1 

Legal Memorandum for Proposed Carbon Pollution Emission 

Guidelines for Existing Electric Utility Generating Units 

Introduction 

The purpose of this memorandum (Legal Memorandum) is 

to supplement the preamble by providing background for the 

legal issues discussed in the preamble for this proposed 

rule1 and further discussion of some, but not all, of those 

issues. This memorandum is intended to be read in 

conjunction with, and assumes familiarity with, the

preamble. 

I. Background 

A. Clean Air Act section 111

Clean Air Act (CAA) section 111, which Congress 

enacted as part of the 1970 CAA Amendments, establishes 

mechanisms for controlling emissions of air pollutants from 

stationary sources. This provision requires EPA to 

promulgate a list of categories of stationary sources that 

the Administrator, in his or her judgment, finds “causes, 

or contributes significantly to, air pollution which may 

reasonably be anticipated to endanger public health or 

welfare.”2 EPA has listed more than 60 stationary source 

 

1 The proposed rule is the “Carbon Pollution Emission 

Guidelines for Existing Stationary Sources: Electric 

Utility Generating Units.” 

2 CAA section 111(b)(1)(A). 
2 

categories under this provision.3 Once EPA lists a source 

category, EPA must, under CAA section 111(b)(1)(B),

establish “standards of performance” for emissions of air 

pollutants from new sources in the source category.4 These 

standards are known as new source performance standards 

(NSPS), and they are national requirements that apply 

directly to the sources subject to them. 

When the EPA establishes NSPS for new sources in a 

particular source category, the EPA is also required, under 

CAA section 111(d)(1), to prescribe regulations for states 

to submit plans regulating existing sources in that source 

category for any air pollutant that, in general, is not 

regulated under the CAA section 109 requirements for the 

national ambient air quality standards (NAAQS) or regulated 

under the CAA section 112 requirements for hazardous air 

pollutants (HAP). In contrast with CAA section 111(b), 

which provides for direct federal regulation of new

sources, section 111(d)’s mechanism for regulating existing 

sources provides that states will submit plans that

establish “standards of performance” for the affected 

sources and that contain other measures to implement and 

enforce those standards. 

 

3 See 40 CFR 60 subparts Cb – OOOO. 

4 CAA section 111(b)(1)(B), 111(a)(1).
3 

The term “standard of performance” is defined under

CAA section 111(a)(1) as a “standard for emissions of air 

pollutants” that “reflects the degree of emission 

limitation achievable” from the “best system of emission 

reduction,” considering costs and other factors, that “the 

Administrator determines has been adequately demonstrated.” 

CAA section 302(l) also defines “standard of performance” 

as “a requirement of continuous emission reduction,

including any requirement relating to the operation or 

maintenance of a source to assure continuous emission 

reduction.” 

Under the EPA’s implementing regulations for CAA 

section 111(d)(1), the EPA must determine the best system 

of emission reduction for the sources, and then apply that 

best system to determine the required level of emissions or 

emission reduction, which the regulations refer to as the 

“emissions guideline.”5 Under section 111(d)(1), the states 

must then adopt state plans that establish standards of 

performance and measures that implement and enforce those 

standards. In the case of an air pollutant that EPA has 

determined may cause or contribute to endangerment of 

public health, the states’ standards of performance must 

 

5 40 CFR 60.22(b)(5). 
4 

not be less stringent than the EPA’s emission guideline.6 

CAA section 111(d)(1) grants states the authority, in 

applying a standard of performance to particular sources, 

to take into account the source’s remaining useful life or 

other factors. 

The state must submit its plan to the EPA for 

approval, and, under CAA section 111(d)(2), the EPA must 

approve the state plan if it is “satisfactory.”7 If a 

state does not submit a plan, the EPA must establish a 

federal plan for that state.8 Once a state receives the 

EPA’s approval for its plan, the provisions in the plan 

become federally enforceable against the entity responsible 

for noncompliance, in the same manner as the provisions of 

an approved state implementation plan (SIP) under CAA 

section 110. 

B. Legislative history 

The legislative history of the 1970 Clean Air Act 

Amendments indicates that at that time, Congress grouped 

air pollutants from existing stationary sources into three 

categories: (i) air pollutants that affected the National 

Ambient Air Quality Standards (NAAQS), which would be 

regulated under CAA section 110 state implementation plans 

 

6 40 CFR 60.24(c). 

7 CAA section 111(d)(2)(A). 

8 Id. 
5 

(SIPs), (ii) hazardous air pollutants (HAPs), which would 

be regulated under EPA-promulgated national emission 

standards pursuant to CAA section 112, and (iii) all other 

air pollutants. The House bill did not address this third 

group of air pollutants, but the Senate bill did: it 

termed them “selected air pollution agents” and proposed to 

require the EPA to promulgate national emission standards 

pursuant to proposed CAA section 114. The 1970 House-Senate 

Conference Committee that was formed to resolve differences 

between the House and Senate versions of the CAA Amendments 

did not adopt the Senate bill’s proposed CAA section 114, 

but did adopt section 111(d), which covers the same nonNAAQS, non-HAPs air pollutants. Under section 111(d)(1) as 

included in the 1970 CAA Amendments, the states were 

required to submit to the EPA state plans that “establish[] 

emission standards” for their existing sources. Although 

the legislative history of the 1970 CAA Amendments does not 

contain statements that directly discuss the specific 

provisions included in section 111(d), the legislative 

history of the Senate bill’s proposed section 114 is 

relevant to the meaning of section 111(d), and we refer to 

parts of that legislative history below. 
6 

For new sources, section 111(b)(1)(B) required the EPA 

to promulgate “standards of performance,” and defined that 

term, under section 111(a)(1), as— 

a standard for emissions of air pollutants which 

reflects the degree of emission limitation 

achievable through the application of the best 

system of emission reduction which (taking into 

account the cost of achieving such reduction) the 

Administrator determines has been adequately 

demonstrated. 

The legislative history discusses, among other things, the 

meaning of the term “standard of performance,”9 which we 

refer to below. 

In the 1977 CAA Amendments, Congress made several 

changes to section 111, including section 111(d). Congress 

substituted “standards of performance” for “emission 

standards,” which, as noted above, the states are required 

to establish in their state plans. In addition, Congress 

added to section 111(d)(1) the requirement that the EPA’s 

regulations “permit the State in applying a standard of 

performance to any particular source under a [section 

111(d)] plan ... to take into consideration, among other 

factors, the remaining useful life of the existing source 

to which such standards applies.” Congress added to section 

111(d)(2) a similar requirement applicable to federal 

plans. In addition, Congress revised the definition of 

 

9 See, e.g., Senate Comm. Rep. No. 91-1196 at 16. 
7 

“standard of performance” in section 111(a)(1) to 

distinguish among different types of sources, and to 

require that for fossil fuel-fired sources, the standard 

(i) be based on, in lieu of the “best system of emission 

reduction ... adequately demonstrated,” the “best 

technological system of continuous emission reduction ... 

adequately demonstrated;” and (ii) require a percentage 

reduction in emissions. In addition, in the 1977 CAA 

Amendments, Congress expanded the parenthetical requirement 

that the Administrator consider the cost of achieving the 

reduction to also require the Administrator to consider 

“any nonair quality health and environment impact and 

energy requirements.” Congress also added the definition of 

“standard of performance” in section 302(l), which defines 

the term to require a “continuous emission reduction.” 

In the 1990 CAA Amendments, Congress made further 

amendments to section 111, including section 111(d). Among 

other things, Congress again revised the definition of 

“standard of performance” under CAA section 111(a)(1), this 

time repealing the requirements that the standard of 

performance be based on the best technological system and 

achieve a percentage reduction in emissions, and replacing 

those provisions with the terms used in the 1970 CAA 

Amendments’ version of section 111(a)(1) that the standard 
8 

of performance be based on the “best system of emission 

reduction ... adequately demonstrated.” In addition, in 

section 111(d)(1)(A)(i), Congress revised the description 

of which air pollutants are subject to section 111(d) but, 

as discussed below, left the provision ambiguous with 

respect to its applicability to the air pollutant emitted 

from the sources at issue in this rulemaking: CO2 emissions 

from fossil fuel-fired EGUs . CAA section 111 has not been 

revised since the 1990 CAA Amendments. 

C. Regulatory history and case law 

The EPA issued regulations implementing CAA section

111(d) in 1975,10 and has revised them in the years since.11 

(We refer to the regulations generally as the implementing 

regulations.) These regulations provide that, in 

promulgating requirements for sources under CAA section 

111(d), the EPA first develops regulations known as

“emission guidelines,” which establish binding requirements 

that states must address when they develop their plans.12 

 

10 “State Plans for the Control of Certain Pollutants From 

Existing Facilities,” 40 FR 53,340 (Nov. 17, 1975).

11 The most recent amendment was in 77 Fed. Reg. 9304 (Feb. 

16, 2012). 

12 40 CFR 60.22. In the 1975 rulemaking, the EPA explained 

that it used the term “emissions guidelines” – instead of 

emissions limitations – to make clear that guidelines would 

not be binding requirements applicable to the sources, but 

instead are “criteria for judging the adequacy of State 

plans.” 40 Fed. Reg. at 53,343.
9 

The implementing regulations also establish timetables for 

state and EPA action. The default rule is that states must 

submit state plans within nine months of the EPA’s issuance 

of the guidelines,13 but the regulations provide the EPA 

with authority to extend the deadlines for those 

submissions.14 The regulations also provide that the EPA 

must take final action on the state plans within four 

months of the due date for those plans.15 In the present 

rulemaking, the EPA is following the requirements of the 

implementing regulations, except that the EPA is extending 

certain timetables, as described in the preamble.16 

Over the last forty years, under CAA section 111(d), 

the agency has regulated four pollutants from five source 

categories (i.e., phosphate fertilizer plants (fluorides), 

sulfuric acid plants (acid mist), primary aluminum plants 

(fluorides), Kraft pulp plants (total reduced sulfur), and 

municipal solid waste landfills (landfill gases)).17 In 

 

13 40 CFR 60.23(a)(1). 

14 See id.; 40 CFR 60.27(a). 

15 40 CFR 60.27(b). 

16 The EPA is not re-opening the existing regulations, 

although it is revising the deadline for action on state 

plan submittals. The EPA is proposing additional regulatory 

requirements, which are contained in proposed subpart UUUU. 

17 See “Phosphate Fertilizer Plants; Final Guideline 

Document Availability,” 42 Fed. Reg. 12,022 (Mar. 1, 1977); 

“Standards of Performance for New Stationary Sources; 

Emission Guideline for Sulfuric Acid Mist,” 42 Fed. Reg. 

55,796 (Oct. 18, 1977); “Kraft Pulp Mills, Notice of 
10 

addition, the agency has regulated additional pollutants 

under CAA section 111(d) in conjunction with CAA section 

129.18 The agency has not previously regulated CO2 or any 

other greenhouse gas under CAA section 111(d) (although 

because landfill gases include methane, the agency’s 

regulation of landfill gases reduced emissions of that 

greenhouse gas). 

The D.C. Circuit has never handed down a decision that 

interpreted, or reviewed EPA’s interpretation of, section 

111(d). The D.C. Circuit has, however, reviewed 

rulemakings under CAA section 111 on numerous occasions 

during the past four decades, handing down decisions dated 

from 1973 to 2011.19 These decisions concerned various 

aspects of section 111, primarily the interpretation of the 

 

Availability of Final Guideline Document,” 44 Fed. Reg. 

29,828 (May 22, 1979); “Primary Aluminum Plants; 

Availability of Final Guideline Document,” 45 Fed. Reg. 26,294 (Apr. 17, 1980); 

“Standards of Performance for New Stationary Sources and 

Guidelines for Control of Existing Sources: Municipal Solid 

Waste Landfills, Final Rule,” 61 Fed. Reg. 9905 (Mar. 12, 

1996). 

18 See, e.g., “Standards of Performance for New Stationary 

Sources and Emission Guidelines for Existing Sources: 

Sewage Sludge Incineration Units, Final Rule,” 76 Fed. Reg. 

15,372 (Mar. 21, 2011). 

19 Portland Cement Ass’n v. Ruckelshaus, 486 F.2d 375 (D.C. 

Cir. 1973), cert. denied, 417 U.S. 921 (1974); Essex 

Chemical Corp. v. Ruckelshaus, 486 F.2d 427, (D.C. Cir. 

1973), cert. denied, Appalachian Power Co. v. EPA, 416 U.S. 

969 (1974); Portland Cement Ass’n v. EPA, 665 F.3d 177 

(D.C. Cir. 2011). 
11 

term “standard of performance.” Relevant aspects of these 

cases are discussed below. 

D. Summary of section 111 proposals 

The EPA is in the process of conducting three 

rulemakings to regulate CO2 from fossil fuel-fired 

electricity generating units (EGUs), including both fossil 

fuel-fired electric utility steam generating units and 

natural gas-fired stationary combustion turbines (affected 

sources or affected EGUs). The first, published in January, 

2014, proposes standards of performance under CAA section 

111(b) for affected sources undertaking new construction. 

The second is the present rulemaking, under CAA section 

111(d), which proposes emission guidelines for states to 

follow in adopting state plans that regulate existing 

affected EGUs. In the third rulemaking, which we expect to 

propose concurrently with the present one, the EPA is 

proposing standards of performance under section 111(b) for 

affected EGUs that undertake modifications or 

reconstructions. 

II. Summary of legal basis 

The following summarizes the main features of the 

EPA’s legal rationale for this proposed rulemaking. All of 

this rationale is discussed in the appropriate sections of 
12 

the preamble for this rulemaking. This Legal Memorandum 

elaborates on some, although not, all of these features. 

Today’s proposed action is consistent with the 

requirements of CAA section 111(d) and the implementing 

regulations. As an initial matter, the EPA reasonably 

interprets the provisions identifying which air pollutants 

are covered under CAA section 111(d) to authorize the EPA 

to regulate CO2 from fossil fuel-fired EGUs. Specifically, 

an ambiguity in the provisions of section 111(d)(1)(A)(i), 

arising from Congress’s simultaneous enactment of two 

separate versions of this provision, has led some 

stakeholders to argue that the fact that the EPA has 

regulated hazardous air pollutants from EGUs prevents the 

EPA from regulating CO2 emissions from EGUs. As explained 

below, however, the EPA reads the provision to authorize 

regulation of CO2 emissions from EGUs and this 

interpretation is both reasonable and entitled to 

deference. 

In addition, the EPA recognizes that CAA section 

111(d) applies to sources that, if they were new sources, 

would be covered under a CAA section 111(b) rule. The EPA 

intends to complete two CAA section 111(b) rulemakings 

regulating CO2 from new fossil fuel-fired EGUs and from 
13 

modified and reconstructed fossil fuel-fired EGUs before it 

finalizes this rulemaking, and either of those section 

111(b) rulemakings will provide the requisite predicate for 

this rulemaking. 

A key step in promulgating requirements under CAA 

section 111(d) is determining the “best system of emission 

reduction ... adequately demonstrated” (BSER). In 

promulgating the implementing regulations, the EPA 

explicitly stated that it is authorized to determine BSER;20

accordingly, in this rulemaking, the EPA is determining 

BSER. 

