### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. **I. General Information** A. S ummary 1. Executive Summary In this rulemaking, the EPA proposes to limit GHG emissions from new fossil fuel - fired power plants by limiting CO 2 emissions. In today’s action, the EPA is proposing to combine electric utility steam generating units (boilers and IGCC units, which are currently included in the Da category) and combined cycle units that generate electricity for sale and meet certain si ze criteria (which are currently included in the KKKK category), into a new category for new sources (the TTTT category) for the purposes of GHG emissions . The EPA is proposing standards of performance that require that all new fossil fuel - fired EGUs meet an electricity
- output -based emission rate of 1,000 lb CO 2 /MWh of electricity generated on a gross basis. This proposed standard is based on the demonstrated performance of natural gas combined cycle (NGCC) units, which are currently in wide use throughout the country , and are likely to be the predominant fossil fuel - fired technology for new generation in the future . New c oal - , coal refuse - , oil
- and petroleum coke - fired boilers and IGCC units should also be able to meet this standard by employing CCS technology. There are currently a number of

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. coal - and pet coke - fired EGU projects under development that include CCS. While a coal unit with CCS may be more expensive to construct than NGCC generation, for reasons explained below, we expect the difference to de crease over time as CCS becomes more mature and less expensive. We include in today’s proposed rulemaking a 30
- year averaging compliance option under which affected coal - and pet coke - fired sources could comply with the 1,000 lb CO 2 /MWh standard on a 30
- year average basis. Coal
- and pet coke - fired EGUs that use this compliance alternative must meet an immediate performance standard of 1,800 lb CO 2 /MWh (gross) on a 12
-month annual average basis, which can be achieved by a “supercritical” efficiency level, during the period before installation of CCS. By no later than the beginning of the 11 th year, the facility would be required to meet a reduced CO 2 emission limit of no more than 600 lb CO 2 /MWh (gross) on a 12
-month annual average basis for the remaining 20 years of the 30
- year period, such that the weighted average CO 2 emissions rate from the facility over the 30
- year time period would be equivalent to the proposed standard of performance of 1,000 lb CO 2 /MWh. Today’s proposal to require an emission rate of 1,000 lb CO 2 /MWh meets the requirements for a “standard of performance,” as defined under CAA section 111(a)(1). This proposed standard

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. is based on the degree of emission limitation achievable through natural gas combined cycle generation . NGCC qualifies as the “best system of emission reduction” (BSER) that the EPA has determined has been adequately demonstrated because NGCC emits the least amount of CO 2 and does so at the least cost. New natural gas - fired EGUs are less costly than new coal - fired EGUs, and as a result, our Integrated Planning Model ( IPM ) model projects that for economic reasons, natural gas
- fired EGUs will be the facilities of choice until at least 2020, which is the analysis period for this rulemaking . Indeed, our IPM model do es not project construction of any new coal - fired EGUs during that period. This state of affairs has come about primarily because technological development s and discoveries of abundant natural gas reserves have caused natural gas prices to decline precipitously in recent years and have secured those relatively low prices for the near
- future. We empha size that , in light of a number of economic factors, including the increased availability and significantly lower price of natural gas, energy industry modeling forecasts uniformly predict that few , if any, new coal - fired power plants will be built in the foreseeable future. For these economic
reasons , and independent of this proposed standard , the fossil fuel - fired electricity generating industry has been trending

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. towards increased use of natural gas and decreased use of coal for new generating capacity . We recognize that some owners/operators may nevertheless seek to construct new coal - fired capacity. Th is may be beneficial from the standpoint of promoting energy diversity, and today’s proposal does not interfere with construction of new coal - fired capacity . At present, while CCS would add considerably to the cost s of a new coal - fired power plant, there
a re sources of funding available to support the deployment of CCS, including a limited number of government demonstration programs. 1 Even if companies decide to construct a few new coal fired power plants under any circumstance, those few may well have acce ss to those government programs. We expect that the costs of CCS will decline in the future as CCS matures and is utilized more widely. The proposed 30
- year averaging compliance option adds additional flexibility for new coal - and pet coke - fired power plants by allowing them to construct and begin operations without CCS , and then to install and operate CCS at some time in the future, as long as they install CCS within ten years and

1 A number of the sources that EPA has identified as transitional sources have received some form of DOE financial assistance to demonstrate CCS. In addition, several additional projects have received funding but have not yet received air permits. Beyond these projects, prospects for additional federal funding are dependent on the overall budget proccess .

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. operate it in a manner that allows them to meet the 1,000 lb CO 2 /MWh standard , on a weighted average basis, over the 30
- year The EPA is aware that approximately 1 5 proposed EGUs have received CAA permitting authority approval for their preconstruction permits, but may not have “commenced construction” by the date of today’s proposed rulemaking. For this proposed rule, these sources that, as of the date of this propo sal, have a PSD permit and are poised to commence construction within the very near future are referred to as “transitional sources.” In today’s proposed rulemaking, the EPA is not proposing a standard of performance for transitional sources, which we defi ne as sources that have been issued a PSD permit by the date of proposal (including sources that have approved permits that are in the process of being amended, if those sources are intending to install CCS as evidenced by participating in any of the DOE CCS funding programs, either loan guarantee or grant programs) and that commence construction within 12 months of the date of publication of this proposal in the Federal Register . Upon finalization of this rulemaking without a standard of performance applic able to these sources, they will not be treated as new sources subject to the specific limitations set forth in the final new source standards.

