially during extreme weather events. The commenters stated that the CPP proposal accelerates the shift toward more natural gas generation and could create additional pipeline needs. The com menters concluded that the increased demand can be addressed with sufficient lead time ( i.e., more than three years), which is needed to plan, collect contracts, permit, procure, and bu ild new pipelines.

Commenters added that the proposed guidelines actua lly could prohibit the building of new natural gas-based units because, in some states, th e emission rate goals are less than the emission rate allowed these units under CAA section 111(b).

Commenters stated that IPM does not consider that i n many cases, coal units that are retired will be replaced with additional generation added at ano ther location, or with new onsite NGCC generation. The commenters stated that where a mult i-unit coal plant is replaced by a NGCC plant, both the reliability of the onsite generatio n and the operational flexibility of the transmission system will be decreased, especially d uring transmission outage season. The commenters stated that remotely located generation cannot provide the necessary dynamic reactive power, resulting in the need for a transmi ssion solution. The commenters stated that there are areas that will require transmission upgr ades that are not addressed by EPA's resource adequacy and reliability assessment. The commenters recommended that EPA revise its analysis to appropriately consider these potential impacts a nd outcomes.

Commenters also stated that EPA fails to consider r eliability concerns associated with increased reliance on natural gas. Commenters noted special c oncern during unforeseen events that disrupt natural gas supply and delivery for the power secto r in high-congestion regions, increasing the risk for potential blackouts. The commenters stated that NERC has also expressed concern regarding reliability issues and constrained natura l gas delivery and storage during peak usages.

The commenters added that due the IPM's overestimat ion of potential gains in energy output through increased utilization of NGCC units and und erestimation of the number of NGCC units that will be needed to provide reactive support and load-following for variable energy resources, the commenters opposed proposals that displace coal , either by NGCC generation under189

Building Block 2 or by RE and EE generation under B locks 3 and 4. Commenters added that EPA's reference to flexibility is misleading due to threats to fuel diversity and the hard limits and compliance deadlines.

Commenters stated that EPA's assumption that natura l gas plants can increase annual utilization to 70% across the entire fleet presents huge techno logical challenges both at the plants and within the supply chain and has not been fully cons idered in EPA's analyses. The commenters noted that 70% utilization rates have been exceptio nally rare and therefore technical feasibility requires detailed modeling, contingency planning, a nd real-word testing.

Commenters stated concern that the CPP could advers ely impact the reliability of the electric power grid as early as 2017. The commenters stated the CPP promotes future increases in natural gas and renewable electric generation at th e expense of coal fired generation, which places additional financial pressure on coal fired generation units that will most likely lead to an additional wave of coal generation unit retirements beginning as early as 2020. The commenters

noted that this wave of retirements is in addition to the approximate 60 GW of coal fired generation that has already retired or is anticipat ed to retire within the next five years due to previously enacted environmental rules coupled with low natural gas prices and stated that EPA's own modeling of the impacts of the CPP predicts an additional 40 to 48 GW of fossil unit retirements by 2020. The commenters indicated it i s unlikely that, given long lead times for permitting and construction of replacement generati on and transmission, the industry will be prepared for such a dramatic change in the time per iod required by the CPP. The commenters provided an example that would drop reserve margins to below 5% and place customers in the perilous position of being dependent on other regio ns to meet their electric power needs.

Commenters expressed concern that the CCP may shrin k capacity margins, damage power quality, and leave the grid unprepared for extreme weather conditions. The commenters cited NERC's worry that the CPP is moving too far too fas t and is not paying sufficient attention to the question of electric reliability, costs and the ris k of power failures.

Commenters stated that the industry will primarily increase its dependence on natural gas fired generation and given the "just-in-time" nature of n atural gas fueling, the industry will become more vulnerable to natural gas supply and transport ation disruptions which add to the reliability risk especially during extreme weather events. The commenters further stated that unlike coal units, combustion turbine EGUs do not have onsite s torage of fuel. The commenters indicated that the time necessary to develop the required nat ural gas infrastructure (e.g. pipelines and storage facilities), is not offered in the 2020 sta rt date of the CPP thus creating even more risk to electric service reliability.

Commenters noted that the CPP is designed to promot e power generation from a subset of

renewable resources. The commenters stated that cur rent wind and solar PV technology provides intermittent generation that is non-dispatchable an d is subject to large variations in output, requiring increased generation ramping flex ibility by conventional units. The commenters cited there are reliability issues with large onsets of non-dispatchable resources having already created operational challenges in Ca lifornia, Hawaii, and Germany.190

Commenters also noted that generation variation cha llenges can be accommodated, but the changes to the grid require further study and plann ing, the time for which is not offered in the

CPP.

Commenters also requested a safety valve or "off-ra mp" to address unexpected scenarios and to address electric system reliability and the CPP sho uld include a predetermined procedure that would allow the provision of the program to be adju sted or suspended to address adverse impacts of the program on electric system reliability. The commenters further recommended that safety valve or "off-ramp" provision could also offer stat es and/or affected entities protection in terms of not being penalized for fewer emission reduction s resulting from the unpredictable performance of renewable generation units.

Commenters stated that the EPA proposes that almost a third of the existing coal-fired generation

will be retired between 2020 and 2022 a third of ex isting coal-fired generation will be gone. The commenters further stated that these plants current ly provide electricity that sustains our economy and the health and well-being of our citize ns and when these plants are shuttered, our electricity supply will be entirely dependent upon EPA's predictions about energy efficiency and the growth of costly and currently underdeveloped a lternative energies. The commenters stated that their fear is that without current generating facilities, all it will take is another polar vorte x or heat wave to expose vulnerabilities and subject bus inesses and citizens to energy shortages and price shocks.

Commenters stated that EPA projects that this rule will cause the loss of 41 to 49 gigawatts of coal-generating capacity by the year 2020. Commente rs stated EPA's estimates are far too low. These retirements are in addition to the 92 gi gawatts of coal capacity that the EPA has already projected will shut down between 2012 and 2 020, due in large part to the compliance with the 2012 mercury and air toxic rule. The comm enters stated that losing around 130 gigawatts of base-load coal capacity, nearly 40 per cent of the nation's coal generation fleet in

2012 raises serious concerns about the future relia bility of our electrical power supplies.

Commenters stated that in its reliability study, NE RC also identified reliability concerns with increased reliance on natural-gas-fired generation. The commenters stated further that historically, NGCC units have been used for load fo llowing and are better suited for this purpose. The commenters noted that extreme weather (as exper ienced in last winter's polar vortex) impacts fuel availability for NGCC units, and can r esult in forced outages. The commenters

stated that overreliance on NGCC sources will under mine the resiliency and fuel diversification built into the existing system and increased relian ce on NGCC units will naturally increase demand for natural gas. The commenters stated that additional infrastructure will have to be constructed to supply natural gas to new generation and the implementation timeline presented in the CPP does not adequately account for the time ne cessary to create required infrastructure.

Commenters stated the following concerns regarding reliability:

• The carbon emission rate that EPA proposes for Virg inia will require the retirement of a significant amount of fossil-fuel g eneration in a timeframe that compromises reliability.191 • EPA's modeling shows 2,851 megawatts of dispatchabl e fossil-fuel generation in Virginia being retired and replaced, before 2020, w ith 351 megawatts of nondispatchable onshore wind.

• Additional near-term generator retirements caused b y the Proposed Regulation will compound existing, unresolved reliability conc erns in the Commonwealth.

Commenters stated EPA's proposed rule would prevent replacement of coal-fired base load, creating a gap that natural gas cannot completely f ill, thereby leading to decreased reliability and security of the power grid. The commenters stated t hat the reliability concerns stem from the fact that natural gas, unlike coal, cannot reliably be s tored for immediate availability at EGUs during demand spikes. The commenters stated that decreased reliance on coal due to the retirement of coal-fired EGUs has led many to become concerned ov er grid reliability issues, such as FERC officials, AEP, SPP, and ERCOT.

Commenters stated disruptive changes such as retire ments, retrofits and/or changes in the operating characteristics of base load resources, m ust be considered carefully and communicated clearly in a transparent and open process. The com menters stated that findings in their assessment make it clear that new generation and tr ansmission expansion will be necessary to maintain reliability during summer peak conditions if EPA's projected generator retirements occur. The commenters stated more comprehensive pla nning efforts with stakeholders and new tools/metrics will be required and coordination and cooperation beyond regional planning efforts will be necessary, but may not be timely given sign ificant challenges with interregional planning and necessary system expansion. The commenters stat ed broader system assessments of the bulk power system, and natural gas pipeline and storage systems based on environmental constraints will be required. The commenters stated that implem entation of approved state plans will take time, as will potential mitigation measures to addr ess unacceptable system conditions to accommodate retirements, and/or retrofits to existi ng plants.

Commenters stated that in some instances, the most cost-effective means of complying with the EPA's rule may be to retire more coal-based generat ion than is already projected to retire due to the EPA's MATS regulation. The commenters stated t hat CO2 regulation could increase coal plant retirements and thereby place substantial new pressure on the grid to ensure reliability. The commenters stated that EPA is under an obligation t o ensure that the shift in the industry's generation mix as a result of the CPP does not unde rmine the reliability of the North American electric system.

Commenters stated that if the CPP is adopted and im plemented, the proposed requirements will necessitate a monumental shift in how our country g enerates electricity, including premature retirement of coal-based power plants along with an unprecedented expansion of natural gasbased and renewable electricity. The commenters st ated that the rule could have significant negative impacts on the reliability and affordabili ty of electricity because of the scope of the changes necessary to achieve the emission requireme nts set forth in the Proposed Rule, and the short time frame to achieve the majority of these c hanges.

Commenters stated that it is unclear whether the pr oposed rule has taken into account future potential load growth from population shifts or inc reases in the electrification of states'192

transportation sectors and could leave states unabl e to comply with their performance standards.

The commenters stated that electrification of the t ransportation sector is widely viewed as an important means of reducing GHG emissions from mobi le sources, and EPA should not create a disincentive for states to pursue these policies. T he commenters remarked that load growth and peak energy demand increases from future population shifts and increases in electrification of the transportation sector mean that zero- and low-emitt ing sources will likely be operating at capacity and states will be forced to rely on highe r-emitting sources to meet their increased generation needs.

Commenters stated very concerned about the reliabil ity of the service we provide to their customers. The commenters noted that proposal is si lent on providing for an increase in demand from an expanding population or the addition of an energy intensive industry or customer and that energy efficiency and renewable energy will no t be sufficient to attract any business to compete in these markets. The commenters stated th at they are very concerned about the reliance on natural gas by substantially increasing the operating capacity of the natural gas combined cycle plans. The commenters noted that the re is a lack of understanding in the proposal about how natural gas electric generating units are used to ensure the reliability of renewable energy, power quality and intermittent op eration which will exclude many units from being available for base load generation, and relia nce on more natural gas generation will only exacerbate the problem.

Commenters stated that they question implementation of Building Block 2 and limiting use of coal burning plants could result in not meeting nee ds in times of high demand.

Commenters stated that Building Block 2 of EPA's "B est System of Emissions Reduction" assumes transmission operators increase the dispatc h of NGCC plants to 70 percent of capacity. Commenters stated that the proposed rule applies to NGCC plants that "were in operation or had commenced construction as of January 8, 2014. Comme nters stated that "uncertainties exist regarding what, if any, regulatory agency would hav e the authority to enforce a minimum utilization limit, or to design a permitting condit ion for specific sources. Commenters stated that because transmission operators employ "security-con strained economic dispatch," environmental considerations do not directly factor into dispatch decisions. Commenters stated that instead, existing environmental regulations have had an indi rect impact on dispatch decisions by altering the variable cost of electricity produced at EGUs. Commenters stated that in this regulatory and policy context, EPA proposes two ways for states to implement Building Block 2. Commenters stated that states can superimpose a de-facto price on carbon through a variety of market-based mechanisms, which would increase the variable cost of dispatching higher-emitting EGUs. Commenters stated that states can "impose limits on utilization or CO2 emissions at higheremitting EGUs." Commenters stated that they believe placing direct limits on plants' operating conditions entails significant legal and practical difficulties for Indiana. Commenters stated further that directly limiting the number of hours a coal-fired plant can operate puts a hard ceiling on the amount of electricity the plant can provide to the grid. Commenters stated that in periods of unusually high demand, Indiana's coal-fi red plants may be necessary to preserve the state's bulk power reliability. Commenters stated t hat during the early 2014 cold spell the vast majority of coal-fired units that were slated for r etirement because of EPA's MATS were running at full capacity to meet demand. Commenters stated that to the extent that displacing coal-fired193

units with NGCC units causes the former to adopt a reduced operating profile, Building Block 2

could leave utilities without the tools needed to r espond to extreme conditions.

Commenters stated an assessment of pipeline expansi on was needed to meet the expected reliance on natural gas for electric generation. Th e commenters stated that though the EPA concluded, in its assessment of Building Block 2, t hat major gas infrastructure investment is not needed to support the increased gas consumption by the power sector, there are some very obvious and critical regions of the country that wi ll need major capital investments. The commenters gave the example the current pipeline ca pacity in the North East that is constrained as evidenced during the 2014 polar vortex where pow er prices skyrocketed, the region is in need of additional pipeline capacity.

Commenters said the current constraint in the North East does not address the scheduled, or anticipated, increase in gas demand from EGUs repla cing baseload coal unit retirements, and that this gas generation requires dedicated pipeline cap acity that lessens interdependency issues and decreases potential blackouts. The commenters said to get to a point where gas transmission capacity meets gas generation demand, there must be a thorough consideration of the time required for such projects to be constructed, and t hat an industry planning and analysis group

will be able to look at the multitude of variables incorporated into critical infrastructure construction, which often include: Planning, Permi tting, Financing, Purchase agreements, Construction, and Timetables.

Commenters stated that the over-reliance on natural gas also creates a less-diverse generation portfolio. Commenters stated that they believe tha t its portfolio should be diverse both in terms of geography and fuel (to the extent possible given its limited size). Commenters stated that the proposed rules rely heavily on natural gas for base load, reactive power, voltage support, inertia, and grid reliability. Commenters stated that this heavy reliance on one fuel for grid stability leaves the grid and customers vulnerable to potenti al disasters like the gas explosions mentioned here, or the extreme cold of 2014 which caused a la ck of natural gas supply for some generators as heating demands reached record levels, causing e mergency conditions in PJM and ISO-NE.

Commenters stated that there are concern related to reliability due to concentration on a single fuel and the time schedule to adjust infrastructure

.

Commenters stated that they disagree with U.S. EPA' s contention that the re-dispatch to natural gas is a "routine and well-established operating pr actice," especially when the proposed rule is predicated on offsetting generation from coal sourc es to natural gas on a one-to-one basis.

Commenters stated that examination of U.S. EPA's IP M results demonstrates this result (one-toone generation offset) is predicted only when signi ficant amounts of coal retirements occur (46- 49 GW) by 2020 nationwide. Commenters stated that t hey have strong concerns that shutdowns of this magnitude on a short time-table will have n egative impacts on grid reliability and energy costs even though U.S. EPA emphatically states it " will not jeopardize system reliability." Commenters stated that U.S. EPA is over-estimating the ability to convert without any technical basis and knowledge of individual state capabilitie s.

Response 15: The preamble to the final rule has a full descripti on of the basis for Building Block 2 which is a gradual shifting of generation from ex isting fossil steam to existing NGCC within194

each region up to a maximum NGCC utilization of 75% on a net summer basis. In that section EPA discusses the technical basis for using this as a part of BSER, taking into account important factors such as reliability of the electric system, natural gas infrastructure, natural gas production potential, transmission planning and cost considera tions. Please see Chapter V.D. of the preamble. In addition there is a Technical Support Document, entitled GHG Mitigation Measures Technical Support Document discusses technical and cost issues including a discussion of natural gas prices.

Regarding the extreme cold or "polar vortex" experi enced in early 2014, we note that all kinds of generation, not only gas-fueled units, experienced difficulty.(See :https://www.pjm.com/~/media/documents/reports/20140 509-analysis-of-operational-eventsand-market-impacts-during-the-jan-2014-cold-weather -events.ashx) We also note that in a similar extreme cold weather event the following ye ar, most operators had managed to overcome the problems that had been experienced only a year earlier. We further note that permit limits and electric transmission constraints are not uniqu e to NGCC units.

With regards to the comment that it is unclear as to whether future population growth and industry demand growth are considered in the develo pment of the CPP, the EPA does consider future electricity demand in the IPM modeling condu cted. EIA forecasts are incorporated into IPM. See Chapter 3 of the RIA and documentation fo r the IPM model available at: http://www.epa.gov/powersectormodeling

Comment 16: Commenters noted that the economics of the natural gas market are more volatile than the coal market, causing negative consequences on reliability and electricity costs.

Commenters offered the following comments on the ec onomics of natural gas and the underpinnings of the market. According to commenter s, "Because natural gas prices were at or near historical lows when the proposed rules were d rafted, any supply or demand issues will drive prices further upward. A multitude of factors can drive significant gas price increases in the

future:

• "Gas prices were recently low because of perceived supply [or oversupply] for the

long term. If any event occurs to change the percep tion of plentiful supply or the actual level of supply, gas prices will rise."

• "Gas supplies may tighten because at current price levels many gas producers are losing money or showing small profits. As a result they may cut back on production (or go bankrupt) to stop losing money an d to reduce supply- which will increase prices. Some experts believe that sus tainable profits cannot be made on natural gas development until prices rise to mor e than $7.00 per MMBtu."

• "Gas supplies may tighten because productivity decr eases due to greater difficulty in extracting natural gas easily from wells that ar e drying up and new wells are simply less productive."195 • "New, more stringent environmental regulations and in some cases outright bans on fracking, the most common technique for extracti ng natural gas from shale, will increase gas production costs and potentially reduce productivity- both of which will cause natural gas price increases."

• "Demand for natural gas will increase as the econom y continues to rise out of the Great Recession because natural gas is a feedstock for many products and is used by industrial facilities for heat and steam. Expert s predict as much as 2.6 trillion cubic feet per year additional demand for usage in industrial steam and industrial combined heat/power applications."

According to commenters, "It is dangerous public po licy for EPA to base regulatory decisions on the highly volatile economics of natural gas prices , particularly when the current prices are on the low side of the volatility curve." Commenters n oted that if the rule "drives more electricity producers to natural gas and away from the more sta ble and plentiful coal, the cost of electricity will rise." Furthermore, commenters noted that "it will be more difficult for utilities to switch back to coal because of the uncertain regulatory en vironment for coal-fired power plants and new coal-fired power plants cannot be built if the prop osed New Source Performance Standards for coal-fired plants is ever finalized."

Furthermore, commenters stated, "EPA's directive to push greater investment in natural gas generation also ignores the high degree of sensitiv ity investment in natural gas based generation has to the cost of gas." Commenters agreed with EPA that "the vast majority of the overall cost of building and operating an NGCC facility is the c ost of the natural gas" and "when natural gas costs are low, the economic driver for building NGC C facilities is very strong." On the other hand, commenters noted that "as gas prices increase , the drive to shift to cheaper baseload generation facilities is equally strong" and "the e conomics are exacerbated by the fact that the stranded capital costs in an NGCC facility are so l ow which in turn provides an incentive to switch away from those facilities." According to co mmenters, "When gas prices increase, power producers will have strong impetus to turn to older , less energy efficient coal facilities for lower cost baseload generation" and "there will be fewer new NGCC facilities built, which then creates a supply risk, particularly if too many existing co al facilities have been shuttered."

Commenters noted that "there is great risk that new natural gas units cannot replace existing

coal-fired units that will be shut down as a result of this rule." Commenters noted that "Investors won't invest in new pipeline capacity unless gas su ppliers will make long term commitments regarding gas shipments" and "suppliers are current ly reluctant to make commitments under current market scenarios because prices are low (in many cases below production costs) and there is a fear of significant natural gas price in creases created by increased demand and potentially tighter supply caused by power generato rs needing more natural gas."

Commenters stated, "Natural gas prices also tend to be more volatile than coal prices, putting remaining baseload electricity at risk once coal pl ants have closed. Although new supplies and infrastructure will help, price volatility will rem ain a challenge because of how many sectors of the economy use natural gas for various purposes. G overnment policies that create more demand for natural gas will likely only worsen the problem ."196

Commenters stated that in addition to the potential impact on electric reliability, the proposed regulations will also have potential impact on the reliability of natural gas service. Commenters stated that the NPRM recognizes that a mandatory in crease in utilization of gas-fired generation will necessitate construction and investment in pro duction and transportation capabilities. Commenters stated that if those chan ges cannot be implemented as quickly and efficiently as assumed, the reliability of natural gas service could be compromised by the required shift to gas-fired generation.

Response 16: The preamble to the final rule has a full descripti on of the basis for Building Block 2 which is a gradual shifting of generation from ex isting fossil steam to existing NGCC within each region up to a maximum NGCC utilization of 75% on a net summer basis. In that section EPA discusses the technical basis for using this as a part of BSER, taking into account important factors such as reliability of the electric system, natural gas infrastructure, natural gas production potential, transmission planning and cost considera tions. Please see Chapter V.D. of the preamble. In addition there is a Technical Support Document, entitled GHG Mitigation Measures Technical Support Document discusses technical and cost issues including a discussion of natural gas prices.

Comment 17: Commenters noted that the rule is lacking in fuel diversity, which will negatively impact reliability of the electric system. On the o ther hand, commenters noted that the proposed

rule itself will contribute to the increase of fuel diversity.

Commenters noted "Diversity of energy supply is not only critical in keeping energy costs reasonable, it is essential in ensuring steady and reliable streams of energy to power our factories

and heat our homes"

Commenters stated, "The proposed rule does not adeq uately consider fuel diversity and the long term impacts of relying too heavily on predominant fuels such as natural gas and intermittent generation from renewables."

Commenters stated, "A diverse energy supply is not only critical in keeping energy costs reasonable, but it is essential in ensuring steady and reliable streams of energy to power farms and heat our member's homes." According to commente rs "For many farmers, energy represents a major input cost that can ultimately determine vi ability and prosperity."

Commenters noted, "A prominent energy research grou p, IHS Energy, recently found that the current diversified portfolio of U.S. power supply lowers the cost of generating electricity by more than $93 billion per year versus a less divers ified supply with no meaningful amount of coal or nuclear generation." [IHS Energy, The Value of U.S. Power Supply Diversity 34 (July 2014), available at http://www.energyxxi.org/sites/default/files/USPowe rSupplyDiversityStudy.pdf.]

Commenters noted that "a reliable and economic powe r system should be composed of all categories of power generation - fossil fired steam , natural gas simple cycle, natural gas combined cycle, nuclear, hydro, solar, and wind."197

Commenters noted, "We believe the U.S. needs an ene rgy policy that emphasizes expanded production of all forms of energy and the developme nt of new forms of energy."

Commenters noted that "Adoption and implementation of the EPA's current plan introduces similar risks and consequences" as the Fuel Use Act from the late 1970s that "restricted construction of power plants using oil or natural g as and encouraged the use of coal, nuclear energy and other alternative fuels."

Commenters stated "Because Florida imports most of its fuel and is a peninsula, which limits opportunities to import power, fuel diversity is cr itical for electricity reliability in Florida." Commenters noted the importance of fuel diversity d uring cold weather and hurricanes when natural gas supply may not be available."

Commenters stated "Reliability requires a diversifi ed portfolio of resources, so that when one generation technology is temporarily unavailable, o thers can fill in." Commenters noted that "A diverse portfolio of generation technologies that i ncludes fossil fuel sources and renewables can complement one another to create a reliable supply of electricity for customers." Commenters concluded with "No single source of electricity gen eration is the answer."

Conversely, commenters noted that the rule can "spu r further investment in clean energy technologies [and] increase energy supply diversity ." Commenters also stated that "By employing increasingly competitive renewable techno logies, along with energy efficiency and other low-carbon energy technologies, states will b e able to cost-effectively meet the emission reduction targets of the Clean Power Plan, while di versifying their energy mix."

Commenters stated that possibly the most troubling finding by the NERC that the rule may create an over-reliance on gas, narrowing the diver se fuel mix required to minimize the risk from unforeseen events and pointed out that NERC notes t hat fuel diversification is an important component of an "all hazards" approach to system pl anning, and the dangers of placing too much reliance on natural gas were evident when the polar vortex weather system swept down across the United States in January 2014. The commenters a dded that an alarming number of power plants were unable to operate at peak levels becaus e they could not secure enough gas, straining reliability to the limit and forcing operators to t ake emergency measures. The commenters stated that many manufacturers were asked to curtail produ ction or shut down altogether during that period. The commenters concluded as power generatio n shifts more towards more natural gas consumption, the NERC warns that the industry will become increasingly vulnerable to natural gas supply and transportation risks.

Commenters said EPA's attempt to cut carbon emissio ns through re-dispatch to lower or zero emitting EGUs could come at the cost of reliability which depends on maintaining a portfolio of various resources across the region. The commenters stated EPA's goal-setting formula proposes to diminish fuel diversity by creating an energy po rtfolio consisting almost entirely of natural gas and renewable resources, which can be unpredictable and unreliable unless paired with other fossil fuel generation resources. The commenters re ferenced the System Operator for New England (ISO-NE) who identified the three biggest f actors that create risk to the reliable supply of power to New England as: natural gas dependency, power plant retirements, and renewable resource integration.198

Commenters also referenced the success of the ISO-N E's 2013/2014 Winter Reliability Program which provided compensation for EGU's to maintain o il inventory throughout the winter months and FERC's approval of the program for the 2014/201 5 winter. The commenters said the planned retirements of coal and nuclear plants in New Engla nd compound the region's reliability issues and increase the importance of fuel diversity.

Commenters also referenced the ISO-NE's finding tha t the factors contributing to natural gas fuel availability issues include inadequate infrastructu re, unreliable fuel arrangements, limited storage, and out of sync markets, and these factors have a substantial effect on power grid reliability and wholesale prices. The commenters st ated that under the EPA's model, New England as a whole is projected to have no remainin g oil or coal resources, which would be highly detrimental to the region's reliability as w ell as customer rates. The commenters stated many renewable sources are intermittent, cannot be dispatched on-demand, and require reliable back-up generation sources. With regard to resourc e inadequacies, the commenters gave the example of when ISO-NE called on wind farms to redu ce output during the heat wave of the 2013 summer due to insufficient transmission system s even though demand required additional resources to be dispatched. The commenters said the reduction was required due to insufficient transmission systems.

Commenters also recommended EPA consider the effect s of renewable resource goals on the reliability of the electric grid as many are interm ittent, cannot be dispatched on-demand, and require reliable back-up generation sources.

Commenters stated that if implemented in the curren t form, the CPP will impact the reliability and diversity of the nation's electricity supply, w hich could dramatically destabilize electricity prices and energy security.

Commenters stated that NERC expressed concern about the CPP-induced shift from coal to natural gas and renewables for power generation. Co mmenters stated that, as NERC explained, greater reliance on natural gas requires significan t construction of new natural gas pipelines, while more transmission capacity is needed to deliv er renewable generation to demand centers.

Commenters stated that the CPP will accelerate the ongoing shift toward greater use of naturalgas-fired generation and variable energy resources (VERs) (renewable generation). Commenters stated increased dependence on renewable energy gen eration will require additional transmission to access areas that have higher-grade wind and sol ar resources (generally located in remote areas). Commenters stated that increased natural ga s use will require pipeline expansion to maintain a reliable source of fuel, particularly du ring the peak winter heating season. Commenters stated that pipeline constraints and gro wing gas and electric interdependency challenges impede the electric industry's ability t o obtain needed natural gas services, especially during high-use horizons.

Response 17: With changes in relative costs of generation by fue l type the electricity sector is becoming more diverse, rather than less and the fin al rule will encourage that movement toward a more diverse electricity sector. With lower natur al gas prices, natural gas fueled generation has grown but as the cost of renewable electricity is f alling as well renewable are becoming a larger share of the generation mix. We refer the comment ers to Chapter 3 of the Regulatory Impact199

Analysis for a discussion of EPA’s projections rega rding fuel mix with an illustrative scenario under the final rule compared to the fuel mix in th e base case. Regarding the intermittent nature of renewable energy, this was considered by EPA in quantification of building block 3 potential. See preamble section V.E.

Comment 18: Multiple commenters noted that additional transmis sion infrastructure will be needed to accommodate new capacity and maintain rel iability. Multiple commenters noted that relying on the existing infrastructure implies that replacement generation will be built in the same place as the retiring units, which is not real istic.

Commenters stated that "additional transmission inf rastructure will be needed to maintain reliable operation of the grid." Commenters’ assess ment "revealed 38 overloaded elements that commenters would be required to mitigate with trans mission planning solutions." Commenters further noted that "portions of the system in the T exas panhandle, western Kansas, and northern Arkansas were so severely overloaded that cascading outages and voltage collapse would occur and would result in violations of NERC reliability standards."

Commenters stated that unless the proposed rule is modified significantly, the commenter's transmission system impact evaluation indicates "se rious, detrimental impacts on the reliable operation of the bulk electric system in the SPP re gion, introducing the very real possibility of rolling blackouts or cascading outages that will ha ve significant impacts on human health, public safety and economic activity within the region."

Commenters stated that "The remaining useful life o f expensive infrastructure modifications undertaken to comply with other requirements impose d by EPA can and should be recognized in this rulemaking" and "utility and customer investme nts required by the government to effect

these environmental remediations should not be conf iscated by operation of a subsequent requirement."

Commenters stated "The second issue is the ability of the transmission system to reliably transmit power to load." Commenters used a "well-es tablished path-rating process for the BES." According to commenters, "Those ratings may be affe cted due to the changing resource mix, resulting in a need for path re-rating and transmis sion utilization analysis to ensure available generation can actually be delivered to load center s."

Commenters noted the following concerns:

• "EPA inadequately considers electric transmission f acilities in establishing the timeline for the interim goals in the draft CCP"

• "the energy efficiency assumptions relied upon in t he CPP are unrealistic and not
sustainable"

• "utilization of a 70% capacity factor for combined cycle units is unsound"200 • "failure to consider the availability of the materi als and labor for constructing the electric transmission and generation infrastructure required to comply with the CPP proposed rule"

• "the short time frame to meet interim goals by 2020 risks the reliability of the bulk electric system"

Commenters noted that "Existing natural gas pipelin es are operating at near capacity today, and some regions have inadequate capacity."

Commenters explained that the BPS is a network of t ransmission lines that allow electricity to flow from generating sources to customer loads even if certain sections of the transmission network are out of service. According to commenters , the realignment of generation resources contemplated in the Proposed Rule may reverse the f low of electricity on a transmission

network. Commenters asked that these flows be studi ed so they can be anticipated and managed. Commenters specified a study conducted by the Bratt le Group for SRP that evaluates the challenges of new flows on the Western Interconnect with the loss of fossil-fired generation in

Arizona.

Commenters noted that increased dependence on renew able energy generation will require

"additional transmission to access areas that have higher-grade wind and solar resources (generally located in remote areas)." Commenters al so noted that "increased natural gas use will require pipeline expansion to maintain a reliable s ource of fuel, particularly during the peak winter heating season."

Commenters raised reliability concerns for six stat es, including parts of Texas. According to an evaluation by commenters, additional transmission i nfrastructure will be needed to maintain grid reliability. The commenters stated that the propose d rule "will impede reliable operation of the electric transmission grid in the SPP region, resul ting in violations of NERC's mandatory reliability standards and exposing the power grid t o significant interruption or loss of load."

Commenters noted that "the total re-dispatch of all coal-fired generation to NGCC will create an imbalance in the state's electrical transmission sy stem" which can cause overloading of transmission lines, overheating of the lines, and f ailure of the transmission system. Commenters noted that the loss of coal generation will lead to "reliance on congested transmission" lines.

Commenters stated, "A robust electric transmission grid is an essential component of a CO2 emissions reductions strategy." Commenters added th at "renewable resources are often located in remote areas, some distance from load centers" and "if sufficient levels of transmission capacity are not built, utilities will not be able to fully access this country's substantial renewable electricity potential."

Commenters added that the rule should "recognize th at a robust transmission grid is critical for reducing emissions and ensure that transmission inv estments are appropriately monetized by permitting states to receive credit for consuming r enewable electricity generated in another

state."201

Commenters noted that electric transmission provide s the following benefits:

• "available transmission capacity can reduce electri c rates by adding new generation supply options and also can enhance grid reliability"

• "Investments in grid modernization are likewise ess ential for improving operational and system efficiency. A modernized tra nsmission system will enable new products and services that reduce emissions bot h by more effectively using electricity and enhancing grid resiliency."

• "It will also serve as a platform to enable custome rs and markets to reduce CO2
emissions."

Commenters stated, "EPA fails to recognize the leng th of time necessary to incrementally identify and construct transmission, generation, an d natural gas infrastructure adequate for the transformation of the currently adequate and existi ng energy supply infrastructure into that required by this proposal."

Commenters stated "Recent estimates of the cost of expanding grid lines are in the range of $1,000,000 per mile, and such projects could take s everal years to complete."

Commenters stated "Without upgrades to the Alaska I ntertie, which is currently operating at or near capacity, the only generation resources that c ould replace the Healy coal generation are old, oil-fueled generation resources in North Pole and F airbanks." Commenters continued that "By contrast, Healy is co-located with its fuel source, Usibelli Coal Mine."

Commenters noted that it takes more than a decision to build more pipeline capacity because the pipeline must be certificated, and routed, which co uld raise eminent domain issues.

Commenters stated that "the increased development a nd utilization of renewable energy resources introduces a number of concerns regarding the need to upgrade and/or expand the existing grid." Commenters noted that the concerns become more significant when "coupled with the impact of all the building blocks on the grid i n terms of changes to the location and capabilities of generation versus load centers." Ac cording to commenters, "NERC has identified

a number of issues that must be addressed in order to accommodate the increased development

of renewable resources."

Commenters stated "replacing a significant amount of base load capaci ty and production without compromising reliability will require the r apid development of significant new infrastructure."

Commenters noted "The Electric Reliability Council of Texas has noted that the proposed rule would result in an increase in energy costs of up t o 20% by 2020." However, according to commenters, that estimate does not account for "cos ts associated with transmission upgrades, natural gas supply infrastructure upgrades, procure ment of additional ancillary services, energy efficiency investments, capital costs of new capaci ty, and other costs associated with the retirement or decreased operation of coal-fired cap acity."202

Commenters stated that "renewable energy requires e xpansion of the transmission grid."

Commenters noted that "The change in generation wil l almost certainly require development of new transmission to ensure operational reliability, but scheduling outages of existing facilities will be difficult if simultaneous upgrades across m any systems are needed such that the time lines for commissioning of new transmission facilit ies may be delayed."

Commenters stated the proposed CPP does not adequat ely provide for planned integration of generation and transmission resources to meet the s ubstantial CO2 reductions targets suggested by the EPA. The commenters stated that the retirem ent of base-load resources and the prospect of their replacement by the re-dispatch of intermed iate-duty generating facilities will require substantial natural gas pipeline and electric trans mission infrastructure additions and improvements crossing the entire country and that t he CPP proposes to undertake this reinvention on an unprecedented timeline.

Commenters stated that Building block 1 will requir e existing coal generation sources ("Coal Generation") to be modified and refurbished to achi eve the required heat rate improvements. Commenters stated that to meet these requirements, existing Coal Generation will need to be taken out of service and then brought back on line after the modifications are complete. Commenters stated that transmission capacity will b e critical to ensure continued grid reliability

as the Coal Generation is taken out of service.

Commenters stated that Transmission investment will likely be necessary to ensure the availability of the Replacement Generation as it ma y not be possible to locate Replacement

Generation at the sites where the Coal Generation w ill be retired. Commenters stated that natural gas generation may be sited near existing pipelines to avoid additional costs of gas transportation, and certain renewable generation so urces like wind and solar will necessarily be sited where the renewable resources are abundant, e ven though those locations may be distant from load, because those types of fuel sources are not transportable. Commenters stated that as generation resources change, the existing transmiss ion infrastructure may be insufficient to deliver the replacement generation reliably to cons umers.

Commenters stated that with its diverse portfolio o f energy assets they have maintained electric reliability in the area with minimal transmission s upport. Since the transmission system in this part of the state was not built to support the comm unity, service from their plants is necessary to preserve that electric reliability. Commenters stat ed that the closure of generation would make it very difficult to meet peak loads, and the Proposed Rule would compound the dilemma of inadequate power supply by indirectly restricting n ew generation from natural gas, and significant emphasis on greater wind and solar powe r, or some combination thereof. Commenters stated that regulations such as the Clea n Power Plan must be crafted so as to preserve, not undermine, their continued vitality o f Municipal Power Providers.

Commenters stated that RTOs are mandated by the Fed eral Energy Regulatory Commission (FERC) to ensure reliable supplies of power, adequa te transmission infrastructure, and a competitive wholesale electricity marketplace. Comm enters stated that commenters’ areas are serviced by the Southwest Power Pool (SPP) and Midc ontinent Independent System Operator (MISO). Commenters stated that SPP relayed the resu lts of its assessment of the impacts that the203

Clean Power Plan (CPP) will have on reliability in the SPP region. Commenters stated that SPP concluded that "unless the proposed [CPP] is modifi ed significantly, SPP's transmission system impact evaluation indicates serious, detrimental im pacts on the reliable operation of the bulk electric system in the SPP region, introducing the very real possibility of rolling blackouts or cascading outages that will have significant impact s on human health, public safety and economic activity within the region."

Commenters stated that SPP concluded: "if the assum ed EGU retirements were to occur absent requisite transmission and generation infrastructur e improvements, the power grid would suffer extreme reactive deficiencies ... that would expose it to widespread reliability risks resulting in significant loss of load and violations of [North A merican Electric Reliability Corporation (NERC)] reliability standards...even with generation capacity added to replace the assumed EGU retirements, additional transmission infrastruc ture will be needed to maintain reliable operation of the grid. This assessment revealed ove rloaded elements that SPP would be required to mitigate with transmission planning solutions."

Commenters stated that the IPM model that EPA relie s upon assumes the availability of transmission adequate to meet the changing pattern of electric supply and demand that the proposed rule would induce. Commenters stated that transmission lines can take 10 years or

more to site and construct. Commenters stated that there is simply insufficient time to ensure that electric transmission upgrades and new line constru ction, with their attendant permitting and regulatory approvals, can occur to meet an initial 2020 compliance schedule.

Commenters stated that the potential risks to relia bility posed by the Clean Power Plan are illustrated by the latest Long-Term Reliability Ass essment by the National Electric Reliability Corporation (NERC). NERC's December 2013 analysis, prepared prior to the development of this rule, cites concerns about increased reliance on natural gas, difficulties in integrating planned intermittent renewable energy sources withi n the existing bulk power system, and uncertainties associated with current and anticipat ed levels of energy efficiency and demandresponse resources. Commenters stated that NERC's o verall assessment identifies substantial portions of the eastern and western United States t hat are projected not to meet planning reserve margin requirements in 2023.

Commenters stated that as a vertically integrated municipal ut ility, providing not only generation, but also transmission and distribution to their customers, they own and operate 64
miles of 138kV and 66 miles of 69 kV transmission l ines for the 80 square miles of their service territory. Commenters stated that their original sy stem and substations were all built on the 69kV transmission line, from which the majority of their load is served. Commenters stated that as part of the engineering and economic assessment of optio ns to make APC and EE upgrades, they concluded the cost to retire these units was dispro portionate to any gain. Commenters stated that one notable concern is the impact early retirement will have on their transmission system. Commenters stated that analysis of removal of 31 an d 32 generation concludes reliability consequences of sufficient magnitude to require sig nificant transmission upgrades and to mitigate these reliability issues, they would be re quired to install multiple new connections between the 69 kV to 138 kV system. Commenters stat ed that two engineering alternatives are available but costly. Commenters stated that the le ast expensive option that is deemed necessary but adequate is estimated to cost approximately $8, 900,000 for upgrades that include new204

transformers and a new 138 kV line. Commenters stat ed that the other option, which provides greater benefits, is estimated to cost more ($12,21 6,800 in 2012 dollars). Commenters stated that additional facility study would be necessary to det ermine a more accurate cost estimate, which would include a short-circuit analysis and stabilit y analysis, and would also require a very coordinated outage schedule to complete any upgrade s and additionally, these investments would have to be proposed analyzed and approved by the MI SO, a time consuming and expensive

process.

Commenters stated that other logistical and financi al issues arise with the concept of closing

units 31 and 32. Commenters stated that in addition to the transmission voltage step down costs, the building that serves units 31 and 32 also house s unit 33. Commenters stated that during a unit 33 outage, heat that is currently provided by units 31 and 32 boilers to the building and would no longer be available. Commenters stated that while t his may seem inconsequential, the estimate to install building heat is $1.5 million. Commenters s tated that closing the plant is estimated to cost an additional $1M, to address closure issues such a s hydrogen and oil removal and other closure expenses. Commenters stated that sales associated w ith units 31 and 32 provide significant income to the City's general fund by contributing 3 0% of revenue of sales from these units.

Commenters stated that revenue from sales associate d with units 31 and 32 are also directed to fund their energy efficiency programs and therefore , early retirement of units 31 and 32 would require the City to determine not only how to pay f or the transmission voltage step down, heating and closure costs, but also how to raise funds for the City services and their energy efficiency

programs.

Response 18: EPA believes the comments are primarily answered b y the overall provisions of a long compliance period and flexible implementation in the rule. However, EPA is also sensitive to the need to maintain adequate infrastructure and to the time required to do so. EPA has considered these comments, along with others, and h as modified the compliance period to provide for a later start year – 2022 rather than 2 020 – and modified compliance requirements so provide a smoother path during the interim period f rom 2022 to 2029. EPA believes these modifications will provide sufficient time and flex ibility to build transmission and related infrastructure to meet the requirements of the rule

.

Contrary to this comment, EPA does not rely solely on existing infrastructure or assume no additional transmission will be built. Planning fo r new infrastructure is a regular part of electric power industry operations and EPA believes that inf rastructure required for this rule is within the normal planning parameters and can be achieved at m odest additional cost. With respect to Building Block 2 and natural gas, the rule is expec ted to lead to increases at existing facilities,

which can lead to less need for new transmission th an new facilities. In the case of Building Block 3, new transmission infrastructure is already being developed to meet current increases in wind and solar power; increases that occur under th e rule can be efficiently incorporated into these existing planning processes. For further inf ormation on natural can and renewables infrastructure, see the GHG Mitigation Measures TSD . See also the State Goal Computation section of this RTC in Chapter 4 for more informati on.205

Comment 19: Multiple commenters noted that the intermittent op erating nature of renewables could negatively influence reliability. Commenters also asked for funding related to variable generation resources and reliability issues.

Commenters stated, "Replacing coal with alternative energy sources like wind turbines endangers electric grid reliability because the win ds do not always blow."

Commenters stated "The proposed Clean Power Plan wi ll likely result in increased penetration of variable energy resources that will impact the oper ating characteristics and practices of the power system" leading to the need for "adequate fle xibility to integrate intermittency and to provide regulation and other system reserve service s."

According to commenters, "increased operation and s torage ability are key drivers" to "increase the reliability of variable generation resources." Commenters asked that "funding be available for research and development into the light-weighting o f wind blades and turbines and development of new battery technologies."

Commenters expected that "renewable generation [wil l] be constructed in states with higher wind and solar capacity and therefore not in the en d use states." Commenters stated that "the transferring of renewable generation from one state to another to meet the CPP [will] result in additional system transfers which will increase the possibility of system frequency variations, congestion and reliability concerns."

Commenters also noted that "line loss will increase during the system transfer of renewables."

Commenters asked that EPA "incentivize states with low capacity factors for renewable energy by allowing for a multiplier for energy produced in the state." As an example, commenters stated, "some states in their renewable portfolio s tandard allow for a 1.25 to 1.5 multiplier for MWh produced in the state" bringing "projects, empl oyment and economic develop[ment] to rural areas in a state and provides for a more effi cient electric system paid for by members/customers who actually utilize the energy."

Commenters stated that "prematurely retiring large quantities of reliable coal-based power while pushing intermittent renewable sources higher in th e 'merit order of dispatch' could complicate the task of balancing loads and ensuring grid relia bility."

Commenters stated "Until there are massive breakthr oughs in storage technologies, these intermittent sources have little hope of supplying base load energy."

Commenters stated, "Renewables, at least at this po int, are insufficient by themselves to ensure a reliable energy supply, so coal-fired plants must r emain open to fill the demand gap and to provide back-up capacity in times of greater demand ."

Commenters stated, "One of the major issues with re newables is their impact on the electric grid's reliability due to the intermittent nature o f their operation." Commenters added, "Another is the inability to match the times of peak electri c demand with renewable energy availability (e.g., sun, wind, etc.)." According to commenters, "As a result, the grid requires fossil units to be206

used as backups resulting in their operation at low loads and hence increased heat rate operating regime (i.e., low efficiency)."

Commenters noted "As resource mix changes, the reli ability characteristics associated with different generation types must be considered" due to "the challenge of steep daily ramps

associated with intermittent resources such as wind and solar generators all coming online or going offline at the same time." Commenters also no ted that "Some renewable resources generally operate at full production, rather than b elow maximum related output, which provides less flexibility."

Commenters cited NERC studies that show "as variabl e sources of energy generation increase, maintaining voltage stability becomes challenging" and that "voltage stability is essential to a reliable electricity grid."

Commenters noted "The rapid, unrealistic growth in variable renewable resources assumed under the Proposed Rule will pose acute challenges for ma intaining grid reliability. For instance, commenters noted that "dispatchable resources like coal and natural gas provide a number of essential reliability services, including reactive power support, voltage support, frequency and ramping responses, and inertial support." According to commenters, "These are essential reliability services that variable renewable resour ces cannot presently provide in a reliable and

economical manner."

Commenters noted that "Renewable sources, such as w ind and solar, are variable in nature and, as a result, are less reliable in providing energy and grid reliability services such as voltage support, frequency response, and contingency suppor t."

Commenters stated, "EPA's assumption that renewable energy can be increased to offset coal plants like Big Stone probably raises issues with r espect to physical inertia necessary for long

distance transmission."

Commenters noted that "Integrating large amounts of renewable resources into the bulk power system requires significant changes to power system planning and operations to maintain the adequate level of system reliability." Commenters s tated that "The major attributes of wind and solar photovoltaic ("PV") generation that are diffe rent from conventional forms of generation are variability and uncertainty of the available power output." Commenters added that "It is vital to understand the specific attributes of wind and sola r PV generation and resulting impacts on power system performance." Commenters also added th at "Large-scale penetration of renewable generation will displace the self-regulating charac teristics of conventional synchronous generators and affect system stability."

According to commenters, some of the attributes of renewable energy that affect system stability include inertia, frequency response, regulation, vo ltage stability, and low and high voltage ridethrough:

• Related to inertia, commenters stated, "The energy rotating machines such as

synchronous and induction generators can store and release, helping system transient stability. According to commenters, the " latest converter control207 technologies in wind turbine generators and PV inve rters can emulate inertial behavior similar, but are limited in magnitude, whe n compared to that of synchronous machines."

• Related to frequency response, commenters stated th at "Synchronous generators are equipped with a turbine-governor that provides corrective adjustment of power output in response to frequency excursion." A ccording to commenters, "Conventional generators designated as Automatic Ge neration Control units control the power output to increase when the syste m frequency falls below or rises above the target (60 Hz) frequency." Commente rs noted that without

modifications that would reduce the amount of deliv ered power, "PV generation offers little to no frequency response, and wind ge neration offers virtually none unless specifically designed to do so." Commenters noted that recent studies suggested a need of over-frequency drop response ca pabilities on renewable

resources."

