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## Chapter 2
Legal Issues and Statutory Authority

Contents
2.1 Applicability

................................ ................................ ................................ ........................ 2
2.2 GHG Regulation

................................ ................................ ................................ .................. 2
2.2.1 Rati onal Basis Analysis and Endangerment Finding

................................ ....................... 11
2.3 Applicability to Both 111(b) and 111(d)

................................ ................................ ........... 12
2.4 Regulatory Provisions Concerning Modification and Reconstruction, Including the Pollution Control Project (PCP) Exemption

................................ ................................ ................. 14
2.5 Application of BSER for Utility Boilers and IGCC Facilities

................................ ........... 14
2.6 Application of BSER for Combustion Turbines

................................ ................................ 15 2.6.1 Feasibility

................................ ................................ ................................ ......................... 16
2.7 NSR and BACT

................................ ................................ ................................ ................. 17
2.8 State Authority

................................ ................................ ................................ ................... 18
2.9 CAA Statutory Requirements

................................ ................................ ............................ 182

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### 2.1 APPLICABILITY

Comment 2.1

- 1: Commenter 0190 stated that the preamble to the NSPS specifically provided that existing units that commence modifications would not be treated as new sources subject to standards of performance and instead, they would be treated as existing sources. 79 FR 1446. The commenter stated that the CAA defines modification identically for purposes of both the PSD and section 111 regulations, even though the Supreme Court has held that EPA has the discretion to implement the definition differently in each program. The commenter stated that they are concerned that EPA will exercise its discretion in a manner other than it is interpreted today, for purposes of this proposal. The commenter stated that the EPA indicates that its modeling tools do not allow projection of any specific number of utility boilers and IGCC units that are expected to trigger the NSPS modification provision; however, EPA believes there are likely to be few. The commenter st ated that a fundamental assumption in this regard is the continuing applicability of the pollution control project (PCP) exemption; even with the PCP exemption, there may be circumstances that create uncertainty that EPA should resolve in its final rule.

Response 2.1

- 1: T he provisions of EPA’s final rule are clear on the issues raised in this
comment.



### 2.2 GHG REGULATION

Comment 2.2

- 1: Commenter (0170, 0186) stated that the Modified and Reconstructed Source Rule should be withdrawn.

Commenters (0153, 0278) stated that the EPA must withdraw this proposed rule, because modified and reconstructed sources would be subject to the same standards as new units under the CAA.

Response 2.2

- 1: The EPA has withdrawn the proposed emission standards for coal

- fired EGUs that make small modifications and for modified stat ionary combustion turbines. The EPA is promulgating final emission standards for reconstructed coal

- fired EGUs and stationary combustion turbines, as well as for coal

- fired EGUs that make large modifications. For more details, see the preamble to the final rule.

Comment 2.2

- 2: Commenter 0259 stated that because of the minimal benefit and costs projected for the Proposed Rule, EPA has an opportunity to exercise its 111 discretion to decline regulation of modified or reconstructed sources, as it has in past cases. The comme nter stated that several factors support a good cause showing that EPA should exercise its discretion and decline regulation of modified and reconstructed EGUs: the unlikelihood that any existing EGUs will be modified or reconstructed between now and 2025, the minimal costs and benefits that the proposed rule is hypothesized to produce, the applicability of the proposed 111(d) CO 2 emission standards to existing EGUs, and (assuming the EPA can justify its 75,000 tpy CO 2 e threshold) the application of BACT r equirements under the PSD program for modifications/reconstructions2

- 3 that lead to significant CO 2 emission increase. The commenter believes that all those factors strongly suggest that there is a minimal chance the rule will ever be actually applied in the real world, and that, even without a rule for modified/reconstructed EGU, other regulatory limits would assure CO 2 emissions would remain at virtually the same level with or without adoption of the instant rule.

Commenter 0241 stated that there was a lot o f ambiguity in the ruling, and it seems like the EPA is unclear as to how they plan to regulate and enforce this ruling.

Response 2.2

- 2: As discussed in the preamble, EPA is finalizing requirements for certain modified steam turbines and for reconstructed steam turbines and combustion turbines. EPA is deferring action on certain modified steam turbines and on modified combustion turbines.

Comment 2.2

- 3: Commenter (0195, 0211) supported EPA's efforts to address modified and reconstructed EGUs in a rulemaking separate from the proposed n ew source standards. Commenter said CAA section 111 requires EPA to issue standards for new sources and to revise those standards every 8 years, as appropriate, but does not otherwise prescribe the administrative procedure by which EPA carries out this tas k, other than to specify that standards be set through notice and comment rulemaking. Commenter said initiating two separate rulemakings is primarily a matter of form, not substance, and that EPA's "two track" approach to setting new source standards is fu lly consistent with the Supreme Court's decision in Massachusetts v. EPA. Commenter noted in Massachusetts, the court indicated that when regulating GHGs under the authority of the CAA, "EPA no doubt has significant latitude as to the manner, timing,
conte nt and coordination of its regulations with those of other industries." Commenter said proceeding with a separate rulemaking proceeding for modified and reconstructed sources is within EPA's discretion to affect the manner and timing of regulations under C AA section 111(b). Commenter continued that EPA may also set standards for modified and reconstructed sources that are different from those applied to new sources. CAA section 111(b)(2) allows the Administrator to "distinguish among classes, types, and siz es within categories of new sources for the purposes of establishing such standards." As noted in our comments on the new source rule, EPA has previously set different CAA section 111 standards for modified and reconstructed units. Such an approach likewis e may be taken with respect to modified and reconstructed fossil fuel

- fired EGUs, so long as the achievability of the standards adopted for such sources is adequately demonstrated.

Response 2.2

- 3: EPA agrees that the provisions in section 111(b)(1)(B) provide EPA with the flexibility to follow the process that it followed here with respect to newly constructed, modified and reconstructed sources.

Comment 2.2

- 4: Commenter 0280 stated that although not many modifications or reconstructions are expected, this proposed rule is needed to ens ure that the relationship between the 111(d) ESPS and the 111(b) NSPS for new sources is clarified. The commenter said if an existing source is reconstructed or modified in a way that would increase its emissions, this rule must ensure that the source will "install the latest available control technology" (reference to the Portland Cement Association v. Ruckelhaus case) while remaining within the ambit of the CAA section 111(d) CO 2 standards.2

- 4 Response 2.2

- 4: This comment goes to the issue of whether and how existing sourc es that become new sources are continued to be regulated under section 111(d). This issue is discussed in the context of EPA’s section 111(d) rule.