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. Our IPM modeling, using Energy Information Administration (EIA) reference case assumptions, projects that there will be no construction of new coal
- fired generation without CCS by 2030 . Under these assumptions, the proposed rule will no impose costs by 2030 . We also examined a scenario with both increased future natural gas prices and increased future el ectric demand. In this sensitivity case we saw small amounts of coal - fired generation being built in 2030. Even under this sensitivity analysis with small amounts of new coal generation under conditions of high natural gas prices and simultaneously high electricity demand in 2030 , we do not project that this proposed rule will impose notable costs upon sources. B. Overview and Outline 1. Overview In this rulemaking, the EPA proposes to limit GHG emissions from new fossil fuel - fired power plants by limiting CO 2 emissions. In 2009, the EPA issued a finding that GHG air pollution may reasonably be anticipated to endanger Americans’ public health and welfare, now and in the future, by contributing to climate change. Fossil fuel - fired power plants emit more GHG emissions than any other stationary source category in the United States, and among new GHG emissions sources, the largest individual sources are in this source

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. category. This rulemaking proposes federal standards of performance for new fossil fuel
- fired power plants that can be met with existing technology. Note that in this preamble, while we refer to these sources, interchangeably, as power plants, steam generating units, affected sources, fossil fuel - fired electric generating units, covered EGUs, or, simply, EGUs, the proposed standards apply to only those sources identified in Section III.A. as the affected source category. 2. Why is the EPA proposing this rule? This proposed rule reflects the EPA’s common - sense approach to reducing CO 2 and other GHG emissions, which by causing climate change, pose a serious threat to public health and welfare. The EPA is focusing first on reducing emissions from the largest emitters through measures with reasonable costs. The EPA is proposing to control CO 2 pollution from fossil fuel - fired power plants because they are responsible for approximately 40 percent of all U.S. anthropogenic CO 2 emissions. 2 Individual new coal fired power plants are among the largest individual new sources of GHGs. Furthermore, design and technology choices exist that can be readily and cost
- effectively used to reduce GHG emissions

2 Or 32.4% of all anthropogenic GHG emissions; f rom information in Table 2
- 1 from ‘Inventory of U. S. Greenhouse Gas Emissions and Sinks: 1990

– 2009’, U. S. Environmental Protection Agency, EPA 430
- R- 11
- 005, April 2011.

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. from new fossil fuel - fired power plants . Thus, this proposed rule is a rational first step to control GHG emissions from the largest - emitting stationary sources under CAA section 111.
a. The Serious Threat of Climate Change to the Public’s Health and Welfare. Climate change, including global warming, is a significant threat to the global environment. The National Research Council (NRC) of the National Academies 3 stated in a 2011 report, “Each additional ton of greenhouse gases emitted commits us to further change and greater risks. In the judgment of the [NRC] Committee on America's Climate Choices, the environmental, economic, and humanitarian risks of climate change indicate a pressing need for substantial action to limit the magnitude of climate change and to prepare to adapt to its impacts.” 4 Action to reduce emissions is warranted because, as the EPA stated in its 2009 Endangerment Finding 5 , GHGs endanger the public health and public welfare of current and future

3 The National Academies comprise the National Academy of Sciences, National Academy of Engineering, Institute of Medicine and National Research Council. 4 National Research Counci l (2011) America’s Climate Choices , Committee on America’s Climate Choices, Board on Atmospheric Sciences and Climate, Division on Earth and Life Studies, The National Academies Press, Washington, DC. 5 EPA, “ Endangerment and Cause or Contribute Findings for Greenhouse Gases under Section 202(a) of the Clean Air Act” (74 FR 66,496; Dec. 15, 2009) . http://epa.gov/climatechange/endangerment.html .

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. generations. The anthropogenic buildup of GHGs in the atmosphere is very likely (90 to 99 percent probability) the cause of most of the observed global warming over the last 50 years. 6 Based on the Endangerment Finding and its underlying technical support document ( TSD ) 7 , reasons to reduce GHG emissions include the following:

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

 These effects are anticipated to result in premature deaths, illnesses, damage to property and infras tructure, and other harm to people’s welfare in the U.S.

6 Endangerment Finding at 74 FR 66,518, which notes that the 2007 conclusion of the Intergovernmental Panel on Climate Change was re - confirmed by the June 2009 assessment by the U.S. Global Change Research Program . 7 EPA, “Technical Support Document for Endangerment and Cause or Contribute Findings for Greenhouse Gases under Section 202(a) of the Clean Air Act, Dec. 9, 2009.” Both the Federal Register Notice and the TSD for Endangerment and Cause or Contribute Findings are found in the public docket established for the endangerment rulemaking, Docket No. EPA

–OAR

– 2009

– 0171 and at http://epa.gov/climatechange/endangerment.html.

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review.

