Technical Support Document for the EGU GHG NSPS Proposed Rule

Docket ID No. EPA

- HQ

- OAR

- 2013

- 0495

Fossil Fuel

- Fired Boiler and IGCC EGU Projects Under Development: Status and Approach

U.S. Environmental Protection Agency

Office of Air and Radiation
September 20131

I. Summary
II. Background Related to the April 2012 Proposal

a. April 2012 proposal regarding “transitional sources” b. Comments received on the April 2012 proposal
III. Status of Fossil Fuel

- Fired Boiler and IGCC EGU Projects Under Development

a. Overview b. Individual project discussions
IV. Proposed Approach

a. Description of approach b. Legal framework

c. Reasons for not applying the 1,100 lb CO 2 /MWh standard
d. Reasons for not proposing an alternate CO 2 standard at this time

I. Summary
In April 2012, pursuant to section 111(b) of the Clean Air Act (CAA), EPA proposed new source performance standards (NSPS) for greenhouse gas emissions (GHGs) from certain electric generating units (EGUs), a proposal that is being rescinded coincident with issuance of the current proposal. In the April 2012 proposal, we proposed that “transitional sources,” defined gen erally in that proposal as solid fossil fuel

- fired EGU projects that possessed complete Prevention of Significant Deterioration ( PSD ) preconstruction permits as of April 13, 2012 and that commenced construction for NSPS purposes by April 1 3 , 2013, would be treated as existing sources not subject to the then

- proposed carbon dioxide ( CO 2 ) standard of performance for new sources

. Our principal reason for proposing this approach was a

concern that for solid fossil fuel

- fired EGU projects with significant sunk costs and on the verge of commencing construction, the then

- proposed CO 2 standard might not be representative of the “best system of emission reduction ... adequately demonstrated” ( BSER )

. We identified as “potential
transitio nal sources” 15 solid fossil fuel

- fired projects that we believed had been issued complete PSD permits by the appropriate permitting authority but had not yet commenced construction for NSPS

purposes.
At this time, EPA believe s there is most likely only one proposed fossil fuel

- fired boiler or integrated gasification combined cycle ( IGCC ) EGU project

– and at most three such projects

– that may be capable of commencing construction in the very near future and that as currently d esigned could not meet the proposed standard of 1,100 pounds of CO 2 per gross megawatt

- hour ( lb CO 2 /MWh ) : the proposed Wolverine project in Rogers City, Michigan. The current proposal does not apply to the Wolverine project because w e have not formulated a view as to whether the project is on the verge of construction and whether , if the project is on the verge of construction, th e 1,100 lb CO 2 /MWh standard or some other CO 2 standard of performance would be representative of BSER for th e project . Instead

, we are inviting comment on these questions , and at the time of finalization of th e current proposal , if the Wolverine project remains under development and has not either commenced construction or been canceled, we anticipate proposing that the project either be made subject to the 1,100 lb CO 2 /MWh standard or be assigned to a subcategory with an altern ate CO 2 standard.

There are two other fossil fuel

- fired boiler EGU projects without carbon capture and storage ( CCS ) technology

– the Washington County project in Georgia and the Holcomb project in Kansas

– that appear to remain under development but whose developers have represented that the projects have already commenced construction for NSPS purposes. Based solely on the devel opers’ representations, the projects would be considered existing sources and thus not subject to th e current proposal. However, neither developer has sought an EPA determination of NSPS applicability, and if , upon review,2

it was determined that the proje cts have not “commenced construction,” then the projects should be situated similarly to the Wolverine project. Accordingly, if i t is determined in the future that either of these projects has not commenced construction as of the date of publication of the current proposal

, then that project will be addressed in the same manner as the Wolverine project.

The next section of this document provides additional background on the April 2012 proposal and the comments received in response to that proposal . The remain ing sections then address in greater detail , first, EPA’s understanding of the status of potentially relevant fossil fuel

- fired boiler and IGCC EGU projects curr ently or recently under development

, and second, the regulatory approach described above.

II. Background Related to the April 2012 Proposal

a. April 2012 proposal regarding “transitional sources”
In the April 2012 EGU GHG NSPS proposal, EPA noted the possibility tha t for some planned solid fossil fuel

- fire d EGU projects, which we termed “transitional sources, ” the then

- proposed CO 2 standard might not be representative of BSER. We described transitional sources conceptually as projects that had significant sunk costs and that were on the verge of commencing construction. Our concern was that for such a project , imposition of a CO 2 standard would be a fundamental change in regulatory requirements that could result in the loss of the project’s sunk costs and cause multi

- year delays or abandonment of its imminent plans to construct. We stated that such consequences would be outside the scope of BSER.

EPA also explained in the April 2012 proposal that we lacked sufficient information on the deta ils of proposed EGUs’ actual costs and planned construction schedules to determine whether in fact there were any projects that should be considered transitional sources. Among other uncertainties , we noted the difficulty of determining in advance whether a project was truly on the verge of construction.
W e therefore defined two proxy criteria for determining whether a particular project should be considered a transitional source. The first criterion was that the project had to possess a complete PSD preconstruction permit as of Federal Register publication of the proposal (i.e., by April 13, 2012). 1 The second criterion was that the project had to commence construction within one year of Federal Register publication of the proposal (i.e., by April 13, 2013). We then identified as “potential transitional sources” 15 specific proposed solid fossil fuel

- fir ed projects that appeared to have complete PSD permits and might therefore ult imately qualify as transitional sources for purposes of that proposal if they were to commence construction by April 13, 2013. We requested comment from the developers of th o se projects confirming the status of the projects’ PSD permits, and we also reque sted comment on whether any other proposed projects existed that we should have identified as potential transitional

sources. (As discussed below, only two additional developers submitted comments arguing for

treatment of their projects as potential transitional sources.)

EPA did not propose any CO 2 standard of performance for projects meeting the two proxy criteria, but instead indicated that such projects would be treated as existing sources for purposes of th at GHG NSPS. We noted that in addition to lacking information on which specific projects should be considered transitional sources, we also lacked information needed to determine appropriate alternate
CO 2 standards for such sources. We further explained that there would be limited utility in u ndertaking the process of obtaining the information necessary to propose alternate standards given our

1 In a variation on the PSD permit criterion, a project with CCS funding support from the Department of Energy and an expired PSD permit could qualify if it was seeking a PSD permit extension as of Federal Register publication of the proposal.3

expectation that within one year (which we considered a reasonable estimate of the time needed to develop and propose alternate standards), each of the p otential transitional sources either would have commenced construction, thereby becoming an existing source, or by failing to commence construction within the required one

- year period would have been disqualified from treatment as a transitional

source. I f a project did not commence construction by April 13, 2013, but commenced construction after that date, it would have been considered a new source subject to the GHG NSPS in the same manner as any other non

- transitional new source.

b

. Comments received o n the April 2012 proposal
Comments on the April 2012 proposal’s “ transitional source ” provisions expressed a wide range of supporting and opposing views. Through a final action being published coincident with the current proposal , EPA is rescind ing the April 2012 proposal , rendering moot the perspectives expressed on

, among other issues, the legality of the transitional source approach under th at proposal. 2 Nevertheless, consideration of comments re garding various details of the April 2012 proposal has informed our approach in the current proposal. For example, we generally agree with comments pointing out that the relevant costs for purposes of determining BSER are future costs, not sunk costs , a s well as comments taking the position that proposed project s already designed to be capable of physically meeting the proposed CO 2 standard of performance through the use of CCS should be subject to the standard.