Comment 2.2

- 5: Commenter 0183 stated that EPA must revisit their approach to divide section 111(b) regulated units into mu ltiple rulemakings. The revisions made to the same regulatory language creates confusion and obfuscation about how EPA can resolve issues identified in the comments of one rulemaking without presupposing the outcome of comments on the second rulemaking. Th e commenter suggested that EPA withdraw both proposals and re

propose under a single rulemaking that would allow for commenters to make comprehensive and constructive comments on how section 111(b) applies to new, modified and reconstructed units.

Commente r 0282 stated that the proposed standards for utility boilers and IGCC units is much less stringent than the agency's proposed section 111(b) standards for the same type of newly constructed sources. Commenter said EPA may not set standards for modified an d reconstructed sources that differ from those for newly constructed sources. The statutory language of section 111(b) and the relevant statutory definitions contained in section 111(a) legislative intent and case law leave no doubt that Congress intended section 111(b) new source performance standard to be equally applicable to newly constructed and modified and reconstructed sources. EPA's attempt to devise a different standard of BSER for modified and reconstructed sources is therefore unsupportable. We urge EPA to assign the same standard to modified, reconstructed and newly constructed sources.

Commenter 0192 stated that EPA's separate and later treatment of modified and reconstructed sources under section 111(b) is problematic and inconsistent with the CAA. EPA offers no legal support for its effort to regulate reconstructed and modified fossil fuel

- fired EGUs in a distinct rulemaking separate and apart from newly constructed EGUs. By proceeding with separate rulemakings on different schedules, EPA has created legal uncertainty that adversely affected existing fossil fuel

- fired EGUs that have begun or are considering modification or reconstruction projects. The commenter suggested that EPA withdraw the proposed rules and propose a single rule that addre sses new, reconstructed and modified sources simultaneously as different subcategories with different standards of performance, or at minimum to finalize the two proposals at the same time.

Commenter 0216 stated that EPA should apply the NSPS to reconstruc ted steam generating units. The commenter noted that EPA argues that it is necessary to establish different emission standards for reconstructed and newly constructed steam generating units because it may not be technologically and economically feasible fo r reconstructed steam generating units to comply with the NSPS. However, the commenter stated that t his is not a reasoned basis for EPA's departure from prior practice of requiring reconstructed sources to meet the NSPS because EPA's regulations already pr ovide that a source is exempt from being classified as reconstructed if EPA determines that it is not feasible for the source to comply with the new source standard

Commenter 0244 stated that EPA lacks statuatory authority to distinguish between reconstruc ted and new EGUs for NSPS purposes. The commenter stated that Section 111(b) directs EPA to issue emission standards for sources that undergo modification or construction, which EPA interpreted to included reconstructions. The commenter believes that the E PA cannot distinguish2

- 5 between reconstructed sources and newly constructed sources without a technologically compelling reason to consider them separate "classes" or "types" under section 111(b)(2).

Response 2.2

- 5: As discussed in the preamble, EPA is finalizing requireme nts for certain modified steam turbines and for reconstructed steam turbines and combustion turbines. EPA is deferring action on certain modified steam turbines and on modified combustion turbines. EPA has the authority to establish different requirements for different types of “new” sources under Section 111(b)(2), which expressly provides that EPA “may distinguish among classes, types and sizes.”

Comment 2.2

- 6: Commenter (0183, 0209) stated that the three GHG EGU proposals create confusion as to what sources will be reg ulated under which of the three proposals, and that this has made it difficult to provide meaningful comment. Commenter 0183 suggested that EPA withdraw all three proposals until they can develop a consistent and cohesive approach instead of a piecemeal ru lemaking process. Commenter 0209 stated that this proposal is designed to complement the NSPS and to apply to sources also subject to the ESPS, and it cannot be evaluated independently of the NSPS and ESPS. Key concepts, such as the sour ce categories and d efinition of affected unit, have been public noticed with slightly different details in each proposed rule. For example, in this proposal, EPA red

- lined numerous parts of the previously proposed NSPS; however, in most cases, the red

- lines appear to have no necessary relationship to modified and reconstructed units, but instead, appear to be corrections to the proposed NSPS. Additionally, the text of the proposal was not directly published in the Federal Register. Finally, Commenter 0209 stated that the prop osed ESPS is, at this point, not sufficiently detailed to compare to this proposal. Colorado Springs Utilities requests that all three rules be re

- proposed at the same time, so that they can be appropriately evaluated for consistency and implementation

con cerns.

Commenter 0271 stated that the three proposed rules are duplicative and will subject sources to be applicable to multiple rules. This proposal would result in unnecessary regulatory burdens on EGUs resulting in high costs and little emission reducti on. The commenter believed that three separate standards under section 111 will cause confusion in the interpretation of applicability for sources and regulatory agencies.

Commenter 0250 stated that this is the first time in the history of NSPS developmen t that a new

source and modified and reconstructed sources rules have been proposed separately. The commenter added that the EPA proposed a range of possibilities for which they are seeking
comment instead of actual rules, which means that important detail s are not set forth in the language that will govern applicability and compliance. The commenter said these two items have made it difficult to comment on this proposal, and they requested that EPA issue a new, integrated proposal with actual regulatory la nguage governing all section 111 regulation.

Response 2.2

- 6: EPA disagrees that presenting the three proposals separately made it difficult to provide meaningful comment, and that the proposals should be withdrawn and re

- proposed. The final requirements imposed in these rules are clear and not duplicative.

Comment 2.2

- 7: Commenter (0218, 0278 ) stated that the proposed rules violate CAA section 111 and exceeds EPA's CAA authority because EPA is acting in violation of Congressional2

- 6 intent under the CAA by proposing separate performance standards categories for new, existing, modified and reconstructed EGUs.