 Those “most vulnerable” to climate related health effects, such as children, the elderly and the poor

– and future generations
-- face disproportionate risks. 8

 Human - induced climate change impacts have the potential to be far - reaching and multidimensional, though not all risks and potential impacts can be quantified. 9

 A supporting consideration is that climate change impacts in certain regions of the world (potentially leading , for example , to food s carcity, conflicts or mass migration) may exacerbate problems that raise humanitarian, trade and national security issues for the United States. 10 The TSD further notes that some risks, such as the extinction of many species, would be irreversible. 11 Also, the TSD points to research on the potential for “abrupt changes” 12 which have uncertain or low probability but high potential impact. The NRC has said abrupt changes are an important consideration because, if triggered, they could occur so quickly

8 Endangerment Finding, 74 FR 66498. 9 Endangerment Finding, 74 66497. 10 Endangerment Finding, 74 FR 66535. 11 Endangerment TSD, p. 136 12 Endangerment TSD, p. 75 - 78. The U.S. Climate Change Science Program defined “abrupt change” as a “large - scale change in the climate system that takes place over a few decades or less, persists (or is anticipated to persist) for at least a few decades, and causes substantial disruptions in human and natural systems.” Synthesis and Assessment Product (SAP) 3.4: Abrupt Climate Change (2008).

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review.

and unexpectedly that human or natural systems would have difficulty adapting to them. 13 Examples include severe drought in subtropical areas, release of large amounts of GHGs stored in the sea floor and frozen Arctic soils, and rapid disintegration of Greenl and ice sheet or collapse of the West Antarctic ice sheet leading to many feet of sea level rise. 14 The special characteristics of GHGs make it important to take initial steps to control the largest emissions categories without delay. Unlike most traditi onal air pollutants, GHGs persist in the atmosphere for time periods ranging from decades to millennia, depending on the greenhouse gas. Greenhouse gases will continue to accumulate in the atmosphere at higher and higher concentrations each year unless sub stantial reductions in global greenhouse gas emissions are achieved. The NRC notes that emissions reduction choices made today matter in determining the level of impacts experienced not just over the next few decades, but in the coming centuries and millennia. 15 Also, the longer that the U.S. and other countries take to reduce emissions, the

13 Endangerment TSD, p. 75, citing National Research Council (2002) 14 Endangerment TSD , pp. 76
- 78 15 National Research Council (NRC) (2011). Climate Stabilization Targets. Committee on Stabilization Targets for Atmospheric Greenhouse Gas Concentrations; Board on Atmospheric Sciences and Climate, Division of Earth and Life Sciences, National Academy Press . Washington, DC.

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. greater the future emissions reductions that will be required to limit global temperature increase to any given level. This proposed rule to limit GHG emissions from the largest U.S. stationary source category will contribute to the emissions reductions required to slow or reverse the accumulation of GHG concentrations in the atmosphere, which is necessary to protect against projected climate change impacts and risks. Re ducing GHG emissions reduces the impacts and risks articulated in the Endangerment Finding and TSD. b. The High Level of GHG Emissions from Fossil
- Fuel - Fired Power Plants and the Opportunities to Reduce these Emissions . Fossil fuel - fired power plants compr ise the largest category of stationary source GHG emissions in the U.S. These sources account for approximately 40 percent of total U.S. anthropogenic CO 2 emissions, based on 2009 data. 16 Among all stationary sources of GHG emissions, fossil
- fuel - fired power plants generally constitute the largest individual sources. Furthermore, a range of options are available to reduce emissions of new power plants . For economic reasons, most new power plants being built in the U.S. today are either natural gas - fired or are powered by renewable sources of energy, such as
16 Or 32.4% of all anthropogenic GHG emissions; f rom information in Table 2
- 1 from ‘Inventory of U. S. Greenhouse Gas Emissions and Sinks: 1990

– 2009’, U. S. Environmental Protection Agency, EPA 430
- R- 11
- 005, April 2011.

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. wind and solar , and therefore generally produce significantly fewer CO 2 emissions than uncontrolled coal - fired power plants. Natural gas combustion inherently emits less CO 2 than coal combustion and the technology of choice for generating electricity with natural gas, stationary combined cycle gas turbines , is also more efficient . Almost all the stationary combined cycle gas turbines built in the U . S . in the last five years can meet the proposed standard of 1,000 lb CO 2 /MWh . New
c oal - fired power plants can install CCS technology and can thereby limit their CO 2 emissions per MWh generated to levels similar to, or even lower than, those of natural gas
- fired combined cycle plants without CCS. New c oal - fired power plants with CCS are being permitted and built today, albeit usually with considerable financial assistance from the fede ral government. c. Alignment with Industry’s Other CAA Obligations. Establishing the overall regulatory requirements for GHG emissions from new fossil fuel - fired power plants at this time is efficient because the EPA has recently issued regulations to limi t criteria and hazardous air pollutants from these sources. Aligning the timing of these GHG rules with the rules for criteria and air toxics pollutants gives the industry more regulatory certainty, will facilitate the industry’s investment decisions, and will help

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. inform its compliance decisions to meet all of its CAA obligations. d. Promotion of Energy Diversity. This proposed rule is consistent with the P resident’s goal to ensure that “by 2035 we will generate 80% of our electricity from a diverse set of clean energy sources - including renewable energy sources like wind, solar, biomass and hydropower, nuclear power, efficient natural gas and clean coal.” 17 The proposed rule will assist the deployment of CCS technology for new coal - fired power plants and
reinforce incentive s for the use of efficient natural gas
- fired generation. Regulatory uncertainty may be hindering the development and deployment of CCS, as evidenced by American Electric Power (AEP)’s recent deferral of a large
- scale CCS retrofit demonstration project on one of its coal
- fired power plants because the S tate’s utility regulators would not approve CCS without a regulatory requirement to reduce CO 2 . 18 The