A further potentially relevant issue raised in comments on the April 2012 proposal concerns the interaction between the April 13, 2013 construction commencement deadline for transitional sources under the 2012 proposal and the timing of EPA’s process for reconsideration of certain provisions of the Mercury and Air Toxics Standards for power plant s (MATS). 3 The MATS rule established standards of performance for emissions of hazardous air pollutants (HAP) from new solid fossil

- fueled EGUs (among other sources)

. Shortly after publication of the April 2012 GHG NSPS proposal, EPA received several pet itions seeking administrative reconsideration of the MATS rule in part to address claims that the stringency of certain HAP emissions standards for new units exceeded levels at which monitoring equipment vendors would offer performance guarantees. 4 In subsequent comments on the April 2012 GHG NSPS proposal, some EGU developers claimed that construction delays due to the MATS

- related

2 Many of th e comments submitted on individual solid fossil fuel

- fired projects are likewise moot because the status of most of the projects has changed since the comments were submitted. For example, several projects appear not to be subject to the current proposal either because they claim to have commenced construction for NSPS purposes (and therefore would be existing sources if those claims are correct ) or because they have been canceled, and several projects have been redesigned to use natural gas instead of sol id fuel. EPA’s understanding of the current status of the individual projects is discussed in section III below.

3 “ National Emission Standards for Hazardous Air Pollutants From Coal

- and Oil

- Fired Electric Utility Steam Generating Units and Standards of Performance for Fossil

- Fuel

- Fired Electric Utility, Industrial

Commercial

- Institutional, and Small Industrial

- Commercial

- Institutional Steam Generating Units, ” 77 FR 9304 (Feb. 16, 2012).

4 See, e.g., Institute of Clean Air Companies, Request for Partial Reconsideration of EPA’s National Emission Standards for Hazardous Air Pollutants from Coal

- and Oil

- Fired Electric Utility Steam Generating Units (Apr. 16, 2012), EPA

- HQ

- OAR

- 2009

- 0234

- 20176. Similar claims were pursued in proceedings seeking judicial rev iew of MATS. See, e.g., Joint Motion by Developers of New Solid

- Fueled Electric Generating Units, White Stallion Energy Center, LLC v. EPA , No. 12

- 1100 (D.C. Cir. filed Apr. 27, 2012).4

equipment vendor guarantee issue and uncertainty as to the ultimate MATS emissions standard s could prevent potential tr ansitional sources from commencing construction by April 13, 2013 and could thereby make it impossible to qualify as a transitional source under the GHG NSPS proposal. 5

In July 2012, EPA announced that some of the HAP emissions standards for new units wo uld be reconsidered and we indicated our intent to complete that reconsideration process before April 2013. Reconsidered standards were proposed in November 2012 and were signed by the Administrator in March 2013. 6 While uncertainty regarding the stringe ncy of the reconsidered MATS standards was therefore resolved prior to the April 13, 2013 construction commencement deadline for transitional sources under the April 2012 GHG NSPS proposal, we acknowledge that the existence of that uncertainty for most of the year leading to the deadline could have increased developers’ difficulty in completing arrangements necessary to commence construction of their proposed projects. As discussed above, our purpose in setting that one

- year period for commencement of cons truction was to determine which proposed projects were truly on the verge of construction and therefore merited treatment as transitional sources. To the extent that our own actions related to the MATS rule may have hampered developers’ efforts to commenc e construction during the one

- year period designated in the April 2012 proposal, our purpose in establishing that one

- year period was frustrated.

III. Status of Fossil Fuel

- Fired Boiler and IGCC EGU Projects Under Development

a. Overview
In the April 2012 proposal, EPA identified 15 proposed solid fossil fuel

- fired projects as “potential transitional sources.” These were projects that appeared to us, based on then

- current information, to be EGUs with complete PSD permits that might be capable of commencing construction in the very near future

. We invited comment from developers of these “potential transitional sources” regarding the status of the projects’ PSD permits, and developers of ten of the projects commented. We also invited comment from other developers who believed that their projects should or might qualify for treatment as transitional sources, and we received comments of that nature regarding two additional projects. This section addresses the current status of each of the se 17 proj ects. 7

EPA’s current understanding of the projects’ development status is summarized in Table 1

. As shown in the table, several of the projects claim already to have commenced construction for NSPS

purposes , which would (if those claims are correct) make th os e projects , if completed, existing sources not subject to the proposed standard. 8 Several other projects have been converted to or replaced by natural gas combined cycle ( NGCC ) projects; we consider these projects as currently designed , if completed, capable of meeting the proposed CO 2 standard applicable to NGCC units. Several other projects have been canceled or lack effective PSD permits; we do not consider these projects capable of

5 See, e.g., Comments of Deseret Generation & Transmission Co

- operativ e et al. , (June 25, 2012), EPA

HQ

- OAR

- 2011

- 0660

- 10021.

6 The reconsidered standards were published in the Federal Register in April 2013. 78 FR 24073 (Apr. 24, 2013).

7 EPA is unaware of any other proposed fossil fuel

- fired boiler or IGCC EGU project rele vant to this discussion: i.e., a new source for NSPS purposes, at a stage of development comparable to the projects discussed here, that would be incapable as currently designed of achieving the proposed 1,100 lb
CO 2 /MWh standard.

8 One of these projects , Texas Clean Energy, as currently designed would also be capable of meeting the proposed 1,100 lb CO 2 /MWh standard.5

commencing construction in the very near future (assuming, contrar y to present indications, that the developer s decide to resume active development efforts ). One of the projects is not subject to the proposed standard because it is not an EGU.

Table 1: Apparent Development Status of “ Potential Transitional Sources ” Id entified in April 2012
GHG NSPS Proposal and Related Comments *
Project ( S tate) Type CCS Apparent Development Status

1. Wolverine (MI) CFB No Remains under development; does not claim to have commenced construction

2. Washington C ounty (GA) SCPC No Claims to have commenced construction
3. Holcomb (KS) SCPC No Claims to have commenced construction

4. Two Elk (WY) PC No Claims to have commenced construction; state agency has apparently accepted claim

5. Texas Clean Energy (TX) IGCC Yes Claims to have commenced construction; also capable of meeting proposed CO 2 standard
6. Cash Creek (KY) IGCC Yes Converted to NGCC project
7. Good Spring (PA) IGCC Yes Converted to NGCC project
8. Mesaba (MN) ** IGCC No Converted to NGCC project

9. De Young (MI) CFB No Replaced by NGCC project
10. Taylorville (IL) IGCC Yes Canceled
11. Trailblazer (TX) SCPC Yes Canceled
12. Coleto Creek (TX) SCPC No Canceled
13. Limestone (TX) SCPC No Canceled
14. White Stallion (TX) CFB No Canceled

15. Las Brisas (TX) ** CFB No Canceled

16 . Bonanza (UT) CFB No PSD permit never effective; developer has also identified project to DOE as canceled or indefinitely postponed
17. Power County (ID)

-- Yes N ot an EGU

* Technology a bbreviations: CCS = carbon capture and storage; CFB = circulating fluidized bed; IGCC = integrated gasification combined cycle; NGCC = natural gas combined cycle; PC = pulverized coal; SCPC = supercritical pulverized coal

** D eveloper submitted comments o n the April 2012 proposal arguing for treatment of the project as a potential transitional source

Based on the infor mation summarized in the table, it appears that there is only one proposed fossil fuel

- fired boiler or IGCC EGU project

– the Wolverine project in Rogers City, Michigan

– that may6

be capable of commencing construction in the very near future and that as currently designed could not meet the proposed 1,100 lb CO 2 /MWh standard

. However, the re are two additional proposed projects

– the Washington County project in Georgia and the Holcomb project in Kansas

– that appear to remain under development and whose current designs lack CCS. T he developers of these two additional projects have represented that the projects have commenced construction for NSPS purposes , and based solely on those representations, the projects would be considered existing sources not subject to this rulemaking. However, we recognize that if, upon review, it were to be determined that the proj ects have not in fact commenced construction for NSPS purposes

, they should be situated similarly to Wolverine for purposes of th e current proposal. 9 The discussion s of individual projects below begin with these three projects.

b. Individual project discussions

1. W olverine (Michigan)
This proposed circulating fluidized bed EGU without CCS apparently remains under development. The project’s PSD permit was issued in 2011 and in December 2012 the project received a permit extension through June 29, 2014. 10 In contrast to the Washington County and Holcomb projects, EPA is unaware of any representations by the developer of the Wolverine project that construction has already commenced. Given the developer’s recent efforts to extend the air permit, and the absence of other information regarding either commencement of construction or project cancellation, we consider this project’s status as one of continued pre

- commencement development.
EPA has conflicting information regarding whether the Wolverine project should be considered on the verge of construction

. As noted above, the project was issued a PSD permit and the developer has taken steps to extend that permit fairly recently. But de spite the permit extension, it is unclear whether this project is being actively pursued. In January 2012, the developer informed local leaders that the project was being placed on hold, attributing the decision to an inability to obtain guarantees from a ir pollution control equipment vendors that the plant would be able to meet the HAP emissions standards finalized by EPA in December 2011. 11 As discussed in section II.b. above, EPA finalized revised HAP emissions standards in March 2013. Public statement s made by employees of the developer in January 2013, shortly after the project’s permit extension and after proposal but before finalization of the revised HAP emissions standards, appear to indicate that at that time there were still no immediate

9 Although the Two Elk project likewise lacks CCS and has not requested an applicability determination, EPA does not consider this project to be situated similarly to the Washington County and Holcomb projects, as further discussed below.