Commenter 0218 stated because the EPA's authority to promulgate a rule for existing EGUs under Section 111(d) is predicated on the existence of a valid rule for new EGUs u nder 111(b), CAA Section 111(d) (1)(A)(ii); 79 FR 34852

- 34854, the invalidation of the Section 111(b) rule for new EGUs by the courts would place EPA's Section 111(d) rule for existing EGUs in jeopardy. So, the commenter stated, as a backstop against the possibility (or, indeed, the high likelihood) that invalidation of its "new" new source rule by the courts will leave it without the necessary "new source rule" predicate for its Section 111(d) rule for existing EGUs, EPA is promulgating a separate "new source rule" f or modified EGUs. Commenter stated that there are two principal legal issues the commenter sees with EPA's strategy for a Section 111(b) rule for modified EGUs. First, a necessary predicate to the promulgation of a valid existing source rule under Section 111(d) is the existence of performance standards that "would apply if such existing source were a new source." CAA Section 111(d)(1)(A)(ii). The commenter stated that although Section 111 defines "new source" to include "modified" sources, CAA Section 111( a)(2), in the case of EGUs, EPA has chosen to promulgate separate categories of Section 111(b) rules for "new" and "modified" EGUs. In this context, the Section 111(d) language quoted above is clear. The commenter believes that in the scenario of a court

- i nvalidated Section 111(b) rule for "new" new sources, the surviving Section 111(b) rule that applies only to modified sources will not provide the necessary "new" source predicate which Section 111(d) requires for a valid existing source rule. The commente r's second stated reason was that EPA's plan to regulate modified EGUs under its proposed Section 111(d) rule for existing EGUs is, to the commenter, plainly illegal. The commenter stated that section 111(b) governs "new" sources, which by definition, incl udes modified sources. CAA Section 111(a)(2). Section 111(d) governs existing sources. By definition, this excludes new or modified sources: "[t]he term "existing source" means any stationary source other than a new source." CAA Section 111(a)(6). The comm enter concluded by stating that EPA cannot regulate Section 111(b) modified sources under its Section 111(d) rule for existing sources, as it plans to do.

Response 2.2

- 7: EPA has the authority to promulgate different requirements for different types of sources under sect ion 111(b)(2). With respect to the discussion in the comment concerning what 111(b) standards are sufficient to provide a predicate for a 111(d) rule, that issue is discussed , among other places, in Chapter 1 of the response to comments document for the 11 1(d) rule.

Comment 2.2

- 8: Commenters (0153, 0278, 0183, 0283) stated EPA's three EGU CO 2 proposals taken together violate Congress' intent in for the regulation of stationary sources under the CAA by creating a separate performance standards category for new, existing, modified and reconstructed EGUs. The commenters said CAA Section 111, consistent with CAA Title I, was designed to place the more stringent, technology

- forcing performance standards on new stationary sources so that these sources could be designed to meet these emissions limits. For existing sources it is more difficult to meet aggressive performance standards because the units cannot be redesigned and must rely on add

- on controls or operation changes to meet new emissions limits. The modification and recon struction rules reflect Congress' recognition that significant physical changes to sources can also provide the potential for units to be retrofitted to meet new unit performance standards. The commenters indicated that the practical reality of this2

- 7 basic structure is that more stringent emissions limits apply to new, modified and reconstructed units and less stringent emissions limits apply to existing units. However, if EPA finalizes the proposed NSPS, ESPS, and this proposal, the effect will be for many states that the most stringent CO 2 emissions rate limits will apply to existing EGUs, less stringent limits will apply to new EGUs and the least stringent limits will apply to modified and reconstructed EGUs. This result perverts Congress' intent for CAA s tationary source emissions regulation. EPA in good faith cannot create this result.

Response 2.2

- 8: We disagree that the section 111(d) standards are more stringent than the section 111(b) standards. The use of the term “ordinarily” in the 1975 preamble reflects the
agen cy’s long term understanding that standards under 111(d) may differ from those under 111(b). In any case, the statute does not dictate that 111(d) standards must be less stringent in all cases. Rather, Congress recognized that the agency would be faced wit h different sets of challenges in regulating existing rather than new sources. Congress addressed this in part by establishing a cooperative

- federalism planning regime under section 111(d) similar to section 110. Reflecting this, the guidelines include sig nificant flexibilities, including the ability to trade and relatively long periods for compliance . This issue is discussed in section V.B.7. of the preamble for the section 111(d) rule, as well as in t he preamble for the section 111(b) rule and the legal memorandum for the section 111(d) rule

.
Comment 2.2

- 9: Commenter 0209 stated that EPA should further align this proposed rule with the ESPS. The commenter was encouraged that EPA contemplates aligning this rule and the ESPS in co

- proposed alternative 2, but suggested tha t a better alternative is to recognize compliance with the state ESPS plan to be equivalent to compliance with this rule.

Response 2.2

- 9: EPA has finalized requirements for certain modified sources and for reconstructed sources consistent with the requirements of section 111.

Comment 2.2

- 10: Commenter 0170 stated in the preamble to the proposed Modified and Reconstructed Source Rule, EPA claims expansive authority under Massachusetts v. EPA, 549 U.S. 497, 520 (2007), and American Electric Power Co. v. Connecticut, 131 S. Ct. 2527, 2537

-- 3 8 (2011) [hereinafter AEP]. Contrary to EPA's assertion, however, the Supreme Court in UARG held that Massachusetts v. EPA established Act

- wide, but not necessarily programmatic, authority for regulating CO 2 . With respect to programmatic authority, the "an y air pollutant" language found in section 111(b) of the CAA will not be judicially construed to include CO 2 whenever and wherever the resulting regulation "would bring about an enormous and transformative expansion in EPA's authority without clear congres sional authorization." To the extent EPA would rely on AEP's statements about section 111 authority to justify its overreach, EPA's reliance is wholly misplaced. In AEP, the Supreme Court did not decide that greenhouse gases ("GHG") were pollutants for all purposes under the CAA, as EPA supposes. In fact, the Court in UARG expressly pointed out that no party in AEP had argued that section 111 was ill

suited for the control of GHGs, so the Court never reached the issue. Here

-- because EPA believes it necess ary to conflate sections 111(b) and 111(d) to regulate CO 2 -- section 111 of the CAA, as actually written, is obviously not well

- suited for such regulation.2

- 8 Response 2.2

- 10: EPA has considered the statutory language and the applicable case law, including the cases cited b y commenter, and concluded that it has the authority and discretion to regulate CO2 under section 111.