17 “Blueprint for a Secure Energy Future”, March 30, 2011 . 18 In a July 17, 2011, press release, AEP’s chairman said, “We are placing the project on hold until economic and policy conditions create a viable path forward ... We are clearly in a classic ‘which comes first?’ situation. The commercialization of this technology is vital if owners of coal
- fueled generation are to comply with potential future climate regulations without prematurely retiring efficient, cost
- effective generating capacity. But as a regulated utility, it is impossible to gain regulatory approval to recover our share of the costs for validating and deploying the technology without federal requirements to reduce greenhouse gas emissions already in

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. standard established in this proposal would help create the regulatory certainty that CCS is the path forward for new coal
fired generation. 3. Legal Proceedings Leading up to this Rulemaking In April 2007, the U.S. Supreme Court ruled, in Massachusetts v. EPA , 19 that GHGs meet the definition of “air pollutant” in the CAA. This decision clarified that the authorities and requirements of the CAA, including section 111, apply to GHG emissions. As a result of this decision, the EPA obtained a voluntary remand from the U.S. Court of Appeals for the District of Columbia Circuit (the “Court”) to reconsider the EPA’s actions in a 2006 rulemaking for EGUs under CAA section 111, in which the EPA had promulgated standards for c riteria air pollutants, but had declined to regu late GHG emissions. In part in response to threatened litigation over the EPA’s failure to act on the remand, the EPA agreed to propose today’s action to regulate GHG emissions from new fossil fuel
- fired EGUs. 4. Legal Basis for CAA Standards for Fossil
- F ired Power Plants a. General Legal Requirements. Clean Air Act section 111 establishes a several step process for the EPA and the S tates to place. The uncertainty also makes it difficult to attract pa rtners to help fund the industry’s share.” 19 549 U.S. 497 (2007).

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. regulate air pollutants from stationary sources. First, the EPA must list categories of stationary sources that cau se or contribute significantly to air pollution that may reasonably be anticipated to endanger public health or welfare. Then, the EPA must regulate emissions from new sources in the source category by issuing a standard of performance, which is defined as “a standard for emissions of air pollutants which reflects the degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account ... cost [and other factors]) ... has been adequately demon strated.” New sources include new construction, and, as discussed below, modifications to existing sources as well as reconstructed sources. Standards of performance for new sources are often referred to as new source performance standards (NSPS). b. Cause - or - Contribute
- Significantly Finding for Fossil Fuel
Fired Power Plants and Endangerment Finding for GHG Air Pollution. The EPA is authorized to regulate GHGs from power plants based on earlier actions concerning endangerment. Before today’s rulemaking, the EPA listed different types of fossil fuel - fired EGUs as source categories that caused or contributed significantly to air pollution that may reasonably be anticipated to endanger public health or welfare. Specifically,

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. the EPA listed electric utility ste am generating boilers, including coal
- fired boilers, and initially regulated them in subpart D of its regulations under CAA section 111. Subsequent regulation of utility boilers has been under subpart Da. The EPA listed stationary combustion turbine engine s and initially regulated them under subpart GG. The stationary combustion turbine engine portions of combined cycle facilities were also regulated under subpart GG. Heat recovery steam generators (HRSG) associated with combined cycle facilities with duct burners were regulated under either subpart Da or one of the industrial boiler regulations, depending on the specific characteristics of the HRSG . To minimize the compliance burden for owners/operators o f combined cycle facilities some monitoring harmonization was done, but the two subparts were still applicable. In 2005, the EPA proposed subpart KKKK as a replacement for subpart GG and specifically covered the entire combined cycle facility under subpart KKKK such that only a single set o f requirements would apply. In that same year, the EPA proposed to include Integrated Gasification Combined Cycle (IGCC) facilities under the applicability of subpart Da. The EPA is authorized to promulgate the rulemaking proposed today -- which would establish standards of performance for CO 2 emissions from EGUs currently in the Da and KKKK source categories
--

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. because the EPA has already determined that both those source categories cause or contribute significantly to ai r pollution that may reasonably be expected to endanger public health or welfare. Clean Air Act section 111 does not require the EPA, as a prerequisite to regulating any particular air pollutant, to issue an endangerment finding or a cause
- or - contribute
si gnificantly finding for that air pollutant from that source category. As an alternative, the EPA is considering whether CAA section 111 should be interpreted to require that the EPA base its regulation of CO 2 emissions from EGUs on two findings: (i) a finding that GHG air pollution may reasonably be anticipated to endanger public health or welfare; and (ii) a finding that CO 2 emissions from EGUs cause or contribute significantly to that air pollution. If section 111 were so interpreted, the EPA believes that (a) the 2009 Endangerment Finding, along with the EPA’s 2010 action denying petitions to reconsider that finding (which action reviewed scientific developments after the Endangerment Finding) would fulfill any requirement to make the endangerment finding concerning GHG air pollution; and (b) the large amount of CO 2 emissions from EGUs clearly exceeds the low applicability threshold upon which the EPA would make the cause
or - contribute
- significantly finding.