10 See Letter from G. Vinson Hellwig, Chief, Air Quality Division, Michigan Department of Environmental Quality, to Brian L. Warner, Wolverine Power Supply Cooperative, Dec. 18, 2012 , available at http://www.deq.state.mi.us/aps/downloads/permits/CFPP/2007/317

- 07/317

- 07ExtLt r.pdf

.

11 See Jim Dulzo, As Coal Plant Teeters, Groups Mount Legal Attack

, Michigan Land Use Institute blog, Feb. 13, 2012, http://www.mlui.org/energy/news

- views/news

- views

- articles/as

- coal

- plant

- teeters

groups

- mount

- legal

- attack.html (quoting Eric Baker, CEO of Wolverine Power Cooperative: “We are not convinced that we can get any vendor to guarantee an emission rate that would achieve that new proposed level .... What that means is that we are not going to move forward with the enginee ring ... with the detailed design and bidding process because ... the emission rates are virtually unachievable at this point.”)

.7

plans t o commence construction. 12 The project may face litigation over the December 2012 air permit
extension. 13 We also note that since initially proposing the project, the developer has acquired or agreed to acquire capacity in three existing coal

- fueled plants, at least in part meeting the developer’s apparent objective of fuel diversification. 14 In summary, we are currently uncertain whether this project is or is not on the verge of construction.
Similarly, EPA has conflicting information on the questio n of whether and, if so, with what degree of difficulty this project could be redesigned to meet the proposed 1,100 lb CO 2 /MWh standard. As currently designed, the project does not incorporate CCS technology and would be unable to achieve the standard. M oreover, in a BACT analysis performed by the state permitting authority for purposes of the project’s air permit it was concluded that CCS was not technically feasible. 15 However, in 2010 the developer submitted a proposal to the Department of Energy for f unding to support a version of the project that did incorporate CCS technology. 16 Although the developer apparently did not propose CCS deployment at a scale that would have enabled the project to meet the 1,100 lb CO 2 /MWh standard, we view th at proposal a s strong support for the technical compatibility of CCS at some scale with the project’s currently proposed site, fuel type, and combustion technology. We do not have information

on the degree of design changes that might be required to allow the project to deploy CCS at a scale sufficient to meet the proposed CO 2 standard or on the consequences of such changes for the project’s development schedule

.

12 See, e.g., Jordan Travis, Wolverine Waiting for EPA to Make Next Move , Alpena News, Jan. 11, 2013, http://www.thealpenanews.com/ page/content.detail/id/524035/Wolverine

- waiting

- for

- EPA

- to

- make

next

- move.html?nav=5004 (quoting Ken Bradstreet, director of community and government affairs for Wolverine Clean Energy Venture: “Quite frankly, it seems at this point to be highly unlikely, but we’re going to explore it until it’s obviously not doable”); Michael Walton, Permit Extended for Coal Plant Project Construction , Traverse City Record

- Eagle.com, Jan. 13, 2013, http://record

eagle.com/local/x1746077955/Permit

- extended

- for

- coal

- plant

- pr oject

- construction (quoting Nancy Tanner, spokes person for Wolverine: “Wolverine hasn’t made a decision to move forward and before proceeding would evaluate the project to ensure it is a competitive power supply option”).

13 See Jim Dulzo, Permit Is Renewed , but Rogers City Coal Plant Still Stalled , Michigan Land Use Institute blog, Jan. 7, 2013, http://www.mlui.org/energy/news

- views/news

- views

- articles/permit

- is

- renewed

but

- rogers

- city

- coal

- plant

- still

- stalled.html.

14 In late 2010, Wolverine purchased appr oximately 150 MW of capacity in two coal plants in Indiana and Ohio. FirstEnergy Corp. Press Release, FirstEnergy Sells 6.65 Percent Interest in Ohio Valley Electric Corporation , Dec. 28, 2010, http://investors.firstenergycorp.com/phoenix.zhtml?c=102230&p =irol

newsArticle&ID=1510989&highlight=. In late 2012, Wolverine agreed to purchase a share of a 344

- MW Michigan coal plant. We Energies Press Release, We Energies, Wolverine to Enter into Joint Ownership of Presque Isle Power Plant , Nov. 27, 2012, http: //wecnews.wisconsinenergy.com/news/newsrel/pages/newsrelease_188.

15 The permit sets a CO 2 emission rate limit of 2.1 lb CO 2 /kWh (gross), or 2,100 lb CO 2 /MWh (gross). Michigan Department of Environmental Quality, Permit to Install 317

- 07, Wolverine Power Supply Cooperative, Inc., at 27 (rev. July 12, 2011), available at http://www.deq.state.mi.us/aps/downloads/permits/finpticon/2007/317

- 07_Rev1.pdf

.

16 H. Hoffman et al., Expansion of Michigan EOR Operations Using Advanced Amine Technology at a 600 MW Project: Wolverine Carbon Capture and Storage Project (July 13, 2010), available in the docket.8

EPA is not applying t he current propos al to the Wolverine project , nor are we proposing an alternate CO 2 standard for the project at this time, because we do not have clear information as to where the project stands in the development process and therefore have not formulated a view as to whet her the project is on the verge of construction. Nor have we formulated a view regarding whether the 1,100 lb CO 2 /MWh standard or some other CO 2 standard would be representative of BSER for the project if it is on the verge of construction

. We are taking comment on the se question s and anticipate proposing at a later time that the project either be made subject to the 1,100 lb CO 2 /MWh standard or be assigned to a subcategory with an alternate CO 2 standard, if the project has not already commenced

construct ion for NSPS purposes (thereby becoming an existing source) or been canceled. This approach is discussed further in section I V below

.
2. Washington County (Georgia)
In April 2013, the developer of this proposed supercritical pulverized coal EGU without CCS announced the execution of contracts for fabrication and erection of the project’s boiler, as well as the intention to execute a contract for construction of the balance of the facility by September 2013. 17 The execution date of the boiler contracts wa s one day before the April 13, 2013 date by which the project would have had to commence construction in order to qualify as a transitional source under the proposed April 2012 EGU GHG NSPS, and statements by the developer show the developer’s intent for

t he project in fact to qualify as a transitional source under that proposal. 18 EPA views these announcements and statements as clear indications of the developer’s intent for the project to be treated as having commenced construction for NSPS purposes in Ap ril 2013, which (if correct) would make the project an existing s ource for purposes of the current proposal.