Comment 2.2

- 11: Commenters (0191, 0268, 0276) stated the EPA's proposed Carbon Pollution Standards for Modified and Reconstructed Stationary Sources, combined with the p roposed Section 111(b) new source performance standards (NSPS) and Section 111(d) emission guidelines for existing sources, evidences unparalleled regulatory hubris. Through these three rules, the EPA seeks to unlawfully leverage its authority under the Cl ean Air Act, which is limited to regulating air pollutant emissions, to take near total control over the entire electricity sector, from generation to transmission and even demand. Commenter 0237 stated that the EPA's intention to bypass congressional inte nt and initiate a unilateral executive agenda is illegal for
two reasons. The commenter's first reason is that EPA has no authority to regulate outside the express structures of the authorizing law enacted by Congress in FDA v. Brown and Williamson. The co mmenter's second reason is that this measure creates an unconstitutional intrusion into the sole domain of Congress. The commenter stated that EPA has no authority
to "enact" new laws, such as eliminating coal

- fueled power plants. Commenter 0160 stated tha t Congressional action, not administrative rule, is required to properly address the complex and impactful issue of limiting greenhouse gas emissions. The effect of the EPA's action would be the crippling of the Nation's electric generation fleet. The EPA should abandon this effort now and limit its rulemaking to that which is authorized by the Act.

Response 2.2

- 11: For the reasons discussed in various places in the preambles and other supporting materials for the 111(b) and 111(d) rules, EPA disagrees that its final actio n here is beyond its authority under the CAA and further disagrees that these rules will create the negative effects that the commenter claims.

Comment 2.2

- 12: Commenter 0256 stated that The EPA should cite the portion of the Clean Air Act (CAA) that provides authority to EPA to promulgate rules whose intent is to restrict the modification or reconstruction of existing units. Unless it is documented that this is allowed by the CAA, the proposed rule should be withdrawn since the EPA doesn't have the authority to arbitrar ily stunt economic development by promulgating regulations that restrict the legitimate modification or reconstruction of a unit.

Response 2.2

- 12: EPA disagrees that this rule is intended to or will have the effect of restricting the modification or reconstruction of exist ing units.

Comment 2.2

- 13: Commenters (0153, 0278) stated that the CAA was not intended for EPA to be able to regulate GHG, and that EPA does not have the authority to promulgate this rule if promulgated. Commenter continued that in the Endangerment Finding, the EPA has identified climate change as a global problem, and that CO 2 emissions from other countries affect the US. Commenter noted that EPA previously questioned the practicality and value of establishing National Ambient Air Quality Standard (NAAQS) for GHG, and t hat they have still not issued a NAAQS for GHGs despite a petition to do so. The commenter attributed no NAAQS for GHG to the fact that EPA recognizes that GHG present global issues and do not present local air quality issues in this country.2

- 9 Commenter (0153, 0278) stated this proposal is contrary to and not authorized by Title I of the Clean Air Act which regulates stationary sources to ensure that the NAAQS are met. Section 111(b)(1)(B) of the Act requires the EPA Administrator to establish s tandards of performance within one year after including a category of stationary sources in a list as required by subparagraph (A) of section 111(b)(1). Additionally, the Administrator is required to review those standards and, if appropriate, revise them. EPA first established standards of performance for new EGUs under Section 111(b) in 1971. Those standards, which are codified in 40 C.F.R. Part 60, Subpart D and Da, only cover criteria pollutants particulate matter ("PM"), sulfur dioxide ("SO2"), and nit rogen oxides ("NOx"). The standards do not address or limit GHG emissions. Accordingly, EPA's action falls outside its statutory authority because EPA is not merely revising the existing standards that apply to new EGUs and instead, is illegally adding GHG s ( CO 2 ) as a new NSPS pollutant for fossil

- fired utility sources.

Response 2.2

- 13: EPA disagrees that it does not have the authority to promulgate this rule.

Comment 2.2

- 14: Commenter 0144 noted that while the public comment period for the Proposed Carbon Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units, 79 FR 34830 (June 18, 2104) was extended to December 1, 2014, EPA chose to maintain the deadline for comments on the proposed rule for modified and reconstructed electric generating units (EGU). Becaus e the rules are so inextricably linked, this puts the regulated community and other interested parties at a distinct disadvantage in the preparation and submission of substantive comments. EPA's action has all but eliminated the ability to cross reference concerns with the rule for modified and reconstructed units with comments related to the existing EGU rule.

Commenter 0152 stated that the EPA did not provide adequate time and opportunity to understand, analyze and develop comments on this proposal. The c ommenter said that each rule and its supporting documents, as well as other comments, are extremely lengthy and interconnected, and suggested that EPA, the regulated community, and the public would have benefited from more time in order to provide more tho rough analyses.

Response 2.2

- 14: EPA disagrees that the length of the comment period was insufficient.

Comment 2.2

- 15: Commenter 0187 stated that based on the sheer number of questions and input sought by EPA on the Proposed Rule, it is clear that the Agency does not fully understand the implications of the Proposal, or how the proposed standards might apply to Subpart Da and Subpart KKKK electric generating units (EGUs). Commenter is concerned that the final rule will be developed based almost entirely on feedback on the Proposed Rule, th ereby depriving affected sources the opportunity to understand and comment on a comprehensive rule prior to it becoming final. It is fundamental that persons affected by a proposed rule have an opportunity to provide meaningful comment before it is finaliz ed. 5 U.S.C. Section 553(c). The Proposal deprives affected sources of this opportunity and, therefore, should be withdrawn.

