From: Higgins, Cortney [mailto:Cortney_Higgins@omb.eop.gov] 

Sent: Monday, May 19, 2014 9:03 PM 

To: Wayland, Robertj 

Cc: Culligan, Kevin 

Subject: RE: Legal Memo/TSD 

Thank you! 

From: Wayland, Robertj [mailto:Wayland.Robertj@epa.gov] 

Sent: Monday, May 19, 2014 9:00 PM 

To: Higgins, Cortney 

Cc: Culligan, Kevin 

Subject: Legal Memo/TSD 

Cortney - 

Attached are: 

1. Current version of Legal Memo 

2. Red-line showing changes from the version of the Legal Memo that we sent OMB a few 

weeks ago 

3. Responses to OMB comments (indicated in replies to comment bubbles) to the version of 

the Legal Memo that we sent OMB a few weeks ago. 

 

Please let Kevin or me know if you have any questions/concerns. 

bob 

Robert J. Wayland, Ph.D. 

Leader, Energy Strategies Group 

U.S. Environmental Protection Agency 

Office of Air Quality Planning and Standards 

Sector Policies and Programs Division 

Mail Code D243-01 

Research Triangle Park, North Carolina 27709 

 

Office: (919) 541-1045 

Cell: (919) 306-2290 

Fax: (919) 541-5450 

 

Email: wayland.robertj@epa.gov 

 

************************************** 

DRAFT/Deliberative Document - FOIA EXEMPT 

************************************** 
<< Leg-Mem_05-19-14.docx >> 

<< Leg-Mem_05-19-14_red-line-from-OMB.docx >> 

<< Leg Mem_OMB comm_Resp_05-19.docx >> 
1 

Legal Memorandum for Proposed Carbon Pollution Guidelines for Existing Power 

Plants 

Introduction 

This memorandum provides background for, and further discussion of, legal 

issues raised in the proposed rule, “Carbon Pollution Guidelines for Existing Power 

Plants: Emission Guidelines for Greenhouse Gas Emissions from Existing Stationary 

Sources: Electric Utility Generating Units.” This memorandum is intended to be read in 

conjunction with, and assumes familiarity with, the preamble for this proposed rule. 

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.” 1 EPA has listed more than 60 stationary source 

categories under this provision.2 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 categories.3 These standards are known as 

new source standards of performance (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. 

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 

 

1

 CAA §111(b)(1)(A). 

2 See 40 CFR 60 subparts Cb – OOOO. 3

 CAA §111(b)(1)(B), 111(a)(1). 
2 

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.”4

 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 not be less stringent than the EPA’s emission guideline.5 

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.”6 If a state does not 

submit a plan, the EPA must establish a federal plan for that state.7 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. In the case of a 

tribe that has one or more affected EGUs on its lands,8 the tribe would have the 

opportunity, but not the obligation, to establish a CO2 performance standard and a plan 

for its tribal lands. 

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 §110 state implementation plans 

(SIPs), (ii) hazardous air pollutants (HAPs), which would be regulated under EPApromulgated national emission standards pursuant to CAA §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 §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 non-

 

4

 40 CFR 60.22(b)(5). 

5

 40 CFR 60.24(c). 

6

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

7 Id. 8

 The EPA is aware of at least three affected sources located in Indian Country located in Indian Country, 

two on [Navajo] lands – the Navajo Generating Station and the Four Corners Generating Station – and one 

on [Ute] lands – the Bonanza Generating Station. All three are coal-fired EGUs. 
3 

NAAQS, 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 meaning of section 111(d), and we refer to parts of that 

legislative history below. 

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 “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 

 

9 See, e.g., Senate Comm. Rep. No. 91-1196 at 16. 
4 

terms used in the 1970 CAA Amendments’ version of §111(a)(1) that the standard 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 

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 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 addition, 

the agency has regulated additional pollutants under CAA section 111(d) in conjunction 

 

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. 

13 40 CFR 60.23(a)(2). 

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

15 40 CFR 60.27(b). 

16 The EPA is not re-opening these regulations, although it is revising The deadline for action on state plan 

submittals. 

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 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). 
5 

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). . 

D. Case law 

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 term “standard of 

performance.” Relevant statements of these cases are discussed below. 

E. 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

Today’s proposed action is authorized by the requirements of CAA section 111(d) 

and is consistent with the implementing regulations. As an initial matter, the CAA 

authorizes the regulation of greenhouse gases (including CO2) under section 111. We 

discuss below an ambiguity in the provisions of section 111(d)(1)(A)(i), arising from 

Congress’s simultaneous enactment of two separate version of this provision, has led 

some stakeholders to argue that the fact that EPA has regulated hazardous air pollutants 

from EGUs prevents EPA from regulating CO2 emissions from EGUs. As explained 

below in detail, however, EPA reads the provision to authorize regulation of CO2

emissions from EGUs and this interpretation is both reasonable and entitled to deference. 

Moreover, although section 111(d) applies only to sources that, if they were new sources, 

would be covered under a section 111(b) rule, the EPA intends to complete the section 

111(b) rulemakings regulating CO2 from newly constructed EGUs and from modified and 

 

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); Essex Chemical Corp. v. 

Ruckelshaus, 486 F.2d 427, (D.C. Cir. 1973); Portland Cement Ass’n v. EPA, 665 F.3d 177 (D.C. Cir. 

2011). 
6 

reconstructed EGUs by the time we finalize the section 111(d) rule, and either of those 

rulemakings will provide the requisite predicate for this rulemaking. 

A key step in promulgating requirements under CAA section 111(d) is identifying 

the “best system of emission reduction which ... the Administrator determines has been 

adequately demonstrated” (BSER). The 1975 implementing regulations, are explicit that 

under section 111(d), the EPA determines the BSER in promulgating emission guidelines 

under that provision.20 Accordingly, in this rulemaking, the EPA is determining the 

BSER. 

In the preamble, the EPA lays out in detail its proposed determination of BSER, 

which includes a set of measures that constitute a system of emission reduction that has 

been adequately demonstrated by fossil-fuel-fired sources across the country. 

Specifically, the EPA proposes that that the BSER includes measures that can be sorted 

into four building blocks: (1) heat rate improvements, (2) re-dispatch from fossil-fuelfired steam-generating boilers to NGCC units, (3) new low- or zero-emitting generation, 

and (4) demand-side energy efficiency measures. Under the EPA’s proposed approach to 

determining the BSER, the EPA identifies as a component of BSER the heat rate 

improvements in building block 1 that could be made at coal-fired steam generating units 

to reduce their carbon intensity (i.e., to decrease the amount of carbon emitted per unit of 

energy generated). Importantly, the EPA’s proposed approach views the measures in 

building blocks 2, 3, and 4 in light of the fact that the electricity system is an integrated 

system with fungible products (electricity and electricity services). Under this approach, 

the BSER includes building blocks 2, 3, and 4 because they result in reductions in 

emissions from those sources. In addition, the EPA is also identifying an alternative 

basis, under which the BSER includes limitations in utilization of the fossil-fired EGUs, 

which reduce mass emissions from those EGUs, and building blocks 2, 3, and 4 provide 

the basis for applying those limitations. In both cases, the EPA reasonably identifies the 

sets of measures as components of BSER based on the factors that the EPA is required to 

consider and the EPA’s authority to weigh those factors. 

As noted above and explained in the preamble and various Technical Support 

Documents, the measures in each of the building blocks are both technically feasible and 

“adequately demonstrated.” Heat rate improvement measures (identified in building 

block 1) are well-recognized as feasible within the industry. Under the EPA’s approach to 

BSER, the measures that entail dispatch changes from fossil-fuel-fired steam-generating 

EGUs to NGCC units, investments in renewable and nuclear energy, and demand-side 

energy efficiency (measures in building blocks 2, 3 and 4) are each well-established in 

numerous states, and many of them have already been relied on to reduce CO2 and other 

air pollutants from fossil-fuel-fired EGUs. Further, all of the measures achieve an 

important degree of emission reduction. In addition, they are not unreasonably costly, 

including when considered through a nation-wide lens. In addition, and importantly, the 

measures encourage the development and expansion of technology and practices to 

reduce CO2 and are consistent with current trends in the electricity sector. By the same 

token, under the alternative approach to BSER, generation reduction from the fossil-fired 

 

20 The EPA is not re-opening that interpretation in this rulemaking. 
7 

EGUs is technically feasible and adequately demonstrated because of the characteristics, 

just described, of the measures in building blocks 2, 3, and 4. 

The implementing regulations provide that, in establishing an emission guideline 

under section 111(d), EPA both determines BSER and the emission limitation that results 

from application of the BSER to the affected sources. In this rulemaking, the EPA is 

taking the approach of applying the BSER to covered EGUs on a state-by-state basis and 

determining the resulting emission limitation – termed the “state goal” – for each state. 

The EPA is formulating each state goal as an average emissions rate. The state goals 

form the EPA’s emission guidelines. 

 

Once the EPA promulgates the emission guidelines, each state must develop a 

plan that identifies and achieves its emission performance level. The emissions 

performance level must be at least equivalent to (that is, no less stringent than) the state 

goal that the EPA has determined. This means, among other things, that the states may 

adopt mass emission limits, instead of rate-based emissions levels, provided such mass 

emission limits achieve equivalent emission reductions to those that would be achieved 

by application of the rate that is the state goal. In addition, the state plans must establish 

standards of performance and include measures that implement and enforce those 

measures. 

As the preamble for this rulemaking discusses, based on suggestions from states 

and other stakeholders directing the EPA to consider measures that in some cases are 

established by entities other than EGU owners or operators, 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 emissions performance level. Instead, the proposal 

would allow for compliance plans that impose or entail requirements on other parties 

(which we will refer to as affected entities) – such as renewable energy and demand-side 

energy efficiency measures - that would provide a means or basis for reducing utilization 

of, and therefore CO2 emissions from, the affected EGUs. As noted in the preamble for 

this rulemaking, a possible basis for this approach is that those requirements on other 

affected entities may be authorized as standards of performance or implementing 

measures. 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 emissions performance level on the affected EGUs. 

The preamble further notes that even if state plan imposes all of the legal 

obligations on the affected EGUs, the state plan could nevertheless include the 

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 that under the proposed approach. The preamble solicits comment on other 

issues concerning state plans, including whether a state may include in its plan an 

enforceable commitment by the state to assure some amount of emissions reduction from 

the affected sources, but not include the specific measures that would achieve that 

amount of reduction. 
8 

The EPA emphasizes that in developing the state plans, as long as the plans 

reduce emissions from the affected sources to achieve the emissions performance level, 

the states have substantial discretion in designing the standards of performance. 

Moreover, the states may require sources to implement specific measures that the EPA 

did not identify as BSER, and may include other approaches such as, for example, 

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

 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 varies 

from that in the implementing regulations, and the EPA is revising that provision of the 

implementing regulations accordingly. 

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 Clean Air 

Act and the EPA actions it authorizes displace any federal common law right to seek 

abatement of carbon-dioxide emissions from fossil-fuel-fired power plants” was premised 

on the Court’s understanding that §111, including §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 CAAA – 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. In this circumstance, the enacted law signed 

by the President (as 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 

 

21 549 U.S. 497 (2007). 
9 

[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 

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). Under the U.S. Supreme Court’s 1984 decision in Chevron U.S.A. Inc. v. NRDC,

to interpret how a statute applies to a particular question, an agency must, at Step 1, 

determine whether Congress’s intent as to the specific question is clear, and, if so, the 

agency must give effect to that intent. If congressional intent is not clear, then the agency, 

at Step 2, has discretion to fashion an interpretation that is a reasonable construction of 

the statute.1 Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-844 (1984). 

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 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. * * * 

 

 

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 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. 
10 

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 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. 

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 
11 

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 

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 

§111(b)(1)(A). In that proposal, the EPA stated that it is rational to regulate GHGs from 

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 

 

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

24 See 79 FR at 1,452/3 – 1,456/1. 
12 

section 111(b), not in this rulemaking. Thus, the EPA is not seeking comment in this 

proposal on any issues related to a rational basis or endangerment finding.

 

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 §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 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 

 

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. 
13 

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 “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 §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 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

 

27 40 CFR 60.22(a). 

28 Id. at 60.22(b). 

29 40 CFR 60.21(e). 

30 Id. at 60.22(c). 
14 

 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 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 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. 

It should be noted that the preamble discusses the EPA’s proposal in this 

rulemaking to adopt state-specific goals based on a single, consistent methodology, rather 

than to adopt nationally uniform emission rates for particular types of affected EGUs. 

The preamble explains that this state-by-state approach ensures that the proposed goals 

reflect opportunities to reduce CO2 emissions by shifting generation among different 

types of EGUs and accounts for the differences among the generating fleets in the various 

states. 

VI. Best system of emission reduction adequately demonstrated

We discuss in the preamble our interpretation of the section 111(d)(1) and (a)(1) 

provisions that require the state plans to establish “standards of performance” for existing 

sources, and that define that term. In this section of this Legal Memorandum, we 

elaborate on that discussion. 

 As background, it should be recalled that important to the BSER are the 

measures in the four “building blocks,” which the preamble describes at length and 

summarizes as follows: 

Building block 1: Reducing the carbon intensity of generation at 

individual affected EGUs through heat rate improvements. 

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 zero-carbon generation. 
15 

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. 

A. General approach for determining the best system of emission reduction 

adequately demonstrated 

 The EPA’s explanation for this BSER proposal begins with the statutory 

definition of a “standard of performance”: 

The term “standard of performance” means 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. 

CAA section 111(a)(1). 

 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 

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 this CAA provision, including its 

component elements.32 In one of the earliest cases, Essex Chemical Corp. v. Ruckelshaus, 

in 1973, the Court stated that because the standard must be “achievable,” the emission 

limits must be technically feasible, and added that “[a]n adequately demonstrated system 

is one which has been shown to be reasonably reliable, reasonably efficient, and which 

can reasonably be expected to serve the interests of pollution control without becoming 

exorbitantly costly in an economic or environmental way.”33

Under this case law, the EPA determines the BSER based on the following key 

considerations, among others: 

 The system of emission reduction must be technically feasible.34 

 

31 Oxford Dictionary of English (3rd ed.) (published 2010, online version 2013) 

http://www.oxfordreference.com.mutex.gmu.edu/view/10.1093/acref/9780199571123.001.0001/acref9780199571123 

32 Portland Cement Ass’n v. Ruckelshaus, 486 F.2d 375 (D.C. Cir. 1973); 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 Essex Chemical Corp. v. Ruckelshaus, 486 F.2d at 427. 34 As noted in the text, the case law may be read to treat technical feasibility as the measure for whether the 

standard of performance is “achievable,” not as a criterion for whether the system of emission reduction is 
16 

 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.35 

 The EPA must also consider that CAA section 111 is designed to promote the 

development and implementation of technology.36

Other considerations are also important, including that 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. 

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. 

B. Application of the BSER criteria 

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. 

The EPA proposes an approach to determining the “best system of emission 

reduction ... adequately demonstrated” that includes several components, some of which 

are based on the interconnected nature of the electricity generating grid. The first 

 the “best system of emission reduction ... adequately demonstrated.” However, for convenience, we may 

refer to technical feasibility as another of the criteria for the BSER. 35 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), 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. 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.

36 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). 

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

 
17 

component is building block 1, which entails measures that the affected sources may 

undertake to improve their efficiency. 

The remaining components are based on the interconnected nature of the grid. 

Because the grid is interconnected, CO2 emissions reductions can be achieved in either of 

two ways: (i) Instituting measures in building blocks 2, 3, and 4, which, due to the 

interconnected nature of the grid, result in drawing utilization away from higher-emitting 

fossil-fuel-fired EGUs, thereby lowering those EGUs’ emissions. (ii) Reducing utilization 

from higher-emitting fossil-fuel-fired EGUs, which due to the interconnected nature of 

the grid and its operation in the regulated markets, result in replacement generation, such 

as that identified in the building blocks 2, 3, and 4. Thus, each of these approaches may 

be considered to be a “system of emission reduction.” 

Accordingly, the EPA proposes that the “best system of emission reduction ... 

adequately demonstrated” also includes the measures in building blocks 2, 3 and 4, which 

would substitute generation at higher-emitting EGUs with increases in generation at 

lower- or zero-emitting sources and in end-use efficiency in ways that reduced CO2

emissions at fossil-fuel-fired EGUs. In addition, as an alternative approach, the EPA also 

proposes that BSER includes reduced utilization of the higher-emitting fossil-fuel-fired 

EGUs, with the measures in building blocks 2, 3, and 4 serving to provide replacement 

generation. Each of these approaches assures reliability of electricity supply and avoids 

unreasonable costs and meets all of the criteria to qualify as BSER. 

It is also significant that CO2 is a global pollutant, and therefore the location of 

the emissions (or emission reductions) does not affect the environmental consequences of 

an amount of emissions generated at any given source in any one location.38 The global 

nature of CO2 means that CO2 emissions may be reduced anywhere within the electricity 

grid and still achieve the intended environmental benefits. 

2. Interconnected nature of the electricity system 

As we observe in the preamble, 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. Through this 

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 electricity. Because the electricity grid operates through the 

interconnection of multiple EGUs and favors least-cost generation, owners and operators 

 

38 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 §173(c)(1) (limiting offsets for air 

pollutants subject to new source review requirements to emissions reductions from sources in certain 

nonattainment areas). 
18 

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 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 facilities, the higher-emitting assets tend to be 

utilized relatively less, and, as direct result, emit less pollution and reduce cost. 

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 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. 

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. We believe that the proposed emission guidelines, including the 

temporal flexibility that the guidelines incorporate, allow states and EGUs to implement a 

 

 

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_scoping_plan.pdf. 
19 

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 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 associated 

with reduced emissions from those EGUs. The latter include substituting generation at 

higher emitting sources through increasing generation at less carbon-intensive EGUs, 

expanding the amount 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). 

3. Heat rate improvements 

As discussed in the preamble, under the EPA’s proposed approach to determining 

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 here is not necessary.

4. Measures in building blocks as BSER 

Under the first approach, the “best system of emission reduction ... adequately 

demonstrated” includes the measures in building blocks 2, 3 and 4 for the affected fossilfuel-fired steam generating boilers, and building blocks 3 and 4 for the fossil-fuel-fired 

combustion turbines. In this section, we first explain why the measures in these building 

blocks are a “system of emission reduction,” and then why they are the “best” system that 

is “adequately demonstrated.” 

In brief, the building blocks 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 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 
20 

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. 

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.”41 This definition is broad. It encompasses 

virtually any “set of things” that reduce emissions. Moreover, no other provisions in 

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” (it must be, among other 

things, technically feasible and of reasonable cost) that is “adequately demonstrated.” 

Thus, the “system of emission reduction” may include anything that reduces emissions, 

ranging from add-on controls applied to the affected sources’ smokestacks to control 

emissions, to measures that replace production 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 just quoted 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 on the grounds that even under those 

circumstances, the standards of performance would still have the effect of reducing 

emissions from the affected sources. Under either of those interpretations, there is 

nothing in that phrase that limits the type of “system of emissions reductions” 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 

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 

 

41 Oxford Dictionary of English (3rd ed.) (published 2010, online version 2013) 

http://www.oxfordreference.com.mutex.gmu.edu/view/10.1093/acref/9780199571123.001.0001/acref9780199571123 
21 

the emissions of the affected sources may serve as the basis for the standards of 

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. 

Based on these interpretations, for existing sources in the electric utility industry, 

we propose that the term “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” this broadly. 

 (I). Legislative history of “standard of 

performance” 

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.)42 In the 1990 CAA Amendments, Congress again changed this 

definition, 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 

 

42 The 1977 CAA Amendments also revised section 111(a)(1) to require that the standards of performance 

for fossil-fuel-fired sources require a percentage reduction in emissions (the “percentage reduction” 

requirement). 
22 

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)....”43 

 (II). Pollution prevention

In addition, interpreting the term “system of emission reduction” broadly to 

include the building blocks is 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 § 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 § 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 § 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 

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 

 

43 “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. 
23 

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 during 

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 fossil-fuel fired 

EGUs, and the Congress recognized the relationship in several Title IV provisions.44 

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 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 by 

reducing of SO2 and NOx emissions – 

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....”45

 

44 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). 