The EPA is proposing two alternative approaches for

the “best system of emission reduction ... adequately 

demonstrated” for fossil fuel-fired EGUs, each of which is 

based on methods that have employed for reducing emissions 

of air pollutants, including, in some cases, CO2, from these 

sources. The first identifies the combination of the four 

building blocks as the BSER. These include operational 

improvements and equipment upgrades that the coal-fired 

steam-generating EGUs in the state may undertake to improve 

their heat rate (building block 1) and increases in, or 

retention of, zero- or low-emitting generation, as well as 

 

20 The EPA is not re-opening that interpretation in this 

rulemaking. 
14 

measures to reduce demand for generation, all of which, 

taken together, displace, or avoid the need for, generation 

from the affected EGUs (building blocks 2, 3, and 4). All 

of these measures are components of a “system of emission 

reduction” for the affected EGUs because they either 

improve the carbon intensity of the affected EGUs in 

generating electricity or, because of the integrated nature 

of the electricity grid and the fungibility of electricity 

and electricity services, they displace or avoid the need 

for generation from those sources and thereby reduce the 

emissions from those sources. Moreover, those measures may 

be undertaken by the affected EGUs themselves and, in the 

case of building blocks 2, 3, and 4, they may be required 

by the states. 

Further, these measures meet the criteria in CAA 

section 111(a)(1) and the case law as the “best” system of 

emission reduction because, among other things, they 

achieve the appropriate level of reductions; they are of 

reasonable cost, including when viewed through a nationwide lens; they are consistent with trends in the energy 

sector; and they encourage technological development and 

expansion that is important to achieving further emission 

reductions. Moreover, the measures in each of the building 

blocks are “adequately demonstrated” because they are each 
15 

well-established in numerous states, many of them have 

already been relied on to reduce air pollutants, including 

CO2, from fossil fuel-fired EGUs and, as noted, they may be 

undertaken by the affected EGUs or, in general, required by 

the states. 

For the alternative approach for the BSER, the EPA is 

identifying the “system of emission reduction” as 

including, in addition to building block 1, the reduction 

of affected fossil fuel-fired EGUs’ mass emissions 

achievable through reductions in generation of specified 

amounts from those EGUs. Under this approach, the measures 

in building blocks 2, 3, and 4 would not be components of 

the system of emission reduction, but instead would serve 

as bases for quantifying the reduction in emissions

resulting from the reduction in generation at affected 

EGUs. In light of the available sources of replacement 

generation through the measures in the building blocks, 

this approach also meets the criteria for being the “best” 

system because of, among other things, the emission

reductions it would achieve, its reasonable cost, its 

promotion of technological development, as well as the fact 

that under this approach, the reliability of the 

electricity system would be maintained. The approach of 

reduced generation is also “adequately demonstrated” 
16 

because of the ability of affected EGUs to adjust their own 

generation, the authority of the state to impose 

requirements, and the fact that other entities that operate 

in the various types of markets in the states can be 

expected to respond to the reduction in generation from the 

fossil-fuel fired EGUs by undertaking the measures in the 

building blocks or other actions that would assure 

reliability. 

After determining BSER, the EPA is authorized under

the implementing regulations, as an integral component to 

setting emission guidelines, to apply the BSER and 

determine the resulting emission limitation. The EPA is 

proposing to apply the BSER to the affected EGUs on a 

statewide basis. In this rulemaking, the EPA terms the 

resulting emission limitation the state goal. The EPA is 

formulating each state goal as an average emissions rate. 

The state goals form the EPA’s emission guidelines. 

With the promulgation of the emission guidelines, each 

state must develop a plan to achieve an emission 

performance level that corresponds to the state goal. The 

state plans must establish standards of performance for the 

affected EGUs and include measures that implement and 

enforce those standards. Based on requests from states and 
17 

other stakeholders, the EPA is proposing that states be 

authorized to submit state plans that do not impose legal 

responsibility on the affected EGUs for the entirety of the 

emission performance level, but instead, by adopting what 

this preamble refers to as a “portfolio approach,” impose 

requirements on other affected entities -- e.g., renewable 

energy and demand-side energy efficiency measures -- that 

would reduce CO2 emissions from the affected EGUs. (In the 

preamble and the regulatory text for this proposed 

rulemaking, we refer to the affected EGUs and other

entities with obligations under the state plan as “affected 

entities.”) As noted in the preamble for this rulemaking, a 

possible basis for this approach is that those requirements 

on affected entities other than affected EGUs may be 

authorized as standards of performance or implementing 

measures. In the preamble, the EPA proposes that this is an 

appropriate flexibility and solicits comment, but also 

solicits comment on whether state plans must impose all of 

the legal responsibility for achieving the required

emission performance level on the affected EGUs. 

 It should be noted that an important aspect of the

BSER for affected EGUs is that the EPA is proposing to 

apply it on a statewide basis. The statewide approach also 

underlies the required emission performance level, which, 
18 

as noted, is based on the application of the BSER to a 

state’s affected EGUs, and which the suite of measures in 

the state plan, including the emission standards for the 

affected EGUs, must achieve overall. The state has 

flexibility in assigning the emission performance 

obligations to its affected EGUs, in the form of standards 

of performance -- and, for the portfolio approach, in 

imposing requirements on other affected entities -- as long 

as, again, the required emission performance level is met. 

This state-wide approach both harnesses the 

efficiencies of emission reduction opportunities in the 

interconnected electricity system and is fully consistent 

with the principles of federalism that underlie the Clean 

Air Act generally and CAA section 111(d) particularly. That 

is, this provision achieves the emission performance 

requirements through the vehicle of a state plan, and 

provides each state significant flexibility to take local 

circumstances and state policy goals into account in 

determining how to reduce emissions from its affected 

sources, as long as the plan meets minimum federal 

requirements. 

This state-wide approach, and the standards of 

performance for the affected EGUs that the states will 
19 

establish through the state-plan process, are consistent 

with the applicable CAA section 111 provisions. 

The preamble further notes that even if the state plan 

imposes all of the obligations to achieve the required 

emission performance level on the affected EGUs, the state 

plan could nevertheless include requirements on other 

affected entities in order to facilitate the reduced 

utilization of, and CO2 emissions from, the affected EGUs – 

and the practical effect for the EGUs would be the same as 

under the proposed portfolio approach. The preamble

solicits comment on other issues concerning state plans, 

including whether a state may include in its plan a

mechanism to achieve a specified portion of the required 

emission performance level on behalf of the affected EGUs, 

and thereby limit the obligations of the affected EGUs. 

The EPA emphasizes that in developing the state plans, 

the states have substantial discretion in designing the 

standards of performance, as long as the plans reduce 

emissions from the affected sources to achieve the required 

emission performance level. Moreover, the states may 

require sources to implement specific measures that the EPA 

does not identify as part of the BSER, and may include 

other approaches such as, for example, emission trading 

programs. By the same token, states may allow sources, in 
20 

complying with their applicable standards of performance, 

to rely on any measures that will reduce their CO2 

emissions, regardless of whether the EPA identifies those 

measures as part of BSER, as long as, again, the state plan 

achieves the requisite level of emissions reduction from 

the affected entities. 

 In this rulemaking, the EPA proposes reasonable 

deadlines for state plan submission and the EPA’s action. 

The proposed deadline for the EPA’s action on state play 

submittals varies from that in the implementing 

regulations, and the EPA is proposing to revise that 

provision in the regulations accordingly. Under CAA section 

111(d)(2), the state plans must be “satisfactory” for the 

EPA to approve them, and in this rulemaking, the EPA is 

proposing the criteria that the state plans must meet under 

that requirement. 

III. Authority to regulate CO2 from EGUs 

CAA section 111 authorizes EPA to regulate CO2

emissions. The Supreme Court has held that greenhouse 

gases (including CO2) are an “air pollutant” under the CAA. 

Massachusetts. v. EPA.

21 Furthermore, the U.S. Supreme 

Court’s holding in American Electric Power Co. v. 

Connecticut, 131 S. Ct. 2527, 2537-38 (2011), that “the 

 

21 549 U.S. 497 (2007). 
21 

Clean Air Act and the EPA actions it authorizes displace 

any federal common law right to seek abatement of carbondioxide emissions from fossil fuel-fired power plants” was 

premised on the Court’s understanding that section 111, 

including section 111(d), applies to carbon dioxide

emissions from those sources.

The fact that EPA has regulated EGU emissions of 

mercury and other hazardous air pollutants under CAA 

section 112 does not deprive EPA of the authority to 

regulate CO2 emissions from EGUs under CAA section 111(d) 

under the Agency’s established construction of the 

ambiguous provisions in CAA section 111(d)(1)(A)(i) that 

identify the air pollutants subject to CAA section 111(d). 

The ambiguities stem from apparent drafting errors that 

occurred during enactment of the 1990 CAA Amendments, which 

revised section 111(d). The confusion arises because two 

different amendments to section 111(d) were enacted in the 

1990 CAA Amendments – one in title I of the bill, the other 

in title III of the bill (both amendments were to be 

codified in section 111(d)). The confusion is exacerbated 

because the U.S. Code does not accurately reflect what was 

enacted – it presents only one of the two amendments. 

However, the enacted law signed by the President (as 
22 

recorded in the U.S. Statutes at Large), not the U.S. Code, 

is controlling. 

As presented in the U.S. Code, section 111(d)(1)(A)

requires states to submit standards of performance for 

existing sources “for any air pollutant (i) [1] for which 

air quality criteria have not been issued or which is not 

included on a list published under [CAA section 108(a)] or 

[2] emitted from a source category which is regulated under 

[section 112].” (Emphasis added.) This provision has two 

components that exclude from section 111(d) two types of 

air pollutants. The first component, which we call the 

NAAQS Exclusion, excludes NAAQS pollutants. The second 

component, which we call the Section 112 Exclusion,

presents the ambiguities. As presented in the U.S. Code, 

the Section 112 Exclusion appears by its terms to preclude 

from section 111(d) any pollutant if it is emitted from a 

source category that is regulated under section 112. The 

U.S. Code version of 111(d) can be read to provide that the 

provision would not cover GHGs because GHGs are emitted 

from EGUs and EGUs are a source category regulated under 

section 112.22 

 

22 By the same token, GHGs are emitted by many other source 

categories, such as refineries, that are regulated under 

section 112. Indeed, the text as presented in the U.S. 

Code could be read to exclude virtually every pollutant 
23 

The text of section 111(d) as presented in the U.S.

Code, however, does not accurately reproduce the Section 

112 Exclusion as enacted in the 1990 CAA Amendments. The 

correct statement of the Section 112 Exclusion – the one 

that was enacted by Congress and signed by the President, 

and which therefore is controlling – is found in the U.S. 

Statutes at Large. This text incorporates two versions of 

the Section 112 Exclusion, one passed by the U.S. House of 

Representatives and one passed by the U.S. Senate. The two 

versions were never reconciled, and both were enacted as 

part of the 1990 CAA Amendments. The two versions conflict 

with each other and thus render the Section 112 Exclusion 

ambiguous. Under these circumstances, the EPA may 

reasonably construe the Section 112 Exclusion to authorize 

the regulation of GHGs under section 111(d). 

To understand the different amendments by the House

and Senate, one must start with section 111(d)(1) as it 

read before the 1990 CAA Amendments: 

The Administrator shall prescribe regulations 

which shall establish a procedure similar to that 

provided by section 7410 of this title under 

which each State shall submit to the 

Administrator a plan which (A) establishes 

 

from regulation under Section 111(d), because it would be 

difficult to identify any pollutant that is not emitted 

from at least one source category that is regulated under 

112. We do not need to address this ridiculous result, 

however, for the reasons discussed in the text above. 
24 

standards of performance for any existing source 

for any air pollutant (i) for which air quality 

criteria have not been issued or which is not 

included on a list published under section 

7408(a) or 7412(b)(1)(A) of this title, but (ii) 

to which a standard of performance under this 

section would apply if such existing source were 

a new source. * * * 

42 U.S.C.A. 7411(d)(1) (West 1977); Public Law 95–95 

(emphasis added). In this version, the Section 112 

Exclusion, by its terms, applied to section 112 pollutants, 

and not to categories of sources that emit those 

pollutants. It should also be noted that in the 1990 CAA 

Amendments, Congress amended section 112 to include a 

statutory list of hazardous air pollutants for EPA to 

regulate, instead of relying on EPA to develop its own 

list. 

The 1990 Senate bill amended revised section 

111(d)(1)(A)(i) by striking the term to ‘‘112(b)(1)(A)’’ 

and inserting in its place the term ‘‘112(b).’’ Under this 

amendment, the text would read as follows (with changes 

shown in strikeout): 

The Administrator shall prescribe regulations 

which shall establish a procedure similar to that 

Provided by section 7410 of this title under 

which each State shall submit to the 

Administrator a plan which (A) establishes 

standards of performance for any existing source 

for any air pollutant (i) for which air quality 

criteria have not been issued or which is not 
25 

included on a list published under section 

7408(a) or 7412(b) (1)(A) of this title, but (ii) 

to which a standard of performance under this 

section would apply if such existing source were 

a new source. 

The 1990 House bill amended section 111(d)(1)(A)(i) of 

the 1977 CAA by striking the phrase ‘‘or 112(b)(1)(A)’’, 

and inserting in its place the phrase ‘‘or emitted from a 

source category which is regulated under section 112.’’ 

Under this amendment, the text would read as follows (with 

changes shown in underline and strikeout): 

The Administrator shall prescribe regulations 

which shall establish a procedure similar to that 

Provided by section 7410 of this title under 

which each State shall submit to the 

Administrator a plan which (A) establishes 

standards of performance for any existing source 

for any air pollutant (i) for which air quality 

criteria have not been issued or which is not 

included on a list published under section 

7408(a) or 7412(b)(1)(A) emitted from a source 

category which is regulated under section 7412 of 

this title, but (ii) to which a standard of 

performance under this section would apply if 

such existing source were a new source. 

 

The House-Senate Conference Committee did not 

reconcile these two conflicting amendments, and both were 

included in the 1990 CAA Amendments as reported by the 

Conference Committee, approved by both the House and the 

Senate, and signed by the President. As presented in the 

Statutes at Large, the Section 112 Exclusion is therefore 

ambiguous. 
26 

The EPA discussed these different amendments in the

preamble to “Revision of December 2000 Regulatory Finding 

on the Emissions of Hazardous Air Pollutants From Electric 

Utility Steam Generating Units and the Removal of Coal- and 

Oil-Fired Electric Utility Steam Generating Units From the 

Section 112(c) List,” 70 FR 15994, 16029-32 (March 29, 

2005). There, the EPA concluded that the Section 112 

Exclusion could be read as follows: Where a source category 

is regulated under section 112, a section 111(d) standard 

of performance cannot be established to address any HAP 

listed under section 112(b) that may be emitted from that 

particular source category. The EPA explained that this 

approach reasonably interprets the Section 112 Exclusion to 

give some effect to both amendments. The EPA emphasized 

that it is not reasonable to give full effect to the House 

language because a literal reading of that language would 

mean that the EPA could not regulate any air pollutant from 

a source category regulated under section 112, a result 

that would be inconsistent with (i) Congress’ desire in the 

1990 CAA Amendments to require the EPA to regulate more 

substances, and not to eliminate the EPA’s ability to 

regulate large categories of air pollutants, and (ii) the 

fact that the EPA has historically regulated non-hazardous 

air pollutants under section 111(d), even where those air 
27 

pollutants were emitted from a source category actually 

regulated under section 112. See 70 FR 16031-32. The EPA 

continues to view this interpretation of the Section 112 

exclusion as reasonable, for the reasons just stated. 

Applying this interpretation of the Section 112 

Exclusion to this rule, we conclude that section 111(d) 

authorizes the EPA to establish section 111(d) guidelines 

for GHG emissions from EGUs. Although EGUs are a source 

category that is regulated under CAA section 112, GHGs are 

not a HAP regulated under section 112. Therefore, the 

Section 112 exclusion in section 111(d) does not apply to 

GHGs, and 111(d) does not preclude the EPA from 

establishing guidelines covering GHGs from EGUs. 