However, EPA is aware that a citizens group has voiced skepticism as to whether the Washington County project has in fact commenced construction for NSPS purposes

. M ore generally, we remain uncertain as to the project’s development status. Shortly after the April 2013 boiler contract announcement, the last of the project’s original owners

– a consortium of local electricity cooperatives

– relinquished their ownership interests to third

- party investors

. 19 As of mid

- September 2013, the

17 “POWER4Georgians, LLC, today announced it executed a contract on April 12 wi th IHI Corporation, a leading international boiler manufacturer, for fabrication of the boiler for Plant Washington, a 850

- MW clean

- coal energy facility being developed near Sandersville, in Washington County. Also on April 12, POWER4Georgians entered int o a contract with Zachry Industrial, Inc., one of the leading engineering and construction companies in the U.S., for erection of the boiler. POWER4Georgians expects to execute a construction contract for the balance of the facility by September 2013.” P ower4Georgians Press Release, Power4Georgians Executes Contract for Plant Washington Boiler , Apr. 15, 2013, http://www.power4georgians.com/docs/P4G%20Release%20

- %20Boiler%20Contracts%2004

- 13

- 13%20FINAL.pdf.

18 “[T]he plant’s developer signed key contracts o n April 12 to purchase and erect a boiler, which he said means Plant Washington remains in compliance with a certain part of the rule that allows them to bypass any new carbon dioxide limits.... ‘[W]e’re a transitional source [].’” Maggie Lee, Plant Washing ton Future Unclear Due to Emissions Fight , Macon Telegraph, Apr. 14, 2013, http://www.macon.com/2013/04/14/2438122/deadline

- fails

- to

- resolve

- plant.html (quoting Dean Alford, spokes person for Power4Georgians).

19 Power4Georgians Press Release, P ower 4Georgians Announces Corporate Restructuring , Apr. 26, 2013, http://power4georgians.com/docs/News/ P4GReleaseRestructuring4

- 26

- 13.pdf (describing end of ownership role for last four of ten earlier sponsoring cooperatives)

.9

develop er has not announce d execution of a contract for construction of the balance of the facility or the execution of power contracts for any of the project’s output with either the former owners or any other purchasers. The developer recently announced that it is applying for an 18

- month extension of the date by which the project must commence construction for PSD purposes. 20 Thus, the developer’s statements that the project has commenced construction, along with its request for a PSD permit extension, indicate ongoing interest in pursuing this project, but the other developments and lack of

announcements create uncertainty as to whether the project should be co nsidered to be on the verge of
construction.

T he developer of the Washington County project has not sought an applicability determination, and EPA is not making such a determination in th e current proposal or in this document

. B ased solely on the developer’s representations discussed above, at this time we are treating the project as having commenced construction for purposes of th e current proposal

. However, a s indicated in the proposal and discussed further in section IV below

, if it is determined in the future that the Washington County project has not commenced construction as of the date of publication of the current proposal , then th e project w ill be addressed in the same manner as the Wolverine project. We note that nothing in this rulemaking binds EPA to the position that the Washington County project has commenced construction for NSPS purposes.

3

. Holcomb (Kansas)
In February 2013, one of the developers of this proposed supercritical pulverized coal EGU without CCS informed EPA that the developer considers the project to have commenced construction for NSPS purposes. 21 The developer had previously submitted comments on the April 2012 GHG NSPS proposal stating that contracts for both the steam generator (i.e., the boiler) and the steam turbine/ electricity generator had already been awarded. 22 W e view th e February 2013 statement, supported by the earlier comments, as a clear indication of the developer’s intent for the project to be treated as having already commenced construction for NSPS purposes, which (if correct) would make the project an existing sou rce for purposes of the current proposal.

However, EPA notes that the developer has also indicated concern that its view on the project’s status of having comm enced construction could be subject to legal challenge

. 23 More generally, as with the Washington Cou nt y project, we remain uncertain as to the Holcomb project’s development status. For example, we are aware that this project faces pending state court litigation over the validity of its air permit that could delay or possibly prevent completion of the project. 24 We are also aware of federal court rulings that would require preparation of an environmental impact statement as a prerequisite to

20 Jennifer Moulliet, New Federal Air Pollution Rules Could Halt Power Plant , 13WMAZ, Sept. 16, 2013, http://sandersville.13wmaz.com/news/news/160712

- new

- federal

- air

- pollution

- rules

- could

- halt

- coal

power

- plant

.

21 “We believe that we have done enough to ‘commence construction’ within the meaning of the [April 2012] Proposed Rule and thus qualify Holcomb 2 as a ‘transitional source’....” Letter from Barbara Walz, Senior Vice President, Tri

- State Generation & Transmis sion Association, to Janet McCabe, Principal Deputy Assistant Administrator, EPA Office of Air and Radiation, Feb. 13, 2013, available in the docket.

22 Comments of Tri

- State Generation & Transmission Ass’n on April 2012 GHG NSPS Proposal at 9 (June 25, 201 2), EPA

- HQ

- OAR

- 2011

- 0660

- 9845.

23 Walz letter, supra note 23.

24 Sierra Club v. Moser , No. 105,493 (Kan. argued Aug. 31, 2012).10

obtaining any necessary further project approvals from the Rural Utilities Service, a requirement which presumably could likewise delay or otherwise impact the project. 25 We further note that in a n October
2012 resource plan update submitted to state regulators by the same developer (als o the project’s principal sponsor ) , n o new coal

- fired project

– i.e., neither the Holcomb project nor any other coal

- fired project

– is included among the new generation resources added to the developer’s portfolio through out the 20

- year planning horizon under any of the eight planning scenarios evaluated

. 26

Because the resource plan lacks any indication of a final determination at this time to complete the project and appears also to suggest a potential lack of mark et demand for the project

, it is another basis for uncertainty as to whether the project should be considered to be on the verge of construction

. The developer of the Holcomb project has not sought an applicability determination, and we are not making such a determination in the current proposal or in this document

. Based solely on the developer’s representations discu ssed above, at this time we are treating the project as having commenced construction for purposes of the current proposal. However, as indicated in the proposal and discussed further in section IV below, if it is determined in the future that the Holcomb project has not commenced construction as of the date of publication of the current proposal , then th e project will be addressed in the same manner as the Wolverine project. We note that nothing in this rulemaking binds EPA to the position that the Holcomb project has commenced construction fo r NSPS purposes.

4

. Two Elk (Wyoming)
This proposed pulverized coal EGU without CCS was originally issued a PSD permit in 1998. 27 The permit was subsequently revised and reissued twice, most recently in 2003. 28 Responding to a deadline set by the Wyoming Department of Environmental Quality (WY DEQ) , the developer took actions in 2005 that apparently were subsequently accepted by WY DEQ as sufficient to constitute commencement of construction. 29 Citing those actions, in comments on the April 2012 proposal t he developer claimed the project was an existing source and exempt from that proposal on that basis. 30 Whether the project has engaged in sufficiently continuous construction activities since 2005 to prevent its PSD permit from lapsing has been a matter of dispute. 31 However, it is not necessary to resolve that dispute for purposes of this proposed rule: if construction timely commenced and has been continuous and the permit i s therefore valid, EPA agrees with the developer that the project should be consid ered an existing source not covered by this rule. On the other hand, if the permit has lapsed because of insufficiently continuous construction activity, then the project could not be considered to be capable of

25 Sierra Club v. U.S. Dept. of Agric. , 841 F.Supp.2d 349, 357

- 60 (D.D.C. 2012), appeal dismissed

, 716 F.3d 653, 660 (D.C. Cir. 2013).

26 Tri

- State Generation and Transmission Ass’n, Electric Resource Plan Annual Progress Report at 13 & tbl.2 (Oct. 31, 2012), available in the docket. There were five planning scenarios with assumed cost adders for CO 2 emissions and three scenarios without such cost adders. Id. at 10

- 11 & tbl.1.

27 See Joint Stipulation and Settlement at 1, In the Matter of the Appeal of the Revocation of Permit No.
CT

- 1352B Two Elk Generation, No. 07

- 2601 (Wyo. Envtl. Quality Council filed Nov. 21, 2007).

28 See i d. at 2.

29 See i d.

30 Comment of Two Elk Generation Partners at 2

- 3 (June 22, 2012), EPA

- HQ

- OAR

- 2011

- 0660

- 9798.