45 CAA §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. 
24 

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....; 

fuel-switching and least-emissions dispatching in order to maximize 

emission reductions.”46

In addition, Congress incorporated into Title IV specific incentives to further encourage 

electric utilities (defined as entities that sell electricity47) 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 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.”48 

 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 (re-dispatch; low- or zero-emitting generation, including renewables; and demandside energy efficiency, respectively.) 

 (IV). 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 base the section 111(d) standards of performance on measures such as re-

 

46 1990 Senate Committee Report at 316, reprinted in 1990 Legislative History, vol. V, at 8656 (emphasis 

added). 

47 CAA § 404(f)(1)(C). 

48 CAA § 404(f)(2)(B)(iii)(I). 
25 

dispatch, renewable energy, and demand-side energy efficiency.49 Some stakeholders 

have as well.50

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 “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.”51 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 

 

49 See Nordhaus R., Gutherz I., “Regulation of CO2 Emissions from Existing Power Plants Under §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 §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.”).

50 Ceronsky M., Carbonell T., “Section 111(d) of the Clean Air Act: The Legal Foundation for Strong, 

Flexible & Cost-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_actstrong_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). 

51 Essex Chemical Corp. v. Ruckelshaus, 486 F.2d at 427. 
26 

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 BSER 

First, the measures in those building blocks are technically feasible, as described 

in the preamble. To reiterate briefly, building block 2, which entails substituting 

generation at higher emitting units (fossil-fuel-fired steam generating units) by shifting to 

generation at lower-emitting 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-fuel-fired steam generating units. Re-dispatch is already widely used 

(usually more in response to fuel price signals than as a GHG 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 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 un-needed 

allowances), and the same would be true for a tradable emission rate system. 

As discussed in the preamble, building block 3, which entails new low- and zeroemitting energy as well as preservation of nuclear capacity that might otherwise be 

retired, is also technically feasible. The technology for renewable energy is wellestablished and in use now, and the amount of renewable energy contemplated by 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, a 

market for renewable energy certificates, which facilitates investment in renewable 

energy, is 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. 
27 

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, building blocks 2, 3, and 4 also meet 

the remaining criteria to qualify as the 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, the proposed levels of reduced generation are not unreasonably 

costly for the affected source category or the nation-wide electricity system, they do not 

have adverse effects on the overall energy system (to the contrary, they improve it by 

reducing its carbon intensity), and they promote the development and implementation of 

technology that is important for continued emissions reductions. 

ii. Basis for “adequately demonstrated” finding 

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 by the affected EGUs themselves, which confirms 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 higher-emitting 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 well-positioned 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 that include 

re-dispatch from higher-emitting fossil-fuel-fired generation to lower-emitting 
28 

generation, the purchase of renewable capacity or the development of renewable 

generation assets, and the implementation of demand-side energy efficiency measures.52

Other states have de-regulated their electricity markets53 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 welldeveloped 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 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 re-dispatch requirements, renewable portfolio standards that require investment in 

renewable energy resources, as well as demand-side energy efficiency measures.54 As 

noted in the preamble, many states have already done so.55 

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 

 

52 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. 

53 Some states, such as Ohio, have hybrid model that includes elements of a regulated market and a deregulated market. 

54 It should be noted that under the portfolio approach to the state plan, discussed in the preamble, the 

entities 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. 

55 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.
29 

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 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 re-dispatch, 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 §111(d). According to these 

latter stakeholders, as a legal matter, the BSER is limited to measures that may be 

undertaken at the affected units, and not measures that are beyond the affected units; the 

measures in building blocks 2, 3, and 4 are “beyond-the-unit” measures because they are 

implemented outside of the affected units and outside their control; and as a result, those 

measures cannot be considered components of the BSER.56 

We welcome comment on this issue. As discussed above, we propose that the 

provisions of section 111 do not by their terms preclude the BSER from including those 

types of measures. In addition, as discussed above, under our proposed approach, affected 

sources may themselves 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.57 It should also be noted that, as discussed above, the re-

 

56 “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 § 111(d) – A whitepaper from the Coalition for Innovative Climate 

Solutions” (Feb. 26, 2014). 

57 Commenters have critiqued this “at-the-unit” and beyond-the-unit” distinction as follows: 

There is an argument that the at-the-unit/beyond-the-unit distinction is not 

a meaningful one. Specifically, it could be argued that the distinction between 

at-the-unit and beyond-the-unit measures is largely artificial, because 

all of the emission reductions under consideration—whether from at-the-unit 

measures (e.g., fuel-switching or efficiency upgrades) or from beyond-theunit 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 
30 

dispatch measures in building block 2 are limited to affected sources. Thus, the proposed 

approach and alternative described above respond to these stakeholder concerns. 

5. Reduced utilization approach 

The EPA is also proposing an alternative approach to BSER, which identifies a 

component of the “system of emission reduction” as reduced utilization in specified 

amounts of the higher-emitting fossil-fuel-fired EGUs. For the reasons discussed below, 

reduced generation in the specified amounts is a “system of emission reduction,” and it is 

the “best” that is “adequately demonstrated” because it meets the criteria for the BSER 

and it is a well-established method of pollution control. 

a. “[S]ystem of emission reduction” 

The phrase “system of emission reduction” may be interpreted to include reduced 

generation in the specified amounts as a matter of Chevron step 1. The phrase applies by 

its terms because reduced generation is an action or a set of actions – which include 

reduced use of generating equipment and 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. The legislative history supports this interpretation. Beginning with the 1970 

CAA Amendments, Congress has recognized that SIPs under CAA §110, in order to 

assure reductions in NAAQS pollutants to meet attainment requirements, may need to 

impose emission limits on industrial sources that those sources could meet only by 

retiring.58 Similarly, in adopting CAA §112, which directed the EPA to promulgate 

 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 at-the-unit measures that ultimately reduce emissions solely 

from regulated EGUs. If energy-efficiency programs, added renewable energy, 

and redispatch from higher emitting facilities to lower emitting facilities 

are viewed as at-the-unit systems of emission reduction, the at-the-unit/ 

beyond-the-unit distinction arguably becomes irrelevant—at least from a 

legal perspective. Rather, the real issue may come down to whether §111(d) 

authorizes EPA to require EGUs to curtail their output of electricity as a 

means of complying with the rule. 

Nordhaus R., Gutherz I., “Regulation of CO2 Emissions from Existing Power Plants Under §111(d) of the 

Clean Air Act: Program Design and Statutory Authority,” Environmental Law Reporter, 44: 10366, 10383 

n. 133 (May 2014).

58 See CAA §110(g) (authorizing temporary emergency suspensions of SIP revisions if needed to prevent 

the closing of a source of air pollution), enacted as CAA §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 
31 

emission standards for sources of hazardous air pollutants (HAPs) to a level of stringency 

that provides an “ample margin of safety to protect the public health,”59 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.”60 As noted 

above, Congress adopted CAA §111(d) to address air pollutants from existing stationary 

sources that were neither NAAQS pollutants nor HAPs, but that EPA might eventually 

regulate as either NAAQS pollutants or HAPs. Because Congress intended that sources 

of NAAQS pollutants and HAPs might have to restrict production or even retire to meet 

their emission limits, it is reasonable to consider that Congress intended the same for 

sources of air pollutants regulated under section 111(d). As a result, it is reasonable to 

interpret the term “system of emission reduction,” which Congress mandated as the basis 

for controls on §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 fossilfuel-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.61 

Similarly, fossil-fuel-fired EGUs have employed reduced generation as one of the 

options to comply with other CAA requirements, including Title IV and CAA §110 SIP 

requirements implementing the Clean Air Interstate Rule (CAIR),62 

b. “[B]est system of emission reduction ... adequately 

demonstrated” 

Reduced generation from the higher-emitting EGUs in the indicated amounts is 

the “best system of emission reduction ... adequately demonstrated” because it is 

technically feasible due to the source’s ability to limit its own operations; and the amount 

(i) may be substituted with the building block 2, 3, and 4 measures for increased 

generation from low- or zero-emitting sources and increased demand-side energy 

efficiency; and (ii) may be accomplished in a manner that assures the reliability of the 

electricity grid. 

 already highly polluted. For this reason, Congress included in the 1970 CAA Amendments authorization 

for SIPs under section 110 to include “transportation controls.” CAA §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). 

59 CAA §112(b)(1)(B), as approved in the 1970 CAA Amendments. 

60 116 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 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. 

61 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/wisconsinpower-cd.pdf [correct cite] 62 70 Fed. Reg. 25,162 (May 12, 2005). 
32 

Specifically, the amount of emission reduction achieved is appropriate, as 

discussed above. In addition, the cost of the proposed levels of reduced generation are 

reasonable for the affected source category and the nation-wide electricity system and do 

not jeopardize reliability. Further, reduced generation from the higher-emitting EGUs 

promotes the development and implementation of technology that is important for 

continued emissions reductions by increasing the demand for that technology. 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 makes reduced utilization a viable approach for emissions 

reductions by EGUs. 

As noted above, the measures in building blocks 2, 3, and 4 are already in widespread use 

in the industry. At the levels in the proposal, they have the technical capability to 

substitute for the affected units’ reduced utilization at reasonable cost. Moreover, it is 

reasonable to expect that they will develop at the level requisite to ensure an adequate 

and reliable supply of electricity. There are two reasons for this. First, the affected 

sources themselves could invest in new renewable energy resources and demand-side 

energy efficiency, as discussed above.63 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 above. 

 

In addition, in this rulemaking, as described in the preamble, the EPA is 

determining the BSER in a manner that is consistent with, and that provides further 

impetus for, current trends in the nation’s electricity system that offer promise to reduce 

the carbon intensity of the system over the near- and long-term, while maintaining 

reliability and affordability. This approach is consistent with the case law, which 

authorizes the EPA to determine 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....”64

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 boilers, and corresponding increases in 

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

generating boilers may reduce, and that NGCC units may increase, up to an average of 

70% capacity utilization of the NGCC units. 

 

63It 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 fossilfuel-fired generation by the amount of a specified amount of new renewable resources. This is because 

under these circumstances, the fossil-fuel-fired generators could still reduce their generation without 

causing reliability or other problems in the electric power system. 

64 Sierra Club v. Costle, 657 F.2d 298, 331 (D.C. Cir. 1981). 
33 

Accordingly, this component of BSER involves two sets of sources. The first (the 

steam generating boilers) decreases its emissions. The second (the lower-emitting NGCC 

units) may increase its 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 boilers 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 

boilers) are subject to reduction requirements through other components of the BSER, 

specifically, building blocks 3 and 4 (low- and zero-emitting energy and demand-side 

energy efficiency, respectively). In addition, as noted in the preamble, the EPA is coproposing to combine the two source categories into a single source category, covering 

fossil-fuel-fired EGUs. 

8. Re-dispatch: 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 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 an average 70% capacity utilization as possible, 

given the amount of generation from in-state fossil-fuel-fired steam generating boilers, 

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.65 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. 

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-fired boiler 

steam generation. In contrast, based on the region-wide approach, more of the states 

could increase their average NGCC utilization to 70%. In addition, the costs of the intrastate 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 

 

65 It should be noted that we also evaluated region-wide re-dispatch, for which the costs are less. 
34 

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 BSER may be applied on the assumption that each state 

would implement that component on a purely intra-state 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. 

VII. State plans – content 

 This section discusses various aspects of the content of state plans. 

A. Types of measures – state flexibilities 

As discussed above, under CAA section 111(a)(1), determining the BSER is part of 

the methodology by which the EPA determines the amount of emissions reduction that 

the state plans must achieve. Under section 111(d)(1), each state plan must include 

standards of performance that achieve its requisite emissions performance level. 

However, the state enjoys broad discretion in determining the standards of performance, 

at least under certain circumstances, as discussed below. Moreover, if a state wishes, it 

may require in its section 111(d) state plan particular measures that sources must 

implement, in order to achieve the reductions necessary for the state to meet its emission 

performance level. These state plan measures are not limited to the measures that the 

EPA identifies as part of the BSER. Similarly, affected sources that are subject to the 

state plan may meet their requirements through any measure they choose, as long as that 

measure is consistent with the plan’s requirements, and these sources are not limited to 

using measures identified as part of the BSER. 

For example, as the preamble explains, in this rulemaking, the EPA is not 

identifying carbon capture and storage (CCS) as a component of BSER. Even so, a state 

could elect to include in its plan a requirement that a coal-fired EGU achieve an emission 

limit consistent with CCS, or even that the EGU implement CCS. By the same token, if 

the state plan simply imposes an emissions limit on the source, the source could elect to 

achieve that limit through CCS. 

B. Design, equipment, work practice, or operational standards 
35 

In this section, we discuss whether section 111(d) state plans may include design, 

equipment, work practice, or operational standards. 

CAA section 111(h)(1) authorizes the Administrator to promulgate “a design, 

equipment, work practice, or operational standard, or combination thereof,” if in his or 

her judgment, “it is not feasible to prescribe or enforce a standard of performance.” 

Section 111(h)(2) provides the circumstances under which prescribing or enforcing a 

standard of performance is “not feasible”: Generally, when the pollutant cannot be 

emitted through a conveyance designed to emit or capture the pollutant, or when there is 

no practicable measurement methodology for the particular class of sources. Other 

provisions in section 111(h) further provide that a design, equipment, work practice, or 

operational standard (i) must “be promulgated in the form of a standard of performance 

whenever it becomes feasible” to do so,66 and (ii) must “be treated as a standard of 

performance” for purposes of, in general, the CAA.67

As noted above, section 111(d) requires that state plans “establish[] standards of 

performance” as well as “provide[] for the implementation and enforcement of such 

standards of performance.” Section 111(d) is silent as to whether (i) states may include 

design, equipment, work practice, or operational standards, or (ii) they may include those 

types of standards, but only under the limited circumstances described in section 111(h) 

(i.e., when it is “not feasible” to prescribe or enforce a standard of performance). 

Similarly, section 111(h) applies by its terms when the Administrator is authorized to 

prescribe standards of performance (which would include rulemaking under CAA section 

111(b)), but is silent as to whether it applies to state plans under CAA section 111(d).68

We invite consideration of the proper interpretation of CAA §§111(d) and (h), 

under either Chevron step 1 and step 2, specifically: (i) Do the provisions of section 

111(d) preclude state plans from including “design, equipment, work practice, or 

operational standard[s]” unless those things may be considered “standards of 

performance” or as providing for the implementation and enforcement of such standards? 

As a related matter, do the references to “standard[s] of performance” in section 111(h) 

indicate that design, equipment, work practice, or operational standards may not be 

considered “standards of performance?” (ii) Alternatively, are state plans authorized to 

include those design, equipment, work practice, or operational standards, but only under 

the limited circumstances described in section 111(h) relating to infeasibility? (iii) As 

another alternative, are state plans authorized to include design, equipment, work 

practice, or operational standards under all circumstances, so that the limits of section 

111(h) do not apply? Finally, to the extent there is legal uncertainty over whether, and 

under what circumstances, state plans may include those standards, should the EPA 

authorize state plans to include them, on the understanding that if the Court invalidates, 

state plans would be required to be revised accordingly without further rulemaking from 

the EPA? 

 

66 CAA section 111(h)(4). 

67 CAA section 111(h)(5). 

68 It should be noted that section 111(b)(5), which concerns controls promulgated by the Administrator for 

new and modified sources, does refer to section 111(h).
36 

C. Emissions averaging and trading 

In this section, we discuss why CAA section 111(d) state plans may include 

standards of performance that authorize emissions averaging and trading. 

Section 111(d) authorizes state plans to include “standards of performance” and 

measures that implement and enforce those standards of performance. 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 ... adequately demonstrated.” Section 302 contains a set of 

definitions that apply “[w]hen used in [the Clean Air Act],” including subsection (l), 

which provides a separate definition of “standard of performance” as “a requirement of 

continuous emission reduction....” 

The EPA proposes that the definition of “standard of performance” is broad 

enough to incorporate emissions averaging and trading provisions, including both 

emissions rate programs, in which sources may average or trade those rates; and mass 

emission limit programs, in which sources may buy and sell mass emission allowances 

(and, under certain circumstances, offsets).69 The term “standard” in the phrase “standard 

for emissions of air pollutants” is not defined in the CAA. As the Supreme Court noted in 

a Clean Air Act case, a “standard” is simply “that which ‘is established by authority, 

custom, or general consent, as a model or example; criterion; test.’” Engine Mfrs. Ass’n v. 

South Coast Air Quality Magmt. Dist., 541 U.S. 246, 252-53 (2004) (quoting Webster’s 

Second International Dictionary, at 2455 (1945)). A tradable emission rate or a tradable 

mass limit is a “standard for emissions of air pollutants” because it establishes an 

emissions limit for a source’s air pollutants, and as a result, qualifies as a “criterion” or 

“test” for those air pollutants. In addition, a tradable rate or mass limit may “reflect[] the 

degree of emission limit achievable through the application of the best system of 

emission reduction” because it may be set at a level that assures that emissions will not 

exceed the amount that would result from application of the best system of emission 

reduction. 

Moreover, although there may be doubt that the definition of “standard of 

performance” in section 302(l) applies to section 111(d) in light of the fact that the 

definition of the same term in section 111(a)(1) is more specific, even if the section 

302(l) definition does apply, an averaging or trading requirement qualifies as a 

“continuous emission reduction” because, in the case of a tradeable emission rate, the rate 

is applicable at all times, and, in the case of a tradeable mass limit, the source is always 

under the obligation that its emissions be covered by allowances. 

 

69 Typically, in a mass emission limit trading program, sources are required to obtain an allowance for each 

measure (e.g., ton) of air pollutant they emit. The acid rain program under Title IV of the CAA is an 

example of this type of trading program. 
37 

 It should be noted that the EPA has promulgated two other section 111(d) 

rulemakings that authorized state plans to include emissions averaging or trading.70

VIII. Ongoing applicability of section 111(d) state plan 

[NOTE TO INTERAGENCY REVIEWERS: We intend to move this section to the 

preamble.] 

The EPA is proposing that an existing source that becomes subject to 

requirements under CAA section 111(d) will continue to be subject to those requirements 

even after it undertakes a modification or reconstruction. Under this interpretation, a 

modified or reconstructed source would be subject to both (1) the section 111(d) 

requirements that it had previously been subject to and (2) the modified source or 

reconstructed source standard being promulgated under 111(b) simultaneously with this 

rulemaking. 

As noted above, a “new source” is defined under section 111(a)(2) as “any 

stationary source, the construction or modification of which is commenced after,” in 

general, a proposed or final section 111(b) rule becomes applicable to that source; and 

under section 111(a)(6), an “existing source” is defined as “any stationary source other 

than a new source.” Under these definitions, an “existing source” that commences 

construction of a modification or reconstruction after the EPA has proposed or finalized a 

section 111(b) standard of performance applicable to it, becomes a “new source.” 

However, section 111(d) is silent on whether requirements imposed under a section 

111(d) plan continue for a source that ceases to be an existing source because it modifies 

or reconstructs. For example, section 111(d) provides that the state plans will “establish[] 

standards of performance for any existing source” but does not say whether, once a 

standard of performance is established for a given source, that standard is lifted if the 

source ceases to be an existing source. Similarly, no other provisions of section 111 

address whether the imposition of a section 111(b) standard on a modified or 

reconstructed source ends the source’s obligation to meet any applicable section 111(d) 

requirements. 

Because section 111(d) does not address whether an existing source that is subject 

to a 111(d) program remains subject that program even after it modifies or reconstructs, 

the EPA has authority to provide a reasonable interpretation, under the Supreme Court’s 

decision in Chevron U.S.A. Inc. v NRDC, 467 U.S. 837, 842-844 (1984). The EPA’s 

interpretation is that under these circumstances, the source remains subject to the section 

111(d) plan, for two reasons. The first is to assure the integrity of the section 111(d) 

plan. The EPA believes that many States will develop integrated plans that include all of 

 

70 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) [also known as the Clean Air Mercury 

Rule, or “CAMR”], 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 (Dec. 19, 1995).
38 

their EGUs, such as rate- or mass-based trading programs. Uncertainty about whether 

units would remain in the program could be very disruptive to the operation of the 

program. The second reason is to avoid creating incentives for sources to seek to avoid 

their obligations under a section 111(d) plan by undertaking modifications. The EPA is 

concerned that owners or operators of units might have incentives to modify purely 

because of potential discrepancies in the stringency of the two programs, which would 

undermine the emission reduction goals of section 111(d). The EPA invites comments on 

this interpretation, including whether this interpretation is supported by the statutory text 

and whether this interpretation is sensible policy and will further the goals of the statute. 
1 

Leg-Mem_15-18-14_red-line-from-OMB

Legal Memorandum for Proposed Carbon Pollution Guidelines for Existing Power 

Plants 

Introduction 

This memorandum provides background for, and further discussion of, legal 

issues raised in the proposed rule, “Carbon Pollution Guidelines for Existing Power 

Plants: Emission Guidelines for Greenhouse Gas Emissions from Existing Stationary 

Sources: Electric Utility Generating Units.” This memorandum is intended to be read in 

conjunction with, and assumes familiarity with, the preamble for this proposed rule. 