IV. Rational basis, endangerment finding 

 In response to the January 2014 Proposal for standards 

of performance for GHGs emissions from newly constructed 

fossil fuel-fired EGUs,23 some stakeholders raised concerns 

that the EPA could not promulgate those standards without 

first issuing a finding that GHGs from those sources cause 

or contribute significantly to air pollution which may 

reasonably be anticipated to endanger public health or 

welfare, under CAA section 111(b)(1)(A). In that proposal, 

the EPA stated that it is rational to regulate GHGs from 

 

23 79 Fed. Reg. 1,430 (Jan. 8, 2014). 
28 

fossil fuel-fired EGUs because the EPA has previously found 

that GHG emissions endanger public health and welfare, and 

because the electric generating industry emits a 

significant amount of GHGs. The EPA added that CAA 

section 111 does not require that EPA issue a formal 

endangerment finding, and that even if section 111 did 

require such a finding, the EPA’s rational basis would 

qualify as one.24 The EPA is taking the same position in the 

section 111(b) rulemaking proposal to establish standards 

of performance for GHG emissions from modified and 

reconstructed fossil fuel-fired EGUs. 

 The EPA will finalize either or both of the January 

2014 Proposal and the rulemaking for modified and 

reconstructed EGUs by the time that it finalizes this 

proposed rulemaking. In that event, the EPA would not be 

required to further address the rational basis or 

endangerment finding in this rulemaking. In any event, 

these questions are properly addressed and resolved in the 

context of the parallel rulemakings under section 111(b), 

not in this rulemaking. Thus, the EPA is not seeking 

comment in the preamble to this proposal on any issues 

related to a rational basis or endangerment finding.

 

24 See 79 FR at 1,452/3 – 1,456/1. 
29 

V. Authority for EPA to determine BSER and emission

guidelines 

 In this section we describe the authority, as set out 

in the EPA’s implementing regulations under CAA section 

111(d), for the EPA to determine the “best system of 

emission reduction ... adequately demonstrated” and the 

amount of required emission reduction that is based on the 

BSER. We also describe how, in this rulemaking, the EPA 

proposes to apply the BSER to each state, and on that 

basis, to determine the amount of emission limitation 

achievable by each state, which we refer to as the state 

goal. The state goal is the “emissions guideline” that the 

implementing regulations require the EPA to promulgate. 

CAA section 111(d) directs the EPA to – 

prescribe regulations which shall establish a 

procedure similar to that provided by [CAA 

section 110] under which each State shall submit 

to the Administrator a plan which (A) establishes 

standards of performance for any existing source 

for [certain air pollutants] ... and (B) provides 

for the implementation and enforcement of such 

standards of performance. 

As noted above, the EPA promulgated the implementing 

regulations for section 111(d) in 1975, and has revised 

parts of them since. The regulations set out a multi-step 

process for the development and approval of state plans, 

and assign responsibility for the various steps in the 

process to the EPA or the states. The EPA has followed 
30 

these regulations in promulgating previous rulemakings 

under section 111(d).25 In the present rulemaking, EPA 

continues to follow them, except that EPA is establishing a 

different deadline for submission of state plans than what 

the regulations would otherwise require.26 

Under the implementing regulations, at the same time 

or after the EPA proposes and then finalizes standards of 

performance for sources in a source category under section 

111(b), the EPA must propose and then finalize a “guideline 

document” with information pertinent to state plans under 

section 111(d): 

Concurrently upon or after proposal of standards 

of performance for the control of a designated 

pollutant from affected facilities, the 

Administrator will publish a draft guideline 

document containing information pertinent to 

control of the designated pollutant form [sic: 

from] designated facilities. Notice of the 

availability of the draft guideline document will 

be published in the Federal Register and public 

comments on its contents will be invited. After 

consideration of public comments and upon or 

after promulgation of standards of performance 

for control of a designated pollutant from 

affected facilities, a final guideline document 

will be published and notice of its availability 

will be published in the Federal Register.”27

The regulations go on to describe the contents of the 

“guideline document” as including, among other things, an 

 

25 These rulemakings are cited above. 

26 The EPA is not re-opening these regulations, although it 

is revising the deadline for EPA action on state plans.

27 40 CFR 60.22(a). 
31 

“emission guideline” that incorporates the “best system of 

emission reduction ... adequately demonstrated”: 

Guideline documents published under this section 

will provide information for the development of 

State plans, such as: * * * * 

(5) An emission guideline that reflects the 

application of the best system of emission 

reduction (considering the cost of such 

reduction) that has been adequately demonstrated 

for designated facilities, and the time within 

which compliance with emission standards of 

equivalent stringency can be achieved.* * * * 

(6) Such other available information as the 

Administrator determines may contribute to the 

formulation of State plans.28

The implementing regulations define the “emission 

guideline” as – 

A guideline set forth in subpart C of this part, 

or in a final guideline document published under 

section 60.22(a) which reflects the degree of 

emission reduction achievable through the 

application of the best system of emission 

reduction which (taking into account the cost of 

such reduction) the Administrator has determined 

has been adequately demonstrated for designated 

facilities.29

In addition, the implementing regulations mandate that for 

air pollutants that adversely affect public health, the 

“emission guidelines” must be proposed and finalized with 

the draft and final guideline document: 

[For air pollutants that have been demonstrated 

to adversely affect public health], the emission 

 

28 Id. at 60.22(b).

29 40 CFR 60.21(e). 
32 

guidelines and compliance times referred to in 

paragraph (b)(5) of this section will be proposed 

for comment upon publication of the draft 

guideline document, and after consideration of 

comments will be promulgated in subpart C of this 

part with such modifications as may be 

appropriate.30

 With this proposed rulemaking, the EPA is complying 

with these regulatory provisions. This proposed rulemaking 

follows the proposal of standards of performance for newly 

constructed affected sources in the January 2014 Proposal, 

and is concurrent with the proposal of standards of

performance for modified and reconstructed affected

sources. This proposed rulemaking – including the preamble 

and the supporting documents -- comprise the “draft

guideline document.” The documents contain the “information 

for the development of State plans” described in the 

regulations. This information includes descriptions as well 

as technical and economic evaluations of the four building 

blocks. This information also includes the EPA’s 

application of the BSER to each state, and the EPA’s 

calculation of the resulting proposed state goals. These 

state goals comprise the proposed “emission guidelines.” 

In addition, the preamble and supporting documents propose 

the “time within which compliance with emission standards 

 

30 Id. at 60.22(c). 
33 

of equivalent stringency can be achieved,” which are the 

periods of 2020-2029 for interim compliance, and the 

subsequent period for final compliance, and provide other 

information. 

VI. Best system of emission reduction adequately 

demonstrated and standards of performance 

In this section we discuss our interpretation of the 

CAA section 111(d)(1) and (a)(1) provisions that require 

the state plans to establish, for “any existing source,” 

“standards of performance,” and that define the latter term 

to mean, in general, emission standards that “reflect the 

degree of emission limitation achievable through the 

application” of the “best system of emission reduction ... 

adequately demonstrated” (BSER). 

In subsection A of this section, we explain these 

section 111(d)(1) and 111(a)(1) provisions and summarize 

key parts of the applicable case law. 

In subsection B, we describe our proposed two 

alternative determinations for the BSER. We note that each 

alternative includes two main components. One component, 

for each alternative, is efficiency improvements that coalfired power plants can make to their operations and

equipment (which we call building block 1). For the first 
34 

type of BSER, the remaining component is, in general, 

increased zero- or low-emitting generation in specified 

amounts (building blocks 2 and 3), and increased demandside energy efficiency in specified amounts (building block 

4), all of which have the effect of displacing generation 

from the higher-emitting affected sources. For the

alternative type of BSER, the remaining component is 

reduced generation from higher-emitting affected sources in 

specified amounts, which is the amount that can be replaced 

by, in general, increased zero- or low-emitting generation 

and eliminated by increased demand-side energy efficiency. 

After we explain these alternatives, we go on to discuss 

why each alternative is a “system of emission reduction,” 

and why we propose to determine that each system is the 

“best” that is “adequately demonstrated.” 

In subsection C, we discuss our interpretation of the 

requirement that each state must develop a plan that 

establishes for “any existing source” “standards of

performance,” that is, emission standards that “reflect the 

degree of emission limitation achievable through the 

application of the [BSER].” We explain that once the EPA 

determines the BSER, it undertakes “the application of the 

[BSER]” to each state’s set of sources on a state-wide 
35 

basis, and thereby determines the “emission limitation 

achievable,” which we term the state goal, and which in 

turn becomes the required emission performance level that 

the state plan must achieve. The state must then develop 

its plan by identifying emission standards for its affected 

EGUs -- and, in the case of a state that adopts the

portfolio approach, by identifying other obligations on 

other affected entities -- that in total, achieve the 

required emission performance level. Through this process, 

the state plan may meet the requirements of sections 

111(d)(1) and (a)(1) to “establish[] standards of 

performance for any existing source” because it imposes, on 

each of its affected sources, emission standards that 

“reflect [that is, embody or represent] the degree of [that 

is, the part of] emission limitation achievable through the 

application of the best system of emission reduction ... 

adequately demonstrated” [that is, the state’s required 

emission performance level].

A. CAA requirements for standards of performance and 

BSER 

In this subsection, we explain the relevant provisions 

of sections 111(d)(1) and 111(a)(1) and summarize key parts 

of the applicable case law. 
36 

 The EPA’s explanation for this BSER proposal begins 

with the key statutory provisions in CAA sections 111(d)(1) 

and 111(a)(1). Section 111(d)(1) requires that a state plan 

“(A) establish[] ... standards of performance for any

existing source” and “(B) provide[] for the implementation 

and enforcement of such standards.” Section 111(a)(1) 

defines a “standard of performance” as -- 

a standard for emissions of air pollutants which 

reflects the degree of emission limitation 

achievable through the application of the best 

system of emission reduction which (taking into 

account the cost of achieving such reduction and 

any nonair quality health and environmental 

impact and energy requirements) the Administrator 

determines has been adequately demonstrated. 

Several points should be made about the BSER. By its 

terms, it is a “system of emission reduction” that is both 

the “best” and “adequately demonstrated.” The CAA does not 

define the term, “system,” and as a result, that term 

should be given its ordinary, everyday meaning: “a set of 

things working together as parts of a mechanism or 

interconnecting network; a complex whole.”31 In addition, 

the U.S. Court of Appeals for the D.C. Circuit (D.C. 

Circuit or Court) has handed down case law over a 40-year 

period that interprets the requirements that the “system of 

 

31 Oxford Dictionary of English (3rd ed.) (published 2010, 

online version 2013) 

http://www.oxfordreference.com.mutex.gmu.edu/view/10.1093/a

cref/9780199571123.001.0001/acref-9780199571123 
37 

emission reduction be the “best” and be “adequately

demonstrated.”32 Under this case law, the criteria for the 

EPA to use in determining whether the system is the “best” 

include the following key considerations, among others: 

• The system of emission reduction must be technically 

feasible.33 

• The EPA must consider the amount of emissions 

reductions that the system would generate. 

• The costs of the system must be reasonable. The EPA

may consider the costs on the source level, the 

industry-wide level, and, at least in the case of the 

power sector, on the national level in terms of the

overall costs of electricity and the impact on the 

national economy over time.34 

 

32 Portland Cement Ass’n v. Ruckelshaus, 486 F.2d 375 (D.C. 

Cir. 1973), cert. denied, 417 U.S. 921 (1974); Essex 

Chemical Corp. v. Ruckelshaus, 486 F.2d 427, (D.C. Cir. 

1973), cert. denied, Appalachian Power Co. v. EPA, 416 U.S. 

969 (1974); Sierra Club v. Costle, 657 F.2d 298 (D.C. Cir. 

1981); Portland Cement Ass’n v. EPA, 665 F.3d 177 (D.C. 

Cir. 2011). 

33 The case law may be read to treat technical feasibility 

as the measure for whether the standard of performance is 

“achievable,” Essex Chemical Corp. v. Ruckelshaus, 486 F.2d 

at 427, not as a criterion for whether the system of 

emission reduction is the “best system of emission 

reduction ... adequately demonstrated.” However, for present 

purposes, we refer to technical feasibility as another of 

the criteria for the BSER.

34 See Sierra Club v. Costle, 657 F.2d 298, 330-31, 337-39 

(D.C. Cir. 1981). As discussed in the January 2014 

Proposal, the D.C. Circuit’s case law formulates the cost 

consideration in various ways: the costs must not be 

“exorbitant[]”, Essex Chemical Corp. v. Ruckelshaus, 486 

F.2d 427, 433 (D.C. Cir. 1973) cert. denied, Appalachian 

Power Co. v. EPA, 416 U.S. 969 (1974), see Lignite Energy 

Council v. EPA, 198 F.3d 930, 933 (D.C. Cir. 1999); 

“greater than the industry could bear and survive,”

Portland Cement Ass’n v. EPA, 513 F.2d 506, 508 (D.C. Cir. 

1975); or “excessive” or “unreasonable.” Sierra Club v. 
38 

• The EPA must also consider that CAA section 111 is 

designed to promote the development and implementation 

of technology.35

• The EPA must also consider energy impacts, and, as 

with costs, may consider them both on the source level 

and on the nationwide structure of the power sector

over time. 

Importantly, the EPA has discretion to weigh these various 

considerations, may determine that some merit greater 

weight than others, and may vary the weighting, depending 

on the source category. 

 In determining whether a system is “adequately 

demonstrated,” the EPA is to look forward toward what may 

fairly be projected for the regulatory future, rather than 

determining what is available now. In the D.C. Circuit’s 

first decision under section 111, Portland Cement Ass’n v. 

Ruckelshaus, 486 F.2d 375, 391 (D.C. Cir. 1973), the Court 

explained: 

Section 111 looks toward what may fairly be 

projected for the regulatory future, rather than 

the state of the art at the present . . . . The 

Senate Report made clear that it did not intend 

that the technology “must be in actual routine 

 

Costle, 657 F.2d 298, 343 (D.C. Cir. 1981). In the January 

2014 Proposal, EPA stated that “these various formulations 

of the cost standard ... are synonymous,” and, for 

convenience, EPA used “reasonableness” as the formulation. 

EPA takes the same approach in this rulemaking. 

35 See 79 Fed. Reg. at 1,465/1-2 (discussing case law and 

legislative history that includes technological development 

as a consideration in the determination of BSER, including 

Sierra Club v. Costle, 657 F.2d 298 (D.C. Cir. 1981)). 
39 

use somewhere.” . . . The Administrator may make 

a projection based on existing technology, that 

that projection is subject to the restraints of 

reasonableness and cannot be based on “crystal 

ball” inquiry. . . . [T]he question of 

availability is partially dependent on “lead 

time”, the time in which the technology will have 

to be available.36

The forward looking nature of determining whether a

system is adequately demonstrated is particularly relevant 

for this proposal given the lengthy period for implementing 

state plans that the EPA is proposing. The EPA discussed 

the CAA requirements and Court interpretations of the BSER 

at length in the January 2014 Proposal,37 and incorporates 

by reference that discussion in this rulemaking. 

 It should be noted that the EPA may identify as the 

best system of emission reduction adequately demonstrated 

as the BSER a system that would form the basis for emission 

standards that could be achieved by some, but not 

necessarily all, of the existing sources in the source 

category. This approach is consistent with the technologyforcing purposes of section 111, as well as the fact that 

under section 111(d)(1), the state retains authority, “in 

applying a standard of performance to any particular source 

 

36 Portland Cement Ass’n v. Ruckelshaus, 486 F.2d 375, 391-

92 (D.C. Cir. 1973) (citations omitted). 