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. As another alternative, the EPA is also conside ring whether CAA section 111 should be interpreted to require that the EPA base its regulation of CO 2 emissions from EGUs on a rational basis for protection of the public health or welfare. If section 111 were so interpreted, the EPA believes that (i) its 2009 Endangerment Finding and 2010 denial of petitions to reconsider, by themselves, and particularly in conjunction with the National Academy of Sciences’ assessment reports issued since then, coupled with (ii) the fact that EGUs are the largest stationar y source emitters of CO 2 , provide a rational basis for regulating CO 2 emissions from EGUs. There is no reason to revisit the 2009 Endangerment Finding given recent scientific findings that strengthen the scientific conclusion that GHG air pollution endange rs public health and welfare. 20 5. Summary of Today’s Proposed Requirements to Reduce GHG Emissions from New Fossil Fired Power Plants, and Rationale for Those Requirements a. Summary of Proposed Revisions to Categories and Requirements for New Sources

20 These recent scientific findings are described in section II of this notice, titled “Background.” See subsection II.B.3., “Climate Impacts Detailed in Recent NRC Assessments.” The legal options introduced here are presented in detail below in section IV.A .2, “Endangerment and Cause
- or - Contribute
- Significantly Finding.”

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. i. Revisions to Categories of EGUs. In today’s action, the EPA is proposing to combine electric utility steam generating units (boilers and IGCC units, which are currently included in the Da category) and combined cycle units that generate electricity for
sa le and meet certain size criteria (which are currently included in the KKKK category), into a new category for new sources (the TTTT category) for the purposes of GHG emissions . Today’s proposed rulemaking would not affect c riteria air pollutants , simple c ycle turbines or EGUs located in non
continental areas . 21 It also would not affect biomass
- fired boilers (including those that sell electricity to the grid) that
co - fire with less than 250 MMBtu/h of any fossil fuel (biomass boilers currently subject to subpart Db, the Industrial
Commercial
- Institutional Steam Generating Unit NSPS). ii. Control Requirements for New Sources. The EPA is proposing standards of performance that require that all new fossil fuel fired EGUs meet an electricity
- output -based emission rate of 1,000 lb CO 2 /MWh of electricity generated on a gross basis. This proposed standard is based on the demonstrated performance of natural gas combined cycle (NGCC) units, which are currently in wide use throughout the country , and are likely to be the

21 Thus, today’s rulemaking does not affect the Da and KKKK categories for conventional pollutants and does not affect the KKKK category for simple cycle turbines.

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. predominant fossil fuel - fired technology for new generation in the future . New c oal - , coal refuse - , oil
- and petroleum coke - fired boilers and IGCC units should also be able to meet this standard by employing CCS technology. There are currently a number of coal - and pet coke - fired EGU projects under development that include CCS. While a coal unit with CCS may be more expensive to construct than NGCC generation, for reasons explained below, we expect the difference to decrease over time as CCS bec omes more mature and less expensive. We include in today’s proposed rulemaking a 30
- year averaging compliance option under which affected coal - and pet coke - fired sources could comply with the 1,000 lb CO 2 /MWh standard on a 30
- year average basis. Coal
- and pet coke - fired EGUs that use this compliance alternative must meet an immediate performance standard of 1,800 lb CO 2 /MWh (gross) on a 12
-month annual average basis, which can be achieved by a “supercritical” efficiency level, during the period before ins tallation of CCS. By no later than the beginning of the 11 th year, the facility would be required to meet a reduced CO 2 emission limit of no more than 600 lb CO 2 /MWh (gross) on a 12
-month annual average basis for the remaining 20 years of the 30
- year perio d, such that the weighted average CO 2 emissions rate from the facility over the

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. 30
- year time period would be equivalent to the proposed standard of performance of 1,000 lb CO 2 /MWh. We seek comment on this compliance option and on reasonable variations on the framework we propose to establish, and in particular on a mechanism for establishing practicably enforceable short term limits during the 30
- year period . The potential approaches here include (1) requiring the owner/operator to identify and obtain approval of, at the time of construction, an alternative 30
- year emission trajectory to the 10
- and 20
- year limits described immediately above; and (2) specifying the emission rate for each year during the 30
- year period consistent with meeting a 30
- year average emission rate of 1,000 lb CO 2 /MWh . Such an option would provide coal
- fired sources that intend to use a reduction technology , such as CCS , significant flexibility in how that reduct ion technology is implemented. They could install the technology as part of the original project but use some or all of the initial ten year period to optimize the system. Such flexibility could be particularly useful to early adopters (i.e., “first movers”) of the technology . Alternatively, they could delay installation of the technology for a period of up to ten years to take advantage of advancements in the technology that could reduce cost s and enhance performance . Under CAA section 111(b)(1)(B), the EPA is

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. required to conduct a review of the new source standards in eight years and we intend at that time to review the availability and cost of CCS . As proposed, this 30
- year averaging compliance option is only available to new coal
- and pet coke - fired EGUs. We do not believe that it is necessary for NGCC units, as they should be able to meet the proposed performance with no need for add
- on technology. We also solicit comment on the need to extend the applicability for the 30
- year averaging compliance option to other fossil fuels beyond just coal and pet coke. b. Rationale. Today’s proposal to combine the relevant parts of the Da and KKKK categories is authorized under CAA section 111(b)(1)(A) because that provision authorizes the EPA, after drawing up the list of affected source categories, to “revise” that list from time to time. Combining the relevant parts of the categories, as the EPA proposes to do, is one method to “revise” the list. Moreover, the EPA’s action to combine the relevant parts of the categories is reasonable because with the combination, all new fossil fuel - fired electricity generating units that meet specified minimum criteria will be subject to the same requirements, and therefore will be treated alike because they serve the same function, that is production of baseload or intermediate load power . The EPA is not including