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.” 1 EPA has listed more than 60 stationary source 

categories under this provision.2

 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 categories.3

 These standards are known as 

new source standards of performance (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, CAA section 111(d)’s 

mechanism for regulating existing sources differs from the one that CAA section 111(b) 

provides for new sources because section 111(d) 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. 

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 

 

1

 CAA §111(b)(1)(A). 

2 See 40 CFR 60 subparts Cb – OOOO. 3

 CAA §111(b)(1)(B), 111(a)(1). 

Formatted: Font: 10 pt, Complex Script Font:

10 pt

Formatted: Font: 10 pt, Complex Script Font:

10 pt
2 

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 appropriate amount of emission reductionrequired level of 

emissions or emission reduction, which the regulations refer to as the “emissions 

guideline.”4 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 not be less 

stringent thant the EPA’s emission guideline.5

 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.”6

 If a state does not 

submit a plan, the EPA must establish a federal plan for that state.7

 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. In the case of a 

tribe that has one or more affected EGUs on its lands,8

 the tribe would have the 

opportunity, but not the obligation, to establish a CO2 performance standard and a plan 

for its tribal lands. 

B. Legislative history 

Congress adopted CAA section 111 in 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 §110 state implementation plans (SIPs), (ii) hazardous air pollutants (HAPs), which 

would be regulated under EPA-promulgated national emission standards pursuant to 

CAA §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 §114. At that time, Congress defined “standard of 

performance,” under §111(a)(1), as— 

 

4

 40 CFR 60.22(b)(5). 

5

 40 CFR 60.24(c). 

6

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

7 Id. 8

 The EPA is aware of at least three affected sources located in Indian Country located in Indian Country, 

two on [Navajo] lands – the Navajo Generating Station and the Four Corners Generating Station – and one 

on [Ute] lands – the Bonanza Generating Station. All three are coal-fired EGUs. 
3 

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. 

Section 111(d) was added during tThe 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 non-NAAQS, 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 Tthe 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 meaning of 

section 111(d), and we refer to parts of that legislative history below. 

although the legislative history does discuss, among other things, the meaning of the term 

“standard of performance.”9 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. 

although the The legislative history does discusses, among other things, the meaning of 

the term “standard of performance,.”10 which we refer to below.

In the 1977 CAA Amendments, Congress made several changes to section 111, 

including section 111(d). Among other things, 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 “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 

 

9 See, e.g., Senate Comm. Rep. No. 91-1196 at 16. 10 See, e.g., Senate Comm. Rep. No. 91-1196 at 16. 

Formatted: Indent: Before: 0.5", After: 0.5"

Formatted: Indent: First line: 0"

Formatted: Indent: Before: 0.5", After: 0.5"
4 

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 §111(a)(1) that the standard 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 

The EPA issued regulations implementing CAA section 111(d) in 1975,11 and has 

revised them in the years since.12 (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.13 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,14 although but the regulations 

provide the EPA with authority to extend the deadlines for those submissions.,15 The 

regulations also provide that and the EPA must take final action on the state plans within 

four months of the due date for those plans.16 In the present rulemaking, the EPA is 

 

11 “State Plans for the Control of Certain Pollutants From Existing Facilities,” 40 FR 53,340 (Nov. 17, 

1975). 

12 The most recent amendment was in 77 Fed. Reg. 9304 (Feb. 16, 2012). 

13 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. 

14 40 CFR 60.23(a)(2). 

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

16 40 CFR 60.27(b). 
5 

following the requirements of the implementing regulations, except that the EPA is 

extending certain timetables, as described in the preamble.17 

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)).18 In addition, 

the agency has regulated additional pollutants under CAA section 111(d) in conjunction 

with CAA section 129.19 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). . 

D. Case law 

The D.C. Circuit has never handed down a decision that had occasion to review a 

rule promulgated directly under 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 2011.20 These decisions concerned various aspects of section 111, primarily the 

interpretation of the term “standard of performance.” Relevant statements of Tthese cases 

are discussed below. 

E. 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 

 

17 The EPA is not re-opening these regulations, although it is revising except for certain timetables. The 

deadline for action on state plan submittals.

18 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 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). 

19 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). 20 Portland Cement Ass’n v. Ruckelshaus, 486 F.2d 375 (D.C. Cir. 1973); Essex Chemical Corp. v. 

Ruckelshaus, 486 F.2d 427, (D.C. Cir. 1973); Portland Cement Ass’n v. EPA, 665 F.3d 177 (D.C. Cir. 

2011). 

Formatted: Font: Not Bold, Not Italic
6 

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 EPA believes that tToday’s proposed action is authorized by the requirements 

of CAA section 111(d) and is consistent with the implementing regulations. As an initial 

matter, the CAA clearly authorizes the regulation of greenhouse gases (including CO2) 

under section 111. An We discuss below an ambiguity in the provisions of section 

111(d)(1)(A)(i), arising from Congress’s simultaneous enactment of two separate version 

of this provision, has led some stakeholders to argue that the fact that EPA has regulated 

hazardous air pollutants from EGUs prevents EPA from regulating CO2 emissions from 

EGUs, but to the contrary,. As explained below in detail, however, EPA reads’s 

reasonable interpretation of the provision concerning the air pollutants covered under 

section 111(d)to authorizes EPA to regulateregulation of CO2 emissions from EGUs and 

this interpretation is both reasonable and entitled to deference. Moreover, although 

section 111(d) applies only to sources that, if they were new sources, would be covered 

under a section 111(b) rule, the EPA intends to complete the section 111(b) rulemakings 

regulating CO2 from newly constructed EGUs and from modified and reconstructed 

EGUs before by the time we finalizeing the section 111(d) rule, and either of those 

rulemakings will provide the requisite predicate for this rulemaking. 

A key step in promulgating requirements under CAA section 111(d) is identifying 

the “best system of emission reduction which ... the Administrator determines has been 

adequately demonstrated” (BSER). In promulgating tThe 1975 implementing regulations, 

are the EPA explicitly stated that it is required under section 111(d), the EPA to

determines the BSER in promulgating emission guidelines under that provision.

21

Accordingly, in this rulemaking, the EPA is determining the BSER. 

In the preamble, the EPA lays out in detail its proposed determination of BSER, 

which includes a set of measures that constitute a system of emission reduction that has 

been adequately demonstrated by fossil-fuel-fired sources across the country. 

Specifically, the EPA proposes that that the BSER includes measures that can be sorted 

into four building blocks: (1) heat rate improvements, (2) re-dispatch from fossil-fuelfired steam-generating boilers to NGCC units, (3) new low- or zero-emitting generation, 

and (4) demand-side energy efficiency measures. Under the EPA’s proposed approach to 

view these measures asdetermining the BSER, the EPA identifies as a component of 

BSER the heat rate improvements in building block 1 that could be made at coal-fired 

steam generating units to reduce their carbon intensity (i.e., to decrease the amount of 

carbon emitted per unit of energy generated). Importantly, the EPA’s proposed approach 

views the measures in building blocks 2, 3, and 4 in light of the fact that the electricity 

system is an integrated system with fungible products (electricity and electricity 

services). Under this approach, the BSER includes building blocks 2, 3, and 4 because 

they decrease the demand for generation at fossil-fuel-fired EGUs, and thereby 

reduceresult in reductions in emissions from those sources. In addition, the EPA is also 

 

21 The EPA is not re-opening that interpretation in this rulemaking. 
7 

identifying an alternative basis, under which , the BSER includes limitations in utilization 

of the fossil-fired EGUs, which reduce mass emissions from those EGUs, and building 

blocks 2, 3, and 4 provide the foundation basis for applying those limitations. In both 

cases, the EPA reasonably identifies the sets of measures as components of BSER based 

on the factors that the EPA is required to consider and the EPA’s authority to weigh those 

factors. 

As noted above and explained in the preamble and various Technical Support 

Documents,, the measures in each of the building blocks are both technically feasible and 

“adequately demonstrated.” Heat rate improvement measures (identified in building 

block 1) are well-recognized as feasible within the industry. Under the EPA’s approach to 

BSER, the measures that entail dispatch changes from fossil-fuel-fired steam-generating 

EGUs to NGCC units, investments in renewable and nuclear energy, and demand-side 

energy efficiency (measures in building blocks 2, 3 and 4) are each well-established in 

numerous states, and many of them have already been relied on to reduce CO2 and other 

air pollutants from fossil-fuel-fired EGUs. Further, all of the measures achieve an 

important degree of emission reduction. In addition, they are not unreasonably costly, 

including when considered through a nation-wide lens. In addition, and importantly, the 

measures encourage the development and expansion of technology and practices to 

reduce CO2 and are consistent with current trends in the electricity sector. By the same 

token, under the alternative approach to BSER, generation reduction from the fossil-fired 

EGUs is technically feasible and adequately demonstrated because of the characteristics, 

just described, of the measures in building blocks 2, 3, and 4. 

After determining BSER, the EPA is authorized under theThe 1975 implementing 

regulations, as an integral component to setting emission guidelines, provide that, in 

establishing an emission guideline under section 111(d), EPA both determines BSER and 

to apply the BSER to determine the resulting emission limitation that results from 

application of the BSER to the affected sources. In this rulemaking, the EPA is taking the 

approach of applying the BSER to covered EGUs to each stateon a state-by-state basis

and determining the resulting emission limitation – termed, the “state goal” – for each 

state. The EPA is formulating each state goal as an average emissions rate. The state 

goals form the EPA’s emission guidelines. 

 

Once the EPA promulgates the emission guidelines, each state must develop a 

plan that identifies and achieves its emission performance level. The emissions 

performance level must be at least equivalent to (that is, no less stringent than) the state 

goal that the EPA has determined. As a practical matter, tThis means, among other 

things, that the states may adopt mass emission limits, instead of rate-based emissions 

levels, provided such mass emission limits achieve equivalent emission reductions to 

those that would be achieved by application of the rate that is the state goal. In addition, 

the state plans must establish standards of performance and include measures that 

implement and enforce those measures. 

As the preamble for this rulemaking discusses, based on suggestions from states 

and other stakeholders directing the EPA to consider measures that in some cases are 
8 

established by entities other than EGU owners or operators, 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 emissions performance level. Instead, the proposal 

would allow for compliance plans that impose or entail requirements on other parties 

(which we will refer to as affected entities) – such as renewable energy and demand-side 

energy efficiency measures - that would provide a means or basis for reducing utilization 

of, and therefore CO2 emissions from, the affected EGUs. The As noted in the preamble 

for this rulemaking, notes that a possible basis for this approach is that those 

requirements on other affected entities may be authorized as standards of performance or 

implementing measures. The EPA acknowledges countervailing points of view, but 

proposes that this is an appropriate flexibility and solicits comment, but . As a result, in 

the preamble, the EPA also solicits comment on whether state plans must impose all of 

the legal responsibility for achieving the emissions performance level on the affected 

EGUs. 

The preamble further notes that even if state plan imposes all of the legal 

obligations on the affected EGUs, that is the case, the state plan could nevertheless 

include the 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 that under the proposed approach. The preamble solicits 

comment on other issues concerning state plans, including whether a state may include in 

its plan an enforceable commitment by the state to assure some amount of emissions 

reduction from the affected sources, but not include the specific measures that would 

achieve that amount of reduction. 

The EPA emphasizes that in developing the state plans, as long as the plans 

reduce emissions from the affected sources to achieve the emissions performance level, 

the states have substantial discretion in designing as to the form of the standards of 

performance. Moreover, the states may require sources to implement specific measures 

that the EPA did not identify as BSER, and may include other approaches such as, for 

example, emission trading programs. By the same token, states may allow sources, in 

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 sources. 

 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 varies 

from that in the implementing regulations, and the EPA is revising that provision of the 

implementing regulations accordingly. 

III. Authority to regulate CO2 from EGUs 

A. Authority to regulate CO2
9 

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.

22 Furthermore, the U.S. Supreme Court’s holding in American 

Electric Power Co. v. Connecticut, 131 S. Ct. 2527, 2537-38 (2011), that “the Clean Air 

Act and the EPA actions it authorizes displace any federal common law right to seek 

abatement of carbon-dioxide emissions from fossil-fuel-fired power plants” was premised 

on the Court’s understanding that §111, including §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).23 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 CAAA – 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. In this circumstance, the enacted law signed 

by the President (as 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. 

Looking solely at this presentation of the text of the Section 112 Exclusion, one might 

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

 

22 549 U.S. 497 (2007). 

23 Under the U.S. Supreme Court’s 1984 decision in Chevron U.S.A. Inc. v. NRDC, to 

interpret how a statute applies to a particular question, an agency must, at Step 1, 

determine whether Congress’s intent as to the specific question is clear, and, if so, the 

agency must give effect to that intent. If congressional intent is not clear, then the agency, 

at Step 2, has discretion to fashion an interpretation that is a reasonable construction of 

the statute.23 Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-844 (1984). 

Formatted: Indent: First line: 0"
10 

provision would not cover GHGs because GHGs are emitted from EGUs and EGUs are a 

source category regulated under section 112.24

TThis conclusion would be incorrect, however, because 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 the 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). Under the U.S. Supreme 

Court’s 1984 decision in Chevron U.S.A. Inc. v. NRDC, to interpret how a statute applies 

to a particular question, an agency must, at Step 1, determine whether Congress’s intent 

as to the specific question is clear, and, if so, the agency must give effect to that intent. If 

congressional intent is not clear, then the agency, at Step 2, has discretion to fashion an 

interpretation that is a reasonable construction of the statute.1 Chevron U.S.A. Inc. v. 

NRDC, 467 U.S. 837, 842-844 (1984).

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 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. 

 

24 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 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. 
11 

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 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. 

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 
12 

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 

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. 

B. Authority to regulate EGUs 

[NOTE TO INTERAGENCY REVIEWERS: This subsection was moved to the 

preamble.] 

Before the EPA finalizes this section 111(d) rule, the EPA will finalize a section 

111(b) rulemaking regulating CO2 emissions from new EGUs, which will provide the 

requisite predicate for applicability of section 111(d). 

CAA section 111(d)(1) requires the EPA to promulgate regulations under which 

states must submit state plans regulating “any existing source” of certain pollutants “to 

which a standard of performance would apply if such existing source were a new 

source.”25 A “new source” is “any stationary source, the construction or modification of 

which is commenced after the publication of regulations (or, if earlier, proposed 

regulations) prescribing a standard of performance under [section 111] which will be 

applicable to such source.”26 It should be noted that these provisions make clear that a 

“new source” includes one that undertakes either new construction or a modification. It 

should also be noted that EPA’s implementing regulations define “construction” to 

include “reconstruction,” which the implementing regulations go on to define as the 

replacement of components of an existing facility to an extent that (i) the fixed capital 

cost of the new components exceeds 50 percent of the fixed capital cost that would be 

required to construct a comparable entirely new facility, and (ii) it is technologically and 

economically feasible to meet the applicable standards.27

Under section 111(d)(1), in order for existing sources to become subject to that 

provision, the EPA must promulgate standards of performance under CAA section 111(b) 

to which, if the existing sources were new sources, they would be subject. Those 

 

25 CAA section 111(d)(1). 

26 CAA section 111(a)(2). 

27 40 CFR 60.15(b). The EPA is not re-opening these regulations in this rulemaking. 

Formatted: Font: Bold, Italic
13 

standards of performance may include ones for sources that undertake new construction, 

modifications, or reconstructions. 

The EPA is in the process of promulgating two rulemakings under section 111(b) 

for CO2 emissions from affected sources. The EPA proposed the first, which applies to 

affected sources undertaking new constructions, by notice dated January 8, 2014, which 

we refer to as the January 2014 Proposal.28 The EPA is proposing the second, which 

applies to affected sources undertaking modifications or reconstructions, concurrently 

with this section 111(d) proposal. The EPA will complete one or both of these CAA 

section 111(b) rulemakings before or concurrently with this section 111(d) rulemaking, 

which will provide the requisite predicate for applicability of section 111(d).29

IV. Rational basis, endangerment finding 

 In the course ofresponse to the January 2014 Proposal for standards of 

performance for GHGs emissions from newly constructed fossil-fuel-fired EGUs,30 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 §111(b)(1)(A). In that proposal, the EPA stated that it is rational to regulate 

GHGs from 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.31 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 fossilfuel-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 this 

proposal on any issues related to a rational basis or endangerment finding.

 

V. Authority for EPA to determine BSER and emission guidelines 

 

28 79 Fed. Reg. 1430. 

29 In the past, EPA has issued standards of performance under section 111(b) and emission guidelines under 

section 111(d) simultaneously. See “Standards of Performance for new Stationary Sources and Guidelines 

for Control of Existing Sources: Municipal Solid Waste Landfills – Final Rule,” 61 Fed. Reg. 9905 (March 

12, 1996). 

30 79 Fed. Reg. 1,430 (Jan. 8, 2014). 

31 See 79 FR at 1,452/3 – 1,456/1. 
14 

 In this section we describe the authority, as set out in the EPA’s 1975 

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 is applyingproposes to apply the BSER to each state, and, based on that on that 

basis, to determineing the amount of required emission reduction 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 §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 these implementing regulations for section 111(d)

in 1975, and has revised parts of them since. The 1975 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 these 

regulations in promulgating previous rulemakings under section 111(d).32 In the present 

rulemaking, EPA continues to follow them, except in one instance, in whichthat EPA is 

revising one of the defaultestablishing a different deadlines for submission of state 

implementation plans than what the regulations would otherwise require.33 

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 notice of 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.”34

 

32 These rulemakings are cited above. 

33 The EPA is not re-opening these regulations, although it is revising except for the revised deadline for 

EPA action on state plans. 34 40 CFR 60.22(a). 
15 

The regulations go on to describe the contents of the “guideline document” as including, 

among other things, an “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.35

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 §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.36

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 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.37

 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 

 

35 Id. at 60.22(b). 36 40 CFR 60.21(e). 

37 Id. at 60.22(c). 
16 

documents -- comprise the “draft guideline document.” The documents contain the 

“information for the development of State plans” described in the regulations. This 

information includes the four building blocks, which are the BSER. 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 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. 

It should be noted that the preamble discusses the EPA’s proposal in this 

rulemaking to adopt state-specific goals based on a single, consistent methodology, rather 

than to adopt nationally uniform emission rates for particular types of affected EGUs. 

The preamble explains that this state-by-state approach ensures that the proposed goals 

reflect opportunities to reduce CO2 emissions by shifting generation among different 

types of EGUs and accounts for the differences among the generating fleets in the various 

states. 

VI. Best system of emission reduction adequately demonstrated

We discuss in the preamble our interpretation of the section 111(d)(1) and (a)(1) 

provisions that require the state plans to establish “standards of performance” for existing 

sources, and that define that term. In this section of this Legal Memorandum, we 

elaborate on that discussion.A. Introduction and Overview

Under CAA §111(d), the foundation for the standards of performance in the state 

plans is the “best system of emission reduction which ... the Administrator determines 

has been adequately demonstrated” (BSER). In the preamble for the proposed rule, the 

EPA describes the measures that comprise the BSER As background, it should be 

recalled that important to the BSER are the measures in the , which are organized into 

four “building blocks,,” which the preamble describes at length and summarizes as 

follows:and then explains why those building blocks, taken together, meet the criteria for 

the BSER. 

 

The measures in the four building blocks are described at length in the preamble, 

and may be summarized as follows:

Building block 1: Reducing the carbon intensity of generation at 

individual affected EGUs through heat rate improvements. 

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). 