• Related to regulation, commenters noted that "Relia ble operation of the power system requires continuous balancing of power suppl y and demand as demand for electricity ramps up and down." According to commen ters, "conventional generation provide[s] controlled output following t he fluctuating demand" but "wind and solar PV generation output is subject to instant available power from wind or solar irradiation." According to commenters , "the output of wind and solar PV generation is seen by the operator as nega tive demand, and the effective net demand (actual demand minus output from renewab le resources) is controlled by traditional generation." According to commenters , "Managing the supply and demand balance can be challenging for system operat ors if the wind and solar PV output decreases as demand increases and vice versa ."

• Related to voltage stability, commenters stated, "D ependence on increasingly remote resources (such as those located in wind-ric h rural regions of Texas) creates the need for increasingly expensive transmi ssion equipment to ensure stable and reliable delivery because of the long di stance and weak grid conditions." According to commenters, "The lightly loaded transmission infrastructure connecting concentrated wind resourc es in the Texas Panhandle is a prime example." Referencing ERCOT's recent study, c ommenters noted, "'The ERCOT panhandle grid is remote from synchronous gen erators and requires long distance power transfer to the load centers in ERCO T's Stability challenges and weak system strength are expected to be significant constraints for the Panhandle Export."

• Related to low and high voltage ride-through, comme nters stated "Renewable resources are required to stay connected after a ce rtain disturbance period as specified in FERC Order No. 661-A." According to co mmenters, "Modern wind turbine generators and solar PV inverters are desig ned to have the low/high voltage ride-through capability through the convert er controls."208

Commenters stated that the notion that fossil fuel- fired baseload units can be replaced with intermittent RE generation and EE measures is not a ppropriate, as RE and EE are not dispatchable, intermittent and cannot be used for r eliability. The commenters stated that the backup generation needed would likely be natural ga s, which would diminish CO2 reductions and lead to more investment for natural gas capacit y and therefore higher electricity prices.

Commenters stated that electricity is fungible and that there is no way to distinguish between

resources on the basis of environmental attributes. The commenters also stated that in many cases renewable or otherwise environmentally prefer red resources are more expensive and that wind and solar at present cannot be dispatched at t imes of peak demand. The commenters further stated that the Clean Power Plan is likely to incre ase electricity costs and destabilize grid security and power reliability due to overreliance on certai n fuel sources and is likely to increase electricity costs and destabilize grid security and power reliability.

Commenters stated that renewable energy resources r equire significant amount of reactive support and ramping capability and that EPA failed to consider the impact that increased reliance on renewable energy could have on increased reserve requirements, reliability of operations and

the need for additional transmission infrastructure . Commenters stated that renewables require additional dispatchable generation (typically gas-f ired combustion turbines) as backup for reliability purposes and the combination will be si gnificantly more expensive than the existing coal plants. The commenters stated that it is uncle ar if EPA considered the additional transmission requirements that would be required to serve the projected levels of renewable generation in Building Block 3, particularly if the y are in remote areas.

Commenters stated that the proposed guidelines seek to more than double the energy capacity that currently is provided by variable energy resou rces, like wind and solar which will significantly increase the demand for reactive powe r and ramping flexibility and make maintaining voltage stability more challenging.

Commenters stated that grid reliability issues asso ciated with increased variable resources are not directly addressed in the EPA's proposed Building B locks. The commenters stated that while conventional generators are able to respond automat ically to frequency changes and historically have provided most of the power system's essential support services, a large penetration of variable energy resources will require maintaining a sufficient amount of reactive support and ramping capability. The commenters stated that more frequent ramping needed to provide this capability could increase cycling on conventional g eneration. The commenters stated this could contribute to increased maintenance hours or higher forced outage rates, potentially increasing operating reserve requirements.

Commenters stated that renewables are an important source of electricity but large penetration of intermittent renewables will have a significant imp lication on many aspects of power system planning, operation and control. The commenters fur ther stated that the proposed regulation will strand assets, raise the cost of operating due to l oad cycling, possibly raise the costs of meeting long term service agreements put in place before th e onset of rapid and frequent cycling and diminish future investments in clean air technology . The commenters recommended that systems be put in place to ensure that artificial market me chanisms or regulations are not established that209

encourages the deployment of assets favoring of a s ingle technology that could aggravate the intention of ensuring a reliability electrical syst em.

Commenters noted that in Europe, only 4% of the win d installed capacity has a probability of being available 95% of the time, solar power is cha racterized is well correlated with hours of high demand however large fluctuations in output ar e observed, and wind may result in such a low value of net demand that forces a large number of thermal units to shut down only to have to start up a few hours later. The commenters stated t hat by putting environmental dispatch as the first priority, Europe created an artificial market that encouraged the significant over-investment in renewables and exaggerated the impact of renewab les on grid integrity, so that production from renewables can only be limited by security rea sons. The commenters stated that in other words, whenever the market price equals zero or a n egative value, even if the optimal solution is to curtail wind rather than stop a conventional the rmal plant for a short period of time, renewable production will be scheduled to receive the feed-in tariff or premium. The commenters stated that this should not be considered acceptable and t hat conventional power plants should not be penalized for the inability of non-dispatchable pow er to meet peak demand. The commenters recommended that a different approach is needed to consider the cost of achieving environmental benefits, including subsidies that are not being co nsidered.

Commenters discussed the challenges associated with integrating new wind and solar resources, including the need for improved forecasting capabil ities and the need to avoid curtailment to maintain operational reliability if sufficient ramp ing capability and operational reserves are not available during periods of high renewable penetrat ion. The commenters detailed and discussed the modeling scenarios assessed by ERCOT which foun d that if a $25/ton CO2 scenario is employed, intermittent renewable generation sources will contribute 22% of energy on an annual basis in 2029 and meet interim and final goals thro ugh the installation of a higher proportion of solar and lower proportion of wind resources. The c ommenters noted limitations to the model, including difficulties modeling the real world chal lenges of accommodating maximum ramps from solar and wind generation decline and accurate ly forecasting the proportion, size and

location of resources. The commenters stated that i f wind resources are the majority of new renewable resources, the reliability impacts may be more severe because it results in lower net loads. The commenters also stated that regulation a nd non-spinning reserves will need to be

increased to address increased intra-hour variabili ty and uncertainty of power production from wind and solar, forecasting systems for wind and so lar will become increasingly important, and market mechanisms for flexible generation to be ref lected in real time energy prices will be

needed.

Commenters stated that EPA's analysis does not take into account operational or reliability impacts, and the impacts of the required transmissi on infrastructure, associated with the change in renewable energy generation that would be requir ed to meet the goal. Commenters stated that increased use of wind power will significantly incr ease the demand for reactive power and ramping flexibility, which will increase cycling on conventional generation and often results in either increased maintenance hours or higher forced outage rates. The commenters stated that increased variable energy resource may also result in the need for increased reserve margins, which is problematic because the proposed rule will leave several regions with significant deficiencies in their reserve margin. The commenter s also stated that new transmission will be210

required to integrate new resources, which generall y require a large amount of space and are

often built in rural areas that are distant from th e point of interconnection, with the existing electrical grid. The commenters added that in many cases variable energy resources will only be able to produce enough power to meet minimum voltag e requirements.

Commenters discussed the potential impacts if solar is expanded to meet the CO2 target goals amount, and stated that it would result in insuffic ient fossil generation on line to deal with system regulation and the loss of solar generation due to its variability.

Commenters stated that impacts to the system from i ncreased reliance on renewables must be included in the analysis of benefits included in th e Clean Power Plan. The commenters provided a detailed explanation of the impacts of renewables and how they can negate the intended benefits of changing fuel source, including results of a net load projection developed by California ISO. The commenters recommended that: (1 ) a penalty be assigned to intermittent energy sources that result in negative impacts on o ther power sources relied upon to meet net load demands, impacts on energy losses in the elect ric grid resulting from increased use of intermittent sources, and impacts on downstream equ ipment that decrease overall system efficiency and equipment life; and (2) benefits be included for facility owners that invest in improving the reliability and efficiency of the ent ire system that will result in a net decrease in CO2, such as upgrading transmission and distributio n systems though the inclusion of power factor upgrading devices or incorporating grid-scal e energy storage, especially when it can be integrated into an existing generation facility.

Commenters stated that DOE, EPRI, and several utili ties acknowledge that high amounts of variable renewable generation (specifically solar, but also wind) present significant operational challenges to maintaining a secure and reliable ele ctric grid, including the possibility of bottomout conditions in low load periods and ramping chal lenges, and that it is difficult to forecast long term capacities and impacts. The commenters remarke d that the knowledge gained from the Sunrise project and other efforts is required befor e the impacts of large amounts of solar generation to distribution, transmission, and gener ation systems can be fully understood and quantified. The commenters also noted that renewabl es can create the need for additional regulating reserves in the short term which could i mpose additional regulating reserve costs and

increase consumer costs.

Commenters also noted that forecasting non-dispatch able renewables can be far more uncertain than forecasting temperature or load. Commenters ci ted an October 2011 study by EPRI indicating that day ahead wind production forecast errors could vary from 10 percent to 25 percent or more. The commenters stated that forecas t errors can only be overcome by having and using resources that are flexible enough to respond in the 30 to 60 minute timeframe which

creates the need for "flexible" reserves in additio n to the regulating and spinning reserves currently required by NERC standards.

Commenters stated additional reliable backup genera tion will be required to ensure grid reliability and proper balancing since a significan t portion of the additional renewable generation needed to attain Building Block 3 goals is wind. Th e commenters added that system frequency and voltages must be maintained within defined, ext remely tight tolerances and wind and solar PV technologies present challenges to power system operators, owing to variability and211

uncertainty of their generation output on the times cales relevant to the task of maintaining system reliability. The commenters indicated that t he proposal failed to consider these needed generation resources and how they would be acquired and financed.

Commenters cited, as an example, the California ISO , with its RPS of 33 percent of retail electricity from renewables by 2020, who indicate i ts grid's flexible generator capacity is

nowhere near what it needs to be to accommodate inc reasing wind and solar energy on the grid. The commenters stated that any capital investment c osts for increased flexible generator capacity, transmission system build-outs, and assoc iated O&M cost increases, will be charged to rate payers via rate schedules and fees on electric bills, not to wind turbine owners.

Commenters stated that NERC concluded that Building Block 3 would pose several reliability challenges:

• EPA's analysis relies on resource projections that may overestimate reasonably

achievable expansion levels and do not fully reflec t the reliability consequences of renewable resources;

• Increased reliance on of Variable Energy Resources (VERs) (e.g., wind and solar) can significantly impact reliability operations and requires more transmission and adequate ERSs to maintain reliability; and

• With a greater reliance on VERs, transmission and r elated infrastructure expansion lead times may not align with the NOPR's implementation timeline.

Commenters stated the EVA's analysis concluded that the flaws in EPA's assumptions suggest that as a technical and practical matter, the propo sed rule is likely to be unachievable, and that the total costs will far exceed EPA's ten-year proj ections (2020-2030): EVA found that the proposed rule would increase wholesale electricity costs by $274 Billion, non-power natural gas costs by $80 Billion, and require additional capita l costs for replacement power of $53 Billion.

Commenters stated that they are concerned that the increased use of renewable power and NGCC units anticipated by the Proposed Rule will result in greater cycling of existing baseload units which were not designed to run at variable generati ng rates. The commenters stated that operating at variable rates will increase the wear on plant equipment, in part due to metal expansion and contraction, which in turn will incre ase the occurrence of unscheduled outages and detrimentally impact reliability of the total e lectric system and that this unintended cycling will also lead to potential heat rate increases in coal units, contrary to the purpose of the Proposed Rule.

Commenters stated that grid reliability issues asso ciated with increased renewable resources are not directly addressed as part of the EPA's propose d building block approach and as the penetration of variable generation resources increa ses, maintaining system reliability will become more challenging. The commenters stated that given that Arizona would be required to retire all of its existing coal-fired generation in 2020 to comply with EPA's goals, additional

assessments will be needed.212

Commenters stated grid reliability issues associate d with increased renewable resources are not directly addressed as part of the EPA's proposed bu ilding block approach, and based on recent industry studies and prior NERC reliability assessm ents, as the penetration of variable generation resources increases, maintaining system reliability will become more challenging.

Commenters stated ERCOT's analysis indicates that t he impacts of proposed and recently finalized environmental regulations will result in retirement of legacy base-load generation and development of new renewable generation resources w ill have a significant impact on the reliability of the transmission system and will lik ely require significant upgrades to the transmission infrastructure of the ERCOT system. Th e commenters said retirement of resources would result in a loss of real and reactive power, potentially exceeding thermal transmission limitations and the ability to maintain stable tran smission voltages while reliably moving power from distant resources to major load centers. The c ommenters also said in the ERCOT region, it takes at least five years for a new major transmiss ion project to be planned, routed, approved and constructed, and as such, the need must be seen at least five years in advance, though unit retirement decisions will likely be made with only the minimum required notification (currently 90 days).

Commenters stated units that are at risk of retirem ent from the proposed rule are located near load centers, and future transmission needs would b e increased or accelerated by the likely retirements. The commenters gave examples in the Ho uston, San Antonio, and Dallas-Fort Worth regions. The commenters also stated growth in renewable generation would also likely have a significant impact on transmission requireme nts and provided examples to illustrate costs on recent upgrades. The commenters concluded that w ile recent upgrades provide transmission capacity beyond current generation development, the new circuits will not provide sufficient capacity to reliably integrate the amount of renewa bles necessary to achieve the requirements of the proposed rule.

Commenters concluded the retirement of existing cap acity in ERCOT could result in localized transmission reliability issues due to the loss or fossil fuel-fired generation resources in and around major urban centers, and will strain ERCOT's ability to integrate new intermittent renewable generation resources. The commenters stat ed the CPP will also result in increased energy costs for consumers in the ERCOT region by u p 20%. The commenters stated there is uncertainty regarding the implementation of environ mental regulations.

Commenters stated the CPP is likely to negatively a nd significantly impact the reliability of the electrical service they receive.

Commenters stated the RIA understates the cost of i ntermittent sources of power, such as wind and solar as it is necessary to have available othe r power sources readily available and capable of supplying and balancing the total peak load of elec tricity to avoid disruption in supply. The commenters said, these "intermediate sources" are e ffectively constantly spinning and consuming fuel. The commenters gave the example of the variab le nature of wind power. The commenters referenced the Idaho Public Utility Commission who placed a cost on the integration of variable sources of about $21/MWh. The commenters stated im proved energy efficiency at power plants (CPP Building Block 1) would likely be at least par tially offset by efficiency degradation213

wrought by reliance on intermittent renewable energ y technologies as a result of imposed efficiency degradation at power plants forced into grid balancing operation.

Commenters stated modeling of blackouts and brownou ts indicates that the higher the percentage of wind power on the grid, the greater the unreliab ility of the grid and the greater the likelihood of blackouts and brownouts, and the risk increases exponentially, not linearly, with increasing levels of wind generation. The commenters reference d NERC as having recognized the operational impact of variable energy resources suc h as wind and solar, which are the bulk of CPP building block 3. The commenters stated that op erationally, an increase in wind and solar resources continues to challenge operators with the inherent swings, or ramps, in power output, and system planners accommodate added variability b y increasing the amount of available regulating reserves and potentially carrying additi onal operating reserves.

Commenters stated that Building Block 3 assumes sta te-level increases in renewable energy generation based on regional renewable energy targe ts and the preservation of "at risk" nuclear

and under construction nuclear. The commenters sta ted that any significant changes involving new generation, retiring generation, and/or changes in the dispatch or operating parameters of existing generation can have significant power syst em (grid) reliability impacts and that compliance with this proposal as currently drafted could significantly alter the generation mix.

The commenters stated that assessments to determine which specific units may be retired and specific units will replace them cannot readily be performed and could vary depending upon the actual provisions in the final state plan. The comm enters stated that transmission facilities will be required to reliably integrate new facilities into the system.

Commenters stated they worked with members of the A UG to develop proposed improvements to goal calculations for Arizona. The commenters st ated if EPA would implement these improvements, the impact to customers would be $2.4 billion less than if the commenters were forced the implement the rule as proposed by EPA. T he commenters also stated it is important for EPA to support a rational path for carbon reduc tions that fully accounts for the complex structure of the country's current electric generat ion and transmission grid, natural gas supply network, and the recent infrastructure investments mandated by EPA.

Commenters stated concerns about renewables, nuclea r, and infrastructure.

Commenters stated that that the proposal makes broa d assumptions about access to renewables and fails to consider how increased renewable penet ration will impact grid reliability and existing base-load capacity. The commenters asked the following questions:

• Has the federal government conducted an analysis to determine the environmental impact of building renewable energy systems at the scale envisioned in the proposal?

• Given the amount of land required by renewable ener gy systems, has the Administration considered that federal land permitt ing requirements may preclude or stall the development of renewable projects?214 • Has the Administration mapped out a transition path way for renewables from an artificial to a competitive market?

Commenters stated that the proposal supports nuclea r power as a key part of carbon dioxide emissions reduction strategy and maintaining existi ng reactors and building new units is essential for many states to reach their assigned reduction t argets; however, at least nine states have bans

on new nuclear builds. The commenters asked the fo llowing questions:

• Will a viable, long-term solution for disposal that would win public support and the necessary votes in Congress be brought forward, and if so, when?

• If not, are the states with bans on new nuclear fac ilities expected to revise their
laws?

Commenters stated that the proposal entails signifi cant fuel switching from coal to natural gas, but most retiring coal plants cannot simply be repl aced by natural gas plants. The commenters asked the following questions:

• What steps will be taken to ensure the necessary co nstruction of interstate natural gas infrastructure, including pipelines? Will you c onsider expediting the environmental impact study (EIS) process so that ga s transmission can be built to serve constrained regions?

• What is the estimated cost of the gas infrastructur e required to meet compliance targets under the proposal, and who does the federa l government foresee paying

for it?

Commenters stated that adding significant renewable resources to the grid could create additional interconnection, congestion and dispatch problems, threatening the reliability of the electrical supply. Commenters stated that congestion is curren tly a problem for the 800+ wind turbines located in and around White County, Indiana. Commen ters stated that this problem has been acknowledged by other U.S. federal agencies. Commen ters stated that a 2014 draft study on congestion by the U.S. Department of Energy found t hat in the Midwest "congestion results from high and growing levels of wind generation that can not be delivered from western sources to more distant loads, and the lack of additional tran smission to enable further development in renewable-rich areas." Commenters stated that they have no reason to believe EPA took these unique circumstances into consideration when drafti ng the proposed rule, which calls into question the appropriateness of the agency's expect ations for Indiana.

The commenters stated that the TSD states that, whe re needed for reserve margin, retiring capacity is replaced by new generation sources, inc luding 10 GWs of wind. Commenters stated that the TSD incorrectly discusses wind generation as if it can provide the same capacity as

baseload resources. Commenters stated that it is in appropriate to assume that wind can provide capacity to ensure reliability. Commenters stated t hat periods of peak demand often occur when wind is minimal (i.e., hot summer days/nights with stagnant air conditions). Commenters stated that during the coldest winter days/nights, wind co nditions do not consistently support215

generation. Commenters stated that during these per iods, it is a high risk to assume that 10 GWs

of wind will be available.

Commenters stated that wind and solar power generat ion naturally fluctuate depending on weather conditions and therefore require a solid al ternative backstop to ensure that provision of electricity remains constant. Commenters stated th at Building Block 3, as amended by the NODA, undermines this security by forcing the reduc tion of coal-fired EGUs as RE utilization climbs. Commenters stated that the significant re-d ispatch of NGCCs also takes away some of the margin currently available to firm renewables.

Commenters stated that EPA's proposal to nearly dou ble the state's RE sources in Building Block 3 poses additional problems for rules put in place by the SPP to ensure reliable operation of the regional grid. Commenters stated that based on crit eria, they can only consider approximately 5 percent of its wind generation toward its planning capacity margin requirements. So, in order to replace a 500 MW coal plant with enough wind to mee t the capacity requirements of the SPP, commenters stated that they would need to install 1 0,000 MW of wind generation (which, again, under the Proposed Rule and NODA would mandate the reduction of coal-fired generation, resulting in a vicious cycle.

Commenters stated that they do not believe that it has been adequately demonstrated that noncombustion renewable sources can serve as providers of base load power. Commenters stated that they do not believe that the differences in ge neration dispatched to serve various demand levels were considered fully in either the RE goal setting calculations or the IPM model. Commenters stated that there are significant grid r eliability concerns that have not been adequately addressed. Commenters stated that a clea r distinction between base load and non-base load capable renewable sources must be made in both the goal setting and IPM projections.

Commenters stated that EPA acknowledges some renewa ble resources provide intermittent availability. Commenters stated that EPA indicates that storage can serve to bridge the intermittent availability of those resources. Com menters stated that they believe EPA is overestimating the ability of electricity storage t echnologies and that it cannot be counted on to address reliability issues with RE sources. Comment ers stated that electricity storage technology has not advanced to a degree that it can be reliabl y considered. Commenters stated that DOE states: "Industrial standards for grid storage are in their infancy. Industry acceptance could also gain ground when we reduce the uncertainty surround ing how storage technology is used, and monetized, at scale. Ultimately, it will be the exp erience and real-world use of storage that will provide the confidence and desire to expand install ed storage."

Response 19: The EPA addresses considerations for feasibility o f the 2030 level of RE deployment, and the rate of progress during the int erim period in getting to that level, in section V.E on building block three of the preamble to the final rule. RE feasibility is addressed in more detail in the GHG Abatement Measures technical supp ort document. EPA found that these levels were supported by comments received, DOE analysis, and external studies evaluating the costs of and potential for higher levels of RE penetratio n.216

Comment 20: Commenters stated that renewable generation source s do not interfere with the reliability of the electricity system.

Commenters stated, "despite being an intermittent r esource, wind energy has proven to be a reliable source of energy" and has provided "more t han 10 percent of the energy mix in multiple states across the country, and it has not led to an y reliability concerns throughout those states."

Commenters offered counterpoints to common argument s about voltage support and frequency stability services, two "Essential Reliability Serv ices" (ERSs) that could be negatively affected by renewable generation sources:

• Voltage support. According to commenters, voltage s upport "mostly comes down to the grid's ability to balance 'real' power (the usable power on the grid) with 'reactive' power (the unusable power on the grid, a lso called phantom power)." Commenters cited NERC's ERS Task Force in stating t hat "generators attached to wind or solar plants also can provide both real and reactive power, and inverters attached to those generators can do so even when th e plants are not producing any electricity."

• Frequency stability. According to commenters freque ncy services "are primarily focused on maintaining the system at the standard f requency (in the United States, this is 60 Hertz, or power cycles/second)." Comment ers noted that "Perhaps the most pervasive critique of renewable energy resourc es from a reliability perspective is that they are unsuited for providing ramping services because their output is constrained by meteorology." According to commenters noted that "Wind power plants in particular, but also large-sc ale solar installations, are already required to have the capability to provide ramping services as required." Commenters ended their argument with "This is not t o say, of course, that it will necessarily be good policy to ask too much ramping from utility-scale renewable generators, because doing so normally requires curt ailing their power output (which reduces their overall capacity factors); but finding the right balance is part of the challenge to which EPA rightly expects state s and grid operators can and will respond."

Commenters noted that "technical experts have concl uded that variable renewable energy resources can represent as much as 50 percent of el ectric systems, provided that utilities make

'investment in additional distribution and transmis sion system infrastructure as well as changes in electric system operations, markets, and plannin g to achieve reliability.'"

Commenters supplied detailed information related to the inherent reliability of renewable generation sources in the next comment.

Commenters stated that to absorb more solar energy into the electric grid, there are ways that the electric grid can be adapted and as part of a balan ced energy portfolio, solar can improve grid reliability and provide benefits to the existing en ergy infrastructure, including reducing transmission losses and relieving congestion on the grid. The commenters stated that advanced features enable solar PV to provide a state or regi on with additional system flexibility by217

responding to utility and independent system operat or instructions. The commenters went on to describe operations by a solar provider.

Commenters stated that on an aggregated basis, util ity scale and distributed solar resources provide significant reliability and transmission be nefits to a state or regional grid. Commenters stated even if solar output varies at a few individ ual locations due to localized cloud coverage, when the sum of the solar installations in a geogra phic area is assessed, the variability is reduced and can be managed by the grid operator. The commen ters stated further that targeted deployment of solar generation in congested areas c an provide relief to transmission and distribution systems, defer costly transmission upg rades, and help maintain grid reliability. The commenters stated that solar technologies that requ ire transmission investment often do not require pipelines, coal transport or the associated production and processing infrastructure needed by coal and gas industries, thus having the potential to save immense costs as the energy infrastructure in the U.S. ages and requires repair s.

Commenters stated that the CPP encourages the use o f modern electricity resources, such as solar power and energy efficiency, which have many additional co-benefits. The commenters noted that solar is a zero-fuel resource, so solar energy protects customers from the risks of price volatility from fossil fuel generation and as a res ult, can provide important hedge value to customers, insulating them from potential future in creases in fuel prices from natural gas and

coal. The commenters stated further that distribute d solar power and energy efficiency benefit our transmission system and because they allow us t o generate electricity right where we need it, these resources can lessen the strain on our aging grid and reduce the need for expensive new

transmission and distribution infrastructure.

Commenters stated solar can improve grid reliabilit y and provide benefits to the existing energy infrastructure, including reducing transmission los ses and relieving congestion on the grid.

Commenters stated that there are several resources the EPA can look to for understanding how solar fits into the grid in terms of reliability an d higher penetrations of renewable energy.

Reliability and Transmission Benefits of Solar: Com menters stated solar energy can be configured and operated to provide various reliabil ity services and transmission benefits that will be essential to electric power system operations in conjunction with the state implementation of 111(d) regulations.

Commenters stated that on an aggregated basis and u tility-scale, distributed solar resources provide significant reliability and transmission be nefits to a state or regional grid. Commenters stated that even if solar output varies at a few in dividual locations due to localized cloud coverage, when the sum of the solar installations i n a geographic area is assessed, the variability is reduced and can be managed by the grid operator. Commenters stated that solar technologies that require transmission investment often do not r equire pipelines, coal transport or the associated production and processing infrastructure needed by coal and gas industries. Commenters stated that this has the potential to sa ve immense costs as the energy infrastructure in the U.S. ages and requires repairs.

Commenters stated that they do not agree with ERCOT or NERC that distributed generation represents a serious reliability concern in the nea r-term future, to give one example, the 9 to 13.5218

GW of new solar capacity ERCOT's model anticipates over the next fifteen years is entirely utility-scale generation, but to the extent some ma rket changes are needed, we note again that grid operators are already examining the various ch anges that may be required.

Response 20: The EPA appreciates this comment and agrees that RE can be an important part of the mix of generation types in a system. Please se e the GHG Abatement Measures technical support document for more information.

Comment 21: Commenters noted the following details on the reli ability of renewable generation

sources:

"With the potential for utilities in the Southeast to deploy renewable energy resources on their systems at a scale of 15% or more over the next dec ade, some may raise concerns about reliability risks or other operational consideratio ns. Elsewhere in the country, technical experts have concluded that variable renewable energy resou rces can represent as much as 50 percent of electric systems, provided that utilities make 'inv estment in additional distribution and transmission system infrastructure as well as chang es in electric system operations, markets, and planning to achieve reliability.'

Across much of the United States, these questions a re systematically addressed through the planning processes of regional transmission operato rs (RTOs), independent system operators (ISOs) and super-regional planning councils. For ex ample, the US DOE SunShot analysis included GridView simulations to verify the basic h ourly operational feasibility of high solar scenarios, confirming that electricity demand and o perating reserves are completely served in all areas during every hour of the year.

However, in the Southeast, several large vertically -integrated utilities conduct their own resource adequacy, reliability and operational planning with minimal market exposure. Due to historically limited solar and wind development, vertically-inte grated utilities in the Southeast have not provided analyses of renewable energy that are as c omprehensive or similarly robust as those in RTO or ISO regions. While few of their planning stu dies have thoroughly examined renewable energy resources, these studies do often raise ques tions regarding renewable resource adequacy, reliability and flexibility.

A new study by SACE, provided as Attachment A, summ arizes the information available from these utilities, and answers several key questions (laid out below) with analysis that could be used in a variety of energy planning activities.

• Renewable energy offers dependable on-peak capacity that is effective at replacing conventional power resources. While the s pecific values vary by technology, a blended portfolio of wind and solar r esources is likely to provide dependable capacity of approximately 50 MW per 100 MW of nameplate capacity.219 • While the dependable capacity ratings of renewable energy would decline with large scale deployment, that decline will be gradua l and predictable, and will remain substantial at generation levels of 10-20% o f annual energy demand.

• While renewable energy resources are variable, they perform very well during high demand periods when utility systems need to us e most of their generation resources. On average, regional solar and imported wind resources should generate at 50-60% capacity factors during these ho urs. At current and near-term levels of renewable energy use, long-term modeling analysis indicates no increased reliability risks at the system level--ev en during hours in which renewable energy production might be low. Even if r enewable energy is increased to meet 10-20% of annual energy demand, reliability should be relatively unaffected on balance. At these higher levels of re newable energy use, there

would be a balance of increased and decreased risks that utilities would need to study and monitor. Hours with increased reliability risks would occur very infrequently, roughly one hour per year on average. That same level of renewable energy generation would also increase the number of hours in which reliability is ensured by about 80 hours per year.

1. Solar power is unlikely to cause some utility syste ms to effectively shift from a summer to winter peak. With responsible planning an d management, renewable energy will not be a problem during a "polar vortex " type event.

2. Utility operators will not need to increase the ram ping of convention generation in the near future. Up to around 10% of energy supply, uti lity systems may actually be easier to operate, since solar energy in the Southe ast is closely aligned with system peaks. While the transition point depends on the ut ility system and the resources applied, even at 10-20% of annual energy demand, th e California "duck curve" problem of high ramp rates for conventional generat ion is unlikely to appear in the

Southeast.

These questions have been answered by matching indu stry-standard data about potential wind and solar generation to the historical generation d ata supplied by Duke Energy (in the Carolinas), Southern Company (including Alabama, Florida, Georg ia and Mississippi subsidiaries), and the Tennessee Valley Authority (serving portions of sev en Southeastern states). The methods applied in these analyses apply industry-standard technique s, enhanced to more carefully examine concerns about renewable energy development in the Southeast."

Response 21: The EPA addresses considerations for feasibility of the 2030 level of RE deployment, and the rate of progress during the int erim period in getting to that level, in of the preamble to the final rule in section V.E which dis cusses building block three. It is further

addressed in more detail in the GHG Abatement Measu res technical support document. EPA found that these levels were supported by comments received, DOE analysis, and external studies evaluating the costs of and potential for h igher levels of RE penetration.220

Comment 22: Commenters commented on the national security and cybersecurity risks that will be increased by the proposed rule.

Commenters noted that "the U.S. power sector alread y faces serious cyber security threats." For example, commenters noted, "Recently, Admiral Micha el Rogers, director of the National Security Agency and head of U.S. Cyber Command, tes tified before a House Intelligence Committee hearing on cybersecurity threats that oth er countries are currently capable of launching cyber-attacks that would shut down the el ectric grid." Commenters stated that "EPA must work with the NSA, Homeland Security and all s takeholders to ensure implementation of the Clean Power Plan, with its heavy reliance on na tural gas, does not exacerbate this situation."

Commenters stated that "Reliable and secure electri c generation and transmission are essential to national security and the economy." According to co mmenters, "EPA is proposing sweeping unprecedented changes to the interconnected power s ystem, including the natural gas transmission system, yet has not conducted a baseli ne study of the cumulative interstate and intrastate effects of the proposed building blocks on stability, reliability and security."

Commenters also noted the national security aspects of the rule by stating, "the effect of applying the Proposed Carbon Rule also adversely affects nat ional security with respect to critical energy infrastructure facilities by rendering that infrast ructure less resilient to natural or man-made

disasters."

Commenters stated that as indicated above, the heav y reliance on intermittent resources and natural gas, raises serious reliability questions. Commenters stated that with reliability concerns come national security concerns. Commenters stated that if the grid becomes heavily reliant on natural gas, the natural gas supply as well as the pipelines themselves become targets for the disruption on our electric grid, whether by vandals or domestic or foreign terrorists. Commenters stated that in January, 201 4, a TransCanada natural gas pipeline near Winnipeg ruptured and exploded. Commenters stated that the explosion not only affected TransCanada, but led to the precautionary closure o f two nearby pipelines, resulting in the loss or severe limitation of natural gas to more than 100,0 00 customers in the upper Midwest. Commenters stated that utilities responde d by asking home-heating and other customers to limit natural gas consumption. Commen ters stated that markets responded with a dramatic jump in natural gas prices. Commenters st ated that in May, 2014, a natural gas line belonging to Viking Gas Transmission Co. exploded, affecting customers again. Commenters

stated that if those same customers were also relia nt on that natural gas for electricity as well, the

results would have been even worse.

Commenters stated that the proposed rule moves the nation away from centralized power to a more decentralized or distributed placement of gene ration. Commenters stated that with a centralized generation approach, security and relia bility is protected by redundancy in the system, particularly with redundancy in transmissio n and distribution lines. Commenters stated that as the nation moves to a more decentralized ap proach, there will need to be transmission and distribution upgrades not only to support the new g eneration being built, but also for reliability and redundancy. Commenters stated that if that red undancy in infrastructure is not met or delayed, it again opens the grid to a national secu rity risk. Commenters stated that without221

sufficient redundancy, a portion of the grid may go down without the possibility of "re-routing" the power around the disrupted portion of the grid to serve customers.

Commenters stated that it would be highly irrespons ible for EPA to adopt the Clean Power Plan in a vacuum, disregarding the fact that significant impacts on the electric industry pose a direct

threat to the most critical missions of our nationa l defense. Commenters stated that the failure of EPA to evaluate grid vulnerabilities that can impac t defense missions, and lead to major economic ramifications, demonstrates that EPA has n ot adequately evaluated the reliability issues created by its proposal. Commenters stated that until it does so, in close collaboration with NERC and FERC, the proposal should be delayed indefinitely.

Commenters stated that one of the biggest impacts o f block 2 is that it means shutting down or reducing coal-fired generation. Commenters stated that shutting down coal-fired plants, particularly in the short period of time allowed by the glide path and the interim goals, means that there is less base load on the grid to provide vital ancillary services. Commenters stated that it is assumed that given the short time for complia nce, it will force more reliance on and buildout of NGCC. Commenters stated that the decrease i n diversity is also a decrease in reliability, as well as a possible national security issue. Com menters stated that the reliance on significant increases in intermittent renewables coupled with c ompeting natural gas uses (peaking, base load, voltage support, harmonics, and dispatchable power, not to mention winter heating) puts the robustness and stability of the grid at risk.

Response 22: EPA is sensitive to potential implication of the r ule for national security and cyber security risks, but does not agree that the rule in creases these risks. The specific concerns expressed in this comment have been addressed in ot her responses in this section. For infrastructure concerns, see Response 18; for relia bility concerns see Responses 7 and 9 in

section 8.9 of this RTC.

Comment 23: Commenters asked that skill certification standard s be put in place to improve the reliability of the electricity system.

Commenters suggested that EPA consider requiring th e industry to "adopt skill certification

standards to ensure that all new and modified facil ities we are going to rely on for our future energy systems" are "correctly designed, [and] prop erly constructed, which means the skills of the construction craft personnel should be specifie d, evaluated and verified or the end goal of reliability will again be put at risk."

Response 23: The EPA agrees worker certification can help to ens ure that that construction personnel are well qualified to perform high qualit y work which can benefit the program and achievement of state goals. EPA encourages states to ask for a demonstration that the work is performed by a proficient workforce. We further sug gest that a good way of ensure such a workforce is to require that workers have been cert ified by: 1) an apprenticeship program that is registered with the U.S. DOL, Office of Apprentices hip or a state apprenticeship program approved by the DOL; 2) a skill certification align ed with the U.S. DOE Better Building222

Workforce Guidelines and validated by a third party accrediting body recognized by DOE; or 3) other skill certification validated by a third part y accrediting body.

Comment 24: Commenters noted that the proposed rule interferes with existing state authorities and mandates to provide reliable, affordable electr icity.

Commenters stated that "Implementation of the Clean Power Plan raises a host of complicated jurisdictional questions that promise to roil state oversight of the electricity sector in Montana." Commenters gave the following examples:

• "EPA's proposal is silent as to which state body sh ould implement the regulatory regime." For commenters, federal environmental stat utes have been administered in Montana by the Board of Environmental Review and the Department of Environmental Quality while the Board of Environmen tal Review has rulemaking authority and the Department of Environmental Quali ty is delegated enforcement and administration of air quality laws. Commenters stated, "the proposed regulation lends no insight into which body should take the lead." For example, commenters offered, "Were the Board of Environmenta l Review and the Department of Environmental Quality to adopt their traditional roles, and assume responsibility for the implementation of section 11 1(d), the two state bodies, in so doing, undoubtedly would override the Public Servic e Commission's legal authority to oversee the state's electricity market ." Commenters stated that "In all likelihood, the legislature would have to decide wh o leads by passing an enabling

statute."

• "The Clean Power Plan also confuses Montana's parti cipation in multistate power grids." According to commenters, "the Clean Power P lan seems to require the State to somehow deputize regional grid operators a s part of its State Implementation Plan" and "it is unclear how this co uld be accomplished."

• "EPA's Clean Power Plan would thrust into regulator y limbo the state's municipally-owned utilities." According to commente rs, "these 'munis' would have to be part of any Montana strategy to achieve the Clean Power Plan, but they are exempt from rate regulation by the Public Servi ce Commission."

• "The proposed regulation is silent as to how Montan a should incorporate its public power utilities into a compliance plan" and "any attempt to further regulate these entities no doubt would court a political bat tle."

Commenters noted "States have jurisdiction over ret ail markets, while FERC has jurisdiction

over wholesale markets."

Commenters stated, "The Proposed Rule materially in trudes on Montana's authority to make

determinations critical to the interests of Montana 's retail and wholesale electric ratepayers, including LCG's members."223

According to commenters, the rule "violates both Mi ssouri state law and federalism principles guaranteed to Missouri under the Constitution of th e United States by Tying the Hands of Missouri's Public Service Commission from Managing the State's Electricity Grid". Commenters added these specifics:

• "by setting emission rate limits that can be achiev ed only through aggressive outside-the-fence measures, EPA is attempting to su bstitute its judgment for that of our State's PSC, utilities, grid operators, and other Missouri decision-makers with respect to allowable amounts of electricity fr om coal, natural gas, nuclear,

and renewables."

• "EPA is presuming how much electricity Missourians should use. This is the job we have delegated to the PSC. If EPA requires trans mission utilities to dispatch electricity to draw from 'greener' energy sources i nstead of the most costeffective--for example, favoring drawing power from wind plants instead of coal plants--EPA would infringe on the authority of ener gy regulators at all levels. In this regard, the Proposed Rule would deprive the Mi ssouri PSC of its ability to maintain constant and reliable electricity supply a t the times it is most needed."

Commenters stated that the rule "threatens to disru pt long-term, proactive planning of Georgia's energy generation and distribution networks that wi ll potentially lead to reduced reliability, supply disruptions, wasted resources and more expen sive energy supplies."

Commenters noted that Missouri River Energy Service s (MRES) is already "allowing municipal

utilities to make their own resource decisions to m eet state goals and mandates." As a result, commenters added, they are "able to carefully study and select those resource projects that best
fit the needs of its 61 member communities in four states, and do so without creating major rate shock." According to commenters, "The Clean Power P lan is the direct opposite of the thorough and deliberative process used by MRES and municipal utilities everywhere to provide reliable, cost-effective long term energy and energy services in a fiscally responsible and environmentally sensitive manner" and "gives no credence to reliabi lity, planning horizons, and power quality."

Commenters stated that wind and solar, the predomin ant renewables being deployed currently, are both intermittent resources which strain the sy stem and require redundant resources to back up when they are not available. Commenters stated that the NERC report says that in 2008, Texas faced a near catastrophic event when it unexp ectedly experienced a loss of all of its wind capacity at once when a major weather system moved through the state. Commenters stated that the NERC report says that dramatic events like that will only become more common with the massive deployment of renewables contemplated by th e Clean Power Plan. Commenters stated that the NERC report says that in such a case, foss il resources will need to be called upon to try to pick up the load and avoid a voltage collapse, c ausing a widespread black out.

Commenters stated that Wyoming has vast wind resour ces which it is eager to develop. Commenters stated that the NERC report sa ys that since it has no significant load to utilize those resources, high voltage transmission must be built from Wyoming across multiple

states to reach its intended Nevada or California d estination. Commenters stated that without that build-out of transmission, the renewables dema nded by the Clean Power Plan lack the224

critical infrastructure to move forward with a curr ently proposed 1,000 MW wind farm. Commenters stated that it is irresponsible to take the approach that forces utilities and others to build renewables without first ensuring the reliabi lity of the underlying infrastructure.

Commenters stated that one of the underlying assump tions of the proposed rule is that natural gas, renewables, and energy efficiency can each rep lace coal-fired generation and that each are interchangeable with the other. Commenters stated that when it comes to reliability, the fact is that electric generation is not fungible as EPA sta tes. Commenters stated that intermittent renewable energy cannot provide voltage control or dispatchable (reactive) power. Commenters stated that in 2008 when the ERCOT system came dang erously close to experiencing a black out, the grid frequency dropped suddenly when wind produ ction fell from more than 1,700 megawatts to 300 MW and a system emergency was decl ared. Commenters stated that multiple power suppliers fell below the amount of power they were scheduled to produce. Commenters stated that this created problems moving power to t he west from North Texas, leading to the

emergency.

Commenters stated that NERC explicitly points out t hat an increasing reliance on natural gas poses reliability concerns when, for example, extre me weather strains demand for electricity. Commenters stated that NERC reported that during Winter 2012-2014, there were over 35,000 MW of outages due to cold weather and f uel issues; 17,700 MW of those outages were caused by frozen equipment, controls, and froz en coal. Commenters stated that a number of generators were exposed to extremely high fuel p rices and interruptible gas transportation was often unavailable. Commenters stated that, as a re sult, uplift costs in organized electricity markets for the month of January 2014 rivaled the t otal uplift incurred by the RTOs for an entire year. (PJM reported energy uplift costs greater tha n $500 million for January 2014.) Commenters stated that in addition, record high natural gas price spikes drove up prices to electric end use customers, both in real-time an d over the past year, as higher wholesale electric prices were passed through in retail elect ric rates.

Commenters stated that the final rule should be mod eled and studied by NERC, the RTOs, and by state utility boards to simulate the impact on r eliability. Commenters stated that the modeling

should include recommendations and cost estimates f or infrastructure and upgrades needed to maintain high reliability and power quality, includ ing transmission and distribution equipment upgrades and build-out, plans to meet incremental a nd large load growth, and build-out of transmission and natural gas infrastructure.

Commenters stated that in SPP's Reliability Impact Assessment of the EPA's Proposed Clean Power Plan dated October 8, 2014, the RTO reported on its analysis of the impact of the proposed rule. Commenters stated that its work ind icates an expected increase in thermal overloads and low voltages due to EPA's assumed ret irements, and that its summer peak modeling runs were not solving under a single conti ngency due to an extreme lack of reactive support. Commenters stated that under the Clean P ower Plan, its minimum required reserve margin of 13.6% cannot be maintained and the reserv e margin will fall to a -4.0% by 2024, as it experiences a capacity deficit of approximately 10, 100 MW. Commenters stated that SPP has emphasized in its Assessment that the Clean Power P lan will require an unprecedented level of coordination and study by local, regional and natio nal experts before it can possibly be implemented.225

Commenters stated that the NERC report emphasizes t he need for a "Reliability Assurance Mechanism," or a reliability "back-stop" to preserv e the reliability of the Bulk Power System (BPS) and manage impending risks to the BPS.

Response 24: The implementing regulations at 40 CFR part 60.26 r equire that each state plan show the State has legal authority to carry out the plan. The EPA notes that for state plans under CAA section 111d, usually it is the state environme ntal agency that will be responsible for submitting and implementing a plan per the emission guidelines. However, under the implementing regulations, states may authorize a st ate governmental agency, or local agency, other than the air pollution control agency to carr y out the plan if the plan demonstrates to the EPA’s satisfaction that such agency has the legal a uthority to implement the plan.

EPA encourages the State agency with appropriate le gal authority to work closely with the other state agencies where a state plan affects those age ncies area of jurisdiction. These other agencies are likely to include the state public utility comm ission and state energy offices and possibly others. Close coordination among these agencies wil l help to produce a high quality plan.

The ISOs/ and RTO’s are not under the jurisdiction of states. However the ISO/RTO Council has offered to assit the states as they develop and implement their plans. EPA encourages the states to discuss state plan design with these orga nizations and make use of their capabilities.

Comment 25: Multiple commenters made statements concerning FER C regulations and FERC jurisdiction under the FPA.

Commenters asked that "EPA, in its dealings with FERC, seek ways to asses s the effect of the proposed Rule on natural gas delivery systems and e nsure natural gas deliverability, which is outside the control of electric utilities, is suffi ciently reliable to permit compliance with the fina l

rule."

Commenters stated that "FERC is legally-designated with the authority and responsibility for grid reliability"

and "The most efficient and productive manner of moving forward with the proposed Rule's implementation is for FERC and EPA to work closely and effectively together regarding the mandates imposed by the proposed Rule , mindful of reliability and other electric grid issues, for the benefit of the country, includ ing the electric industry." Commenters noted that

there are "aspects of the proposed Rule that have the potenti al to abridge or affect FERC's jurisdiction over grid reliability, specifically, a nd the utility industry, generally."

Commenters noted that FERC "has oversight over the re-dispatch from coal-fired EGUs to natural gas-fired EGUs to the extent that it includ es wholesale generation or interstate

commerce transactions."

Commenters noted that "to comply with the Clean Power Plan, states may have to submit plans that may contradict FERC r equirements, which potentially sets states up for failure."

Commenters asked for guidance to address this pote ntial conflict between the two agencies.226

Commenters stated that FERC and NERC "have the expe rtise on the reliability implications of altering the generation resource mix in the nation' s energy markets."

Commenters asked that FERC be involved to assess "b oth the reliability implications of the Clean Power Plan as well as its implications for a host of issues that fall within FERC's jurisdiction."

Commenters reminded EPA of the Energy Policy Act of 2005 where Congress recognized that "the population density of the New York City area, the percentage of the population that lives or works in very tall buildings and relies upon underg round transportation, and the critical importance of institutions located there intensify the need to maintain the reliability of New York's electric system."

Commenters stated, "EPA's proposed CPP rule impinge s on FERC's regulatory primacy over energy markets and ensuring the reliable operation of the bulk electric system" and "EPA should respect the equal and exclusive jurisdiction of FER C and not seek to dictate electricity policy that could have harmful impacts on grid reliability ."

Commenters noted, "Congress clearly intended FERC t o have exclusive jurisdiction over wholesale, transmission and grid reliability becaus e it granted the agency such jurisdiction in the FPA as modified by the Energy Policy Act of 2005." Commenters noted that Congress "intended that the CAA be confined to the regulation of air p ollution and not the energy sector writ large, which is under the statutory jurisdiction of FERC." and "clearly intended that matters that can be

left to the states must be left with the states."

Commenters noted "States have jurisdiction over ret ail markets, while FERC has jurisdiction

over wholesale markets."

Commenters stated that "The Section 111(d) proposal presents significant jurisdictional challenges between the Federal Energy Regulatory Co mmission (FERC) and U.S. EPA, and in fact has been referred to as a 'jurisdictional trai n wreck."

Commenters stated, "Under the Federal Power Act, FE RC has jurisdiction to promulgate and enforce mandatory reliability standards for the bul k-power system, a power that FERC has delegated to the North American Reliability Council (NERC)" to "ensure reliable operation of the bulk-power system."