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. stationary simple cycle turbines in this rule because they generally operate differently than the other units covered by today’s rule. The units covered by today’s rule are generally used for baseload or intermediate power generation, while simple cycle turbines are generally used much less often (and thus have lower GHG emissions) and are generally used to meet peak rather than base or intermediate load requirements. Today's proposal does not apply to new sources in non
conti nental areas, which include Hawaii and the territories. This is because non
- continental areas do not have available pipeline quality natural gas and, accordingly, a natural
- gas fired plant that could comply with the 1,000 lb CO 2 /MWh may not be feasible. At present, we do not have information to identify what types of new power plants may be constructed in those
areas. Those types of power plants may range from liquified natural gas (LNG) - , to oil
- , to coal - fired to renewables. Our la ck of more specific information precludes us from proposing , at this time , a standard for new sources in non
- continental
areas. Today’s proposal to require an emission rate of 1,000 lb CO 2 /MWh meets the requirements for a “standard of performance,” as def ined under CAA section 111(a)(1). This proposed standard is based on the degree of emission limitation achievable through

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. natural gas combined cycle generation . NGCC qualifies as the “best system of emission reduction” (BSER) that the EPA has determined ha s been adequately demonstrated because NGCC emits the least amount of CO 2 and does so at the least cost. We propose that a NGCC facility is the best system of emission reduction for two main reasons. First, natural gas is far less polluting than coal. Combustion of natural gas emits only about 50 percent of the CO 2 emissions that the combustion of coal does per unit of energy generated. Second, new natural gas - fired EGUs are less costly than new coal - fired EGUs, and as a result, our Integrated Planning Mode l ( IPM ) model projects that for economic reasons, natural gas - fired EGUs will be the facilities of choice until at least 2020, which is the analysis period for this rulemaking . Indeed, our IPM model do es not project construction of any new coal - fired EGUs during that period. This state of affairs has come about primarily because technological development s and discoveries of abundant natural gas reserves have caused natural gas prices to decline precipitously in recent years and have secured those relatively low prices for the near
- future. Importantly, because the IPM modeling shows that natural gas
fired plants are the facilities of choice, the proposed standard of performance in today’s rulemaking

–– which is based on the emission rate of a new NGCC unit

–– does not add costs. In

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. addition, compared to coal
- fired EGUs, natural gas
- fired EGUs have fewer nonair quality health and environmental impacts. The just
- described reasons are sufficient as a legal matter to justify today’s proposed actions to combine source categories and establish the 1,000 lb CO 2 /MWh standard. Such a standard could also be met today by new coal - fired units using CCS. In addition, we propose to include the compliance alternative of allowing new coal - and pet coke - fired power plants to meet the 1,000 lb CO 2 /MWh standard over a 30
- year period so that plant developers can take advantage of future advancements cost savings in CCS technology that could lower its cost. This compliance alternative allows owners/operators to install CCS when the unit is first constructed but also provides the operational flexibility that may be necessary to optimize the performance and to have additional time to address any startup challenges related to issues such as business arrangements related to the sale or storage of the captured CO 2 . We recognize that , in light of a number of economic factors, including the increased availability and significantly lower price of natural gas, energy industry modeling forecasts uniformly predict that few , if any, new coal - fired power plants will be built in the foreseeable future. For these economic
reasons , and independent of this proposed standard , the fossil

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. fuel - fired electricity generating industry has been trending towards increased use of natural gas and decreased use of coal for new generating capacity . Today’s proposed action is consistent with that trend ; but, at the same time, today’s proposal is not intended to affect that apparent trend . We recognize that some owners/operators may neverthel ess seek to construct new coal - fired capacity. This may be beneficial from the standpoint of promoting energy diversity, and today’s proposal does not interfere with construction of new coal - fired capacity . In the first instance, a new coal
- fired power plant may be able to meet the 1,000 lb CO 2 /MWh standard by installing CCS at the time of construction. At present, while CCS would add considerably to the cost s of a new coal - fired power plant, there are sources of funding available to support the deployment of CCS, including a limited number of government demonstration programs. 22 Even if companies decide to construct a few new coal - fired power plants under any circumstance, those few may well have access to those government programs. The proposed 30
- year averaging compliance option adds additional flexibility for new coal - and pet coke - fired power

22 A number of the sources that EPA has identified as transitional sources have received some form of DOE financial assistance to demonstrate CCS. In addition, several additional projects have received funding but have not yet received air permits. Beyond these projects, prospect s for additional federal funding are dependent on the overall budget proccess .