Formatted: Font: Not Bold

Formatted: Line spacing: single

Formatted: Indent: First line: 0.5", Tab

stops: 1.67", Left
17 

Building block 3: Reducing emissions from affected EGUs in the amount 

that results from substituting generation at those EGUs with expanded 

low- or zero-carbon 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. 

Building block #1: Lowering the carbon intensity of generation at 

individual affected EGUs (e.g., through heat rate improvements). 

Building block #2: Reducing utilization of, and therefore emissions from, 

the most carbon-intensive affected EGUs to the extent that this can be 

accomplished cost-effectively by shifting to less carbon-intensive existing 

fossil-fuel-fired EGUs, including NGCC units that are under construction. 

Building block #3: Reducing utilization of, and therefore emissions from, 

affected carbon-emitting EGUs to the extent that this can be accomplished 

cost-effectively by expanding the amount of available low- or zerocarbon-intensity generation. 

Building block #4: Reducing utilization of, and therefore emissions from, 

affected carbon-emitting EGUs to the extent that this can be accomplished 

cost-effectively by increasing demand-side energy efficiency. 

As noted below, the EPA is proposing an approach and an alternative to 

explaining how the building blocks provide the basis of the proposed determination of 

BSER. Both meet the criteria specified in the statute, as summarized next, and both are 

based on the integrated nature of the electricity system, as discussed after that. 

BA. General approach for determining the best system of emission reduction 

adequately demonstrated 

 The EPA’s explanation for this BSER proposal begins with the statutory 

definition of a “standard of performance”: 

The term “standard of performance” means 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. 

CAA section 111(a)(1). 
18 

 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.”38 

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 this CAA provision, including its 

component elements.39 In one of the earliest cases, Essex Chemical Corp. v. Ruckelshaus, 

in 1973, the Court stated that because the standard must be “achievable,” the emission 

limits must be technically feasible, and added that “[a]n adequately demonstrated system 

is one which has been shown to be reasonably reliable, reasonably efficient, and which 

can reasonably be expected to serve the interests of pollution control without becoming 

exorbitantly costly in an economic or environmental way.”40

Under this case law, the EPA determines the BSER based on the following key 

considerations, among others: 

 The system of emission reduction must be technically feasible.41 

 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.42 

 The EPA must also consider that CAA section 111 is designed to promote the 

development and implementation of technology.43

Other considerations are also important, including that the EPA must also 

 

38 Oxford Dictionary of English (3rd ed.) (published 2010, online version 2013) 

http://www.oxfordreference.com.mutex.gmu.edu/view/10.1093/acref/9780199571123.001.0001/acref9780199571123 

39 Portland Cement Ass’n v. Ruckelshaus, 486 F.2d 375 (D.C. Cir. 1973); 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). 

40 Essex Chemical Corp. v. Ruckelshaus, 486 F.2d at 427. 41 As noted in the text, the case law may be read to treat technical feasibility as the measure for whether the 

standard of performance is “achievable,” not as a criterion for whether the system of emission reduction is 

the “best system of emission reduction ... adequately demonstrated.” However, for convenience, we may 

refer to technical feasibility as another of the criteria for the BSER. 42 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), 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. 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.

43 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).

Formatted: Font: Not Italic
19 

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. 

The EPA discussed the CAA requirements and Court interpretations of the BSER 

at length in the January 2014 Proposal,44 and incorporates by reference that discussion in 

this rulemaking. 

CB. Application of the BSER criteria 

1. Introduction and overview

The EPA’s BSER proposal in this rulemaking recognizes, and is based in part on, 

both 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. , and on the global nature of the pollutant at issue. 

The EPA proposes an approach to determining the “best system of emission 

reduction ... adequately demonstrated” that includes several components, some of which 

are based on the interconnected nature of the electricity generating grid. The first 

component is building block 1, which entails measures that the affected sources may 

undertake to improve their efficiency. 

The remaining components are based on the interconnected nature of the grid. 

Because the grid is interconnected, CO2 emissions reductions can be achieved in either of 

two ways: (i) Instituting measures in building blocks 2, 3, and 4, which, due to the 

interconnected nature of the grid, result in drawing utilization away from higher-emitting 

fossil-fuel-fired EGUs, thereby lowering those EGUs’ emissions. (ii) Reducing utilization 

from higher-emitting fossil-fuel-fired EGUs, which due to the interconnected nature of 

the grid and its operation in the regulated markets, result in replacement generation, such 

as that identified in the building blocks 2, 3, and 4. Thus, each of these approaches may 

be considered to be a “system of emission reduction.” 

Accordingly, the EPA proposes that the “best system of emission reduction ... 

adequately demonstrated” also includes the measures in building blocks 2, 3 and 4, which 

would substitute generation at higher-emitting EGUs with increases in generation at 

lower- or zero-emitting sources and in end-use efficiency in ways that reduced CO2

emissions at fossil-fuel-fired EGUs. In addition, as an alternative approach, the EPA also 

proposes that BSER includes reduced utilization of the higher-emitting fossil-fuel-fired 

 

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

Formatted: Subscript

Formatted: Subscript
20 

EGUs, with the measures in building blocks 2, 3, and 4 serving to provide replacement 

generation. Each of these approaches assures reliability of electricity supply and avoids 

unreasonable costs and meets all of the criteria to qualify as BSER. 

It is also significant that CO2 is a global pollutant, and therefore the location of 

the emissions (or emission reductions) does not affect the environmental consequences of 

an amount of emissions generated at any given source in any one location.45 The global 

nature of CO2 means that CO2 emissions may be reduced anywhere within the electricity 

grid and still achieve the intended environmental benefits. location. 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, EGU mercury emissions have adverse health and 

welfare effects in the locality where they are emitted, and as a result, the EPA’s Mercury 

and Air Toxics Standards (MATS) rulemaking requires reductions at each affected EGU, 

and does not authorize emissions trading.

46

2. Interconnected nature of the electricity system 

As we observe in the preamble, 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. Through this 

interconnected grid, fungible products – electricity and electricity services – are produced 

and delivered by a diverse group of EGUs operating in a coordinated fashion in 

responseding to the end-users’ demand for electricity created by the users of the product. 

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). 

Instrumental to the success in meeting these several objectives is tThe fact that generation 

at one EGU can be substituted for generation at another. This allows operators to utilize 

their least-cost assets primarilyfirst, and hold their higher-cost assets in reserve, thereby 

assuring that the system achieves the objectives of providing reliable and least-cost 

electricity service. 

 

45 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 §173(c)(1) (limiting offsets for air 

pollutants subject to new source review requirements to emissions reductions from sources in certain 

nonattainment areas). 

Formatted: Font: 12 pt, Complex Script Font:

12 pt

Formatted: Font: Bold, Italic

Formatted: List Paragraph, Numbered +

Level: 1 + Numbering Style: 1, 2, 3, ... + Start

at: 1 + Alignment: Left + Aligned at: 1" +

Indent at: 1.25"
21 

In recent years, the ability to shift between different generation assets on the grid 

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 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 facilities, the higher-emitting 

assets tend to be utilized relatively less, and, as direct result, emit less pollution and 

reduce cost. 

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 that the interconnected nature of the grid allows to achieve those emissions 

reduction objectives, as discussed below. Thus, it is apparent that the interconnected 

nature of the grid has allowed facilitated the achievement of objectives ranging from 

assuring a reliable, least-cost supply of electricity to reducing pollution, including, in 

some states, carbon pollution. 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 percent below 1990 levels by 2050,47 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.48 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. 

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. We believe that the proposed emission guidelines, including the 

temporal 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. 

 

47 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 48 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_scoping_plan.pdf. 

Formatted: Normal, Indent: First line: 0.5"
22 

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 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 decrease 

demand for generation by the affected EGUs, and thereforeresult inassociated with

reduced emissions from those EGUs. The latter include and by substituting generation at 

higher emitting sources through increasing generation at less carbon-intensive EGUs, 

expanding the amount 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). 

Thus, tThe EPA proposes an approach to determining the “best system of 

emission reduction ... adequately demonstrated” in light of the interconnected nature of 

the electricity generating grid that, in turn, includes several components. The first is 

building block 1, which, as discussed below, entails measures that the affected sources 

may undertake to improve their efficiency. 

In addition, the EPA proposes that the “system” for achieving emissions 

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

substitute generation at higher-emitting EGUs with increases in generation at lower- or 

zero-emitting sources and in end-use efficiency in ways that reduced CO2 emissions at 

fossil-fuel-fired EGUs. For the reasons described below, the EPA proposes that this is the 

“best system of emission reduction ... adequately demonstrated.” In addition, as an 

alternative approach to BSER, the EPA also believes that the “system” may be viewed 

simply as consisting of, in addition to building block 1, reduced utilization of the higheremitting fossil-fuel-fired EGUs, with the measures in building blocks 2, 3, and 4 serving 

to assure reliability and avoid unreasonable costs associated with such reduced 

utilization. As also discussed below, this alternative approach may also be considered the 

“best system of emission reduction ... adequately demonstrated.” 

23. Heat rate improvements 

As discussed in the preamble, under the EPA’s proposed approach to determining 

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 component 

part of the BSER. Further elaboration here is not necessary.

34. Components of electricity system Measures in building blocks as 

BSER 

Under the EPA’s first approach, to determining BSER, the “best system of 

emission reduction ... adequately demonstrated” includes the measures in building blocks 
23 

2, 3 and 4, for in conjunction with the affected fossil-fuel-fired steam generating boilers, 

and building blocks 3 and 4 for (in the case of building block 2) and the fossil-fuel-fired 

EGUs combustion turbines(in the case of building blocks 3 and 4). In this section, we 

first explain why the measures in these building blocks are a “system of emission 

reduction,” and then why they are the “best” system that is “adequately demonstrated.” 

In brief, Tthese building blocks, taken together, 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 building blocks, in light because of 

the integrated nature of the electricity system grid. That is, Through they integrated grid, 

the measures are “a set of things working together as parts of a mechanism or 

interconnecting network”49 that leads to reducetions in overall demand for, (and thus in 

therefore utilization of,) higher emitting, fossil-fuel-fired EGUs generation, and that 

therefore which, in turn, reduces CO2 emissions, from thosefossil- fuel-fired EGUs. 

Specifically, increased generation from NGCC units substituting for generation at higheremitting EGUs, in accordance with building block 2, reduces overall CO2 emissions from 

fossil-fuel-fired steam generating units, and therefore overall CO2 emissions from fossilfuel-fired EGUs. In exactly the same way, increased low- or zero-carbon generation, in 

accordance with building block 3, and decreased overall demand for electricity, in 

accordance with building block 4, reduce CO2 emissions from those fossil-fuel-fired 

EGUs.50 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. 

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 

 

49 Oxford Dictionary of English (3rd ed.) (published 2010, online version 2013) 

http://www.oxfordreference.com.mutex.gmu.edu/view/10.1093/acref/9780199571123.001.0001/acref9780199571123. 

50 Although we describe building blocks 2, 3, and 4 as, together, comprising the “system” of emission 

reduction, each by itself could be considered a “system” of emission reduction, for the reasons noted in the 

accompanying text. 

Formatted: List Paragraph, Numbered +

Level: 1 + Numbering Style: a, b, c, ... + Start

at: 1 + Alignment: Left + Aligned at: 1.5" +

Indent at: 1.75"
24 

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.”51 This definition is broad. It encompasses 

virtually any “set of things” that reduce emissions. Moreover, no other provisions in 

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” (it must be, among other 

things, technically feasible and of reasonable cost) that is “adequately demonstrated.” 

Thus, the “system of emission reduction” may include anything that reduces emissions, 

ranging from add-on controls applied to the affected sources’ smokestacks to control 

emissions, to measures that replace production 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 just quoted 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 on the grounds that even under those 

circumstances, the standards of performance would still have the effect of reducing 

emissions from the affected sources. Under either of those interpretations, there is 

nothing in that phrase that limits the type of “system of emissions reductions” 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 

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 of 

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. 

Based on these interpretations, for existing sources in the electric utility industry, 

we propose that the term “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 

 

51 Oxford Dictionary of English (3rd ed.) (published 2010, online version 2013) 

http://www.oxfordreference.com.mutex.gmu.edu/view/10.1093/acref/9780199571123.001.0001/acref9780199571123 
25 

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” this broadly. 

 (I). Legislative history of “standard of 

performance” 

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.)52 In the 1990 CAA Amendments, Congress again changed this 

definition, 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 

 

52 The 1977 CAA Amendments also revised section 111(a)(1) to require that the standards of performance 

for fossil-fuel-fired sources require a percentage reduction in emissions (the “percentage reduction” 

requirement). 
26 

existing sources, the standards of performance were to be based on the “best available 

means of emission control (not necessarily technological)....”53 

 (II). Pollution prevention

In addition, interpreting the term “system of emission reduction” broadly to 

include the building blocks is 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 § 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 § 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 § 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 

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 during 

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 fossil-fuel fired 

EGUs, and the Congress recognized the relationship in several Title IV provisions.54 

 

53 “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. 54 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 
27 

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 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 by 

reducing of SO2 and NOx emissions – 

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....”55

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....; 

 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). 

55 CAA §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. 
28 

fuel-switching and least-emissions dispatching in order to maximize 

emission reductions.”56

In addition, Congress incorporated into Title IV specific incentives to further encourage 

electric utilities (defined as entities that sell electricity57) 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 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.”58 

 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 (re-dispatch; low- or zero-emitting generation, including renewables; and demandside energy efficiency, respectively.) 

 (IV). 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 base the section 111(d) standards of performance on measures such as redispatch, renewable energy, and demand-side energy efficiency.59 Some stakeholders 

have as well.60

 

56 1990 Senate Committee Report at 316, reprinted in 1990 Legislative History, vol. V, at 8656 (emphasis 

added). 

57 CAA § 404(f)(1)(C). 

58 CAA § 404(f)(2)(B)(iii)(I). 

59 See Nordhaus R., Gutherz I., “Regulation of CO2 Emissions from Existing Power Plants Under §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.”); 
29 

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” 

In fact, as the preamble notes, there are many cases in which states and/or 

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 percent below 1990 levels by 2050,61 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.62 Similarly, mechanisms have also been put in 

place regionally that have these same impacts: for example, nine northeast and midAtlantic states participate in the Regional Greenhouse Gas Initiative (RGGI), a market-

 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 §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.”).

60 Ceronsky M., Carbonell T., “Section 111(d) of the Clean Air Act: The Legal Foundation for Strong, 

Flexible & Cost-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_actstrong_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). 

61 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 62 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_scoping_plan.pdf. 

Formatted: Indent: First line: 0.5"

Formatted: Indent: First line: 0.5"

Formatted: Font: Bold, Italic

Formatted: List Paragraph, Numbered +

Level: 1 + Numbering Style: a, b, c, ... + Start

at: 1 + Alignment: Left + Aligned at: 1.5" +

Indent at: 1.75"
30 

based emissions budget trading program that sets an aggregate limit on CO2 from fossil 

fuel fired power plants in the participating states. 

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. We believe that the proposed emission guidelines, including the 

temporal 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. 

For the reasons described next, the measures in each of building blocks 2, 3, and 4 

qualify as components of the “best system of emission reduction ... adequately 

demonstrated.” , As noted elsewhere, the D.C. Circuit has interpreted the BSER as to 

reiterate the test of the D.C. Circuit, “[a]n adequately demonstrated system,” and 

explained that such a system is one that because they 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.”63 In fact, theose measures in the building blocks do meet all the criteria, as

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 BSER

First, the measures in those building blocks are technically feasible, as described 

in the preamble. To reiterate briefly, building block 2, which entails substituting 

generation at higher emitting units (fossil-fuel-fired steam generating units) by shifting to 

generation at lower-emitting 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-fuel-fired steam generating units. Re-dispatch is already widely used 

(usually more in response to fuel price signals than as a GHG mitigation measure), 

including by companies that own both coal- and natural-gas-fired EGUs. It should be 

noted that Tthere are several mechanisms through which states could cause this redispatch 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 could change the relative costs of generation for more carbonintensive 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 

way to do so 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 

 

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

Formatted: Font: Bold, Italic

Formatted: List Paragraph, Numbered +

Level: 1 + Numbering Style: i, ii, iii, ... + Start

at: 1 + Alignment: Left + Aligned at: 2" +

Indent at: 2.5"
31 

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 un-needed allowances), and the same would be true for a 

tradable emission rate system.In addition, re-dispatch is already widely used (usually 

more in response to fuel price signals than as a GHG mitigation measure), including by 

companies that own both coal- and natural-gas-fired EGUs.

As discussed in the preamble, building block 3, which entails new low- and zeroemitting energy as well as preservation of nuclear capacity that might otherwise be 

retired, is also technically feasible. The technology for renewable energy is wellestablished and in use now, and the amount of renewable energy contemplated by 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, a 

market for renewable energy certificates, which facilitates investment in renewable 

energy, is 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. 

It should be noted, as discussed in the preamble, that because of the integrated 

nature of the electricity system, these measures 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. 

For the reasons discussed in the preamble, building blocks 2, 3, and 4 also meet 

the remaining criteria to qualify as the 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, the proposed levels of reduced generation are not unreasonably 

costly for the affected source category or the nation-wide electricity system, they do not 

have adverse effects on the overall energy system (to the contrary, they improve it by 

reducing its carbon intensity), and they promote the development and implementation of 

technology that is important for continued emissions reductions. 
32 

ii. Basis for “adequately demonstrated” finding 

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. 

It should be noted that because the measures in building blocks 2, 3, and 4 have 

the effect of reducing CO2 emissions from fossil-fuel-fired EGUs, each of the building 

blocks is part of a “system” of emission reduction for those EGUs regardless of which 

entities undertake the measures; o. Regardless of the entities required to undertake the 

relevant measuresf course, during the compliance periodthe resulting emission reductions 

in fact will be taking place at individual EGUs. 

At the same time, as discussed in the preamble, all of the measures in building 

blocks 2, 3, and 4 that are needed to achieve the requisite emissions reductions may be 

undertaken by the affected EGUs themselves, which confirms 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 provide substitute 

generation to replace that avoided at higher-emitting 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, Mmany 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 that 

include re-dispatch from higher-emitting fossil-fuel-fired 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.64

 

64 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.

Formatted: Indent: First line: 0"

Formatted: List Paragraph, Numbered +

Level: 1 + Numbering Style: i, ii, iii, ... + Start

at: 1 + Alignment: Left + Aligned at: 2" +

Indent at: 2.5"

Formatted: Font: Bold, Italic

Formatted: Tab stops: 5.45", Left
33 

Other states have de-regulated their electricity markets65 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 welldeveloped 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 service 

companies. Moreover, in many de-regulated states use forward capacity auctions 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 demandside energy efficiency projects. 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” part of the BSER – and wholly apart from the fact 

that the question of which entities should be considered to be responsible forEGUs may

undertakeing 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. Here, wWhile EGU owners and operators may 

effectuate such measures directly or indirectly, the states also have authority to enact 

measures such as re-dispatch requirements, renewable portfolio standards that require 

investment in renewable energy resources, as well as demand-side energy efficiency 

measures.66 As noted in the preamble, many states have already done so.67

The fact that many states have adopted measures that require increased renewable 

electricity generation and increased end-use energy efficiency further supports the 

conclusion that these emission reduction methods are feasible and offer opportunities for 

significant reductions in emissions that are achievable considering cost. 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 

 

65 Some states, such as Ohio, have hybrid model that includes elements of a regulated market and a deregulated market.

66 It should be noted that under the portfolio approach to the state plan, discussed in the preamble, the 

entities 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. 

67 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.

Formatted: Indent: First line: 0.5"

Formatted: Font: 10 pt, Complex Script Font:

10 pt

Formatted: Indent: First line: 0"

Formatted: Font: 10 pt, Complex Script Font:

10 pt

Formatted: Font: 10 pt, Complex Script Font:

10 pt

Formatted: Font: 10 pt, Complex Script Font:

10 pt
34 

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.68

Finally, we note an additional reason that building blocks 3 and 4 should be 

considered to be part of the BSER for fossil-fuel-fired EGUs.that Dduring 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 belowin 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 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 re-dispatch, 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 §111(d). According to these 

latter stakeholders, as a legal matter, the BSER is limited to measures that may be 

undertaken at the affected units, and not measures that are beyond the affected units; the 

measures in building blocks 2, 3, and 4 are “beyond-the-unit” measures because they are 

implemented outside of the affected units and outside their control; and as a result, those 

measures cannot be considered components of the BSER.69 

We welcome comment on this issue. As discussed above, we propose that the 

provisions of section 111 do not by their terms preclude the BSER from including those 

 

68 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. 