Response 2.2

- 15: EPA disagrees that interested parties did not have an adequate opportunity to
comment.2

- 10 Comment 2.2

- 16: Commenter (0242, 0149) stated that EPA's dec laration of the severability of the proposed standards and BSER determinations is not EPA's decision. The commenter said these rules and BSER determinations would only be determined as severable based on judiciary decision, not an executive branch (Ackerle y Commc'ns of Massachusetts, Inc. v. City of Cambridge, 135 F.3d 210, 215 (1st Cir. 1998) (noting that "Severability clauses, though probative of legislative intent, are not conclusive"); see also Cmty. for Creative Non

- Violence v. Turner, 893 F.2d 1387, 1 394 (D.C. Cir. 1990) (looking to whether a regulation contains a severability clause). The commenter continued that severability is inherently a question of interpreting the law and "the ultimate determination of severability will rarely turn on the
presen ce or absence of [a severability] clause," this was referenced from United States v. Jackson, 390 U.S. 570, 585 n.27 (1968); Reno v. Am. Civil Liberties Union, 521 U.S. 844, 885 n.49 (1997) (holding that "a severability clause is an aid merely; not an inex orable command") (internal quotation marks omitted).

Commenter 0142 stated that there is no legal basis supporting the EPA's contention that each proposed section 111 standard "remain in effect" regardless of whether any of the other section 111 standards were to be vacated or remanded. The commenter stated that EPA provides no discussion or rational basis to support this contention in light of the plain language of section 111(d), which limits regulations under section 111(d) to existing sources "to which a standard of performance under this section would apply if such a existing source were a new source."

Response 2.2

- 16: EPA’s view on the severability of different provisions in a rule is a relevant and important factor for determining what provisions are severable.

Comment 2.2

- 17: Comm enter 0263 stated that there is no statutory basis for delineation between a reconstructed new sources and a newly constructed new source.

Response 2.2

- 17: Section 111(b)(2) provides EPA’s authority to distinguish between reconstructed sources and newly constructed sourc es.

Comment 2.2

- 18: Commenter 0242 stated that EPA is requesting comment on having an upper capital cost threshold for reconstructions, where if exceeded, would be considered a new

source. The commenter does not believe that a cost threshold is appropriate. The commenter believes that U.S. EPA must ensure that these final rules do not inhibit or create a disincentive for the types of projects that can be conducted in order to comply with these and other U.S. EPA rules and reduce CO 2 emissions.

Response 2.2

- 18: EPA’s final rule does not co ntain an upper threshold for capitals costs for determining what is a reconstruct ed source

.
Comment 2.2

- 19: Commenter 0242 stated that EPA's once

- in

- always

- in approach to the 111(b) and 111(d) subsections is not allowed under the plain language of section 111, that subj ecting all sources that are covered by any Section 111(d) plan to forever be subject to that plan changes how all Section 111(d) programs are to be applied with real substantive consequences for the sources subject to the plans, and is illegal and a retroa ctive application of a complete regulatory
program.2

- 11 Response 2.2

- 19: EPA is not finalizing an interpretation under which existing sources would continue to be covered by section 111(d) requirements after they become subject to requirements under section 111(b).

Comment 2.2

- 20: Commenter 0214 stated that d ue to the high variability in CO 2 emission rate data from potentially affected sources no standards can be reasonably justified for the subcategory of modified or reconstructed units. The commenter stated that the high variability in emis sion rate data coupled with the other numerous flaws in EPA's proposal solidify the need to affirm that no standards of performance can be established for modified and reconstructed sources. The commenter believes that EPA's attempt to establish unit

- by

- un it standards as a solution to this problem is illegal.

Response 2.2

- 20: EPA disagrees with this comment. EPA has the authority and discretion under section 111 to set unit specific standards , and EPA’s action here is supported by the record

.
2. 2 .1 Rational Basis Analysis and Endangerment Finding

Comment 2.2

- 21: M any commenters submitted comments on whether EPA is required to do an endangerment finding for this rule. Some commenters supported EPA’s view that section 111(b) only requires an endangerment finding when a source category is listed and that no additional endangerment finding is needed to set standards for additional pollutants emitted from a listed source category. Other commenters argued that EPA must make a pollutant

- specific endangerment finding for a ny pollutant that it regulates under section 111(b), and so here must make a pollutant

- specific endangerment finding for CO2.

Response 2.2

- 21: An endangerment finding is only required when EPA lists a source category under section 111(b)(1)(A). Nothing in section 111 req uires that EPA make further endangerment findings with respect to each pollutant that it regulates under section 111(b)(1)(B). EPA’s views on these issues are discussed in detail in Section III.A. of the preamble.

Comment 2.2

- 22: Multiple commenters argued that EPA ca nnot rely on the CAA section 202 finding to regulate CO 2 emissions under section 111.

Response 2.2

- 22: Th e comments on this point are based on a misunderstanding of the role of the 2009 endangerment finding in th ese rules . EPA is not relying on the 2009 endangerment findi ng to be an endangerment finding for this rule. Instead, EPA is considering the information and analysis in the 2009 endangerment finding, along with the more recent information that confirms and expands on that finding, to support its conclusions in the r ational basis analysis. Further, if an endangerment finding is required, then (again) the information and analysis in th e 2009 finding, along with more recent information that confirms and expands on that finding, support a finding that CO2 endangers human health and welfare.2

- 12 

### 2.3 APPLICABILITY TO BOT H 111(B) AND 111(D)

Comment 2.3

- 1: Many commenters submitted comments on EPA’s proposed interpretation to have existing sources continue to be subject to requirements under 111(d) after they become subject to requirements under 111(b).

Response 2.3

- 1: EPA is not finalizing an interpretation that existing sources continue to be subject to requirements under 111(d) after they become subject to requirements under 111(b).

Comment 2.3

- 2: Two commenters (0214 and 0248) recommended that EPA exclude modified and reco nstructed sources from regulation under section 111(b) and allow states to regulate them under section 111(d). Commenter 0214 stated that EPA should address modified and reconstructed units by establishing that no standards should apply because: (1) EPA ha s already conceded that regulating modified and reconstructed units under section 111 will not result in any meaningful benefits and (2) the high degree of variability in CO 2 emission rates of units that could trigger section 111(b) through a modification or reconstruction precludes establishing an achievable source category

- or subcategory

- wide standard. If EPA is determined to regulate modified and reconstructed units under section 111, two options are available to the Agency: (1) withdraw and re

- propose appropriate standards of performance under section 111(b) only for the subcategory of "modified or reconstructed" units, or (2) provide an exemption from the definitions of modification and reconstruction for those sources under its section 111(b) standard s and allow states to continue regulating them as "existing sources" under section 111(d). Because no source category

- wide standard of performance can be set for modified or reconstructed sources, EPA could affirmatively exclude modified and reconstructed units from section 111(b) and allow states to regulate these units under section 111(d).