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. plants by allowing them to construct and begin operations without CCS , and then to install and operate CCS at some time in the future, as long as they install CCS wi thin ten years and operate it in a manner that allows them to meet the 1,000 lb CO 2 /MWh standard , on a weighted average basis, over the 30
- year period. We expect that the costs of CCS will decline in the future as CCS matures and is utilized more widely. Today’s action, if finalized, would promote utilization and further development of CCS by making it clear that CCS would be necessary for new coal fired power plants to meet the performance standard . The prospect of declining CCS c osts, in conjunction with the possibility of continued availability of additional funding mechanisms (e.g. demonstration funding such as Department of Energy ( DOE ) grants, tax credits (for investment and/or EOR), State incentives such as clean energy standards), and sale of other usable products such as CO 2 , sulfur and hydrogen based products, indicates that CCS may well be sufficiently accessible in the near term to the few coal - fired power plants that are expected to commence construct ion . Thus, the 30
- ye ar averaging compliance option , along with the current opportunities for funding to implement CCS immediately, helps to alleviate any

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. concerns that today’s action could restrict new coal
- fired construction. It should be noted that we are not required to ju stify the 30
- year averaging compliance option on grounds that it qualifies as the “best system of emission reduction” adequately demonstrated, and we are not stating in this action whether that compliance alternative does or does not qualify as such. Thus, it is not necessary to determine that our expectation that costs will go down meets the standards for determining that CCS is “adequately demonstrated.” Rather, to reiterate, the 30
- year averaging compliance option , along with the opportunit y to implement CCS to meet the 1,000 lb CO 2 /MWh standard immediately upon startup , make CCS an available option for the limited number of new coal - fired power plants that may construct to serve the policy goals of promoting energy diversity , as well as other policy objectives . 23 Indeed, by clarifying that , in the future, new coal - fired power plants will need to implement CCS, this rulemaking eliminates uncertainty about the status of new coal and may well enhance the prospects for new coal - fired generation. In addition, there may also be other potential compliance options available that were not considered in this proposal. In
23 EIA analysis (AEO 2012 early release) shows that “coal remains the dominant energy source for electricity generation.”

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. the analysis for today’s proposal, the EPA did not include unique treatment of CO 2 emissions from biologically
-based material, otherwise called biogenic CO 2 emissions. 24 In 2011, the EPA prepared and submitted the draft Accounting Framework for Biogenic CO 2 Emissions from Stationary Sources ( http://www.epa.gov/climatechange/emissions/biogenic_emissions/s tudy.html ). The draft Framework includes both a detailed examination of the scientific and technical issues related to accounting for biogenic CO 2 emissions from stationary sources, and a proposed method to account for a stationary source’s onsite CO 2 emissions, taking the biological cycling of carbon into consideration, in a scientifically and technically rigorous
manner. The independent Science Advisory Board (SAB) has convened a Biogenic Carbon Emissions Panel ( http://yosemite.epa.gov/sab/sabproduct.nsf/0/2F9B572C712AC52E85 25783100704886?OpenDocument ) to conduct a peer review of the

24 Biologically
-based material is defined as non
- fossilized and biodegradable organic material originating from modern or contemporaneously grown plants, animals or micro
- organisms (including products, by
-products, residues and waste from agriculture, fores try and related industries as well as the non
fossilized and biodegradable organic fractions of industrial and municipal wastes, including gases and liquids recovered from the decomposition of non
- fossilized and biodegradable organic material).

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. draft Framework. The peer review report will be finalized later in 2012. The SAB’s peer review of the EPA’s discussion on the science related to the impacts of biogenic CO 2 is not yet finalized and the EPA looks forward to the SAB’s conclusions later in 2012 . Given that the SAB’s peer review is ongoing, EPA is not suggest ing specific methods of accounting or otherwise making particular proposals for treatment of biogenic CO 2 emissions in any stationary source program, including NSPS. As more information, including the SAB peer review, becomes available, EPA will consider its options and move forward as warranted. c. Requirements and Rationale for Modifications. For purposes of today’s action, the EPA does not have a sufficient base of information to develop a p roposal for the anticipated relatively few affected sources that may be expected to take actions that would constitute “modifications” (as defined under the EPA’s NSPS regulations) and therefore be subject to requirements for new sources. As a result, the EPA is not proposing requirements for NSPS modifications. 25

25 Note that any analysis of the cost and feasibility of CCS that EPA has undertaken for purposes of this proposal has focused solely on new sources. In today's action, EPA has not undertaken any analysis of the cost or feasibility of CCS for existing units that undergo modifications.

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. The EPA’s current regulations define an NSPS “modification” as a physical or operational change that increases the source’s maximum achievable hourly rate of emissions, but specifically exempt from that definition pollution control projects, which are projects that entail the installation of pollution control equipment or systems. The significant majority of projects that we believe EGUs are most likely to undertake in the foreseeable future that c ould increase the maximum achievable hourly rate of CO 2 emissions would constitute pollution control projects. In many cases, those projects would involve the installation of add- on control equipment required to meet CAA requirements for
c riteria and air t oxics air pollutants. These increases in CO 2 emissions would generally be small and would occur as a chemical byproduct of the operation of the control equipment. In other cases, those projects would involve equipment changes to improve efficiency to meet the requirements of a future 111( d ) rulemaki ng for existing sources and would have the effect of increasing a source’s maximum achievable hourly emission rate ( lb CO 2 /hr), even while decreasing its actual output based emission rate ( lb CO 2 /MWh). Because all of these actions would be treated as pollution control projects under the EPA’s current NSPS regulations, they would be specifically exempted from the definition of modification.