37 See 79 Fed. Reg. at 1,462/1 – 1,467/3. 

 
40 

... to take into consideration, among other factors, the 

remaining useful life of the ... source....”38

B. Best system of emission reduction adequately 

demonstrated 

In this subsection, we describe our two alternative

proposed determinations for the BSER and explain why each 

 

38 The EPA discussed this issue in connection with new 

sources in the recently proposed NSPS for CO2 emissions from 

fossil fuel-fired EGUs, 79 Fed. Reg. 1430, 1466/3 (Jan. 8, 

2014). With respect to existing sources, a commentator has 

stated: 

There is no statutory provision or direct 

precedent under § 111(d) requiring EPA to 

demonstrate that emission limits are achievable 

by every source subject to an [standard of 

performance for existing sources]. Moreover, 

since the trigger for implementing § 111(d) is an 

NSPS under § 111(b), Congress arguably 

contemplated that, once EPA has identified BSER 

for new plants, it should raise the performance 

of the existing fleet with the goal of 

approaching new source levels at existing plants. 

In this reading, 111(d) would have a technologyforcing thrust, tempered by the performance and 

cost constraints at existing plants but 

nonetheless raising the bar significantly for the 

existing fleet. From this perspective, EPA could 

argue that “adequately demonstrated” means 

achievable at a reasonable cost by the more 

modern, better performing coal and gas units, not 

by all plants [citing Reinforcing this approach 

is the fact that cost is not determinative in 

defining a “standard of performance” under § 

111(a) but only must be “taken into account” .... 

Sussman, R., “Power Plant Regulation Under the Clean Air 

Act: A Breakthrough Moment for U.S. Climate Policy?,” 

Virginia Environment Law Journal, 32:97 (2014), at 123 

(citations omitted).
41 

is a “system of emission reduction,” and why each system is 

the “best” that is “adequately demonstrated.” 

1. Introduction and overview

The EPA’s BSER proposal in this rulemaking recognizes, 

and is based in part on, the interconnected nature of the 

electrical generating system, which, among other things, 

means that generation at one EGU can substitute for

generation at another. The importance of the 

interconnected nature of the grid in facilitating CO2

emissions reductions is evident in the long history of 

reliance on it to provide least-cost dispatch, the more 

recent history of implementing air pollutant emissions 

reductions, and the still more recent history of 

implementing CO2 emissions reductions at the company, state, 

and regional level. 

In this rulemaking, the EPA proposes to determine the 

“best system of emission reduction ... adequately 

demonstrated” on a state-by-state basis. Moreover, the EPA 

proposes to determine the BSER based on four “building 

blocks,” some of which rely on the interconnected nature of 

the electricity generating grid: 

Building block 1: Reducing the carbon intensity of 

generation at individual affected EGUs through heat

rate improvements. 
42 

Building block 2: Reducing emissions from the most 

carbon-intensive affected EGUs in the amount that 

results from substituting generation at those EGUs 

with generation from less carbon-intensive affected

EGUs (including NGCC units under construction). 

Building block 3: Reducing emissions from affected 

EGUs in the amount that results from substituting 

generation at those EGUs with expanded low- or zerocarbon generation. 

Building block 4: Reducing emissions from affected 

EGUs in the amount that results from the use of 

demand-side energy efficiency that reduces the amount 

of generation required. 

As discussed in the preamble, with these building 

blocks in mind, we are proposing two alternatives for the 

BSER, each of which is based on methods for reducing fossil 

fuel-fired EGUs’ air pollutants that states and sources 

have already implemented. The first approach is that the 

BSER is the combination of building blocks 1 through 4. 

Building block 1 is a set of operational improvements and 

equipment upgrades that the affected sources may undertake 

to improve their efficiency and reduce their emissions 

rate. Building blocks 2, 3 and 4 are sets of measures 

that, in general, increase zero- or low-emitting generation 

in specified amounts and increased demand-side energy 

efficiency in specified amounts, all of which, due to the 

interconnected nature of the grid, result in drawing 

utilization away from higher-emitting fossil fuel-fired 
43 

EGUs, thereby lowering those EGUs’ emissions. The second 

approach is that the BSER is building block 1 (heat rate 

improvements) combined with reduced generation from fossil 

fuel-fired EGUs in the amount, calculated on a statewide 

basis, that can be replaced by, in general, increased zeroor low-emitting generation and avoided by increased demandside energy efficiency. The EPA proposes that each of 

these alternatives may be considered to be a “system of 

emission reduction,” and that each meets the criteria, set 

out in CAA section 111(a)(1) and the case law, to qualify 

as the “best” system that is “adequately demonstrated.” 

2. Background: Interconnected nature of the 

electricity system 

Central to our BSER determination is the fact that 

the nation’s electricity needs are being met, and have for 

many decades been met, through a grid formed by a network 

connecting groups of EGUs with each other and, ultimately, 

with the end-users of electricity. We discuss this nature 

of the electricity system at length in the preamble and, 

for convenience, summarize that discussion here.

Through the interconnected grid, fungible products – 

electricity and electricity services – are produced and 

delivered by a diverse group of EGUs operating in a

coordinated fashion in response to end-users’ demand for 
44 

electricity. Because the electricity grid operates through 

the interconnection of multiple EGUs and favors least-cost 

generation, owners and operators of generators have been 

able to assure the stability of electricity generation and 

the reliable delivery of electricity to users at least cost 

(subject to certain reliability, environmental and other 

constraints). The fact that generation at one EGU can be 

substituted for generation at another allows operators to 

utilize their least-cost assets first, and hold their 

higher-cost assets in reserve, thereby assuring that the 

system achieves the objectives of providing reliable and 

least-cost electricity service. 

In recent years, the ability to shift between 

different generation assets on the grid has also 

facilitated the achievement of environmental objectives, 

including the reduction of emissions of nitrogen oxides, 

sulfur dioxide, and particulate matter -- which, among 

them, worsen acid deposition and jeopardize the attainment 

and maintenance of national ambient air quality standards – 

as well as hazardous air pollutants. Regulation of those 

air pollutants tends to increase the relative cost of 

electricity from higher-emitting generation assets. Because 

EGU operators have the ability to use the grid as an 

interchange for shifting levels of generation among several 
45 

facilities, the higher costs of higher-emitting assets must 

be considered, along with fuel costs and other marginal 

costs, in determining the extent to which those assets are 

utilized. The amount of their utilization affects the 

amount of their emissions. 

Most recently, states and companies seeking 

specifically to achieve CO2 emissions reduction objectives 

have also relied on the shifting of generation between and 

among EGUs to achieve those emissions reduction objectives. 

In fact, as the preamble notes, there are many cases in 

which companies have reduced emissions through shifting 

generation away from higher emitting units to lower- or 

zero-emitting units, or through reducing overall electric 

demand through demand-side energy efficiency measures. In 

some cases, this has occurred in response to goals set at 

the company level: some companies have established a 

single, company-wide emission target, and then have used 

combinations of strategies such as fuel switching, 

increased renewable or nuclear generation, and increased 

energy efficiency, to achieve those goals. In other cases, 

this has occurred in response to goals set at the state 

level: for example, California enacted its Global Warming 

Solutions Act in 2006 (AB 32), requiring the state to 

reduce its GHG emissions to 1990 levels by 2020 and 80 
46 

percent below 1990 levels by 2050,39 through a suite of 

mechanisms that include energy efficiency programs,

renewable energy programs and an economy-wide cap and trade 

program, along with other programs.40 Similarly, nine 

northeast and mid-Atlantic states participate in the 

Regional Greenhouse Gas Initiative (RGGI), a market-based 

emissions budget trading program that sets an aggregate 

limit on CO2 from fossil fuel fired power plants in the 

participating states. These examples demonstrate that it 

is appropriate to base the BSER at least in part on the 

combination of measures in building blocks 2, 3, and 4, and 

that this component of such a system is adequately 

demonstrated. 

In all of these instances, companies’ choices and 

policies implemented by states may impact decisions about 

dispatching of lower instead of higher emitting generating 

units both as part of the short term dispatch process and 

as part of longer term business planning processes. The 

proposed emission guidelines, including the temporal 

 

 

39 State of California Global Warming Solutions Act of 2006, 

Assembly Bill 32, Chapter http://www.leginfo.ca.gov/pub/05-

06/bill/asm/ab_0001-0050/ab_32_bill_20060927_chaptered.pdf 

40 See Cal. Air Res. Bd., Climate Change Scoping Plan 31-32, 

41-46 (2008), available at: 

http://www.arb.ca.gov/cc/scopingplan/document/adopted_scopi

ng_plan.pdf. 
47 

flexibility that the guidelines incorporate, allow states 

and EGUs to implement a variety of mechanisms that can 

reduce emissions both as part of those shorter term

dispatch decisions and as part of longer term business 

planning processes. 

In this rulemaking, the EPA is building on these 

company, state, and regional approaches by continuing to 

rely on the interconnected nature of the grid to achieve, 

on a nationwide basis, the important objective of 

significant amounts of CO2 reductions from fossil fuel-fired 

EGUs. The EPA is doing so by proposing that the BSER should 

be based on a combination of the implementation of heat 

improvement measures for fossil fuel-fired steam generating 

units (building block 1) to reduce their emissions, as well 

as the implementation of other measures that are associated 

with reduced emissions from those EGUs. The latter include 

substituting generation at higher emitting sources with 

increasing generation at less carbon-intensive EGUs, using 

expanded amounts of low- or zero-carbon generating capacity 

connected to the electric grid, and using electricity more 

efficiently to reduce the total demand for electricity 

(building blocks 2, 3 and 4, respectively). 

In determining the BSER, it is significant that CO2 is 

a global pollutant, and therefore the location of the 
48 

emissions (or emission reductions) does not affect the 

impact on climate change of an amount of emissions 

generated at any given source in any one location.41 The 

fact that CO2 becomes well-mixed in the atmosphere means 

that CO2 emissions may be reduced anywhere within the 

electricity grid and still achieve the intended climate 

benefits. This allows the EPA to determine that a system 

is the “best” system based on the total emission reductions 

the system would achieve, rather than basing the 

determination on the emission reductions achieved at each 

individual affected source. 

3. First Approach to the BSER: Building blocks 1, 

2, 3, and 4 in combination 

Under the EPA’s first approach to determining the 

BSER, the EPA is proposing that the BSER is the combination 

of building blocks 1 through 4. As discussed in the 

 

41 By analogy, because the problem of acid deposition is 

caused by EGU emissions of nitrogen oxide and sulfur 

dioxide over a wide geographic area, Title IV of the Clean 

Air Act established a national emissions trading program 

that addresses that problem by reducing the total amount of 

those emissions, but without regard to the particular 

location of those emissions (or emissions reductions). In 

contrast, other air pollutants have adverse health and 

welfare effects in the locality where they are emitted, and 

as a result, geographic constraints on emissions trading 

are necessary. See CAA section 173(c)(1) (limiting offsets 

for air pollutants subject to new source review 

requirements to emissions reductions from sources in 

certain nonattainment areas). 
49 

preamble, under the EPA’s proposed approach to determining 

the BSER, the measures in building block 1, which entail 

improvements in the efficiency of the affected EGUs’ 

equipment or processes, meet the criteria to qualify as a 

part of the BSER. Further elaboration of this point here is 

not necessary. In addition, in the preamble, we explain why 

all four building blocks in combination meet the criteria 

to qualify as the BSER, and further elaboration of this 

latter point here is also not necessary. Instead, this 

discussion will focus on building blocks 2, 3, and 4. 

Under this first approach to the BSER, the “best 

system of emission reduction ... adequately demonstrated” 

also includes the measures in building blocks 2, 3 and 4 

for the affected fossil fuel-fired steam generating

boilers, and building blocks 3 and 4 for the fossil fuelfired combustion turbines. In this section, we first 

explain why the measures in these building blocks are part 

of a “system of emission reduction,” and then why that 

system is the “best” system that is “adequately 

demonstrated.” 

In brief, building blocks 2, 3, and 4 are part of a

“system of emission reduction” because that phrase, in the 

context in which it is used in section 111 and by its 

terms, is broad enough to apply to the measures in the 
50 

building blocks, in light of the integrated nature of the 

electricity grid. Through the integrated grid, the

measures reduce overall demand for, and therefore 

utilization of, higher emitting, fossil fuel-fired EGUs, 

which, in turn, reduces CO2 emissions from those EGUs. The 

measures in the building blocks are part of the “best” 

system that is “adequately demonstrated” because they meet 

the criteria in section 111(a)(1) and the case law for BSER 

and they are well-established. 

a. “[S]ystem of emission reduction”

The EPA’s proposal that in this rulemaking, the 

“system of emission reduction” includes the measures in 

building blocks 2, 3, and 4 is grounded in the EPA’s 

interpretation of the key CAA provisions: section 

111(d)(1), which requires that each state plan “establish[] 

standards of performance for any existing source” for 

certain types of air pollutants; and section 111(a)(1), 

which defines a “standard of performance” as “a standard 

for emissions ... which reflects the degree of emission 

limitation achievable through the application of the best 

system of emission reduction ... adequately demonstrated.” 

As explained next, the EPA’s interpretation may be 

justified under either a Chevron step 1 or Chevron step 2 

interpretation. 
51 

i. Chevron step 1 interpretation 

The starting point for our analysis is the phrase, 

“system of emission reduction,” which serves as the basis 

for the “standard for emissions.” As noted above, the CAA 

does not define the term, “system,” and as a result, that 

term should be given its ordinary, everyday meaning: “a set 

of things working together as parts of a mechanism or 

interconnecting network; a complex whole.”42 This definition 

is broad. It encompasses virtually any “set of things” 

that reduce emissions. Moreover, no other provisions in the 

definition of “standard of performance” include any other 

constraints on the type of “things” that may serve as the 

basis for the standard for emissions. The only constraints 

are the qualifiers “best” and “adequately demonstrated,” 

but these do not constrain the type of “things” that could 

be a “system of emission reduction,” only whether a

particular “thing” qualifies as the “best” “system of 

emission reduction” that is “adequately demonstrated” (it 

must be, among other things, technically feasible and of 

reasonable cost). Thus, the “system of emission reduction” 

may include anything that reduces emissions, ranging from 

 

42 Oxford Dictionary of English (3rd ed.) (published 2010, 

online version 2013) 

http://www.oxfordreference.com.mutex.gmu.edu/view/10.1093/a

cref/9780199571123.001.0001/acref-9780199571123 
52 

add-on controls applied to the affected sources’ 

smokestacks to control emissions, to measures that replace 

production or generation at the affected sources and 

thereby reduce emissions from those sources. 

Moreover, the context in which “standard of 

performance,” which includes “system of emission 

reduction,” is found does not add additional constraints. 

As noted above, section 111(d)(1) requires that state plans 

establish “standards of performance for any existing 

source,” and in the preamble, we solicit comment on the 

interpretation of that phrase. Among other things, we 

solicit comment on whether the standards of performance 

must apply directly to the affected sources and only to the 

affected sources, in which case the affected sources would 

bear the legal liability for the entire amount of emission 

reduction requirements; or whether, instead, the standards 

of performance may apply to other entities whose actions 

would reduce generation, and thus emissions, from the 

affected sources. Under either of those interpretations, 

there is nothing in that phrase that limits the type of 

“system of emission reduction” that, if it is the “best” 

that is “adequately demonstrated,” may furnish the basis 

for the standards for emissions. That is, even if that 

phrase -- “standards of performance for any existing 
53 

source” -- is interpreted to mean that the standards of 

performance must apply directly to, and only to, the 

affected sources, that application of the standards of 

performance does not limit the scope of the type of “system 

of emission reduction” that may serve as the basis for the 

standards for emissions. Any “system of emission reduction” 

that reduces the emissions of the affected sources may 

serve as the basis for the standards for emissions, as long 

as, again, it is the “best” that is “adequately 

demonstrated.” For these reasons, the scope of the type of 

“system of emission reduction” that may be considered is 

broad. 