With regard to modifications, commenter 0214 argued that EPA can exclude them from section 111(b) despite the statutory provision requiring "new sources" to include "m odifications." EPA has already further defined the term "modification" in its regulations to include only those sources that conduct a physical or operational change that results in an increase in a pollutant "to which a standard applies." EPA's definition of "modification" further confirms that "an existing facility shall become an affected facility for each pollutant to which a standard applies and for which there is an increase in the emission rate to the atmosphere." Therefore, if a physical or operatio nal change results in an increase in a pollutant that is not covered by a standard, that emissions increase does not constitute a "modification," and the unit remains an "existing source" for that pollutant. In other words, under EPA's regulatory definitio n of "modification," sources trigger section 111(b) standards one pollutant at a time. Accordingly, a source may be considered "modified" for one pollutant, and an "existing source" for another pollutant, depending on whether each pollutant is covered by t he section 111(b) standard and whether the source has conducted a physical or operational change that causes an increase in that pollutant. With this regulatory definition of "modification," EPA has clarified the meaning of the statutory definition of "mod ification," which otherwise refers only generally to "increases [in] the amount of any air pollutant." EPA's decision to define "modification" one pollutant at a time is a reasonable interpretation of the statute

-- after all, triggering a section 111(b) sta ndard with an increase in a pollutant that it does not cover would make little practical sense. EPA's decision to limit the scope of the phrase "any air pollutant" to only those already covered by a standard is also consistent with the recent U.S. Supreme Court decision in UARG v. EPA, which held that2

- 13 the phrase "any air pollutant" can have different meanings depending on the context. See UARG v. EPA, 134 S. Ct. 2427, 2439

- 2440 (2014) (citing EPA's NSPS program as an example to confirm that "where the term 'air pollutant' appears in the Act's operative provisions, EPA has routinely given it a narrower, context

- appropriate meaning.") EPA started down this path in its January 2014 Re

- Proposed NSPS: "3. Sources Not Subject to This Rulemaking [for Newly Construc ted Units] We are not proposing standards for certain types of sources. These include 'existing sources undertaking modifications or reconstructions.' As a result, under the CAA section 111(a) definitions of 'new source' and 'existing source,' if those typ es of sources commence construction or modification, they would not be treated as 'new source[s]' subject to the standards of performance proposed today, and instead, they would be treated as existing sources." As such, those sources could remain "existing sources" for the purpose of their CO 2 emissions, and thus subject to section 111(d) standards for that pollutant, not section 111(b).

With regard to reconstruction, commenter 0214 argued that, in contrast to "modifications," the CAA does not define or use the term "reconstruction" at all. That term is entirely EPA's creation. As such, whether a source "reconstructs" is essentially irrelevant to the question of whether it must be considered a "new source" or an "existing source" under the provisions and def initions provided within section 111. In the past, EPA has typically regulated a "reconstructed" unit under section 111(b) as "new sources," claiming that "reconstructions" are essentially another form of "construction," which the statute includes in the d efinition of a "new source." In addition, the same difficulties associated with developing and enforcing an achievable standard for modified units apply to reconstructed units, in that there appears to be little rational basis upon which EPA could establis h a source category

- wide, or even subcategory

- wide standard, as required by section 111(b). As a result of these concerns, EPA could affirmatively exclude reconstructions from its section 111(b) regulations and allow states to continue regulating them as " existing sources."

I n a similar comment, commenter 0248 recommended that modified and reconstructed units be exempt from EPA's proposed section 111(b) NSPS provisions, given the relatively small number of units expected to be affected by EPA's proposed mod ified and reconstructed standards and the fact that these units may have been drawn from the group of existing units that EPA has proposed to regulate for CO 2 emissions under section 111(d). The commenter suggested that states should have the flexibility t o include modified and reconstructed units with existing units of similar fuel type and design and provide for regulation of CO 2 emissions of these units in their state plans, in accordance with the provisions EPA finalizes for existing units as proposed u nder CAA section 111(d).

Response 2.3

- 2: In this rule, EPA is finalizing section 111(b) requirements for certain modified steam turbines and deferring action with respect to other modified steam turbines and for modified combustion turbines. This is discussed in Sections VI and IX of the preamble. EPA is finalizing requirements for reconstructed steam turbines and combustion turbines. Further, EPA agrees with the conclusion that existing sources that modify or reconstruct but do not become subject to a section 111(b) sta ndard continue to be existing sources and subject to requirements under 111(d), as discussed in Section IV.A. of the preamble.2

- 14 

### 2.4 REGULATORY PROVISION S CONCERNING MODIFIC ATION AND RECONSTRUCTION, INCLUDING THE POLLUT ION CONTROL PROJECT (PCP ) EXEMPTION

Comment 2.4

- 1: M any commenters submitted comments concerning the pollution control project (PCP) exemption in 40 CFR 60.14(e)(5).

Response 2.4

- 1: EPA neither proposed nor is taking final action on any changes to the PCP exemption in this rule.

Comment 2.4

- 2: Some commenters suggest ed changes and raise d issues with respect t o the regulatory provisions governing modification in 40 CFR 60.14 and governing reconstruction in 40 CFR 60.15.

Response 2.4

- 2: EPA neither proposed nor is taking final action on any changes to the regulatory provisions in 40 CFR 60.14 or 60.15 in t his rule

.


### 2.5 APPLICATION OF BSER FOR UTILITY BOILERS AND IGCC FACILITIES

Comment 2.5

- 1: Commenter 0282 argued that the section 111(b) new source standards must reduce emissions to the maximum practicable degree , and t he manner in which a section 111(b) standard for new sour ces must be determined is set forth in the statutory text and has been considered and explained by decades of case law.

Response 2.5

- 1: EPA’s standards in this rule meet the requirements of section 111(b).