31 See, e.g., id. at 3.11

commencing construction in the very near fu ture and should be treated like any other new source if the developer were to resume development efforts.
The developer of the Two Elk project has not sought an applicability determination from EPA, and we are not making such a determination in th e current proposal or in this document . Based on the developer’s representations discussed above, at this time we are treating the project as having commenced construction for purposes of the current proposal. W e view the longstanding nature of the developer ’s position that the project commenced construction in 2005 ( a position taken long before the April 2012 proposal ), as well as WY DEQ’s apparent acceptance of tha t position

, as distinguishing the project from the Washington County and Holcomb projects , and w e therefore are not proposing to address the Two Elk project in the same manner as those projects

. However , we also note that nothing in this rulemaking binds EPA to the position that the Two Elk project has commenced construction for NSPS purposes.

5. Texas Clean Energy (Texas)
The developer of this proposed IGCC with CCS has announced the execution of contracts to
commence construction. 32 Commencement of construction for NSPS purposes prior to t he date of the current proposal would make the project an existing source not subject to the proposal. In fact, some of these contracts were executed before the April 2012 GHG NSPS proposal, indicating that the project might have been an existing source e ven for purposes of that earlier proposal. 33 The developer has also executed contracts with purchasers for the project’s outputs of electricity, CO 2 , and urea. 34 The developer did not submit comments on the April 2012 proposal but elsewhere has indicated t hat the project would achieve CO 2 emission rates well below the currently proposed 1,100 lb CO 2 /MWh
standard. 35

The developer of the Texas Clean Energy project has not sought an applicability determination from EPA, and we are not making such a determination in th e current proposal or in this document

. Based on the developer’s representations discussed above, at this time we are treating the project as having commenced construction for purposes of the current proposal. We view the project’s abi lity to meet the 1,100 lb CO 2 /MWh standard as distinguishing the project from the Washington County and Holcomb projects, and we therefore are not proposing to address the Texas Clean Energy project in the same manner as those projects

. However , we also note that nothing in this rulemaking binds EPA to the position that the Texas Clean Energy project has commenced construction for NSPS purposes.

32 Summit Power Group Press Release, Summit’s Texas Clean Energy Project Reaches Major Milestone with Signed EPC and O&M Contracts , Feb. 14, 2012, http://www.texascleanenergyproject.com/2012/summits

- texas

- clean

- energy

- project

- reaches

- major

milestone

- with

- signed

- epc

- and

- om

- contracts/.

33 See Summit Power Group, Update on TCEP to US EPA at 5 (Apr. 11, 2013), available in the do cket.

34 See i d. at 6.

35 See i d. at 8 (projecting CO 2 emission rate of 228 lb/MWh).12

6. Cash Creek (Kentucky)
This proposed IGCC with CCS has been re

- proposed by the developer as an NGCC. 36 EPA believes that new NGCCs should generally be considered c apable of meeting the applicable CO 2 standards in th e current proposal.

7. Good Spring (Pennsylvania)
This proposed IGCC with CCS has been re

- proposed by the developer as an NGCC. 37 EPA believes that new NGCCs should generally be considered capable of meeting the applicable CO 2 standards in th e current proposal.

8. Mesaba (Minnesota)
The developer of this proposed IGCC without CCS submitted co mments on the April 2012 proposal claiming that the project should be considered a potential transitional source because, although the project did not have a PSD permit as of the date of that proposal, the project had met other development milestones that the developer viewed as equally deserving of the treatment offered in th at proposed rule to sources possessing P SD permits. 38 However, even before submitting those comments, the developer had already re

- proposed the project as an NGCC, rendering the claims in its

comments moot. 39 EPA believes that new NGCCs should generally be considered capable of meeting the appli cable CO 2 standards in th e current proposal.

9. De Young (Michigan)
This proposed circulating fluidized bed EGU without CCS has apparently been replaced by an NGCC project. The developer

, a municipal utility

, had proposed to build the project for its own use. However, the utility subsequently determined that building an NGCC would be more economically attractive, and the city council approved the NGCC alternative. 40 While EPA is unaware of any official announcement that the coal

- fueled project has been can celed, EPA believes that the utility considers the new NGCC project a replacement resource, not an incremental resource, and is no longer pursuing the original coal

- fueled project.

36 See Kentucky Division for Air Quality, Permit Number: V

- 09

- 006 R1, Cash Creek Generating Station, at 26 (Nov. 21, 2012) , available at https://dep.gateway.ky.gov/eSearch/Search_AI_Detail.aspx?AgencyID=40285

.

37 See EmberClear Corp. Press Release, Good Spring Power Project Increases to 300 MW , May 17, 2012, available at www.sedar.com (search for EmberClear Corp. filings).

38 Comment of Thoma s A. Micheletti on behalf of Excelsior Energy, Inc. (June 11, 2012), EPA

- HQ

- OAR

2011

- 0660

- 8885.

39 See Letter from Thomas A. Micheletti, Co

- CEO, Excelsior Energy, to Burl Haar, Minnesota Public Utilities Commission, May 31, 2012, available at https://www.ed ockets.state.mn.us/EFiling/edockets/searchDocuments.do?method=showPoup&docum entId={E08B277D

- A35B

- 47D9

- 8743

- 8798EE1FB462}&documentTitle=20125

- 75185

- 01.

40 Holland City Council Resolution in Support of Holland Board of Public Works Recommendations on
Base Lo ad Generation and Renewable Resources (R2012

- 97), Dec. 5, 2012, available at http://www.cityofholland.com/sites/default/files/fileattachments/r2012.97.pdf.13

10. Taylorville (Illinois)

Cancel l ation of this proposed IGCC with CCS has been announced by its developer. 41

11. Trailblazer (Texas)

Cancellation of this proposed supercritical pulverized coal EGU with CCS has been announced by its developer. 42

1 2

. Coleto Creek (Texas)
This proposed supercritical pulverized coal EGU without CCS has apparently been canceled. While EPA has not located any official cancellation announcement, the developers did not submit comments on the proposed rule, their websites provide no recent information on the project, and a website formerly dedicated to th e project is no longer active. 43 Further, a periodic report prepared by the regional transmission organization responsible for the region in which the project was located has described the project as “cancelled” and removed it from the organization’s list of planned future

resources. 44

13. Limestone (Texas)
Cancellation of this proposed supercritical pulverized coal EGU without CCS has been announced by its developer. 45

1 4

. White Stallion (Texas)
Cancellation of this proposed circulating fluidized bed EGU without CCS has been announced by its developer. 46

15. Las Brisas (Texas)
The developer of this proposed circulating fluidized bed EGU without CCS submitted comments on the April 2012 proposal claiming that, contrary to EPA’s view at the time of the p roposal, the project did possess a complete PSD permit as of the proposal date and should have been listed in that proposal

41 See, e.g., Tenaska Drops Taylorville Coal

- Plant Project , St. Louis Post

- Dispatch, June 21, 2013, h ttp://www.stltoday.com/news/state

- and

- regional/illinois/tenaska

- drops

- taylorville

- coal

- plant

project/article_e5e2e58f

- e01b

- 559e

- 93d5

- d6069ef5d6c9.html.

42 See, e.g., John Mangalonzo, Tenaska Abandons Coal Plant Project Near Sweetwater , Abilene Reporter

News, June 21, 2013, http://www.reporternews.com/news/2013/jun/21/tenaska

- abandons

- coal

- plant

project

- near/.

43 The website of one of the developers has a page on the project with a single news story dating to the 2008 filing of the project’s air p ermit application. http://www.stec.org/Coleto2/News.aspx. The link on this page labeled “Visit the Coleto Creek 2 Site” directs to an inactive page.

44 Electric Reliability Council of Texas, Report on the Capacity, Demand, and Reserves in the ERCOT Region at 6 (Dec. 2012), available at http://www.ercot.com/news/presentations/#osp.

45 Letter from Craig R. Eckberg, NRG Energy, to Mike Wilson, Texas Commission on Environmental Quality, Nov. 20, 2012, available in the docket.