Commenters noted that "States cannot force retireme nt of generation facilities if the facilities must run to ensure system reliability." According t o commenters, "Even if states were to adopt laws completely prohibiting production by certain t ypes of generation facilities, states could not guarantee that those facilities would retire or cea se to dispatch" because Section 215 of the FPA grants FERC jurisdiction to "promulgate and enforce mandatory 'reliability standards' for the bulk-power system, a power that FERC has delegated to the North American Electric Reliability Corporation (NERC)." According to commenters, "If a generation facility proposes to retire, the

relevant RTO must determine whether the retirement of that facility will result in the violation of a NERC reliability standard or otherwise jeopardize the reliable operation of the bulk-power system." Commenters continued by noted that "If the RTO determines that retirement of a227

facility will jeopardize the reliable operation of the bulk-power system, the RTO may require that the facility continue to operate." Commenters further noted that "an RTO may require a facility to continue running if it determines that the facility's retirement will result in the overlo ad of transmission facilities or unacceptable voltage levels."

Commenters noted, "there is a direct conflict in th e building block 4 energy efficiency measures and the objectives of FERC in Order 745 to encourag e demand-side participation in organized markets." according to commenters, "Allowing energy efficiency to participate in regional cap and trade markets could tie the concepts together, but as currently formulated the CPP does not allow a regional approach to energy efficiency."

On Order 1000, commenters stated that the rule does not directly address transmission but will "have other impacts on transmission planning and in vestment" including "changes in dispatch under building block 2" that will "change flows on the transmission system, and could even

overload certain lines." Commenters noted that "Uti lities and RTOs with responsibilities for transmission planning and operations will have to t ake these changes into account, but without knowledge of what the final rules will look like or how plants will be dispatched, it is extremely difficult to do the kind of transmission planning e nvisioned and encouraged by FERC Order

1000." Commenters noted that "It seems like the two agencies, EPA and FERC, have different visions of how the future electric industry should operate."

Commenters also commented on FERC's role in dispatc h decisions: "FERC has regulatory authority over the rates, terms and conditions of w holesale power sales and interstate transmission" which includes "exclusive authority o ver RTOs (with the exception of the Electric Reliability Council of Texas ISO which [is] exempt from FERC regulation under a provision of the Federal Power Act)." According to commenters, " Regulation of RTOs occurs primarily under sections 205 and 206 of the Federal Power Act, whic h require that rates, terms and conditions of service be 'just and reasonable' and not unduly dis criminatory" which traditionally has meant that "rates be set at the lowest possible level consiste nt with adequate returns for investors."

Commenters continued: "The just and reasonableness standard of the Federal Power Act is really an economic standard, but under the CPP, RTOs may b e required to make planning and operational decisions based on environmental requir ements." According to commenters, "The changes in operating and other agreements that will be needed to allow the RTO to make these decisions will have to be approved by FERC under th e just and reasonable standard." According to commenters, "There is little precedent, and not much analysis to suggest how FERC can and will apply this economic standard to environmental decisions."

Commenters commented on the Energy Policy Act of 20 05, which gave the FERC authority to set reliability standards governing the nation's in terconnected electric systems. Commenters noted that the rule "does not expect that reliabili ty of electric systems will be harmed by requiring states to meet the proposed emission requ irements" but "is silent about what happens if an operating RTO or utility is faced with violating emissions requirements or violating reliability standards or criteria." According to commenters, "O perators are trained to ensure reliability first, but there may be situations where choices are neces sary with economic consequences." According to commenters, "FERC has not yet said any thing about its expectations for maintaining reliability under the CPP, nor has it i nitiated any studies." Commenters asked that228

the two regulatory regimes be reconciled so that ut ility operators are not faced with the "reliability versus environmental penalty dilemma."

Commenters stated, "EPA's proposed rule to regulate existing EGUs under Section 111(d) of the CAA impinges on the Federal Energy Regulatory Commi ssion's ('FERC') regulatory primacy over wholesale energy markets and reliable operatio n of the bulk electric system." Commenters also noted, "EPA must respect the equal and exclusi ve jurisdiction of FERC and not seek to dictate electricity policy that could have harmful impacts on grid reliability." Commenters noted "Under section 215 of the FPA, FERC is the executiv e agency responsible for promoting the reliability of the nation's bulk power system." Com menters continued, "To that end, FERC has certified the North American Electric Reliability C orporation ("NERC") to develop mandatory and enforceable reliability standards, subject to F ERC's approval." According to commenters, "It is thus FERC and NERC, rather than the EPA, which h ave the expertise on the reliability implications of altering the generation resource mi x in the nation's energy markets."

Commenters noted "The Federal Energy Regulatory Com mission (FERC) has over the past few years adopted policies to promote expansion of tran smission lines" including "Order 1000 adopted on July 21, 2011."

Commenters noted that "Section 215 of the Federal P ower Act authorizes FERC to oversee the reliable operation of the Nation's interconnected e lectrical bulk power system" and stated that "FERC's jurisdiction over the nationwide interconne cted electrical bulk power system means that FERC has a crucial role to play in ensuring that en vironmental regulation does not impair or impede grid reliability." However, according to com menters, "there has been a troublesome lack of coordination between FERC and EPA regarding this proposal." Commenters shared the opinion of Southwest Power Pool (SPP) and North Ame rican Electric Reliability Corporation (NERC) that "significant concerns [with] the Propos ed Rule as drafted could pose a threat to the reliability of the electric power grid." Commenters noted that FERC has exclusive jurisdiction to regulate wholesale sales of electricity and the tra nsmission of electricity in interstate commerce. According to commenters, "The Proposed Rule contemp lates that States will direct utilities to substitute the use of higher emitting CO2 generator s with lower- or zero-emitting generators, through some combination of shifting from coal-fire d units to increased dependence on gas generation, renewables and/or demand response." Com menters noted that the rule "incorrectly assumes that States can regulate activities that ar e subject to FERC's jurisdiction or are otherwise beyond their authority."

Commenters noted that the proposed rule's environme ntal dispatch is "likely inconsistent with a long list of provisions in FERC's Open Access Trans mission Tariff (OATT) defining transmission customers' transmission rights, includ ing the priorities different customers have for access to the transmission system." As an example, commenters noted that "the OATT provides 'first-in-time' priority to transmission capacity f or generation resources that qualify as 'Designated Network Resources' under FERC's pro for ma OATT." According to commenters, "priority to transmission capacity used for 'long-t erm firm transmission service' over the bulk transmission system is assigned transmission custom ers based on a standard that allocates transmission capacity to users (including utilities seeking to serve their own native load) based on a 'first-in-time principle' which applies "regar dless of the fuel-source of any generation that may be competing for access to the transmission sys tem." According to commenters, "a229

transmission customer using transmission capacity for purposes of delivering power from a coalfired generation unit has priority access to transm ission capacity over the incumbent utility that may want the same transmission capacity to serve na tive load with renewable generation as long as the transmission customer requested transmission service first." According to commenters, "A utility cannot reserve transmission capacity for fu ture but currently 'undesignated' network

resources to the detriment to a transmission custom ers' prior-queued request for transmission

service."

Commenters stated that "while FERC has made signifi cant steps towards the integration of renewables, those efforts are in their preliminary stages, partially because of their potential to impact reliability." Commenters also noted that "St ates cannot lawfully implement an environmental dispatch that conflicts with FERC tar iffs, whether they relate to organized markets or any other FERC-jurisdictional service." According to commenters, "it is FERC, and not the States, that must control how renewable res ources may be used to implement the environmental dispatch that the Proposed Rule conte mplates."

Commenters stated that it is vital to the security of America's electric power supply that EPA reexamine the grid reliability impacts of the propose d rule, particularly in conjunction with other EPA rules that are also closing our most dependable sources of electricity. Commenters stated that EPA has not done enough to ensure that the pow er grid remains reliable during the very aggressive implementation period it has proposed. C ommenters stated that in the face of an unprecedented number of power plant closures, the E PA has consistently shrugged off potential reliability problems. In the rule, EPA sums up its position by simply stating, "the proposed rule will not raise significant concerns over regional r esource adequacy or raise the potential for interregional grid problems."

Commenters stated that a number of stakeholders hol d an opposite position. Commenters stated that the organizations, utilities, and regulatory b odies that have the most direct interest in grid reliability are warning EPA that the rule most cert ainly does raise significant concerns. Commenters stated that the Electric Reliability Cou ncil of Texas (ERCOT) issued a report criticizing the impacts of the proposed plan. Comme nters stated that the Southwest Power Pool (SPP) similarly concluded in its own report on the rule that the impacts would be significant and problematic. Commenters stated that the North Ameri can Electric Reliability Corporation (NERC), the organization tasked with developing man datory grid reliability standards after the 2003 blackout, also issued a report in November tha t was very critical of the EPA rule and its effects on the grid.

Commenters stated that NERC concludes that coal ret irement is problematic. Commenters stated that the report notes: The number of estimated reti rements identified in the EPA's proposed rule may be conservative if the assumptions prove to be unachievable. Commenters stated that developing suitable replacement generation resource s to maintain adequate reserve margin levels may represent a significant reliability challenge, given the constrained time period for implementation. Commenters stated that new reliabil ity challenges may arise with the integration of generation resources that have different ERS cha racteristics than the units that are projected to

retire. Commenters stated that NERC is concerned th at developing replacement generation sources during EPA's constrained implementation tim e period will be difficult, and it calls into230

the question EPA's assumptions. Given that, comment ers stated, the agency should be prepared for a scenario in which more capacity is lost than it previously anticipated.

Commenters stated that FERC has issued warnings sim ilar to those of IER's report. Commenters stated that the agency's analysis is particularly i mportant because FERC officials are the government's experts on grid reliability. Commenter s stated that FERC Commissioner Philip Moeller, warned: Prices will definitely rise. Comme nters stated he testified as well before the Senate Committee on Energy and Natural Resources on April 10, 2014 and again affirmed the importance of grid reliability over anything else. Commenters stated that Moeller expressed skepticism about the proposed rule, saying that he feared that EPA had "greatly underestimated the amount of power production that would be retire d due to these rules." EPA should thus seriously reconsider its estimates of how much powe r would go offline as a result of its rule.

Commenters stated that regional grid operators acro ss the country warn of the reliability risks associated with the sweeping retirements of coal-fi red generation that would result from the combination of EPA power plant rules, including the proposed rulemaking.

Commenters stated that the Midcontinent Independent System Operator (MISO) conducted an analysis which suggests that the proposal would put an additional 14,000 MW of coal-fired power at risk of retirement, on top of the 12,600 M W already slated to retire by 2016 because of the MATS rule. Commenters stated that the rule may increase the likelihood of a loss of load and an emergency situation. Commenters stated that EPA' s analysis in the proposed rule is inadequate, and we urge the agency to seriously con sider and address these issues.

Commenters stated that NERC claims that: compliance with the carbon regulations will not be possible without significant investment in new gene ration and associated major improvements to both the electric transmission and natural gas infr astructure to accommodate new generation. Commenters stated the results indicate that by 2020 , SPP's anticipated reserve margin would be 5 percent, representing a capacity margin deficit of approximately 4,500 MW. By 2024, 10,000 MW beyond current plans would be needed to maintain their reserve margin. Commenters stated given the 8- to 10-year timeline needed to plan for and construct these additional resources, SPP

has concluded that there is not sufficient time to achieve compliance with the EPA's interim goals, and that widespread reliability impacts are likely.

Commenters stated SPP's conclusion that as a result of the assumed EPA retirements with no resource additions, the SPP network was so severely stressed by large reactive deficiencies that the software used in the analysis was unable to pro duce meaningful results, which is generally indicative of voltage collapse and blackout conditi ons.

Commenters stated that ERCOT's primary concern with the Clean Power Plan is that the timing and scale of the expected changes needed to reach t he CO2 emission goals could have a harmful impact on reliability. Commenters stated that speci fically, implementation of the Clean Power Plan in the ERCOT region, particularly to meet the Plan's interim goal, is likely to lead to reduced grid reliability for certain periods and an increase in localized grid challenges

Commenters stated that EPA's Response to Grid Exper ts Does Not Address Their Concerns. Commenters stated that EPA has been summarily dismi ssive of concerns to grid reliability.231

Commenters stated that administrator Gina McCarthy gave a speech arguing that "for decades, power plants have met pollution limits without risk ing reliability." Commenters added, McCarthy, however, ignores large differences betwee n past regulations and the proposed rulemaking. Commenters stated that the proposed rul e will likely cause an unprecedented number of power plants to close without reliable so urces of replacement generation. Commenters stated that McCarthy also fails to address the reli ability effects of integrating renewables into the electric grid, arguing, "If anything, what threaten s reliability and causes blackouts is devastating extreme weather fueled by climate change." Commente rs stated that her statement, however, stands in opposition to the Intergovernmental Panel on Climate Change (IPCC)'s latest report. Commenters stated that this Fifth Assessment Report notes that "there is limited evidence of changes in extremes associated with other climate v ariables since the mid-20th century." Commenters stated that the IPCC's opinion matters b ecause it is frequently cited as the leading expert source on climate change assessments. Commen ters stated that even if extreme weather events do occur, Americans will be unable to cope w ith them without reliable power to keep

their homes and offices lit and warm. Commenters st ated that EPA responded to NERC's concerns by arguing that "there have been no instan ces in which "the Clean Air Act standards have caused the lights to go out and the Clean Powe r Plan reflects the EPA's continued commitment to ensuring reliability as standards and programs move forward." Commenters

stated that although EPA compares the proposed rulemaking to ot her rules promulgated under the Clean Air Act, it provides no basis for claimin g that this rule will have the exact same effects as prior rules. Commenters stated that arguing that , because other rules did not cause blackouts or brownouts, the proposed rulemaking will also hav e no negative impacts on the grid, requires far more substantive evidence specific to the propo sed rule.

Commenters stated that there appears to be a high l ikelihood that implementation of the proposed EPSP could threaten grid reliability and stability.

Commenters referenced NERC who has stated that the proposed rule could harm the reliability of the power grid, and who cautioned that the propo sed rule contemplates a wholesale shift from

coal combustion towards more efficient and cleaner- burning combined cycle natural gas plants, an increase in renewables and big efficiency improv ements to cut electricity demand through the 2020s. The commenters also stated the NERC has expr essed concerns that such a rapid transition will damage capacity margins, make it harder to mai ntain aspects of power quality and leave the grid vulnerable to extreme weather; and any one of these outcome would be detrimental to

manufacturers.

Commenters stated that the Proposed Rule underestim ates the critical importance of ensuring the reliability of the electric system. Commenters stat ed that building blocks 2 and 3 involve the displacement of coal-fired EGUs, which are the most reliable form of generation. Commenters stated that the risk associated with coal plant ret irements was made evident during the severe

cold weather events of the winter of 2013-2014. Com menters stated that during this period of increased energy demand, wind produced only 4.7 per cent of the nation's power while solar produced less than 0.2 percent Nuclear provided onl y 5 percent of incremental year-over-year generation, and hydroelectric output declined 13 pe rcent. Commenters stated that power generation from natural gas decreased when the reso urce was diverted for residential heating needs and gas prices soared to over three times tha t of coal (Btu basis). Commenters stated that232

only the availability and operation of coal units s cheduled for retirement over the next two years enabled the power sector to meet demand during peri ods of harsh weather events.

Commenters stated that before making any changes to the generation portfolio pursuant to building blocks 2 and 3, states, utilities, FERC, a nd reliability councils will need to assess resource adequacy, regional power flow, regional st ability and voltage security, natural gas supply and pipeline constraints, operating reserves , system restoration and blackstart protocols, and limited controllability of renewable generation . Increased reliance on natural gas over coal also will require expansion of natural gas pipeline transportation and storage capabilities. Commenters stated that potential reliability issues are most acute in areas where power generators rely on interruptible natural gas pipeli ne transportation.

Commenters stated that in November 2014, NERC publi shed a white paper titled "Potential Reliability Impacts of EPA's Proposed Clean Power P lan," in which NERC provided valuable insight into planned generation retirements, load g rowth, renewable resource development, and energy efficiency measures that impact CO2 emission s and the EPA's target-driven assumptions. Commenters stated that they support NERC's conclusi ons and recommendations and reiterates herein that analysis must be performed to demonstra te electric system reliability before states commit to plans that include changes to their curre nt generation portfolios.

Commenters wrote of concerns of accelerated retirem ent of units by resource owners in ERCOT within a short period of time rather retrofitting t o comply with environmental regulations. The commenters stated if ERCOT did not receive early no tification it could affect reliability of the ERCOT grid since coal resources provide essential r eliability services, including reactive power and voltage support, inertial support, frequency re sponse, and ramping capability.

Commenters stated that the Rule should require EPA to complete a reliability study on a state by state basis to assess impact of rule requirements. Commenters stated that in so doing, EPA should invite and consider technical input from FER C, the North American Electric Reliability Corporation, RTOs and other balancing authorities, on potential electric reliability impacts of the section 111(d) program, as well as economic analyse s from states on rate and other cost impacts of the program.

Commenters stated that as drafted, the proposal req uires wholesale shifts in the way electricity is generated in this country and does so without regar d to the need for expanded electric and natural gas transmission infrastructure. Commenters stated that the failure of EPA to conduct meaningful and substantive consultation with NERC a nd FERC to ensure that the Clean Power Plan can be implemented without grave threats to re liability requires that the proposal be withdrawn until such time as those rigorous studies are completed and can fully inform the rulemaking process.

Commenters stated that as is demonstrated by the re cent publication by NERC of its analysis of the Clean Power Plan, the proposal represents an un precedented and unproven attempt to make wholesale changes to the operation of the electric infrastructure, which threatens the continued operation of the electric grid on a local, regional and national level. Commenters stated that in its report "Potential Reliability Impacts of EPA's Proposed Clean Power Plan: Initial Reliability Review," November 2014 (hereafter "NERC Report"), N ERC provides a non-partisan, objective233

evaluation of the potential implication of the prop osed environmental regulations in an effort to "inform regulators, state officials, public utility commissioners, utilities, and other impacted

stakeholders." Commenters stated that this NERC R eport establishes that the EPA proposal has not undergone a rigorous reliability evaluation, an d that in initiating such an assessment, there are serious and complex reliability issues that hav e not been addressed in the Clean Power Plan, and that it should not go into effect until those c oncerns have been adequately addressed and

resolved

Commenters stated that the NERC report says that th e Clean Power Plan will force the premature closure of base load plants around the country that have not been included in existing NERC case study work to evaluate the impact of such closures, jeopardizing reliable power supply for

millions of Americans. Commenters stated that even if we assume that energy efficiency will reduce demand by 1.5% nationwide (an assumption wit h which commenters do not agree), that will be inadequate to fill the major void caused wh en hundreds of gigawatts of coal-fired power plants close. Commenters stated that the NERC repo rt says that "As reliance increases more on natural gas for both baseload and on-peak capacity, it is important to also examine potential risks associated with reduced diversity and increased dep endence on a single fuel type. Commenters stated that the NERC report says that with this shi ft toward more natural gas consumption in the power sector, the power industry will become increa singly vulnerable to natural gas supply and transportation risks."

Commenters stated that the NERC report says that th e necessary transmission to support natural gas cannot be permitted, sited and constructed in t ime to avoid a major shortfall in resources around the country, a concern that NERC details thr oughout its report. Commenters stated that the NERC report says that instead, the Clean Power Plan's "analysis" "assumes that adequate transmission capacity is available to deliver any r esources located in, or transferred to, the region."

Commenters stated that independent experts and key stakeholders are increasingly alarmed that the Proposed Rule will dramatically increase electr ical grid stress and reliability challenges.

Commenters stated that the North American Electrici ty Reliability Corporation ("NERC") reviewed the Proposed Rule and concluded that the a gency's proposed regulatory deadlines "would increase the use of controlled load shedding and potential for wide-scale, uncontrolled outages." Commenters stated that the Southwest Powe r Pool ("SPP"), which is the Federal Energy Regulatory Commission ("FERC") approved Regi onal Transmission Organization ("RTO") for AECC (NSA and NYS's wholesale electrici ty provider), has determined through modeling that without significant changes, the Prop osed Rule, will result in "numerous thermal overloads and low voltage occurrences" in the SPP R egion, and that the Proposed Rule will have "serious, detrimental impacts on the reliable opera tion of the bulk electric system in the SPP region, introducing the very real possibility of ro lling blackouts or cascading outages that will have significant impacts on human health, public sa fety and economic activity within the region." Commenters stated that during winter 2013- 1014, extreme cold temperatures put a tremendous strain on the electrical grid and result ed in a price spike on the electricity spot market covering the mid-Atlantic and parts of the Midwest. Commenters stated that specifically, the cost of producing electricity in those areas climbed abo ve $1,000 per Mwh for the first time as cold temperatures hit the East Coast. Commenters stated that according to the Energy Information234

Administration, the average wholesale price in that region last year was $42/Mwh. Commenters stated that this price spike was due to strong dema nd for natural gas for heating and electricity production.

Commenters stated that they are amazed that U.S. EP A would not formally analyze information obtained during EPA, FERC, DOE meetings regarding r eliability, as it appears U.S. EPA has also not done under this proposal. Commenters state d that FERC reported "concerns and uncertainty related to potential reliability and pr ice impacts associated with environmental regulations." Commenters stated that PJM coordinate s the movement of electricity through all or parts of Delaware, Illinois, Indiana, Kentucky, Mar yland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virgi nia and the District of Columbia. Commenters stated that this geographically concentr ated retirement is occurring all within the PJM region yet U.S. EPA made no attempt to specific ally analyze reliability concerns within the specific regions under this proposal

Commenters stated that IRC prepared a proposal that would provide a means to assess and mitigate reliability impacts resulting from complia nce action. Commenters cited the NERC report that assesses reliability in response to the rule.

Commenters stated that to promote open and competit ive markets, FERC encouraged the formation of System Operators. Commenters said in a reas of the country where the grid is controlled by a System Operator, the System Operato r facilitates "the interstate sales of electricity products, including energy and capacity , by managing marketplaces where those products may be exchanged." Commenters said the Sy stem Operator also "manages the flow of electric energy through the regional power grid, 'd ispatching' energy in real time to where it is needed." Commenters said in regions controlled by System Operators, these energy and capacity

auctions determine the rates for the transmission a nd sale of energy in interstate commerce. Commenters said accordingly, these wholesale electr icity and capacity markets are subject to the exclusive oversight and regulation of FERC.

Commenters stated, EPA claims that the Proposed Gui delines were "substantially informed by the extensive input from states and a wide range of stakeholders . . . since the summer of 2013." 79 Fed. Reg. at 34,835; see also Id. at 34,845-51. Commenters said, it is clear, however, from statements made by FERC commissioners, including th eir sworn testimony before the House of Representatives' Committee on Energy and Commerce, Subcommittee on Energy and Power on July 29, 2014, that consultations with FERC have be en extremely limited. Commenters said, it appears that only the office of FERC's Chairman had any contact with EPA and that those contacts were both limited and "private and paperle ss." Moeller Testimony at 7. Commenters said, no other Commissioners appear to have been in volved in, or made aware of the details of,

the limited FERC staff communications with EPA.

Commenters stated, the Commissioners' testimony and responses to written questions also make it clear that FERC: (i) was not involved in prepari ng the Technical Support Document ("TSD") entitled "Resource Adequacy and Reliability Analysi s," EPA-HQ-OAR-2013-0602-0368, that accompanied the Proposed Guidelines; (ii) has not c onducted an independent study of the Proposed Guidelines' reliability impacts; and (iii) did not verify the feasibility of EPA's optimistic assumptions concerning the major new ele ctric transmission and gas pipeline235

infrastructure development that must take place for the emission reductions contemplated by the Proposed Guidelines to be achieved (which are discu ssed separately). Commenters said, to date, EPA has also not accepted requests that FERC be giv en a formal role, along with NERC and other entities with reliability expertise, in discu ssing the reliability implications of the Proposed Guidelines. Moeller Testimony at 6 ("Going forward and at a minimum, I will reiterate my request for a formal role for the Commission with t he EPA as it relates especially to the reliability implications of the proposal. Convening the appropriate reliability experts (including the Commission, and possibly the North American Ele ctric Reliability Corporation, electric wholesale market operators, power generators, elect ricity consumers, along with input from the states) to examine the reliability implications is necessary to avoid additional unintended consequences.").

Commenters stated, Commissioner Clark recently reit erated that EPA has not seriously engaged FERC on reliability issues. Commenters said, most r ecently, the Chairmen of the House Energy

and Commerce Committee and the Subcommittee on Ener gy & Power and the Ranking Member of the Senate Energy & Natural Resources Committee wrote a letter to FERC Chairman Cheryl

A. LaFleur that noted the evident lack of substanti ve outreach by EPA. Commenters said, the letter asked FERC to take action to "begin to mitig ate EPA's failure to engage FERC and other relevant agencies . . . ."

Commenters stated, EPA's refusal to consider FERC's expertise regarding wholesale power markets, transmission operations, the real world im pact of transmission constraints, and the BPS is inexplicable, arbitrary, and capricious. Comment ers said, Article III courts frequently recognize and defer to FERC's expertise in these ma tters. Commenters said, EPA's failure to show similar deference has resulted in a proposed r ule that fundamentally misunderstands the technical realities of the modern utility sector an d is therefore not the product of reasoned decision-making.

Response 25: EPA disagrees with these comments where they sugge st a conflict between FERC

and this final rule. The final rule will not confl ict with FERC jurisdiction or regulations.

Commenters raise concerns about the final rule and FERC jurisdiction over grid reliability and wholesale market dispatch. There concerns are simp ly not valid; EPA regulations have successfully coexisted with FERC regulations to ens ure that grid operations are both secure and environmentally sound, and will continue to do so u nder this rule. Contrary to these comments, the final rule is entirely consistent with continui ng operation of security constrained economic dispatch in FERC jurisdictional markets, and does n ot prescribe anything resembling economic dispatch. On the contrary, the final rule assumes planning for transmission will occur along the lines of FERC transmission planning regulations, su ch as Order 1000, which provides planning mechanisms to incorporate public policy initiative like this final rule.

EPA also relies on FERC designated or regulated ent ities, such as NERC and the Reliability Authorities, to provide information and assistance in ensuring that state planning considers reliability. EPA works closely with RTOs in impleme nting current EPA regulations such as MATS and expects to have a continuing coordination during the implementation of this rule. EPA has carefully considered reliability in the dev elopment of this rule, and does not believe

there are conflicts between the rule and reliabilit y.236

Comment 26: Multiple commenters noted the importance that reli ability plays in rural America, especially with respect to farming, ranching, and a griculture. Commenters noted that the rule will violate the Rural Electrification Act (REA) Ma ndate to Provide Affordable and Reliable

Power to Rural America.

Commenters noted, "Texans who live in the rural are as of my county can face greater electricreliability challenges than some more urban areas o f the state." Commenters noted that "Rural electric cooperatives in parts of Texas have often struggled over the years to have adequate and economical sources of generation and transmission t o provide to their members."

Commenters further stated that the rule will "resul t in the significant reduction in either the operation of or retirement of nearly all coal-fired EGUs, many of which are owned and operated by rural electric cooperatives."

Commenters stated that the rule "violates the [Rura l Electrification Act] and over sixteen additional statutes establishing the federal mandat e that rural electric cooperatives reliably serve

rural America."

Commenters noted, "Tennessee farmers need an effici ent, reliable, and affordable energy supply. Energy is a major expense for producers of crops, l ivestock, poultry, and dairy commodities." Commenters noted that "Agricultural industries that supply, process, and produce agricultural products and input items also are major users of en ergy" and this proposal "affect[s] the bottom line of farmers" and "places Tennessee farmers at a competitive disadvantage to producers in

other nations."

Commenters stated, "Farmers and ranchers depend on reliable as well as affordable sources of energy to operate their businesses and depend upon stable input costs to bring agricultural products to American and worldwide consumers. "

Response 26: The EPA is well aware of the concerns about the CPP in rural America. Fortunately the rule is not expected to have a larg e impact on electricity prices. Further the USDA has programs that can help rural electric coop eratives and others in rural America invest in renewable generation and in energy efficiency wh ich can both help states achieve the goals of the CPP. We note that Texas, with its well-develop ed energy efficiency program and substantial renewable generation is well situated to respond to the CPP.

Comment 27: Commenters noted that the role of regional transmi ssion organizations (RTOs) should not be given the authority to create new mar kets as compliance vehicles.

Commenters noted that "the creation of new, mandato ry markets or trading platforms run by the RTOs will significantly complicate the already over ly complex competitive energy market and could very well add unnecessary costs." Commenters voiced concerns with "the lack of consumer focus and transparency in the mandatory en ergy and capacity markets that some RTOs237

run today, as well as how the RTOs themselves are o perated and governed" and asked that those approaches not be broadened. Commenters also noted that it is "important to balance the reliability and environmental compliance with the u ltimate costs on load (consumers and wholesale customers)."

Response 27: The EPA recognizes that the RTOs and ISOs can play a valuable role in CPP compliance. The final rule suggests that the state s consult with them as to the reliability impacts of state plans as they are developing those plans. States can chose to incorporate a larger role for the RTO’s in their state plans if they see that as appropriate; however, regional transmission organizations in wholesale electricity markets are regulated by FERC, and any new markets run by RTOs cannot be created except through FERC order s under its rules for such organizations. The final rule, itself, does not give them authorit y to run trading platforms.

Comment 28: Commenters commented on the plan's reliance on nuc lear power plants.

Commenters stated that there were no issues "supply ing places in the Northeast with nuclear energy" during the Polar Vortex.

Commenters noted that "EPA's conception that nuclea r power is reliable is not applicable in the real world, because it is a logical fallacy to assu me that only 6% of a reactor's capacity would be

available."

Commenters noted that nuclear plants are more expen sive to operate than coal or renewable

energy resources.

Commenters noted that EPA is unlawfully encroaching upon the regulatory domain of the NRC and "EPA should avoid trespassing on NRC's unique r egulatory domain by presuming a positive outcome for NRC license renewal reviews." According to commenters, "Even assuming for purposes of argument that such encroachment is lawf ul, it would be extremely poor public policy for the EPA to build extended operation of aging an d increasingly dangerous reactors into its regulatory scheme as a fait accompli."

Response 28: EPA acknowledges the comments and has determined th at the BSER for the final rule will not include the proposed provisions for n uclear units in the setting of state goals. Please see VIII.G.2 of the preamble for fu rther discussion of the flexibility states have in developing state plans appropriate to ensure compli ance, the requirement that states consider system reliability in plan submittal, and a discuss ion of a Reliability Safety Valve.

Comment 29: Multiple commenters noted that the forced retireme nt of coal-fired generation will have a negative impact on reliability in the energy sector and would result in a large amount of

stranded costs.238

Commenters noted that the impact of unit retirement s is high. The commenters noted that the number of retirements could be underestimated by EP A because of other environmental regulations (e.g., 316(b) rule, CSAPR, MATS, FIP fo r Texas, the Regional Haze program, etc.).

Commenters stated that "Interior Alaska uses coal f ired power plants because it is the only available energy source capable [of] generating cos t effective, on-demand power." According to commenters, "Massive natural gas reserves are avail able hundreds of miles north at Prudhoe Bay, but until a multibillion dollar gas pipeline i s built that fuel is not an option."

Commenters stated, "Fossil fuels, such as coal, and environmental protection are not mutually exclusive--Georgia's energy portfolio is evidence o f this fact".

According to commenters, coal-fired generation is c ritical to the reliability of this nation's energy sector. According to the commenters, if a "signific ant portion of this nation's coal-fired generation is forced into retirement, which is a re alistic consequence of the Existing Source Proposal, then there may be catastrophic failures o f the grid in response to extreme weather events such as the polar vortex that occurred this past winter." See NERC, Potential Reliability Impacts of EPA's Proposed Clean Power Plan (Nov. 20 14) at 10.

Commenters noted that "Coal-fired generation has pr oven for decades that it is a reliable, predictable source of energy" because "our nation h as plentiful supplies of coal, which keeps costs low and predictable" and "because the fuel is solid and tangible, it is easily transported and

stored."

Commenters noted that coal is crucial due to its:

• availability

• affordability

• reliability

• delivery advantages over other sources

Commenters noted that "Coal-fired capacity provides reliable base power to help stabilize the electrical grid and a shift away from coal toward l ess predictable renewable energy sources as planned by this proposed rule will be problematic."

Commenters noted that "dispatchable resources like coal and natural gas provide a number of essential reliability services, including reactive power support, voltage support, frequency and ramping responses, and inertial support" that "vari able renewable resources cannot presently provide in a reliable and economical manner."

Commenters listed multiple reasons that coal should not be eliminated from electricity generation:239 • Clean. According to commenters, "Since 1970, coal g eneration in this country has tripled, but regulated emissions have decreased mor e than 90 percent" and work continues on "creating more efficient, cleaner burn ing coal-fired technology."

• Reliable. According to commenters, "Coal has provid ed more than 75 percent of Missouri's electric power for decades because it is a highly stable, reliable baseload fuel." Commenters noted that during the Polar Vortex, "coal fired-plants were the only sources of energy with the capacity t o meet the high demand."

• Affordable. Commenters noted that "Since 2000, the cost to produce electric power from coal has been one third of the cost to p roduce natural gas" showing that "the relative affordability of coal is the pri mary reason Missourians are accustomed to comparatively low energy rates."

• Abundant. According to commenters, "The U.S. has 27 percent of the world's coal securely located within its borders" and it is an " abundant local source of energy for the vast majority of states in the middle of th e country."

• Predictable. According to commenters, "Coal has the most stable pricing and output of any fuel" while natural gas, "has had the greatest price volatility of any fuel" and renewable energy sources, "such as wind a nd solar, are not reliable enough to be base-load fuels."

• Sustainable. According to commenters, "Contemporane ous land restoration ensures that active areas for mining operations rem ain small and are left in conditions that benefit local mining communities." Commenters also noted that "carbon capture and other clean coal technologies c ontinue to be developed and

U.S. should lead the world in their continued devel opment."

• Long-term resource. Commenters noted that "The U.S. has hundreds of years of coal in its mines and has the ability to advance cl ean coal technologies toward

near-zero emissions."

Commenters stated that the rule will "limit stabili ty and reliability by remov[ing] a viable fuel source from our nation's supply" and will "shut dow n virtually all existing coal fired fuel plants within 15 years." Commenters noted that "It is irre sponsible for the federal government to impose unrealistic and unachievable goals on our st ate, and the pressure on supply will negative[ly] impact our consumers and our economy."

Commenters noted the importance of coal to the US a nd the world:

• "Coal is essential to the achievement of the United Nations' Millennium Development Goals, which range from halving extreme poverty rates to achieving universal primary education."

• "strong relationship between coal and fossil fuel u se and global prosperity"240 • "coal is a plentiful, affordable resource and will therefore be essential to continued economic progress"

• "In the end, the World Bank and "its biggest shareh older," the United States, recognized that raising the developing world out of poverty depends on intelligent development and utilization of coal. That is an imp ortant lesson for the United States domestically as well."

Commenters noted that "No fossil-fueled generation facility in Virginia currently meets the carbon emission rate proposed for Virginia" because "that rate is lower than the emission rate of a new combined cycle natural gas facility." Accordi ng to commenters, "a compliance strategy of replacing all coal-fired generation facilities in V irginia with comparable amounts of state-of-theart natural gas combined cycle facilities would not satisfy the proposed rule.

Commenters referenced an analysis from ERCOT that s tated, "as electricity generation owners consider potential CPP compliance together with oth er pending environmental regulations such as MATS, regional haze, and the 316(b) Cooling Wate r Intake Structures rule, they may decide to retire units early rather than make investments to retrofit them to meet the requirements of these other rules." According to commenters, "ERCOT indicates that if such earlier coal retirements occur, grid reliability challenges coul d be experienced even sooner."

Commenters also stated that "There is simply no eco nomic, reliable, scalable, and timely way to replace the one-third to three-fourths of the coal plant shutdowns anticipated due to this proposed rule and other previous EPA environmental regulatio ns while also continuing to have electricity supplied at the flip-of-a-switch." Commenters state d, "This is especially apparent and especially critical given EPA's timeline for the existing sour ce rule as proposed, with interim goals from 2020-2029." According to commenters, "those interim goals would require carbon reductions

before 2020."

Commenters stated that shuttering coal facilities w ill result in stranded investments, which

"further undermines and erodes the State's economic health."

Commenters stated that utilities would essentially be penalized for increasing electricity production from existing sources and forced to prov ide energy from lower emitting sources in order to comply with the proposed state based goals despite the fact the electrification programs

would result in lower carbon emissions.

Commenters stated that the weather event in January and the reduction of generation capabilities within the PJM footprint demonstrated the vulnerabi lity of the system and is a preview of the challenges the system faces if generation capacity is prematurely taken off-line by these proposed rules. The commenters stated that the unre liability of the electricity supply is a

disincentive for businesses and manufacturers to in vest in Ohio and the Cleveland region and that additional burdensome regulation will accelera te this problem.

Response 29: EPA disagrees with these comments. The final rule does not force coal plants to close, and coal remains a major source of power thr oughout compliance with this rule, as documented in Chapter 3 of the RIA for this rule. Nor will the compliance lead to reliability241

issues. See previous responses in this section and Section VIII.G of the preamble for the treatment of reliability issues in the rule.

EPA also disagrees with comments that maintain the rule will result in stranded costs at coal plants. See Section 5.11 of this RTC for stranded costs issues.

Comment 30: Multiple commenters noted that there are differenc es between baseload generation and intermediate resources and replacing coal with NGCC as baseload generation will likely have negative impacts on grid reliability.

According to commenters, base-load resources "are d esigned to run continuously, irrespective of the short-term price signals" and "environmental re -dispatch of these units (without regard to its questionable technically feasibility, since these u nits have long startup and shutdown times) will further deteriorate the underlying economics of bas e-load generation in the ISOs by limiting the output that is sold."

Commenters also noted that coal units dispatched wi th minimum load will increase the emissions per MWh (of CO2 and criteria pollutant emissions) d ue to inefficient operations.

Commenters stated that "Conventional power plants s hould not be penalized for the inability of non-dispatchable power to meet peak demand" and "a different approach is needed to consider the cost of achieving environmental benefits, inclu ding subsidies that are not being considered."

Commenters stated "EPA has not performed a proper a ssessment of whether the proposed Clean Power Plan will result in an appropriate mix of bas eload and intermediate resources needed to serve load reliably and cost-effectively."

Commenters noted that coal units "are generally run as base load units, operating at or near full output around the clock" and are "ill-suited to fol lowing variations in load over the course of the day" due to "long ramp times." According to comment ers, "NGCC units can also run as baseload [but] they are better suited to provide flexible se rvice, including operation as intermediate resources, which can ramp up or down quickly in res ponse to changes in demand and changes in other resources, such as wind and solar generation. "

Commenters stated that "Baseload capacity is a key component of a reliable generating system and provides value particularly during the peak hou rs of a utility's peak season" and "If Unit 3 is shut down, Tri-State will not have sufficient capac ity to serve firm load, and will be required to construct new generation to replace that capacity, further increasing costs to its member systems."

According to commenters, "Nuclear units, coal units and other forms of baseload capacity provide these necessary services that are crucial f or grid reliability, without which any power system cannot operate safely and reliably."

Response 30: Economic dispatch which helps to assure affordable electricity in the US and the economics of the power sector are dictating the typ es of generating capacity that is used in the242

electric power sector. The availability of abundant low cost natural gas is replacing coal for base load capacity even in the absence of the Clean Powe r Plan. In addition, the growth of renewable generation, itself dictated by falling prices, is a lso making natural gas an attractive source of power as it is flexible and can be used along with variable renewables in a way that neither coal, nor nuclear can. Nuclear energy with its very low fuel costs is in a different position than coal as it will run as long as it is available. However, ev en with the CPP fully implemented, coal does not go away. Even in 2030 and substantial part of the electricity generated in the US will come

from coal.

Comment 31: Multiple commenters noted that unit retirements ah ead of the unit's end of useful life is detrimental to reliability.

Commenters noted that "Another consequence of the f orced closure of the existing fleet of generating units that cannot achieve the more strin gent emissions targets will be accelerated depreciation and other stranded costs that result f rom retiring generation resources well ahead of

their economic or useful lives."

Commenters recommended "Retiring coal units as they reach their normal end -of-life" rather than according to the rule schedule.

Commenters stated that the guidelines should "Avoid premature retirements and stranded

assets."

Commenters asked that EPA consider the loss of usef ul life from coal-fired units, such as those that have seen significant investment based on prio r EPA rulemakings. Commenters stated that "The utilities making these investments - and the r ate-payers who are ultimately paying for them - had a reasonable, investment-backed expectation t hat these upgraded, coal-fired units, would be able to operate through the end of their useful liv es."

Commenters noted that "EPA should allow the full va lue of existing coal plants to be realized

before retirement."

Response 31: EPA disagrees with these comments. See response t o comment 29 in section 8.9

of this RTC.

Comment 32: Multiple commenters noted that entities should rec eive full credit for any retirement of existing fossil-fueled units prior to the beginning of the interim period and regardless of the reasoning for the retirement.

Commenters asked that EPA allow for the following

• "expressly allow states to rely on unit retirements occurring after the baseline year(s) to meet Section 111(d) goals."243 • "retirements should be given equal credit under a r ate-based or a mass-based program. As proposed, the rule would not allow stat es that have adopted a ratebased goal to fully benefit from unit retirements i f the replacement generation comes from out-of-state. This is because, in coal-h eavy states, the pre-retirement and post-retirement emission rate for the state wil l remain largely unchanged, even if the generation is not increased in-state."

• "In states that adopt a mass-based standard, EPA sh ould allow all EGUs that a company or state has agreed to retire to be include d in the state's 'reference case.' The generation from the reference case would then b e used to determine the massbased goal. If generation from the retiring unit is not built into the reference case, then the lower generation and emission rate would r esult in a lower mass-based target."

• "The purpose of the retirement should be irrelevant , since all existing EGU
retirements result in substantial reductions in GHG emissions. Ensuring that states and companies receive credit for retirements will h elp ensure that utilities and states that are planning retirements of existing co al plants are not penalized by

that action. It also will incentivize future retire ments, resulting in additional GHG

emission reductions."

Commenters stated "EPA should make clear that CO2 e mission reductions due to unit retirements after the 2012 base year may be applied toward goal achievement after 2020, and may be banked prior to 2020 beginning on the date o f retirement, without requiring states or utilities to make any demonstration that the retire ment would not have occurred in the absence of the CAA section 111(d) program." According to comme nters, "This should include retirements that, in addition to CO2 reduction, achieve complia nce with MATS or other regulations, as well

as retirements that are carried out in fulfillment of state legislative program such as the Clean Air Clean Jobs Act in Colorado." Commenters continued, "EPA should specify in the final rule how such retirements will be credited, under both rate- based plans and in the event that a state elects to convert its rate target to a mass budget."

Commenters noted that changes to its energy generat ion mix has already happened: "In 2006, the majority of electricity in Georgia was produced by coal (63 percent)" and "In 2001, just 3 percent of Georgia's electricity was generated by natural g as, whereas in 2012, natural gas share of the generation capacity has risen markedly to 35.6 perc ent." Commenters asked that they "gain full credit for these early and proactive investments."

Commenters asked that EPA "recognize the quantifiab le emission reductions achieved as a result of retirements that occur after the baseline period elected by the state and prior to the start of the interim compliance period" by converting them into bankable credits that are allowed to count in future compliance period(s) once the compliance pro gram begins. Commenters offered a potential way to incorporate this idea into the pla n is to "assume the unit's generation was replaced by the existing natural gas combined cycle generation located within the state." According to commenters, "the credit would be based on the reduction in emissions caused by the change in the generation source" and "calculate d by subtracting the state's existing NGCC emission rate (lbs.CO2 /MWh) from the emission rate of the retired unit and then dividing that244

difference by the emission rate of the retired unit to obtain the percentage reduction in emissions resulting from the retirement." According to commen ters, "multiply the percentage reduction by the average annual MWh generated by the retired uni t during its last three years of operation and by the number of years prior to the start of the se ction 111(d) interim compliance period the retirement occurred" and the "resulting number of M Wh would be available to be added to the denominator in calculating a state's emission rate during one or more compliance periods." Commenters also stated, "EPA's emissions guidelines should make it clear that states may provide full compliance credit for the avoided CO2 emissions that result from the retirement of existing fossil-fueled units prior to the beginning of the interim compliance period, without regard to the reason for the shutdown."

Response 32: EPA realizes that reductions will be occurring bef ore the start of the interim period and first notes that these retirements will reduce emissions from the existing fossil steam fleet. The purpose of these retirements does not m atter for purposes of the rule, what matters is the reduction of emissions, and these reductions wi ll facilitate compliance: in a mass-based state, emission emissions levels will be lower; in a rate- based state, retiring a high emitting unit will result in a lower emissions rate. The rule also pro vides for early credit where the generation from the retiring unit is replaced by renewable generati on. See section VIII.B of the final preamble to

the CPP.

Comment 33: Commenters commented on the loss of lignite-fueled electricity generation.

Commenters asked that "New efficient lignite-fueled baseload electric generation facilities should not be removed as an option available for me eting the substantial projected demand." Commenters also asked that "existing lignite-fueled facilities should not be curtailed or closed by any of EPA's GHG-related rulemaking initiatives."

Commenters noted that the rule "threatens North Dak ota's ability to continue to use lignite and other coals as a low cost electricity generation op tion and a means to enable responsible development of the Bakken oil reserves that are cri tical to North Dakota's continued economic development."

Response 33: The final CPP does not require that any type of el ectricity generation be removed as an option for meeting demand, nor does it curtai l or close specific facilities. Rather it sets goals for the states to meet by any of a wide range of policies and measures that they choose.

State should make those choices based on the situat ion in their states.

Comment 34: Commenters noted, "EPA has not sufficiently consid ered the effects that redispatch at the level Building Block 2 requires w ould likely have on the grid" including reliability and the feasibility of implementing the required level of redispatch.

According to commenters, "Generation dispatch must account for the variety of factors that can affect available generation" including the followin g:245 • higher- or lower-than-expected demand,

• planned or unplanned generator outages,

• planned or unplanned transmission outages,

• weather,

• fuel availability, and

• events on a neighboring system.

Response 34: The final rule does not require any level of "redis patch" or shift in generation from

one kind to source to another. States have wide la titude to choose the policies and measure that they will include in their state plans to achieve t he reductions they need to achieve their state goals.

Comment 35: Commenters noted that the rule requires the replac ement of economic dispatch with environmental dispatch.

Commenters stated that the rule will "require RTOs to replace economic dispatch with environmental dispatch, while trying to maintain re liability for different states, all of which have different emissions reduction targets." According t o commenters, "The underlying premise of an RTO is to help their members’ access the lowest cos t generation on a continual basis, regardless of the location of the generation or the location o f the member, while maintaining grid reliability." According to commenters, "under the p roposed Rule every state has a different CO2 emission reduction target, and presumably each stat e implementation plan will propose to achieve its respective target differently" and "RTO s will be forced to implement environmental dispatch of generating units, i.e. RTOs will first consider environmental effects of operating generating units before the economic benefits of op erating those same units." Commenters stated, "This is contrary to the purpose for which RTOs were formed and also violates those regional entities' obligations under the Federal Po wer Act to dispatch generation economically."

Citing Europe's experience with increasing the use of renewables, commenters stated, "By putting environmental dispatch as the first priorit y, Europe created an artificial market that encouraged the significant over-investment in renew ables and exaggerated the impact of renewables on grid integrity."

Commenters stated, "The existing natural gas system infrastructure struggles at times to effectively handle current demand for natural gas d uring peak usage, let alone the increased pressures that would result from demands for increa sed natural gas dispatch as envisioned by the proposal." According to commenters, "the multiple f actors currently at work in the energy market that drive the dispatch of the existing gene ration fleet can effectively be transitioned to prioritize environmental dispatch within the propos ed timeline."246

Commenters stated "While there are several problems with the EPA's assumptions relating to environmental dispatch, the fundamental flaw lies i n the assumption that states or utilities plan for anticipated loads and resources using data aver aged over the course of a year." According to commenters, utilities "are required to provide firm resources to meet the peak hour anticipated load while maintaining adequate reserve margin."