69 “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 § 111(d) – A whitepaper from the Coalition for Innovative Climate 

Solutions” (Feb. 26, 2014). 

Formatted: Numbered + Level: 1 +

Numbering Style: a, b, c, ... + Start at: 1 +

Alignment: Left + Aligned at: 1.5" + Indent at:

 1.75"

Formatted: Font: 12 pt, Complex Script Font:

12 pt
35 

types of measures. In addition, as discussed above, under our proposed approach, affected 

sources may themselves 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.70 It should also be noted that, as discussed above, the redispatch measures in building block 2 are limited to affected sources. Thus, the proposed 

approach and alternative described above respond to these stakeholder concerns. 

45. Alternate Reduced utilization approach 

 

As an alternative to the approach described above for determining the “best 

system of emission reduction ... adequately demonstrated,” the EPA believes the 

“system” may be identified as simply including, in addition to building block 1, the 

reduced utilization of fossil-fuel-fired EGUs, with the measures in building blocks 2, 3, 

and 4 serving as sources of substituting generation or electricity services needed to assure 

that the amount of the reduced utilization from these higher emitting sources will be 

consistent with reliability needs and not be unreasonably costly. 

The EPA is also proposing an alternative approach to BSER, which identifies a 

component of the “system of emission reduction” as reduced utilization in specified 

amounts of the higher-emitting fossil-fuel-fired EGUs. For the reasons discussed below, 

 

70 Commenters have critiqued this “at-the-unit” and beyond-the-unit” distinction as follows: 

There is an argument that the at-the-unit/beyond-the-unit distinction is not 

a meaningful one. Specifically, it could be argued that the distinction between 

at-the-unit and beyond-the-unit measures is largely artificial, because 

all of the emission reductions under consideration—whether from at-the-unit 

measures (e.g., fuel-switching or efficiency upgrades) or from beyond-theunit 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 at-the-unit measures that ultimately reduce emissions solely 

from regulated EGUs. If energy-efficiency programs, added renewable energy, 

and redispatch from higher emitting facilities to lower emitting facilities 

are viewed as at-the-unit systems of emission reduction, the at-the-unit/ 

beyond-the-unit distinction arguably becomes irrelevant—at least from a 

legal perspective. Rather, the real issue may come down to whether §111(d) 

authorizes EPA to require EGUs to curtail their output of electricity as a 

means of complying with the rule. 

Nordhaus R., Gutherz I., “Regulation of CO2 Emissions from Existing Power Plants Under §111(d) of the 

Clean Air Act: Program Design and Statutory Authority,” Environmental Law Reporter, 44: 10366, 10383 

n. 133 (May 2014).
36 

reduced generation in the specified amounts is a “system of emission reduction,” and it is 

the “best” that is “adequately demonstrated” because it meets the criteria for the BSER 

and it is a well-established method of pollution control. 

 Like the approach described above, this alternative treats the measures in 

building block 1 – the heat rate improvements at the affected sources – as a component of 

the BSER. This alternative also includes similarities to the approach described above in 

how it evaluates the measures in building blocks 2, 3, and 4. 

Specifically, under this alternative, the amount of reduced generation corresponds 

to the amounts of increased generation available at NGCC units, increased available lowor zero-carbon generation, and available increased demand-side energy efficiency 

(building blocks 2, 3, and 4, respectively). In light of the building blocks, this approach 

also meets the criteria to qualify as the BSER. 

Reduced generation is a “system of emission reduction” because it is an action or 

a set of actions (i.e., limiting the amount of electricity produced) that the affected source 

may take to reduce its emissions. Reducing generation is technically feasible because of 

the source’s ability to limit its own operations; however, it should be emphasized that the 

reduced generation that the EPA proposes as the “system” is in an amount that (i) as 

discussed below, may be substituted with increased generation from low- or zeroemitting sources and increased demand-side energy efficiency, and (ii) as discussed in the 

preamble, may be accomplished in a manner that assures the reliability of the electricity 

grid. [NOTE TO INTERAGENCY REVIEWERS: We intend to add to the preamble 

the explanation for (ii).] 

a. “[S]ystem of emission reduction” 

The phrase “system of emission reduction” may be interpreted to include reduced 

generation in the specified amounts as a matter of Chevron step 1. The phrase applies by 

its terms because reduced generation is an action or a set of actions – which include 

reduced use of generating equipment and 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. The legislative history supports this interpretation. Beginning with the 1970 

CAA Amendments, Congress has recognized that SIPs under CAA §110, in order to 

assure reductions in NAAQS pollutants to meet attainment requirements, may need to 

impose emission limits on industrial sources that those sources could meet only by 

retiring.71 Similarly, in adopting CAA §112, which directed the EPA to promulgate 

 

71 See CAA §110(g) (authorizing temporary emergency suspensions of SIP revisions if needed to prevent 

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

Formatted: Indent: First line: 0"

Formatted: Font: Bold, Italic

Formatted: List Paragraph, Numbered +

Level: 1 + Numbering Style: a, b, c, ... + Start

at: 1 + Alignment: Left + Aligned at: 1.5" +

Indent at: 1.75"

Formatted: Font: Italic
37 

emission standards for sources of hazardous air pollutants (HAPs) to a level of stringency 

that provides an “ample margin of safety to protect the public health,”72 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.”73 As noted 

above, Congress adopted CAA §111(d) to address air pollutants from existing stationary 

sources that were neither NAAQS pollutants nor HAPs, but that EPA might eventually 

regulate as either NAAQS pollutants or HAPs. Because Congress intended that sources 

of NAAQS pollutants and HAPs might have to restrict production or even retire to meet 

their emission limits, it is reasonable to consider that Congress intended the same for 

sources of air pollutants regulated under section 111(d). As a result, it is reasonable to 

interpret the term “system of emission reduction,” which Congress mandated as the basis 

for controls on §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 fossilfuel-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.74 

Similarly, fossil-fuel-fired EGUs have employed reduced generation as one of the 

options to comply with other CAA requirements, including Title IV and CAA §110 SIP 

requirements implementing the Clean Air Interstate Rule (CAIR),75 

Reduction of, or limitation on, production is already a well-established means of 

reducing emissions of pollutants in the electric sector and not merely a theoretical option 

that is unavailable as a practical matter for sources that may have to operate 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 Call76 and the Clean Air Interstate Rule (CAIR).77 

 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 §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). 

72 CAA §112(b)(1)(B), as approved in the 1970 CAA Amendments. 

73 116 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 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. 

74 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/wisconsinpower-cd.pdf [correct cite] 75 70 Fed. Reg. 25,162 (May 12, 2005). 

76 63 Fed. Reg. 57,356 (Oct. 27, 1998). 

77 70 Fed. Reg. 25,162 (May 12, 2005). 

Formatted: Not Highlight

Formatted: Not Highlight
38 

b. “[B]est system of emission reduction ... adequately 

demonstrated” 

Reduced generation from the higher-emitting EGUs in the indicated amounts is 

the “best system of emission reduction ... adequately demonstrated” because it is 

technically feasible due to the source’s ability to limit its own operations; and the amount 

(i) may be substituted with the building block 2, 3, and 4 measures for increased 

generation from low- or zero-emitting sources and increased demand-side energy 

efficiency; and (ii) may be accomplished in a manner that assures the reliability of the 

electricity grid. 

The levels of reduced generation proposed meet the criteria for the “best system 

of emission reduction ...adequately demonstrated.”Specifically, Tthe amount of emission 

reduction they achieved is appropriate, as discussed above. In addition, the cost of the 

proposed levels of reduced generation are reasonable for the affected source category and 

the nation-wide electricity system, and do not jeopardize reliability. Further, reduced 

generation from the higher-emitting EGUs , and do promotes the development and 

implementation of technology that is important for continued emissions reductions by 

increasing the demand for that technology. 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 makes reduced 

utilization a viable approach for emissions reductions by EGUs. 

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

widespread use in the industry. At the levels in the proposal, they have the technical 

capability to substitute for the affected units’ reduced utilization at reasonable cost. 

Moreover, it is reasonable to expect that they will develop at the level requisite to ensure 

an adequate and reliable supply of electricity. There are two reasons for this. First, the 

affected sources themselves could invest in new renewable energy resources and 

demand-side energy efficiency, as discussed above.78 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 above. Second, the affected sources 

themselves could invest in new renewable energy resources and demand-side energy 

efficiency, as also discussed above.79 

 

78It 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 fossilfuel-fired generation by the amount of a specified amount of new renewable resources. This is because 

under these circumstances, the fossil-fuel-fired generators could still reduce their generation without 

causing reliability or other problems in the electric power system. 

79It 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 fossilfuel-fired generation by the amount of a specified amount of new renewable resources. This is because 

Formatted: Indent: First line: 0"

Formatted: List Paragraph, Numbered +

Level: 1 + Numbering Style: a, b, c, ... + Start

at: 1 + Alignment: Left + Aligned at: 1.5" +

Indent at: 1.75"
39 

5. EPA’s discretion in applying the criteria for the best system of 

emission reduction 

[NOTE TO INTERAGENCY REVIEWERS: We moved this subsection to the 

preamble.] 

 

Each of the approaches to determining BSER described above entail applying the 

same criteria described in the D.C. Circuit case law for evaluating BSER. Above and in 

the preamble, we explain why each approach satisfies those criteria. 

 Here, we emphasize that under the case law, the EPA has significant discretion in 

weighing the different criteria, and may weigh them differently in different rulemakings. 

In the present rulemaking, the EPA is heavily weighting two criteria in particular: the 

amount of emissions reduction and the promotion of technology implementation – while 

also noting that the proposed BSER determination readily meets the other criteria as well. 

The EPA considers it especially important in this rulemaking, while ensuring that costs 

are not unreasonable, to achieve a significant amount of emissions reductions in response 

to the urgency and the magnitude of the need to mitigate climate change. The preamble 

discusses this in the sections concerning the scientific background for this rulemaking. 

The EPA also considers it especially important in this rulemaking to promote 

technological innovation and development of, in particular, the measures in building 

blocks 3 and 4 (to reiterate, low- or zero-emitting electric generation and demand-side 

energy efficiency, respectively). Promoting innovation in, and market penetration of, 

these technologies and practices is critical to making the substantial reductions in 

emissions that will be required during the next few decades to reduce the risks of 

dangerous climate change. 

In addition, in this rulemaking, as described in the preamble, the EPA is 

determining the BSER in a manner that is consistent with, and that provides further 

impetus for, current trends in the nation’s electricity system that offer promise to reduce 

the carbon intensity of the system over the near- and long-term, while maintaining 

reliability and affordability. This approach is consistent with the case law, which 

authorizes the EPA to determine 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....”80

67. 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 boilers, and corresponding increases in 

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

 under these circumstances, the fossil-fuel-fired generators could still reduce their generation without 

causing reliability or other problems in the electric power system. 

80 Sierra Club v. Costle, 657 F.2d 298, 331 (D.C. Cir. 1981). 

Formatted: Tab stops: 3.87", Left
40 

generating boilers may reduce, and that NGCC units may increase, up to an average of 

70% capacity utilization of the NGCC units. 

Accordingly, this component of BSER involves two sets of sources. The first (the 

steam generating boilers) decreases its emissions. The second (the lower-emitting NGCC 

units) may increase its 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 boilers 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 

boilers) are subject to reduction requirements through other components of the BSER, 

specifically, building blocks 3 and 4 (low- and zero-emitting energy and demand-side 

energy efficiency, respectively). In addition, as noted in the preamble, the EPA is coproposing to combine the two source categories into a single source category, covering 

fossil-fuel-fired EGUs. 

7. Stakeholder concerns

The EPA is aware that some stakeholders have expressed concern that redispatch, renewable energy, and demand-side energy efficiency measures (building 

blocks 2, 3, and 4) are not authorized under CAA section 111 to be components of the 

BSER because, according to these stakeholders, these measures are implemented outside 

of the affected units and beyond the control of the affected units. However, the provisions 

of section 111 do not by their terms preclude the BSER from including those types of 

measures. In addition, as noted above, under the proposed approach, affected sources 

may themselves implement the measures included in building blocks 2, 3, and 4, so that 

those measures are within their control. Moreover, under the alternative, the “system” of 

emission reduction may be viewed as including reductions in utilization at the affected 

sources themselves. It should also be noted that, as discussed above, the re-dispatch 

measures in building block 2 are limited to affected sources. Thus, the proposed approach 

and alternative described above respond to these stakeholder concerns. 

8. Re-dispatch: 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 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 
41 

regional grid. In particular, we have assumed that each state would increase generation 

of its own NGCC units to as close to an average 70% capacity utilization as possible, 

given the amount of generation from in-state fossil-fuel-fired steam generating boilers, 

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.81 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. 

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-fired boiler 

steam generation. In contrast, based on the region-wide approach, more of the states 

could increase their average NGCC utilization to 70%. In addition, the costs of the intrastate 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 BSER may be applied on the assumption that each state 

would implement that component on a purely intra-state 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. 

VII. State plans – content 

 This section discusses various aspects of the content of state plans. 

A. Emissions performance level – stringency, state flexibilities 

[NOTE TO INTERAGENCY REVIEWERS: We moved this subsection to the 

preamble.] 

 This subsection discusses the obligations and flexibilities that states have in 

determining the emissions performance levels of their CAA section 111(d) state plans. 

 

 

81 It should be noted that we also evaluated region-wide re-dispatch, for which the costs are less. 
42 

As discussed above, the implementing regulations assign to the EPA the 

responsibility for determining the “best system of emission reduction ... adequately 

demonstrated” and applying it to determine the “degree of emission reduction” reflected 

in the “emission guideline[s],” which in this case are the state goals.82 In addition, the 

implementing regulations provide that, in the case of an air pollutant that adversely 

affects human health, the state plans must achieve emissions reductions equivalent to the 

EPA emission guidelines: “[W]here the Administrator has determined that a designated 

pollutant may cause or contribute to endangerment of public health, emission standards 

shall be no less stringent than the corresponding emission guideline(s) ...."83 

In this rulemaking, we are following these implementing regulations.84 As a 

result, each state plan’s emissions performance level must be equivalent to the state goal 

the EPA promulgates for that state, which, as noted above, is based on the EPA’s 

application of the BSER to the affected sources in the state. In the preamble, we request 

comment on the process for a state to provide input into the EPA’s establishment of the 

state’s goal, including the type of showing that the state must make if it believes that the 

EPA’s proposed goal is inconsistent with BSER as applied to the state. These requests 

should not be interpreted as requesting comment on whether the state plan may establish 

an emissions performance level that is less stringent than the EPA-promulgated state 

goal. 

As discussed in the preamble, the state has flexibility as to the form of the 

emissions performance level, for example, whether it is expressed as an emission rate or a 

mass limit, as long as it is equivalent to – that is, as the regulations provide, “no less 

stringent than”85 -- the state goal. 

[NOTE TO INTERAGENCY REVIEWERS: We intend to move the rest of this section 

to the preamble.] 

BA. Types of measures – state flexibilities 

As discussed above, under CAA section 111(a)(1), determining the BSER is part of 

the methodology by which the EPA determines the amount of emissions reduction that 

the state plans must achieve. Under section 111(d)(1), each state plan must include 

standards of performance that achieve its requisite emissions performance level. 

However, the state enjoys broad discretion in determining the standards of performance, 

at least under certain circumstances, as discussed below. Moreover, if a state wishes, it 

may require in its section 111(d) state plan particular measures that sources must 

implement, in order to achieve the reductions necessary for the state to meet its emission 

performance level. These state plan measures are not limited to the measures that the 

EPA identifies as part of the BSER. Similarly, affected sources that are subject to the 

state plan may meet their requirements through any measure they choose, as long as that 

 

82 40 CFR 60.22. 

83 40 CFR 60.24(c). 

84 The EPA is not re-opening these implementing regulations. 

85 Id. 
43 

measure is consistent with the plan’s requirements, and these sources are not limited to 

using measures identified as part of the BSER. 

For example, as the preamble explains, in this rulemaking, the EPA is not 

identifying carbon capture and storage (CCS) as a component of BSER. Even so, a state 

could elect to include in its plan a requirement that a coal-fired EGU achieve an emission 

limit consistent with CCS, or even that the EGU implement CCS. By the same token, if 

the state plan simply imposes an emissions limit on the source, the source could elect to 

achieve that limit through CCS. 

CB. Design, equipment, work practice, or operational standards 

In this section, we discuss whether section 111(d) state plans may include design, 

equipment, work practice, or operational standards. 

CAA section 111(h)(1) authorizes the Administrator to promulgate “a design, 

equipment, work practice, or operational standard, or combination thereof,” if in his or 

her judgment, “it is not feasible to prescribe or enforce a standard of performance.” 

Section 111(h)(2) provides the circumstances under which prescribing or enforcing a 

standard of performance is “not feasible”: Generally, when the pollutant cannot be 

emitted through a conveyance designed to emit or capture the pollutant, or when there is 

no practicable measurement methodology for the particular class of sources. Other 

provisions in section 111(h) further provide that a design, equipment, work practice, or 

operational standard (i) must “be promulgated in the form of a standard of performance 

whenever it becomes feasible” to do so,86 and (ii) must “be treated as a standard of 

performance” for purposes of, in general, the CAA.87

As noted above, section 111(d) requires that state plans “establish[] standards of 

performance” as well as “provide[] for the implementation and enforcement of such 

standards of performance.” Section 111(d) is silent as to whether (i) states may include 

design, equipment, work practice, or operational standards, or (ii) they may include those 

types of standards, but only under the limited circumstances described in section 111(h) 

(i.e., when it is “not feasible” to prescribe or enforce a standard of performance). 

Similarly, section 111(h) applies by its terms when the Administrator is authorized to 

prescribe standards of performance (which would include rulemaking under CAA section 

111(b)), but is silent as to whether it applies to state plans under CAA section 111(d).88

We invite consideration of the proper interpretation of CAA §§111(d) and (h), 

under either Chevron step 1 and step 2, specifically: (i) Do the provisions of section 

111(d) preclude state plans from including “design, equipment, work practice, or 

operational standard[s]” unless those things may be considered “standards of 

performance” or as providing for the implementation and enforcement of such standards? 

 

86 CAA section 111(h)(4). 

87 CAA section 111(h)(5). 

88 It should be noted that section 111(b)(5), which concerns controls promulgated by the Administrator for 

new and modified sources, does refer to section 111(h).
44 

As a related matter, do the references to “standard[s] of performance” in section 111(h) 

indicate that design, equipment, work practice, or operational standards may not be 

considered “standards of performance?” (ii) Alternatively, are state plans authorized to 

include those design, equipment, work practice, or operational standards, but only under 

the limited circumstances described in section 111(h) relating to infeasibility? (iii) As 

another alternative, are state plans authorized to include design, equipment, work 

practice, or operational standards under all circumstances, so that the limits of section 

111(h) do not apply? Finally, to the extent there is legal uncertainty over whether, and 

under what circumstances, state plans may include those standards, should the EPA 

authorize state plans to include them, on the understanding that if the Court invalidates, 

state plans would be required to be revised accordingly without further rulemaking from 

the EPA? 

DC. Emissions averaging and trading 

In this section, we discuss why CAA section 111(d) state plans may include 

standards of performance that authorize emissions averaging and trading. 

Section 111(d) authorizes state plans to include “standards of performance” and 

measures that implement and enforce those standards of performance. 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 ... adequately demonstrated.” Section 302 contains a set of 

definitions that apply “[w]hen used in [the Clean Air Act],” including subsection (l), 

which provides a separate definition of “standard of performance” as “a requirement of 

continuous emission reduction....” 

The EPA proposes that the definition of “standard of performance” is broad 

enough to incorporate emissions averaging and trading provisions, including both 

emissions rate programs, in which sources may average or trade those rates; and mass 

emission limit programs, in which sources may buy and sell mass emission allowances

(and, under certain circumstances, offsets).

89 The term “standard” in the phrase “standard 

for emissions of air pollutants” is not defined in the CAA. As the Supreme Court noted in 

a Clean Air Act case, a “standard” is simply “that which ‘is established by authority, 

custom, or general consent, as a model or example; criterion; test.’” Engine Mfrs. Ass’n v. 