46 See, e.g., Plans for Coal

- Fired Power Plant in Texas Canceled , Power Engineering, Feb. 15, 2013, http://www.power

- eng.com/articles/2013/02/plans

- for

- coal

- fired

- power

- plant

- in

- texas

- canceled.html.14

as a potential transitional source. 47 EPA does not agree with this claim. While a PSD permit was issued for the project in January 2011, that permit did not address GHG emissions, as was required for PSD permits at that time. In any event, the claim is moot, as cancellation of the project has been announced by its developer. 48

16

. Bonanza (Utah)
This proposed circulating fluidized bed EGU without CCS never possessed an effective PSD permit. A permit was issued by EPA Region 8 in 2007 but was appealed to EPA’s Environmental Appeals Board (EAB) before it took effect, and in November 2008 the EAB re manded the permit. 49 No further action on the permit has been taken since the remand, nor has there been any public indication of development activity since that time. Because this project lacked an effective PSD permit as of the publication of the April 2012 proposed rule, EPA believes that the listing of the project in that proposal as a potential transitional source was an error.
In 2012, the developer twice made public statements claiming that the project remained under development. During litigation over EPA’s MATS rule in April 2012, the developer submitted a joint motion with several other developers claiming that all of them were “actively developing new solid fossil

- fueled electric generating stations” that would be subject to the MATS new

- unit s tandards. 50 Then in June 2012, the developer submitted comments on the April 2012 EGU GHG NSPS proposal asserting that it has been waiting for EPA to act on its remanded permit and claiming that it “wishes to move forward with construction.” 51 However, con trary to these public statements, in the annual Form 860 filings the developer has made with the Energy Information Administration of the Department of Energy for each year from 2007 through 2012 , the developer has reported the project as “canceled, indefinitely postponed, or no longer in resource plan.” 52 Therefore, EPA believes that development on this project has not been proceeding actively and that the project cannot be considered to be capable of commencing construction in the very ne ar future for this reason as well.

47 Comment of John A. Riley on behalf of Las Brisas Energy Center (June 25, 2012), EPA

- HQ

- OAR

- 2011

- 0660

- 9977.

48 Letter from John A. Riley, Attorney for Las Brisas Energy Center LLC, to Mike Wilson, Texas Commission on Environmental Quality, July 29, 2013, available in the docket.

49 In re Deseret Electric Power Cooperative , 2008 WL 5572891 (EAB 2008).

50 Joint Motion of Developers of New Solid fossil

- fueled Electric Generating Units at 2, White Stallion Energy Center, LLC v. EPA , No 12

- 1100 (D.C. Cir. Apr. 27, 2012).

51 Supplemental Comments of Deseret Generation & Transmission Co

- operative at 3 (June 25, 2012),
EPA

- HQ

- OAR

- 2011

- 0660

- 10016.

52 For example, within the 2011 EIA Form 860 zip file available at http://www.eia.gov/electricity/data/eia860/index.html, see file “GeneratorY2011.xls”, tab “Ret_IP”, row 2023 (identifying “status” of Bona nza unit 2 as code “IP”) and file “LayoutY2011.xls”, tab “Reference Tables I”, Table 3c “Other Generator Status Codes” (defining code “IP” as “Planned new generator cancelled, indefinitely postponed, or no longer in resource plan”).15

17. Power County (Idaho)
This proposed project was permitted in 2009 as a non

- EGU that would not sell electricity. 53 EPA now believes that the listing of this project in the April 2012 GHG NSPS proposal as a potential transitional source was an error. If completed in accordance with the 2009 permit , the project would not be subject to the CO 2 standard under this proposed NSPS, which applies only to EGUs.

IV. Proposed Approach

a. Description of approach

The 1,100 lb CO 2 /MWh standard of performance proposed for other new fossil fuel

- fired boiler and IGCC EGUs is not proposed to apply to the Wolverine EGU project in Rogers City, Michigan , nor is EPA proposing an alternate CO 2 standard for the project at this time . Based on current information, the Wolverine project appears to be the only fossil fuel

- fired boiler or IGCC EGU project presently under deve lopment that may be capable of commencing construction for NSPS purposes in the very near future and that , as currently designed, could not meet the 1,100 lb CO 2 /MWh standard. However, in the face of conflicting information, w e have not formulated a view as to where this project stands in the development process , i.e., whether i t is on the verge of construction, or whether th is CO 2 standard or some other CO 2 standard would be representative of BSER for this project

. W e are inviting comment on these question s . At the time of finalization of the current proposal , if the Wolverine project remains under development and has not either commenced construction or been canceled, we anticipate proposing that the project either be made s ubject to the 1,100 lb CO 2 /MWh standard or be assigned to a subcategory with an alternate CO 2 standard.

There are two other fossil fuel

- fired boiler EGU projects without CCS

– the Washington County project in Georgia and the Holcomb project in Kansas

– that appear to remain under development but whose developers have represented that the projects have commenced construction for NSPS purposes. Based solely on the developers’ representations, the projects would be existing sources and thus not subject to the current proposal . However, if , upon review, it was determined that the projects have not commenced construction, the projects should be situated similarly to the Wolverine project. 54 Accordingly, if it is determined in the future that either of these projects has not commenced
construction for NSPS purposes as of the date of publication of the current proposal , then that project will be addressed in the same manner as the Wolverine project. 55

If the Wolverine project commences construction for NSPS purposes before EPA has proposed a

new source CO 2 standard applicable to the project pursuant to CAA section 111(b) , the project, if

53 Idaho Dept. of Env. Q uality, Permit to Construct No. P

- 2009

- 0127 , Southeast Idaho Energy LLC, at 5 (Nov. 30, 2009) , available at http://www.deq.idaho.gov/media/492273

- se_idaho_energy_power_county_ptc_1109_statement.pdf.

54 As discussed in section III above, although the develop ers of the Two Elk and Texas Clean Energy projects have also claimed to have commenced construction and likewise have not requested EPA determinations of NSPS applicability, EPA does not consider these two projects to be situated similarly to the Washingto n County or Holcomb projects (or, by potential extension, to the Wolverine project )

.

55 In this event, there will not be any proposed standard “which will be applicable to such source” within the meaning of CAA section 111(a)(2), and to the extent that the current proposal did, until the time of the construction commencement determination, apply to that project, the proposal should be considered automatically to be withdrawn as it applies to that project as of the time of that determination.16

completed, would be an existing source subject to any CO 2 standard promulgated for existing sources in its source category pursuant to CAA section 111(d). The same would be true of the Washington County and Holcomb projects if they are addressed in the same manner as the Wolverine project.

b. Legal framework

1. Relev an t provisions of CAA section 111
CAA section 111(b) establishes a process of a few basic steps that EPA must follow when setting a standard of performance for new sources. First, the Administrator must “publish ... a list of categories of stationary sources.” Section 111(b)(1)(A). Next, the Administrator must “[propose] ... federal standards of performance for new sources within [the source] category,” and then “promulgate ... such standards with such modifications as he deems appropriate.” Secti on 111(b)(1)(B). In carrying out this process, “[t]he Administrator may distinguish among classes, types, and sizes within categories of new sources for the purpose of establishing such standards.” Section 111(b)(2).
Once the Administrator promulgates standards for new sources under section 111(b), the states, consistent with EPA regulatory requirements, must take action under section 111(d) to establish requirements for “any existing source for any air pollutant (i) [that falls into specific categories ] but (ii) to which a standard of performance under this section would apply if such existing source were a new source....” Section 111(d)(1).
Section 111 also contains several definitions relevant to these procedural provisions. A “new source” is defin ed as “any stationary source, the construction or modification of which is commenced after the publication of regulations (or, if earlier, proposed regulations) prescribing a standard of performance under this section which will be applicable to such sourc e.” Section 111(a)(2). 56 An “existing source” is defined as “any stationary source other than a new source.” Section 111(a)(6). Finally, a “standard of performance” is defined as “a standard for emissions of air pollutants which reflects the degree of e mission limitation achievable through the best system of emission reduction which (taking into account the cost of achieving such reduction and any nonair quality health and environmental impact and energy requirements) the Administrator determines has bee n adequately demonstrated.” Section 111(a)(1).