Commenters stated that the Proposed Rule marks a sh ift from economic to environmental dispatch and such a change in dispatch philosophy c ould potentially upset the significant gains in power market efficiencies. The commenters stated fu rther that power markets have struggled with the balance of maintaining resource adequacy a nd efficient dispatch and that adding another layer of complexity, through implementation of the Proposed Rule, would likely upset that

balance.

Commenters stated that because MISO employs securit y constrained economic dispatch for electric generation, environmental considerations d o not factor directly into dispatch decisions. Instead, the commenters stated existing environment al regulations have an indirect impact on dispatch decisions by altering the variable cost of electricity produced at EGUs. The commenters stated that EPA proposes two ways for states to imp lement Building Block 2: 1) states can superimpose a de-facto price on carbon through a va riety of market-based mechanisms, which would increase the variable cost of dispatching hig her emitting EGUs, and 2) states can "impose limits on utilization or CO2 emissions at higher em itting EGUs." The commenters said neither recognizes that RTOs like MISO are designed to acco mmodate a security-constrained economic dispatch, not an environmentally-based dispatch.

Response 35: These commenters mistakenly think that EPA in the C PP is requiring environmental dispatch. In fact, nothing in the ru le requires dispatch entities to depart from current economic dispatch principles. This final ru les makes that point even clearer by emphasizing the role of market based approaches and the use of tradable emission rate credits and mass allowances that enable the incorporation o f costs as part of the standard economic dispatch.

Comment 36: Commenters noted that distributed energy resources (DERs) are increasing and have negative impacts on reliability.

Commenters, referring to NERC's reliability report (dated November 5, 2014), noted, "NERC warns that increases in distributed energy resource s (DERs), such as rooftop photovoltaic arrays, under the proposed rule will pose significant chall enges to system operators. Id. at 25-26. This resource cannot be dispatched and is generally invi sible to the operator, but will rely on the system for backup services, placing a greater and u npredictable demand for ERSs."

Commenters noted that the increasing penetration of DERs impacts reliability due to the "limited visibility and controllability of these resources."

Response 36: These comments are not directly relevant to the fin al rule, because DERs are not included as part of BSER, and not relied on in sett ing state goals. EPA also believes DERs can247

be reliably managed and contribute to energy effici ency and be effectively managed to contribute to reliability by reducing peak demand as well as o verall load.

Comment 37: Commenters noted that there are other factors that influence reliability.

Commenters noted that "By capturing CO2 from existi ng coal or gas-fired plants, [the commenter] will help maintain total system reliabil ity, and our ability to pay for the CO2 will ensure that there is minimal impact on electricity prices."

Commenters noted that "The unprecedented closure of coal base load capacity is not the only development affecting the future reliability and af fordability of the electric grid." Commenters elaborated that "approximately 25 percent of the co al, natural gas and nuclear base load capacity is 40 years or older" and "within ten years, the 40 -plus years demographic will increase to about 50 percent of the entire base load fleet."

Commenters noted that "much of Arizona's fleet of c ombined cycle natural gas plants is owned by merchant operators" which is currently committed to Arizona facilities but "there is no guarantee that these contracts will be extended int o the future." According to commenters "The capacity currently available to Arizona utilities c ould be sold to utilities in other states" and "may

not be available to Arizona utilities in sufficient quantity to meet EPA's 2020 interim goal."

Commenters expressed concern that there is the pote ntial for many irreconcilable differences in emission compliance plans between the 13 PJM states in RTOs due to the diverse characteristics of the states (economic makeup, generation rich vs. generation constrained, states with renewable portfolio standards vs. states without th ese standards, vertically integrated vs. deregulated state). The commenters stated there is the potential for many irreconcilable differences in emission compliance plans between th e states; PJM will ultimately be required to manage the end result of these plans which could ne gatively impact reliability and affordability.

Commenters recommended that EPA amend Building Bloc k 1 stipulating that no reductions associated with coal plant heat rate improvements w ill be required for states that generated less than 10% of their total annual energy from coal. Co mmenters stated that there are many reasons EPA should exclude states with limited coal product ion from Building Block 1. Commenters

stated that first and foremost those states with le ss than 10% of their total energy generated from coal have already undergone a significant change in the energy mix. Commenters stated that the coal currently operating in New York is performing a needed function as it helps to address local reliability issues and in many instances is operati ng because those units must run for local reliability needs.

Commenters stated that EPA fails to account for add itional capital expenditures needed to ensure system reliability concerns. The commenters discuss ed factors, such as the highest cooling degree days in the continental U.S., that require F lorida to rely heavily on a robust and dispatchable generating fleet contrary to many of t he low carbon/zero carbon technologies the EPA uses to justify the 10 percent Block 3 calculat ion. The commenters added that the low capacity factors of many low carbon/zero carbon tec hnologies (excepting nuclear) combined248

with Florida's need for dispatchable generation mea ns Florida would need to build additional natural gas-fired facilities and related infrastruc ture, which would again be fully paid for by Florida's citizens, for use as stand-by units for r eliability purposes.

Commenters stated that EPA's assumptions do not app ly to Alaska where the majority of the EGUs are not interconnected via a grid, and none of the EGUs can engage in the type of economic dispatch practices assumed by EPA. The com menters were thus unable to fully evaluate and understand the proposed rule. The comm enters further stated that reliability is important in Alaska's extreme climate and that elec tric utilities most directly affected by this proposed rule are municipal or cooperative utilitie s not investor owned utilities. The commenters stated that as a result, the financial impact will be borne directly by consumers.

Commenters stated that EPA has failed to consider t hat Arizona has only two major natural gas pipeline systems serving the state and no in-state natural gas storage. Commenters cited NERC findings that the addition of CPP-induced power gen eration demand in the Southwest could lead to a situation where the current pipeline system is inadequate to serve all demand during periods of peak usage.

Commenters also discussed disproportionate impacts to Arizona state-wide as a result of the rule

due to one of the most severe carbon emission reduc tion targets of all states with a reduction below its baseline of 52 percent. The commenters st ated that Arizona stands out as the state most impacted by building block 2 due to its high coal-f ired generation and significant existing NGCC capacity, which will result in significant cost imp acts from new infrastructure investments and the recovery of stranded investments, and put the s tate at a significant competitive disadvantage compared to neighboring states resulting in job imp acts.

Commenters stated that Building Block 2 will result in a major shift to natural gas in a short period of time, away from the current more optimal mix of generation sources. Commenters also discussed the Integrated Resource Planning rule whi ch requires utilities to demonstrate how it will meet its future energy requirements in an effi cient, cost-effective, and responsible manner. The commenters remarked that the proposed rule will result in significant risk from natural gas supply disruptions as well as price increases and s ecurity risks.

Commenters added that EPA's building blocks provide s Arizona no flexibility, would require Arizona to shut down all coal plants by 2020 in ord er to comply, and would jeopardize grid reliability and the reliability of electric service . The commenters further stated that the proposed rule will cause a health and safety problem during the load peaking summer months for the many elderly, fixed income citizens.

Commenters stated that EPA fails to ensure that uti lities can meet peak demand and that implementation of BB2 will jeopardize the reliabili ty of Arizona's electricity grid. Commenters

added that it is not clear that Arizona utilities c an purchase sufficient power to attempt to make up for shortfalls through purchases on the short-te rm market because other states in the region also experience peak demand during the summer. The commenters stated that an NGCC resource could easily run at a 90 percent capacity factor du ring the peak summer hours in Arizona leaving no existing NGCC generation to replace existing coa l and OG steam generation during this249

period, despite an annual NGCC capacity factor arou nd 30 percent. The commenters provided examples and illustrated the shortfalls that would occur without coal generation.

Commenters also stated that coal generation was not designed to cycle with intermittent resources, does not possess the ramping capabilitie s to do so, would place heavy wear-and-tear on these units, and result in escalating costs of o perations. The commenters added that EPA insufficiently estimated the availability and cost of renewable resources, as well as the cost of fossil fuel source backup.

Commenters stated that the proposed rule is an over reach of federal administrative authority with the potential to increase uncertainty and impact th e reliability and affordability of energy for

residents and businesses of Arizona. The commenters discussed the disproportionate financial

burden to citizens in rural areas due to the areas' significant reliance on coal investments that are still being paid off. The commenters remarked that the issue of stranded assets must be addressed to provide relief for our most vulnerable citizens.

Commenters stated that EPA's assumption that coal-f ired generation cannot be re-dispatched to NGCC units as envisioned by EPA, and incremental, l ower-emitting generation resources cannot be permitted and brought online in a two to three y ear period. The commenters further remarked that virtually a megawatt-for-megawatt replacement of this generation to maintain safe reserve margins.

Commenters discussed the proposed rule's impacts re sulting from shifts in electricity generation from coal to natural gas, such as upward pressure o n natural gas demand and price burdens. The commenters stated that North Carolina is served by only one major interstate pipeline and significant natural gas transportation constraints and prices were realized during the polar vortex. The commenters also stated that supply constraints could force utilities to burn fuel oil or more polluting fuels which would be contrary to the miss ion of EPA's Clean Power Plan.

Commenters stated concern about impacts to Montanan s as a result of the decisions that may be made by other states as they implement the rule wit hin their borders. The commenters stated Montana coal is a mainstay for many power plants in the Midwest, where it has been projected that many plants may close, and the reshuffling of the industry could have significant impacts for

Montana families such as electric rate increases in the future since the eastern part of the state draws much of their electricity from the Midwest. The commenters also stated that many of the ratepayers are customers of small rural electric co operatives that may not have resources to further embrace renewables and energy efficiency.

Commenters also stated there may be ways to address these concerns, and still achieve the goal of reducing the nation's carbon emissions. The comm enters stated regional planning must remain a key feature of the final rule and may allow for c oordination, cost allocation, and a least cost strategy. The commenters strongly encouraged EPA t o tailor the rule and its goals more to the useful life of the nation's coal fleet, such that a lready planned and anticipated retirements can play a more central role in complying with the fina l rule, capturing efficiencies and minimizing the negative economic impacts attributable to the r ule itself.250

Commenters stated residential rates in Montana are projected to increase by 16 percent to 19 percent as a result of the Clean Power Plan; Indust rial rates are expected to increase 23 percent, and perhaps as much as 40 percent in the eastern pa rt of the State. The commenters stated the rule also poses a threat to electric reliability an d the preliminary modeling demonstrates the rule threatens the State's reserve margin.

Commenters stated a minimum level of coal and oil-f ired generation must be preserved to avoid the potential for extreme economic consequences and hardship that could occur due to the loss of any one type of fuel supply. The commenters referen ced the winter of 2013-2014 when the northeast was exposed to a period of extreme cold t emperatures. The commenters stated NJ would likely have had brownouts and blackouts if no t for the remaining coal and oil-fired EGUs.

The commenters said assumed emissions reductions fr om Building Block 2 would eliminate NJ's remaining coal and oil-fired electric generation wh ich are equipped with approximately $2 billion in air pollution controls. The commenters s tated it would be unreasonable for EPA to impose requirements that could lead to calamitous r esults in New Jersey while allowing higher emitting coal units in many other states to continu e operations.

Commenters stated that EPA's plan is a solution in search of a problem, and it's looking in the wrong place and that Colorado's clean low sulfur, l ow mercury, low ash coal is not a major contributor to pollution. The commenters noted tha t, according to the Energy Information Administration, carbon dioxide emissions from U.S. coal amount to only about 3 percent of the global total. The commenters suggested that a more prudent federal policy for pollution control would perhaps involve facilitating exports of Color ado's clean coal to nations to replace the dirtier forms that they are currently using.

Commenters stated there are serious concerns regard ing the proposal's impact on Florida's

infrastructure. The commenters stated further that EPA has not studied the ability for Florida's limited natural gas pipeline infrastructure to deli ver the needed natural gas, nor has EPA assessed the feasibility of adding new generation resources within required timeframes.

Commenters stated that they have serious concerns a bout the impact that EPA's Clean Power Plan would have on the reliability of Florida's ele ctric grid, and on the electric utility ratepayers that would be forced to pay significantly higher el ectric bills. The commenters noted that their comments are based on the understanding that the CP P would require at least 90% of Florida's coal-based electric generating capacity to be retir ed.

Commenters stated that they believe the CPP's timel ines will create an unrealistic and unachievable mandate for Florida's utilities to rep lace their existing coal facilities in a relatively short time period while maintaining grid reliabilit y. The commenters have requested that the EPA withdraw or significantly redraft the CPP in li ght of the consequences that almost surely will result from the CPP because the new proposed r ule should not place utilities in the position of being forced to incur fines and potentially crim inal penalties if they need to utilize a power plant that is required to run in order to keep the lights on, and should not unduly burden the
ratepayers.

Commenters noted that: Reliability - EPA's complian ce modeling results (Option 1 - State compliance scenario) depicts a significant amount o f retirements by 2020. The commenters251

stated that this option depicts 12,222 megawatts of fossil fuel-fired retirements for the state of Florida by 2020, and of that amount, 9,995 megawatt s are incremental retirements from EPA's

base case scenario. The commenters stated that the retirement of this amount of baseload capacity raises reliability concerns and provided a n example. The commenters stated that it is highly unlikely there is sufficient time, materials or craft labor to construct this replacement generation in the state of Florida, much less so to have this replacement generation in place nationwide by 2020.

Commenters stated that the potential impact of the proposed rule to disrupt power generation within Illinois and within the ISO footprints is gr eat. The commenters stated further that resources in PJM are already strained with the so-c alled "polar vortex" contributed to the inability of 22% of its installed capacity to opera te within the RTO, and left PJM perilously close to instituting select outages to maintain system in tegrity. The commenters stated further that the

situation is so serious that PJM has instituted a s pecial procedure to alter the means it uses to compensate for capacity, to better insure resource adequacy in the event of such a situation. The commenters also noted that MISO anticipates similar capacity shortfalls that, if unresolved, could see systemic reliability issues within its fo otprint, and MISO's reserve margin dropping below the generally accepted reserve requirement of 15% as early as 2015.

Commenters stated that complicating this issue is t hat Illinois, as a deregulated state, has no regulatory mechanism in place to ensure resource ad equacy within its borders.

Commenters stated that given the tenuous nature of the current capacity resource situation in Illinois (based on past and pending capacity retire ments) as well as the uncertain ability of RTO markets to provide for timely capacity replacement within the RTOs, USEPA should adopt a safety valve or off-ramp of some sort that acknowle dges the vital importance of resource adequacy for the health and safety of Illinois' cit izens and allows for delay or deferral of greenhouse gas reduction requirements in the event that adequate resource thresholds cannot be met under the rule as adopted.

Commenters stated that in adopting policies that re align their State's energy generators, decision makers must take care not to strain our already ove rburdened energy infrastructure. The commenters stated that MISO predicted that over the next ten years the North/Central Region will suffer an increasingly pronounced energy short fall given current trends in energy generation. The commenters stated further that if policy changes force existing sources of energy to retire early, without sufficient time to find suitable replacement sources or develop efficiency increases to offset the loss in generati on, residents and businesses throughout the region may find themselves without power when they need it.

Commenters stated concern about electric reliabilit y and that EPA has not adequately examined the impact of the proposal on this issue. The comme nters stated that they are very concerned that a shift away from a coal-fired fleet to natural gas plants, which are designed to supplement coalgenerated power to meet peak demands, will jeopardi ze their ability to meet electricity needs.

Commenters stated EPA's primary renewable energy pr oposal fails to recognize real-world constraints on the integration of new renewable ene rgy capacity and generation, and it ignores other potential constraints on the growth of renewa ble energy resources that are likely to be252

state-specific. The commenters included the followi ng examples: increasing renewable energy generation often requires increased transmission in frastructure to transmit long distances; and there must be sufficient back-up fossil fuel-fired resources to meet peak demand in the event that a peak occurs at a time when renewable resources ar e unavailable, of particular importance to New Mexico, where winter peak demand is almost as h igh as summer peak demand, but during winter some renewable energy resources are typicall y far less productive.

Commenters stated EPA inappropriately assumes that all renewable generation will provide the same level of service: wind energy capacity can be expanded relatively rapidly but is least likely to be available when demand is at a peak while sola r energy matches peaks in demand well but is more difficult to expand quickly. The commenters sa id this was first realized in New Mexico with the interconnection of PNM's first significant variable energy resource in 2003 during

which came the awareness that the variable nature o f wind energy can have a significant impact on system operations, particularly in regard to the regulation for moment-to-moment power fluctuations. The commenters said a study was commi ssioned that concluded that 700 MW of wind could not be accommodated given PNM's low peak load, current resource mix, and transmission constraints even though New Mexico has significant wind resources.

Commenters explained that during low peak demand le vels, fluctuations in the variable generation resources will have a more significant i mpact by affecting a larger percentage of the total on-line capacity. The commenters also stated the existing dispatchable resource mix in New Mexico is dominated by large coal-fired units and o ut-of-state nuclear capacity that cannot provide as rapid a response as may be needed to sup port rapid fluctuations in renewable energy generating levels. The commenters added, New Mexico has relatively limited interconnections to neighboring utilities, which makes it difficult for the State to purchase the additional dispatchable power needed to support the developmen t of additional renewable generation

resources.

Commenters stated integrating new wind and solar re sources will increase the challenges of reliably operating the ERCOT grid, and almost 10% o f the ERCOT region's annual generation

came from wind resources. The commenters stated the increased penetration of intermittent renewable generation, as projected by modeling resu lts, will increase the challenges of reliably operating all generation resources, and if there is not sufficient ramping capability and operational reserves during periods of high renewab le penetration, the need to maintain operational reliability could require the curtailme nt of renewable generation resources which would reduce production from renewable resources, l eading to possible non-compliance with the proposed rule deadlines.

Commenters stated intermittent renewable generation sources will contribute 22% of energy on an annual basis in 2029; however, during 628 hours of the year intermittent generation will serve more than 40% of system load. The commenters contin ued, during 128 hours, instantaneous renewable penetration will be higher than 50%, and the peak instantaneous renewable penetration from the model results is 61%; the high est renewable penetration hours will be driven by maximum solar production during relativel y high wind periods, occurring during the day (8 a.m. to 5 p.m.), as opposed to early morning hours (usually 2 to 4 AM], as currently experienced in the ERCOT region.253

Commenters wrote in detail about the model results and the unrealistic assumptions made by the model and the challenges of real-time operations. T he commenters said to ensure grid reliability,

there would need to be increased consideration of o perational activities on the distribution and transmission systems. The commenters said based on ERCOT's modeling, the majority of new renewable generation resource additions are anticip ated to be solar. However, if instead ERCOT sees a large amount of wind resource capacity addit ions, then the reliability impacts may be more severe. The commenters stated wind production in We st Texas results in high renewable penetration during early morning hours, when load i s lowest, and a larger expansion in wind production relative to solar may result in lower ne t loads and significant reliability issues. The commenters concluded if ERCOT cannot reliably opera te the grid with these high renewable penetration levels, then production from these reso urces will be curtailed to maintain operational reliability which would reduce production from rene wable resources, leading to possible noncompliance with the proposed rule deadlines.

Commenters stated that the concerns about legal cha llenges - about the uncertainty of litigation involving aspects of the plan - are irrelevant to t he core issues the plan is attempting to address. The commenters stated that lack of signif icant innovation and diversification in our state that has now resulted in the costly, aging an d polluting infrastructure we now have, creating a highly uncertain future for coal-generated power.

Commenters stated that, with Louisiana as part of S PP and MISO, uncertainty increases with the potential for carbon emission limitations. While th e specifics of any carbon proposal are unclear, any carbon emission limitations will negatively imp act MISO's coal generation fleet and further increase the resource deficiency.

Commenters stated that Arizona needs to protect the reliability of its energy grid because it is

unclear if Arizona could survive the loss of a natu ral gas pipeline and still support the grid demand without retaining backup coal-fired options. The commenters stated that the assumption that coal generation can be one-for-one diverted to existing NGCC units is inaccurate. The commenters also stated that the Proposed Rule will eliminate energy reserves and has timing issues that will significantly risk the reliability of the Arizona electric transmission network. The commenters stated that in order to maintain grid re liability and security, EPA should include a reliability safety valve mechanism in the final rul e, as well as including circumstances under which compliance can be delayed to manage real time issues that will compromise electric reliability. The commenters stated further that th e modeling does not take into account regionspecific technical issues.

Commenters stated that EGU owners and operators, as well as FERC and NERC are concerned with impacts to reliability. Commenters stated that many of the concerns stem from its impossibly short timelines, as previously discussed . Commenters stated that it is not clear how

customers would be able to invest in its units in v arious states to meet the compliance of the units' local state and how that would interplay wit h Indiana's compliance. Commenters stated that the proposed rule would require generating uni ts to comply in the individual state of its location or suggests that states may cooperate with one another. Commenters stated MISO and

PJM in combination control a substantial amount of the whole U.S. power grid and also part of

Canada's. Commenters stated that the EPA calls the proposed rule flexible but does nothing to solve the problem of the interconnectedness of the whole power system.254

Commenters stated that the dispatch of generating u nits is currently handled on an economic basis by the MISO and PJM RTOs. Commenters stated t hat the proposed rule assumes that NGCC units will all operate at 70 percent capacity factor. Commenters stated that this upends running the most economical unit first in the RTO's dispatch order. Commenters stated that spinning reserve will also have to be maintained wh ich effectively are units running at reduced output at the ready if another unit that is online needs to come offline due to a problem.

Commenters stated that if the coal units are backed off to meet the 70 percent NGCC capacity factor level or the state's emission rate target, t hose units are running at a lower efficiency level and at a higher CO2 emission rate. Commenters state d that environmental dispatch in place of economic dispatch of generating units as is now don e by the RTOs will increase cost to customers by disturbing the economic order of dispa tch keeping lower marginal cost units on the

sidelines.

Response 37: These comments show the many factors that influence reliable operation of the electricity system, and EPA generally that these multiple factors are impor tant. As many of these commenters noted the electric power sector is complex with differing market structures, ownership structures, fuel mixes, and state require ments across the country. But, as we pointed out in Chapter VIII of the preamble, there are mult iple features well embedded in the electricity system that ensure that electric system reliability will be maintained. The CPP is designed to assure that it does not interfere with the industry ’s ability to maintain electric reliability. Pleas e see Chapter VIII.G.2 for a discussion of this. The final rule has been modified from the proposal to address comments that express concern over the 2 020 start of the compliance period, and

issues raised in comments that address the use of n atural gas and renewables are discussed in The GHG Mitigation Measures TSD.

Comment 38: As an example of maintaining reliability during co al phase-out, commenters offered "the province of Ontario's experience in ph asing-out coal from its supply mix."

Commenters stated "Whereas 7,500 MW of coal represe nted approximately 25% of provincial capacity in 2003, Ontario shut down its last coal-f ired generating station in April 2014 and passed legislation to prevent restarting." Commente rs stated "This generation has been replaced by a mix of non- and low-emitting resources such as natural gas, hydropower, nuclear, wind and

solar."

Commenters noted, "In order to protect reliability, though, Ontario was compelled to adjust its coal phase-out schedule on several occasions." Comm enters stated "A shutdown originally scheduled to occur in four years ultimately took mo re than 10 years." Commenters noted that "The province achieved a significant accomplishment in becoming the first jurisdiction in North America to eliminate coal as a power generation sou rce" but noted that "preserving electric reliability was a paramount imperative and extended timelines became necessary as a result."

Response 38: EPA appreciates this comment. EPA has considered these types of issues in developing the final rule. The final rule does not attempt to shut down coal generation prematurely, provides flexibility to states in desi gning plans for compliance, and provides a long period to ensure reliable transition to a changing generation mix.255

Comment 39: Multiple commenters cited analyses by NERC and othe r organizations regarding reliability concerns.

Commenters referenced NERC's concerns about potenti al reliability risks.

Commenters cited NERC, MISO, and PJM concerns regar ding reliability. Similarly, Commenters cited NERC, SPP, MISO, ERCOT and AEP ass essments indicating the CPP will result in reliability threats due to coal retiremen ts, shifts to natural gas, and increased RE that may result in issues with reserve margins, vulnerab ility to natural gas supply constraints, the need for increased essential reliability services, thermal overloads, voltage collapse, and

increased time and costs related to additional tran smission infrastructure.

Commenters provided a lengthy description of resour ce adequacy and the importance of providing reliable power, citing the FERC primer, a NERC ERS report and several FERC regulations. The commenters also explained that the re are many entities involved in maintaining reliability, described the interconnections of the U.S. electric grid, listed key functions of system operators, and summarized energy markets. The comme nters stated that "significant market changes impact price signals which could have relia bility and resource adequacy implications if the price signals do not incent construction of nee ded new generation and infrastructure."

Commenters also referenced the November 2014 NERC R eliability Study which highlights the reliability impacts of coal-fired generation units that may be forced into retirement as a result of building block 2 and the importance of diversificat ion of fuel sources to offset unforeseen events such as abnormal weather, regional transfers and un planned outages. The commenters also referenced the September 2014 NERC study reviewing the events of the polar vortex. The stated the CPP lacks meaningful discussion on how to mitig ate any detrimental impacts that may arise

as a result of an increased reliance on VERs.

Commenters stated the NERC Reliability Study sets f orth the following concerns with building block 4, all of which could impact reliability of t he electric grid:

• US EPA appears to overestimate the amount of energy efficiency expected to reduce electricity demand over the compliance time frame;

• Substantial increases in energy efficiency programs exceed recent trends and projections;

• The CPP assumption appears to underestimate costs a nd may underestimate the capital investments that would be required by utili ties to sustain energy efficiency performance through 2030; and

• The offsetting requirements in more coal retirement s, along with expansions in natural gas and VERs, in a constrained time period could potentially result in reliability or ERS constraints.256

Commenters listed the following issues in the propo sed rule as identified by the Initial NERC report: (1) EPA assumed "rapid growth in non-hydro renewable generation exceeds its own forecast" in the RIA of 356 TWh/year by 2030; (2) E PA overlooked real world differences among state renewable portfolio standards that are contrary to EPA's assumptions; and (3) EPA failed to address the well-known grid reliability c hallenges associated with increased dependence on "variable" resources, which have also been noted by FERC Commissioners. The commenters quoted NERCs initial reliability report which state d that as variable resources increase, a sufficient amount of reactive support and ramping c apability is needed that could increase cycling on conventional generation and contribute t o increased maintenance hours or higher forced outage rates, potentially increasing operati ng reserve requirements. The commenters stated the report further stated that successful la rge-scale storage solutions have not yet been commercialized. The commenters stated that the repo rt makes it clear that increased dependence may seriously impact reliability.

Commenters cited NERC's November 2014 report in dis cussing the potential for resiliency and fuel diversification to be degraded as a result of the proposed rule, which is crucial to keeping energy prices affordable, supporting grid reliabili ty, and mitigating unanticipated events such as weather, strikes, and outages. The commenters also noted that the U.S. has an unparalleled opportunity for energy independence and security as a result of housing 28% of coal reserves and increasingly available oil and gas reserves, and ci ted Tom Donilon's statements on the relationship between energy, foreign policy, econom ic strength and world leadership. The commenters concluded that "purposefully moving away from energy diversity in the United States is a short-sighted, irresponsible policy cho ice that benefits neither our nation nor the rest

of the world."

Commenters cited NERC as having grave reliability c oncerns with the proposal, which NERC

believes would result in between 108 and 134 GW of generation retirements by 2020, most of which will disproportionately impact base-load coal generation in the U.S. The commenters cited NERC's concern over pipeline constraints, growing g as and electric interdependency, increased transmission projects, policy and operations and re gional and multi-regional coordination for electric utility planning. The commenters cited NER C's conclusion that the EPA's "proposed timeline does not provide enough time to develop su fficient resources to ensure continued reliable operation of the electric grid by 2020". T he commenters warned of a high probability of blackouts occurring around the country as a result of the proposed rule.

Commenters cited Southwest Power Pool comments, NER C's reliability impact analysis, and DOE's 2012 study on large power transformers and th e electric grid, to highlight their concern surrounding reliability issues and the proposed rul e timeframe. The commenters discussed planning, materials procurement, and construction t imelines, and stated that manufacturing of transmission systems may take one to five years if procurement of raw materials and equipment from foreign countries do not slow the process. The commenters also cited DOE's discussion of lead times which may extend from five months to fiv e years depending on the manufacturer and

location of the materials. The commenters stated th at new extra-high voltage transmission systems will need to be studied and built to mainta in reliability and that if the timeline in the Propose Rule is not adjusted, certain regions may s ee significant impact on reliable operations.257

Commenters stated that the CPP puts the reliability of the U.S. electricity supply at risk and cited statements by NERC, MISO, PJM, SPP and ERCOT for su pport. The commenters attached analyses by MISO, ERCC and PJM that indicate uncert ainty and reliability concerns. The commenters suggested that because every independent non-partisan analysis by system operators agrees that the CPP may threaten electric reliabili ty, EPA should reconsider the proposed rule, because reliability risks entail serious legal and public policy consequences. The commenters provided several attachments discussing reliability concerns, such as one from U.S. Government Accountability Office, as well as several FERC Comm issioners. The commenters also stated that electrical outages endanger economic growth and hav e a demonstrable negative effect on public health, as noted by health care professionals who a lso serve as Members of Congress, such as unemployment, disease, extreme weather, and food sa fety, among other benefits. The commenters stated putting these public benefits at risk is undesirable and wrong, especially when the alleged benefits associated with the CPP are te nuous and unverifiable. The commenters cited ISO New England's statements on the importance of r eliable electricity, the Institute of Electrical and Electronics Engineers of the U.S. observations that "even minor disruptions in the electric power grid can sometimes lead to catastrophic 'casc ading' blackouts, and that the loss of a single generator can result in an imbalance between load a nd generation. The commenters stated the resulting blackouts cause incalculable economic dam age. The commenters added that for example, the direct costs to high technology manufa cturing in the San Francisco Bay Area alone during the California blackouts alone ran as high a s one million dollars a minute due to lost production, and the relatively brief Northeast blac kout of 2003 cost business about $13 billion in lost productivity." The commenters noted that the " polar vortex made it clear that coal-fired generation, much of which is currently scheduled to be retired as a result of EPA rules, is vital to the reliability of our electricity supply. In some areas, coal-fired plants thought to be obsolete were discovered to be essential to reliability, and one of the nation's largest electricity generators reported that 89 percent of the coal-fired generati on slated for retirement by 2015 as a result of EPA rules was needed to supply electricity during t he cold weather."

Commenters also referenced the polar vortex as evid ence of potential reliability concerns and cited NERC's statements regarding potential reliabi lity concerns. The commenters urged EPA to address these concerns regarding the aggressive tim etable of emission reductions required under the Proposed Rule.

Commenters cited an October 2014 NERA study of the CPP stating that the Proposal will result in from 46 to 169 additional gigawatts retired unle ss EPA makes significant corrections to the rule, which is likely to seriously threaten the nat ion's electric reliability The commenters stated that state regulators and industry stakeholders hav e warned that the proposal will force them to choose between meeting its requirements at the risk of potentially violating FERC reliability mandates, or complying with those mandates at the r isk of failure to comply with the proposal.

The commenters further cited:

• Southwest Power Pool predictions that the proposal will increase retirements in its area by 200%, with significant economic, health, an d safety impacts resulting

from "rolling blackouts or cascading outages";258 • Electric Reliability Council of Texas warnings that the proposal will have "a harmful impact on reliability" and "will have a significant impact on the planning and operation of"

its grid, forcing the retirement of between 3.3 an d 8.7 gigawatts in its region alone;

• North Dakota officials' concern that FERC may rejec t state 111(d) plans on reliability grounds and may even impose significant penalties for any blackouts and similar failures that might result from states efforts to meet EPA's requirements;

• FERC Commissioner Moeller's warnings that the propo sed shift from least-cost to least-emission dispatch priorities "has the potenti al to completely undermine the market principles that underpin dispatch of the sys tem";

• NERC's determinations that "Essential Reliability Services may be strained by the proposed" rule, and that the rule requirements "represent a significant reliability challenge."

• The commenters also paraphrased NERC in the followi ng statements: "[p]ipeline constraints and growing gas and electric interdepen dency challenges" and the need for "more transmission and new operating proce dures" will limit state and utility ability to comply with the proposal while p reserving reliability. And the retirements of coal-fired units due to the proposal will "lessen industry diversification of fuel sources." Cumulatively, the se issues mean the proposal will impair the reliability of the grid, especially unde r extreme weather conditions such as last winter's "polar vortex."

Commenters cited SPP comments on reliability impact s as a result of compliance with the proposed rule, such the lack of time available to u pgrade transmission and the challenges associated with increased regional and interregiona l planning efforts needed to handle the necessary system expansions.

Commenters stated their concern for reliability und er the proposed rule and cited several system operators, reliability councils, and public service commissions including APPA, NERC, TVA, SPP, National Rural Electric Cooperative Associatio n, ERCOT, ISO/RTO Council regarding the CPP's effect on bulk electric system reliability. T he commenters specifically cited: NERC's initial reliability review discussions of adequate reserve margin levels, constrained time periods, and resource mix shifting: SPP's comments regarding NERC violations, transmission expansion time and cost restraints, and reliability during ex treme events as a result of the proposed rule; ERCOT's analysis indicating reliability and managem ent challenges associated with market design, increased renewables, coal plant closures, transmission system upgrades and dispatchable generation capacity issues; and TVA's comments stat ing that there is insufficient implementation time for implementing the glide path, that IPM is i nadequate, and that detailed transmission reliability studies are required to determine the s upply and transmission changes required to meet FERC requirements to maintain Bulk Electric System reliability.259

Commenters cited statements from FERC Commissioner Moeller and Chair LaFleur as well as representatives from Alliance for Cooperative Energ y Services and American Electric Power discussing recent winter grid reliability issues an d the potential reliability impacts of EPA's recent and proposed rules, such as those resulting from coal fleet closures. The commenters discussed the instability of natural gas prices whe n compare to coal during the winter, included a figure illustrating the point, and stated that elec tricity price spiked followed the natural gas price increases- primarily as a result of a less diverse electricity grid driven by policy-induced closures of coal power plants. The commenters cited Southern Company reports to indicate the importance of fuel diversity and coal power for ele ctricity prices. The commenters then summarized findings of Energy Ventures Analysis' (E VA) study for the NMA and cited statements from PJM, MISO, JP Morgan as well as EIA statistics to illustrate the importance of the existing coal fleet to reliability, reserve mar gins and electric prices and provide projections increases in costs and prices in various seasons an d scenarios. The commenters further cited ConocoPhillips who projects domestic natural gas de mand will exceed DOE/EIA's projection by 30 percent in 2017. Commenters provided further cit ations from SPP regarding the impact of the proposed rule's timeline on reliability due to new transmission needs, and from NERC, MISO and ERCOT regarding the negative reliability and re serve margin impacts of the interim performance requirements on reliability. The commen ters also discussed NERC's concerns of overdependence on a single fuel type and the effect of increased reliance on wind and solar on the reliability of the grid due to storage, ramping flexibility, reactive power, and voltage stability

issues. The commenters added statements from First Energy and Virginia State Corporation

Commission that stated that EPA rules will lead to less reliable service over time and that the EPA Section 111(d) proposal could have an impact si milar to the MATS rule that has brought the electric grid to the edge. The commenters summa rized that the proposed rule creates an unacceptable risk to our nation's electricity gener ation, transmission and delivery system that may result in widespread voltage degradation, colla pse and cascading outages in its system.

Similarly, commenters cited NERC, MISO, SPP, NERA, ERCOT to indicate that the CPP, especially its interim targets, will create signifi cant reliability risks by forcing early retirement of fossil units that cannot be timely replaced with an y form of generation, let alone generation with similar reliability attributes. The commenters also stated that the proposed rule will also create difficulties with respect to state efforts to devel op an effective portfolio of generation resources and discussed NERC's concerns of overdependence on a single fuel type and the effect of

increased reliance on wind and solar on the reliabi lity of the grid.

Commenters summarized and cited PJM and ISO New Eng land's proposals as well as MISO statements to illustrate that every market has its own unique resource performance issues and EPA's capacity mandates in the BSER could exacerbat e such issues by restricting the ability of these markets to utilize all types of generation to ensure reliability.

Commenters stated the CPP was developed without tho rough consultation with the Federal Energy Regulatory Commission (FERC), the North Amer ican Electric Reliability Corporation (NERC), or any of the regional transmission organiz ations that regulate and control grid reliability. The commenters stated the FERC has app roved mandatory, enforceable reliability standards with which electric utilities must comply or face civil monetary penalties. The commenters agreed with the Southwest Power Pool (SP P) who stated the bulk electric system260

will be at serious risk of violating limits if the CPP remains as-is and the likelihood would increase if not given enough time to construct the infrastructure necessary to facilitate compliance with the state goals being contemplated under the proposed CPP. The commenters stated that planning, design, siting, permitting, a nd construction can easily take as long as a decade. The commenters also stated the CPP clearly advocates a greater transition from coalpower generation to natural gas-fired generation, b ut there has been no assessment as to whether there will be adequate natural gas supplies or infr astructure to meet the increased demands created by the CPP.

Commenters also stated the need for EPA to consult with FERC, NERC, and RTOs to determine impacts to reliability, cost stabilization and nati onal security issues. The commenters referenced concerns raised by NERC, MISO, and SPP. The comment ers stated a lack of sufficient pipeline infrastructure to increase supply of natural gas an d the impossibility to modify existing plants and build new plants to meet EPA deadlines.

Commenters listed the following negative reliabilit y impacts that will result from the proposed

rule:

• overall reliability of service impacts to New Mexic o's electric grid and the

utilities' electric grid if plants are shuttered or if plant output is reduced;

• reliability of service impacts to utility customers , industries and the State's economy if plants are shuttered or if plant output is reduced;

• utility's ability to integrate existing and prospec tive New Mexico located renewable energy projects if plants are shuttered o r if plant output is reduced;

• promotion of New Mexico's renewable energy industry and the State's economy if plants are shuttered or if plant output is reduced; and

• State's ability to attract economic development.

Commenters stated that EPA's power plan will not wo rk and poses an unacceptable risk to our nation's electricity generation, transmission and d elivery system. The commenters stated that a growing number of experts are warning that the agen cy's proposal will degrade grid reliability and produce substantially higher utility and energy costs for all Americans. The commenters noted NERC's conclusion that implementation of the proposal will prove impossible while damaging the reliability of the nation's electricit y supply and the proposal "would increase the use of controlled load shedding and potential for w ide-scale, uncontrolled outages." The commenters further noted NERC's findings that these results are inevitable because EPA's plan underestimates the number of power plants that will be closed and overestimates the amount of new power sources and increased energy efficiency e xpected to offset the power generation lost. The commenters stated concerns of several po wer organizations: Southwest Power Pool's warning that the proposal will result in cascading outages and voltage collapse; MISO's forecasts that the power reserves needed in the fifteen-state region will fall below safe margins and only get worse; and American Electric Power studies that indicated the plan would result in widespread voltage degradation, collapse and cascad ing outages in its system.261

Commenters stated concern about how the implementat ion of the Plan will impact grid reliability in coming years. The commenters further cited conc erns by NERC, MISO, and SPP about how the retirement of significant coal-fired capacity w ill impact the reliability of the nation's electric grid. The commenters noted an observation by NERC that while NGCC units are capable of running at a high capacity factor, those units are generally not designed to be utilized as baseload resources. The commenters also noted that NERC poin ted out that overreliance on one fuel

source threatens the fuel diversification that util ities rely on to help maintain reliability. The commenters also noted that EPA's finding that 10% o f the 464 NGCC units in service in 2012 had a capacity factor of 70% or greater does not su pport a conclusion that all of these generating

units can be used at the same rate.

Commenters reiterated concerns raised by SPP, notin g that SPP performed an evaluation of the impacts of the projected EGU retirements on SPP's r eserve margin and concluded that by 2020, SPP's reserve margin would fall to 4.7%, which is 8 .9% below SPP's minimum reserve margin requirement and would result in a violation of SPP' s reliability criteria and NERC reliability

standards. The commenters further noted that out o f the fourteen load-serving members impacted by the EPA's projected EGU retirements, ni ne would be deficient in 2020. Furthermore, SPP found that its anticipated reserve margin would fall to -4.0% by 2024, causing ten of SPP's load-serving members to be deficient.

Commenters also presented information by other reli ability experts:

• In a letter to EPA, 18 current and former State PUC Commissioners asserted that "[p]oor forecasting by EPA [in the proposed rule] a lso means the reliability of the electric grid will be threatened due to coal shutdo wns ...."

• Several sources have concluded that, if the NOPR we re implemented, the Midcontinent Independent System Operator ("MISO") a nd SPP would be forced to operate well below FERC's required 14.5% reserve capacity.

• A joint study by NERC and the California ISO conclu ded that the reliability of bulk power supply can be diminished when renewable resources reach 20% or more of total supply (19) - a number that EPA proje cts can be achieved or exceeded by 24 States to achieve the NOPR's emissio ns reduction mandates.

Commenters stated that the concerns being raised by the organizations that focus on electricity grid reliability issues highlight not only the unpr ecedented scope of the NOPR, but also the risks it would create in an area where it has less expert ise than other federal agencies such as FERC or industry bodies such as NERC and SPP. The commenter s further stated that reliability impacts have not been adequately addressed in the NOPR or r elated technical support documents and that the impacts are so substantial that the NOPR should be withdrawn to enable them to be more adequately assessed on a nationwide basis.

Commenters summarized some of the concerns by SPP t hat the NOPR would pose a "serious risk" to reliability and the bulk electric system w ill be at serious risk of violating limits [to ensu re that transmission lines are not overloaded and volt age is maintained]. The commenters presented

SPP's conclusions from the assessments:262 • If the assumed EGU retirements were to occur absent requisite transmission and generation infrastructure improvements, the power g rid would suffer extreme reactive deficiencies that would expose it to wides pread reliability risks resulting in significant loss of load and violations of NERC reliability standards.

• Even with generation capacity added to replace the assumed EGU retirements,
additional transmission infrastructure will be need ed to maintain reliable operation of the grid. The assessment revealed 38 o verloaded elements in portions of six states that SPP would be required to mitigat e with transmission planning

solutions.

Commenters noted that the transmission expansion cu rrently planned in SPP does not consider EGU retirements expected as a result of the CPP and that EPA's projected EGU retirements represent approximately 6,000 MW of additional capa city being retired in the SPP region beyond that currently expected by 2020, or approximately a 200% increase in retired generating capacity compared to SPP's current expectations. The commen ters noted that SPP's transmission system impact evaluation indicates serious, detrimental im pacts on the reliable operation of the bulk electric system in the SPP region, introducing the very real possibility of rolling blackouts or cascading outages that will have significant impact s on human health, public safety and economic activity within the region.

Commenters said EPA's analysis does not appropriate ly consider all of the potential impacts on the safe and reliable provision of electricity, nor the potential adverse impacts on the cost of electricity that can result from implementation of the Proposed Rule as drafted. The commenters said increased renewable generation resulting from building block 2 will likely result in the need

for additional electric transmission facilities or constrain existing facilities; likewise, greater reliance on cleaner-burning natural gas will create a greater demand on natural gas infrastructure.

The commenters said the interrelated nature of the natural gas and electricity markets, combined with varying compliance costs and mandates between neighboring states, will complicate the ability to permit and develop the needed infrastruc ture, resulting in a direct impact on electric system reliability. The commenters stated, furtherm ore, EPA's analysis does not appear to review how the proposed requirements would influence the d ispatch of electric generation resources, potentially shifting the market away from an effici ent economic dispatch structure, to one that is driven by environmental mandates, and this could si gnificantly increase the cost of electricity to consumers and adversely impact the economies of the states involved, as well as negatively affect grid reliability.

Commenters stated EPA's assessment must include an evaluation of how the proposed reduction targets would impact individual states within an in terconnected electrical planning region where the interconnected states have widely varying reduc tion mandates. The commenters said that impacts could adversely affect the cost and reliabi lity of electricity throughout a region, and based on comments already received from stakeholder s, EPA has recognized the interrelated nature of the building blocks and the need to devel op necessary infrastructure. The commenters

said there is insufficient data in the record to co nclude that the Proposed Rule will not adversely impact the availability or reliability of electrici ty. The commenters said while EPA indicated that it had consulted with ISO and RTOs, other agencies that would be most optimally positioned to263

assess the impacts of the Proposed Rule on electric ity reliability and costs - the Federal Energy Regulatory Commission (FERC), the North American El ectric Reliability Corporation (NERC), the Western Electric Coordinating Council (WECC), a nd other local and regional balancing authorities - do not appear to have been engaged in EPA's initial assessment. The commenters stated that emphasizing the importance of ensuring that the Proposed Rule does not jeopardize the electricity bulk system, on November 7, 2014, F ERC Chairman Cheryl LaFleur called for a reliability mechanism to be incorporated into the C lean Power Plan, noting that "protecting reliability isn't optional". The commenters said th e EPA should utilize the expertise and regional insights of these various agencies to further refin e the Proposed Rule in a manner that addresses

the concerns that have been raised. The commenters stated that at the national level, NERC has undertaken reliability assessments to examine the C lean Power Plan and identify the reliability implications and potential consequences from the im plementation of the Proposed Rule and the EPA's underlying assumptions. The commenters added that the NERC Initial Reliability Review notes that there are several assumptions embedded i n EPA's building blocks that are likely to impact the reliability of the bulk power system, an d which should be further considered prior to finalizing the Clean Power Plan. The commenters sai d NERC identified several assumptions that warrant further consideration, including the follow ing:

• Development of replacement generation for facilitie s that will be retired may be too conservative, and developing replacement genera tion in the constrained time period allowed for implementation under the Propose d Rule could present significant reliability challenges;

• Constraints on electric transmission and gas pipeli nes due to greater reliance on variable resources and natural gas are not properly accounted for;

• Proposed energy efficiency expansions are not suppo rted by peer data;

• Changes to the resource mix resulting from implemen tation of the Proposed Rule will result in changes to the operations and expect ed behaviors on the bulk power system that are not addressed in the Clean Power Pl an;

• Necessary reliability enhancements are not likely t o be implemented within the timeframe contemplated under the Proposed Rule.

Commenters stated NERC also recommends that the Pro posed Rule include a form of reliability assurance, which should be developed on a multi-age ncy and state level, and "EPA, FERC, the DOE, and state utility regulators should employ the array of tools and their regulatory authority to develop a reliability assurance mechanism, such as a 'reliability back-stop'" (NERC Initial Reliability Review, p. 3). The commenters stated th e EPA should continue its outreach to stakeholder groups and work with NERC and other age ncies that will be conducting reliability assessments to ensure that the development - and im plementation - of the final rule does not have the unintended result of disrupting the reliability of the nation's bulk power system.

Commenters stated, in addition to the nationwide re view conducted by NERC, in the west, WECC has undertaken a phased-study process that is intended to provide the industry with unbiased and independent analysis of the potential reliability impacts of the Proposed Rule. The264

commenters said that in WECC's preliminary report, one result of exploratory sensitivities regarding carbon price "highlighted the interconnec ted nature of the Western Grid" (WECC Preliminary Technical Report at p. 30). The comment ers said this emphasis on the interconnected nature of the regions relevant to th e provision of electricity cannot be understated, and must be recognized by EPA in the final rule tha t is promulgated.

Commenters said coordination with FERC, NERC, and W ECC to determine the real impact of the Clean Power Plan on regional and national opera tions and markets is essential, and must be done prior to making any final determinations regar ding the Proposed Rule's impact on the electricity markets. The commenters urged EPA to re view the studies being done by NERC, WECC, and other regional entities, and to address n ational and regional ramifications of the EPA's proposal in the final rule. The commenters sa id EPA simply cannot promulgate massive, national emission reduction strategies like those p roposed in the Clean Power Plan without fully analyzing the impacts on the provision of electrici ty and the cost of the electricity.