 Interpreting the “system of emission reduction” in

this manner is also consistent with the scope of the state 

plans. Under section 111(d)(1), a state plan must 

“establish[] standards of performance” and “provide[] for 

the implementation and enforcement of such standards of 

performance.” At the state’s discretion, measures in 

building blocks 2, 3, and 4 may be included in state plans 

either through the portfolio approach or as measures that 

“provide[] for the implementation” of standards of 

performance that limit emissions from affected EGUs. 

Based on these interpretations, for existing sources 

in the electric utility industry, we propose that the term 
54 

“system of emission reduction” is sufficiently broad to 

include the measures in building blocks 2, 3, and 4 because 

they are part of the interconnected electricity sector and 

result in reduced utilization, and therefore reduced 

emissions, from the higher emitting fossil fuel-fired power 

plants. This proposed reading is clear as a matter of 

Chevron step 1 because of the breadth of the term, 

“system,” in the context in which it is found. 

ii. Chevron step 2 interpretation 

Moreover, even if the term, “system of emission 

reduction” is not considered to be clear as a matter of 

Chevron step 1 to include the measures in building blocks 

2, 3, and 4, then the EPA’s interpretation of the term to 

include those measures is valid as reasonable construction 

under Chevron step 2. There are several reasons for 

interpreting “system of emission reduction” in this way.43 

(I). Legislative history of 

“standard of performance” 

 

43 See EPA v. EME Homer City Generation, L.P., No. 12-1182, 

slip op. at 22 (U.S. April 29, 2014) (after explaining why 

the text of the CAA "did not answer" the largely technical 

question of how EPA should allocate each state's 

responsibility for the tangle of potentially "significant" 

upwind-to-downwind air pollution contributions, 

stating: "Under Chevron, we read Congress' silence as a 

delegation of authority to EPA to select from among

reasonable options.") 
55 

First, the legislative history of the definition of

“standard of performance,” including the phrase “best 

system of emission reduction ... adequately demonstrated,” 

makes clear that the “system of emission reduction” is 

broader than a technological system. As enacted by Congress 

in the 1970 CAA Amendments, section 111(a)(1) defined the 

term “standard of performance” as, in relevant part -- 

a standard for emissions of air pollutants which 

reflects the degree of emission limitation 

achievable through the application of the best 

system of emission reduction ... adequately 

demonstrated. 

In the 1977 CAA Amendments, Congress changed this 

definition to require that for new sources, the standard 

must, in relevant part, “reflect the degree of emission 

limitation ... achievable through application of the best 

technological system of continuous emission reduction ... 

adequately demonstrated;” and for existing sources, the 

standard must, in relevant, “reflect[] the degree of 

emission reduction achievable through the application of 

the best system of continuous emission reduction ... 

adequately demonstrated....” (Emphasis added.)44 In the 1990 

CAA Amendments, Congress again changed this definition, 

 

44 The 1977 CAA Amendments also revised section 111(a)(1) to 

require that the standards of performance for fossil fuelfired sources require a percentage reduction in emissions 

(the “percentage reduction” requirement). 
56 

this time to reinstate the definition as found in the 1970 

CAA Amendments (with some revisions not here relevant). 

That is, Congress repealed the requirements added in the 

1977 CAA Amendments that the “system” be, in the case of 

new sources, “technological.” 

These amendments make clear that the “system[s] of 

emission reduction” upon which the section 111(d) standards 

of performance may be based are not limited to 

technological systems. Even when, in the 1977 CAA 

Amendments, Congress limited the systems that could provide 

the basis for the standards of performance for new sources 

to technological systems, Congress did not establish that 

limit on the systems for existing sources. Moreover, the 

1977 House-Senate Conference Committee report stated that 

for existing sources, the standards of performance were to 

be based on the “best available means of emission control 

(not necessarily technological)....”45 

 (II). Pollution prevention

In addition, interpreting the term “system of emission 

reduction” broadly to include the building blocks is 

 

45 “Joint Explanatory Statement of the Committee of 

Conference,” reprinted in Congressional Research Service, A 

Legislative History of the Clean Air Act Amendments of 

1977, vol. 3 at 502, 509 (1978) (1977 Legislative History). 

The House Committee Report included the same statement. See 

H. Rep. 95-294 at 195, reprinted in 1977 Legislative 

History, vol. 4 at 2465, 2662. 
57 

consistent with a primary purpose of the CAA, which is 

encouraging pollution prevention, including assuring that 

states fulfill their role in developing pollution 

prevention measures. CAA section 101(c) states that “[a] 

primary goal of [the Clean Air Act] is to encourage or 

otherwise promote reasonable Federal, State, and local 

governmental actions, consistent with the provisions of 

this chapter, for pollution prevention.” CAA section 

101(b)(4) adds that one of “the purposes of [title I of the 

CAA, which includes section 111] are ... (b) to encourage and 

assist the development and operation of regional air 

pollution prevention and control programs.” Indeed, in the 

U.S. Code, in which the CAA is codified as chapter 85, the 

CAA is entitled, “Air Pollution Prevention and Control.” 

CAA section 101(a)(3) describes “air pollution prevention” 

as “the reduction or elimination, through any measures, of 

the amount of pollutants produced or created at the

source,” and adds: “The Congress finds -- ... (3) that air 

pollution prevention ... and air pollution control at its 

source is the primary responsibility of States and local 

governments.” 

The measures in building blocks 2, 3, and 4 all 

qualify as types of “pollution prevention” because they are 

“measures” that “reduc[] or eliminate[e] ... the amount of 
58 

pollutants produced or created at the [fossil fuel-fired 

affected] source[s].” It is reasonable to interpret the 

section 111 provisions at issue in this rulemaking in light 

of these section 101 provisions, and this supports the 

reasonableness of interpreting the broad term found in 

section 111(a)(1), “system of emission reduction,” to 

include the pollution prevention measures in building 

blocks 2, 3, and 4. 

 (III). Title IV

The breadth of the term, “system of emission 

reduction” is further confirmed by reference to certain 

provisions of CAA Title IV. In Title IV, Congress 

established the program that regulates fossil fuel-fired 

power plants to reduce their emissions of the precursers to 

acid deposition, including reducing sulfur dioxide (SO2) 

emissions in two phases, and reducing nitrogen oxides (NOx) 

emissions. Congress enacted Title IV as part of the 1990 

CAA Amendments, at the same time that Congress revised the 

definition of “standard of performance” to generally return 

it to its 1970-vintage reading. In certain respects, 

section 111 and Title IV are related because both apply to 
59 

fossil-fuel fired EGUs, and Congress recognized the

relationship in several Title IV provisions.46 

One contrasting provision in Title IV is section 

407(b)(2), which requires the EPA to base the NOx emission 

limits for certain types of boilers “on the degree of 

reduction achievable through the retrofit application of 

the best system of continuous emission reduction...;” and 

further requires the EPA to revise previously promulgated 

emission limits for certain types of boilers “to be more 

stringent if the [EPA] determines that more effective low 

NOx burner technology is available.” (Emphasis added.) 

These narrower specifications for the basis of the Title IV 

emissions limits make clear that Congress knew how to 

constrain the basis for emission limits to the results of 

certain technology, and that its choice to base the section 

111(d) standards of performance on a “system of emission 

 

46 See, e.g., CAA section 402(8), 405(c)(2). In fact, in the 

1990 CAA Amendments, Congress based its decision to repeal 

the percentage reduction requirements added in the 1977 CAA 

Amendments to the section 111(a)(1) definition of “standard 

of performance” for new fossil fuel-fired sources at least 

in part on the grounds that provisions of Title IV would 

cap SO2 emissions from fossil-fuel fired EGUs, and, further, 

Congress conditioned that repeal on the continued 

applicability of the SO2 cap, so that if the cap were 

eliminated, the repeal would, by operation of law, be 

eliminated. See Pub. L. 101-549 section 403(b), S. Rep. 

101-228, at 338, reprinted in 1990 Legislative History 

8338, 8678 (1990 Senate Committee Report). 
60 

reduction” indicates its intent to authorize a broader 

basis for those standards. 

Other provisions in Title IV and their legislative 

history provide further support for interpreting the term, 

“system of emission reduction” to include building blocks 

2, 3, and 4. In designing Title IV, Congress recognized the 

integrated nature of the electricity sector and how that 

integration could be harnessed to reduce air pollutant 

emissions; and, in fact, Congress included provisions to 

encourage re-dispatch to lower emitting sources, renewable 

energy, and demand-side energy efficiency, all of which are 

measures in those building blocks. Specifically, Congress 

added into the “purposes” provision of Title IV, the 

statements that in addition to the reducing the adverse 

effects of acid deposition – 

It is also the purpose of [Title IV] to encourage 

energy conservation, use of renewable and clean 

alternative technologies, and pollution 

prevention as a long-range strategy, consistent 

with the provisions of [Title IV], for reducing 

air pollution and other adverse impacts of energy 

production and use....”47

 

47 CAA section 401(b). See H. Rep. 101-490 Part 1 at 369-70 

(1990 House Comm. Rep.), reprinted in “A Legislative 

History of the Clean Air Act Amendments of 1990,” 

Congressional Research Service (1993) (1990 Legislative 

History), vol. II, at 3021, 3393-94. 
61 

Congress recognized that the very structure of Title IV – 

which imposed a marketable trading system under which 

affected sources were required to have an allowance for 

each ton of SO2 emitted and could buy and sell allowances on 

the open market -- encouraged such measures as demand-side 

energy efficiency and re-dispatch by lower-emitting

sources. The 1990 Senate Committee Report explained: 

[T]he incentives created by the allowance market 

should stimulate innovations and the technologies 

and strategies used to reduce emissions.... [T]he 

allowance market should encourage sources to 

exploit energy efficiency, enhanced emission 

reduction or control technologies....; fuelswitching and least-emissions dispatching in 

order to maximize emission reductions.”48

In addition, Congress incorporated into Title IV 

specific incentives to further encourage electric utilities 

(defined as entities that sell electricity49) to reduce 

their emissions through demand-side energy efficiency and 

renewable energy: Section 404(f)-(g) provided a special 

reserve of allowances to be allocated to electric utilities 

“for each ton of SO2 emissions avoided by an electric 

utility ... through the use of ... energy conservation measures 

or ... renewable energy.” In fact, in adopting these

provisions, Congress explicitly recognized the integrated 

 

48 1990 Senate Committee Report at 316, reprinted in 1990 

Legislative History, vol. V, at 8656 (emphasis added). 

49 CAA section 404(f)(1)(C).
62 

nature of the electricity sector: As one of the conditions 

for eligibility for this special reserve of allowances, the 

utility must “ha[ve] adopted and is implementing a least 

cost energy conservation and electric power plan which 

evaluates a range of resources, including new power

supplies, energy conservation, and renewable energy

resources, in order to meet expected future demand at the 

lowest system cost.”50 

 These CAA provisions and the accompanying statements 

in the legislative history make clear that in enacting the 

Title IV provisions to reduce SO2 and NOx emissions from 

fossil fuel-fired EGUs, Congress viewed the electricity 

sector as interconnected and considered re-dispatch to 

lower emitting sources, renewable energy, and demand-side 

energy efficiency as methods to reduce those emissions. 

All this supports the reasonableness of the EPA’s proposed 

interpretation that the “system of emission reduction” that 

serves as the basis for “standards of performance” for CO2 

emissions from fossil fuel-fired EGUs may include those 

same measures, that is, building blocks 2, 3, and 4 (redispatch; low- or zero-emitting generation, including 

renewables; and demand-side energy efficiency, 

respectively.) 

 

50 CAA section 404(f)(2)(B)(iii)(I). 
63 

 (IV). EPA Precedent 

 In the past, the EPA has promulgated rules under CAA 

section 111(d), in conjunction with CAA section 129, that 

were based on measures that are similar to some of the 

measures in the building blocks that EPA proposes as the 

basis for the regulatory requirements in this rulemaking. 

For example, the EPA has authorized states to allow large 

municipal waste combustors to average their emission rates 

and trade NOx emission credits,51 and have required the 

owners of certain waste incineration facilities to take 

steps to reduce the amount of waste that the facilities 

combust.52

 

51 See “Standards of Performance for New Stationary Sources 

and Emission Guidelines for Existing Sources; Municipal 

Waste Combustors,” 60 Fed. Reg. 65,387 (Dec. 19, 1995) 

(trading rules codified in 40 C.F.R. section 60.33b(d)(1)-

(2)). EPA also authorized an emission trading program in 

the Clean Air Mercury Rule. See “Standards of Performance 

for New and Existing Stationary Sources: Electric Utility 

Steam Generating Units, Final Rule,” 70 Fed. Reg. 28,606 

(May 18, 2005) vacated on other grounds by New Jersey v. 

EPA, 517 F.3d 574 (D.C. Cir. 2008), cert denied sub nom. 

Util. Air Reg. Grp. v. New Jersey, 555 U.S. 1169 (2009); 

“Standards of Performance for New Stationary Sources and 

Emission Guidelines for Existing Sources; Municipal Waste 

Combustors,” 60 Fed. Reg. 65,387 at 28616-24, (Dec. 19, 

1995). 

52 See, e.g., Standards of Performance for New Stationary 

Sources and Emission Guidelines for Existing Sources: 

Hospital/Medical/Infectious Waste Incinerators, 62 Fed. 

Reg. 48,348, 48359 (Sept. 15, 1997); Standards of 

Performance for New Stationary Sources and Emission

Guidelines for Existing Sources: Commercial and Industrial 
64 

 (V). Other considerations

It should also be noted that a number of commentators 

in the private sector and academia have indicated support 

for interpreting the term, “system of emission reduction” 

to incorporate measures such as re-dispatch, renewable 

energy, and demand-side energy efficiency.53 Some 

stakeholders have as well.54

 

Solid Waste Incineration Units, 65 Fed. Reg. 75338, 75341 

(Dec. 1, 2000). 

53 See Nordhaus R., Gutherz I., “Regulation of CO2 Emissions 

from Existing Power Plants Under section 111(d) of the 

Clean Air Act: Program Design and Statutory Authority,” 

Environmental Law Reporter, 44: 10366, 10384 (May 2014) 

(“strong arguments for” interpreting “system” to include 

measures such as the addition of new zero-carbon generating 

capacity and increases in end-user energy efficiency); 

Sussman R., “Power Plant Regulation Under the Clean Air 

Act: A Breakthrough Moment for U.S. Climate Policy?” 

Virginia Environment Law Journal, 32:97, 119 (2014) (“EPA 

would seem to have discretion to define ‘system’ to include 

any mix of strategies effective in reducing emissions.”); 

Konschnik K., Peskoe A., “Efficiency Rules: The Case for 

End-Use Energy Efficiency Programs in the Section 111(d) 

Rule for Existing Power Plants,” Harvard Law School 

Environmental Law Program – Policy Initiative 4 (March 3, 

2014) (EPA is authorized to “consider[] ... the entire 

[electricity grid] system when setting performance 

standards.”); Monast J., Profeta T., Pearson B., Doyle J., 

“Regulating Greenhouse Gas Emissions From Existing Sources: 

Section 111(d) and State Equivalency,” Environmental Law 

Reporter, 42: 10206, 10209 (March 2012) (“Demand-side 

energy-efficiency programs and renewable energy generation 

may fit within the section 111 framework, however, because 

both reduce the utilization of power plants .... According to 

this reasoning, emission reductions are occurring within 

the source category, because of changes in generation at 

the power plant.”). 