2. Authority and precedents for not promulgating standards of performance for a ll sources in a source category

As already noted , EPA is not proposing a CO 2 standard applicable to the Wolverine project (and pot entially the Washington County and/or Holcomb projects). In the April 2012 proposal, EPA carefully explained the legal basis for concluding that CAA section 111 does not require us to address all new

56 The CAA does not include definitions of “commenced” or “construction” for these purposes, but EPA’s framework regulations promulgated under section 111 define the terms as follows:

Commenced means, with respect to the definition of new source in section 111(a)(2) of the Act, that an owner or operator has undertaken a continuous program of construction or modification or that an owner or operator has entered into a contractual obligation to un dertake and complete, within a reasonable time, a continuous program of construction or modification

.
Construction means fabrication, erection, or installation of an affected facility.

40 CFR § 60.2.17

sources each time we propose standards of performance f or a source category . This statutory interpretation continues to be sound in the circu mstances of the current proposal :

The EPA interprets the CAA provisions described above to authorize the EPA not to promulgate a standard of performance for [the Wolveri ne project] . Under section 111(b)(1)(B), once the EPA lists a category of sources, the EPA is required to propose and promulgate standards of performance for new sources in that category. The EPA is not, however, required to promulgate standards of perfo rmance that cover all new sources. This is clear from the directive in section 111(b)(1)(B), which requires that the EPA propose standards of performance “for new sources” within the category, but does not require that the EPA propose such standards for a ll new sources or for any new source. The EPA may fulfill that directive by proposing standards that cover some, but not all, sources that newly commence construction or modification.
Similarly, the term “new source” in section 111(a)(2) is defined to inc orporate the limitation that the EPA must propose or promulgate a standard applicable to the source for the source to be considered “new.” That is, section 111(a)(2) defines a “new source” as any source for which construction or modification commences aft er the EPA proposes “a standard of performance ... which will be applicable to such source.” By its terms, this provision contemplates that the EPA may not propose a standard of performance applicable to certain sources, and that if the EPA does not, thos e sources would not be considered to be “new source[s]” and therefore would not be subject to any new source standard of performance.
Thus, these provisions do not, by their terms, mandate that the EPA propose standards for each and every source in the sou rce category. Under Chevron step 1, these provisions do not unambiguously require that the EPA propose standards of performance for all sources in the source category. We read these provisions as according the EPA some measure of discretion to determine not to set standards for a particular portion of the source category, where appropriate, bounded by the principle of rationality. If these provisions are read to be ambiguous as to whether the EPA has discretion to propose and promulgate standards of perf ormance for all sources in the source category, we believe it reasonable to read the provisions to provide such discretion in appropriate circumstances and that such reading is entitled to deference under Chevron step 2. In addition, interpreting these provisions to give the EPA the discretion not to propose and promulgate standards covering all sources in a category under appropriate circumstances

– such as those present here

– is consistent with the case law th at authorizes agencies to establish a regulatory framework in an incremental fashion, that is, a step at a time. [footnote]
[footnote: As the U.S. Supreme Court recently stated in Massachusetts v. EPA

, 549 U.S. 497, 524 (2007): “Agencies, like legislatures, do not generally resolve massive problems in one fell regulatory swoop;” and instead they may permissibly implement such regulatory programs over time, “refining their preferred approach as
circumst ances change and as they develop a more nuanced understanding of how best to proceed.” See Grand Canyon Air Tour Coalition v. FAA , 154 F.3d 455 (D.C. Cir. 1998); City of Las Vegas v. Lujan , 891 F.2d 927, 935 (D.C. Cir. 1989); National Ass’n of Broadcaster

s v. FCC , 740 F.2d 1190, 1209

- 14 (D.C. Cir. 1984).]

77 FR at 22425

- 26.18

Following that discussion in the April 2012 proposal, EPA cited multiple NSPS precedents where we have proposed or promulgated standards for fewer than all sources in a source catego ry, precedents that we believe likewise continue to apply in the context of the current proposal:

In applying section 111 over the past several decades, there have been a number of rulemakings in which the EPA has promulgated new source performance standar ds that do not cover all sources within the relevant source category that newly commence construction or modification. Some examples include the following: (i) In an early NSPS, involving lime kilns, the EPA promulgated an NSPS for certain types of kilns

, but not for all types of sources that remained within the relevant source category. The D.C. Circuit, in its opinion reviewing the rule, noted this state of affairs, without expressing concerns. National Lime Ass’n v. EPA , 627 F.2d [416,] 426 & n.28 [( D.C. Cir. 1980)] (noting that “of the various types of kilns that may be used in the calcination of limestone, only rotary kilns are regulated by the standards,” and not “the vertical kiln; the rotary hearth kiln; and the fluidized bed kiln”). (ii) In the EPA’s initial promulgation of NSPS regulations for petroleum refineries, the EPA did not promulgate standards of performance for certain units, including fluid coking units, delayed coking units, and process heaters, instead promulgating standards of perf ormance for those units subsequently. See 40 CFR § 60.100a(a); “Standards of Performance for Petroleum Refineries: Proposed Rules,” 72 FR 27178 (May 14, 2007). (iii) Similarly, in the EPA’s recent revision of the NSPS regulations for coal preparation an d processing plants, the EPA “expand[ed] applicability of the existing NSPS by revising the definitions of thermal dryers, pneumatic coal

- cleaning equipment, and coal. It also establishe[d] work practice standards for open storage piles. The final rule a mend[ed] the definition of thermal dryer for units constructed, reconstructed, or modified after May 27, 2009, to include both direct and indirect dryers drying all coal ranks (i.e., bituminous, subbituminous, lignite, and anthracite coals) and coal refuse .” “Standards of Performance for Coal Preparation and Processing Plants,” 74 FR 51950, 51952 (Oct. 8, 2009). (iv) In subpart KKKK of the NSPS regulations, the EPA promulgated regulations for the source category of stationary combustion turbines. The EPA did not promulgate regulations for turbines with smaller than 10 MMBtu/h heat input, emergency units, or combustion turbine test cells. 40 CFR §§ 60.4305(a), 60.4310(a),(d). (v) For other source categories, the EPA also declined to propose and promulgat e standards of performance for the smaller sources. For example, for the source category of metal furniture coating operations, the EPA did not apply standards of performance to metal furniture surface coating operations that use less than 3.842 liters of coating (as applied) per year. 40 CFR § 60.310(b). (vi) In proposing standards of performance for natural gas processing plants, the EPA proposed standards for only two of the three emission points in the plants (“storage emission sources” and “equipmen t leaks”) and declined to propose standards for the third emission point (“process emission sources”) on grounds that “[b]est demonstrated control technology has not been identified for [the latter] sources.” “Standards of Performance for New Stationary S ources; Onshore Natural Gas Processing Plants in the Natural Gas Production Industry, Equipment Leaks of VOC,” 49 FR 2636, 2637 (Jan. 20, 1984).

77 FR at 22426.19

c. Reasons for not applying the proposed 1,100 lb CO 2 /MWh standard

In th e current proposal

, EPA is not proposing that the 1,100 lb CO 2 /MWh standard apply to the Wolverine project

. As indicated in the summary of CAA requirements above , EPA may not apply a standard of performance to sources unless that standard reflects the “best system of emissio n reduction [BSER] ... adequately demonstrated” for those sources. We have not formulated a view at this time regarding whether CCS is BSER for the Wolverine project , and we therefore do not propose at this time that the 1,100 lb CO 2 /MWh standard apply to the project. Two principal sources of uncertainty underlie our present inability to form a view on whether the proposed standard should apply to the Wolverine project: first, our uncertainty regarding whether the project is on the verge of construction

, and second

, our uncertainty regarding the opportunity costs that might be created if the project were required to comply with the proposed standard (in the event that we were to decide that such opportunity costs are relevant for purposes of determining B SER)

. Each of these uncertainties is further described below.