Commenters said concerns regarding impacts to relia bility have been raised at the national, regional, and state-wide level. The commenters said that in a prepared testimony, FERC Commissioner Moeller raised concerns regarding the impacts of the Clean Power Plan on the integrated electricity grid, including concerns reg arding infrastructure constraints and integration issues. The commenters said the integrated nature o f the electric grid and the need for multi-state coordination are not adequately address in the Prop osed Rule, and as more fully addressed below, there would likely be significant benefits t o having a regional plan in the west, given the interconnected nature of the electric grid. The com menters stated that while multi-state and regional plans and agreements would address many of the "seams" issues associated with the interconnected nature of the electricity grid, ther e are a number of impediments that are likely to thwart the timely development of such regional plan s, including the level of reductions required of neighboring states, the interaction between pote ntial rate- and mass-based approaches utilized by neighboring states, and the amount of time that will be required to coordinate such a plan between multiple governmental agencies. The comment ers said it is these very concerns that have prompted FERC Chair LaFleur to note that FERC will need to be involved in implementation and enforcement of the Proposed Rule to ensure that reliability is protected, and LaFleur has also noted the complexities associated with regional implications, which would require a lot of "work to help regional transmissio n organizations patch together state plans to ensure that states can comply with the rule while p ower generation is dispatched regionally".

Commenters stated that SPP's comments filed on Octo ber 9, 2014 in response to the proposed

rule and based on SPP's own evaluation are centered around a reliability impact assessment based on the EPA's plan. The commenters identified several of SPP's concerns including the SPP region will experience numerous thermal overloa ds and low voltage occurrences. The

commenters also stated that based on the SPP's anal ysis, it is clear EPA has not adequately demonstrated the reliability of its Clean Power Pla n and due to the shortcomings of the EPA's IPM modeling, EPA cannot demonstrate whether its Cl ean Power Plan is reliable. The commenters stated that EPA must rely on Regional Tr ansmission Organizations and utilities to determine what changes to generation mix are feasib le while still ensuring reliability of the electric grid.265

Commenters stated that the organization supports NE RC's conclusions and recommendations in the November 2014 report and reiterates that analys is must be performed to demonstrate electric system reliability before states commit to plans th at include changes to their current generation portfolios.

Commenters cited concerns from NERC, Edison Electri c Institute, MISO, and SPP regarding retirements and shrinking reserve margins of coal-g enerated power and its impacts on reliability for various regions of the country. The commenters stated that electric grid operators in their region will be placed into a situation where an inc reasing amount of backup and emergency procedures are necessary to ensure the adequate sup ply of electricity.

Commenters stated that several entities such as NER C, FERC, SPP, MISO and SO/RTO Council have examined the reliability impacts of the Propos al, and have found that it would exacerbate the reliability concerns that already exist due to the nation's transition from coal-fired generation to natural gas and renewables. The commenters stat ed some of the reliability concerns raised by NERC with regard to the four building blocks. The c ommenters stated challenges to reliability that would occur from the change in resource mix co ntemplated by the Proposal and that with greater reliance on natural gas, there are risks fr om the reduced diversity and increased reliance on a single fuel source. The commenters cited NERC 's recommendations to ensure reliability including a Reliability Safety Valve, immediate coo rdination and meetings among EPA and state and industry planning and analysis groups, more tim e for implementation of the Proposal, and a "reliability back-stop" that would allow for greate r timing readjustments and granting extensions,

when needed.

Commenters stated MISO performed an initial analysi s of the Proposal and concluded that up to 14 gigawatts (GW) of coal capacity could be at-risk for retirement in addition to the 10 to 12 GW expected to retire to comply with the MATS. The com menters stated that MISO already faces extremely tight reserve margins, increased probabil ity of reliance on emergency operating procedures, and loss of load. The commenters noted that MISO called for removal of the interim compliance requirements and greater flexibility in any final rule to reduce reliability risks.

Commenters stated that a FERC commissioner raised r eliability concerns and indicated support for a RSV that also included cost as part of the re liability assessment. The commenters also stated that SPP recommended EPA provide more time f or compliance with any final rule and

include a RSV. The commenters also stated that AF&P A and AWC support adoption of an RSV, and the other mechanisms to reduce reliability risk s discussed in this comment.

Commenters referenced NERC's reliability impact stu dy their concerns related to the CPP that are more impactful than prior environmental complia nce programs due to the extensive impact to fossil-fired generation NERC's questioning many of the assumptions EPA used to support its economic impact analysis of the CPP. The commenters cited NERC who stated EPA's assessment of the potential coal plant retirements could be conservative, and that, if EPA's assumptions prove wrong, "developing suitable repla cement generation resources to maintain adequate reserve margin levels may represent a sign ificant reliability challenge, given the constrained time period for implementation". The co mmenters also wrote about NERC's concern about the CPP-induced shift from coal to natural ga s and renewables for power generation.266

Commenters stated that with respect to Building Block 1, the I nitial NERC Report acknowledges that improving the existing coal generation fleet's efficiency by six percent "may be difficult to achieve." Commenters stated that it explains that E PA calculated unit-specific heat rates using gross generation data from the CEMS, thereby ignori ng "generation-reducing effects from postcombustion environmental controls . . . .", and tha t EPA also used net-generation data, without considering the fact that these retrofits would red uce the net output and net heat rate efficiency of affected units. "Not considering these reductions c reates an inconsistent approach, especially considering that most coal-fired EGUs will require control retrofits to comply with environmental regulations, such as [MATS] and Secti on 316(b) of the Clean Water Act."

Commenters further stated that EPA also assumed tha t turbine overhauls would result in major heat rate improvements but "[r]egular turbine overh auls are generally not practical or economical" because they require units to be out of service for protracted periods, and that the notion that there are significant efficiencies to b e obtained through overhauls also ignores the reality that generation owners have strong incentiv es to operate at peak efficiency, including profit incentives in FERC-regulated wholesale power markets. Commenters stated that, moreover, the Initial NERC Report notes that EPA fa ils to account for factors that have "profound effects on the process efficiency of a co al-fired EGU," including "(1) subcritical versus supercritical boiler designs; (2) fluidized bed combustion, integrated gasification combined-cycle (IGCC), and pulverized coal; (3) uni t size and age; and (4) coal quality variations in moisture and ash (i.e., every 5 perce nt change in coal moisture results in a 1 percent change in boiler heat rate efficiency)."

Commenters stated that in the November 2014 "Potential Reliabi lity Impacts of EPA's Clean Power Plan" report, NERC stated: "NERC is concerned that the assumed improvements may not be realized across the entire generation fleet sinc e many plant efficiencies have already been

realized and economic heat rates have been achieved . Commenters stated that multiple incentives are in place to operate units at peak efficiency, a nd periodic turbine overhauls are already a best practice".

Commenters stated that NERC pointed out a number of areas which EPA's analysis fails to account for that impact coal unit efficiency and ul timately have reliability implications: 1) factors including subcritical versus supercritical boiler designs, 2) fluidized bed combustion, integrated gasification combined cycle (IGCC), and pulverized coal, 3) unit size and age, and 4) coal quality variations in moisture and ash.

Commenters stated that the NERC reliability study h ighlights faults with US EPA's regression analysis. Commenters stated that NERC also cites nu merous problems with US EPA's regression analysis in building block 1. Commenters stated tha t the NERC Reliability Study states that US EPA fails to account for (1) coal-fired plant retro fits; (2) subcritical vs. supercritical boiler designs; (3) fluidized bed combustion, integrated g asification combined-cycle (IGCC), and pulverized coal; (4) unit size and age; and (5) coa l quality variations in moisture and ash.

Commenters stated that over time, the utilities wil l want to retire the coal plants that operate at low capacity factors, but that can be delayed until they can be made redundant by efficiency, renewables, new gas plants, CCS coal, nuclear, tran smission, or other solutions.

Commenters stated that some observers assume that t he Plan would require shutdown of power plants required for reliability. Commenters stated that AEP CEO Akins said:267

"I instructed my team here at AEP to run system pla nning and performance studies, typically known as load-flow studies that engineers use to pl an and confirm the reliable operation of the grid. And I asked them to assume the EPA 2020 corne rstone assumptions and add generation that's included in the PJM queue. The results of th ose studies found widespread occurrences of voltage degradation, collapse, and in fact, cascadi ng outages of the electric grid. These results are even before any contingency outages, such as loss o f generation or transmission facilities. The

Southwest Power Pool ran their own studies and conf irmed the same results for their region of the country, which we also serve."

Commenters stated that indeed SPP's presentation in Arkansas (October Presentation 4) claims as follows: “If CPP compliance begins before genera tion and transmission infrastructure is added [the region will experience] extreme reactive defic iencies of approximately 5,200 MVAR across SPP system, [which] will result in significant loss of load and violations of NERC reliability standards. During CPP compliance without additional transmission infrastructure, loading on 38 facilities in SPP [would] exceed equipment ratings, some overloads would be so severe that cascading outages would occur, [resulting] in viola tions of NERC reliability standards. (Slide 11) By 2020, SPP's anticipated reserve margin would be 4.7%, representing a capacity margin deficiency of approximately 4,600 MW. By 2024, SPP' s anticipated reserve margin would be - 4.0%, representing a capacity margin deficiency of approximately 10,100 MW”.

Commenters stated that our nation's electrical powe r grid is interconnected and dependent upon a stable and constant flow of energy. Commenters said that regional power organizations such as the Southwest Power Pool (SPP) and the North Americ an Electricity Reliability Corporation (NERC) are mandated by the Federal Energy Regulator y Commission to ensure reliable supplies of power, adequate transmission infrastructure, and competitive wholesale prices of electricity. Commenters said that several of these organizations have expressed serious concern with the impact of the rule.

Commenters stated that they concur with NERC conclu sions. Commenters stated that the interim goals provide a constrained time period for implementation to the point of being unrealistic and efforts to meet the interim goal wi ll raise reliability concerns. Commenters stated that the heat rate improvements contained in Block 1 are unrealistic because heat rate improvements that are technically available already have been implemented.

Commenters stated that the EPA should schedule tech nical conferences with FERC, NERC and the regional transmission organizations to fully ev aluate potential impacts of the CPP on power grid reliability.

Commenters stated that Section 215 of the FPA autho rizes FERC to certify an electric reliability organization to develop and enforce mandatory relia bility standards for the nation's bulk-power system, and further authorizes FERC to approve and enforce those reliability standards. Commenters stated that pursuant to this authority, FERC has certified the NERC as the electric reliability organization. Commenters stated that NE RC and its various regional reliability entities now administer a comprehensive set of mandatory rel iability standards subject to FERC's oversight. Commenters stated that the Proposed Rule acknowledges that reliability is an issue of concern, but ultimately rests on a conclusion that it provides sufficient flexibility to avoid reliability concerns.268

Commenters stated that EPA has not adequately consu lted with FERC or NERC regarding its conclusion on the potential reliability implication s of the Proposed Rule or other issues related to NERC's reliability standards approved by FERC. Comm enters stated that there is every indication, however, that the massive changes in ge neration dispatch that the Proposed Rule would require will lead to conflicts between EPA's policies and NERC's reliability standards.
Commenters stated that EPA contravenes Section 215 of the FPA by supplanting FERC as the ultimate authority over the reliability of the bulk -power system.

Commenters explained the process by which the Arizo na Cooperation Commission monitors readiness of facilities to meet energy demands, and address issues of quality and reliability. The commenters stated that the EPA's proposal will over take well thought out existing state processes designed to ensure reliability electric service to customers, and jeopardize reliability of the grid

and electric service in the state.

Commenters claimed that the EPA did not consider re liability in their analysis for the CPP. Commenters stated that the requirement to redispatc h NGCC units to achieve a 70% capacity factor may require significant transmission upgrade s that are necessary to maintain system reliability. The commenters referenced the NERC's a nd SPP's Reliability Impact Assessments of the CPP, NERC's report published in November 2014, entitled "Potential Reliability Impacts of EPA's Proposed Clean Power Plan" and SPP's assessme nt published October 2014. Commenters referred to the FERC's reliability standards.

Commenters stated, EPA's assumption that the Propos ed Guidelines' emission reductions could be achieved on the contemplated timetable without s ignificant negative impacts on electric reliability and reliability markets is contradicted by independent expert analyses. Commenters extensively referenced the "Initial NERC Report" an d also noted some other expert analyses.
Commenters said, these detailed comments are relate d to the "arbitrary and capricious" issue but are more specifically related to technical concerns of electric system reliability and so are presented in section 8.10, Reliable affordable elec tricity.

Response 39: Since issuing the proposed rule, EPA has held many discussions concerning the potential reliability concerns with the proposed ru le, and has modified the proposal to address reliability in this final rule. On reviewing the comments that appear throughout t his section, EPA notes that some comments on reliability express concerns that the rule will adversely impact reliability, while others do not foresee suc h impacts, and some see benefits in terms of modernizing the generation fleet. EPA believes tha t reliability can be addressed in the state planning process in ways that will ensure that conf licts with reliability requirements and compliance with this final rule will be very unlike ly, and also provides a Reliability Safety Valve mechanism in the event of such unlikely and unantic ipated occurrences. See section VIII.G.2 of the preamble for the final rule for a discussion of electric reliability and for the important provisions on reliability in this rule.269

Comment 40: Multiple commenters discussed reliability concerns with the proposed rule.

Commenters stated that the timing and scale of the expected changes needed to reach the CO2 emission goals could have a harmful impact on grid reliability given current regional market designs and existing transmission infrastructures. The commenters stated that there is a limit to how fast compliance can be achieved within applicab le reliability criteria and that resource mix changes will force the following reliability impact s: retirement of up to half of existing coal capacity in the ERCOT region and an associated loss of dispatchable generation capacity, increased challenges to integrate renewable resourc es and the associated costs to procure additional regulating services, improve forecast ac curacy, and address system inertia issues, improvements in transmission systems to integrate r esource mix changes, and changes to energy market design and their associated costs. The comme nters stated that the final rule must include a process to effectively manage electric system relia bility issues and a more flexible implementation timeline to address each state's or region's unique market characteristics.

Commenters stated that the proposed rule could jeop ardize the security of ancillary services, a crucial element to reliability in ERCOT system, due to additional renewables on the grid. The commenters further explained that because the five- minute dispatch in ERCOT does not insure that appropriate resources are available to balance system generation and system load, ERCOT procures ancillary services to ensure that sufficie nt resources with necessary characteristics are available to balance any additional variability and to maintain system frequency through a variety of potential conditions, including unit tri ps, large up or down ramps, and ensuring enough capacity is available. The commenters noted that NE RC also recognized this issue in its reliability assessment report and provided supporti ng text from the report noting ERSs' role in load and resource balance, voltage support and freq uency support that may be impacted by a changing resource mix.

Commenters stated that "EPA, [in] its own words, me rely assumed that adequate transmission capacity would be available to deliver resources se amlessly and reliably. However, this assumption may not even be valid for the system tha t will exists in 2016, after all MATS retirements have occurred, and certainly cannot be assumed to be the case once all other recommended changes introduced by the CPP take plac e."

Commenters stated that EPA's assumption that transm ission is adequate within or between regions is flawed and unsubstantiated. The commente rs discussed the results of AEP's preliminary power flow analyses for the transmissio n systems in PJM and SPP based on EPA's

modeled unit retirements in 2020 and stated that t he analyses identified severe, widespread reliability concerns such as thermal overloads, low voltages, and voltage collapse leading to cascading outages. The commenters noted that the st udy results are likely to be conservative because they did not include an analysis of inter-r egional impacts or the effects of adding substantial amounts of new renewable generation. Th e commenters anticipated that the reliability issues identified would require significant upgrade s to the transmission infrastructure to maintain system reliability, accommodate new generation, and to support the dispatch of the system in a manner significantly different from historical oper ations.

The commenters also noted that the study's reliabil ity analysis showed significant reliability problems within many of the 64 IPM model regions an d the assumed ratings of the interfaces270

between the IPM regions are negatively impacted by the changes to the generation fleet. The commenters added that these interface ratings are e stablished using power flow models and often are limited by voltage limitations as opposed to tr ansmission line capacity, and that AEP's analysis shows that the capacity of key interfaces within PJM could be reduced by as much as 20% due to a reduction in voltage support following retirement of coal generating plants. Commenters recommended that at a minimum, RTOs shou ld facilitate development of transmission upgrades necessary to sustain reliabil ity and ensure the integrity of the transmission grid is maintained during the implementation period

.

Commenters stated that the proposed rule could nega tively impact large industrial customers due to reliability risks stemming from the proposed rul e and other recent regulatory burdens. The commenters cited reliability concerns of NERC, SPP and ERCOT.

Commenters discussed reliability concerns associate d with the 120 gigawatts of installed coal capacity due to be retired as a result of the previ ous and proposed rules and stated that replacing this amount of installed capacity cannot be done wi th intermittent renewable sources alone. The commenters noted that events such as the polar vort ex may overwhelm infrastructure without coal-fired plants if enough natural gas is unable t o be secured like previous events.

Commenters also discussed reliability and cost conc erns associated with the proposed rule during

extreme events. Commenters further stated that the proposed rule does not account for infrastructure challenges associated with redispatc hing, and stressed the importance of coal fired plants in maintaining fuel diversity and hedging ag ainst price volatilities that disproportionately impact low and fixed income citizens.

Commenters stated that the difference between previ ous rules and the proposed rule is that the power grid's fuel flexibility and choice was mainta ined under previous actions, whereas the proposed rule will displace fuel sources and upset reliability and cost-effectiveness.

Commenters also stated concerns with the affordabil ity and reliability impacts of the proposed

rule.

Commenters stated the proposed EPA rule considers o nly the adequacy perspective of the reliability impact of the rule and does not address the potential thermal, voltage, or frequency impacts. The commenters further stated that the rul e does not consider the associated potential transmission economic implications of additional fa cilities required to ensure operational reliability or financial implications of stranded t ransmission investments that become underutilized as a result of the change in system p ower flows.

Commenters also stated that constructing new facili ties requires outages on existing facilities, which are increasingly difficult to schedule, and c oordinating outages across many systems that are attempting to simultaneously develop new transm ission facilities will be challenging and likely result in increased congestion costs and lon ger lead times to commission the new facilities as sequencing of outages will be required. The comm enters noted that most of the transmission reliability considerations can be mitigated with ad ditional investments in transmission infrastructure, but the impact of these costs and t iming of these facility upgrades on reliability during transitional periods should be considered as part of the proposed rule.271

Commenters stated that under Clean Power Plan condi tions and forecasts, it should be prudent for EPA to provide leeway for states, for Regional Transmission Organizations (RTOs), and the various Independent System Operators (ISOs) to inco rporate into EPA's Clean Power Plan safeguards that better protect the reliability of t he bulk power system and the resiliency of the bulk power system. The commenters stated that EPA needs to consider transitional precautions, such as retaining some of the inactivated coal-fire d generating units in New England as emergency, or "black start" reserves, to prevent lo ng term regional grid outages during the 15- year (2015-2030) EPA Clean Energy Plan transition.

Commenters stated that EPA Clean Power Plan is base d upon a rationale that needs to include greater robustness to cope with emergency grid outa ges. The commenters stated that NERC

conducted a review of the EPA Clean Power Plan and found greater reliance on natural gas-fired generation and long distance electricity transmissi on are likely results of the EPA plan, as well as challenges to reliability. The commenters also pro vided quotations from a FERC commissioner on planning for gas-electric interdependence as wel l as findings of the Lincoln Laboratory at MIT that the electricity generation system has beco me increasingly dependent on the operation of the natural gas system.

Commenters stated the central issue with the NOPR i s that EPA has not adequately assessed its impact on the reliability of the electricity grid a nd that the rule would have significant adverse impact on grid reliability. The commenters further stated that EPA's failure to fully and properly assess and account for the NOPR's impact on grid re liability puts at risk the economic viability of thousands of manufacturing facilities in the Uni ted States that are interconnected to their utilities at transmission voltages. The commenters provided examples of the economic effects of power outages on the industrial sector.

Commenters referenced NERC's November 2014 report, which identifies concerns related to the changes in resource mix and the consequent reliabil ity issues that would be forced by the NOPR.

The commenters further stated the NERC found that t he NOPR would constrain the availability of Essential Reliability Services resulting from th e intermittent nature of Variable Energy Resources ("VERs") such as wind and solar. The com menters also noted that NERC indicated

that the number of estimated retirements identified by EPA "may be conservative if the assumptions prove to be unachievable. Developing su itable replacement generation resources to maintain adequate reserve margin levels may represe nt a significant reliability challenge, given the constrained time period for implementation. The commenters further noted the NERC warned that increased penetration under the NOPR of so-called Distributed Energy Resources ("DERs"), which most commonly are roof-top photovol taic arrays, will pose significant challenges to system operators because this resourc e cannot be dispatched and is generally invisible to the operator.

Commenters stated that the compliance with the prop osal for reductions in CO emissions by almost 30 percent will directly cost the state by i ncreased energy rates, loss of jobs in industry, and a negative impact of less in energy reliability . The commenters further stated that the U.S. Chamber of Commerce predicts that the compliance co st of these new regulations will be $28 billion each year to 2030, which is a cumulative to tal of nearly $480 billion. The commenters noted this is three times larger than EPA's estimat e and rising electric rates would damage our272

gross domestic product (GDP), with the loss in GDP to be $50 billion per year and peaking at $100 billion in 2025.

Commenters stated that energy reliability could be jeopardized because these rules will remove coal from the energy mix and reduce the overall amo unt of power generation available and that their nursery business cannot continue our record o f successful business with rolling blackouts or brownouts and plants that rely on irrigation would not survive.

Commenters stated that by eliminating diversity in fuel choices, this rule creates the potential of future electricity shortages and price spikes that would do great harm to those who can least afford it: hardworking American consumers.

Commenters stated that this past winter provided a clear warning that our bulk power system is close to the edge of breaking, and additional power plant retirements induced by EPA rules would push it over the edge. The commenters stated businesses and families in many parts of the country paid unprecedented high prices for electric ity. The commenters stated that coal based power plants supplied 92 percent of the incremental demand for power this winter.

Commenters stated that an analysis performed by the Energy Ventures Analysis shows that wholesale power prices will rise 27 to 55 percent a cross different regions of the country, with no state spared, and businesses and households paying $35 billion more for natural gas. The

commenters continued that EPA's assessment of the e conomic impacts of its rules inspires little

confidence in the estimate that would cause less th an 5,000 megawatts of power capacity to close. The commenters stated that it will likely b e 10 to 12 times more.

Commenters stated that there are few definitive ans wers about how this rule can actually work, that the cost and risks are real, but the benefits are not. The commenters further stated that residents' economic and energy security are put at great risk, control of their electricity and energy supplies and infrastructure surrendered, and their state's full potential for economic growth forfeited.

Commenters expressed concern about the reliability risks that are created by the proposal and the proposal needs to be carefully analyzed before anyt hing like this is adopted. The commenters stated that EPA's proposal clearly increases the ri sk that our electricity supply will be less reliable and that EPA's own analysis suggests that roughly a third of the generation fleet will be

retired between 2020 and 2030.

Commenters stated that EPA has not made any serious attempt to consider the practical and legal difficulty of getting all the approvals necessary t o build not only new power plants, but also the transmission lines and pipelines that will be neces sary for those plants. The commenters further stated that extreme weather conditions may expose p eople who are most vulnerable to energy shortages and blackouts.

Commenters stated EPA claims that it has looked at the 18 reliability impacts. The commenters claimed EPA doesn't have expertise in this area, an d there has been no consultation between EPA and those who really are responsible for reliab ility, especially those at FERC.273

Commenters stated given their experience with MATS those numbers could become far worse and closing so much coal so fast threatens the reli ability of the nation's electric grid, creating the potential for widespread blackouts and brownouts du ring periods of peak usage. The commenters noted that during the recent polar vortex 90 percen t of American electric powers coal plants scheduled to be closed under MATS were used to gene rate electricity and that PJM, a regional transmission authority operating in the Mid-Atlanti c and Eastern Midwest reportedly came within 700 megawatts of being unable to meet electr icity demand.

Commenters stated the implementation of the propose d rule would cause serious economic harm, reduce energy diversity, increase electricity prices, jeopardize grid reliability, result in major job losses, hinder coal technology advance s, and fail to achieve the administration and EPA's goal of global leadership on CO2.

Commenters stated that the discussion needs to incl ude the critical importance of the reliability of our electricity supply. The commenters stated th at coal is, from all accounts, the most reliable fuel source to generate electricity on this plan[e] t and as Americans we take it for granted how reliable our electricity is. The commenters noted t hat in many cases it is literally a life giving and sustaining resource and for [EPA] to tamper wit h the reliability of electricity by forcing the switch to less reliable fuel sources is wrong-heade d and simply dangerous.

Commenters stated that the reliability risk created by this proposal are significant and need to be analyzed carefully prior to the adoption of climate change policies at the federal and state level. The commenters further stated that EPA's building b locks require the states seeking EPA approval to reconfigure how electricity is generate d and how it is dispatched. The commenters stated that at the end of the process the proposal promises that almost a third of the existing coal fired generation fleet will be retired between 2020 and 2022 and that these plants currently provide electricity that sustains our economy and t he health and well-being of our citizens. The commenters noted that when these plants are shutter ed, our electricity supply will be entirely dependent on EPA predictions about energy efficienc y and the growth of costly underdeveloped alternative energies.

Commenters stated that EPA is not in the best posit ion to craft reliability policies, and EPA has never been tasked with this authority by Congress. The commenters stated that the most effective reliability policies result from the careful coordi nation between the federal energy regulatory commission, state and regional regulators, reliabil ity organizations and other stakeholders, and under this proposal, EPA would be given the power t o trump their decisions by approving or disapproving state energy policies.

Commenters provided a review of available generatio n sources as an argument about reliability of coal and stated that coal accounts for 38 percen t of the electric power generated, which is 1340 terawatts per hour, and the overall demand is expected to grow by 15 percent by 2030. The commenters summarized the status of nuclear energy, noted that the current pipeline infrastructure for natural gas cannot support the r equired growth to cover the loss of coal, production of solar panels is not economical due to global oversupply, and wind produced less

than 3% of the current need. The commenters noted that energy production by solar and wind are weather dependent. The commenters also identifi ed what other energy sources could replace274

coal, including biomass and algae, which are still in early stages and ethanol, which costs 3 dollars for every dollar's worth of fuel.

Commenters stated that closing coal plants and incr easing the amounts on natural gas for generation are adversely impacting reliability, aff ordability and supply. The commenters noted that American Electric Power relied on over 89 perc ent of its coal fired capacity from sources slated to close in April 2015 to meet the demand du ring the "polar vortex", and the Southern Company relied on 75% of its announced closures.

Commenters stated concerns about the loss of jobs d ue to the EPA's proposed Clean Power Plan

and estimates that the Clean Power Plan could kill 52,000 direct jobs and more than 100,000 associated positions by the year 2020 and EPA proje cts that this rule will cause the loss of 41 to 49 gigawatts of coal-generating capacity by the yea r 2020. The commenters noted that these retirements are in addition to the 92 gigawatts of coal capacity that the EPA is already projecting will shut down between 2012 and 2020, due in large part to the compliance with the 2012 Mercury and Air Toxic Rule. The commenters stated that these things raise serious, serious concerns for the reliability of the electric power supplies and that gas alone is not the answer.

Commenters recommended that the proposed rule provi de credit to states that have already reduced carbon emissions to help meet EPA targets a nd also a delay in the implementation of the Clean Power Plan to give states and utilities adequ ate time to implement compliance with these strategies.

Commenters stated that one of the keys to achieving those goals is maintaining a stable electric grid that delivers reliable and affordable power, b ut the electricity service that we take for granted is under stress from market dynamics, from inadequate transmission infrastructure, from too few new power plants that we need for supply, a nd new federal regulations. The commenters further stated that the federal government does not have a plan to ensure the stability of the grid and instead, has taken a series of piecemeal and ad hoc actions without a complete understanding of how they all interact together and impact the gr id.

Commenters stated that this country's course on the electric grid is unsustainable and recommended to stop ad hoc regulation and changes t o the electrical system, to appoint a task force with representatives from the EPA, Department of Energy, the Nuclear Regulatory Commission, the Federal Energy Regulatory Commissio n, plus regional transmission operators, electric generator companies, and others to develop a comprehensive, integrated cross-functional national grid policy and an action plan that will h elp to ensure an adequate, affordable, and reliable electric grid.

Commenters stated that they believe the EPA's exped ited timeline to replace Florida's baseload coal generation with natural gas and intermittent r enewables has serious implications for the reliability of Florida's electric grid. The commen ters made several points to support the conclusions: first, under normal circumstances it t akes more than 5 years to plan, permit, and construct a natural gas combined-cycle plant, which is the only new baseload capacity that can be added within the CPP's timeline; second there is the question of whether there will be enough pipeline capacity in Florida to supply natural gas to all of the new generators that would be required by the CPP. The commenters stated that re liability issues must be fully evaluated275

before the CPP can be adopted and this must be coor dinated with the states and federal agencies that have exclusive jurisdiction over the reliabili ty of the electric grid.

Commenters stated that the CPP appears to usurp the authority of FERC and NERC even though Congress clearly has granted this responsibility to the FERC and the states, and has not granted any such authority to the EPA. The commenters noted that both FERC and NERC have expressed concerns about the CPP.

Commenters stated that the reliability of the elect ric grid is vital to the health, safety and wellbeing of everyone in the United States and to o ur economy, and reliability issues must be fully vetted with the states and with PERC before t he EPA issues its final rule.

Commenters stated that compliance with the emission limits contained in the proposed rule has the potential to raise electric system reliability concerns associated with the shutdown of coalfired generating units. The commenters further stat ed that the transmission system is planned and built to ensure reliable delivery of system resourc es to identified load centers and all of the planning work is performed in accordance with NERC planning standards.

Commenters stated that transmission planning analys is focuses on a future horizon that allows sufficient lead time to complete corrective measure s before the identified issues can occur and

that the corrective measures are chosen based on co st effectiveness. The commenters identified a concern expressed by NERC with the transmission a nd timing constraints that EPA's proposal ignores.

Commenters stated that when generating resources ar e affected by new environmental regulations, and compliance with those regulations affects continued operation of those resources, the approach to compliance must recogniz e that any resulting changes to generating resource operation, up to and including possible sh utdown of that resource, will affect the pattern of system flows on the transmission system and pote ntially have a negative impact on transmission system reliability. The commenters st ated that significant changes to the pattern of power flows could result in cascading outages or vo ltage collapse under contingency conditions that were not considered in the original planning i f there is not sufficient time to implement corrective measures on the transmission system.

Commenters stated the real impact to a specific sys tem cannot be known without study of the specific effects of proposed environmental regulati on on the generation fleet. The commenters further stated assumptions cannot be made as to whe ther or not there will be a serious impact without completion of a transmission planning analy sis based on the best estimate of generation impacts, and it would be imprudent to establish a c ompliance deadline for the environmental regulation without consideration of the transmissio n reliability effects.

Commenters stated the proposed regulations will pus h the system over the brink and trigger rolling blackouts during times of peak electricity demand in the winter and summer.

Commenters stated that the rule would substantially reduce the use of coal fired generation. The commenters listed some of the advantages of using c oal. The commenters stated that the rule would increase dependency on natural gas, which is delivered in real time and not stockpiled like276

coal, for power generation. The commenters further stated that the rule would also increase reliance on renewable energy, which can be very exp ensive and is also unreliable. The commenters stated that grid reliability problems le ad to electricity curtailments of manufacturing

facilities that can cost small manufacturers tens o f thousands of dollars a day, and large manufacturing companies tens of millions of dollars a day and is especially troublesome during peak demand periods.

Commenters stated we have the energy resource to co ntinue to provide cheap and efficient power, yet we throw it all away for hope and a pray er. The commenters stated that this policy will simply not be sustainable when fully implement ed and no one can tell what the actual impact will be on the power grid that cannot react to immediate increased power needs on a

lower scale. The commenters also stated it is certa in wind and solar cannot meet any of these

instantaneous demands and if we continue to travel down this road towards energy deficiency, somebody had better written another rule to determi ne power rationing.

Commenters stated that several organizations that a re responsible for electric reliability or efficient grid operation have expressed serious con cerns about the proposed rule's threat to on electric reliability. The commenters identified the se organizations include the North American Electric Reliability Corporation, the Southwest Pow er Pool, the Midcontinent Independent System Operator, and the Electric Reliability Counc il of Texas. Part of the concern expressed by these organizations is the short period of time EPA proposes between approval of state compliance plans and the substantial CO2 reductions required during the first years of the CPP. The commenters noted this front-loading of th e CO2 reduction requirement has the effect of requiring states to achieve, on average, 75 perc ent of the total reductions required during the first 10-year implementation period (2020-2029) the re is simply not enough time to achieve these reductions due to the limited opportunity to build out the additional generation capacity and natural gas and transmission infrastructure that wo uld be necessary.

Commenters stated that to assure the reliability of the electric grid, NERC and the various other regional transmission authorities must have an oppo rtunity to evaluate the potential reliability impacts of state plans. The commenters stated furth er that due to the interconnections of the electricity grid across state boundaries, a compreh ensive evaluation of potential reliability impacts can be accomplished only after all state pl ans are finalized. The commenters stated that this is not possible under the compressed schedule as currently proposed nor does the proposed schedule allow enough time for transmission operato rs to begin the design and permitting process for new infrastructure.

Commenters stated that independent, third-party stu dies in Georgia project that the CPP alone will cause significant increase in electricity pric es for all Georgia consumers. The commenters stated that NERA Economic Consulting projects that the CPP alone will cause a 12-13% increase in retail electricity prices and the National Minin g Association estimates similar impacts, including a peak year wholesale electricity price i ncrease of 15.5% for Georgia consumers. The commenters noted that the CPP will dramatically inc rease electrical grid stress and reliability challenges.

Commenters stated that NERC reviewed EPA's rule and concluded that the agency's proposed regulatory deadlines "would increase the use of con trolled load shedding and potential for wide-277

scale, uncontrolled outages" and the impact of the January 2014 polar vortex had on energy markets further demonstrates the importance of a di verse electricity power fleet.

Commenters stated it is imperative that these cost and reliability concerns be addressed, and accordingly, respectfully requests that EPA work wi th economic and reliability experts, states, and industry stakeholders to undertake a detailed, comprehensive analysis of potential cost and reliability impacts of the CPP before it is finaliz ed.

Commenters stated that EPA has not adequately consi dered or explained its determination that the proposed rule will not affect electric grid rel iability and that rather than conduct a sufficient review of reliability issues, the EPA flatly dismis ses them. The commenters provided several (cited) quotations from several documents to suppor t the position.

Commenters stated that EPA's dismissal of these ser ious reliability concerns cannot be explained. The commenters stated that FERC has rais ed significant concerns with the proposed rule that the EPA appears to ignore. The commenters stated EPA claims that it has met on several occasions with staff from FERC and the Depa rtment of Energy to discuss EPA's approach to the rule and its potential impact on th e power system but EPA does not indicate what, if any, position FERC or DOE staff has taken with respect to these critical issues. The commenters stated that moreover, the EPA appears to have ignored critical reliability observations made by FERC Staff and noted some of t he correspondence between EPA and FERC. The commenters stated that regarding infrast ructure development needed to meet the requirements of building blocks 2 and 3, FERC's Off ice of Electric Reliability alerted the EPA that such development could lead to significant cos ts for new pipelines and transmission.

Commenters stated several concerns by NERC, and amo ng other things, that the proposed rule introduces potential reliability concerns that are more impactful than prior environmental compliance programs due to the extensive impact to fossil-fired generation. The commenters

also noted NERC's concern that a number of studies and analyses must be performed to demonstrate reliability, and industry must closely coordinate with the states to ensure the SIPs are aligned with what is technically achievable wit hin the known time constraints. The commenters stated that NERC also raised significant concerns about the EPA's analysis (or lack thereof) of the four building blocks. The commente rs provided brief comments about each of the building blocks.

Commenters stated that similar concerns have been r aised by other organizations that have evaluated the impacts of the proposed rule on their service territories. The commenters stated that SPP found that serious, detrimental impacts on the reliable operation of the bulk electric system in the SPP region and that it is clear that the proposed rule will impede reliable operation of the electric transmission grid in the SPP region . The commenters further stated that ERCOT performed an analysis of the proposed rule and warn ed that, if implemented, the rule is likely to lead to reduced grid reliability for certain period s and an increase in localized grid challenges as well as have a significant impact on the planning a nd operation of the ERCOT grid.

Commenters stated implementation of the Proposed Ru le as it is currently structured will negatively impact reliability in the MISO region by forcing retirements of baseload coal plants earlier than they would have otherwise ceased opera ting. The commenters stated further that278

relative to an analysis in which the Proposed Rule is not implemented, EPA projects in its RIA that about 30 to 49 gigawatts of coal-fired capacit y is projected to be uneconomic to maintain (about 12 percent to 19 percent of all coal-fired c apacity projected to be in service in the base case) by 2020.

Commenters stated that compliance with the proposed rule will threaten the reliability of electricity generation and the reliability of elect ricity delivery to manufacturers. The commenters said conventional fossil fuel generators and hydro provide many essential reliability services, including frequency response, voltage support, reac tive power operating reserves and ramping capability to ensure that high-quality power is alw ays available to manufacturing customers, as well as others. The commenters said, with the excep tion of hydro, zero-emissions sources such as wind and solar, which are contemplated under EPA 's plan to at least partially supplant generation lost due to retiring coal plants, genera lly cannot provide these services in the same way. The commenters said more fossil-fueled generat ors (mostly gas-fired) will need to be kept on standby or operated part-loaded to provide impor tant reliability services, which will increase capital, operating and maintenance costs throughout the electric generation industry.

Commenters stated that EPA may want to consider the potential impact of the Proposed Rule on grid reliability. The commenters stated that as a c ompany with large, energy intensive manufacturing facilities in the U.S., reliable elec tricity is critical and power outages have severe economic impacts. The commenters stated they develo p contingency plans to prepare for these outages in their facilities and that these plans, a long with investments in alterative electricity supply options, are costly. The commenters asked EP A consider the severe impact of outages and the importance of grid reliability to U.S. manu facturers in developing the final Clean Power

Plan.

Commenters stated that MISO estimates that within M ISO 14 GW of coal units will be retired as a result of the CPP, on top of the 12.6 GW retired due to MATS. The commenters stated that MISO projects that it will be short on capacity as the CPP is implemented and that energy will have to be imported to meet peak demand; however ad jacent systems will also be impacted by the CPP meaning additional energy may not be availa ble for import. The commenters stated that MISO and similar energy markets operate based on re liability-centered economic dispatch of resources and since 2003 MISO has approved $20.6 bi llion in reliability-centered projects. The commenters stated that changing the dispatch parame ters may reduce the value of the previous infrastructure investment and the proposed CPP forc es a fundamental change by requiring environmental dispatch of resources without conside ration of reliability or economic impacts.

Commenters stated that numerous studies and analyse s of the CPP have been conducted and these studies uniformly conclude that the CPP, as p roposed, will negatively impact the reliability of the rural electric power supply. The commenters stated that EPRI explained in its comments on the CPP that if the levels of RE, nuclear credit s, and EE (Building Blocks 3 & 4) contemplated by the proposed CPP are not achieved, power generators may be forced to choose between compliance and reliability, resulting in a shortage of electricity if the CPP is not properly implemented. The commenters stated furth er that comparable findings were made by NERC in its reliability study.279

Commenters stated that in the proposed CPP, EPA is taking an unprecedented approach to environmental regulation and that EPA is directing utilities how to generate electricity. The commenters stated that because the proposed CPP pla ces severe restrictions on utility operation, and because it impacts nearly all power generation in a relatively short time frame, impact on grid reliability will be greater from the CPP when compared to prior environmental regulation

programs.

Commenters provided an example in which the CPP's E E goals far exceed recent trends and projections included in reports and analysis conduc ted by NERC, the Energy Information Administration (EIA), EPRI and various utilities. The commenters stated if a state cannot meet the EE goal, offsets in the form of coal retirement s may be required. The commenters stated that separate pending EPA regulations could also require some coal units to be retired, which would cause additional strain on the system and could neg atively impact reserve margins and reliability.

Commenters stated that according to a study by IHS Energy, several states in the North Central region face significant compliance gaps between the ir assigned CPP emission rate goals (both interim and final 2030). The commenters presented IHS calculations of the compliance gaps for several states. The commenters stated that accompl ishing the EE goals and obtaining RE alternatives is highly unlikely, therefore, the pri mary compliance action would be eliminating enough coal-fired generation to meet EPA's proposed goal. The commenters stated that the IHS energy report indicates that reliance on coal-fired generator retirements as the compliance mechanism would mean significantly reducing the amo unt of coal-fired generation.

Commenters stated that NERC's studies show that as variable sources of energy generation increase, maintaining voltage stability becomes cha llenging. The commenters stated further that coal-fired generators are able to respond automatic ally to frequency changes, provide operating reserves ramping capability and disturbance perform ance, and that RE sources are not similarly capable of. The commenters stated that NERC conclud ed that the RE goals established in the CPP may overestimate reasonably achievable expansio n levels for RE sources and do not fully reflect reliability consequences of RE sources. Th e commenters stated that FERC is also concerned the CPP will hamper reliability of the en ergy grid and that FERC commissioners' testimony makes clear that the agency is gravely co ncerned about impacts that the proposed CPP will have on grid reliability.

Commenters stated that studies and analyses underta ken by, and on behalf of, numerous rural electric cooperatives all reached the same conclusi on: the reliability of the power supply grid will be significantly harmed by the CPP's proposal to re tire numerous EGUs, nor does the CPP provide adequate mechanisms to successfully replace these lost power sources with NGCC, RE or through reduced demand in the form of EE.

Commenters summarized the findings of the NERC's No vember 2014 major conclusions:

• The number of estimated retirements identified in E PA's proposed rule may be conservative if the assumptions prove to be unachie vable; developing suitable replacement generation resources to maintain adequa te reserve margin levels may represent a significant reliability challenge.280 • The assumed improvements in heat rates may not be r ealized across the entire generating fleet.

• Increased natural gas use will require pipeline exp ansion to maintain a reliable source of fuel, particularly during the peak winter heating season.

• With such aggressive energy efficiency expansion, t he EPA assumes that energy efficiency will grow faster than electricity demand , with total electricity demand shrinking after 2020. If the EPA-assumed energy eff iciency growth rate cannot be obtained, additional carbon reduction measures woul d be required.

• State and regional plans must be approved by EPA wh ich is anticipated to require up to one year leaving as little as 6 months to 2 y ears to implement the approved plan. Areas that experience a large shift in their resource mix are expected to require transmission enhancements to maintain relia bility.

Commenters concluded that based on the Initial Reli ability Review, it is apparent that EPA did not fully consider the serious reliability impacts of the proposed CPP rule and that many of the NERC reliability concerns could be ameliorated by e xtending the initial, interim and final compliance goal deadlines for the rule to account f or NERC and industry reliability concerns.

Commenters stated that separate studied by independ ent parties (NERA Economic Consulting and Energy Ventures Analysis) will cause increases in retail electricity prices ranging from 12% to 31%. The commenters stated that independent exp erts and key stakeholders are increasingly alarmed that the CPP will dramatically increase ele ctrical grid stress and reliability challenges.

The commenters stated that NERC's review of EPA's r ule would increase the use of controlled load shedding and potential for wide-scale, uncontr olled outages. The commenters stated further that the impact that the January 2014 polar vortex had on energy markets further demonstrates the importance of a diverse electricity power fleet and how further federal regulations aimed at limiting fuel options could threaten the nation's e lectrical grid.

Commenters stated that EPA work with economic and r eliability experts, states, and industry stakeholders to undertake a detailed, comprehensive analysis of potential cost and reliability impacts of the CPP before taking any further action on the proposal.

Commenters stated that the CPP will reduce the reli ability of electricity to consumers because it

forces dramatic reductions in the use of some of th e more highly reliable forms of generation, including early retirement of conventional generati ng units, and potentially forces limits on the hours of operation, while requiring the increased u se of less reliable and more expensive renewable energy generation.

Commenters stated that the rule also poses a threat to electric reliability and that nationwide, 132 gigawatts of generating capacity is projected to re tire between 2016 and 2020, of which 68 GW is directly attributable to the Clean Power Plan, w hile in Colorado, 645 megawatts of fossil fuel electric generating capacity is projected to retire , and it is uncertain if Colorado, and neighboring states similarly impacted, can afford to lose this capacity.281

Commenters stated that the Edison Electric Institut e cautioned that, "The dynamics of compliance, under circumstances of any unexpected s hortfall in the non-emitting resources required for compliance, creates the risk of multi- state compliance failures that would disrupt interstate power flows." The commenters also noted comments by the FERC Commissioner
warned that the rule threatened the 15-State MISO f ootprint. The commenters provided further comments from other RTOs and electric power compani es: the Southwest Power Pool, a regional transmission organization spanning eight states, wa rned that the Clean Power Plan "introduce[ed] the very real possibility of rolling blackouts or cascading outages"; the CEO of Southern Company, which services a multistate regio n in the southeast, said that "I don't think we have the ability to maintain a reliable system"; and ERCOT, the independent service operator that maintains Texas's grid, warned the rule "could result in transmission reliability issues due to the loss of generation resources in and around majo r urban centers." The commenters also stated that the proposal would have serious consequences f or Colorado and its citizens.

Commenters stated that these dangers potentially co uld have been avoided if EPA had included a safety valve in its plan, and if EPA had not propos ed to require states to make dramatic cuts in GHG emissions by 2020, front-loading compliance bur dens through a rapidly approaching date that does not provide adequate time for states to m ake the major planning decisions necessary to comply.

Commenters stated the Proposed Rule threatens relia bility of electricity for their Members. The commenters stated that MISO has expressed growing c oncern of the effect on reliability caused by multiple environmental regulations. MISO is alre ady anticipating impacts from MATS that include significant coal retirements, increased cha llenges with outage coordination, shrinking reserve margins, and a growing dependence on natura l gas. The commenters stated that MISO's goal is to maintain a reserve margin of 14.8% and t hat the Proposed Rule significantly adds to an expected shortfall resulting in the reserve margin falling to -3.3% in 2020 and -11.8% in 2023.

Commenters stated that numerous studies and analyse s of the Proposed Rule have been conducted by (and on behalf of) rural electric coop eratives, concluding that that the Proposed Rule will significantly impact the reliability of t he rural electric power supply. The commenters stated that comparable findings were made by NERC, concluding that the projected energy efficiency (EE) goals will lead to reliability issu es and that the EE goals far exceed recent trends and projections included in reports and analysis co nducted by NERC, EIA, EPRI and various

utilities. The commenters stated further that the P roposed Rule EE goals appear to underestimate costs and the capital investments necessary to sust ain EE performance through 2030, and if a state cannot meet the EE goal, offsets in the form of coal retirements may be required.

Commenters stated that the Proposed Rule anticipate s shifting a substantial percentage of electricity generation to existing NGCC units; howe ver, there is not enough existing NGCC in this country to make up for the forced reductions i n coal generation, and EPA recognizes this fact in the Notice of Data Availability (NODA) that was issued in this docket. The commenters stated that that these NGCC units were not designed to operate at capacity factors close to EPA's 70 percent redispatch goal.

Commenters stated that separate from the Proposed R ule, demand for natural gas is expanding and additional reliance on NGCC sources may not be feasible considering the natural gas market282

and infrastructure is already at its edge. The com menters continued that without considering the NGCC expansion proposed in the Proposed Rule, the I nterstate Natural Gas Association of America (INGAA) estimated that the U.S. and Canada will need 28,900 to 61,600 miles of additional natural gas pipelines through 2030.

Commenters stated that NERC's reliability study als o identified reliability concerns with increased reliance on natural-gas-fired generation. The commenters stated further that NERC's studies show that as variable sources of energy gen eration increase, maintaining voltage stability becomes challenging and pointed out that voltage st ability is essential to a reliable electricity grid.