54 Ceronsky M., Carbonell T., “Section 111(d) of the Clean 

Air Act: The Legal Foundation for Strong, Flexible & Cost-
65 

In addition to the just-discussed reasons why 

interpreting the term, “system of emission reduction” to 

include those measures is a reasonable interpretation under 

the CAA, that interpretation also is reasonable as a matter 

of policy, as we discuss extensively in the preamble. To 

reiterate briefly, including those measures is consistent 

with the industry’s long-standing methods of operating to 

assure reliability at the least cost, how states have more 

recently reduced non-greenhouse gas air pollutants from the 

industry, and, how states and segments of the industry 

have, still more recently, reduced CO2 emissions. 

b. “Best system of emission reduction ... 

adequately demonstrated” 

For the reasons described next, the measures in each 

of building blocks 2, 3, and 4 qualify as components of the 

 

Effective Carbon Pollution Standards for Existing Power 

Plants,” Environmental Defense Fund, at 9 (Oct. 2013),

available at http://www . edf .org/sites/default/files/111-

clean_air_act-strong_flexible_cost-effective_ 

carbon_pollution_standards_for_existing_power_plants .pdf ; 

Doniger D., “Questions and Answers on the EPA’s Legal 

Authority to Set ‘System Based’ Carbon Pollution Standards 

for Existing Power Plants under Clean Air Act Section 

111(d),” NRDC [Natural Resources Defense Counsel] Issue 

Brief (Oct. 2013); “Comments of the Attorneys General of

New York, California, Massachusetts, Connecticut, Delaware, 

Maine, Maryland, New Mexico, Oregon, Rhode Island, Vermont, 

Washington, and the District of Columbia on the Design of a 

Program to Reduce Carbon Pollution from Existing Power 

Plants” (Dec. 16, 2013).
66 

“best system of emission reduction ... adequately 

demonstrated.” As noted elsewhere, the D.C. Circuit has 

interpreted the BSER as “[a]n adequately demonstrated 

system,” and explained that such a system is one that can 

“be[] shown to be reasonably reliable, reasonably 

efficient, and ... reasonably ... expected to serve the

interests of pollution control without becoming 

exorbitantly costly in an economic or environmental way.”55

In fact, the measures in the building blocks do meet the 

criteria established by the Court in the section 111 case 

law. In addition, the measures are “adequately 

demonstrated” because they have already been implemented in 

many states, and because they may be undertaken by the 

affected EGUs in the regulated markets in which they 

operate, or may be implemented by the states in the state 

plans. 

i. Criteria for the BSER 

The measures in building blocks 2, 3, and 4 meet the 

criteria for inclusion as components of the BSER because 

they are individually and together technically feasible, 

and together they achieve significant emission reductions, 

are not unreasonably costly, and will promote the 

development and implementation of technology improvements 

 

55 Essex Chemical Corp. v. Ruckelshaus, 486 F.2d at 427. 
67 

for continued emission reductions.56 The bases for these 

conclusions are discussed in detail in the preamble and 

briefly summarized below. 

Building block 2, which entails substituting 

generation at higher emitting units (fossil fuel-fired 

steam generating units) by shifting to generation at loweremitting affected sources (existing NGCC units) is 

technically feasible because the NGCC units are already 

providing electricity to the grid and have sufficient 

capacity to generate the additional amount of electricity 

that would substitute for the generation at fossil fuelfired steam generating units. Re-dispatch is already widely 

used (usually more in response to fuel price signals than 

as a CO2 mitigation measure), including by companies that 

own both coal- and natural-gas-fired EGUs. It should be 

noted that there are several mechanisms through which 

states could cause re-dispatch to occur. First, a state 

could use its permitting authority to impose limits on the 

hours of operation (or emissions) of individual steam 

generating units over a given time period. Second, a state 

 

56 As noted above, we are proposing to determine BSER as the 

combination of all four building blocks, and because we 

discuss in the preamble the reasons why building block 1 

meets the criteria for inclusion in the BSER,and why the 

BSER is the combination of all four building blocks, we are 

not further discussing those points here. 
68 

could change the relative costs of generation for more 

carbon-intensive and less carbon-intensive generating units 

by imposing a cost on carbon emissions. A state could do so 

through any of several market-based mechanisms. One would 

be to adopt an allowance-based system. An example is the 

Regional Greenhouse Gas Initiative, an allowance-based 

system in which sources purchase allowances in periodic 

auctions. Another way would be through a tradable emission 

rate system, under which the state would impose an emission 

rate on the steam generating unit that the unit could meet 

only by purchasing the right to average its emission rate 

with a unit with a lower rate, such as an NGCC unit. Most 

broadly, an allowance system would provide the greatest 

incentive for the most carbon-intensive affected sources to 

reduce emissions as much as possible so as to reduce their 

need to purchase allowances (or to allow them to sell unneeded allowances), and the same would be true for a 

tradable emission rate system. 

As discussed in the preamble, building block 3, which 

entails use of new low- and zero-emitting generation, as 

well as preservation of nuclear capacity that might

otherwise be retired, is also technically feasible. The 

technology for renewable energy is well-established and in 

use now, and the amount of renewable energy contemplated by 
69 

the proposal would not impair the reliability of the grid. 

The nuclear capacity at issue either is already in 

operation or, in the case of new nuclear capacity under 

construction, has long been known to grid operators for 

planning purposes. The measures in building block 3 may be 

implemented in different ways, including market mechanisms. 

In particular, markets for renewable energy certificates, 

which facilitates investment in renewable energy, are 

already well-established. In addition, as noted above with 

re-dispatch, an allowance system or tradable emission rate 

system would provide incentives for sources to reduce their 

emissions as much as possible, including by substituting 

their generation with generation from renewable energy. 

As for building block 4, as discussed in the preamble, 

numerous state and utility programs have demonstrated that 

improvements in demand-side energy efficiency are 

technically feasible at the levels contemplated in the 

proposal. An allowance system or tradable emission rate 

system would provide incentives that promote the measures 

in building block 4 in the same manner as just discussed 

for other building blocks. 

For the reasons discussed in the preamble, the 

combination of building blocks 2, 3, and 4, along with 

building block 1, also meet the criteria to qualify as the 
70 

BSER. The level of CO2 emissions reduction they achieve is 

significant, which is appropriate because of the severity 

of the risk to public health and the environment of climate 

change, and the magnitude of both the amount of emissions 

reductions needed and the amount of CO2 emissions from 

fossil fuel-fired power plants. 

In addition, based on the measures in building blocks 

2, 3, and 4 combined, the proposed levels of reduced 

generation are not unreasonably costly for the affected 

source category or the nation-wide electricity system. 

These levels do not have adverse effects on the overall 

energy system. Electricity consumers would continue to 

have access to the electricity they need under these 

building blocks, although they would need less energy for 

the same amount of economic activity as a result of the 

measures in building block 4. Additionally, the measures 

in building blocks 2, 3, and 4 would improve the 

electricity system by reducing its carbon intensity, as 

well as other pollutants, allowing consumers to get the 

same amount of electricity for less environmental harm. 

Together, these measures would also promote the development 

and implementation of technology that is important for 

continued emissions reductions. 
71 

ii. Basis for “adequately 

demonstrated” finding 

The measures in building blocks 2, 3, and 4 are 

“adequately demonstrated” because each of the individual 

measures is adequately demonstrated, and because it has 

been adequately demonstrated that the measures can be taken 

in combination with each other in a manner consistent with 

the criteria for determining the BSER. 

The measures in building block 1 are adequately 

demonstrated because they are based on the real-world 

experience of individual power plants in recent years, as 

more fully described in the preamble and a technical 

support document. 

The measures in building blocks 2, 3, and 4 are 

“adequately demonstrated” because, as discussed in the 

preamble, due to the integrated nature of the electricity 

system, they have long been relied on to reduce costs in 

general, assure reliability, and implement pre-existing 

pollution control requirements in the least cost manner. As 

also noted in the preamble, some utilities, states and 

regions are already relying on these measures for the 

specific purpose of reducing CO2 emissions from EGUs. 

At the same time, as discussed in the preamble, 

measures in building blocks 2, 3, and 4 may be undertaken, 
72 

and in fact have been undertaken, by the affected EGUs 

themselves, which further indicates that these measures are 

“adequately demonstrated.” To achieve the re-dispatch 

described in building block 2, operators of the affected 

fossil fuel-fired steam-generating EGUs may reduce 

generation, while operators of the affected NGCC units may 

increase generation to replace that avoided at higheremitting facilities. Operators of the affected EGUs may 

invest in, or otherwise acquire power from, the new low- or 

zero-carbon intensive generation described in building 

block 3, as well as in many of the demand-side energy 

efficiency measures described in building block 4. 

More specifically, many states maintain a utility 

regulatory structure under which the utilities that serve 

end users in the state are vertically integrated, and not 

only own the EGUs, but often also own renewable energy 

resources and provide service directly to retail customers. 

Operators of EGUs, in those circumstances, are wellpositioned to undertake the measures in building blocks 3 

and 4. In fact, as noted in the preamble, numerous states 

have already imposed renewable portfolio standards and 

demand-side energy efficiency requirements on those

utilities. As a result, as also noted in the preamble, many 

companies have already developed integrated resource plans 
73 

that include re-dispatch from higher-emitting fossil fuelfired generation to lower-emitting generation, the purchase 

of renewable capacity or the development of renewable 

generation assets, and the implementation of demand-side 

energy efficiency measures.57

Other states have de-regulated their electricity 

markets58 and as a result, in some instances, the EGUs in 

those states are merchant generators that sell to the 

wholesale electricity market. The EPA believes that markets 

for acquiring renewable energy resources and for delivering 

demand-side energy efficiency services are sufficiently 

well-developed that operators of these EGUs could undertake 

or acquire those measures as well. For example, merchant 

generators can invest in NGCC capacity, invest in renewable 

capacity or purchase renewable energy or renewable energy 

certificates (representations that a certain amount of 

energy was produced from renewable sources), as well as 

purchase demand-side energy efficiency services from energy 

 

57 Moreover, in many de-regulated states, forward capacity 

auctions are used to ensure the ability to meet future 

demand, and generators may bid into those auctions based on 

all of their resource portfolio, 

including renewable energy assets and demand-side energy 

efficiency projects. This has encouraged generators to 

undertake the measures in building blocks 3 and 4. 

58 Some states, such as Ohio, have hybrid model that 

includes elements of a regulated market and a de-regulated 

market.
74 

service companies. The fact that the affected sources may 

themselves implement or invest in the measures in building 

blocks 2, 3, and 4 -- which, again, reduce their emissions 

-- supports treating those measures as components of the 

BSER. 

Another reason that the measures in building blocks 2, 

3, and 4 should be considered “adequately demonstrated” – 

and wholly apart from the fact that the EGUs may undertake 

those measures themselves – is based on the fact that CAA 

section 111(d)(1)(A) provides, by its terms, that the 

standards of performance that are based on the BSER must be 

established by the states in state plans. As a result, 

emissions reduction measures that the states themselves 

have the authority under state law to put in place may be 

considered to be part of the BSER. While EGU owners and 

operators may effectuate such measures directly or 

indirectly, the states also have authority to enact

measures such as dispatch limitations, renewable portfolio 

standards that require investment in renewable energy 

resources, as well as demand-side energy efficiency

measures.59 As noted in the preamble, many states have 

already done so.60 

 

59 It should be noted that under the portfolio approach to 

the state plan, discussed in the preamble, the entities 
75 

Finally, we note that during the public outreach 

sessions, stakeholders generally recommended that state 

plans be authorized to rely on, and that affected sources 

be authorized to implement, re-dispatch, renewable energy 

measures and demand-side energy efficiency measures, in 

order to meet the states’ and sources’ emissions reduction 

obligations. The EPA agrees that state plans may include 

these measures, at least under certain circumstances 

discussed in the preamble, and that sources may rely on 

them to achieve required reductions. It is clear that 

these types of measures are well-accepted by the 

stakeholders as means to reduce emissions from affected 

sources. The fact that state plans and sources would be 

expected to use these types of measures to reduce emissions 

supports the view that these measures are part of a “system 

 

that undertake some of the measures in, for example, 

building block 4 may not be the affected EGUs. Regardless 

of which entities undertake the measures in the building 

blocks, those measures have the effect of reducing CO2

emissions from fossil fuel-fired EGUs, and therefore each 

of the building blocks remains part of a “system” of 

emission reduction for those EGUs. 

60 More than half the states have established renewable 

portfolio standards (RPS) that require minimum proportions 

of electricity sales to be supplied with generation from 

renewable generating resources. More than 20 states have 

energy efficiency resource standards (EERS) that require 

utilities to effectuate a certain amount of savings in 

electricity demand each year or cumulatively. Database of 

State Incentives for Renewables & Efficiency (DSIRE), 

http://www.dsireusa.org/summarymaps/index.cfm?ee=0&RE=0.
76 

of emission reduction” for those sources that the EPA may 

evaluate against the appropriate criteria to determine 

whether they comprise the “best system of emission 

reduction ... adequately demonstrated.” 

c. Stakeholder concerns 

As noted above, some stakeholders have argued that 

section 111(a)(1) authorizes the EPA to identify redispatch, low- or zero-emitting generation, and demand-side 

energy efficiency measures (building blocks 2, 3, and 4) as 

components of the “best system of emission reduction ... 

adequately demonstrated.” However, other stakeholders have 

disagreed that this approach is consistent with CAA section 

111(d). According to these latter stakeholders, as a legal 

matter, the BSER is limited to measures that may be

undertaken at the affected electric generating units 

(EGUs), including on-site controls, activities, or work 

practices, and cannot include measures that are beyond the 

affected units. These stakeholders take the position that 

although efficiency improvements at the affected EGUs may 

be included in the BSER,the measures in building blocks 2, 

3, and 4 are “beyond-the-unit” measures because they are 

implemented outside of the affected EGUs and outside of the 
77 

control of their owners or operators.61 Some stakeholders 

have also argued that section 111(d)(1) requires that the 

performance standards established by the states must 

reflect what is achievable at each existing unit.62

As the preamble notes, we welcome comment on these 

issues. As discussed above, we propose that the provisions 

of section 111 allow the BSER to include those types of 

measures. In addition, as discussed above, under our 

proposed approach, affected sources may themselves 

 

61 “Response of the Utility Air Regulatory Group to EPA’s 

‘Considerations in the Design of a Program to Reduce Carbon 

Pollution from Existing Power Plants” (Oct. 2013); 

“Existing Source Performance Standards for Greenhouse Gas 

Emissions from Electrical Generating Units: Creating a 

Regulatory Framework Under Clean Air Act section 111(d) – A 

whitepaper from the Coalition for Innovative Climate 

Solutions” (Feb. 26, 2014); “Perspective of 18 States on 

Greenhouse Gas Emission Performance Standards for Existing 

Sources under §111(d) of the Clean Air Act,” included in 

“Testimony before the Subcommittee on Energy and Power of 

the House Committee on Energy and Commerce – ‘EPA’s

Proposed GHG Standards for New Power Plants and H.R. __, 

Whitfield-Manchin Legislation’” (Nov. 14, 2013) (statement 

of E. Scott Pruitt), 

http://democrats.energycommerce.house.gov/sites/default/fil

es/documents/Testimony-Pruitt-EP-EPA-GHG-StandardsWhitfield-Manchin-Legislation-2013-11-14.pdf. See National 

Climate Coalition, “Discussion Background Paper: Best 

System of Emission Reduction” (Oct. 16, 2013)(“BSER

approach that mandates reductions based on actions outside 

the control of the regulated source would involve legal 

uncertainty. There is nothing in the CAA that authorizes 

EPA to issue guidelines that require a standard to be based 

on something that is outside the fence and outside the 

control of the source.”) 