As discussed above in section III.b.1, EPA has conflicting information regarding where the Wolverine project stands in the development process

. Specifically, our information indicates that the developer has made recent efforts to extend the project’s permit

, but has also acquired other coal

- fired generating capacity and has made statements suggesting that there are no immediate plans to
commence construction of this project

. (To the extent tha t the developer was delayed by the MATS reconsideration process, discussed above in section II.b., our own actions may have contributed to the uncertainty.) Because of this conflicting information, we are uncertain whether the project should be considered to be on the verge of construction or not. This is a threshold uncertainty that drives what further questions we would need to address in order to determine whether the proposed 1,100 lb
CO 2 /MWh standard or some other standard would be BSER for the proje ct. For example, i f the project is not on the verge of construction, we believe it would be situated similarly to any other proposed fossil fuel

- fired boiler EGU project for purposes of the CO 2 standard. On the other hand, i f the project is on the verge of construction, there could be other factors

– notably opportunity costs

– that would distinguish the project from other proposed EGU projects and that might have relevance for the determination of BSER. 57

EPA’s uncertainty regarding whether the project is on the verge of construction creates an additional area of uncertainty concerning the opportunity costs that might result from making the project subject to a particular proposed CO 2 standard of performance

. Imposition of a CO 2 standard implicates a proposed EGU’s fundamental site, fuel, and technology choices much more directly than imposition of standards for criteria or HAP pollutants because the latter can be addressed by post

combustion controls that can more easily be rede signed into an already

- planned plant without bringing those earlier fundamental choices into question. 58 If the Wolverine project truly is on the verge of construction in order to meet a valuable near

- term resource need or market opportunity , and if

57 In the April 2012 proposal, EPA indicated that not only opportunity costs (from potential delays and cancellation) but also unusually high sunk costs were a factor leading us to view “transitional sources” as distinct from other sources. We received comments both strongly supporting and strongly opposing our discussion of sunk costs as a relevant consideration. Some of these comments noted that sunk costs are not a “cost of achieving such reduction” relevant to the determination of BSER but instead, consistent with economic theory, should be ignored for p urposes of prospective decision making in the context of the BSER definition. In the current proposal, we do not rely on sunk costs as a basis for distinguishing the Wolverine project from other projects under development.

58 We also noted this distincti on in the April 2012 GHG NSPS proposal. 77 FR 22425.20

complying with the 1,100 lb CO 2 /MWh standard would require changes to the project’s fundamental site, fuel type, or combustion technology choices that could not be accomplished without a degree of delay that would cause that valuable opportunity to be miss ed

, then making the project subject to the standard could entail high opportunity costs. 59 The question of whether the Wolverine project would experience opportunity costs of this nature is therefore dependent on whether the project is on the verge of construction (among other factors)

. Under CAA section 111(a)(1), a determination of BSER must “tak[e] into account the cost of achieving such reduction

.... ” One possible interpretation of this language is that opportunity costs of the nature just described could be a type of cost relevant to the determination of BSER. EPA has not yet decided whether to adopt this interpretation, as the interpretive question arises only if there is a project on the verge of construction, which remains uncertain. However, as suming we did decide to adopt th is interpretation, in order to formulate a view on BSER for the Wolverine project we would need to formulate a view on the magnitude of opportunity costs that might be imposed on the project . Our ability to do so is impeded in part by our threshold uncertainty regarding whether the project is on the verge of construction, as just discussed , and is further impeded by our lack of information concerning the degree of difficulty the project would face in adapting its design to i ncorporate CCS and the associated consequences for the project’s development schedule , as discussed in section III.b.1 above

. For these reasons, we have not at this time form ulated a view regarding whether CCS is BSER for the project and the project should therefore be made subject to the 1,100 lb CO 2 /MWh standard , or instead CCS is not BSER for the project and the project should therefore be assigned to a subcategory with an alternate CO 2 standard

. d. Reasons for not proposing an alternate CO 2 standard at this time

EPA is also not proposing at this time any alternate CO 2 standard of performance for the Wolverine project

. Section 111 can reasonably be read not to require EPA to propose a standard of performance when faced with the specific circumstances presented by the Wolverine project (and if similarly situated, the Washington County and/or Holcomb projects) in this rule making. Those circumstances include, first, the near

- term uncertainties regarding the project’s development schedule and potential opportunity costs and the consequences of those uncertainties for determin ing BSER, as discussed above; second, the signific ant uncertainty as to whether the project will actually ever be completed ; and third, the fact that if the project is not made subject to new

- source standards of performance established pursuant to section 111(b), it would become subject to existing

- source standards of performance established pursuant to section 111(d).
The first circumstance just listed , concerning the project’s near

- term uncertainties and the consequences for BSER, was discussed above. The only additional point to be made on this
circums tance is that those uncertainties affect EPA’s ability to determine not only whether the 1,100 lb
CO 2 /MWh standard is appropriate, but also what alternate CO 2 standard might be appropriate instead.
With respect to the second circumstance, the uncertainty whether the project will ever be completed, there has already been extensive discussion above of the fact that, based on present information, the Wolverine project appears to be the only fossil fuel

- fir ed boiler or IGCC EGU project that may be capable of commencing construction for NSPS purposes in the very near future and that, as

59 In the April 2012 proposal, EPA expressed a concern that imposition of a CO 2 standard might excessively burden even projects capable of meeting the standard by disrupting those projects’ business plan s. After consideration of comments received on this point, we now believe that this concern was overstated, and that projects capable of meeting the standard should be required to do so.21

currently designed, could not meet the 1,100 lb CO 2 /MWh standard

. We have also discussed our conflicting information on whether this project actually should be c onsidered on the verge of
construction

, and we have pointed out that if the project in fact is not on the verge of construction, then the project would be situated similarly to any other new fossil fuel

- fired boiler EGU project, which would make the 1,100 lb CO 2 /MWh standard appropriate if the project were eventually built

. Th e same information that suggests the Wolverine project in fact may not be on the verge of construction likewise can be interpreted as suggesting that the project may never be built a t all . Either of these situations

– deferred construction or outright cancellation

– would make development of an alternate CO 2 standard

unnecessary. The CAA does not require EPA to establish standards for non

- existent source types, and there is a consid erable possibility that any EPA resources spent to develop a n alternate CO 2 standard for the Wolverine project at this time would be wasted. (Similarly, there is no justification for expending resources at this time to develop alternate CO 2 standards for the Washington County and Holcomb projects, whose developers have represented that the projects are existing sources not subject to this rulemaking.)
With respect to the third circumstance, if the Wolverine project ( and possibly the Washin gton County and/or Holcomb project) were to commence construction before an applicable new

- source CO 2 standard of performance is proposed , the project would become an existing source for purposes of any future CO 2 standard of performance applicable to exis ting sources under CAA section 111(d). This fact distinguishes the current situation involving CO 2 emissions from situations involving emissions of criteria pollutants, because no CAA section 111 standards of performance are established for existing sources of criteria pollutants

. Applicability of a section 111(d) standard for CO 2 emissions would mitigate any negative impact that might arise from not covering the project under the proposed 1,100 lb CO 2 /MWh
standard. Indeed, it is possible that a sec tion 111(d) standard would be similarly stringent as any alternate GHG standard of performance that could have been developed for the Wolverine project consistent with retaining the project’s ability to commence construction in the very near term.

Fina lly, a s noted in the current proposal, EPA anticipate s resolving the development status and

propos ing a CO 2 standard for the Wolverine project (and possibly the Washington County and/or Holcomb project) at the time of finalization of the current proposal

. Based on information available at that time, the approach could take the form of applying the 1,100 lb CO 2 /MWh standard applicable to other new sources or subcategoriz ing with alternate CO 2 standards. However, we again note the possibility that the project (or projects) will either have been canceled or will no longer be a new source at the time the current proposal is finalized. If that is the case, it will be unnece ssary to propose a standard.