Commenters stated that existing generation methods serve as a foundation for reliable electricity for ratepayers and cooperative members served. The commenters stated that testimony from FERC commissioners makes clear that the agency is c oncerned about the impacts that the Proposed Rule will have on grid reliability and tha t FERC is eager to work collaboratively with EPA to ensure reliable electricity remains availabl e to all.

Commenters stated that EPA is taking an unprecedent ed approach to environmental regulation in attempting to regulate what type of energy source a utility can use to serve its members. The commenters stated that rather than allow a utility to determine how best to provide reliable and affordable power to its customers and regulating th e emissions produced from that generation, EPA is directing the utilities how to generate elec tricity.

Commenters stated that although they support the EP A's decision to encourage states to reduce CO2 emissions, we are concerned about the Proposed Rule's potential impacts on electric reliability. The commenters stated that emission g oals the EPA proposes to establish under the Proposed Rule will likely result in significant cha nges to the electric power sector and some of these changes could lead to significant electric re liability issues in certain areas or during certain

seasons.

Commenters stated that in California, significant i ncreases in RE generation are already leading to major, short-term electric reliability problems during peak hours and the changes needed to comply with the Proposed Rule could further exacerb ate these problems.

Commenters stated that NERC's preliminary study of the Proposed Rule finds that new reliability challenges may arise with the integration of genera tion resources that have different essential reliability service characteristics than the units that are projected to retire.

Commenters stated that in approving state plans, th e EPA must, at a minimum, consider the potential impacts that other state plans in the reg ion will have on local and regional electric reliability and that EPA should establish a process or procedure to approve an initial state plan with an extended implementation schedule in those c ases in which additional time may be necessary to ensure the reliability of electricity grid.

Commenters stated that another issue with EPA's ass umption that NGCC units could increase their capacity factors to 70% is that doing so coul d compromise electric reliability on a local or regional basis. The commenters stated that if NGCC utilization were to increase to the levels that283

the EPA assumes, the system could become even more vulnerable to periodic blackouts or curtailments during high-demand, low-variable-suppl y scenarios, as well as periodic weather- or natural disaster-related reliability issues.

Commenters stated NERC's concern over the number of coal unit retirements, reliability, time period for implementation, and construction of reso urce additions and transmission enhancements. The commenters stated that the propo sed rule threatens the U.S. electrical grid reliability, and, if implemented, would harm more c itizens than it would ever protect. The commenters identified studies by regional transmiss ion organizations warning that EPA's proposal will create electricity generation capacit y shortages with a greater likelihood of rotating or cascading outages.

Commenters reported on a two-part assessment of the impacts that the proposed CPP will have on reliability in the SPP region. The commenters no ted as a result of the assessment that the SPP region will experience numerous thermal overloads a nd low voltage occurrences under both

scenarios studied. Commenters stated results of the first part of the transmission system impact

evaluation indicate that if the assumed EGU retirem ents were to occur absent requisite transmission and generation infrastructure improvem ents, the power grid would suffer extreme reactive deficiencies that would expose it to wides pread reliability risks resulting in significant loss of load and violations of NERC reliability sta ndards.

Commenters stated that coal needs to remain within the energy resource mix to provide for a high degree of reliability for power generation dur ing times of peak demands. The commenters stated that in terms of renewables, the reliability of these energy sources is tied to the unpredictable nature of weather and the ability of fossil fuel power generation to supplement power demands. The commenters stated that keeping c oal as part of the energy mix of our nation will not only provide support for gas and renewable energy production, but it will provide a reliable cost effective source of energy that will diversify the energy portfolio of the nation and help maintain jobs and stabilize the economic base of energy producing states and communities

across the nation.

Commenters stated industry's concern on how the pro posed CPP will impact reliability of power and is as significant as our concern regarding incr eased energy prices. The commenters stated that reliability of the power system is vital for o ur country to have a productive manufacturing sector and that reliability concerns are fully anal yzed and addressed before this rule is finalized.

Commenters stated EPA fails to include adequate inf ormation that clearly demonstrates the proposed BSER, when applied state-by-state and nati onally at the levels proscribed by EPA, could be implemented without negative impact to the electric system. The commenters stated that the proposed guidelines do not take into accou nt the regional nature of the electricity markets, and the potential adverse system impacts t hat the proposed BSER would have on the adequacy and reliability of electricity supply. The commenters stated that NERC challenges some of EPA's assumptions about reliability under t he proposed guidelines and recommends EPA address NERC's concerns and provide a clear dem onstration of how the proposed BSER, as implemented state-by-state and nationally, will not negatively impact electric system reliability.284

Commenters stated concerns about EPA's proposed rul e that would result in several adverse effects in that it would have the unintended conseq uences to threaten or to disrupt the reliability of the Eastern interconnection transmission grid.

Commenters stated that under the Proposed Rule, Ari zona becomes very dependent upon two natural gas pipeline systems and loss of one for an y period may result in substantial service disruptions and significant reliability issues woul d be likely in the event of a pipeline failure.

Commenters stated that the electric reliability iss ues from CPP are associated with both supply and deliverability and the elimination of existing coal-fired generation reduces overall electric supply. The commenters stated that the assumption t hat incremental, lower-emitting generation resources can be permitted and brought online in a two to three year period from state plan development to compliance is not possible and would drive lower reserve margins. The commenters estimated that 3.5 GW of new natural gas capacity by 2020 and over 10 GW by 2030 would be needed to meet reserve margin require ments in Arizona by 2030 following the retirement of all affected coal capacity within the state.

Commenters stated that the rule poses a distinct th reat to electric reliability. The commenters

stated that on account of both the retirement of co al-fired electric generating capacity due to EPA regulations and the inadequacy of existing natural gas pipeline capacity in the region, there is a distinct possibility that the CPP, if implemented i n its current form, would lead to trouble with keeping the lights on, especially in the event of u nusually cold temperatures.

Commenters stated that Arizona relies on its base-l oad coal generation to meet summer peak load needs when ambient temperatures can exceed 115 degrees and questioned if EPA analyzed the impact of its proposal on the state's ability t o continue to reliably serve customers when energy is needed most.

Commenters stated the Proposal would create unneces sary reliability risks relating to electricity and natural gas service.

Commenters stated removing coal as a power source f rom the generation portfolio unnecessarily reduces reliability and market flexibility while in creasing costs.

Commenters stated the electric power industry has r aised numerous concerns about the potential impacts of EPA's proposal on both grid reliability and cost to the consumer and urge EPA to

listen to all stakeholders and evaluate the true co sts and technical feasibility of implementing what amounts to sweeping changes to the nation's el ectric system.

Commenters stated that their organization recommend s that EPA establish a formal process with the FERC for review of the potential reliability im pacts of the Clean Power Plan to identify and enable EPA to address any reliability risks that fl ow from the design of the rule; 2) to provide guidance to states on potential reliability risks a rising from various implementation options; and 3) to assess the potential reliability impacts of p roposed state implementation plans. The commenters noted that that NERC has already indicat ed its intention to conduct a multi-stage review of the potential reliability impacts of the Clean Power Plan and the commenters indicated285

their proposed process would align well with NERC's schedule and could draw upon NERC's

assessment.

Commenters stated that in addition to the challenge s to utilities posed by the building blocks in the Plan, they are concerned about how the implemen tation of the Plan will impact grid reliability in coming years. The commenters also pr esented supporting arguments from NERC, MISO, and SPP.

Commenters stated that changes to the composition a nd operation of the nation's electric system, within a relatively short period of time, and chang ing the operating characteristics of units has the potential to adversely impact system reliabilit y. The commenters suggested that EPA include a "reliability safety valve" mechanism to provide a dditional compliance and/or enforcement flexibility to ensure electric system reliability.

Commenters stated the mandates in the Proposed Rule stand to disrupt the provision of reliable electric service at just and reasonable rates, and will cause direct, immediate, and long-term harm to organization members.

Commenters stated that the Proposed Rule raises sig nificant electric reliability concerns. The commenters stated that CO2 emission rate EPA propos es for Wyoming and neighboring states directly or indirectly threatens the retirement of a significant amount of coal-fueled generation in a timeframe that compromises the continued reliable distribution and delivery of generated electricity. The commenters stated that the Propose d Rule incorporates generic and unsupported expectations of levels of integrated renewable gene ration and energy efficiency that, when applied to Wyoming, are extremely ambitious, almost certainly unachievable, and uneconomic

under traditional standards.

Commenters stated that EPA's rule will cause a dram atic shift in the way the United States produces electric energy and maintains reliability of the electric grid, and that EPA remain committed to understanding the reliability impacts of the rule, adjusting the final rule as necessary to avoid detrimental impacts to electric reliability.

Commenters stated that the EPA needs to consider th e impacts of the Proposed Rule on reliability of the electric grid. The commenters st ated that the Proposed Rule will potentially cause the early retirement of fossil fueled electri c generation, and that the time frame needed to install new renewable resources and replacement fos sil fueled electric generation will most likely exceed the allowed timeframe proposed by the CPP

Commenters reiterated the primary areas of concern expressed by SPP in its comments on the proposed rule: 1) the CPP will impact reliability o f the bulk electric system; 2) the timing proposed by EPA for compliance is infeasible; and 3 ) the proposed CPP will have material impacts on the market-based dispatch of electric ge nerating units within the SPP region.

Commenters stated that there appears to be a high l ikelihood that implementation of the proposed EPSP could threaten grid reliability and stability.286

Commenters stated that as traditional fossil-fired generation is retired as a result of the Clean Power Plan to reduce CO2 emissions, the availabilit y of Essential Reliability Services (ERS) - load and resource balance, voltage support, and fre quency support - will decline and will adversely impact bulk-power system reliability. The commenters stated that ERS is not typically provided by non-conventional generation resources, such as renewable resources.

Commenters stated that the lack of certainty as to the requirements that will be included in the final rule and the required state plans make it imp ossible to assess the impacts on grid reliability or the economic costs of the proposed requirements.

Commenters stated as large coal-fired generation un its are retired, utilities must be provided sufficient time to plan, obtain regulatory approval s for, and construct replacement generation; generation planning and transmission planning must include sufficient lead time to identify issues and develop corrective measures to ensure re liability in the system. The commenters said EPA should allow utilities and other organizations with the expertise in generation planning and transmission planning to determine how the rule imp acts South Carolina's generation mix and the state's transmission system to ensure a reliable an d cost effective solution is obtained. The commenters listed the following areas of concern wi th regard to reliability of the electric system:

The substantial amount of fossil fuel generation re tirement, which will likely result in stranded assets that increase consumer costs,

Insufficient time to address transmission constrain ts and resource reliability,

Significant reliance on energy efficiency ("EE") to displace demand growth,

Considerable reliance on variable energy resources and natural gas-fired generation,

• Impact of resource mix change, and

• Fast track of the Proposed Rule scheduled to begin in 2020.

The commenters said South Carolina has limited capa city to bring additional natural gas volumes to our state, and expansion of interstate a nd intrastate pipelines to meet the increased demand of natural gas would be required. The commen ters said the intermittent nature of solar and other types of renewable generation create chal lenges in the need for new backup capacity, and modeling potential compliance costs will be nec essary to determine which existing fossilfired generation units will be needed as backup and to assess which grid infrastructure upgrades will be needed to tolerate fluctuations in power su pplies and increased bi-directional line activity associated with renewable generation.

Commenters stated EPA should set a consistent and p ractical state goal which includes consideration of the effects on grid reliability.

Commenters stated EPA estimates that 12,400 megawat ts of fossil fuel electricity generating capacity would retire in Texas due to the rule, and it is uncertain if Texas, and neighboring States similarly affected, can afford to lose this much ca pacity. The commenters said ERCOT warned287

the rule "could result in transmission reliability issues due to the loss of generation resources in and around major urban centers," and the FERC Commi ssioner warned that the rule threatened the 15-State Midcontinent Independent Service Opera tor region-which includes pockets of eastern Texas-with "widespread rotating blackouts." The commenters said the SPP cautioned that the CCP "introduce(s) the very real possibility of rolling blackouts or cascading outages."

Commenters said the proposed rule would require sta te plans to achieve a 30 percent reduction in CO2 emissions from existing power plants below 2005 levels, and while the full level of reductions is not required until 2030, substantial CO2 reductions are required under the state plans as early as 2020. The commenters stated while each of the building blocks generates reductions that are used to develop a total require d reduction, the Proposed Rule allows states to have the flexibility to develop plans to meet these emission reduction targets, and this flexibility necessarily allows for greater-than-anticipated red uctions to offset lower-than-anticipated

reductions in other areas. The commenters said it i s possible that more coal-fired power plants will need to be retired than originally projected i n order to make up for shortfalls in emission reductions from other categories. The commenters c ited NERC and their concerns about reliability.

Commenters stated EPA's Proposed Guidelines are fou nded upon numerous fundamental factual errors that violate the "reasoned decision-making" requirement under the Administrative Procedure Act ("APA"). 5 U.S.C. 706(2)(A). The comm enters said the Proposed Guidelines wrongly assume that various "technically feasible" but impracticable objectives can be achieved

without serious harm to wholesale electric markets or to BPS reliability, the EPA has unreasonably excluded FERC from a substantive role in developing the Proposed Guidelines and has irrationally deprived itself of the input of th e federal agency that has real world expertise overseeing electricity markets, transmission grids, and electric reliability.

Commenters stated that the draft rules go beyond th e authority of the Clean Air Act, jeopardize reliability, and drive-up costs by essentially dict ating to states which generation resources will be deployed and at what time.

Response 40: See section VIII.G.2 of the preamble for the final rule for a discussion of electric reliability and for the important provisions on reliability in this rule. Also see the Resource Adequacy and Reliability Analysis TSD for a discuss ion of the treatment of resource adequacy in the analysis of the impact of this final rule.

Comment 41: Commenters asserted there are potential legal outco mes associated with reliability

concerns.

Commenters stated that "potential legal outcomes as sociated with reliability disruptions are also severe. Power plant owners might be trapped between lawsuits and federal enforcement actions, all because EPA neglected to adequately consider th e implications of the CPP on our nation's electricity supply."288

Commenters stated that the finding that the CPP wil l not significantly impact electric reliability involved no substantive coordination with FERC, and that EPA's failure to adequately consult with, and defer to, FERC concerning issues that fal l squarely within its expertise is arbitrary and capricious.

Commenters stated that neither EPA nor the states c an force retirement of units that must run to ensure system reliability.

Commenters stated that the CPP is legally flawed an d should be withdrawn in its entirety.

Commenters stated that the rule needs to address re liability-related issues in a diligent fashion through the development of a reliability-based stud y process that would include a number of regional technical conferences, conducted jointly b etween the EPA, the FERC, state regulatory commissions, and regional transmission organization s/reliability organizations.

Response 41: Commenter s are ill informed regarding EPA’s consideration of reliability and EPA’s extensive and ongoing coordination with FERC regarding the final rule.

As for commenters asserting that neither EPA nor th e states can force retirements of units, the meaning in the context of the final rule, which doe s not force retirements of units, is unclear.

Comment 42: Reliability concerns are needlessly pessimistic

Commenters stated EPA has calculated that implement ation of the CPP could lead to retirement of an additional 50 GW of coal-based electricity pr oduction over the base case by 2025. The commenters stated that according to EPA's BSER form ula, lost generation will be replaced through a combination of capacity factor increases at gas facilities, increased generation from renewable energy resources, and demand-side energy efficiency, and renewable generation and efficiency improvements would also replace lost cap acity, along with increased electricity storage and demand response, as discussed further b elow. The commenters stated that one of the broadest critiques of EPA's overall calculations ha s come from NERC, in its Initial Reliability Review, in particular, NERC questions the viability of EPA's proposed renewable energy, transmission, and energy efficiency build-out goals . The commenters stated these critiques paint a needlessly pessimistic view of what is achievable , and run contrary to several studies demonstrating the potential for renewable energy an d energy efficiency to replace existing generation.

Commenters stated NERC and other grid operators dis miss transmission planning as an excessively long-term solution, arguing that it tak es too long to fully install new planned transmission lines. The commenters said NERC in par ticular uses an assumed 10-15 year timetable to justify its calls to delay implementat ion of the CPP, arguing further that regional grid operators cannot even begin to plan transmissi on until state plans are approved under the CPP, which would give them less than two years to b uild out the necessary transmission. The commenters said NERC's use of this supposed transmi ssion "bottleneck" is inapposite for several reasons; first, transmission lines simply don't tak e 10-15 years to build on a regular basis. The commenters said ERCOT, in its analysis of the CPP n otes that major transmission projects can289

be planned, routed, approved and constructed in fiv e years. The commented said furthermore, the process of building out transmission to transport r enewable energy to load centers has already begun in recent years, and will ramp up significant ly if grid operators take appropriate steps to prepare for CPP implementation; multiple RTOs are c onsidering transmission improvements already. The commenters said, in particular, Clean Line Energy Partners is currently working to construct five major transmission lines to move 15. 5 GW of largely wind-sourced electricity in the middle of the country out to load centers in th e Midwest, Southwest, and on the West Coast.

Commenters stated that NERC misstates the timeline on which transmission projects could be planned and needed. The commenters said states and grid operators do not need to wait until plans are approved to begin studying what transmiss ion upgrades may be needed, and grid operators have an obligation to assess and respond to policy developments and how they will affect the need for generation and transmission; fo rthcoming regulatory obligations such as the CPP therefore give rise to their duty to begin plan ning for future transmission needs despite some degree of uncertainty about some details in st ate plans. The commenters stated CPP's compliance schedule contemplates a slow ramping of stringency, and transmission improvements are generally considered to be a mid- to long-term need, rather than an immediate

one

Commenters stated that NERC overlooks numerous alte rnatives to new transmission projects that also could resolve its predicted transmission constraints including: adding lines to existing transmission corridors, reconductoring, or otherwis e upgrading existing facilities. The commenters said these types of projects take far le ss time, both for regulatory approval and construction, require no siting process, they are l ess expensive than building new transmission lines, and can be implemented more quickly and at l ower cost than new transmission. The commenters pointed out that transmission system pla nners are required to consider nontransmission alternatives to new wires projects suc h as demand-side management. The

commenters also stated NERC's evaluation fails to r eflect how energy efficiency will lessen the need for new transmission infrastructure in general , or how states could design targeted demandside management programs to resolve areas of conges tion.

Commenters stated with regard to ("ride-through" an d quick-start or "black-start" capabilities, transition to cleaner electricity sources will unam biguously help: wind and solar plants are often more able to ride out disturbances, and return to s ervice more quickly, because they are already necessarily designed to deal with fluctuating power over time, and they lack complicated thermal or mechanical systems that require significant amou nts of time to restart. The commenters said the smaller capacity and more distributed nature of wind and solar plants address some of the root of the problem - a malfunction at a 50 MW sola r facility is less likely to cause a large system shock than when a 800 MW central-station gen erator trips offline.

Commenters stated NERC has raised concerns that inc reasing the share of electricity produced by gas-burning power plants would make the grid mor e vulnerable to disturbances like that where single events act to reduce the supply of gas over a large region such as the polar vortex. The commenters said the polar vortex did not result in widespread power losses in the region, even though it was by any measure an extreme weathe r event; and improved electricity

transmission infrastructure can alleviate the risk that any one region suffers from a power shortage. The commenters added that sensible planni ng and low cost power plant upgrades290

would have avoided a large part of the problem, in which a big part of the problem leading to these capacity constraints was that coal and gas pl ants were simply unprepared for these climatic conditions. The commenters said most of the plants that were out of service were unavailable because of operational and mechanical problems like frozen coal stockpiles, boiler tube failures, and faulty ignition, and grid operators are working on corrective measures and are evaluating additional financial incentives to reward plant ope rators that deliver higher performance levels. The commenters also said pipeline capacity and gas supplies were not the problem; rather sufficient gas supply was available, but an anomaly in the power and gas markets kept some gasfired generators from obtaining sufficient fuel on high-demand days. The commenters said in

October 2014 FERC shared its intention to better co ordinate daily natural gas and electricity markets; enable gas-burning power plants to run tem porarily on oil during emergencies; and make other market changes to resolve the issues tha t led to the capacity crisis during the polar

vortex.

Commenters stated that the obvious solution to NERC 's concerns is increased fuel diversification which the commenters cite NERC as acknowledging, th ough their solution is to continue

excessive reliance on coal. The commenters stated t hat unlike both coal and gas plants, wind and solar plants rely on "fuel sources" that do not nee d to be imported from anywhere, and the supply of which is far less likely to be interrupted unifo rmly across broad swaths of the country.

Commenters stated grid operators already have the t ools necessary to adjust to the retirement of coal-burning power plants over the next fifteen yea rs without seriously impacting the reliability of the power grid. The commenters said with penetra tion rates of renewable resources of up to 30-40 percent or more by 2030 in some areas, severa l recent studies have addressed this contingency, considering whether and how it is poss ible to incorporate those levels of renewable energy using today's resources and technologies, an d their common conclusion is that high levels of integration are feasible. The commenters said th e studies call for restructuring the energy market, advanced transmission planning and installa tion, increased utilization of demand response programs, additional electricity storage i nstallations, incorporation of contingency reserve and curtailment capabilities into wind and solar facilities, independent improvements in ancillary service providers, and continued limited use of some fossil fuel plants as "peaker"

facilities. The commenters said these studies were performed by grid operators and experts seeking to understand the implications of underlyin g market and policy trends favoring renewable energy development.

Commenters stated to the extent feasible, EPA shoul d help ensure that states and grid operators plan for the retirements of coal units as soon as p ossible, make sure they fully understand the reliability implications of those retirements, and prepare their electricity grids to incorporate significantly higher levels of renewable energy. Th e commenters said it is critical that state environmental regulatory agencies work closely with utilities and grid operators to ensure that states' individual plans are designed to minimize a ny disruptions to grid reliability which may involve regional compliance options for states with in a single RTO, or it may simply involve

extensive consultations. The commenters also stated NERC should work more with regional RTOs, ISOs, and utilities to help them identify and respond to predictable changes in their resource mixes. The commenters concluded that manag ing renewable electricity in a way that291

minimizes disruptions to grid reliability will requ ire advanced planning and understanding, and EPA should help facilitate these conversations.

Commenters stated that states often do not exercise the same level of jurisdiction over municipalities and cooperatives that they do over i nvestor-owned utilities, making the state plandriven process less optimal for sources operated by cooperatives and publicly-owned utilities. The commenters said support their recommendation th at enforcement of the CPP falls entirely on sources (and by extension on all utilities, includi ng municipalities and cooperatives), rather than on states, who have limited control over their own power infrastructure. The commenters said Cooperatives serve some of the poorest and least co nnected parts of the United States, and so EPA should explore opportunities to enforce the CPP without unduly impacting poor

communities. The commenters stated the CPP offers a significant opportunity for community investment in energy efficiency and distributed ren ewable generation, programs which have the potential to create high-quality jobs, and EPA shou ld work with RUS to ensure that guidance offered on these types of programs is appropriate f or, and well-communicated to, cooperatives,

and EPA should consult with RUS to understand wheth er the framework for RUS's existing financing tools could be improved in order to facil itate CPP compliance. The commenters said EPA should also consider other existing mechanisms that already encourage renewables and efficiency build-out, and explore how harnessing th ese various support networks can help municipalities and coops to reduce their greenhouse gas emissions with minimal disruption.

Response 42: The EPA agrees with the commenters that proper plan ning and implementation of the CPP will not lead to reliability issues with th e electricity grid. States in their planning can anticipate infrastructure needs and other requireme nts relating to changes in the network. See the GHG Resource Adequacy and Reliability Technical Sup port Document for more information on the treatment of resource adequacy treatment in ana lyzing the impact of this rule.

Comment 43: Commenters discussed beneficial aspects of upgrad es to the electricity grid.

Commenters stated the rule must respond to grid rel iability which will set the stage for a more efficient transportation system with modern enginee ring considerations. The commenters also stated infrastructure project of this size and impo rtance could generate jobs and promote apprenticeship opportunities all while reducing ene rgy loss and consumption, setting the stage for a new era in energy generation, and meeting the standards for clean power.

Commenters described independent modeling conducted by the commenters’ organization that showed likely reductions in energy consumption and GHG emissions resulting from linked recycling and replacement rebates. The commenters n oted that while the main driver for ER programs would be the achievement of energy savings and GHG reductions, other benefits would be realized as well, such as declines in elec tricity bills, declining emissions of conventional pollutants, and boosting manufacturing output and retail activity.

Response 43: Regarding reliability, See section VIII.G.2 of the preamble for the final rule for a discussion of electric reliability and for the impo rtant provisions on reliability in this rule. Also292

see the Resource Adequacy and Reliability Analysis TSD for a discussion of the treatment of resource adequacy in the analysis of the impact of this final rule. Thank you for your comments.

Comment 44: Comment stating that reliability planning within th e Western Electricity Coordinating Council (WECC) electrical grid is crit ical to support significant changes in generation resource mix required by the CPP.

Commenters stated that reliability planning within the Western Electricity Coordinating Council (WECC) electrical grid is critical to support signi ficant changes in generation resource mix required by the CPP. The commenters stated that the electric generation and transmission grids across the nation, including the WECC grid, are alr eady losing a significant proportion of their base-load coal generation. As such, the commenters noted that the grids were already planning to change their generation mix before EPA proposed the CPP. The commenters stated that the EPA should take into account these existing efforts and promote streamlining of the planning and approvals needed to facilitate the extra work that will be needed to accommodate CPP mandates.

Response 44: The EPA agrees with the commenters and to support a more effective reliability planning process, the EPA is moving the start of th e interim period from 2020 to 2022 and adjusting the interim goals to provide a less drama tic initial reduction requirement and a more gradual glide path to the final 2030 goals. Additi onal discussion on this topic is found in the final rule preamble, section VIII.H.

Comment 45: Commenters asserted the building blocks impact reli ability.

Commenters stated BBs 3 and 4 cannot be readily qua ntified, and less than expected energy savings will require additional decreases in fossil -fuel generation to meet the proposed state emissions reduction goal which is the opposite of w hat is required to assure the reliability of the bulk electric system as well as provide reasonably priced electric service to consumers. The commenters estimate that the adoption of building b locks 3 and 4 will result in significantly higher electrical exports from Nebraska than is cur rently the case which will undercut the longstanding purpose of public power utilities and make them, in effect, more like independent power producers. The commenters stated that if it i s physically possible to implement the proposed building blocks, the resulting shift cause d by the additional amount of energy from renewables and decreased consumption due to energy efficiency reductions will cause a shift from economic to environmental dispatch and will li kely mean that many existing base load units will be dispatched less frequently, if at all, thus reducing their efficiency and their economic usefulness and system reliability will suffer. The commenters cited SPPs in their October 9 letter to EPA that raised concerns of potential cascading blackouts.

Commenters stated that EPA has severely underestima ted the net economic impact of Building Block 1. The commenters strongly recommended that U .S. EPA work with FERC prior to proceeding with the proposed rule to address the ef fects of this proposed rule on electricity grid reliability.293

Commenters stated NERC's reliability analysis of th e potential reliability impacts of the EPA's proposed rule and "found a number of reliability co ncerns regarding increased reliance on natural-gas-fired generation." The commenters stat ed that an independent power market analysis of an alternative coal unit retirement scenario, re presenting a gradual reduction in Arizona coalfired generation capacity between 2017 and 2030, ad dresses the most problematic impacts of the EPA's proposed building block approach (reserve mar gin, electricity and natural gas reliability) by providing ample time to plan for and make the ne cessary adjustment to infrastructure, while still achieving meaningful reductions in CO2 emissi ons.

Commenters stated concern that Building Block 4 wou ld be implemented de facto by setting annual mass-based CO2 emission limits for Virginia' s EGUs. The commenters stated they do not

believe its EGU members or its demand side members should have to face the possibility of electricity rationing and that manufacturing member s cannot be subjected to any such uncertainty about the reliability of the electricity supply the y must have to sustain their economic viability.

Commenters stated EPA has not provided a complete a nalysis of how grid reliability can be maintained if the plan's building blocks are applie d as proposed. The commenters stated that the IPM used by EPA to evaluate the building blocks and whether goals are achievable uses less robust data than that possessed and used by MISO. T he commenters also stated EPA should engage RTOs, ISOs, and NERC to assist in modeling t he impacts of the rule on electric reliability and evaluating the natural gas transfer and storage capacity requirements needed under this proposal, as well as fully utilize the resourc es and expertise of the FERC. The commenters stated that EPA's system modeling should also evalu ate the rule's impact on the generation reserve margins and understand what resources will be called on to meet those reserves. The commenters also stated that EPA should provide stat es a safety valve to ensure the reliability, safety, and security of the electrical system.

Commenters stated that increased penetration of int ermittent resources under Building Block 3 will only serve to exacerbate the negative efficien cy performance of the national coal fleet as

these resources come on line. The commenters said e xperiences in California have taught utilities that increased renewable penetration requires signi ficant fast-start capabilities as well as substantial standby power supplies to meet demand w hen renewable resources are not available. The commenters stated generator efficiency has been maximized by utilizing NGCC units to fill this role, and EPA's view of the energy market will require coal to fill this role as well.

Commenters stated there has been a recent revelatio n by the Government Accountability Office that EPA has been inaccurately calculating the cost s and benefits of other regulatory policies. The commenters further added if the methodology for calculating costs and benefits were inaccurate for some of the agency's regulations, it stands to reason that the calculations for other regulations will also be inaccurate.

Commenters stated that EPA should defer to the NERC 's expertise in the field of bulk-power system reliability and that NERC, authorized by FER C to establish and enforce mandatory reliability standards for users, owners, and operat ors of the bulk-power system, is in the best position to analyze reliability impacts of the Prop osed Rule. The commenters stated that NERC identified potential electric reliability concerns of the Proposed Rule, citing potential issues with the underlying assumptions of the four building blo cks that are used to determine each state's294

proposed mandatory emission reductions. The comment ers stated further that NERC has announced plans to conduct more detailed assessment s and EPA should consider NERC's initial findings and recommendations, including a reevaluat ion of the underlying assumptions used to determine the four building blocks for mandatory em ission reductions. The commenters also stated EPA should also closely monitor NERC's futur e assessments to learn of the reliability impacts of the Clean Power Plan at every step, and adjust the rule and implementation timelines as necessary to avoid creating a situation in which the rule will jeopardize the reliability of the bulk-power system and could result in negative impa cts on the health and welfare of the general public.

Commenters stated that the underlying assumptions u sed to determine the four building blocks for mandatory emission reductions may be flawed and require further study. The commenters stated that the impacts include an underestimated a mount of fossil-fired generation retirements, a lack of infrastructure to support increased relianc e on natural gas, an inconsistent assumption that energy efficiency aligns with load forecasts, and t he reduction of Essential Reliability Services to support the bulk-power system.

Response 45: EPA disagrees with these comments. EPA believes that reliability has been adequately addressed in this rule. EPA believes re liability can be addressed in the state planning process in ways that will ensure that conflicts wit h reliability requirements and compliance with this final rule will be very unlikely, and also pro vides a Reliability Safety Valve mechanism in the event of such unlikely and unanticipated occurr ences. See section VIII.G.2 of the preamble

for the final rule for a discussion of electric rel iability and for the important provisions on reliability in this rule. Also see the Resource Ad equacy and Reliability Analysis TSD for a discussion of the treatment of resource adequacy in the analysis of the impact of this final rule.

Comment 46: Commenters encouraged the states to begin operation al and planning scenario

studies.

Commenters encouraged the states to begin operation al and planning scenario studies, including resource adequacy, transmission adequacy, and dynam ic stability, to assess economic and reliability impacts and requested regional and mult i-regional industry planning and analysis groups include Building Trades representation. The commenters suggested that state policy makers work with existing utility, labor, and finan ce industry relationships to ensure there is clear understanding of the complex interdependencie s potentially adversely affecting labor, as well as the potential strain on states' power syste m reliability.

Response 46: The EPA agrees with commenters’ assertions that sta tes must in their implementation plans consider resource and transmis sion adequacy and stability. The rule requires states to consult with relevant reliabilit y entities in developing their plans. See

Preamble Section VII.G.2 for discussion of reliabil ity issues.295

Comment 47: The Proposed Rule interferes with regional and stat e resource planning efforts and exacerbates existing reliability issues.

Commenters stated that the proposed rule will inter fere with regional and state planning efforts and exacerbate issues associated with generation re source mix in the regional energy markets' system planning process. The commenters further st ated that the proposed rule will create difficulties with respect to state efforts to devel op an effective portfolio of generation

resources. The commenters stated that all of these processes reflect the fact that different types of generation have varying degrees of reliability and provide different benefits with respect to resource adequacy.

Commenters stated that regional energy markets unde rtake extensive system planning. The commenters discussed ISO New England's annual regio nal system plan to identify capacity needs and the ideal mix of resources to reliably pr ovide service to customers in ISO New England's service territory. The commenters noted that gas-fired generation depends on "just-intime" delivery whereas coal and oil-fired generatio n are able to store fuel on site. The commenters quoted a January 17, 2014 filing by ISO New England that defined some of the problems of its existing generation fleet encounter ed during the 2013-2014 winter season. The commenters also discussed PJM's August 2014 proposa l to address reliability concerns and that the major fuel switch from coal to natural gas thro ughout the country is placing the reliability of PJM's generation fleet at risk. The commenters als o noted that MISO faced resource performance issues during the 2013-2014 "polar vort ex" winter season and that FERC held a technical conference on operations in the winter of 2013-2014 in which MISO noted outages not normally seen during winter months.

Commenters stated that PJM and ISO New England's pr oposals, as well as MISO's comments at the technical conference, illustrate that every mar ket has its own unique resource performance issues, and EPA's capacity mandates in the BSER cou ld exacerbate such issues by restricting the ability of these markets to utilize all types of ge neration to ensure reliability.

Commenters also stated that the proposed rule's pri mary goal of replacing carbon-intensive generation with less carbon-intensive generation wi ll further complicate the extensive system planning processes, exacerbate the resource perform ance issues faced in New England and elsewhere, and place system reliability at risk.

Commenters noted that one compliance option that ha s been suggested is "environmental dispatch" (i.e., dispatching resources based on the ir environmental attributes, such as carbon intensity), which the commenters oppose as unnecess ary, disruptive of the electricity market, and economically inefficient. The commenters stated tha t while environmental dispatch would pick the least-carbon intensive units first, it is not t he least-cost approach to achieving carbon targets and will inevitably lead to inefficiencies. The co mmenters noted that EPA representatives have also stated that they do not intend regions to empl oy an environmental dispatch as part of the CPP, due to the relatively inefficient manner in wh ich it would help achieve carbon targets.

Response 47: EPA agrees with those commenters that recognize th at the CPP is consistent with current economic dispatch practice, and disagrees w ith those commenters who maintain that the CPP is inconsistent or otherwise problematic for cu rrent planning and dispatch of power.296

"Redispatch" as used in the proposal was, in practi ce, just the overall annual shifting of generation among resource types. The final rule us es the terminology of generation shifting, not redispatch. However, the proposed rule was intende d and designed to work with current environmental regulations that are consistent with the current security constrained economic dispatch (SCED) protocols and to continue that hist ory of compatibility between environmental regulation and economic dispatch. This final rule reinforces that approach by making clear that the concept of emissions rate trading is part of th e BSER process and can be implemented consistently with the building blocks on which it i s based. See Preamble Section V. The commenters fail to adequately grasp that changes th at the final rule encourages are already occurring in the industry, and the final rule build s on these changes and the planning that is already taking place. The final rule also adopts m easures to ensure reliability in state plans and includes a reliability safety valve for unanticipat ed reliability conflicts that give rise to emergency conditions (See Preamble Section VIII.G.2 ).

Comment 48 : Commenters gave the following reliability benefits associated with cross-border electricity trade between Canada and the US:

• "complementarity in the operational characteristics of segments of the grid on either side

of the border"

• "Many regions in Canada have winter-peaking systems , thus enabling them to contribute available surplus to adjoining U.S. regions which e xperience peak demand season during

the summer"

• "As noted by the U.S. National Renewable Energy Lab oratory, '[t]he different peaking periods in Canada and the United States allow shari ng of reserve services across the border and therefore reduce the need for new capaci ty in both countries'"

• "Diversity of load ... means that capacity resource s can be shared in order to optimize the fulfillment of overall peak loads, with cost saving s achieved by reducing the total resources required to meet system demand"

• "Canada-U.S. trade can serve to increase the divers ity of supply options available in certain regions confronting unique challenges"

• "the ability to manage conditions of oversupply and loss of supply."

• "U.S.-Canada electric integration enhances affordab ility of supply for U.S. consumers"

• "U.S.-Canada electric integration helps enable deve lopment of clean energy in the U.S."

Response 48: The EPA acknowledges this comment.297

8.9.1 Changes in operational capacity

Comment 1: Commenters noted operational capacity as a concern that must be addressed by the

rule.

Commenters noted that the "critical question [is] w hether there will be sufficient capability to handle flexible operations duties that are now prin cipally handled by NGCCs." Commenters noted that "flexibility and reliability could becom e primary concerns as many NGCCs may move to baseload while coal generation capacity is reduc ed and variable generation from renewable energy substantially increases."

Commenters noted that "assumed improvements may not be realized across the entire generation fleet because many plant efficiencies have already been realized and economic heat rate improvements have been achieved."

Commenters stated, "The Midcontinent Independent Sy stem Operator, the regional transmission operator managing the grid for much of the Midwest and South, is predicting a 2.3 gigawatt capacity shortfall in 2016 due to planned coal plan t retirements in its territory [reference: Press Release, Former and Current State Utility Regulator s Express Concerns of the EPA's Proposed Carbon Rules for Power Plants (Sept. 17, 2014), ava ilable at http://www.eenews.net/assets/2014/09/18/document_pm _04.pdf.].").

Response 1: EPA believes that annual capacity factors NGCCs use d in the development of this rule are conservative and will permit continued use of NGCCs to support flexible operations. See the GHG Mitigation Measures TSD for discussion of these capacity factors.

8.9.2 Reduction in excess reserves

Comment 1: Commenters noted concerns with lower reserve margi ns.

Commenters noted that the retirement of 6,000 MW of generation capacity would be expected to reduce the system reserve margin by about 8%.

Commenters noted that the proposed rule would "cons train the availability of essential reliability services (ERSs), such as load following, regulation and ramping services." According to the commenters, the proposed rule would result in reduc ed reserve capacity due to the retirement of

coal-fired EGUs. The commenters further noted that the "the reliability of bulk power supply can

be diminished when renewable resources reach 20% or more of total supply".

Commenters conducted a preliminary analysis and not ed that "Under Southern Company and NERC Transmission Planning criteria, the transmissi on system must have available generation to allow for the largest unit on the system to trip." Commenters stated that "Using EPA's retirement assumptions, with all available generation online i ncluding generation not designated as a network resource in 2020, the Southern Balancing Au thority Area did not have adequate298

generation to allow for the loss of a single genera tor," noting that "This would fail to meet reliability criteria."

Commenters referenced an SPP reliability analysis t hat concluded "by 2020 SPP's reserve margin would fall below 4.7%, which is 8.9% below S PP's minimum reserve margin requirement and would result in a violation of SPP' s reliability criteria and NERC reliability

standards."

Commenters stated that the reserve margin in the SP P is projected to fall to 4.7 percent in 2020 and -4.0 percent by 2024 under the CPP, below the c urrent requirement of a minimum reserve margin of 13.6 percent. The commenters provided se veral recommendations to minimize impacts:

• A series of technical conferences jointly sponsored by FERC and the EPA

• Completion of a detailed, comprehensive and indepen dent analysis of the impacts the proposed CPP will have on the reliability of th e nation's bulk electric system

• Extension of the proposed schedule for compliance i n order for the necessary electric transmission, electric generation, and gas pipeline infrastructure to be identified and constructed within and across the ap propriate planning are

• Adoption of the "reliability safety valve" as propo sed by the ISO/RTO Council

Commenters stated that they are very concerned with long term reliability issues associated with the electricity grid. The commenters stated that on -peak resource mix has shifted recently to be predominately gas fired and the transformation of t he resource mix presents new challenges for the electricity industry. The commenters stated fur ther that the tightening of reserve margins

increases the need to ensure all risks are accurate ly captured as policy and changing generation trends drive new potential risks to resource adequa cy. The commenters provided estimates by MISO of reserve margin shortfalls: falling from the NERC- required 14.8% to 10.6% due to MATS; by 2020-2021, dropping to a -3.3% to comply w ith the additional requirements of CO2 regulation; and by 2023-2024, shrinking to -11.8%.

Commenters stated that EPA's analysis of the existi ng NGCC capacity "available" for redispatch fails to consider reserve margin requirements. The commenters stated that out of the fourteen load-serving SPP members impacted by the EPA's proj ected EGU retirements, nine would be deficient in 2020, and furthermore, SPP found that its anticipated reserve margin would fall to - 4.0 percent by 2024, causing ten of SPP's load-serv ing members to be deficient.

Commenters stated their assessment showed that by 2 020, SPP's reserve margin would fall to 4.7%, which is 8.9% below the minimum reserve margi n requirement and out of SPP's fourteen load-serving members impacted by the EPA's projecte d retirements, nine would be deficient in

2020. The commenters stated further that SPP found that its anticipated reserve margin would fall to -4.0% in 2024, increasing the number of def icient load serving entities to ten. The commenters stated these anticipated reserve margins represent a generation capacity deficiency of approximately 4.6 GW in 2020 and 10.1 GW in 2024

.299

Commenters stated that the planning reserve margins are trending downward and are below their reference levels for MISO by 2016 and ERCOT by 2018 and are occurring despite the lowest electric load growth on record, with the primary dr iver being fossil-fired generation retirements occurring at a faster rate than new generation can be built. The commenters stated that many coal units are being forced or anticipated to retir e due to compliance with existing environmental regulations, low natural gas markets prices, and no w the Proposed Rule and that the combination of economic pressure, existing environmental regula tions, and additional environmental regulation in the CPP will likely result in additio nal fossil-fired generation retirements that decrease bulk-power system reliability to unaccepta ble levels. The commenters stated that they concur with NERC that the assumption for the amount of fossil-fired generation retirements resulting from the Proposed Rule may be underestima ted and require further study to ensure the reliability of the bulk-power system.

Commenters stated that by considering reliability o nly after determining emission reductions, the Proposed Rule leads to substantial decreases or def iciencies in reserve margins in many regions, compromises reliability and increases the risk of b lack outs, brown outs, and other load shedding events. The commenters explained reserve margins an d how they are typically calculated so that they are high enough that involuntary load shedding due to inadequate supply would occur only once in ten years, as established by NERC standards . The commenters stated that even a small drop below the required reserve margin may result i n a violation of NERC's reliability standards and compromises the reliability of the electric gri d.

The commenters stated that EPA's assumption that mo st of the retirements caused by the Proposed Rule will be absorbed by a reduction in ex cess reserves over time is incorrect and that the retirements more than deplete the excess capaci ty in several regions. The commenters provided the following examples:

• "SPP reserve margins would be 4.6 GW deficient by 2 020 and 10.1 GW deficient by 2024;

• In the Northwest, the retirements the Proposed Rule imposes would further exacerbate the 2 GW deficiency that was already ant icipated to exist by 2021.

• In Arizona, under IPM Option 1, reserve margins wou ld be 6 GW deficient during peak summer demand by 2030.

The commenters further stated that the proposed rul e would force these areas to construct new generation and associated infrastructure to make up for these deficiencies, but until the necessary generation and infrastructure could be constructed, NERC standards would be violated. The commenters stated that in SPP, "extreme reactive po wer deficiencies of approximately 5,200 mega volt-amperes reactive would occur. Reactive po wer is integral to avoiding power plant and transmission line failures. Even assuming new gener ation could be constructed to offset the retirements the Proposed Rule imposes, inadequate i nfrastructure would cause loading on 38 SPP facilities that would exceed equipment ratings and cause cascading outages in some regions."

The commenters added that EPA cannot rely on IPM pr ojected power imports for the reliability deficiencies because the Proposed Rule requires ret irements that would induce reserve margin300

deficiencies for many states and deficient states c annot depend on out-of-state imports because they have no means to require that units outside th eir borders dispatch power to them. The commenters further stated that the "Proposed Rule c annot require state actions for compliance while simultaneously depending on out-of-state acti ons for reliability. If compliance is to be state-based, then EPA must analyze reliability conc erns and solutions at the state level."

Commenters stated that the ability to transmit reso urces cost-effectively also may be a factor. Commenters stated that the potential for enhanced t ransmission and impacts on reserve margins needed for electric system reliability may need to be considered. Commenters stated that an analysis would need to be done to assess the constr aints of power supply resources both in the

summer and in the winter.

Commenters stated that reserve margins are dropping dangerously low as a result of generation retirements. Commenters stated that in recent year s reserve capacity has dropped from near 20% to just over 10%. Commenters stated that EPA assu med excess reserve capacity could account for retirements, but with reserve capacity already down, due in part to MAT reductions, there could be insufficient reserve capacity. Commenters stated that the Proposed Rule commands more use of NGCC units and renewable energy sources , which are not especially reliable during periods of extreme weather, such as the 2013- 2014 polar vortex. Commenters stated that the Proposed Rule's environmental dispatch measures req uire those low and no-carbon resources to be used first. Commenters stated that beyond reliab ility, environmental dispatch will also increase electric rates without exacting much of an emission reduction. Commenters stated that RTOs dispatch the most economic resources first. Co mmenters stated that environmental dispatch will require the more expensive resources to be used first. Commenters stated that if coal units run at a lower efficiency level to allow NGCC units to meet the 70 percent capacity factor, the coal units will emit more carbon dioxid e per megawatt hour, displacing what reductions may have occurred from heat rate improve ments. Commenters stated that EPA should also consider that environmental dispatch wi ll result in less reliable and more costly electricity because significant investments in EGUs to comply with MATs will be absorbed by ratepayers without corresponding value since the un its will be operate at lower capacity factors

or even retire.

Commenters stated that SPP notes that the EPA model projects about 9 gigawatts (GW) of existing coal and gas-fired generating capacity in the SPP region will retire by 2020 due to the proposed rule, 6 GW more than originally planned by SPP members. Commenters stated that the SPP analysis "revealed the generating-unit retireme nts expected as a result of the CPP will cause significant reactive power deficiencies and numerou s overloaded facilities." Commenters stated that SPP also studied the region's reserve margin. Commenters stated that currently, SPP requires a minimum reserve margin of 13.6 percent. Commenter s stated that with the EPA's projected retirements and without new generation and transmis sion expansion, the region's reserve margin falls to 4.7 percent in 2020 and 4.0 percent by 202 4.

Commenters stated that SPP's filed comments include d the following assessment: "EPA's projected EGU retirements represent approximately 6 ,000 MW of additional capacity being retired in the SPP region beyond that currently exp ected by 2020. Commenters stated that this represents approximately a 200% increase in retired generating capacity compared to SPP's current expectations. Commenters stated that unless the proposed CPP is modified significantly,301

SPP's transmission system impact evaluation indicat es serious, detrimental impacts on the reliable operation of the bulk electric system in t he SPP region, introducing the very real possibility of rolling blackouts or cascading outag es that will have significant impacts on human health, public safety and economic activity within the region."

Commenters stated that Louisiana's electric utiliti es, as well as several RTOs, have clearly indicated that future compliance could hinge on the use of systematic curtailment of service through "brown-outs" and rolling black-outs. Commen ters stated that the EPA has not provided any information, nor conducted any independent reli ability analyses to contradict this assertion.

Commenters stated that he SPP conducted two differe nt analyses: one on the impacts the Proposed CPP would have on transmission system reli ability and a second analysis on the impact of the Proposed CPP on regional reserve margins and generation adequacy.

Commenters stated that the SPP's transmission syste m reliability analysis considered two potential bulk power system scenarios that included : one where unused/underutilized (existing) generation is dispatched to offset generation antic ipated to be retired by the CPP; and a second that assumes new generation will be developed, to s upplement existing generation, to meet regional power generation requirements (and offset generation retired due to CPP implementation). Commenters stated that the SPP tra nsmission system reliability analysis found, under both scenarios, that the Proposed Rule would result in "extreme reactive power deficiencies" that would expose the system, includi ng areas in northwestern Louisiana, to widespread reliability risks and violations of NERC standards.