South Coast Air Quality Magmt. Dist., 541 U.S. 246, 252-53 (2004) (quoting Webster’s 

Second International Dictionary, at 2455 (1945)). A tradable emission rate or a tradable 

mass limit is a “standard for emissions of air pollutants” because it establishes an 

emissions limit for a source’s air pollutants, and as a result, qualifies as a “criterion” or 

“test” for those air pollutants. In addition, a tradable rate or mass limit may “reflect[] the 

degree of emission limit achievable through the application of the best system of 

emission reduction” because it may be set at a level that assures that emissions will not 

 

89 Typically, in a mass emission limit trading program, sources are required to obtain an allowance for each 

measure (e.g., ton) of air pollutant they emit. The acid rain program under Title IV of the CAA is an 

example of this type of trading program. 
45 

exceed the amount that would result from application of the best system of emission 

reduction. 

Moreover, although there may be doubt that the definition of “standard of 

performance” in section 302(l) applies to section 111(d) in light of the fact that the 

definition of the same term in section 111(a)(1) is more specific, even if the section 

302(l) definition does apply, an averaging or trading requirement qualifies as a 

“continuous emission reduction” because, in the case of a tradeable emission rate, the rate 

is applicable at all times, and, in the case of a tradeable mass limit, the source is always 

under the obligation that its emissions be covered by allowances. 

 It should be noted that the EPA has promulgated two other section 111(d) 

rulemakings that authorized state plans to include emissions averaging or trading.90

VIII. Ongoing applicability of section 111(d) state plan 

[NOTE TO INTERAGENCY REVIEWERS: We intend to move this section to the 

preamble.] 

The EPA is proposing that an existing source that becomes subject to 

requirements under CAA section 111(d) will continue to be subject to those requirements 

even after it undertakes a modification or reconstruction. Under this interpretation, a 

modified or reconstructed source would be subject to both (1) the section 111(d) 

requirements that it had previously been subject to and (2) the modified source or 

reconstructed source standard being promulgated under 111(b) simultaneously with this 

rulemaking. 

As noted above, a “new source” is defined under section 111(a)(2) as “any 

stationary source, the construction or modification of which is commenced after,” in 

general, a proposed or final section 111(b) rule becomes applicable to that source; and 

under section 111(a)(6), an “existing source” is defined as “any stationary source other 

than a new source.” Under these definitions, an “existing source” that commences 

construction of a modification or reconstruction after the EPA has proposed or finalized a 

section 111(b) standard of performance applicable to it, becomes a “new source.” 

However, section 111(d) is silent on whether requirements imposed under a section 

111(d) plan continue for a source that ceases to be an existing source because it modifies 

or reconstructs. For example, section 111(d) provides that the state plans will “establish[] 

standards of performance for any existing source” but does not say whether, once a 

standard of performance is established for a given source, that standard is lifted if the 

source ceases to be an existing source. Similarly, no other provisions of section 111 

 

90 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) [also known as the Clean Air Mercury 

Rule, or “CAMR”], 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 (Dec. 19, 1995).

Formatted: Indent: First line: 0"

Formatted: Font: Bold, Italic
46 

address whether the imposition of a section 111(b) standard on a modified or 

reconstructed source ends the source’s obligation to meet any applicable section 111(d) 

requirements. 

Because section 111(d) does not address whether an existing source that is subject 

to a 111(d) program remains subject that program even after it modifies or reconstructs, 

the EPA has authority to provide a reasonable interpretation, under the Supreme Court’s 

decision in Chevron U.S.A. Inc. v NRDC, 467 U.S. 837, 842-844 (1984). The EPA’s 

interpretation is that under these circumstances, the source remains subject to the section 

111(d) plan, for two reasons. The first is to assure the integrity of the section 111(d) 

plan. The EPA believes that many States will develop integrated plans that include all of 

their EGUs, such as rate- or mass-based trading programs. Uncertainty about whether 

units would remain in the program could be very disruptive to the operation of the 

program. The second reason is to avoid creating incentives for sources to seek to avoid 

their obligations under a section 111(d) plan by undertaking modifications. The EPA is 

concerned that owners or operators of units might have incentives to modify purely 

because of potential discrepancies in the stringency of the two programs, which would 

undermine the emission reduction goals of section 111(d). The EPA invites comments on 

this interpretation, including whether this interpretation is supported by the statutory text 

and whether this interpretation is sensible policy and will further the goals of the statute. 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

1 

Legal Memorandum for Proposed Carbon Pollution Guidelines for Existing Power 

Plants 

Introduction 

This memorandum provides background for, and further discussion of, legal 

issues raised in the proposed rule, “Carbon Pollution Guidelines for Existing Power 

Plants: Emission Guidelines for Greenhouse Gas Emissions from Existing Stationary 

Sources: Electric Utility Generating Units.” This memorandum is intended to be read in 

conjunction with, and assumes familiarity with, the preamble for this proposed rule. 

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.” 1 EPA has listed more than 60 stationary source 

categories under this provision.2

 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 categories.3

 These standards are known as 

new source standards of performance (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). CAA section 111(d)’s mechanism for 

regulating existing sources differs from the one that CAA section 111(b) provides for 

new sources because section 111(d) 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. 

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 

 

1

 CAA §111(b)(1)(A). 

2 See 40 CFR 60 subparts Cb – OOOO. 3

 CAA §111(b)(1)(B), 111(a)(1). 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

2 

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 appropriate amount of emission reduction, which the 

regulations refer to as the “emissions guideline.”4

 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 not be less stringent that the EPA’s emission guideline.5

 

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.”6

 If a state does not 

submit a plan, the EPA must establish a federal plan for that state.7

 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. In the case of a 

tribe that has one or more affected EGUs on its lands,8 the tribe would have the 

opportunity, but not the obligation, to establish a CO2 performance standard and a plan 

for its tribal lands. 

B. Legislative history 

Congress adopted CAA section 111 in the 1970 Clean Air Act Amendments. At 

that time, Congress defined “standard of performance,” under §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. 

Section 111(d) was added during the 1970 House-Senate Conference Committee 

that was formed to resolve differences between the House and Senate versions of the 

 

4

 40 CFR 60.22(b)(5). 

5

 40 CFR 60.24(c). 

6

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

7 Id. 8

 The EPA is aware of at least three affected sources located in Indian Country located in Indian Country, 

two on [Navajo] lands – the Navajo Generating Station and the Four Corners Generating Station – and one 

on [Ute] lands – the Bonanza Generating Station. All three are coal-fired EGUs. 

Comment [A1]: This text is inconsistent with the 

text on pg. 222 of the Preamble which indicates that 

if a Tribe chooses not to submit a tribal plan or if 

EPA does not approve the tribal plan, then EPA will 

develop a plan for the EGUs on tribal lands.

Comment [A2]: There is no inconsistency. 

Rather, the preamble simply adds another piece of 

information, which is what happens if the tribe does 

not submit a state plan or submits one that can’t be 

approved. 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

3 

CAA Amendments. The legislative history of the 1970 CAA Amendments does not 

contain statements that directly discuss the specific provisions included in section 111(d), 

although the legislative history does discuss, among other things, the meaning of the term 

“standard of performance.”9

 In the 1977 CAA Amendments, Congress made several 

changes to section 111, including section 111(d). Among other things, 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 “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 §111(a)(1) that the standard 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 

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 

 

9 See, e.g., Senate Comm. Rep. No. 91-1196 at 16. 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). 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

4 

when they develop their plans.12 The implementing regulations also establish timetables 

for state and EPA action: states must submit state plans within nine months of the EPA’s 

issuance of the guidelines,13 although the regulations provide the EPA with authority to 

extend the deadlines for those submissions,14 and 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 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). 

D. Case law 

The D.C. Circuit has never had occasion to reviewed a rule promulgated directly 

under 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 term “standard of performance.” These cases are 

discussed below. 

E. Summary of section 111 proposals 

 

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. 

13 40 CFR 60.23(a)(2). 

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

15 40 CFR 60.27(b). 

16 The EPA is not re-opening these regulations, except for certain timetables. 

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 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); Essex Chemical Corp. v. 

Ruckelshaus, 486 F.2d 427, (D.C. Cir. 1973); Portland Cement Ass’n v. EPA, 665 F.3d 177 (D.C. Cir. 

2011). 

Comment [A3]: – Why are we describing this as 

reopening the regulations as opposed to making a 

change in the time-frames in the regulations for this 

specific rule (ie making a subpart specific 

timeframe)? Shouldn’t we argue we are not 

reopening the regulations at all. We are simply 

establishing appropriate time-frames for this rule. 

Comment [A4]: Edits have been made. 

Comment [A5]: What about landfill gas? 

Comment [A6]: Edits have been made.

Comment [A7]: This is an attempt to make this 

easier to understand., but is it still true? The 

sentence, as written, implies that EPA is issuing a 

rule, rather than a rule for guidelines, via this action. 

Comment [A8]: Edits have been made.
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

5 

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 EPA believes that today’s proposed action is authorized by the requirements 

of CAA section 111(d) and is consistent with the implementing regulations. As an initial 

matter, the CAA clearly authorizes the regulation of greenhouse gases (including CO2) 

under section 111. An ambiguity in the provisions of section 111(d)(1)(A)(i) has led 

some stakeholders to argue that the fact that EPA has regulated hazardous air pollutants 

from EGUs prevents EPA from regulating CO2 emissions from EGUs, but to the 

contrary, EPA’s reasonable interpretation of the provision concerning the air pollutants 

covered under section 111(d) authorizes EPA to regulate CO2 emissions from EGUs. 

Moreover, although section 111(d) applies only to sources that, if they were new sources, 

would be covered under a section 111(b) rule, the EPA intends to complete the section 

111(b) rulemakings regulating CO2 from newly constructed EGUs and from modified and 

reconstructed EGUs before finalizing the section 111(d) rule, and either of those 

rulemakings will provide the requisite predicate for this rulemaking. 

A key step in promulgating requirements under CAA section 111(d) is identifying 

the “best system of emission reduction which ... the Administrator determines has been 

adequately demonstrated” (BSER). In promulgating the implementing regulations, the 

EPA explicitly stated that it is required to determine BSER.20 Accordingly, in this 

rulemaking, the EPA is determining the BSER. 

In the preamble, the EPA lays out in detail its proposed determination of BSER, 

which includes a set of measures that constitute a system of emission reduction that has 

been adequately demonstrated by fossil-fuel-fired sources across the country. 

Specifically, the EPA proposes that that the BSER includes measures that can be sorted 

into four building blocks: (1) heat rate improvements, (2) re-dispatch from fossil-fuelfired steam-generating boilers to NGCC units, (3) new low- or zero-emitting generation, 

and (4) demand-side energy efficiency measures. Under the EPA’s proposed approach to 

view these measures as the BSER, the EPA identifies as a component of BSER the heat 

rate improvements in building block 1 that could be made at coal-fired steam generating 

units to reduce their carbon intensity (i.e., to decrease the amount of carbon emitted per 

unit of energy generated). Importantly, the EPA’s approach views the measures in 

 

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

Comment [A9]: Or concomitantly, right? You 

just can’t issue a 111(d) rule before a final 111(b) 

rule?? 

Comment [A10]: This is a reference to what EPA 

plans to do, and EPA’s plan is to complete the 

111(b) new construction rulemaking before the 

111(d) rule. 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

6 

building blocks 2, 3, and 4 in light of the fact that the electricity system is an integrated 

system with fungible products (electricity and electricity services). Under this approach, 

the BSER includes building blocks 2, 3, and 4 because they decrease the demand for 

generation at fossil-fuel-fired EGUs, and thereby reduce emissions from those sources. 

In addition, the EPA is also identifying an alternativebasis, under which , the BSER 

includes limitations in utilization of the fossil-fired EGUs, which reduce mass emissions 

from those EGUs, and building blocks 2, 3, and 4 provide the foundation for applying 

those limitations. In both cases, the EPA reasonably identifies the sets of measures as 

components of BSER based on the factors that the EPA is required to consider and the 

EPA’s authority to weigh those factors. 

As noted above and explained in the preamble and various Technical Support 

Documents,, the measures in each of the building blocks are both technically feasible and 

“adequately demonstrated.” Heat rate improvement measures (identified in building 

block 1) are well-recognized as feasible within the industry. Under the EPA’s approach to 

BSER, the measures that entail dispatch changes from fossil-fuel-fired steam-generating 

EGUs to NGCC units, investments in renewable and nuclear energy, and demand-side 

energy efficiency (measures in building blocks 2, 3 and 4) are each well-established in 

numerous states, and many of them have already been relied on to reduce CO2 and other 

air pollutants from fossil-fuel-fired EGUs. Further, all of the measures achieve an 

important degree of emission reduction. In addition, they are not unreasonably costly, 

including when considered through a nation-wide lens. In addition, and importantly, the 

measures encourage the development and expansion of technology and practices to 

reduce CO2 and are consistent with current trends in the electricity sector. By the same 

token, under the alternative approach to BSER, generation reduction from the fossil-fired 

EGUs is technically feasible and adequately demonstrated because of the characteristics, 

just described, of the measures in building blocks 2, 3, and 4. 

After determining BSER, the EPA is authorized under the implementing 

regulations, as an integral component to setting emission guidelines, to apply the BSER 

to determine the resulting emission limitation. In this rulemaking, the EPA is taking the 

approach of applying the BSER to each state and determining the resulting emission 

limitation – termed, the “state goal” – for each state. The EPA is formulating each state 

goal as an emissions rate. The state goals form the EPA’s emission guidelines. 

 

Once the EPA promulgates the emission guidelines, each state must develop a 

plan that identifies and achieves its emission performance level. The emissions 

performance level must be at least equivalent to (that is, no less stringent than) the state 

goal that the EPA has determined. As a practical matter, this means that the states may 

adopt mass emission limits, instead of rate-based emissions levels. In addition, the state 

plans must establish standards of performance and include measures that implement and 

enforce those measures. 

As the preamble for this rulemaking discusses, based on suggestions from states 

and other stakeholders directing the EPA to consider measures that in some cases are 

established by entities other than EGU owners or operators, the EPA is proposing that 

Comment [A11]: This isn’t true from NG fired 

units under BB2. Please correct. 

Comment [A12]: The statement is literally 

correct. Refining it to distinguish between steam 

boiler EGUs and NGCC units would add a level of 

complexity that is not appropriate for a brief 

summary. 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

7 

states be authorized to submit state plans that do not impose legal responsibility on the 

affected EGUs for the entirety of the emissions performance level. Instead, the proposal 

would allow for compliance plans that impose or entail requirements on other parties 

(which we will refer to as affected entities) – such as renewable energy and demand-side 

energy efficiency measures - that would provide a means or basis for reducing utilization 

of, and therefore CO2 emissions from, the affected EGUs. The preamble for this 

rulemaking notes that a possible basis for this approach is that those requirements on 

other affected entities may be authorized as standards of performance or implementing 

measures. The EPA acknowledges countervailing points of view, but proposes that this is 

an appropriate flexibility and solicits comment. As a result, in the preamble, the EPA 

also solicits comment on whether state plans must impose all of the legal responsibility 

for achieving the emissions performance level on the affected EGUs. 

The preamble further notes that even if that is the case, the state plan could 

nevertheless include the 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 that under the proposed approach. The 

preamble solicits comment on other issues concerning state plans, including whether a 

state may include in its plan an enforceable commitment by the state to assure some 

amount of emissions reduction from the affected sources, but not include the specific 

measures that would achieve that amount of reduction. 

The EPA emphasizes that in developing the state plans, the states have discretion 

as to the form (i.e. mass- or rate-based) of the standards of performance. Moreover, the 

states may require sources to implement specific measures that the EPA did not identify 

as BSER, and may include other approaches such as, for example, emission trading 

programs. 

 

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

 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 varies 

from that in the implementing regulations, and the EPA is revising that provision of the 

implementing regulations accordingly. 

III. Authority to regulate CO2 from EGUs 

A. Authority to regulate CO2

CAA section 111 authorizes EPA to regulate CO2 emissions. The Supreme Court 

has held that greenhouse gases (including CO2) are a pollutant under the CAA. 

Massachusetts. v. EPA.

21 Furthermore, the U.S. Supreme Court’s holding in American 

 

21 549 U.S. 497 (2007). 

Comment [A13]: Is this what you mean? Please 

clarify. 

Comment [A14]: This comment seems to 

confuse the states’ discretion as to the state emission 

performance level (rate- or mass-based) with the 

states’ discretion as to the form of the standards of 

performance, which may take numerous forms. 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

8 

Electric Power Co. v. Connecticut, 131 S. Ct. 2527, 2537-38 (2011), that “the Clean Air 

Act and the EPA actions it authorizes displace any federal common law right to seek 

abatement of carbon-dioxide emissions from fossil-fuel-fired power plants” was premised 

on the Court’s understanding that §111, including §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 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).22 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 CAAA – 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 amendments. In this circumstance, the enacted law signed by the President (as 

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 0in 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. 

Looking solely at this presentation of the text of the Section 112 Exclusion, one 

might conclude that section 111(d) would not cover GHGs because GHGs are emitted 

from EGUs and EGUs are a source category regulated under section 112.23 This 

 

22 Under the U.S. Supreme Court’s 1984 decision in Chevron U.S.A. Inc. v. NRDC, to 

interpret how a statute applies to a particular question, an agency must, at Step 1, 

determine whether Congress’s intent as to the specific question is clear, and, if so, the 

agency must give effect to that intent. If congressional intent is not clear, then the agency, 

at Step 2, has discretion to fashion an interpretation that is a reasonable construction of 

the statute.22 Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-844 (1984). 

23 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 from regulation under Section 

111(d), because it would be difficult to identify any pollutant that is not emitted from at 

Comment [A15]: Consider whether you might

include an expanded discussion of the AEP case at

the close of this section (III.A.).  Readers will know

that no regulatory actions under § 111(d) have been

litigated and thus wonder how it is that the

Supreme Court spoke to this question.  The brief

treatment of AEP at the beginning of this section is

helpful but may not provide sufficient context to

convince a skeptic that the case is on point.

Further, why not provide the relevant quote(s),

rather than a summary here?

Comment [A16]: We appreciate this comment 

but we think that the discussion of AEP explains the 

relevance of section 111 to that case. In addition, the 

level of detail included about the AEP case is 

sufficient. 

Comment [A17]: Consider whether it might

benefit your argument to observe that, under a

plain language reading, the clause in section

111(d)(1)(A)(i) that EPA terms the Section 112

Exclusion is not an exclusion at all.  Section 111(d)(1)

directs the states to establish standards of

performance for any existing source for any air

pollutant “for which air quality criteria have not

been issued or which is not included on a list

published under section 7408(a) of this titled or

emitted from a source category which is regulated

under section 7412” (emphasis added).  Taken

literally, this is a disjunctive list and EPA may

regulate any pollutant that fits within any of the

three categories under § 111(d).  We understand

that EPA has not adopted this reading in the past

and we are not suggesting EPA do so here.  

Nevertheless, it may be helpful to mention this

reading as a way of illustrating that EPA has not

chosen the most expansive reading available to it.

Comment [A18]: We appreciate this comment 

but we do not think it is useful to add this reading 

here. 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

9 

conclusion would be incorrect, however, because the text of section 111(d) as presented 

in the U.S. Code 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 the Congress and signed by the President -- 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 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 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. 

 

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. 

Comment [A19]: The statement that the House

and Senate language “conflict with each other and

thus render the Section 112 Exclusion ambiguous”

would benefit from further development.  Shouldn’t

EPA first attempt to harmonize the two provisions

and then to apply various canons of statutory

construction (i.e. the specific governs the general,

etc.) before concluding that the statute is

ambiguous within the meaning of Chevron?

Comment [A20]: We are considering this 

comment. 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

10 

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. 

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 

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 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

11 

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. 

B. Authority to regulate EGUs 

Before the EPA finalizes this section 111(d) rule, the EPA will finalize a section 

111(b) rulemaking regulating CO2 emissions from new EGUs, which will provide the 

requisite predicate for applicability of section 111(d). 