62 “Response of the Utility Air Regulatory Group to EPA’s 

‘Considerations in the Design of a Program to Reduce Carbon 

Pollution from Existing Power Plants” (Oct. 2013). 
78 

implement the measures included in building blocks 2, 3, 

and 4, so that those measures are within their control. 

Moreover, under our proposed alternative approach, the 

“system of emission reduction” includes reductions in 

utilization at the affected sources themselves.63 It 

 

63 Commenters have critiqued this “at-the-unit” and beyondthe-unit” distinction as follows: 

There is an argument that the at-the-unit/beyondthe-unit distinction is not a meaningful one. 

Specifically, it could be argued that the 

distinction between at-the-unit and beyond-theunit measures is largely artificial, because all 

of the emission reductions under consideration—

whether from at-the-unit measures (e.g., fuelswitching or efficiency upgrades) or from beyondthe-unit measures—are, in fact, emission 

reductions at or from electric generating units 

on the interconnected electric grid. For example, 

neither the addition of renewable generation nor 

the reduction of end-user demand directly reduces 

atmospheric emission of CO2; rather these 

measures permit fossil EGUs to reduce their own 

output and emissions. It can be argued that all 

of the systems of emission reduction here 

contemplated—whether they involve end-use energy 

efficiency, displacing high-emission generation 

with lower emission generation, fuel-switching, 

heat-rate improvements, etc.—are effectively atthe-unit measures that ultimately reduce 

emissions solely from regulated EGUs. If energyefficiency programs, added renewable energy, and 

redispatch from higher emitting facilities to 

lower emitting facilities are viewed as at-theunit systems of emission reduction, the at-theunit/beyond-the-unit distinction arguably becomes 

irrelevant—at least from a legal perspective. 

Nordhaus R., Gutherz I., “Regulation of CO2 Emissions from 

Existing Power Plants Under section 111(d) of the Clean Air 
79 

should also be noted that, as discussed above, the redispatch measures in building block 2 are limited to 

affected sources. In addition, we discuss below that the 

performance standards that the states may establish under 

our approach meet the requirements of section 111(d)(1) and 

section 111(a)(1) because they would reflect the degree of 

the required emission performance level (which, in turn, 

is based on the BSER, as the EPA has applied it to the 

state’s sources) that the state assigns to the affected 

EGUs. Thus, the proposed approach and alternative described 

next respond to these stakeholder concerns.

4. Second approach: Heat rate improvement 

measures inbuilding block 1 plus reduced 

utilization at levels commensurate with 

building blocks 2, 3 and 4 

The EPA is also proposing an alternative approach to 

the BSER: heat rate improvements (building block 1) 

combined with reduced utilization in specified amounts of 

the affected fossil fuel-fired EGUs, commensurate with the 

amount of low- and zero-emitting generation and avoided 

generation in building blocks 2, 3, and 4. The reasons why 

the measures in building block 1 qualify as a component of 

this approach to BSER, and the reasons why the combination 

 

Act: Program Design and Statutory Authority,” Environmental 

Law Reporter, 44: 10366, 10383 n. 133 (May 2014). 
80 

of building block 1 with the reduced generation qualify as 

the BSER are the same as discussed above in connection with 

the first approach to BSER and in the preamble, and will 

not be discussed further in this subsection 4. Instead, 

this subsection will discuss the reduced generation

component of this second approach to BSER. 

Under this approach, the measures in building blocks 

2, 3, and 4 would not be components of the system of 

emission reduction but instead would serve as bases for 

quantifying the reduced generation (and therefore 

emissions) at affected EGUs, and assuring that the amount 

of reduced generation meets the criteria for the “best” 

system that is “adequately demonstrated” because, among 

other things, the reduced generation can be achieved while 

the demand for electricity services can continue to be met 

in a reliable and affordable manner. Specifically, the 

amount of generation from the increased utilization of NGCC 

units would determine a portion of the amount of the 

generation reduction component of the BSER for affected 

fossil fuel-fired steam EGUs; and the amount of generation 

from the use of expanded low- and zero-carbon generating 

capacity that could be provided, along with the amount of 

generation from fossil fuel-fired EGUs that could be 

avoided through the promotion of demand-side energy
81 

efficiency, would determine a portion of the amount of the 

generation reduction component of the BSER for all affected 

EGUs. 

For the reasons discussed below, reduced generation 

in the specified amounts is a “system of emission 

reduction,” and meets the criteria to qualify as the “best” 

that is “adequately demonstrated.” 

a. “System of emission reduction” 

Reduced generation is encompassed by the terms of the 

phrase “system of emission reduction” in CAA section 

111(a)(1), as a matter of Chevron step 1, because, in 

accordance with the above-discussed definition of “system,” 

reduced generation is a “set of things” – which include 

reduced use of generating equipment and therefore reduced 

fuel input – that the affected source may take to reduce 

its CO2 emissions. 

If the phrase “system of emission reduction” is not

considered clear by its terms, then it may reasonably be 

interpreted under Chevron step 2 to include reduced 

generation, for several reasons. First, Congress has 

recognized reduced utilization in several contexts as a 

method to reduce air pollution. Beginning with the 1970 

CAA Amendments, Congress has recognized that SIPs under CAA 

section 110, in order to assure reductions in NAAQS
82 

pollutants to meet attainment requirements, may need to 

impose emission limits on industrial sources that those 

sources could meet only by retiring.64 Similarly, in 

adopting CAA section 112, which directed the EPA to

promulgate emission standards for sources of hazardous air 

pollutants to a level of stringency that provides an “ample 

margin of safety to protect the public health,”65 Congress 

was clear that the standards could be sufficiently 

stringent so that “effectively, ... a plant would be required 

to close because of the absence of control techniques.”66

 

64 See CAA section 110(g) (authorizing temporary emergency 

suspensions of SIP revisions if needed to prevent the 

closing of a source of air pollution), enacted as CAA 

section 110(f) in the 1970 CAA Amendments; 116 Cong. Rec. 

42384 (Dec. 18, 1970), reprinted in 1970 Legislative 

History, vol. 1, at 132-33 (statement of Sen. Muskie) 

(discussing criteria for sources to receive compliance date 

extensions). Similarly, Congress recognized that to achieve 

the NAAQS, it was necessary to reduce emissions from motor 

vehicles, and that an important method of doing so could be 

restricting the use of motor vehicles in urban areas that 

were already highly polluted. For this reason, Congress 

included in the 1970 CAA Amendments authorization for SIPs 

under section 110 to include “transportation controls.” 

CAA section 110(a)(2)(B), as approved in the 1970 CAA 

Amendments. Sen. Edmund S. Muskie (D-ME), who led the 

proponents for the Amendments in the Senate, explained that 

for some areas to attain the NAAQS, “[c]entral city use of 

motor vehicles may have to be restricted.” 116 Cong. Rec. 

42384 (Dec. 18, 1970), reprinted in 1970 Legislative 

History, vol. 1, at 132 (statement of Sen. Muskie).

65 CAA section 112(b)(1)(B), as enacted in the 1970 CAA 

Amendments. 

66 116 Cong. Rec. 42385 (Dec. 18, 1970), reprinted in 1970 

Legislative History, vol. 1, at 133 (statement of Sen. 

Muskie). Sen. Muskie added that the emission standards set 
83 

Congress’s recognition that closing plants is a method of 

reducing pollution necessarily encompasses reduced 

utilization as a system of reducing pollution. As a 

result, it is reasonable to interpret the term “system of 

emission reduction,” which Congress mandated as the basis 

for controls on section 111(d) air pollutants, to include 

reduced production. 

Other examples of reduced utilization as a means of

reducing emissions to comply with CAA requirements are 

found in settlement agreements between the EPA and fossil 

fuel-fired EGUs to resolve alleged violations of the CAA 

new source review (NSR) requirements. These agreements 

typically allow the EGUs to choose one of several means to 

comply with their emission reduction obligations, including 

retiring units.67 

Reduction of, or limitation on, the amount of 

generation is already a well-established means of reducing 

emissions of pollutants in the electric sector, 

 

by the EPA “could include emission standards which allowed 

for no measureable emissions,” id., which further suggests 

that, as a practical matter, the standards could result in 

reduced production.

67 See, e.g., Consent Decree, USA v. Wisconsin Power and 

Light Co., Civil Action No. 13-cv-266 (WWi.DC), at 18, 

section IV, available at 

http://www2.epa.gov/sites/production/files/documents/wiscon

sinpower-cd.pdf 
84 

notwithstanding the fact that as a practical matter, some 

facilities may have to operate, or remain available, to 

ensure system reliability. For example, reduced generation 

by higher-emitting sources is one of the compliance options 

available to, and used by, EGUs to comply with the Clean 

Air Act acid rain program in CAA title IV, as well as the 

transport rules that we refer to as the NOx SIP Call

68 and 

the Clean Air Interstate Rule (CAIR).69 Reduction in 

generation is also a possible means by which an EGU can 

achieve compliance with its requirements under RGGI. 

b. “Best system of emission reduction ... 

adequately demonstrated” 

Reduced generation in specified amounts meets the 

criteria to be the “best” system of emission reduction that 

is “adequately demonstrated.” Reduced generation is

technically feasible due to the source’s ability to limit 

its own operations. Moreover, because the amount of reduced 

generation may be substituted with the building block 2, 3, 

and 4 measures for increased generation from low- or zeroemitting sources and increased demand-side energy 

efficiency, that amount may be determined with precision 

and may be accomplished in a manner that assures the 

reliability of the electricity grid. 

 

68 63 FR 57356 (Oct. 27, 1998). 

69 70 FR 25162 (May 12, 2005). 
85 

Specifically, through this reduced generation 

approach, the amount of emission reduction achieved is 

appropriate, as discussed above. In addition, the cost of 

the levels of reduced generation are reasonable for the 

affected source category and the nation-wide electricity 

system and do not jeopardize reliability. This is because 

the measures in building blocks 2, 3, and 4 are already in 

widespread use in the industry, and it is reasonable to 

expect that these measures will develop to achieve the 

levels proposed as part of this approach and thereby ensure 

an adequate and reliable supply of electricity. Moreover, 

reduced generation from fossil fuel-fired EGUs and its 

replacement through the measures in building blocks 2, 3, 

and 4 is consistent with trends in the energy sector and 

offer promise to reduce the carbon intensity of the system 

over the near- and long-term. This approach also promotes 

the development and implementation of technologies that are 

important for continued emissions reductions by increasing 

the demand for those technologies. This is because of the 

interconnected nature of the electrical grid and the 

fungibility of electricity, which allows decreases in 

utilization at one facility to be seamlessly offset by 

increased utilization elsewhere (building blocks 2 and 3) 

or by decreased demand (building block 4), and thereby 
86 

makes reduced utilization a viable approach for emissions 

reductions by EGUs. Further, this fungibility increases 

over longer timeframes with the opportunity to invest in 

infrastructure improvements, and as noted elsewhere, this 

proposal provides an extended state plan and source

compliance horizon. Thus, this approach is consistent with 

the case law, which authorizes the EPA to determine the 

BSER by “balanc[ing] long-term national and regional 

impacts,” and by “using a long-term lens with a broad focus 

on future costs, environmental and energy effects of 

different technological systems....”70

Reduced generation in those amounts is also 

“adequately demonstrated.” As noted above and discussed 

further in the preamble, the measures in building blocks 2, 

3, and 4 are already in widespread use in the industry. At 

the levels proposed, they have the technical capability to 

substitute for reduced generation at some or all affected 

EGUs at reasonable cost. The NGCC capacity necessary to 

accomplish the levels of generation reduction proposed for 

building block 2 is already in operation or under 

construction. Moreover, it is reasonable to expect that the 

incremental resources reflected in building blocks 3 and 4 

 

70 Sierra Club v. Costle, 657 F.2d 298, 331 (D.C. Cir. 

1981). 
87 

will develop at the levels requisite to ensure an adequate 

and reliable supply of electricity at the same time that 

affected EGUs may choose or be required to reduce their CO2

emissions by means of reducing their utilization. There are 

several reasons for this. First, the affected sources 

themselves could invest in new renewable energy resources 

and demand-side energy efficiency, as discussed in the 

preamble.71 Second, the states, as part of their plans, have 

mechanisms available to put these substitutes in place: 

they could establish requirements or incentives that would 

result in new renewable energy and demand-side energy 

efficiency programs, as also discussed in the preamble.72

Third, as also discussed in the preamble, regional entities 

in the electricity system can accommodate these 

substitutes. 

Most broadly, with respect to the measures in building 

blocks 2, 3, and 4, provided there is sufficient lead time 

 

71It should be noted that in light of the low current and 

projected near term prices for natural gas, market forces 

may lead investors to choose to build new NGCC units, 

rather than new renewable resources. This result would not 

call into question the technical feasibility of a BSER that 

included reductions in fossil fuel-fired generation by the 

amount of a specified amount of new renewable resources. 

This is because under these circumstances, the fossil fuelfired generators could still reduce their generation 

without causing reliability or other problems in the 

electric power system. 

72 The nuclear generating capacity reflected in building 

block 3 is already in operation or under construction. 
88 

for planning, mechanisms are in place in both regulated and 

deregulated electricity markets to assure that substitute 

generation will become available and/or steps to reduce 

demand will be taken to compensate for reduced generation 

by affected EGUs. These mechanisms are based on, among 

other things, the integrated nature of the electricity 

system coupled with the availability of capacity in

existing NGCC units, the growing institutional capacity of 

entities that develop renewable energy and demand-side 

energy efficiency resources, and the ability of system 

operators and state regulators to incentivize further 

development of those resources. 

7. Re-dispatch and sources in the regulated 

source categories. 

As described in the preamble, building block 2 

consists of reductions in generation from fossil fuel-fired 

steam generating units, and corresponding increases in 

generation by NGCC units. The amount of this re-dispatch is 

the amount that the steam generating units may reduce, and 

that NGCC units may increase, up to an average of 70% 

capacity utilization of the NGCC units. 

Accordingly, this component of the BSER involves two 

sets of affected sources. The first (the steam generating 

units) decreases their emissions. The second (the lower-
89 

emitting NGCC units) may increase their emissions if 

increased operations are necessary to ensure the ongoing 

reliability of the integrated electricity system, of which 

both sets of source are a part, as emissions and generation 

reduction is occurring at steam generating units and net 

reductions are being achieved. Both these sets of sources 

are affected sources because they are in source categories 

that are covered by this rulemaking. As noted in the 

preamble, the fossil fuel-fired steam generating boilers 

are in a source category that the EPA listed under CAA 

section 111(b) in 1971, and the NGCC units are in a source 

category that EPA listed in 1979. The NGCC units (as well 

as the steam-generating units) are subject to reduction 

requirements through other components of the BSER, 

specifically, building blocks 3 and 4 (low- and zeroemitting energy and demand-side energy efficiency, 

respectively). In addition, as noted in the preamble, the 

EPA is co-proposing to combine the two source categories 

into a single source category, covering fossil fuel-fired 

EGUs. 

8. Building blocks 2, 3, and 4: intra-state and 

inter-state compliance 

In this section, we discuss the issue of whether CAA 

section 111(d) limits the EPA to applying the re-dispatch 
90 

component (building block 2) of the BSER, based on the 

assumption that each state will comply with that component 

on a purely intra-state basis, or instead, whether the EPA 

could base building block 2 on an assumption that the 

states will comply with that component through the 

interstate region with which they share the grid. 