Commenters stated that the SPP also conducted a gen eration adequacy analysis finding that the proposed CPP would result in as much as 6,000 MWs o f retirements: an amount that is some 200 percent above current SPP unit retirement projectio ns. Commenters stated that the SPP notes that it currently utilizes a 13.6 percent minimum planni ng reserve margin and, based upon its estimates, the CPP could drive actual reserve margi ns to 4.7 percent for the overall region, by 2020 and into a negative level by 2024.

Commenters stated that despite EPA projections that the SPP region can expect capacity reserves of 21.21 percent (well above the 13.6 percent requi red by NERC standards), the SPP projects that reserves will fall short by approximately 4,60 0 MW in 2020 and 10,100 MW in 2024.

Commenters stated that SPP's analyses revealed sign ificant impacts on reserve margin, falling well below NERC reliability standards. Commenters s tated that in combination, these results indicate that the proposed rule will have significa nt and potentially dangerous impacts on grid reliability and led SPP to conclude "unless the pro posed CPP is modified significantly, SPP's transmission system impact evaluation indicates ser ious, detrimental impacts on the reliable operation of the bulk electric system in the SPP re gion, introducing the very real possibility of rolling blackouts or cascading outages that will ha ve significant impacts on human health, public safety and economic activity within the region".

Commenters stated that The Southwest Power Pool concluded that imposition of the CPP as proposed would result in the RTO reserve margin fal ling to 5% by 2020 and -3.8% by 2024.302

Response 1: Commenters seem to not have taken into account the many tools that are currently used in the electric power system to meet demand an d to maintain reliability. As was said in the preamble to the final rule and they include plannin g, transmission upgrades, calling on demand response, installation of new capacity, and demand side actions. The CPP with its long implementation timeline provides ample opportunity for these activities. EPA does not anticipate that reserve margins will be violated.

Comment 2: Commenters noted that the rule will result in the loss of operating reserves.

Commenters noted that "between 1/3 of the coal plan ts in Texas (EPA's projection) and all of them (BAML's projection) would be rendered uneconom ic by the rule in its first year" putting resource adequacy at risk. Commenters noted that "T he fundamental requirement for electric reliability is to have enough generating capacity t o match the energy usage of customers" and "If energy usage exceeds capacity, the entire grid is a t risk of collapsing." Commenters noted that "reliability rules require the power system to alwa ys maintain enough reserves of generation (referred to as operating reserves) to stand-in for outages or failures and still be able to meet the highest expected levels of consumption." Commenters noted that "If high levels of power consumption and outages cause operating reserve lev els to fall below the required level, reliability rules require utilities to intentionall y disconnect customers (called 'load shedding') to reduce energy consumption to a level that allows ad equate reserve levels." Commenters noted that assuring resource adequacy includes "ensuring enough generation capacity exists to meet the highest reasonably expected levels of energy consum ption, plus enough extra generation on reserve to be able to substitute for other power pl ants that might experience outages or failures during these high levels of energy consumption." Co mmenters noted that "the amount of needed extra generation to ensure resource adequacy is cal led the planning reserve margin." Commenters stated "The retirement of large amounts of existing power plants at once, without enough time and forward certainty to plan and build their replacements, is the perfect recipe for resource adequacy problems, especially where operat ing reserves levels are already close to the planning reserve margin."

Commenters stated that "The EPA's plan for increasi ng the utilization of natural gas may place a significant strain on system reliability, including reserve requirements." Commenters stated "Coal serves a crucial role in meeting system reser ve requirements" due to the large amounts of

coal reserves that can be stored on-site.

Commenters stated that "many renewable technologies , such as wind and solar plants, produce intermittent generation that is difficult to predic t." Commenters stated in order to manage the "variability and uncertainty inherent with intermit tent renewable resources, system operators must have sufficient resources with the operational flexibility held in reserve, known as operating reserves, to quickly respond to fluctuati ons in intermittent renewable generation." Commenters stated "High penetrations of variable en ergy resources will result in an incremental need for operating reserves to maintain system reli ability."

Commenters noted that "the amount of operating rese rves is a critical issue in any power system and particularly when trying to integrate a substan tial amount of renewable resources, such as303

wind and solar power." Commenters stated "From a re serve and reliability perspective, a megawatt of capacity from coal is different than a megawatt from wind" and the proposal, which relies heavily on renewable generation, "does not c onsider the need for operating reserves. Commenters stated "the variability of renewable res ources over different operational time frames (hours, minutes, and seconds) and the uncertainty a ssociated with renewable production forecasting (i.e., forecast errors) are key operati onal characteristics of renewable resources." Commenters noted that "the integration of renewable resources requires increased operational flexibility to provide load following and regulatio n operating reserves at ramp rates fast enough to sustain in a wider operating range." According t o commenters, "Operating reserves can be categorized as non-event reserves (including regula tion reserve and load following reserve) and event reserves (including contingency reserve and r amping reserve)" and variability of wind generation increases the need for load following re serve and regulation reserve on different time frames. According to commenters, "the uncertainty o f the large-scale wind generation contributes to ramp events which may yield increase d ramping reserve requirements."

Commenters offered an example case study to demonst rate how a mandated shift to renewables looks in the real world." According to commenters, wind generation may not correspond with customers' electricity needs. According to com menters, "Wind generation is typically at its highest during the spring and winter months, with t he summer periods being the lowest wind production months." According to commenters "More c apacity from traditional resources will be needed to maintain an adequate level of operating r eserves during the summer peak, when wind

is less available."

Commenters noted that there may be large swings in generation from hour-to-hour, based on historical information. According to commenters, th ese fluctuations will result in the need for additional operating reserves and frequency control

.

Commenters stated that SPP's analyses revealed sign ificant impacts on reserve margin, falling well below NERC reliability standards. Commenters s tated that in combination, these results indicate that the proposed rule will have significa nt and potentially dangerous impacts on grid reliability and led SPP to conclude "unless the pro posed CPP is modified significantly, SPP's transmission system impact evaluation indicates ser ious, detrimental impacts on the reliable operation of the bulk electric system in the SPP re gion, introducing the very real possibility of rolling blackouts or cascading outages that will ha ve significant impacts on human health, public safety and economic activity within the region".

Response 2: EPA does not agree with these comments. Operating reserves are a component of maintaining a reliable electricity system, and EPA has considered reliability in developing this

final rule. Regarding reliability, See section VIII.G.2 of the preamble for the final rule for a discussion of electric reliability and for the impo rtant provisions on reliability in this rule. Also see the Resource Adequacy and Reliability Analysis TSD for a discussion of the treatment of resource adequacy in the analysis of the impact of this final rule.

Comment 3: Commenters discussed other types of reserves, whic h are essential to the reliability of the electric system.304

Commenters stated that "Regulation reserves are use d to manage continuous load and generation variation which results in energy imbalance" and ar e required to "balance the minute-by-minute changes in the system and keep Area Control Error w ithin limits." According to commenters, "The possibility of short-term wind generation fore cast errors increase regulation reserve requirements.

Commenters noted that "load following reserves use online generation on economic dispatch or quick start generation to meet the intra- and inter -hour changes in loads" and are required to "ensure the system has enough capacity on economic dispatch to move from one five-minute dispatch interval to the next."

Commenters noted that "Contingency reserves deal wi th sudden events, such as loss of a large generation unit or a long transmission line." Comme nters noted that "After the event, the inertia of synchronous rotating machines will either supply or absorb the energy difference due to loss of supply and load" and "generator governors sense the frequency change and begin to adjust the output to increase or decrease the required energy. "

Commenters noted that "Ramping reserves cover extre me ramp events caused by large unpredictability of wind generation, which may not be covered by load following reserves."

Response 3: Regarding reliability in general, See section VIII. G.2 of the preamble for the final rule for a discussion of electric reliability and f or the important provisions on reliability in this rule. Also see the Resource Adequacy and Reliabili ty Analysis TSD for a discussion of the treatment of resource adequacy in the analysis of t he impact of this final rule.

EPA recognizes the need to have flexible resources on the electricity grid, and has developed the rule to be consistent with existing economic dispat ch protocols, and designed building blocks from a conservative standpoint. EPA believes that annual capacity factors NGCCs used in the development of this rule are conservative and will permit continued use of NGCCs to support flexible operations. EPA also believes that the as sumptions on renewables are in the mid-range of current projections and provide for continued re liable and flexible system operation. See the GHG Mitigation Measures TSD for discussion of these capacity factors.

Comment 4: Commenters commented on the importance of reserve margins in reliable electricity.

Commenters cited information from the Southwest Pow er Pool (SPP) and stated, "SPP's minimum required reserve margin is 13.6 percent per load-serving entity. However, SPP's evaluation of the projected EGU retirements indicat es that by 2020 SPP's reserve margin will fall to 4.7 percent. SPP projected that by 2024, SPP's a nticipated reserve margin would be -4.0 percent, representing a capacity margin deficiency of approximately 10,100 MW. Out of 14 load serving members assessed, 9 would be deficient by 2 020 and 10 by 2024."

Commenters noted that the rule will result in sever e erosion of the reserve margin in the Midwest Independent System Operator (MISO) or Southwest Pow er Pool (SPP).305

Commenters noted that a preliminary reliability ana lysis by the Western Electricity Coordinating Council indicated that the rule will leave the regi on only 0.53 percent above the 15 percent target for reserve margin.

Commenters noted that the rule could lead to "far b elow needed reserve margins for 2020" and "by 2024, the rule could reduce generating capacity so much that the region may not have the power needed to meet demand, reserve margins aside. "

Commenters stated that "Developing suitable replace ment generation resources to maintain adequate reserve margin levels may represent a sign ificant reliability challenge, given the constrained time period for implementation."

Commenters noted that "utilities must maintain a ge neration capacity reserve margin in order to supply energy in the event existing operating capac ity is lost." According to commenters, "The policy target envisioned will negatively impact exi sting capacity and potentially require new dispatchable units to maintain reliability and rese rve margin targets."

Commenters noted "Most of these coal plant retireme nts will occur in regions where the reserve margins are already tight."

Commenters noted "Results of the PACE modeling show that utilities in Arizona would need to build an additional 3.5 GW of new natural gas capac ity by 2020 and 10GW by 2030 to meet peak load and reserve requirements." According to c ommenters, "approximately 2.3 GW is directly attributable to impacts from the proposed rule" and "due to the time it would take to develop this generation and the transmission to del iver it, reserve margins in Arizona would drop below required levels in the early part of the comp liance period."

Response 4: EPA agrees with the importance of maintaining reser ve margins, but disagrees

with comments that assert the rule will harm reserv e margins. The final rule provides provisions to ensure adequate resources and reliability. See section VIII.G.2 of the preamble for the final rule for a discussion of electric reliability and f or the important provisions on reliability in this rule. Also see the Resource Adequacy and Reliabili ty Analysis TSD for a discussion of the treatment of resource adequacy in the analysis of t he impact of this final rule.

8.9.3 Changes in retirements

[No comments were received on this topic.]

8.9.4 Changes in new capacity additions306

Comment 1: Commenters noted that EPA's capacity expansion ass umptions are flawed and asked that EPA "revise the capacity expansion assum ptions in its analysis to reflect what reasonably can be achieved considering construction and operating resource requirements, economics, and the time required to permit, design, and construct the various generating sources

and transmission infrastructure. Consistent data sh ould be used for all of EPA's analyses."

Commenters gave many examples of incorrect informat ion:

• "In the same April 2014 Draft DAT Replacement Files , there is a tab labeled "Unit Info." Focusing on nuclear units there are 5 new nuclear units identified in both the Base Case and Option 1 Case coming on-line between 2015 and 2018. These can be identified as units at Watts Bar (2015 ) and Vogtle and Summer (1 each in 2017 and 2018). These 5 units are associate d with the correct regions: SERC Central TVA, SERC Southeastern and SERCVACAR."

• "In the Base Case there are two more nuclear units identified as coming online in 2020 for the SERC Central TVA region. The Base Case assumes exactly 2 new nuclear units in EACH of the U.S. regions in the U. S. and 4 more in Canada for a total of 126 new nuclear units coming online in 202 0. The Option 1 Case identifies 404 nuclear units coming online in 2020 with 14 in the SERC Central TVA region, 30 in NY and 20 in California. This is not realistic and lacks any kind of support."

• "Further analysis indicates that in Option 1 and Op tion 2, there are 4,399 new wind installations in the U.S. coming online in 201 6 and 2018 with 120 of those in the SERC Central TVA region. Also, there are 638 Solar and 748 Landfill Gas units starting up in 2016 in the U.S. The Base Case has exactly half of these numbers as coming online. These are not realistic e stimates as they are 100 to 500 times the average number of annual new builds over the past 10 years. If it were possible to design, permit, and construct such faci lities within this timeframe, and it is not, each of the facilities would have to be connected to the transmission system. Determining how to do this and doing it wit hout undermining system reliability will require significant additional tim e. None of this is realistic."

• "In the Option 1 case there are 257 biomass fired u nits listed as coming online in
2016 in the U.S. There are 14 listed for the TVA re gion. Again, it is not reasonable to expect that the number of units comin g online in one year exceeds the currently installed units by a factor of 5 or 1 0. It is also not reasonable to expect that there is enough biomass fuel available for this many units. Although biomass is considered a renewable fuel, it is uncer tain as to how to measure it as a carbon neutral generation source and therefore whet her it is beneficial in reducing atmospheric CO2. Depending on the actual biomass fu el used, the CO2 recovery period will be measured in decades."

• "In power modeling, it is normal to determine what new generating units are necessary to maintain the required reserve margin i n each region and to plan for the most economical type of unit. It appears that E PA merely took the number of307 new builds for Solar, Wind and Landfill Gas for the Base Case and multiplied by 2 in each U.S. region for the Option 1 Case new bui lds. The number of Natural

Gas and Biomass units in the Base Case were increas ed by integer factors from 2 to 8 for regions in the U.S. for Option 1. It appea rs that the economics and geographical variability of new generating capacity were not considered in either the Base Case or Option 1 Case."

• "In reviewing the supporting documents named "Propo sed Clean Power Plan Option 1 Regional overview file.xlsx" and "Proposed Clean Power Plan Base Case overview file.xlsx," there are discrepancies i n the capacity new build annual patterns as compared with the previously discussed data files. For the SERC Central TVA region, the overview files indicate mos t of the new builds occur in 2018 whereas in the April 14 draft DAT replacement files most of the new builds
occur in 2016. The Base Case Overview file indicate s only 2 MW of capacity being built from 2016 thru 2020 whereas the "DAT re placement files" indicate 45 units, mostly wind and landfill gas and 2 new nucle ar units being built in that time frame. The "overview" files indicate more new capac ity in years 2025 and 2030 whereas the "DAT replacement files" show only 1 uni t in the Base Case and 7 units in the Option 1 case being build in 2025 and none in 2030."

Response 1: EPA believes these comments are a misreading of the input files to the IPM modeling. It reads the "units" listed in the IPM DAT input file as if they represented actual units that were assumed, or expected, to come online is a particular year. These entries in this file are "model plants" that the units of capacity can choos e to build in future years, based on economics and the conditions existing in the power grid at th at time. This is a standard technique in system modeling, as noted in the fifth bullet in the comme nts.

Comment 2: Commenters noted the importance of excess capacity.

Commenters noted that "utilities are required by th e WVPSC to have a certain amount of excess capacity for accommodating expected demand growth o ver specific periods to facilitate grid reliability in the event of unplanned outages." Com menters noted that "utilities must be allowed to recover the costs of this generation, so there s hould be a component of BSER that accounts for demand growth, even with the use of coal-fired unit s."

Response 2: This rule does not conflict with state requirements for maintaining capacity. BSER is designed as a system for emission reductions. If a state chooses a rate limit, growth in existing resource can occur, as long as the state g oal rate is maintained. The design of the mass limit provides for equivalence with this rate based approach. See further information in the GHG Mitigation Measures TSD and the Goal Computation TS D.308

8.9.5 Reserve transfers

[No comments were received on this topic.]

8.9.6 Alternative case

[No comments were received on this topic.]

8.9.7 Other

Comment 1: Commenters asserted that EPA's Clean Power Plan do es not recognize the unique challenges electric cooperatives and municipalities will face in achieving the carbon emission

reductions outlined in the Plan.

Commenters noted that the rule is driving coal-fire d generation out of the energy market, especially for cooperatives. Commenters stated that "EPA's proposal doesn't provide a workable solution to address cooperatives' unique circumstan ces."

Commenters noted that "Due to their relatively smal l customer base, rural electric cooperatives are particularly vulnerable to the impacts of reduc ed coal generation ahead of the end of those

EGUs useful life."

Commenters noted that not all electric co-ops are v ertically integrated; which means that separate power companies generate and transmit the electric power that co-ops distribute to our

end-use member-owners. The commenters noted that th is vertical "disaggregation" distinguishes electric co-ops from investor-owned and municipally owned utilities; the commenters have the limited option of supplying less than five percent of its generation requirements to meet member electric demands. The commenters noted that they an d other cooperatives rely on long term all requirements contracts with wholesale suppliers for almost all of its electric capacity; therefore, increased regulatory costs to the wholesale supplie rs will necessarily be passed on to the WREA and other distribution co-ops.

Commenters noted that "The proposal fails to recogn ize the significant differences in utility systems...especially electric cooperatives." Commen ters also quoted Oglethorpe Power Corporation, "'(s)maller utility systems would be p laced at a significant disadvantage compared to larger systems" and "these smaller systems, whic h includes many electric cooperatives, typically have far fewer generation assets and thus considerably less flexibility and fewer options for compliance." Commenters noted that "Utilities a lso vary greatly in the mix of industrial, commercial and residential customers they serve.'" Commenters also noted, "When considering aspects of the Proposed Rule related to increased e nergy efficiency (Building Block 4), the309

projected cost versus- benefit to implement efficie ncy measures and reduce usage is extremely

unfavorable for Flint members ... and in fact is fl at out not feasible."

Commenters stated that as a vertically integrated municipal ut ility, providing not only generation, but also transmission and distribution to their customers, they own and operate 64
miles of 138kV and 66 miles of 69 kV transmission l ines for the 80 square miles of their service territory. Commenters stated that their original sy stem and substations were all built on the 69kV transmission line, from which the majority of their load is served. Commenters stated that as part of the engineering and economic assessment of optio ns to make APC and EE upgrades, they concluded the cost to retire these units was dispro portionate to any gain. Commenters stated that one notable concern is the impact early retirement will have on their transmission system. Commenters stated that analysis of removal of 31 an d 32 generation concludes reliability consequences of sufficient magnitude to require sig nificant transmission upgrades and to mitigate these reliability issues, they would be re quired to install multiple new connections between the 69 kV to 138 kV system. Commenters stat ed that two engineering alternatives are available but costly. Commenters stated that the le ast expensive option that is deemed necessary but adequate is estimated to cost approximately $8, 900,000 for upgrades that include new

transformers and a new 138 kV line. Commenters stat ed that the other option, which provides greater benefits, is estimated to cost more ($12,21 6,800 in 2012 dollars). Commenters stated that additional facility study would be necessary to det ermine a more accurate cost estimate, which would include a short-circuit analysis and stabilit y analysis, and would also require a very coordinated outage schedule to complete any upgrade s and additionally, these investments would have to be proposed analyzed and approved by the MI SO, a time consuming and expensive

process.

Commenters stated that other logistical and financi al issues arise with the concept of closing

units 31 and 32. Commenters stated that in addition to the transmission voltage step down costs, the building that serves units 31 and 32 also house s unit 33. Commenters stated that during a unit 33 outage, heat that is currently provided by units 31 and 32 boilers to the building and would no longer be available. Commenters stated that while t his may seem inconsequential, the estimate to install building heat is $1.5 million. Commenters s tated that closing the plant is estimated to cost an additional $1M, to address closure issues such a s hydrogen and oil removal and other closure expenses. Commenters stated that sales associated w ith units 31 and 32 provide significant income to the City's general fund by contributing 3 0% of revenue of sales from these units.

Commenters stated that revenue from sales associate d with units 31 and 32 are also directed to fund their energy efficiency programs and therefore , early retirement of units 31 and 32 would require the City to determine not only how to pay f or the transmission voltage step down, heating and closure costs, but also how to raise funds for the City services and their energy efficiency

programs.

Response 1: EPA recognizes the importance of variations in util ity systems, including the position of cooperatives and other public power ent ities. That is one of the main reasons why the proposal provided flexibility to state environmenta l agencies to design programs for reducing emissions to meet the needs of their utility system s – including the variety of ownership and control structures present in their states. In thi s final rule EPA has made additional changes to make needed adjustments to their systems, such as m oving the start of compliance to 2022 and310

providing a smoother interim path to the 2030 goals , and also to provide more flexible compliance mechanisms to states, such as trading.

Comment 2: Commenters raised a range of general issues about the ability to maintain reliability under the CPP

Commenters stated, EPA assumes that the proposed gu idelines provide sufficient time and flexibility for states to manage the accelerated tr ansition of the existing generating fleet that the rules envision. See, e.g., 79 Fed. Reg. at 34,904; see also Resource Adequacy TSD at 1. Commenters stated as a practical matter, and as dis cussed in greater detail infra, section III, state plans largely will rely on the four Building Blocks because there are few other options to achieve the same magnitude of reductions in states' average emission rates. Commenters said states may be able to vary the level of reductions from any pa rticular Building Block to some degree, relative to the assumptions EPA made in setting the state goal rates, but few states will be able to forego completely any one of the Building Blocks an d still demonstrate compliance with the 2030 emission rate goal.] will not require changes to the existing interconnected power system. Commenters said, this is simply not true. Commenter s said, a change to any part of the interconnected power system - even one that appears relatively minor, such as increasing the generation produced by an existing unit - requires an analysis of the potential impacts on the rest of the system. Commenters said, the multiple, large r changes proposed by EPA certainly require such analysis under NERC's reliability standards. C ommenters stated the Southwest Power Pool (SPP) released a reliability assessment of the prop osed guidelines, which concluded, among other things, that new generation and transmission expansion would be necessary to maintain reliability while achieving the proposed emission r ate goals. See SPP, Reliability Assessment of the EPA's Proposed Clean Power Plan at 7 (Oct. 8, 2 014), http://www.spp.org/publications/CPP%20Reliability%2 0Analysis%20Results%20Final%20Vers ion.pdf. MISO also is analyzing the impact of the p roposed guidelines will file comments in Docket No.EPA-HQ-OAR-2013-0602. Commenters said, in addition to new resources, changes in how the generation fleet is dispatched may cause significant changes in how power flows across the grid. Commenters said, to meet NERC stan dards, new transmission infrastructure may be required, which is not possible by 2020 because of the numerous transmission studies, planning and construction required to reliably inte grate the changed system conditions.

Commenters stated that with the GHG Rule as propose d, designating for Illinois and every other state (except one) what it considers the best mix o f electricity generation and energy efficiency resources consistent with its predetermine goals fo r reducing CO2, no state could achieve these goals through technological or operating improvemen t at a facility within the source category that the USEPA is trying to regulate, especially co al-fired generation. Instead, a state plan would require wholesale changes to how the state's utilit ies provide electricity to the public, dictating electric resource choices that threaten grid reliab ility and affordable energy for our customers, the citizens and businesses of the City of Springfi eld.

Commenters stated that while building blocks 2-4 c annot be BSER, EPA still needs to demonstrate it has authority to implement them to e nsure that the reliability prong of BSER is met, and as EPA has acknowledged, unless it can sho w that the coal generation that EPA is311

ordering to be reduced can be replaced, consistent with the economic prong of BSER, it cannot ensure that reduced generation is economic, and it cannot ensure that grid reliability will be

maintained.

Commenters stated that, as EPA notes, states and el ectric utilities, like KCP&L, are in the process of transitioning the generating fleet and t he interstate transmission system so that it is

cleaner and more resilient. Commenters said that KC P&Ls integrated resource plan already includes new wind resources additions, significant demand side management efforts, and potential coal plant retirements over the planning horizon. Commenters said the plan already models these components and the value to customers. Commenters said that the proposed state goals and compliance period do not account for the complexity of the interconnected power system adequately, nor sufficiently address how the need to maintain reliability affects the pace and timing of implementing changes. Commenters said that an aggressive implementation of the proposed guidelines by EPA could reduce the gains m ade by KCP&L to increase resiliency of the generating fleet and transmission system.

Commenters stated that the need to maintain operati onal reliability while undertaking significant changes to the way in which power is generated, tra nsmitted and consumed has important implications for EPA's BSER determination, the comp utation of the state-specific emission rate goals and the achievement of the proposed interim a verage goals. Commenters said it is essential that these changes be implemented in a way that mai ntains a high degree of reliability for electricity customers. Commenters said that while E PA does not have the expertise to assess fully the implications of the proposed guidelines o n the interconnected power system, that does not mean that the Agency simply can ignore the comp lexity of the electric system when developing state-specific emission rate goals and c ompliance timeframes. Commenters said that EPA should take into account information from exper ts in system operations and reliability matters to develop achievable final goals and a wor kable compliance period. Commenters said all of the necessary information about the changes that will be required to achieve the interim and 2030 goals will not be available before EPA fin alizes the proposed guidelines next year or even before states are required to submit complianc e plans for EPA approval. Commenters said that states, electric utilities, system operators a nd other regulators will need sufficient time to assess the changes that will be required to impleme nt the state plans and will need the time required to make the system changes and develop the infrastructure needed to implement the state plans and maintain reliability. Commenters sa id EPA must be willing to allow states to address these changes by proposing revised complian ce plans as necessary to meet the 2030 goals.

Commenters stated that the Proposed Rule correctly describes the power sector as a "complex, interconnected grid system." Commenters said they f ully agree that "opportunities exist in the power sector" that offer:

"broader, forward-thinking approach to the design o f programs to yield critical CO2 reductions that improve the overall power system by lowering t he carbon intensity of power generation, while offering continued reliability and cost-effec tiveness."312

Commenters stated, however, the Proposed Rule does not adequately reflect the intricate interactions of power sector elements required for a stable, reliable, cost-effective and loweremissions grid.

Commenters stated that, in suggesting that "the [po wer sector] operators themselves treat increments of generation as interchangeable between and among sources," the Proposed Rule overlooks the challenges of the changing, renewable s-based energy supply. Commenters said this lack of consideration of reliability needs pro mpted the North American Electric Reliability Corporation ("NERC"), which is responsible for esta blishing reliability standards for the nation's energy system pursuant to the 2005 Energy Policy Ac t, to raise concern regarding the Clean Power Plan, as discussed below. Commenters said CSP +TES and other technologies can address the reliability challenges ahead while avoiding inc reases in greenhouse gas emissions. Commenters said without an explicit Clean Power Pla n requirement for State Plans to adequately assess and provide for reliability needs without in creasing emissions, emissions from fossilfueled generation responding to reliability needs c ould diminish the results that could otherwise be expected from State Plans.

Commenters stated that the energy system is perhaps best thought of as an ecosystem, relying on a diversity of resources to supply its needs. Comme nters said a disruption in the balance of resources serving the grid, just as with an ecosyst em, can cause unintended and unwanted results. Commenters said that growing concern in California and the recent experience of Germany highlight the need to take reliable integration of the rapidly changing energy supply very seriously. Commenters said solutions to these issue s can contribute to the Clean Power Plan's goals, rather than detract from them, and these sol utions are increasingly available at manageable cost. Commenters said that failure to plan for inte gration needs could jeopardize the emission reductions anticipated by the Clean Power Plan, and cause excessive and unnecessary jumps in
energy costs.

Commenters stated that in Germany, where the combin ation of large quantities of renewable power and lower-cost coal facilities have driven na tural gas units that normally provide reliability services out of the market, grid reliab ility responses have instead come from "cycling" coal plants. Commenters said cycling coal plants ca n decrease their efficiency (i.e. increasing their heat rate) and increase their emissions and c osts. Commenters said that in fact, despite Germany's remarkable success in deploying solar ene rgy, its carbon emissions have actually increased in recent years, and its residential elec tricity rates have risen sharply. Commenters said the unintended consequences of its rapid increase i n renewables have caused the German government to reform its renewable energy program. Commenters said that the Clean Power Plan should learn from this experience, and avoid r epeating the less salutary aspects of the overall German success in renewable energy deployme nt from the outset - by requiring State Plans to provide for reliability solutions that wil l not increase emissions.

Commenters stated, within this decade, increased re newables in the United States could require conventional fossil-fired generation resources to o perate at or near reliability thresholds, and to ramp up and down at rates that may be difficult to achieve-increasing their emissions, as well as their costs. Commenters said that, for example, the highest average ramp rate in California, which presently leads the nation in renewable energ y requirements, is presently about 30 MW per minute. Commenters said by 2020, the highest sy stem ramp is estimated to be three times313

higher. Commenters said that California's energy sp ot market has already experienced days in which over-generation (in which more power is suppl ied to the grid than demand) has caused over 40% of prices to be negative, intended to indu ce generators to stop producing power. Commenters said over-generation has the effect of f orcing curtailment of renewable energy units, thereby wasting their low-carbon energy prod uction potential and increasing the effective cost of these resources-in other words, diminishing the effectiveness and increasing the cost of Building Block 3 measures. Commenters said that ove r-generation presents a more serious grid reliability concern than insufficient supply, as it can damage grid elements that are costly and time-consuming to repair (such as transformers), re duce the effective life of transmission lines and other equipment, and even result in blackouts o r fires. Commenters said a recent study has shown that these over-generation conditions could s ubstantially increase in California, absent an approach to procurement that better anticipates rel iability and integration needs.

Commenters stated that as the California Independen t System Operator ("CAISO") has observed, the threat of over-generation and other concerns sh ould be seen as a sign of success in deploying renewable energy, and projected reliability problem s should be seen as issues that can be

accommodated but these conditions must be addressed before the most significant changes in the energy supply take place. Commenters said in a proc eeding before the California Public Utilities Commission on the long-term reliability of the grid , the CAISO recently noted that efforts are underway to better identify the reliability charact eristics needed by the grid as the energy supply changes, due to the increased replacement of conven tional fossil-fired resources that inherently provided those characteristics with renewables and other new energy sources that may not. Commenters said reliance on natural gas to provide these reliability needs presents its own set of

issues. Commenters said that Western states and oth er stakeholders are raising reliability concerns about a future that substantially relies o n natural gas and Building Block 2 measures. Commenters said natural gas-fired power plants are subject to emissions control and supply constraints in certain areas. Commenters said that, in addition, although natural gas prices have been low in recent years, gas supply remains subjec t to future price fluctuations, which may cause unexpected cost impacts and additional reliab ility pressure.

Commenters stated that reliability concerns have pr ompted NERC to issue a report cautioning EPA on potential negative consequences of the Clean Power Plan. Commenters said the NERC report provides a perceptive analysis of the potent ial reliability implications of the Proposed Rule, including the prospects of insufficient load- following services, ramping, reactive power, and regulation support, as well as risks associated with natural gas supply and deliverability. Commenters said NERC correctly draws attention to t he potential that the Clean Power Plan could result in increased cycling and need for incr eased maintenance of EGUs. Commenters said that these factors could well undermine and outweig h emissions reductions that the Proposed Rule projects as outcomes of Building Block 1 measu res, which are intended to increase the efficiency and heat rate of EGUs. Commenters said t hat EPA should be aware that the reliability concerns raised by NERC can be addressed by CSP+TES , enabling attainment of emission reductions without adverse reliability consequences

.

Commenters stated that NREL, in its Western Wind an d Solar Study, concluded that greenhouse gas reductions associated with renewables outweigh increased greenhouse gas emissions associated with increased cycling and maintenance o f EGUs - although, importantly, it did314

project an overall increase in emission of certain criteria pollutants. Commenters said EPA should note that NREL's study is a "best case" scen ario, as it presumes that EGUs across the Western states would be dispatched to optimally ser ve energy and reliability needs throughout the Western Interconnection, while in reality these EGUs are located within over thirty separate grid balancing areas that are, for the most part, i ndependently dispatched and optimized - effectively limiting optimal dispatch and meaning t hat cycling and maintenance issues (and their associated greenhouse gas and criteria pollutant em issions) could be significantly higher. Commenters said that proper planning and procuremen t of technologies such as CSP+TES can minimize these cycling and maintenance issues. Comm enters said the need for resources that reduce cycling and maintenance without increasing e missions should be addressed by the Clean

Power Plan.

Commenters stated that they fully agree with NERC's conclusion that it is imperative to "review system flexibility and reliability needs while achi eving the EPA's emission reduction goals." Commenters said emissions reductions, reliability a nd affordable cost outcomes cannot reasonably be expected to simply happen; the E3 Stu dy demonstrates that procurement without explicit consideration of reliability consequences is likely to produce significant grid and cost problems. Commenters said in order to ensure the su ccess of the Clean Power Plan, avoid unnecessary emission and energy cost increases, and stave off grid reliability threats, EPA should require State Plans to identify and provide for integration needs in a fashion that reduces greenhouse gas emissions.

Commenters stated that CSP+TES offers many of the k ey values essential for consideration in a State's integration planning efforts. Commenters sa id CSP+TES plants can provide essentially all of the electric power products and reliability serv ices provided by fossil-fueled plants, without

their carbon and other emissions. Commenters said t hat CSP displaces the need to cycle existing EGUs, thereby reducing the emissions issues that re sult from inefficient EGU operation and wear-and-tear on EGU equipment; it also displaces t he need to develop additional natural gasfueled capacity. Commenters said that the flexible, grid-supporting characteristics of CSP+TES systems can address problems associated with integr ating renewable power into the grid, enabling renewable resources' share of the energy s upply to grow while maintaining grid reliability. Commenters said that CSP+TES can provi de a keystone to success for the Clean Power Plan, simultaneously providing clean energy, reducing emissions from fossil-fueled plants and enhancing increased deployment of other clean e nergy generation sources.

Regarding Texas, other commenters noted that the El ectric Reliability Council of Texas (ERCOT) states its "primary concern with the Clean Power Plan is that, given the ERCOT region's market design and existing transmission in frastructure, the timing and scale of the expected changes needed to reach the CO2 emission g oals could have a harmful impact on reliability. Specifically, implementation of the Cl ean Power Plan in the ERCOT region, particularly to meet the Plan's interim goal, is li kely to lead to reduced grid reliability for certai n periods and an increase in localized grid challenge s." The commenters stated that resource mix changes, according to ERCOT's assessment, will requ ire major improvements to the ERCOT transmission system and a final rule should allow f or effective management of electric system reliability issues that may arise due to implementa tion of the Clean Power Plan. The commenters stated that significantly more time is needed to ad dress the state's and region's unique market315

characteristics. The commenters stated that there i s simply not enough time needed to orchestrate a plan that ensures electric reliability is not com promised.

The EPA has not demonstrated a compelling case that proceeding with unnecessary haste provides any tangible environmental benefit.

Commenters stated that given the system requirement s that must be met in order to maintain reliability, even the seemingly simple decision to close a single fossil base load unit and replace it with a renewable generator requires consideratio n of the availability of sufficient generation to meet demand, the need for ramping and back-up power , the availability of natural gas supplies and the infrastructure to deliver it, and the impli cations for transmission use and for providing inertia, frequency and voltage control. Commenters said that choosing to increase the generation at an existing unit that already is interconnected to the transmission system requires

consideration of similar issues. Commenters said ma naging these considerations requires a significant amount of rigorous and time-intensive s tudy and coordination.

Commenters stated the principal functions of the sy stem operator include provision of transmission service and transmission planning to e nsure the future reliability of the grid. [See FERC Order No. 2000] Commenters said they also make dispatch decisions, taking into consideration least cost generation, numerous relia bility requirements and any existing

transmission constraints -- which determine which E GUs run to meet demand or provide other grid reliability services (this is known as securit y-constrained economic dispatch). Commenters said that another key function is to manage congest ion. Commenters said that in regional transmission operators (RTOs) and independent syste m operators (ISOs) this is addressed through competitive markets, including day ahead an d real-time energy markets, capacity markets and other markets to address energy imbalan ces and provide other ancillary services.

Commenters said the market rules and structures are subject to Federal Energy Regulatory Commission (FERC) jurisdiction to ensure that they produce "just and reasonable rates," as required by the Federal Power Act (FPA).

Response 2: EPA believes the final rule will not disrupt any cu rrent reliability processes and is fully consistent with continued maintenance of grid reliability. The final rule features overall flexibility, a long planning and implementation hor izon, and the widest possible range of options

for states and affected EGUs to achieve the CO 2 emissions goal, and an opportunity to trade credits or allowances. This design reflects, among other things, the EPA’s commitment to ensuring that the final rule does not interfere wit h the industry’s ability to maintain the reliabilit y of the nation’s electricity supply. Given this, it is highly unlikely that there will be a situation where an effected EGU cannot meet its requirements under a state plan. EPA nevertheless requires that states address reliability in their p lans and consult with relevant reliability entities in the planning process.

While some have pointed out severe weather or other short-term events as potentially conflicting with state plans, we note that most of those events are of short duration and would not require major adjustments to emission standards on affected EGUs or state plans. However, should such a situation develop the ability to use ERCs and all owances in effect provides a safety valve.316

EPA recognizes however that some states may choose to place inflexible requirements on individual plants as part of their state plans and not authorize the use of credits and allowances.

Those states will be more vulnerable to an unantici pated catastrophic event that could create a conflict that would interfere with reliability. To address this possibility, EPA is providing a safety valve in the nature of a short term modifica tion to the state plan. See Chapter VIII.G.2 of the preamble for EPA treatment of reliability issue s in this rule.

8.10 Other

Comment 1: Commenters noted that EPA did not consider the fol lowing impacts related to the addition of new, non-coal generation and transmissi on facilities.

Commenters noted "there has been no evaluation of a dditional operating and planning measures needed to support integration of significant additi onal renewables and of natural gas availability required to fuel the increased number of gas burnin g units."

Commenters also noted that increased reliance on wi nd generation will result in a "proportional increase in gas burning generators" to maintain "re liable energy supplies and minimum required planning reserves."

Commenters noted that EPA has underestimated energy and electricity infrastructure constraints.

Commenters noted that financing new infrastructure may be more challenging than EPA

assumed. Commenters noted that it is "difficult to finance construction of new pipelines before

new markets are established."

Commenters stated, "It is unclear whether APA fully assessed the impacts associated with the changes in energy resources that would occur under the agency's section 111(d) proposal." Commenters further stated that "EPA should not proc eed to finalize existing source performance standards until the agency conducts a thorough impa ct assessment and allows for public comment on its proposed conclusion."

Commenters noted that EPA has failed to consider tr ansmission grid integration issues, such as voltage control and natural gas backup power.

Commenters noted that wind and solar projects are l and-intensive and EPA fails to examine the environmental impacts of this land development.

Commenters noted that new transmission lines will n eed to be developed, which could increase

the costs of this rule and could have environmental impacts.

Commenters asked that EPA quantify the impacts of n ew generation and transmission facilities that are needed to replace the coal plants being cl osed as a result of this and other EPA regulations.317

Response 1: The EPA disagrees with the commenters that consider ation of infrastructure and environmental impacts were not considered by the EP A in developing the final Clean Power Plan. The EPA held extensive outreach with federal, state, tribal and territory organizations regarding these issues in developing the final rule . The EPA has conducted an extensive analysis of the energy and environmental impacts of the Clea n Power Plan as reported in technical support documents such as the GHG Mitigation Measures, CO 2 Emission Performance Rate and Goal Computation, Resource Adequacy and Reliability Analysis, Rate-based Program Accounting and the Regulatory Impact Analysis (RIA) developed for the final emission guidelines. EPA specifically discusses reliability considerations in section II.D. 3 of the preamble for the final rule and section 8.9 of this response to comments document. Impacts of the CPP are discussed in Section XI of the preamble for the final rule.

As discussed in Section XI of the preamble for the final rule, states, tribal governments and

territories will make the ultimate decisions as to how the emission guidelines will be implemented. States will be afforded flexibilities in compliance with the CPP. States may choose to tailor their compliance programs to consider pot ential local environmental impacts, as well as infrastructure requirements. The CPP allows for fle xibilities that guarantee a continued reliance on a diverse energy mix in the generation of electr icity, and also allows for a long implementation period in order to ease the impacts associated with transitioning to a lower carbon energy mix.

Comment 2: Commenters suggested multiple topics related to nu clear energy that should have been included in the secondary impacts of this rule making.

Commenters stated that "the draft rule does not app ear to fulfill CAA section 111(a) requirement that non-air quality health and environmental impac ts be evaluated." According to commenters, the analysis excluded radioactive waste, uranium fu el production, and nuclear accidents.

Commenters stated that "The draft rule dismisses ra dioactive waste impacts resulting from preservation and/or increased deployment of nuclear capacity." According to commenters, "The EPA disregards this impact as equivalent to the sol id waste impacts of coal generation, but the judgment appears to be qualitative as the draft rul e does not include a technical analysis to support such a claim." Commenters stated "there are multiple forms of radioactive waste that are directly generated by the operation of commercial n uclear reactors, including: (1) Irradiated nuclear fuel and other high-level radioactive waste (HLRW); (2)Contaminated reactor equipment and other low-level radioactive waste (LLRW) produc ed during the decommissioning and site remediation process; (3) Solid and liquid radioacti ve effluents released to the environment during normal reactor operation; (4) LLRW generated during routine operation, from contaminated parts and equipment to uniforms and protective gear ; and (5) Highly radioactive solid waste particles ("crud") from the primary coolant system. " Commenters stated "The EPA must consider the incremental costs of additional waste generated by the construction of new reactors and the continued operation of existing reactors, which are not only considerable but would potentially surpass the cost of any other energy alternative ov er the long and indefinite periods under which they may be incurred."318

Commenters also stated that EPA must also consider "the full cost of decommissioning reactors

in construction."

Commenters stated that "The production of nuclear f uel entails significant environmental impacts, including public health, environmental jus tice, and economic costs" and noted that "The impacts of uranium mining and fuel production shoul d also disqualify nuclear from inclusion in the Clean Power Plan's best system of emissions red uction."

Commenters noted that the rule does not account for "the potential for radiological accidents resulting from continued operation of existing reac tors and the deployment of additional, new

reactors."

Commenters stated that "Ignoring the vast financial costs and human health and environmental impacts stemming from reactor accidents distorts th e evaluation of nuclear in the rule."

Commenters noted that there are a number of radionu clides released from nuclear energy facilities and chose to focus on the impacts of car bon-14 for the following reasons:

• "Carbon-14 is released into air as methane and carb on dioxide, and into water" and "is also radioactive, thereby bridging air and non-air issues as applies to the current proposed rule."

• "Carbon-14 has a half-life of over 5700 years and t he element carbon is a basic building block for life on earth. Therefore, "it co nstitutes a potential health hazard, whose additional production by anthropogeni c sources of today will result in an increased radiation exposure to many future g enerations."

• "Like tritium, it can collect in the tissues of the fetus at twice the concentration of the tissues in the mother, pointing to its dispropo rtionate impact on the most vulnerable stage of the human lifecycle."

• "In a nasty irony, release of non-radioactive carbo n by fossil fuel combustion had diluted the uptake of naturally occurring radioacti ve carbon, actually lowering the dose humans received, thereby mitigating natural ca rbon-14's radioactive impact on human health. Called the Seuss effect, it was ov ertaken after about 1950 with the carbon-14 release from nuclear power and nuclea r weapons. What happens when the non-radioactive carbon from fossil fuel pr oduction is replaced by carbon-14 producing nuclear power? Will biological systems take up not only more naturally occurring carbon-14, as before, but also more carbon-14 from

nuclear emissions?"

Commenters stated, "Any non-air quality health and environmental impact and energy requirements needed study if nuclear was to be part of the performance standards." Commenters noted the following: "aging fleet of nuclear reacto rs, all with significant safety problems and long term storage of highly radioactive nuclear spe nt fuel on site."

Commenters commented that nuclear energy is not emi ssions free and noted the following:319 • "Nuclear Fission from energy production is one of t he hottest activities man conducts and nuclear fission's thermal pollution im pacts on the earth's eco and biospheres have not been included in the climate ch ange conversation."

• "To date nuclear energy only produces approximately 11% of the earth's electricity, yet it produces enough Btus of Nuclear Heat Waste to melt 25% of the

earth's ice."

• "Once started the nuclear fission chain reaction co ntinues producing nuclear heat waste until all the half-lives of the newly created radioisotopes are exhausted" and "it remains thermally HOT for thousands of years."

• "nuclear energy production the most water intensive form of energy production due to the large need of water to constantly cool t he hot radioactive elements."

• after use, the water can be dumped back into water bodies and "The heat shock/thermal impact negatively impacts tens of mil lions of fish"

• uncontained radioactive leaks, including strontium- 90 and tritium

• "Non-carbon emission hazards of low level nuclear e missions from nuclear energy production, despite The National Academy of Sciences study from the late 1990s, commonly referred to as the Bier Vll report, stated that no amount of continuous exposure to low-level radiation is safe"

• "EPA does not consider the health costs, to individ ual and national health care."

• "Nor, has the EPA considered the impacts on low lev el radioactive emission on reproductive health, women, infants, young children , especially young girls."

• "Uranium and other toxic minerals are the fuel for nuclear energy. These fuels are finite, not renewable. Mining of nuclear fuels nega tively impacts human health, water resources and land of many environmental just ice communities."

• sequestration of nuclear waste includes the followi ng risks: "groundwater seeping into the repository, corrosion of waste containers, leaching of radionuclides, and migration of contaminated groundwater towards areas where it might be used as drinking water or for agriculture"

Commenters noted "The EPA rule contains a number of provisions that could expand or prolong the use of dangerous and polluting fuels, including the burning of coal, garbage, natural gas, forests and uranium, rather than encourage a transi tion to healthier solutions like energy efficiency and clean renewables."

Commenters asked that EPA "fully assess and appreci ate the environmental impacts of the nuclear life-cycle."320

Response 2: In response to comments received relating to nuclea r generation, EPA has modified the final rule in this regard. The final rule Best System of Emission Reductions (BSER) reflects certain changes from the proposed rule, based on EP A’s consideration of comments received and further analysis. The principal changes are the exc lusion from the BSER of emission reductions achievable through demand-side energy efficiency an d through nuclear generation; a revised approach to determination of emission reductions ac hievable through increased renewable energy generation, based on an alternate approach o n which EPA solicited comment in the proposed rule; a consistent approach to determinati on of emission reductions achievable through all the building blocks that better reflects the re gional nature of the electricity system; and a revised interim goal period of 2022 to 2029 (instea d of the proposed interim period of 2020 to 2029). These changes to the BSER and the building b locks are discussed in more detail in section V of the preamble for the final rule.

In the June 2014 proposal, the EPA also identified the replacement of generation from fossil fuel-fired EGUs with generation from nuclear units as a potential approach for reducing CO 2 emissions from the affected source category. EPA pr oposed to include two elements of nuclear generation in the BSER: an element representing pro jected generation from nuclear units under construction, and an element representing preserved generation from existing nuclear generating capacity at risk of retirement.

Generation from new renewable energy (RE) generatin g capacity, generation from new nuclear generating capacity can clearly replace fossil fuel -fired generation and thereby reduce CO 2 emissions. However, there are also important differ ences between these types of low- or zeroCO 2 generation. Investments in new nuclear capacity ar e very large, "lumpy," capital-intensive investments and the building of nuclear facilities historically has been subject to delays and substantial risks of non-completion, both of which tend to raise costs. By comparison, investments in new RE generating capacity are relat ively small and low-risk. Based on the small number of new nuclear generating projects, it is di fficult to ascertain a trend of increasing nuclear generation in the industry. These differenc es create greater uncertainty regarding the achievability and cost of generation from new nucle ar capacity as a replacement for fossil fuelfired generation, two important factors in determin ation of the BSER. Accordingly, as described in section V of the preamble for the final rule, th e EPA is not finalizing increased generation from new nuclear capacity as a component of the BSE R.