CAA section 111(d)(1) requires the EPA to promulgate regulations under which 

states must submit state plans regulating “any existing source” of certain pollutants “to 

which a standard of performance would apply if such existing source were a new 

source.”24 A “new source” is “any stationary source, the construction or modification of 

which is commenced after the publication of regulations (or, if earlier, proposed 

regulations) prescribing a standard of performance under [section 111] which will be 

applicable to such source.”25 It should be noted that these provisions make clear that a 

“new source” includes one that undertakes either new construction or a modification. It 

should also be noted that EPA’s implementing regulations define “construction” to 

include “reconstruction,” which the implementing regulations go on to define as the 

replacement of components of an existing facility to an extent that (i) the fixed capital 

cost of the new components exceeds 50 percent of the fixed capital cost that would be 

required to construct a comparable entirely new facility, and (ii) it is technologically and 

economically feasible to meet the applicable standards.26

Under section 111(d)(1), in order for existing sources to become subject to that 

provision, the EPA must promulgate standards of performance under CAA section 111(b) 

to which, if the existing sources were new sources, they would be subject. Those 

standards of performance may include ones for sources that undertake new construction, 

modifications, or reconstructions. 

The EPA is in the process of promulgating two rulemakings under section 111(b) 

for CO2 emissions from affected sources. The EPA proposed the first, which applies to 

affected sources undertaking new constructions, by notice dated January 8, 2014, which 

we refer to as the January 2014 Proposal.27 The EPA is proposing the second, which 

applies to affected sources undertaking modifications or reconstructions, concurrently 

with this section 111(d) proposal. The EPA will complete one or both of these CAA 

section 111(b) rulemakings before or concurrently with this section 111(d) rulemaking, 

which will provide the requisite predicate for applicability of section 111(d).28

 

24 CAA section 111(d)(1). 

25 CAA section 111(a)(2). 

26 40 CFR 60.15(b). The EPA is not re-opening these regulations in this rulemaking. 

27 79 Fed. Reg. 1430. 

28 In the past, EPA has issued standards of performance under section 111(b) and emission guidelines under 

section 111(d) simultaneously. See “Standards of Performance for new Stationary Sources and Guidelines 

for Control of Existing Sources: Municipal Solid Waste Landfills – Final Rule,” 61 Fed. Reg. 9905 (March 

12, 1996). 

Comment [A21]: Or concomitantly, right? 

Comment [A22]: EPA’s plan is finalize the 

111(b) new construction rule first. 

Comment [A23]: Does EPA believe it has

authority under § 111(b) to regulate only

modified/reconstructed sources and not newly

constructed sources in a particular source category?  

If so, that may help support the argument that a

modified source rule, on its own, can serve as a

predicate for regulation under § 111(d).

Comment [A24]: We appreciate this suggestion. 

We think the CAA is clear on its face that regulation 

of either newly constructed sources or modifications 

are an adequate predicate fpr regulation under 

111(d). 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

12 

 

IV. Rational basis, endangerment finding 

 In the course of the January 2014 Proposal for standards of performance for 

GHGs emissions from newly constructed fossil-fuel-fired EGUs,29 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 

§111(b)(1)(A). In that proposal, the EPA stated that it is rational to regulate GHGs from 

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.30 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. Thus, the EPA is not seeking 

comment in this proposal on any issues related to a rational basis or endangerment 

finding.

 

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 

is applying the BSER to each state, and, based on that, determining the amount of 

required emission reduction 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 §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. 

 

29 79 Fed. Reg. 1,430 (Jan. 8, 2014). 

30 See 79 FR at 1,452/3 – 1,456/1. 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

13 

As noted above, the EPA promulgated these implementing regulations 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 these regulations in 

promulgating previous rulemakings under section 111(d).31 In the present rulemaking, 

EPA continues to follow them, except in one instance, in which EPA is revising one of 

the deadlines that the regulations require.32 

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 notice of 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.”33

The regulations go on to describe the contents of the “guideline document” as including, 

among other things, an “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.34

The implementing regulations define the “emission guideline” as – 

 

31 These rulemakings are cited above. 

32 The EPA is not re-opening these regulations, except for the revised deadline. 33 40 CFR 60.22(a). 

34 Id. at 60.22(b). 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

14 

A guideline set forth in subpart C of this part, or in a final guideline 

document published under §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.35

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 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.36

 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 the four building blocks, which are the BSER. 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 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. 

It should be noted that the preamble discusses the EPA’s proposal in this 

rulemaking to adopt state-specific goals based on a single, consistent methodology, rather 

than to adopt nationally uniform emission rates for particular types of affected EGUs. 

The preamble explains that this state-by-state approach ensures that the proposed goals 

reflect opportunities to reduce CO2 emissions by shifting generation among different 

types of EGUs and accounts for the differences among the generating fleets in the various 

states. 

VI. Best system of emission reduction adequately demonstrated

 

35 40 CFR 60.21(e). 

36 Id. at 60.22(c). 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

15 

A. Introduction and Overview 

Under CAA §111(d), the foundation for the standards of performance in the state 

plans is the “best system of emission reduction which ... the Administrator determines 

has been adequately demonstrated” (BSER). In the preamble for the proposed rule, the 

EPA describes the measures that comprise the BSER, which are organized into four 

“building blocks,” and then explains why those building blocks, taken together, meet the 

criteria for the BSER. 

The measures in the four building blocks are described at length in the preamble, 

and may be summarized as follows: 

Building block #1: Lowering the carbon intensity of generation at 

individual affected EGUs (e.g., through heat rate improvements). 

Building block #2: Reducing utilization of, and therefore emissions from, 

the most carbon-intensive affected EGUs to the extent that this can be 

accomplished cost-effectively by shifting to less carbon-intensive existing 

fossil-fuel-fired EGUs, including NGCC units that are under construction. 

Building block #3: Reducing utilization of, and therefore emissions from, 

affected carbon-emitting EGUs to the extent that this can be accomplished 

cost-effectively by expanding the amount of available low- or zerocarbon-intensity generation. 

Building block #4: Reducing utilization of, and therefore emissions from, 

affected carbon-emitting EGUs to the extent that this can be accomplished 

cost-effectively by increasing demand-side energy efficiency. 

 As noted below, the EPA is proposing an approach and an alternative to 

explaining how the building blocks provide the basis of the proposed determination of 

BSER. Both meet the criteria specified in the statute, as summarized next, and both are 

based on the integrated nature of the electricity system, as discussed after that. 

B. General approach for determining the best system of emission reduction 

adequately demonstrated 

 The EPA’s explanation for this BSER proposal begins with the statutory 

definition of a “standard of performance”: 

The term “standard of performance” means 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. 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

16 

CAA section 111(a)(1). 

 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.”37 

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 this CAA provision, including its 

component elements.38 In one of the earliest cases, Essex Chemical Corp. v. Ruckelshaus, 

in 1973, the Court stated that because the standard must be “achievable,” the emission 

limits must be technically feasible, and added that “[a]n adequately demonstrated system 

is one which has been shown to be reasonably reliable, reasonably efficient, and which 

can reasonably be expected to serve the interests of pollution control without becoming 

exorbitantly costly in an economic or environmental way.”39

Under this case law, the EPA determines the BSER based on the following key 

considerations, among others: 

 The system of emission reduction must be technically feasible.40 

 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.41 

 The EPA must also consider that CAA section 111 is designed to promote the 

development and implementation of technology. 

 

37 Oxford Dictionary of English (3rd ed.) (published 2010, online version 2013) 

http://www.oxfordreference.com.mutex.gmu.edu/view/10.1093/acref/9780199571123.001.0001/acref9780199571123 

38 Portland Cement Ass’n v. Ruckelshaus, 486 F.2d 375 (D.C. Cir. 1973); 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). 

39 Essex Chemical Corp. v. Ruckelshaus, 486 F.2d at 427. 40 As noted in the text, the case law may be read to treat technical feasibility as the measure for whether the 

standard of performance is “achievable,” not as a criterion for whether the system of emission reduction is 

the “best system of emission reduction ... adequately demonstrated.” However, for convenience, we may 

refer to technical feasibility as another of the criteria for the BSER. 41 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), 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. 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.

Comment [A25]: We suggest also noting that no

court has opined on the definition of “system.”

Comment [A26]: We think the approach we take 

of using the dictionary definition is adequate and is 

consistent with how the Courts approach interpreting 

a word that is not defined in the statute.

Comment [A27]: Do the cases in FN41 address

the fact that EPA may consider the costs on

different levels (i.e. source‐level, industry‐wide,

nation‐wide)?  If so, we suggest adding language in

the FN to provide support.

Comment [A28]: Edits have been made. 

Comment [A29]: Given that there have been no 

cases on 111(d), why is it reasonable to presume that 

Congress intended 111(d) to also be technology 

forcing? 

Comment [A30]: Edits have been made to 

support this statement.
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

17 

Other considerations are also important, including that 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. 

The EPA discussed the CAA requirements and Court interpretations of the BSER 

at length in the January 2014 Proposal,42 and incorporates by reference that discussion in 

this rulemaking. 

C. Application of the BSER criteria 

1. Introduction and overview

The EPA’s BSER proposal in this rulemaking recognizes, and is based on, both 

the interconnected nature of the electrical generating system, which, among other things, 

means that generation at one EGU can substitute for generation at another, and on the 

global nature of the pollutant at issue. 

As we observe in the preamble, 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. Through this 

interconnected grid, fungible products – electricity and electricity services – are produced 

and delivered by a diverse group of EGUs operating in a coordinated fashion in 

responding to the demand for electricity created by the users of the product. Because the 

electricity grid operates through the interconnection of multiple EGUs and favors leastcost 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. 

Instrumental to the success in meeting these several objectives is the fact that generation 

at one EGU can be substituted for generation at another. This allows operators to utilize 

their least-cost assets primarily, 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 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 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 

facilities, the higher-emitting assets tend to be utilized relatively less, and, as direct result, 

emit less pollution and reduce cost. Most recently, states and companies seeking 

 

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

Comment [A31]: Please explain more clearly 

how these outcomes have been attributed to “the 

grid.” The explanation that follows really seems to 

be an explanation of economic principles – the 

regulation of air pollutants increased the cost of 

generation for some facilities (those that needed to 

install controls had higher costs of production), and 

some lower emitting, lower cost sources bid in below 

them. If you are speaking about the Acid Rain 

program, that wasn’t orchestrated by the grid. 

Comment [A32]: This section has been 

significantly revised. If the commenter continues to 

have these concerns, we’d be glad to discuss.
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

18 

specifically to achieve CO2 emissions reduction objectives have also relied on the shifting 

of generation between and among EGUs that the interconnected nature of the grid allows 

to achieve those emissions reduction objectives, as discussed below. Thus, it is apparent 

that the interconnected nature of the grid has allowed the achievement of objectives 

ranging from assuring a reliable, least-cost supply of electricity to reducing pollution, 

including, in some states, carbon pollution. 

In this rulemaking, the EPA is 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 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 

measures that decrease demand for generation by the affected EGUs, and therefore 

emissions from those EGUs and by substituting generation at higher emitting sources 

through increasing generation at less carbon-intensive EGUs, expanding the amount 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). 

It is also significant that CO2 is a global pollutant, and therefore the location of 

the emissions (or emission reductions) does not affect the environmental consequences of 

an amount of emissions generated at any given source in any one location. 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, EGU mercury emissions have adverse 

health and welfare effects in the locality where they are emitted, and as a result, the 

EPA’s Mercury and Air Toxics Standards (MATS) rulemaking requires reductions at 

each affected EGU, and does not authorize emissions trading.43

Thus, the EPA proposes an approach to determining the “best system of emission 

reduction ... adequately demonstrated” in light of the interconnected nature of the 

electricity generating grid that, in turn, includes several components. The first is building 

block 1, which, as discussed below, entails measures that the affected sources may 

undertake to improve their efficiency. 

In addition, the EPA proposes that the “system” for achieving emissions 

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

substitute generation at higher-emitting EGUs with increases in generation at lower- or 

zero-emitting sources and in end-use efficiency in ways that reduced CO2 emissions at 

fossil-fuel-fired EGUs. For the reasons described below, the EPA proposes that this is the 

 

43 “National Emission Standards for Hazardous Air Pollutants From Coal- and Oil-Fired Electric Utility 

Steam Generating Units and Standards of Performance for Fossil-Fuel-Fired Electric Utility, IndustrialCommercial-Institutional, and Small Industrial-Commercial-Institutional Steam Generating Units – Final 

Rule,” 77 Fed. Reg. 9304 (Feb. 16, 2012). 

Comment [A33]: Where are the specific 

examples? 

Comment [A34]: This section has been 

significantly revised and this point has been 

addressed. 

Comment [A35]: Did EPA ever state this 

explicitly in the rule? Suggest deleting, since saying 

that individual sources have to meet a standard is 

sufficient. 

Comment [A36]: Edits have been made. 

Comment [A37]: Both examples can be

distinguished from the current scenario by express

statutory framework, so it’s an apples‐to‐oranges

comparison regarding EPA’s discretion under

Section 111.   Further, regarding MATS, if EPA did

not expressly state that it set a source‐based

standard based on adverse health and welfare

effects in the locality where Mercury was emitted,

the commenter suggests deleting these sentences.  

The commenter recalls that the tenor of the

benefits and preamble language in MATS spoke to

broader and more indirect justifications.  

Comment [A38]: The Title IV example is valid 

because of the nature of the air pollutant. We have 

replaced the MATS example with another example. 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

19 

“best system of emission reduction ... adequately demonstrated.” In addition, as an 

alternative approach to BSER, the EPA also believes that the “system” may be viewed 

simply as consisting of, in addition to building block 1, reduced utilization of the higheremitting fossil-fuel-fired EGUs, with the measures in building blocks 2, 3, and 4 serving 

to assure reliability and avoid unreasonable costs associated with such reduced 

utilization. As also discussed below, this alternative approach may also be considered the 

“best system of emission reduction ... adequately demonstrated.” 

2. Heat rate improvements 

As discussed in the preamble, under the EPA’s proposed approach to determining 

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 component 

of the BSER. Further elaboration here is not necessary.

3. Components of electricity system 

Under the EPA’s approach to determining BSER, the “system” includes the 

measures in building blocks 2, 3 and 4, in conjunction with the affected fossil-fuel-fired 

steam generating boilers (in the case of building block 2) and the fossil-fuel-fired EGUs 

(in the case of building blocks 3 and 4). These building blocks, taken together, are a 

“system” of emission reduction because of the integrated nature of the electricity system. 

That is, they are “a set of things working together as parts of a mechanism or 

interconnecting network”44 that leads to reductions in demand for (and thus in utilization 

of) higher emitting generation, and that therefore reduces CO2 emissions, from fossilfuel-fired EGUs. Specifically, increased generation from NGCC units substituting for 

generation at higher-emitting EGUs, in accordance with building block 2, reduces overall 

CO2 emissions from fossil-fuel-fired steam generating units, and therefore overall CO2

emissions from fossil-fuel-fired EGUs. In exactly the same way, increased low- or zerocarbon generation, in accordance with building block 3, and decreased overall demand 

for electricity, in accordance with building block 4, reduce CO2 emissions from those 

fossil-fuel-fired EGUs.45

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 loweror 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. 

 

44 Oxford Dictionary of English (3rd ed.) (published 2010, online version 2013) 

http://www.oxfordreference.com.mutex.gmu.edu/view/10.1093/acref/9780199571123.001.0001/acref9780199571123. 

45 Although we describe building blocks 2, 3, and 4 as, together, comprising the “system” of emission 

reduction, each by itself could be considered a “system” of emission reduction, for the reasons noted in the 

accompanying text. 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

20 

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 percent below 1990 levels by 

2050,46 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.47 Similarly, mechanisms have also been put in place regionally that have 

these same impacts: for example, 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. 

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. We believe that the proposed emission guidelines, including the 

temporal 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. 

For the reasons described next, the measures in each of building blocks 2, 3, and 4 

qualify as components of, to reiterate the test of the D.C. Circuit, “[a]n adequately 

demonstrated system” because they 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.”48 In fact, those 

measures do meet all the criteria, as established by the Court in the section 111 case law. 

First, the measures in those building blocks are technically feasible, as described 

in the preamble. To reiterate briefly, building block 2, which entails substituting 

generation at higher emitting units (fossil-fuel-fired steam generating units) by shifting to 

generation at lower-emitting 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-fuel-fired steam generating units. There are several mechanisms 

through which states could cause this 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 could change 

the relative costs of generation for more carbon-intensive and less carbon-intensive 

generating units by imposing a cost on carbon emissions. One way to do so 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 

 

46 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 47 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_scoping_plan.pdf. 48 Essex Chemical Corp. v. Ruckelshaus, 486 F.2d at 427. 

Comment [A39]: The Legal Memorandum

references California’s Global Warming Solutions

Act (AB32) and Regional Greenhouse Gas Initiative

(RGGI) and the market‐based emissions trading

mechanisms. The market‐based mechanisms section

specifically discussed allowance‐based trading and

associated mechanisms. However, both programs

also allow for the utilization of offsets. In addition to

discussing allowances, USDA suggests that EPA

include a comprehensive overview of the use of

offsets for a portion of the compliance

requirements under the programs cited (AB32 and

RGGI). This seems to inadvertently omitted from the

market mechanisms discussion within the Legal

Memorandum.  

For reference, under AB32, “covered entities may

use a limited number of offsets credits to satisfy a

portion of their compliance obligation. Specifically,

covered entities may use offset credits for up to 8

percent of their total compliance obligation for each

compliance period.”  

Under RGGI “CO2 offset allowances may be used to

satisfy a limited portion of a regulated power plant's

compliance obligation. The use of CO2 offset

allowances is constrained to 3.3 percent of a power

plant's  

24  

Comment [A40]: We appreciate this comment. 

We have revised the preamble to refer to offsets. 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

21 

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. In addition, re-dispatch is already widely used (usually more in response 

to fuel price signals than as a GHG mitigation measure), including by companies that 

own both coal- and natural-gas-fired EGUs.

As discussed in the preamble, building block 3, which entails new low- and zeroemitting energy as well as preservation of nuclear capacity that might otherwise be 

retired, is also technically feasible. The technology for renewable energy is wellestablished and in use now, and the amount of renewable energy contemplated by 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. 

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. 

It should be noted, as discussed in the preamble, that because of the integrated 

nature of the electricity system, these measures 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. 

For the reasons discussed in the preamble, building blocks 2, 3, and 4 also meet 

the remaining criteria to qualify as the 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, the proposed levels of reduced generation are not unreasonably 

costly for the affected source category or the nation-wide electricity system, they do not 

have adverse effects on the overall energy system (to the contrary, they improve it by 

reducing its carbon intensity), and they promote the development and implementation of 

technology that is important for continued emissions reductions. 

It should be noted that because the measures in building blocks 2, 3, and 4 have 

the effect of reducing CO2 emissions from fossil-fuel-fired EGUs, each of the building 

blocks is part of a “system” of emission reduction for those EGUs regardless of which 

entities undertake the measures; of course, during the compliance period reductions in 

fact will be taking place at individual EGUs. At the same time, all of the measures in 

building blocks 2, 3, and 4 that are needed to achieve the requisite emissions reductions 

may be undertaken by the affected EGUs themselves. 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 provide substitute generation to replace that avoided at higher-emitting 

Comment [A41]: This is muddled – suggest 

being more clear/expanding on what you mean as it 

relates to the BSER factors. 

Comment [A42]: We think it is clear that this 

point relates to one of the criteria for BSER, noted 

above, which is the amount of emissions reductions 

generated by the system of emission reduction. 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

22 

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. 

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 well-positioned 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 that include re-dispatch 

from higher-emitting fossil-fuel-fired generation to lower-emitting generation, the 

purchase of renewable capacity, and the implementation of demand-side energy 

efficiency measures. 

Other states have de-regulated their electricity markets 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 welldeveloped 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 service 

companies. Moreover, many de-regulated states use forward capacity auctions 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. 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 part of the BSER – and wholly apart from the question of which entities 

should be considered to be responsible for undertaking those measures – 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. Here, while 

EGU owners and operators may effectuate such measures directly or indirectly, the states 

also have authority to enact measures such as re-dispatch requirements, renewable 

portfolio standards that require investment in renewable energy resources, as well as 

demand-side energy efficiency measures. As noted in the preamble, many states have 

already done so. 