As the preamble describes, in evaluating building 

block 2, we have assumed that each state would implement it 

on a state-by-state basis, without relying on a multi-state 

regional grid. In particular, we have assumed that each 

state would increase generation of its own NGCC units to as 

close to the proposed average 70% capacity utilization as 

possible, given the amount of generation from in-state 

fossil fuel-fired steam generating units, and we assumed 

the corresponding amount of reduction in generation from 

those steam generators. We have determined the costs of 

that re-dispatch, and propose to find that they are

reasonable.73 Because we know that dispatch systems operate 

over multi-state regions, however, we have also determined 

the costs of the re-dispatch if each state that is part of 

a multi-state grid implements re-dispatch by taking into 

account the multi-state grid in which it operates. 

 

73 It should be noted that we also evaluated region-wide redispatch, for which the costs are less. 
91 

We found that based on the intra-state approach, some 

states could not increase their average NGCC unit 

utilization to 70% because they have limited fossil fuelfired steam generation. In contrast, based on the regionwide approach, more of the states could increase their 

average NGCC utilization to 70%. In addition, the costs 

of the intra-state approach are demonstrably higher than 

the costs of the region-wide approach. In fact, we expect 

that because all of the lower-48 states, with the exception 

of Texas, are part of a multi-state, regional grid each 

state’s implementation of building block 2 would, as a 

practical matter, necessarily occur on an interstate, and 

not an intrastate, basis. 

CAA section 111(d)(1), by its terms, applies 

requirements on a state-by-state basis. It requires that 

“each State shall submit to the Administrator a plan” that 

includes standards of performance as well as implementing 

and enforcing measures. Further, it allows “the State in 

applying a standard of performance to any particular source 

under a [state] plan” to take into consideration factors 

such as the source’s remaining useful life. 

These provisions raise the issue of whether section

111(d) may be interpreted so that the re-dispatch component 

of the BSER may be applied on the assumption that each 
92 

state would implement that component on a purely intrastate basis, or whether section 111(d) may be interpreted 

so that the re-dispatch component may be applied on the 

assumption that each state would implement through the 

operation of the interstate grid in which it participates. 

This issue may also apply to building blocks 3 and 4. 

C. Application of the BSER; achievability of the 

emissions standards 

1. Introduction and Overview 

In this subsection C, we discuss our interpretation of 

the CAA sections 111(d)(1) and 111(a)(1) requirements that 

each state must develop a plan that establishes for “any 

existing source”74 “standards of performance,” which are 

defined as emission standards that “reflect the degree of 

limitation achievable through the application of the best 

system of emission reduction ... adequately demonstrated.” 

We explain why our state-wide approach to applying the BSER 

and the emission standards that result from the state plan 

process we require are consistent with these section 111 

provisions. 

 

74 It should be recalled that although in this subsection C. 

we refer to “any existing source” or “each existing source” 

in the state, or we use similar terms, CAA section 111(d) 

applies to only those existing sources that would be 

covered by a section 111(b) standard if they were newly 

constructed or if they modified or reconstructed. 
93 

These provisions make clear that an important aspect 

of the state’s establishment of the standards of 

performance is “the application of” the BSER. In this 

rulemaking, the EPA is proposing to apply the BSER for 

affected EGUs on a statewide basis. The statewide approach 

also underlies the required emission performance level, 

which is based on the application of the BSER to a state’s 

affected EGUs, and which the suite of measures in the state 

plan, including the emission standards for the affected 

EGUs, must achieve overall. The state has flexibility in 

assigning the emission performance obligations to its 

affected EGUs, in the form of standards of performance -- 

and, for the portfolio approach, in imposing requirements 

on other entities -- as long as, again, the required 

emission performance level is met. 

This state-wide approach both harnesses the 

efficiencies of emission reduction opportunities in the 

interconnected electricity system and is fully consistent 

with the principles of federalism that underlie the Clean 

Air Act generally and CAA section 111(d) particularly. That 

is, section 111(d) achieves the emission performance 

requirements through the vehicle of a state plan, and 

provides each state significant flexibility to take local 
94 

circumstances and state policy goals into account in 

determining how to reduce emissions from its affected 

sources, as long as the plan meets minimum federal 

requirements. 

For convenience, we set out the requirements of CAA

sections 111(d)(1) and 111(a)(1) here: under CAA section 

111(d)(1), the state must adopt a plan that “establishes 

standards of performance for any existing source.” Under 

CAA section 111(a)(1), a “standard of performance” is a 

“standard for emissions ... which reflects the degree of 

emission limitation achievable through the application of 

the best system of emission reduction ... adequately 

demonstrated.” The EPA proposes to interpret these 

provisions as set forth in this sub-section. 

The first step is for the EPA to determine the “best 

system of emission reduction ... adequately demonstrated.” As 

discussed at length elsewhere, the EPA is proposing two 

alternative BSER. The first is the measures in building 

blocks 1 through 4 combined. This includes operational 

improvements and equipment upgrades that the coal-fired 

steam-generating EGUs in the state may undertake to improve 

their heat rate by, on average, six percent and increases 

in, or retention of, zero- or low-emitting generation, as 
95 

well as measures to reduce demand for generation, all of 

which, taken together, displace, or avoid the need for, 

generation from the affected EGUs. This BSER is a set of 

measures that impacts affected EGUs as a group. The

alternative approach to BSER is building block 1 combined 

with reduced utilization from the affected EGUs in the 

state as a group, in the amounts that can be replaced by an 

increase in, or retention of, zero- or low-emitting

generation, as well as reduced demand for generation. 

After determining the BSER, the EPA then applies the 

BSER to each state’s affected EGUs, on a state-wide basis. 

Building block 1 is applied to the coal-fired steamgenerating EGUs on a statewide basis; building block 2 is 

applied to increase the generation of the NGCC units in the 

state up to certain amounts, and decrease the amount of 

generation from steam-generating units accordingly; and the 

measures in building blocks 3 and 4 are applied to reduce, 

or avoid, generation from affected EGUs on a state-wide 

basis. Under the alternative formulation of the BSER, the 

total amount of reduced generation from the affected EGUs 

in the state, associated with the measures in building 

blocks 2, 3, and 4, is determined on the basis of each 

state’s affected EGUs as a group. 
96 

This statewide approach to applying the BSER is 

consistent with the CAA section 111(a)(1) definition of 

“standard of performance,” which, as quoted above, refers 

to “the application of the [BSER],” for the purpose of 

determining “the degree of emission limitation achievable,” 

but does not otherwise constrain how the BSER is to be 

applied. As a result, we, as the administering agency, have 

discretion under Chevron step 2 to fashion an 

interpretation that is a reasonable construction of the CAA 

provisions.75 Similarly, the implementing regulations give 

the EPA broad discretion to identify the group of sources 

to which the BSER is applied. The regulations provide that 

the EPA “will specify different emission guidelines or 

compliance times or both for different sizes, types, and 

classes of designated facilities when costs of control, 

physical limitations, geographical location, or similar 

factors make subcategorization appropriate.” 

In this rulemaking, the EPA is applying the BSER to

the affected EGUs in each state as a group. As we have 

noted, for this industry, a state-wide approach harnesses 

the efficiencies of emission reduction opportunities in the 

interconnected electricity system, including the 

 

75 Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-844 

(1984). 
97 

opportunities to reduce emissions from all affected EGUs 

through reasonable cost, lower-emitting replacement

generation. Accordingly, under the implementing regulations 

just quoted, it is “appropriate” to apply the BSER to the 

affected EGUs in each state as a group. 

As part of applying the BSER, the EPA, to return to

provisions of CAA section 111(a)(1), calculates the

“emission limitation achievable through the application of 

the [BSER].” In this rulemaking, we refer to this amount 

as the state goal. As noted, the EPA expresses the state 

goal in the emission guidelines as an emission rate. 

The state must develop a state plan that achieves the 

state goal, either in the form of an emission rate, as 

specified for the state in the emission guidelines, or a 

translated mass-based version of the rate-based goal. We 

refer to the state goal, in the form used by the state as 

the foundation of its plan, as the required emission 

performance level. 

As part of its state plan, the state must establish

“standards of performance” for its affected EGUs. To do so, 

the state may consider the measures the EPA identified as 

part of the BSER or other measures that reduce emissions 

from the affected EGUs. Moreover, the state has the

flexibility to establish emission standards in the degree 
98 

of stringency that the state considers appropriate.76 The 

primary limitation on the state’s flexibility is that the 

emissions standards applied to all of the state’s affected 

EGUs -- and, in the case of states that adopt the portfolio 

approach, the requirements imposed on other affected 

entities -- taken as a whole, must be demonstrated to 

achieve the required emission performance level. In 

addition, the state may make the emission standards for any 

of its affected EGUs sufficiently stringent, so that the 

standards and any requirements imposed on other affected 

entities (if relevant), taken as a whole, achieve a level 

of emission performance that is better than the required 

emission performance level. See CAA section 116, 40 CFR 

60.24(g).77

Under these circumstances – that the emission 

standards that the state establishes for its affected EGUs 

 

76 Looked at another way, through our proposal, consistent 

with the EPA’s authority in determining the BSER to

subcategorize sources on the basis of costs and other 

factors, see 40 CFR 60.22(b)(5), the state has the 

opportunity in effect to subcategorize its sources on the 

basis of their costs and other considerations associated 

with their position in the interconnected electricity grid, 

and to assign responsibilities for achieving the emission 

performance level accordingly. 

77 By comparison to state implementation plans (SIPs) under 

CAA section 110, although section 111(d) state plans differ 

from SIPs in that the latter are designed to achieve a 

NAAQS, section 111(d) plans that are designed to achieve a 

required emission performance level incorporate many of the 

same flexibilities as SIPs. 
99 

and any other requirements for the other affected entities, 

as relevant, taken together, are at least as stringent as 

necessary to achieve the required emission performance 

level for the state’s affected EGUs - each emissions 

standard that the state adopts for each of its affected 

EGUs will meet the definition of a “standard of 

performance” under CAA section 111(a)(1). Specifically, the 

“standard of performance” for each source will constitute, 

to return to the provisions of CAA section 111(a)(1), “a 

standard for emissions which reflects [that is, embodies, 

or represents]78 the degree [that is, the portion] of 

emission limitation achievable through the application of 

the [BSER]” [that is, as noted above, the required emission 

performance level for all affected sources in a state]. 

That “degree” or portion of the required emission 

performance level is, in effect, the portion of the state’s 

obligation to limit its affected sources’ emissions that 

the state has assigned to each particular affected source. 

An emissions standard meets this definition of the term 

“standard of performance” regardless of whether it is part 

of a plan that adopts the portfolio approach (in which 

 

78 See Oxford Dictionary of English (3rd ed. 2010 (online 

version 2013)) (defining “reflect” as, among other things, 

“embody or represent (something) in a faithful or 

appropriate way”). 
100 

case, the standard will reflect a relatively smaller part 

of the emission performance level) or one that imposes the 

plan’s emission limitation obligations entirely on the 

affected EGUs (in which case, the standard will reflect a 

relatively larger part of the emission performance level).79

These proposed interpretations of the provisions of

CAA sections 111(d)(1) and (a)(1) are fully consistent with 

the EPA’s overall approach in this rulemaking to 

determining and applying the BSER and identifying the 

appropriate level of emission performance for the affected 

EGUs. As noted, this approach entails applying the BSER on 

a state-wide basis and, based on the BSER, identifying the 

emission performance level that each state must achieve, so 

that each state may then assign responsibilities for 

achieving that performance level among its sources. As 

 

79 The EPA’s approach may also be characterized as (i) 

determining the BSER for the affected EGUs, (ii) 

establishing as the emission guideline the standard for 

emissions that the affected EGUs in the state can achieve 

on average through the application of the BSER, and (iii) 

as part of the emission guideline, authorizing each state 

to establish as the applicable standard for each affected 

EGU, the standard that the state considers appropriate and 

that when totaled with the standards established for the 

other EGUs (and as may be adjusted to account for the 

portfolio approach, if that approach is adopted by the 

state) is at least as stringent as the average standard in 

the emission guideline. As noted in the accompanying text, 

a state has many ways to establish standards that meet the 

CAA requirements, including, for example, following the 

BSER or authorizing emission rate averaging or trading. 
101 

noted, this approach is fully consistent with the 

interconnected nature of the electricity system and with 

the principles of federalism that form part of the 

foundation of the Clean Air Act, and that find expression 

in section 111(d) through its provisions implementing the 

required emission controls through the vehicle of state 

plans. We also note that, as part of our proposal for 

BSER, applying the “best system of emission reduction ... 

adequately demonstrated” on a statewide basis in this 

manner is consistent with interpreting the term “best” to 

include those principles of federalism. That is, one reason 

why each of our proposed two alternative approaches for 

BSER qualifies as the “best” system is that, in effect, 

each can be implemented in an efficient manner by a state – 

through its obligation to assure achievement of the

emission performance level that is based on the BSER -- 

which may mean assigning greater responsibility for

emission limitations to some affected EGUs than to others. 

It should be emphasized that each state has many 

options for assigning the emission limitation obligations 

among its affected sources.80 For example, the state could 

 

80 One of the advantages of the flexibility states have 

under the EPA’s approach is that state officials may 

utilize their knowledge of the electricity sector in their 
102 

impose emission standards that directly flow from the BSER. 

Under these circumstances, the state may assign to 

different affected sources emission standards with 

different levels of stringency because the state will have 

determined that those standards are consistent with the 

extent to which the low- or zero-emitting generation in 

building blocks 2, 3, and 4 will displace the source’s 

generation and thereby lower the source’s emissions. The 

state may establish a relatively less stringent emission 

standard for a source that the state considers will not 

have much of its generation displaced than the state may 

for a source that the state considers will have more of its 

generation displaced.81 The state could base this approach 

on the recognition that the increased zero- and lowemitting generation displaces generation from affected 

sources in different amounts, depending on the affected 

 

state and of the entities involved in fashioning the 

standards of performance and other requirements. 

81 It should be noted that if the state wished to pattern 

the emissions standards after the way that the source was 

affected by the BSER, the state would also need to consider 

the extent to which the source can implement the heat rate 

improvements in building block 1, but for purposes of 

simplifying this example, we will set that consideration 

aside. It should also be noted that this example assumes 

that the state, in assigning emission rates to its sources, 

credits reductions in emissions due to reductions in 

generation against the emission rate.
103 

sources’ costs and on other factors, such as transmission 

line capacity. 

In addition, the state could authorize emission 

trading as part of the emission standards for affected 

sources. Under these circumstances, if an affected source’s 

emissions level was higher than the standard the state 

established for it, the source could achieve the standard 

by purchasing additional emission rights through the 

trading program. 

It bears emphasis that each state has flexibility in 

establishing the standards of performance for its existing 

sources as long as, on a state-wide basis, those standards 

(and, in the case of the portfolio approach, any other 

permissible measures in the state plan) achieve the state’s 

required emission performance level. This flexibility is 

in keeping with the nature of the BSER that we have

determined and the state-wide manner in which we have 

applied it to each state’s existing sources. This 

flexibility is also consistent with the interconnected 

nature of the electricity system, through which the fossil 

fuel-fired EGUs are connected to, and affect, each other, 

and are all affected by other sources of generation. 

Finally, it should be noted that states retain 

authority under CAA section 116 and 40 CFR 60.24(g) to 
104 

impose standards of performance that, cumulatively, are 

more stringent than the emission performance level.