Comment 2.5

- 2: Commenter 0192 argued that the plain language of section 111 requ ires a

source

- based BSER analysis. The plain language of section 111(d) directs EPA to "establish standards of performance for new sources within [a source] category" after making an appropriate significant contribution endangerment determination. 42 U.S.C

. 111 (b)(1)(B). Section 111 further defines a stationary source as "any building, structure, facility, or installation which emits or may emit an air pollutant." The statutory text here is clear. Standards of performance under section 111 are not establish ed on an aggregate basis for an entire sector of the United States' economy. Instead, they must be established on an individual basis for each class or category of sources and, therefore, must be limited to the types of pollution controls that can be imple mented directly by a source within that class or category. Likewise, the best system of emission reduction adequately demonstrated which the standard of performance must reflect must also be applied in a source

- based manner. See, e.g., Portland Cement Asso ciation v. Ruckelshaus, 486 F.2d 375, 391 (D.C. Cir. 1973) ("The essential question was whether the technology would be available for installation in new plants.").

The commenter also noted that the narrow source

- based approach mandated by Congress in Sec tion 111 has been explicitly recognized by the Courts. In ASARCO v. EPA, 578 F.2d 319 (D.C. Cir. 1978), the court applied a narrow construction of the term "stationary source" under section 111. There EPA sought to apply a "bubble concept" to existing stat ionary sources in a manner that would allow certain facilities to avoid regulation under section 111(b) because2

- 15 emissions increases from one source within a facility could be offset by emissions reductions from other sources i n the same facility. The court held that "[t]he regulations plainly indicate that EPA has attempted to change the basic unit to which NSPSs apply from a single building, structure, facility, or installation

-- the unit prescribed by statute

-- to a combination of such units. The agency has no discretion to rewrite the statute in this fashion." Similarly, in Alabama Power Co. v. Costle, 636 F.2d 323, 397 (D.C. Cir. 1979), the court confirmed that under "the limited scope afforded the term 'source' in section 111(a)(3), however, EPA cannot tr eat contiguous and commonly owned units as a single source unless they fit within the four permissible statutory terms [of building, structure, facility, or installation]." In contrast, to the narrow scope of the NSPS program, the D.C. Circuit held that un der the section 169 PSD program, "EPA has latitude to adopt definitions of the component terms of 'source' that are different in scope than those that may be employed for NSPS and other clean air programs due to differences in the purpose and structure of t he two programs."

The commenter further noted that ASARCO and Alabama Power highlight the specific focus of section 111 on individual facilities and prohibit EPA from claiming discretion to apply a BSER analysis or to establish standards of performance u nder section 111 at anything broader than a

source

- specific level. Since the court's decision in ASARCO, EPA has never used section 111 in a manner that would regulate sources outside of the source category identified in the section 111(b) significant cont ribution endangerment determination

Response 2.5

- 2: EPA disagrees that section 111 requires EPA to establish unit

- specific standards, but has conclude d that section 111 does provide EPA with the authority and discretion to do so under appropriate circumstances.



### 2.6 APPLICATIO N OF BSER FOR COMBUS TION TURBINES

Comment 2.6

- 1: Commenter 0215 stated that EPA has identified natural gas combined cycle ("NGCC") technology as BSER, but it has not adequately defined that term. EPA appears to incorrectly believe older NGCC units can meet the same emiss ion limits as new units. EPA must revise its definition of "NGCC technology" to ensure that older units are not subjected to the same requirements as new units.

Commenter added NGCC is not BSER for simple cycle combustion turbines, and EPA should explicitl y exclude simple cycle combustion turbines from the rule.

Commenter added that any Subpart KKKK unit that is technologically and economically incapable of meeting the NSPS should be excused from the modified standard.

Response 2.6

- 1: The EPA is withdrawing the proposed emission standard for modified stationary combustion turbines, as explained in Section IX.D.3.e of the preamble to the final rule. The EPA provided sufficient data to demonstrate that base load combustion turbines that

r econstruct can essentially be rebuilt as a new unit and meet the same 1,000 lb CO 2 /MWh

- g standard. The EPA agrees that, per the regulatory definition of “reconstruction,” a unit that is technologically or economically incapable of meeting the final standar d can petition to be excused from the standard.2

- 16 2. 6 .1 Feasibility

Comment 2.6

- 2: Commenter 0150 stated that reconstructed units are not required to meet the NSPS if it is not "technologically and economically feasible" to do so. EPA must include provisions implementing t his requirement and should state expressly that imposition of any limit that would require the unit to shut down is per se economically infeasible.

Response 2.6

- 2: The EPA agrees that, per the regulatory definition of “reconstruction,” a unit that is technologically or ec onomically incapable of meeting the final standard can petition to be excused from the standard. However, b ase load combustion turbines that reconstruct can essentially be rebuilt as a new unit and can easily meet the same 1,000 lb CO 2 /MWh

- g standard. If a n owner or operator can already afford to invest 50 percent of the cost of a new unit, then the owner or operator can make the necessary efficiency upgrades to meet the final standard and will not need to shut down.

Comment 2.6

- 3: Commenter 0158 stated that EPA has not p rovided a sufficient basis for the proposed standards covering modified and reconstructed natural gas

- based stationary combustion turbines, and those standards are arbitrary.

Response 2.6

- 3: The EPA is withdrawing the proposed emission standard for modified stationary com bustion turbines, as explained in Section IX.D.3.e of the preamble to the final rule. The EPA provided sufficient data to demonstrate that base load combustion turbines that reconstruct can essentially be rebuilt as a new unit and meet the same 1,000 lb CO 2 /MWh

- g standard. See Section IX.D.3.b of the preamble for more details.