Comment [A43]: This section of the TSD argues

that building blocks 2, 3, and 4 are statutorily

eligible for consideration as BSER.  However, in a

few places the reader may be confused whether you

are speaking about the statutory eligibility of these

building blocks for consideration as BSER or whether

in fact these building blocks constitute BSER.  

Specifically, please consider editing the following

passages to make clear you are speaking of

eligibility for consideration as BSER:

P. 22 “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”

P. 22 “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.”

P. 23 “Finally, we note an additional reason

that building blocks 3 and 4 should be

considered to be part of the BSER for fossil‐

fuel‐fired EGUs.”

Comment [A44]: We appreciate this comment. 

We think that the current phrasing is OK. We will 

be glad to discuss this point if the commenter 

wishes. 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

23 

The fact that many states have adopted measures that require increased renewable 

electricity generation and increased end-use energy efficiency further supports the 

conclusion that these emission reduction methods are feasible and offer opportunities for 

significant reductions in emissions that are achievable considering cost. 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.49

Finally, we note an additional reason that building blocks 3 and 4 should be 

considered to be part of the BSER for fossil-fuel-fired EGUs. 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 below, 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 

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.” 

4. Alternate approach 

 

As an alternative to the approach described above for determining the “best 

system of emission reduction ... adequately demonstrated,” the EPA believes the 

“system” may be identified as simply including, in addition to building block 1, the 

reduced utilization of fossil-fuel-fired EGUs, with the measures in building blocks 2, 3, 

and 4 serving as sources of substituting generation or electricity services needed to assure 

that the amount of the reduced utilization from these higher emitting sources will be 

consistent with reliability needs and not be unreasonably costly. 

 Like the approach described above, this alternative treats the measures in 

building block 1 – the heat rate improvements at the affected sources – as a component of 

the BSER. This alternative also includes similarities to the approach described above in 

how it evaluates the measures in building blocks 2, 3, and 4. 

Specifically, under this alternative, the amount of reduced generation corresponds 

to the amounts of increased generation available at NGCC units, increased available lowor zero-carbon generation, and available increased demand-side energy efficiency 

 

49 Database of State Incentives for Renewables & Efficiency (DSIRE), 

http://www.dsireusa.org/summarymaps/index.cfm?ee=0&RE=0. 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

24 

(building blocks 2, 3, and 4, respectively). In light of the building blocks, this approach 

also meets the criteria to qualify as the BSER. 

Reduced generation is a “system of emission reduction” because it is an action or 

a set of actions (i.e., limiting the amount of electricity produced) that the affected source 

may take to reduce its emissions. Reducing generation is technically feasible because of 

the source’s ability to limit its own operations; however, it should be emphasized that the 

reduced generation that the EPA proposes as the “system” is in an amount that (i) as 

discussed below, may be substituted with increased generation from low- or zeroemitting sources and increased demand-side energy efficiency, and (ii) as discussed in the 

preamble, may be accomplished in a manner that assures the reliability of the electricity 

grid. [NOTE TO INTERAGENCY REVIEWERS: We intend to add to the preamble 

the explanation for (ii).] 

Reduction of, or limitation on, production is already a well-established means of 

reducing emissions of pollutants in the electric sector and not merely a theoretical option 

that is unavailable as a practical matter for sources that may have to operate 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 Call50 and the Clean Air Interstate Rule (CAIR).51 

The levels of reduced generation proposed meet the criteria for the “best system 

of emission reduction ...adequately demonstrated.” The amount of emission reduction 

they achieve is appropriate, as discussed above. In addition, the cost of the proposed 

levels of reduced generation are reasonable for the affected source category and the 

nation-wide electricity system, do not jeopardize reliability, and do promote the 

development and implementation of technology that is important for continued emissions 

reductions. 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 makes reduced utilization a viable 

approach for emissions reductions by EGUs. 

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

widespread use in the industry. At the levels in the proposal, they have the technical 

capability to substitute for the affected units’ reduced utilization at reasonable cost. 

Moreover, it is reasonable to expect that they will develop at the level requisite to ensure 

an adequate and reliable supply of electricity. There are two reasons for this. First, 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 discussed above. Second, the 

 

50 63 Fed. Reg. 57,356 (Oct. 27, 1998). 

51 70 Fed. Reg. 25,162 (May 12, 2005). 

Comment [A45]: : In discussing reduced 

utilization, consider whether it might help to 

distinguish between capacity and energy. EGUs 

provide both capacity and energy to the electric 

system and are typically compensated separately for 

the two services. Reduced utilization may cause a 

class of EGUs to provide less energy, but will not 

diminish their value as capacity resources.

Comment [A46]: We appreciate this comment. 

We are considering it. 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

25 

affected sources themselves could invest in new renewable energy resources and 

demand-side energy efficiency, as also discussed above.52 

5. EPA’s discretion in applying the criteria for the best system of 

emission reduction 

 

Each of the approaches to determining BSER described above entail applying the 

same criteria described in the D.C. Circuit case law for evaluating BSER. Above and in 

the preamble, we explain why each approach satisfies those criteria. 

 Here, we emphasize that under the case law, the EPA has significant discretion in 

weighing the different criteria, and may weigh them differently in different rulemakings. 

In the present rulemaking, the EPA is heavily weighting two criteria in particular: the 

amount of emissions reduction and the promotion of technology implementation – while 

also noting that the proposed BSER determination readily meets the other criteria as well. 

The EPA considers it especially important in this rulemaking, while ensuring that costs 

are not unreasonable, to achieve a significant amount of emissions reductions in response 

to the urgency and the magnitude of the need to mitigate climate change. The preamble 

discusses this in the sections concerning the scientific background for this rulemaking. 

The EPA also considers it especially important in this rulemaking to promote 

technological innovation and development of, in particular, the measures in building 

blocks 3 and 4 (to reiterate, low- or zero-emitting electric generation and demand-side 

energy efficiency, respectively). Promoting innovation in, and market penetration of, 

these technologies and practices is critical to making the substantial reductions in 

emissions that will be required during the next few decades to reduce the risks of 

dangerous climate change. 

In addition, in this rulemaking, as described in the preamble, the EPA is 

determining the BSER in a manner that is consistent with, and that provides further 

impetus for, current trends in the nation’s electricity system that offer promise to reduce 

the carbon intensity of the system over the near- and long-term, while maintaining 

reliability and affordability. This approach is consistent with the case law, which 

authorizes the EPA to determine 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....”53

6. Re-dispatch and sources in the regulated source categories. 

 

52It 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 fossilfuel-fired generation by the amount of a specified amount of new renewable resources. This is because 

under these circumstances, the fossil-fuel-fired generators could still reduce their generation without 

causing reliability or other problems in the electric power system. 

53 Sierra Club v. Costle, 657 F.2d 298, 331 (D.C. Cir. 1981). 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

26 

As described in the preamble, building block 2 consists of reductions in 

generation from fossil-fuel-fired steam generating boilers, and corresponding increases in 

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

generating boilers may reduce, and that NGCC units may increase, up to an average of 

70% capacity utilization of the NGCC units. 

Accordingly, this component of BSER involves two sets of sources. The first (the 

steam generating boilers) decreases its emissions. The second (the lower-emitting NGCC 

units) may increase its 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 boilers 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 

boilers) are subject to reduction requirements through other components of the BSER, 

specifically, building blocks 3 and 4 (low- and zero-emitting energy and demand-side 

energy efficiency, respectively). In addition, as noted in the preamble, the EPA is coproposing to combine the two source categories into a single source category, covering 

fossil-fuel-fired EGUs. 

 7. Stakeholder concerns 

The EPA is aware that some stakeholders have expressed concern that redispatch, renewable energy, and demand-side energy efficiency measures (building 

blocks 2, 3, and 4) are not authorized under CAA section 111 to be components of the 

BSER because, according to these stakeholders, these measures are implemented outside 

of the affected units and beyond the control of the affected units. However, the provisions 

of section 111 do not by their terms preclude the BSER from including those types of 

measures. In addition, as noted above, under the proposed approach, affected sources 

may themselves implement the measures included in building blocks 2, 3, and 4, so that 

those measures are within their control. Moreover, under the alternative, the “system” of 

emission reduction may be viewed as including reductions in utilization at the affected 

sources themselves. It should also be noted that, as discussed above, the re-dispatch 

measures in building block 2 are limited to affected sources. Thus, the proposed approach 

and alternative described above respond to these stakeholder concerns. 

8. Re-dispatch: 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 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. 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

27 

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 an average 70% capacity utilization as possible, 

given the amount of generation from in-state fossil-fuel-fired steam generating boilers, 

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.54 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. 

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-fired boiler 

steam generation. In contrast, based on the region-wide approach, more of the states 

could increase their average NGCC utilization to 70%. In addition, the costs of the intrastate 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 BSER may be applied on the assumption that each state 

would implement that component on a purely intra-state 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. 

VII. State plans – content 

 This section discusses various aspects of the content of state plans. 

A. Emissions performance level – stringency, state flexibilities 

 This subsection discusses the obligations and flexibilities that states have in 

determining the emissions performance levels of their CAA section 111(d) state plans. 

 

 

54 It should be noted that we also evaluated region-wide re-dispatch, for which the costs are less. 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

28 

As discussed above, the implementing regulations assign to the EPA the 

responsibility for determining the “best system of emission reduction ... adequately 

demonstrated” and applying it to determine the “degree of emission reduction” reflected 

in the “emission guideline[s],” which in this case are the state goals.55 In addition, the 

implementing regulations provide that, in the case of an air pollutant that adversely 

affects human health, the state plans must achieve emissions reductions equivalent to the 

EPA emission guidelines: “[W]here the Administrator has determined that a designated 

pollutant may cause or contribute to endangerment of public health, emission standards 

shall be no less stringent than the corresponding emission guideline(s) ...."56 

In this rulemaking, we are following these implementing regulations.57 As a 

result, each state plan’s emissions performance level must be equivalent to the state goal 

the EPA promulgates for that state, which, as noted above, is based on the EPA’s 

application of the BSER to the affected sources in the state. In the preamble, we request 

comment on the process for a state to provide input into the EPA’s establishment of the 

state’s goal, including the type of showing that the state must make if it believes that the 

EPA’s proposed goal is inconsistent with BSER as applied to the state. These requests 

should not be interpreted as requesting comment on whether the state plan may establish 

an emissions performance level that is less stringent than the EPA-promulgated state 

goal. 

As discussed in the preamble, the state has flexibility as to the form of the 

emissions performance level, for example, whether it is expressed as an emission rate or a 

mass limit, as long as it is equivalent to – that is, as the regulations provide, “no less 

stringent than”58 -- the state goal. 

B. Types of measures – state flexibilities 

As discussed above, under CAA section 111(a)(1), determining the BSER is part of 

the methodology by which the EPA determines the amount of emissions reduction that 

the state plans must achieve. Under section 111(d)(1), each state plan must include 

standards of performance that achieve its requisite emissions performance level. 

However, the state enjoys broad discretion in determining the standards of performance, 

at least under certain circumstances, as discussed below. Moreover, if a state wishes, it 

may require in its section 111(d) state plan particular measures that sources must 

implement, in order to achieve the reductions necessary for the state to meet its emission 

performance level. These state plan measures are not limited to the measures that the 

EPA identifies as part of the BSER. Similarly, affected sources that are subject to the 

state plan may meet their requirements through any measure they choose, as long as that 

measure is consistent with the plan’s requirements, and these sources are not limited to 

using measures identified as part of the BSER. 

 

55 40 CFR 60.22. 

56 40 CFR 60.24(c). 

57 The EPA is not re-opening these implementing regulations. 

58 Id. 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

29 

For example, as the preamble explains, in this rulemaking, the EPA is not 

identifying carbon capture and storage (CCS) as a component of BSER. Even so, a state 

could elect to include in its plan a requirement that a coal-fired EGU achieve an emission 

limit consistent with CCS, or even that the EGU implement CCS. By the same token, if 

the state plan simply imposes an emissions limit on the source, the source could elect to 

achieve that limit through CCS. 

C. Design, equipment, work practice, or operational standards 

In this section, we discuss whether section 111(d) state plans may include design, 

equipment, work practice, or operational standards. 

CAA section 111(h)(1) authorizes the Administrator to promulgate “a design, 

equipment, work practice, or operational standard, or combination thereof,” if in his or 

her judgment, “it is not feasible to prescribe or enforce a standard of performance.” 

Section 111(h)(2) provides the circumstances under which prescribing or enforcing a 

standard of performance is “not feasible”: Generally, when the pollutant cannot be 

emitted through a conveyance designed to emit or capture the pollutant, or when there is 

no practicable measurement methodology for the particular class of sources. Other 

provisions in section 111(h) further provide that a design, equipment, work practice, or 

operational standard (i) must “be promulgated in the form of a standard of performance 

whenever it becomes feasible” to do so,59 and (ii) must “be treated as a standard of 

performance” for purposes of, in general, the CAA.60

As noted above, section 111(d) requires that state plans “establish[] standards of 

performance” as well as “provide[] for the implementation and enforcement of such 

standards of performance.” Section 111(d) is silent as to whether (i) states may include 

design, equipment, work practice, or operational standards, or (ii) they may include those 

types of standards, but only under the limited circumstances described in section 111(h) 

(i.e., when it is “not feasible” to prescribe or enforce a standard of performance). 

Similarly, section 111(h) applies by its terms when the Administrator is authorized to 

prescribe standards of performance (which would include rulemaking under CAA section 

111(b)), but is silent as to whether it applies to state plans under CAA section 111(d).61

We invite consideration of the proper interpretation of CAA §§111(d) and (h), 

under either Chevron step 1 and step 2, specifically: (i) Do the provisions of section 

111(d) preclude state plans from including “design, equipment, work practice, or 

operational standard[s]” unless those things may be considered “standards of 

performance” or as providing for the implementation and enforcement of such standards? 

As a related matter, do the references to “standard[s] of performance” in section 111(h) 

indicate that design, equipment, work practice, or operational standards may not be 

considered “standards of performance?” (ii) Alternatively, are state plans authorized to 

 

59 CAA section 111(h)(4). 

60 CAA section 111(h)(5). 

61 It should be noted that section 111(b)(5), which concerns controls promulgated by the Administrator for 

new and modified sources, does refer to section 111(h). 
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

30 

include those design, equipment, work practice, or operational standards, but only under 

the limited circumstances described in section 111(h) relating to infeasibility? (iii) As 

another alternative, are state plans authorized to include design, equipment, work 

practice, or operational standards under all circumstances, so that the limits of section 

111(h) do not apply? Finally, to the extent there is legal uncertainty over whether, and 

under what circumstances, state plans may include those standards, should the EPA 

authorize state plans to include them, on the understanding that if the Court invalidates, 

state plans would be required to be revised accordingly without further rulemaking from 

the EPA? 

D. Emissions averaging and trading 

In this section, we discuss why CAA section 111(d) state plans may include 

standards of performance that authorize emissions averaging and trading. 

Section 111(d) authorizes state plans to include “standards of performance” and 

measures that implement and enforce those standards of performance. 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 ... adequately demonstrated.” Section 302 contains a set of 

definitions that apply “[w]hen used in [the Clean Air Act],” including subsection (l), 

which provides a separate definition of “standard of performance” as “a requirement of 

continuous emission reduction....” 

The EPA proposes that the definition of “standard of performance” is broad 

enough to incorporate emissions averaging and trading provisions, including both 

emissions rate programs, in which sources may average or trade those rates; and mass 

emission limit programs, in which sources may buy and sell mass emission allowances.62

The term “standard” in the phrase “standard for emissions of air pollutants” is not defined 

in the CAA. As the Supreme Court noted in a Clean Air Act case, a “standard” is simply 

“that which ‘is established by authority, custom, or general consent, as a model or 

example; criterion; test.’” Engine Mfrs. Ass’n v. South Coast Air Quality Magmt. Dist., 

541 U.S. 246, 252-53 (2004) (quoting Webster’s Second International Dictionary, at 

2455 (1945)). A tradable emission rate or a tradable mass limit is a “standard for 

emissions of air pollutants” because it establishes an emissions limit for a source’s air 

pollutants, and as a result, qualifies as a “criterion” or “test” for those air pollutants. In 

addition, a tradable rate or mass limit may “reflect[] the degree of emission limit 

achievable through the application of the best system of emission reduction” because it 

may be set at a level that assures that emissions will not exceed the amount that would 

result from application of the best system of emission reduction. 

Moreover, although there may be doubt that the definition of “standard of 

performance” in section 302(l) applies to section 111(d) in light of the fact that the 

 

62 Typically, in a mass emission limit trading program, sources are required to obtain an allowance for each 

measure (e.g., ton) of air pollutant they emit. The acid rain program under Title IV of the CAA is an 

example of this type of trading program. 

Comment [A47]: Consider adding “and offsets” 

to the end of the sentence. 

Comment [A48]: Sentence has been edited. 

Comment [A49]: Consider adding “and offsets” 

after “allowance” in the footnote. 

Comment [A50]: We are not aware that offsets 

are “[t]ypically” included in mass emission limit 

trading programs.
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

31 

definition of the same term in section 111(a)(1) is more specific, even if the section 

302(l) definition does apply, an averaging or trading requirement qualifies as a 

“continuous emission reduction” because, in the case of a tradeable emission rate, the rate 

is applicable at all times, and, in the case of a tradeable mass limit, the source is always 

under the obligation that its emissions be covered by allowances. 

 It should be noted that the EPA has promulgated two other section 111(d) 

rulemakings that authorized state plans to include emissions averaging or trading.63

VIII. Ongoing applicability of section 111(d) state plan 

The EPA is proposing that an existing source that becomes subject to 

requirements under CAA section 111(d) will continue to be subject to those requirements 

even after it undertakes a modification or reconstruction. Under this interpretation, a 

modified or reconstructed source would be subject to both (1) the section 111(d) 

requirements that it had previously been subject to and (2) the modified source or 

reconstructed source standard being promulgated under 111(b) simultaneously with this 

rulemaking. 

As noted above, a “new source” is defined under section 111(a)(2) as “any 

stationary source, the construction or modification of which is commenced after,” in 

general, a proposed or final section 111(b) rule becomes applicable to that source; and 

under section 111(a)(6), an “existing source” is defined as “any stationary source other 

than a new source.” Under these definitions, an “existing source” that commences 

construction of a modification or reconstruction after the EPA has proposed or finalized a 

section 111(b) standard of performance applicable to it, becomes a “new source.” 

However, section 111(d) is silent on whether requirements imposed under a section 

111(d) plan continue for a source that ceases to be an existing source because it modifies 

or reconstructs. For example, section 111(d) provides that the state plans will “establish[] 

standards of performance for any existing source” but does not say whether, once a 

standard of performance is established for a given source, that standard is lifted if the 

source ceases to be an existing source. Similarly, no other provisions of section 111 

address whether the imposition of a section 111(b) standard on a modified or 

reconstructed source ends the source’s obligation to meet any applicable section 111(d) 

requirements. 

Because section 111(d) does not address whether an existing source that is subject 

to a 111(d) program remains subject that program even after it modifies or reconstructs, 

the EPA has authority to provide a reasonable interpretation, under the Supreme Court’s 

decision in Chevron U.S.A. Inc. v NRDC, 467 U.S. 837, 842-844 (1984). The EPA’s 

 

63 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) [also known as the Clean Air Mercury 

Rule, or “CAMR”], 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 (Dec. 19, 1995).
INTERAGENCY WORKING COMMENTS ON DRAFT LANGUAGE UNDER EO12866

INTERAGENCY REVIEW. SUBJECT TO FURTHER POLICY REVIEW.

32 

interpretation is that under these circumstances, the source remains subject to the section 

111(d) plan, for two reasons. The first is to assure the integrity of the section 111(d) 

plan. The EPA believes that many States will develop integrated plans that include all of 

their EGUs, such as rate- or mass-based trading programs. Uncertainty about whether 

units would remain in the program could be very disruptive to the operation of the 

program. The second reason is to avoid creating incentives for sources to seek to avoid 

their obligations under a section 111(d) plan by undertaking modifications. The EPA is 

concerned that owners or operators of units might have incentives to modify purely 

because of potential discrepancies in the stringency of the two programs, which would 

undermine the emission reduction goals of section 111(d). The EPA invites comments on 

this interpretation, including whether this interpretation is supported by the statutory text 

and whether this interpretation is sensible policy and will further the goals of the statute.