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. In the past, there have been a small number of instances in which power plants have undertaken actions that, in the EPA ’s view, should be treated as modifications. The sources that took these actions vary widely one from another, and the types of actions were disparate. In light of this, we do not have adequate information as to the types of actions that qualify as modifications, the amount of increase in CO 2 emissions they cause, the types of control measures, or the costs and effectiveness of control measures, on which to base a proposed standard of performance. Therefore, in today’s action, we are not proposing a standard of performance for modifications. As a result, sources that undertake modifications will be treated as existing sources and thus not subject to the requirements proposed in this notice, although they would be subject to requirements that the EPA intends to propose separately for existing EGUs. In today’s action, we solicit comment on the types of modifications power plants may undertake and the appropriate control measures. Depending on the information we develop, we may issue proposed standards of perfo rmance in the future. d. Requirements for Transitional sources. The EPA is aware that approximately 1 5 proposed EGUs have received CAA permitting authority approval for their preconstruction permits, but may

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. not have “commenced construction” by the date of today’s proposed rulemaking. A few of these sources have taken additional action preparatory to commencing construction. For this proposed rule, these sources that, as of the date of this proposal, have a PSD permit and are poised to commence constru ction within the very near future are referred to as “transitional sources.” We are aware that approximately six of these sources have plans to implement CCS to some degree. CAA section 111 provides by its terms that sources that have not “commenced cons truction” before the date of proposed standards for new sources will be subject to the NSPS when they do commence construction. The EPA’s regulations define “commenced construction” as, in general, undertaking a continuous program of construction or enteri ng into a binding contract to do so. 40 CFR 60.2. Commenters 26 have pointed out that absent different treatment, transitional sources will be subject to the same requirements that apply to new sources that did not obtain their

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

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. permit before the date of proposal . These commenters have suggested that today’s proposed rule should treat transitional
sources differently, e specially in light of the substantial redesign that meeting such the proposed standard would have and the impact that redesign would have on the schedule for a project that was nearly ready to commence construction. The transitional sources at issue are coal
- fired EGUs that, absent special treatment, would be subject to the standard of performance proposed in this rulemaking. In today’s propos ed rulemaking, the EPA is not proposing a standard of performance for transitional sources, which we define as sources that have been issued a PSD permit by the date of proposal (including sources that have approved permits that are in the process of being amended, if those sources are intending to install CCS as evidenced by participating in any of the DOE CCS funding programs, either loan guarantee or grant programs) and that commence construction within 12 months of the date of publication of this propos al in the Federal Register . Upon finalization of this rulemaking without a standard of performance applicable to these sources, they will not be treated as new sources subject to the specific limitations set forth in the final new source standards. These s ources would remain obligated, by the terms of their permits, to construct

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. and operate in accordance with their permits. In addition, these sources will be treated as existing sources and would be subject to any requirements that a S tate promulgates to meet its obligations under section 111(d). Sources that do not commence construction within 12 months of the date of this proposed action will be subject to this standard of performance for new
sources. e. Requirements for Reconstructe d S ources, and Rationale. The EPA’s CAA section 111 regulations provide that reconstructed sources are to be treated as new sources and, therefore, subject to new source standards of performance. The regulations define reconstructed sources as, in general, existing sources (i) that replace components to such an extent that the capital costs of the new components exceed 50 percent of the capital costs of an entirely new facility, and (ii) for which compliance with standards of performance for new sources is technologically and economically feasible. 40 CFR 60.15. Historically, we believe that very few power plants have undertaken reconstructions. The EPA is not aware that any power plants are presently planning any project that could meet the requirements fo r a reconstruction. In light of this limited experience concerning reconstructions, we lack adequate information about the type of source; the type of changes; the

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. extent of emissions increases; and the type of control measures, including their cost and emissions reductions,that we need to propose a standard of performance for reconstructions. As a result, in today’s action, the EPA is not including a proposal for reconstruct ed units . Instead, we solicit comment on how we should approach reconstructions and, depending on the information we receive, we may propose and finalize a standard for reconstructions at a later time . 6. Summary of Emissions Impacts, Costs and Benefits Our IPM modeling, using Energy Information Administration (EIA) reference cas e assumptions, projects that there will be no construction of new coal
- fired generation without CCS. In addition we examined a case with higher future electric demand and another case with higher future natural gas prices. We did not see any additional new construction of coal - fired generation through 2030 in either of these cases. Under the relevant assumptions, we do not project that this rule will impose notable costs. We also examined a scenario with both increased future natural gas prices and increa sed future electric demand. In this sensitivity case we saw small amounts of coal - fired generation being built in 2030. Even under this sensitivity analysis with small amounts of new coal generation under conditions of high

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review. natural gas prices and simultaneously high electricity demand in 2030 , we do not project that this proposed rule will impose notable costs upon sources. (See the RIA for further discussion of sensitivities). While this proposed rule also will not have direct impact on U.S. emissions of greenhouse gases under expected economic conditions , it provides assurance that emission rates from new fossil fuel
- fired generation will not exceed the level of the standard and will send a strong signal both domestically and internationally. Domesticall y, this proposed rule can further stimulate investment in CCS and other clean coal technologies , by making it clear that such technologies do provide a clear path forward for new coal - fired generating capacity . Internationally, this rule may encourage others to consider less GHG- intensive forms of power generation.