Comment 2.6

- 4: Commenter 0215 stated EPA has failed to show that its proposed NSPS for reconstructed Subpart KKKK units "is achievable under the range of relevant conditions which may affect the emissions to be regulated," including "under most adverse conditions which c an reasonably be expected to recur." See Nat'l Lime Ass'n v. EPA, 627 F.2d 416, 431 n.46, 433 (D.C. Cir. 1980). A standard that applies to all reconstructed sources, like new sources in the same category, must be achievable "for the industry as a whole" an d not just for a subset of

sources. EPA may not base its determination that a standard is achievable on " mere speculation or conjecture. " Lignite Energy Council, 198 F.3d at 934. Rather, in order to show that its proposed emission level is "achievable," EP A must: "(1) identify variable conditions that might contribute to the amount of expected emissions, and (2) establish that the test data relied on by the agency are representative of potential industry

- wide performance, given the range of variables that a ffect the achievability of the standard." Sierra Club, 657 F.2d at 377 (citing Nat'l Lime Ass'n, 627 F.2d at 433). Commenter continued the validity of EPA's achievability determination depends on how fully it has accounted for the variations among sources in the regulated category that could affect emission levels. Courts have repeatedly rejected NSPS that EPA deemed "achievable" based on test data from a narrow set of sample sources that did not represent the full range of relevant variability among source s to which the standard will apply. See, e.g., Nat'l Lime Ass'n, 627 F.2d at 432; Portland Cement Ass'n, 486 F.2d at 396, 402. Commenter said EPA has traditionally set NSPS such that at least 99 percent of units subject to the standard would be expected to comply. See, e.g., EPA, EPA

- 453/R

- 94

- 012, New Source Performance Standards, Subpart Da

- Technical Support for Proposed Revisions to NOx Standard at Section 3.2.3 (Analysis of Long

- Term Continuous Emission Monitoring Data) at 3

-2

- 17 43, 3

- 49, 3

- 55 (June 1997). Commenter said this reflects the fact that an NSPS "establishes what every source can achieve, not the best that a source could do." See Letter from Gary McCutchen, Chief, New Source Review Section, EPA OAQPS, to Richard E. Grusnick, Chief, Air Division, Ala. Dep't of Envtl. Mgmt. at 1 (July 28, 1987).

Response 2.6

- 4: The EPA provided sufficient data to demonstrate that base load combustion turbines that reconstruct can essentially be rebuilt as a new unit and meet the same 1,000 lb CO 2 /MWh

- g standard. Moreover, the EPA d emonstrated how the final standard accommodates the full range of turbine sizes, operating conditions, site

- specific characteristics, and future degradation. See Sections IX.D.3.a and b of the preamble for more details.

Comment 2.6

- 5: Commenter 0215 noted that EPA states that its analysis "with regards [sic] to reconstructed natural gas

- fired stationary combustion turbines is also applicable to modified" NGCC EGUs. See 79 Fed. Reg. at 34,989. As is the case for modified Subpart Da boilers, there is no TSD or analysis of e missions data in the rulemaking docket that supports EPA's proposed NSPS for modified NGCC EGUs.11 Commenter said the docket is completely devoid of any analysis demonstrating that the proposed NSPS is achievable for modified or reconstructed Subpart KKKK units. Commenter said this defect alone requires that EPA withdraw the Proposed Standards until it has developed and included in a docket the necessary supporting information as required by section 307(d)(3) of the CAA.

Commenter 0215 stated EPA has propo sed that BSER for modified stationary combustion turbines is NGCC technology. See 79 Fed. Reg. at 34,990. Commenter agreed in principle that NGCC technology is an appropriate starting point for BSER and that "NGCC technology is the most efficient technolog y for natural

- gas fired stationary comb ustion turbines." Commenter agreed that EPA has properly rejected the use of carbon capture and sequestration and high efficiency simple cycle aero

- derivative turbines as BSER.

Response 2.6

- 5: The EPA is withdrawing the proposed emi ssion standard for modified stationary combustion turbines, as explained in Section IX.D.3.e of the preamble to the final rule. The EPA has rejected CCS and simple cycle turbines as the BSER for reconstructed base load units in favor of NGCC. The EPA provi ded sufficient data to demonstrate that base load combustion turbines that reconstruct can essentially be rebuilt as a new unit and meet the same 1,000 lb CO 2 /MWh

- g standard. See Section IX.D.3.b of the preamble for more details.



### 2.7 NSR AND BACT

Comment 2.7

- 1: Multiple commenters (0144, 0149, 0242, and 0267) expressed their concern about the impact of the standards for modified and reconstructed units on N S R and BACT and recommended that EPA take action to address this issue , including the creation of exemptions from NSR and BACT requirements

. Response 2.7

- 1: EPA did not propose nor is taking any final action concerning NSR or BACT or the relationship of section 111 standards to BACT.2

- 18 

### 2.8 STATE AUTHORITY

Comment 2.8

- 1: Commenter 0264 requested that EPA make it clear in the proposed regulation fo r new electric generating units that it does not in any way compromise or jeopardize the permitting and enforcement authority of the local air pollution control agencies, such as the local air pollution control districts in California. It is critical that permitting for criteria and toxic pollutants and the implementation of the applicable NSR programs for these pollutants is not hindered by the proposed 111 (b) regulation.

Response 2.8

- 1: EPA does not intend to nor does the final rule contain any provisions that would hin der the administration or enforcement of programs regulating criteria and toxic pollutants.



### 2.9 CAA STATUTORY REQUIREMEN TS

Comment 2.9

- 1: Multiple commenters stated that EPA violated CAA 307(d) by not including sufficient technical support documents, emissions data, economi c analyses, calculation methodology, and memorandum in the docket for the proposed rule.

Response 2.9

- 1: EPA disagrees that the docket for the proposed rule did not contain adequate information or otherwise was inadequate for commenters to understand the proposal and

comm ent on it.

Comment 2.9

- 2: Commenters 0186 and 0237 state that the regulation violates the Clean Air Act because the EPA has failed to satisfy its mandatory obligation under Section 321(a) of the CAA, 42 U.S.C. Section 7621(a), to conduct continuing evaluations of how emp loyment is affected by EPA's actions under the Act.

Response 2.9

- 2: The EPA disagrees with this comment. Section 321(a) authorizes the EPA to conduct “continuing evaluations of potential loss or shifts of employment which may result from the administration or enforcement of the [CAA].” Section 321(a) does not prescribe the scope, timing, or frequency of these evaluations and does not require the EPA to conduct any specific type of analysis. Section 321(a) also does not require the EPA to conduct employment evaluations as p art of the rulemaking process or as a precondition to the issuance of a final rule. On the contrary, Section 321(d) clearly states that Section 321 does not authorize or require the EPA “to modify or withdraw any requirement imposed or proposed to be impos ed under [the CAA.]” Nevertheless, in the exercise of its discretion, the EPA did evaluate the potential employment impacts of both the proposed and final rules in the RIAs accompanying those rules. Thus, the commenters are incorrect that the EPA failed to consid er potential employment impacts.