The EPA is likewise not finalizing the proposal to include a component representing preserved existing nuclear generation in the BSER. On further consideration, EPA believes it is inappropriate to base the BSER on elements that wil l not reduce CO 2 emissions from affected EGUs below current levels. Existing nuclear generat ion helps make existing CO 2 emissions lower than they would otherwise be, but will not fu rther lower CO 2 emissions below current levels. Accordingly as described in section V of th e preamble, the EPA is not finalizing preservation of generation from existing nuclear ca pacity as a component of the BSER.

Comment 3: Commenters noted that the rule has impacts on wate r usage and water resources.321

Commenters "developed a new power sector model that accounts for water use." According to commenters, "neither EPA nor the Energy Information Administration (EIA) have policy models that can estimate changes to water use in the power sector under different regulations."

Commenters stated that, when compared to coal use, "energy efficiency, renewable energy, and natural gas also cut carbon dioxide emissions in ro ughly the same proportions that they save water." According to commenters, "Since these strat egies are the basis for the building blocks proposed in the Clean Power Plan, this means that t he plan will not only reduce CO2 emissions, but also cut water use in the power sector." Commen ters stated that "the implementation of the

Clean Power Plan in Texas would further increase wa ter savings in the State by about two-thirds more compared to the baseline, from a 15 percent dr op to a 25 percent drop."

Commenters noted that water usage "could also be an Achilles heel in the long-term sustainability of hydraulic fracturing and natural gas production."

Commenters noted that "The U.S. energy policy must soon take a more accurate accounting of reducing water usage in a sustainable strategy." Co mmenters stated, "The issues with too much water usage going to energy generation can no longe r be separated from energy policy, air quality policy and greenhouse gas reduction policy. We need sustainable policy solutions."

Commenters stated, "The entire energy market is inc reasingly vulnerable to the current and future drought conditions found in the U.S. and the larger issue of high water usage from the energy sector is not being factored into strategic planning." Commenters asked "What are the best adaptive management strategies in the energy s ector for controlling water use and generating more power from low water use generation sources?" and "Should these water resource management strategies be included in the E PA rules or development further in other regulatory schemes?"

Commenters stated that "The EPA should have conduct ed a more meaningful evaluation of the water resource impacts of including nuclear in the BSER, particularly considering the impact of nuclear in areas of the country that have experienc ed droughts, such as Georgia."

Commenters asked that the costs to the water sector be considered in any reliability analyses.

Commenters stated, "The electricity sector's curren t and future resiliency should be considered while EPA finalizes its CPP, especially in terms of the sector's water intensity." Commenters also stated, "The smart, resilient and less water-i ntensive energy choices we make today will have long-lasting benefits for the country's econom ic and environmental health."

Response 3: Comments received on this topic were mixed with som e commenters asserting that

the CPP will create more demand for water resources and other commenters stating that "energy efficiency, renewable energy, and natural gas also cut carbon dioxide emissions in roughly the same proportions that they save water." The EPA agr ees with the commenter’s statement that "The smart, resilient and less water-intensive ener gy choices we make today will have longlasting benefits for the country's economic and env ironmental health." The EPA recognizes that qualitatively assessing water impacts of the CPP is complex and is dependent in part on actions ultimately taken to comply with the emission guidel ines. The CPP is designed to reduce CO 2322

emissions from electric generating units, the large st domestic stationary source of emissions of

CO 2, and CO 2 is the most prevalent of the group of air pollutan t GHG that the EPA has determined endangers public health and welfare thro ugh its contribution to climate change.

Climate change impacts touch nearly every aspect of public welfare. Among the multiple threats caused by human emissions of GHGs, climate changes are expected to place large areas of the country at serious risk of reduced water supplies, increased water pollution, and increased

occurrence of extreme events such as floods and dro ught. As previously stated, this rulemaking is designed to reduce CO 2 emissions that contribute to climate change and th ese negative impacts

on water resources.

While certain types of electricity generation and f uel sources do use water resources, the EPA also recognizes that increased use of renewable ene rgy (RE) provides numerous benefits in

addition to lower CO 2 emissions. Specifically, RE typically consumes les s water than fossil fuelfired EGUs. Wind power and solar PV systems do not require the use of any water to generate electricity; water is only needed for cleaning to e nsure efficient operation. States will make the ultimate decisions regarding implementation plannin g and will be able to address water related issues specific to their state.

Comment 4: Commenters noted that the rule will have an advers e effect on stormwater compliance at an energy generation site in Orlando Florida. Although not subject to the rule, the

loss of coal units will have an adverse effect on t his energy generation site owned by

commenters.

Commenters stated the following:

"The site was designed in the early 1980s with a vi sionary approach. It utilized recycled water from a nearby wastewater treatment plant to be used in the cooling towers and prohibited the runoff of any stormwater from the site. Florida has an average of 54 inches of rainfall each year, which makes managing and storing stormwater a signi ficant undertaking. The water is directed and stored in ponds 2-6 as depicted on figure 1, wh ich are all lined to meet the requirements for

contact water on an industrial site. There is no of fsite discharge of stormwater at SEC, so the contact water never conveys to waters of the United States. This stored stormwater is then processed through the SEC Stormwater Treatment Faci lity, consisting of a brine concentrating crystallization falling film evaporation process. A common description of this process in the industry is a cooling tower blow down treatment fac ility that converts it to steam through hydric scrubbers to achieve compliance with the Section 11 2 requirements. The SEC site also utilizes wastewater from Orange County, Florida to meet othe r generation needs and that water is evaporated as a part of the generation process. Thi s partnership has provided a large scale use for treated wastewater while limiting the demand at SEC from potable resources to be zero. OUC relies on the resource to produce steam and Orange County Utility Department relies on OUC as a source for beneficial use of the county wastewate r. If the OUC demand is removed the County

does not have the infrastructure to re-route the en tire volume of wastewater, especially during the wet season and will have to discharge this benefici al resource in a wasteful manner."323

"An additional side effect of CPP on OUC is that, w ith the loss of full operation of both of OUC's coal units, the efficient design of our site does not provide for the management of the Florida summer rains (which average 54 inches) and the associated industrial contact and the additional stormwater. Therefore, OUC would be requ ired to design, permit, and construct other means to manage and store this stormwater at an add itional projected cost of at least $50 million. Because OUC does not discharge into Waters of the U nited States we now are not included in the new Proposed Rule and definitional modification . The alternatives we will have to investigate will include deep well injection in an area without a confining layer or treatment of

the stormwater to at least Class 1 standards to mee t the water quality criteria in downstream protected water bodies."

Response 4: The EPA recognizes there are a variety of potential impacts associated with implementing the Clean Power Plan that states, trib es, and terr itories should consider in developing implementation plans including effects o n local infrastructure. This final rule allows states considerable flexibility with respect to the timeframes for plan development and implementation, as well as the choice of emission r eduction measures. The final rule provides up to 2030 for full implementation of all emission red uction measures, with incremental steps for planning and then for demonstration of CO2 reductio ns that will ensure that progress is being made in achieving CO2 emission reductions. States w ill be able to choose from a wide range of emission reduction measures, including measures tha t are not part of the Best System of Emission (BSER) reductions, as discussed in detail in Section VIII of the preamble.

Comment 5: Commenters noted that the impacts analysis did not include the consequences of increasing the amount of fracking (unconventional h ydraulic fracturing) in the United States in order to respond to the increased natural gas usage that will result from this rule.

Commenters noted the following: "There is ample rea son to believe that [hydraulic fracturing] has significant and widespread impacts on groundwat er contamination and methane leakage, both of which have significant impacts on the publi c health and welfare of the United States." Commenters also noted that "increasing reliance on natural gas may lead to even larger climate change impacts, since methane is also a greenhouse gas that the EPA has recognized as having a far greater global warming potential than carbon di oxide, up to 20 times greater over a 100-year period."

Commenters noted the following:

• "the process of hydraulic fracturing will lead to f urther contamination of groundwater supplies"

• "recent reports of earthquakes that appear to be tr iggered by the injection of hydraulic fracturing wastes into deep wells are tro ublesome."

Commenters noted that there are "considerable impac ts to air, land and water resources due to natural gas exploration and development activity." Commenters asked for "Better management, mitigation and awareness of the impacts to public r esources are needed, especially in relation to324

public lands, waters, air quality, and GHG emission s." Commenters also raised the issue of "methane leakage from our ever-expanding network of natural gas fields and distribution pipelines" that could "offset much of the climate b enefit expected by converting from coal to natural gas."

Commenters noted that the rulemaking did not evalua te the consequences of the following:

• "air and water contamination from drilling and frac king operations"

• "unsafe waste disposal"

• "earthquakes"

• "ecological impacts, and damage to roads, property, and communities caused by the boom-bust cycle inherent to this extractive ind ustry".

Commenters cited a "compendium of fully-cited repor ts, studies, and articles compiled by Concerned Health Professionals of New York, which d escribe the many risks and harms of fracking, including its impact on climate change."[ Compendium of Scientific, Medical, and Media Findings Demonstrating Risks and Harms of Fra cking (Unconventional Gas and Oil Extraction), Concerned Health Professionals of New York, July 10, 2014. http://concernedhealthny.org/compendium/]"

Commenters noted that fracking can:

• "Fragment forests and mar landscapes with new roads , well sites, waste pits and pipelines;"

• "Compete with farmers for local water supplies whil e consuming millions of gallons of water for each fracked well;"

• "Produce massive volumes of toxic and even radioact ive waste, the disposal of which is causing earthquakes and putting at risk dr inking water resources;"

• "Cause thousands of accidents, leaks and spills eac h year that threaten public health and safety and put at risk rivers, streams, shallow aquifers and farms;"

• "Pump hazardous pollutants into the air, at the exp ense of local communities, families and farms;"

• "Turn homes into explosive hazards by contaminating water wells with methane and other flammable gases;"

• "Put vital aquifers at risk for generations by crea ting new pathways for the potential flow of contaminants over the coming year s and decades"325 • "Disrupt local communities, with broad physical and mental health consequences; increased demand on emergency and other social serv ices, damage to public roads, declines in property value, increased crime, and losses felt in established

sectors of local economies. When combined with the potential for increased risk of climate change due to methane leakage, these hea lth risks demonstrate how misguided this plan truly is."

Commenters listed the following impacts of increasi ng the supply of shale gas:

• Groundwater quantity and quality from increased sha le gas development

• Air Quality impacts from shale development

• Earthquakes

• Impacts from building out natural gas infrastructur e to meet power sector demand for natural gas.

Commenters stated that they are concerned about how the rules define "clean power" and the plan's heavy reliance on conversion from coal to na tural gas. Commenters said natural gas obtained by hydraulic fracturing is not clean from a public health or climate perspective. Commenters said fracking is associated with local a nd regional air pollution, adverse birth outcomes and contamination of drinking water. Comme nters said the metrics used by the EPA to predict the effectiveness of this strategy have bee n questioned. Commenters said emission estimates should encompass the entire life cycle of fuel instead of just carbon emissions from the

smokestack.

Commenters, regional networks of grassroots communi ty organizations, stated that the proposed rule encourages fuel-shifting from coal to natural gas without considering the significant environmental, public health, economic, and societa l harms related to the extraction of natural gas. Commenters stated that gas development today, which often involves the dangerous process of horizontal high-volume hydraulic fracturing ("fr acking"), is largely unregulated and enjoys broad exemptions from landmark environmental laws, including the Clean Air Act, the Safe Drinking Water Act, and laws regulating hazardous w astes. Commenters stated that the proposed federal guidelines under CAA section 111(d) go to g reat lengths to describe the benefits of reducing coal consumption, but the proposed guideli nes fail to evaluate the negative consequences of increased natural gas production an d related infrastructure, including air and water contamination, unsafe waste disposal, earthqu akes, ecological impacts, and damage to roads, property, and communities caused by the boom -bust cycle inherent to extractive industry. Commenters also submitted a recently assembled comp endium of fully-cited reports, studies, and articles compiled by Concerned Health Professionals of New York, which describe the many risks and harms of fracking, including its impact o n climate change.

Commenters opposed the proposal because of building block 2 and the heavy reliance on expanding the use of natural gas for electricity ge neration. These commenters believed that increasing the demand for natural gas will increase natural gas venting and fugitive emissions of methane from natural gas production, transmission, and distribution. These commenters believed326

that the agency must simultaneously promulgate GHG standards for reducing natural gas venting and fugitive emissions from natural gas systems. Co mmenters stated that the proposal to designate natural gas and nuclear power as BSER is not based on a documented, internally consistent, or fair analysis because the proposal r elies heavily on natural gas for carbon emission reductions. Commenters stated that the proposal was based only on industry data for venting and fugitive methane emissions, and the proposal ignore s peer reviewed literature that indicates much higher methane emissions from venting and fugi tive sources.

Commenters opposed finalizing the proposed rule bef ore the EPA also promulgates a standard for natural gas venting and fugitives because if th e proposed rule was finalized large-scale investments in new gas-fired power plants would soo n follow. Commenters were concerned that further study by the EPA on fugitive emissions from fracking may indicate emissions are much higher than the estimates used for the proposal, an d commenters were concerned that curtailing fugitive emissions from fracking may be an intracta ble problem. Given these concerns, commenters stated that the Agency will not be in a position to reverse course and require the newly constructed gas plants to retire. For these r easons, commenters believed that fugitive emissions associated with shale gas must be address ed in the proposed rule.

Commenters believed that the proposed rule's endors ement of natural gas as a strategy for combating climate change is fundamentally flawed an d not supported by science. Commenters disagreed with the proposal's characterization of n atural gas as "clean" because commenters believed that the best science shows that systemic venting and leakage of methane that occurs during extraction, processing, and transport, along with carbon dioxide released during its combustion, substantially or completely offsets the benefits that natural gas-fired generation has over coal-fired generation with respect to climate change. Commenters recommended that the entire supply chain for gas development should be c onsidered as a single process in analyses published to support the final federal guidelines f or state plans.

Commenters stated that the environmental concerns r egarding the use of fracked natural gas are numerous and deserve the agency's attention in conj unction with adoption of these guidelines. Commenters stated that if the goal is t o reduce greenhouse gas emissions, then the expected increase in emissions of methane associate d with production, transmission, and burning of fracked gas must be fully accounted for, and if the goal is to achieve a healthier environment, then the increase in air and water pollution associ ated with the production, transmission, and burning of fracked gas must be accounted for and re medied. Commenters provided a link to a compendium of the scientific, medical, and media fi ndings that demonstrate the risk and harms of fracking.

Commenters stated that it is crucial that methane p ollution from natural gas production and transport be accounted for and reduced as part of a n overall strategy to reduce carbon emissions and combat climate change, and President Obama has committed to taking action on methane as part of his Climate Action Plan. Commenters stated that it is vital that EPA, along with its sister agency the Department of Interior's Bureau of Land Management, move forward with strong rulemaking to limit methane pollution from new and existing sources of natural gas and oil production on both public and private lands; otherw ise, emissions reductions from use of natural gas at power plants may not be realized.327

Commenters stated the proposed rule for existing po wer plants is only a first step in fulfilling our obligation to protect the health of our residents w hile meeting the challenge of climate change. Commenters urged the EPA to continue to tak e action in regulation of methane emissions as prescribed in the Climate Action Plan from March 2014 Strategy to Reduce Methane Emissions. Commenters stated that according to the IPCC, methane as a greenhouse gas is more than 80 times potent as carbon dioxide over a 20-year period. Commenters stated that wellheads, pipes, valves, pressures, and even abandoned wells are releasing increasing volumes of methane into our atmosphere. Commenters stated that about 30 percent of all methane emissions are derived from natural gas and petroleum systems. Commenters stated that best practices and appropriate regulation must be e nacted and enforced to reduce this greenhouse gas. Commenters stated the EPA must assume responsi bility for setting the standards to

minimize the risk.

Commenters provided comments pertaining to promotin g natural gas as a clean alternative to

coal in the Clean Power Plan. Commenters stated tha t by not including limits on methane emissions as well, the EPA is diluting its efforts to reduce global warming. Commenters noted methane is more potent greenhouse gas than carbon. Commenters stated that when total lifecycle methane emissions from fracked natural gas are incl uded, burning natural gas is equivalent to burning coal in terms of global warming. Commenters stated the EPA has underestimated methane emissions significantly. Commenters stated methane, like carbon, is a greenhouse gas. Commenters indicated it is a more potent green house gas than carbon, 100 percent more potent because of the way it works in the atmospher e over a 20-year period. Commenters stated fracking for natural gas results in releasing unbur ned methane at all stages of the fracking process. Commenters stated that experts tell them that if total methane emissions throughout the lifecycle of fracked natural gas reached three perc ent and has a fuel that is equal to burning coal in terms of global warming. Commenters indicated th e most conservative average for methane released during the lifecycle of fracking is 5 perc ent to 7 percent, well above the 3 percent. Commenters stated the EPA's own study entitled "Imp rovements Needed and EPA Efforts to

Address Methane Emissions from Natural Gas Distribu tion Pipelines," issued on July 25, 2014, cautions that methane emissions from pipelines have been grossly underestimated. Commenters noted a study entitled "Methane Leakage from North American Natural Gas Systems," published in the February 14, 2014, issue of the Journal of S cience synthesizes diverse findings for more than 200 studies ranging in scope from local gas pr ocessing plants to total emissions from the US and Canada. Commenters quoted the article, "People who go out and actually measure methane pretty consistently find more emissions than we exp ect," says the lead author, Adam Brandt. Commenters also quoted, "Atmospheric tests covering the entire country indicating emissions around 50 percent more than the EPA estimates," sai d Brandt, and that is a moderate

estimate. Commenters stated the EPA estimates are b ased on voluntary reporting of methane emissions from the natural gas industry.

Commenters stated that it is important that the EPA include the release of all greenhouse gas emissions, not just carbon dioxide in its regulatio ns. Commenters stated methane gas, released by high-volume horizontal hydro-fracking is 80 times m ore potent a greenhouse gas than carbon dioxide in the first 20 years of its release to the atmosphere. Commenters stated NASA scientists have found that methane may actually have as much a s 105 times more potency than CO2 in the same period. Commenters stated the EPA, however, ha s been using a much shorter 100-year328

time frame and, thereby, calculates the effect of m ethane as only 20 to 25 times more potent than carbon dioxide. Commenters stated due to the potenc y of methane, any leakage of the gas of more than two percent makes it a more dangerous gre enhouse gas than carbon dioxide. Commenters stated studies by NOAA of methane leakag e from high-volume horizontal drilling for gas in the western U.S. shows annual leakage of between 2.3 percent and 17 percent from drilling and venting along pipelines, compressor st ations, and storage facilities. Commenters indicated the fracking industry itself admits that some 5 to 7 percent of its high volume wells leak in the first year of their drilling, and that after 30 years, up to 35 percent of its wells leak methane. Commenters stated that a recent study from the magazine Science, finds that the EPA has seriously underestimated the release of methane from fracking. Commenters indicated that to define methane gas obtained from high-volum e, high-pressure hydro-fracked wells as clean energy is erroneous.

Commenters cited a study by Robert W. Howarth entit led "A Bridge to Nowhere: Methane Emissions and the Greenhouse Gas Footprint of Natur al Gas" published in Energy Science & Engineering in April 2014 (available at http://onlinelibrary.wiley.com/doi/10.1002/ese3.35/ pdf). Commenters stated that measurements by the NOAA and several other independent analyses indicate that at least 3 percent and potentially more than 7 percent of methane from nat ural gas is lost to the atmosphere prior to burning - far exceeding EPA estimates. Commenters s tated that based on the most recent IPCC 20-year GWP for methane, a leakage rate of 2.8 perc ent or higher actually causes natural gas to be more damaging than coal as a driver of climate c hange.

Commenters cited a study by Robert Howers, et al, f rom 2011 that concluded fugitive emissions and production losses of methane from natural gas f ractured rock production practices have a higher climate change impact than coal-fired combus tion. Commenters stated that the EPA has ignored this study and other studies that reached s imilar conclusions. Commenters stated that the problem with looking at the 100-year time period in stead of the 20-year time period was summed up in an article by Joe Ron aptly titled, By the Ti me Natural Gas has a Net Climate Benefit, You Will Likely Be Dead and the Climate Ruined.

Commenters stated that a full review of available d ata indicates that the level of emission reductions achievable by the proposed federal guide line may be negated by the greenhouse gas impacts of expanding natural gas production and ass ociated venting. Commenters stated that the

final rule should include accurate calculations of the expected increases in GHG emissions from the natural gas sector from implementing building b lock 2) corrected for the GWP of methane over a period of 10 years to ensure the switch from coal to natural gas will have the intended effect on climate change. Commenters also stated th at the leak rates assumed in the proposal for natural gas systems are incorrect based on atmosphe ric measurements taken by NOAA in 2012. Commenters stated that the measurements by NOAA ind icated leak rates ranged from 4 to 18 percent in various regions compared to the 2.5 perc ent leak rate used for proposal. Commenters also referenced a series of articles by two Cornell professors, Dr. Tony Agrafia and Dr. Robert Howorth that corroborated the leak rates published by NOAA.

Commenters stated that only EGUs that can show they burn natural gas that is supplied by production, transmission, and distribution systems with a leak rate of less than half a percent should be allowed to displace coal units under buil ding block 2. Commenters stated that the329

Environmental Defense Fund and the University of Te xas have shown that a leak rate of less than half a percent is achievable when natural gas systems are properly operated.

Commenters supported the use of building block 1 in the proposal and stated that greater reductions of carbon emissions at coal plants are a vailable if power plants simply match the lowest emission rate actually achieved by the plant over the past decade.

Commenters stated total lifecycle emissions from me thane gas-fired plants must be addressed. Commenters said, methane is a greenhouse gas even m ore potent than carbon. Commenters said, the rule does not address total lifecycle emissions from methane gas-fired plants, including leakage during production, processing and transmiss ion, emissions flarings at gas wells, and energy consumed in production and transport of liqu efied natural gas. Commenters said, researchers found methane leak rates of 100 to 1,00 0 times greater than the EPA estimates at well pads in Pennsylvania, and the EPA's office of the Inspector General just issued a report citing the Agency's failures to manage methane leak s from pipelines.

Commenters stated that while natural gas is seen as a bridge fuel by the Obama administration, in a State horribly wrecked by hydraulic fracturing , Pennsylvanians know it is not the answer. Commenters stated methane escapes from natural gas drilling have a significantly greater global warming in the short term than carbon dioxide, acco rding to NASA.

Commenters stated, if the goal is to reduce greenho use gas emissions, then the expected increase in emissions of methane associated with production, transmission, and burning of fracked gas must be fully accounted for.

Commenters called upon the EPA to properly calculat e the greenhouse effect of methane gas over a reasonable timeline, as well as to measure t he release of methane from the high-volume horizontal drilling technology. Commenters indicate d this will permit the establishment of CO2 equivalents for released methane and to accurately calculate the greenhouse gas effects of fracked methane. Commenters stated proper steps mus t then be taken to control methane release and, if necessary, actually to ban high-volume hydr o-fracking.

Commenters, graduate students, urged the EPA to imp ose an immediate moratorium on additional drilling for oil and natural gas in Colo rado because their colleagues at the university have empirical evidence that methane emissions are 60 percent higher than assumed for the proposal. Commenters believed the moratorium should stay in place until we have the science that proves beyond a doubt that it is safe.

Commenters stated a range of studies have shown hig h level of methane leaks from gas drilling and fracking operations, undermining the notion tha t natural gas is a climate solution or a transition fuel. Commenters noted that major studie s have concluded that early work by the EPA greatly underestimated the impacts of methane and n atural gas drilling on the climate.

Commenters stated that the EPA's estimate for metha ne contribution to climate change is too low. Commenters indicated the EPA has significantly underestimated emission rates of methane from active gas fields, and has underestimated the warming potential of methane. Commenters

noted the EPA must account for increases in the amo unt of methane emissions from gas-fired330

power plants which result from coal-fired power pla nts converting the gas or from new gaspowered plants. Commenters stated the EPA's estimat es for methane contribution to climate change still lag far behind scientific consensus, w hich deemphasizes the impact that the natural gas sector will have on climate change. Commenters stated a recent study published in the National Academy of Sciences found that emissio ns rates of methane from active gas fields were 1,000 times higher than EPA estimates. Comment ers stated the IPCC recently reported that methane is 86 times more potent at warming our plan et than carbon over a 20-year time period, while research by a NASA scientist shows that metha ne is 105 times more potent when including aerosol effects. Commenters noted the EPA's global warming potential of 25 is inadequate for studying regulations. Commenters indicated the lif ecycle emissions from the gas industry may already be worse for the climate than coal. Comment ers stated methane emissions will increase if plants switch to natural gas when methane emissions from active gas fields are considered.

Commenters stated the EPA should also set methane e mission reduction targets for oil and gas industry. Commenters stated that in addition, the E PA must move quickly on setting ambitious methane reduction targets or regulations for the oi l and gas industry.

Commenters stated that the EPA has to step up and d irectly regulate methane, both from oil and gas and coproducing wells, during gas production, d uring gas processing, and during transport on new and existing wells.

Commenters stated that the Clean Power Plan will no t solve climate change in isolation. Commenters indicated that as a nation, we will have to tackle methane leaks from oil and gas.

Commenters stated, if you know anything about frack ing, the government has given their state [PA] over as a sacrifice zone to the natural gas in dustry, and commenters hoped at some point [EPA] will also regulate methane, which is a much m ore powerful gas than CO2.

Commenters stated, one-hundred miles away they are developing an oil field at an amazing pace in the Bakken Region of North Dakota and Montana. C ommenters indicated there is natural gas that is a by-product and is simply being flared and wasted. Commenters stated we should salvage all the natural gas now being wasted. Commenters st ated methane emissions are a greenhouse gas that must be looked at in addition to carbon di oxide. Commenters indicated it is critical that the BLM's proposal to limit flaring and venting of methane and the EPA's methane pollution

standards move forward. Commenters noted that other wise, switching from coal to natural gas could make climate change worse, not better. Commen ters stated even with better controls on methane, though, promoting natural gas is not a goo d solution to climate change; energy efficiency and renewable energy are much better.

Commenters stated that EPA should account for carbo n dioxide equivalents, not just CO2 in order to encompass other greenhouse gases that are emitted from the extraction, storage, transport and generation components of fuel combust ion. Commenters cited, as an example, methane emissions that can be released during natur al gas extraction and transport.

Commenters urged the EPA to act quickly to release meaningful standards for methane, particularly extract[ion] of methane.331

Commenters stated that without including limits on methane emissions, the EPA will be leaving out a massively important source of greenhouse gas emissions. Commenters noted that other

witnesses have testified that methane has a severe impact on greenhouse gas versus carbon dioxide on the 20-year term. Commenters thought met hane leakage, especially at the point of extraction is a major concern.

Commenters stated the International Energy Agency t ells us that two-thirds of proven fossil fuel reserves must be kept in the ground to prevent pote ntial catastrophic consequences. Commenters noted this includes natural gas and oil. Commenters stated about one-third of the total U.S. methane emissions are responsible for greenhouse ga s emissions [sic]. Commenters added the new unconventional gas wells are also emitting toxi ns like benzene, and radon, that are then sent through compressor stations and pipelines. Commente rs stated that several studies have shown that overall, methane emissions are considerably hi gher than official inventories report.

Commenters stated that without sensible health base d regulations for the unconventional, natural gas industry, the economic and health benefits of t he proposed rule will be undone and create potentially equally daunting challenges for future Pennsylvanians. Commenters indicated the EPA and Pennsylvania DEP should (1) require best av ailable technology for capturing unintended methane emissions, green completions and close wastewater systems; (2) create systems and enforcement from monitoring of well bor e integrity; (3) weigh out health protective, well permitting guidelines; (4) enforcement authori ty and resources for state and local agencies to oversee this emerging industry; (5) transparency around reduced water components and disposal systems; and (6) a prospective epidemiolog ical investigation of potential health effects which are to date unknown and under investigated.

Commenters believed that replacing coal with natura l gas is not a valid solution to climate change and the only long-term solution is for the U .S. to rapidly develop renewable energy systems that will quickly free us from dependence o n all fossil fuels. Commenters believed this approach makes both environmental and economic sens e. Commenters believed the final rule should reflect the potential for using renewables. Commenters opposed regulating methane losses in a later federal regulatory action (separa te from the current 111(d) action) because the proposed 111(d) rule could lead states to ignore th e potential climate benefits of renewables and to make decisions about long-term investments in el ectricity generation based only on

combustion emissions. Commenters believed states ma y make poor choices in their 111(d) plans if they are not presented with all the facts about methane losses. Commenters noted that the proposal's Regulatory Impact Analysis (RIA) indicat ed the rule would boost the amount of additional electricity generation from natural gas by nearly ten times the gain projected for renewables before 2020. Commenters believed that by accelerating EGU investments in natural gas in the near-term, the plan could tip the scales toward fossil fuels for decades to come, and commenters believed that once gas-fired plants are in operation, there will be less incentive for utilities to reinvest in renewables because the cap ital outlay for gas infrastructure will have already occurred.

Commenters requested that the EPA protect us agains t harmful methane and fracking. Commenters stated natural gas is not the answer; cl ean, renewable energy is the answer.332

Response 5: Commenters contend that EPA did not fully consider the environmental consequences of increased unconventional natural ga s development that may result from increased demand for natural gas by EGUs in respons e to the CPP. Commenters cited the following as impacts relating to increased natural gas production: increased methane emissions, contamination of groundwater, increased water usage , decreased air quality, increased frequencies of earthquakes, increased natural gas i nfrastructure needs, and a variety of impacts

on local communities.

EPA assessed the likely impact of changes in genera tion mix and power plant demand for natural gas that may result from the CPP in an illustrative analysis in chapter 3 of the RIA for the final rule. Table 3-16 in Chapter 3 shows that there may be increases in demand for natural gas for electricity production nationwide in 2020, but by 2 025, demand for natural gas by electric utilities will decline or not change beyond what wo uld have occurred without CPP. By 2030, the demand for natural gas by EGUs is expected to decli ne. These estimates are based upon illustrative control strategies that may be pursued to implement the CPP and actual implementation may differ. These illustrative resul ts indicate that the environmental consequences commenters suggest stem from increased shale gas production due to the CPP are not likely to materialize in the 2025 and 2030 time frames. To the extent that natural gas production does increase due to implementation of t he CPP, EPA has enacted regulations to address air quality impacts. (http://www.epa.gov/ai rquality/oilandgas/index.html), and has existing statutory and regulatory authorities to ad dress potential water quality impacts.

Regarding impacts of increased methane emissions du e to a greater use of natural gas for electricity production, the EPA assessed the net ch ange in upstream methane emissions from natural gas and coal production and also assessed t he potential magnitude of changes relative to CO2 emissions reductions anticipated at power plant s. This analysis found that the net upstream methane emissions from natural gas systems and coal mines and CO2 emissions from flaring of methane will likely decrease under the proposed gui delines. Furthermore, the changes in upstream methane emissions are small relative to th e changes in direct emissions from power plants. The technical details supporting this analy sis can be found in the Appendix to Chapter 3

of the final RIA included in the docket for this ru lemaking. For further information on potential changes in upstream methane emissions and methane e missions from natural gas systems, please also see response to comment 18 in section 8.2.

The CPP is designed to address carbon emissions ass ociated with electricity production. Regulatory actions undertaken under the Clean Air A ct as well as voluntary programs may

address emissions from other sectors such as the oi l and gas industry. As discussed in the President’s Climate Action Plan Strategy to Reduce Methane Emissions 33 , EPA is assessing

33 https://www.whitehouse.gov/sites/default/files/str ategy_to_reduce_methane_emissions_2014- 03-28_final.pdf333

methane emissions from the oil and gas industry and considering regulatory action. Potential

actions taken to address methane emissions for the oil and gas industry will build upon successful regulatory actions and voluntary program s already taken by the EPA.

Comment 6: Commenters noted that there are non-energy benefit s of energy efficiency technologies.

Referencing an analysis prepared for the OECD/IEA [ Lisa Ryan and Nina Campbell, Spreading the Net: The Multiple Benefits of Energy Efficienc y Improvements (International Energy Agency, Insight Series 2012), p. 25], commenters li sted the following benefits:

• provider benefit and infrastructure

• energy prices

• public budgets

• energy security

• macro-economic effects

• health

• affordability

• access

• development

• job creation

• asset values

• disposable income

• productivity

Response 6: The EPA agrees with the commenters’ contention that there are non-energy benefits of demand-side energy efficiency technologies. A nu mber of these benefits are discussed in the Demand Side Energy Efficiency TSD for the CPP Final Rule and in Chapter 3 of the Regulatory Impact Analysis for the final rule. Please see the se documents for more information.

Comment 7: Commenters noted that there are other impacts rela ted to this rule that should be considered by EPA.334

Commenters noted that the elimination of coal plant s will impact the pension and health care

benefits of retired coal miners and their families.

Commenters asked that EPA consider the social and c ultural impacts of this rule.

Commenters stated that EPA's reliability analysis " fails to account for supply assets and relies on overly optimistic assumptions about demand reductio ns associated with the rules of energy efficiency that will comply."

Commenters noted that "energy intensive industries, at minimum, would need carbon allowances and border adjustments to prevent greenhouse gas le akage "as a result of companies moving offshore to avoid this rule's higher energy costs.

Commenters noted that the impacts analysis does not account for the increased demand for electricity and "this proposal does not accommodate load growth in any manner."

Commenters noted that the human impacts of increase d electricity costs must be considered.

Commenters noted that the rule does not address "th e environmental impacts of the whole fuel cycle on the externalities such as air and water qu alities, the severe environmental impacts of mountaintop removal mining and other fossil-fuel ex traction methods, and the health and economic impacts on communities overall."

Commenters asked that EPA examine "other consequenc es besides just what comes out of a smokestack." Commenters elaborated by adding, "For coal you have a lot of damage from the mining, especially in Appalachia" and "With nuclear power there's a lot of nuclear waste disposition problems that have not been resolved."

Commenters noted that there are "thousands of death s and health impacts each year associated with mountaintop removal" and "communities choking on a toxic grip of filthy extraction industries, including coal, fracked gas, nuclear of fshore drilling and industrial biomass." Commenters asked that EPA "not promote fracking and the other dirty energy sources" and stop mountaintop removal through "a bill in the federal legislation, the Appalachian Community Health Emergency Act, HR526."

Commenters stated, "the expense of dismantling a re tired plant is substantial, and such costs may be passed on to government and, ultimately, tax- an d rate-payers."

Commenters noted that greenhouse gas emissions leak age has not been factored into the RIA. Commenters stated, "The CPP will result in leakage, as some productive activity flees to foreign shores (where intensities are in many cases higher) , diminishing or eliminating global carbon abatement." According to commenters, "By failing to take into account this leakage, the RIA thus overestimates the greenhouse gas emission redu ction benefit from the CPP."

Commenters stated that "policies that substantially increase the cost of energy-thereby decreasing the competitiveness of U.S. industries-i nvestments and emissions will be sent to other, less efficient countries with higher CO2 emi ssions intensities." Therefore, commenters noted that "overly restrictive and costly U.S. poli cies to reduce emissions will not only be offset335

by the rapidly increasing emissions from other coun tries, but could actually result in a net increase in global emissions."

Commenters noted that "there is a real cost in live s when the cost of energy rises" and that "EPA has used the calculation of one pre-mature death fo r every $10M in lost disposable income." Commenters asked that EPA "provide a full analysis of the costs of its proposal, especially as it

relates to seniors."

Commenters asked that EPA work with FERC to include the following issues in the impacts analysis: (1) the supply and demand of natural gas; (2) natural gas prices; (3) current gas transmission pipelines; (4) the need and timing for construction within a state of new gas pipelines; and (5) the impacts on energy and capaci ty prices"

Commenters asked that "EPA conduct an ongoing analy sis of the potential adverse effects of its proposed greenhouse gas standards on impacted commu nities [low-income communities of color] and determine the distributive costs and ben efits to impacted communities" and that "States should be required to do the same analysis. "

Commenters asked that EPA consider the public healt h and welfare impacts of higher electricity

rates as a result of this rule.

Commenters noted that "The Clean Power Plan's inclu sion of nuclear power, 'waste-to-energy', carbon capture and sequestration, biomass incinerat ion and other dirty fuels fails to acknowledge adverse environmental and public health impacts." C ommenters noted that "These technologies poison our land, water and public health and must n ot be considered clean energy."

Commenters stated, "The Clean Power Plan's promotio n of natural gas as an alternative to coal

would continue our reliance on fossil fuels for man y decades and incentivize more investment in dirty energy infrastructure. Commenters noted that "According to EPA's own database, burning municipal waste is the most carbon intensive form o f energy generation, producing over twice the amount of CO2 per unit of energy than coal plan ts." Commenters noted that "Incentivizing any form of combustion energy, whether it be coal, gas, trash, or biomass, raises serious concerns about increased public health impacts, esp ecially for communities that are already overburdened by such industrial pollution."

Commenters stated that there are about 1.3 billion people in the world without electricity. The commenters said that a greater contribution to huma n health will be achieved through electrification using coal, which is abundant and l ow cost, instead of using expensive regulations to limit carbon and stifle economies and developmen t.

Commenters stated that EPA should be able to protec t public health and safety and that emissions from Navajo Generating Station and five o ther coal-fired power plants in the region is harming tribal health. Commenters stated that a ho st of respiratory illness plagued those living on Black Mesa with bronchitis and black lung diseas e and asthma.

Commenters stated that for this rule to be effectiv e EPA should look at all stages and impacts of coal and fossil fuel and gas, natural nuclear power plant. Commenters stated that they are336

downwind from Navajo Generating Station and Four Co rners Power Plant and the only feedback from the Department of Interior as the trust respon sible party is that they hold trust responsibility for 10 tribes in Southern Arizona, which is supplie d with Central Arizona Project water. Commenters stated that Center Arizona Project water is from the Navajo Sandstone Aquifer only, supplying for mining activities on Black Mes a, which has depleted aquifers and springs. Commenters stated that of the energy that is produc ed at Navajo Generating Station, EPA identified, only 320 megawatts is needed to push th e water from Lake Havasu to Tucson. Commenters stated that however there's 2,250 megawa tts being produced, so the rest of it is all for profit and that this is just a profit issue, no t a health issue. Commenters stated EPA has violated the way of worship, freedom of religion.

Commenters stated that EPA failed to show that its proposed "system" is the "best system," because EPA did not properly account for non-air qu ality health and environmental impacts, and other factors in defining its "system." Commenters said that EPA gives nothing more than lip service to this statutory mandate and does not even identify non-air quality health and environmental impacts as an important criterion in its decision-making. Commenters listed the statements presented by the Administrator in regard s to those considerations, and stated that EPA cannot turn its head to known impacts from its "sys tem" and pretend they do not exist. Commenters said the statute requires EPA to conside r "any" non-air quality health and environmental impact, and EPA has not discussed kno wn impacts.

Commenters stated that EPA noted that NGCC combusti on does not produce solid waste and uses less cooling tower water than coal combustion. Commenters argued that natural gas extraction creates solid waste, contributes to ozon e formation, and carries risks of potential groundwater contamination, and that land disturbanc e and noise pollution are other known impacts. Commenters said that EPA have recognized t hese impacts in its comments on the Oregon LNG Export Project and Washington Expansion Project, but that EPA does nothing here to consider these impacts. Commenters added that EP A merely makes a conclusory statement that hazardous waste generated by nuclear electric production is better than the solid waste generated from coal electric production without any evidentiary support. Commenters said that these unsupported and conclusory statements are not entitled to any deference, and highlight the arbitrary and capricious nature of EPA's proposal.

Commenters stated that while EPA tries to hide thes e deficits by touting benefits from reducing other criteria pollutant emissions, which do not qu alify as a proper assessment of non-air quality health and environmental impacts, it is unclear whe ther EPA's assessment considers upstream criteria pollution emissions increases from the nat ural gas sector and renewable energy sources in its system. Commenters said that it appears EPA did not consider that drilling rigs can produce substantial NOx emissions (13-15 tons NOx/well) and that its "system" may promote more rapid drilling of thousands of exploratory and production wells. Commenters pointed out that drilling is also required to install offshore windmills. Com menters also said that EPA did not consider the fugitive emissions impacts from increased road traffic associated with natural gas development and that in some areas of the country, fugitive emissions from natural gas development represents a significant component of t he PM10 emissions inventory.

Commenters also stated that it appears EPA did not consider water impacts and hazardous waste production from increased Solar PV cells production , which according to the commenters can337

used between 500-800 gallons per MW/hr, same as coa l-fired or nuclear power plant. Commenters added that many of the regions that have the highest potential for solar energy also tend to be those with the driest climates, so produ ction in these areas will stress water resources, or alternatively require production in alternative locations that increase the cost and impact of transporting the cells onsite. Commenters also said that reducing availability of coal ash can negatively affect the GHG emissions footprint of ot her industries, such as concrete and gypsum

wallboard.

Response 7: Commenters raise a variety of secondary impacts ass ociated with the Clean Power Plan that they assert are not fully considered by E PA including: impacts on electricity reliability; failure to consider electricity demand growth in mo deling; secondary market impacts for energy intensive industries and potential leakage; and hea lth and environmental impacts associated with mountain-top mining, natural gas fracking, producti on and installation of solar PV and wind energy, and with nuclear energy. EPA disagrees with commenters statements that these secondary impacts were not considered in developing the Clean Power Plan.

EPA disagrees with the comment that EPA’s reliabili ty analysis "fails to account for supply assets and relies on overly optimistic assumptions about demand reductions associated with the rules of energy efficiency that will comply." Proj ected changes in the demand for electricity expected in future years of analysis (2020, 2025, a nd 2030) were considered when modeling the illustrative compliance scenarios in the Regulatory Impact Analysis (RIA). See the RIA for more details concerning the modeling conducted for the C PP. Electricity demand and supply assets were directly considered in the reliability and res ource analysis completed for the CPP. See the Reliability and Resource Technical Support Document for more details concerning this analysis. The analyses conducted by EPA show that the emissio n guidelines will result in cleaner generation from the existing power plant fleet and will support continued investments by the industry in cleaner power generation to ensure reli able, affordable electricity now and into the

future.

The EPA recognizes that electric generating units a re predominately domestically located and movement of generating units outside the U.S. due t o the CPP is unlikely. Thus, direct CO 2 emission leakage in the electricity sector is not l ikely. EPA addresses energy impacts for secondary markets including energy intensive manufa cturing in chapter 5 of the RIA. The implementation approaches designed by the states, a nd the compliance strategies adopted by affected electric generating units (EGUs), will ult imately drive the magnitude and timing of secondary impacts from changes in the price of elec tricity, and the demand for inputs by the electricity sector, on other markets that use and p roduce these inputs. The flexibility afforded to states in their state plans allows them to encourag e compliance methods which include design elements that may mitigate or promote particular im pacts based on their priorities. For example, states in the Regional Greenhouse Gas Initiative us e the revenues from allowance auctions to support direct bill assistance for retail consumers , fund investments in clean energy and electricity demand reduction for business consumers , and support employment in the development of clean and renewable energy technolog ies. In its recent regulations to limit greenhouse gas emissions, California’s Air Resource s Board designated a portion of allowances to be allocated to electric distribution companies for the purpose of mitigating electricity rate increases and their associated impacts. Other state s may encourage compliance methods by338

affected EGUs with particularly robust deployment o f renewables, energy efficiency, or natural gas to promote manufacturing demand or employment i n those sectors. For example, energy efficiency investments may be targeted towards redu cing both electricity consumption and natural gas or heating oil consumption, such as wea therization projects. The state plan approach and the composition of these programs will influenc e the effects of compliance with the final rulemaking.

In Chapter 5 of the RIA, the EPA recognizes that ch anges in the price of electricity, natural gas, and coal can impact markets for goods and services produced by sectors that use these energy inputs in the production process. The direction and magnitude of these impacts is influenced by a number of factors discussed in the RIA. Changes in cost of production may lead to changes in price, quantity produced, and profitability of firm s within secondary markets. If regulation results in changes in domestic markets that lead to an increase in imports, increases in production in countries with more energy-intensive production may lead to changes in CO 2 emissions elsewhere. See chapters 3 and 5 of the RIA for a di scussion of potential energy price changes for the illustrative CPP control scenarios. As previous ly stated, the flexibility afforded to states in developing their state plans allows them to encoura ge compliance approaches which include design elements that may mitigate or promote partic ular impacts based on their priorities.

With regard to the comment suggesting that EPA coll aborate with the Federal Energy Regulatory Commission concerning natural gas markets, EPA cons ulted extensively with FERC and the United States Department of Energy (DOE). The final rule reflects changes in the CPP that are the product of compelling information and analysis provided to the EPA via the comment record – and by the work of, and consultation with, other federal agencies, notably the FERC and the DOE. Earlier this year, FERC conducted a series of technical conferences comprising one national session and three regional sessions. The i nformation provided by workshop participants

echoed much of the material that had been submitted to the comment record for this rulemaking. On May 15, 2015, the FERC Commissioners, drawing up on information highlighted at the technical conferences, transmitted to the EPA some suggestions for the final rule. In addition, via comments, states, utilities, and reliability entiti es asked us to ensure adequate time for states, utilities, and grid operators to implement strategi es to achieve CO 2 reductions and the final emission guidelines reflect relaxing compliance tim elines.

Finally, several commenters take issue with the con sideration of nuclear power, 'waste-toenergy', carbon capture and sequestration, biomass incineration, coal generation relying on mountain top mining, and other dirty fuels in the C lean Power Plan, because the commenters contend these forms of electric energy generation p ose health risks. See the response to comment 2 in this Response to Comments Section 8.10 for a d iscussion of changes made in the CPP final relating to nuclear energy. Specifically, nuclear e nergy is excluded from the Best System of

Emission Reduction determination in the final rule. With respect to coal electricity generation, the EPA illustrative analysis indicates that coal g eneration will decline in the future as a result of the CPP. See the Regulatory Impact Analysis Chapte r 3 for additional information relating to expected mix of electricity generation under the CP P. Regarding health and environmental impacts associated with natural gas exploration, pr oduction of solar energy and installation of wind energy, the EPA as well as state and local gov ernments have existing environmental programs to address these impacts on federal, state and local levels, respectively. For example339

ozone is addressed in the National Ambient Air Qual ity Standards. See Appendix A of Chapter 3 of the RIA for an analysis of the potential changes that may occur in methane emissions due to possible changes in electricity generation fuel mix for the illustrative scenario analyzed in the RIA and the response to comment 18 in section 8.2 o f this response to comment document. In addition, states may choose to tailor their complia nce programs to consider potential environmental impacts such as increased localized d emand for water. The CPP allows for flexibilities that guarantee a continued reliance o n a diverse energy mix in the generation of electricity, and also allows for a long implementat ion period in order to ease the impacts associated with transitioning to a lower carbon ene rgy mix.

Comment 8: Commenters stated Building Block 2 must be adjusted to allow for preservation of 10% to 12% of coal-fired steam generation in each s tate because such generation could otherwise be completely displaced by re-dispatch to NGCC unit s and is necessary for ensuring reliable and affordable electricity.

Response 8: The goal setting methodology (preamble sections VI and VII) for the final rule is calculated at the regional interconnect-level, cons istent with BSER (section V), and incorporates various elements that ultimately do not see a full realization of all of the building blocks combined, and the effect that would have on higher emitting steam generation using the adjusted 2012 baseline. For example, the least stringent in terconnect sets the performance rates for each technology category (and thus state goals) for each year, such that the full level of BSER is not incorporated in the performance rates and states go als. This approach in the final rule is responsive to many comments, including those that p ointed out the ability for some states higher emitting steam generation to be entirely phased out in the calculation of state goals for the proposed rule. In addition, states have ample flex ibility to design and implement appropriate plans (preamble section VIII) in accordance with pa rticular state climate and energy policy objectives.