From: Culligan, Kevin 

Sent: Friday, July 31, 2015 1:53 PM 

To: Frey, Nathan J.; Szabo, Aaron 

Cc: Vasu, Amy; Hoffman, Howard 

Subject: Response to Interagency question 

Nathan, 

The attached responds to the interagency question regarding clarification related to exclusion of 

BB-4. 

- Kevin 

<< V B 3 -revisions_BB2-3 v BB4_07-31-15__11am_clean.docx >> 

<< V B 3 -revisions_BB2-3 v BB4_07-31-15__11am_redline_w-o comments.docx >> 
1 

Draft/V.B.3.-revisions_BB2-3 v BB4_07-31-15__11am_clean 

[Note for reviewers: This piece has revisions to section 

111(d) preamble section V.B.3.a (adds new material), 

V.B.3.b(1) (deletes some paragraphs) and V.B.3.(b)(9) (adds 

new material; adds the paragraphs deleted from 

V.B.3.(b)(1), with edits; and makes additional edits).] 

3. Building blocks 2 and 3 as a “system of emission 

reduction”

a. Overview. As we explain above, the emission performance 

rates that we include in this rule’s emission guidelines 

are achievable by the affected EGUs through the application 

of the BSER, which includes the three building blocks. 

Commenters object that building blocks 2 (generation shift) 

and 3 (renewable energy) cannot, as a legal matter, be 

considered part of the BSER under CAA section 111(d)(1) and 

(a)(1). These commenters explain that in their view, under 

CAA section 111, the emission performance rates must be 

based on, and therefore the BSER must be limited to, 

methods for emissions control that the owner/operator of 

the affected source can integrate into the design or 

operation of the source itself, and cannot be based on 

actions taken beyond the source or actions involving thirdparty entities.1 For these reasons, these commenters argue 

 

1 See, e.g., comments by UARG at 6-7 (“Standards promulgated 

under section 111 must be source-based and reflect measures 

that the source’s owner can integrate into the design or 
2 

that the phrase “system of emission reduction” cannot be 

interpreted to include building blocks 2 and 3. 

We disagree with these comments, and note that other 

commenters were supportive of our determination to include 

building blocks 2 and 3. Under CAA section 111(d)(1) and 

(a)(1), the EPA’s emission guidelines must establish 

achievable emission limits based on the “best system of 

emission reduction ... adequately demonstrated.” While some 

commenters assert that emission guidelines must be limited 

in the manner summarized above, the phrase “system of 

emission reduction,” by its terms and when read in context, 

contains no such limits. To the contrary, its plain meaning 

 

operation of the source itself. A standard cannot be based 

on actions taken beyond the source itself that somehow 

reduce the source’s utilization.”); comments by UARG at 31 

(the building blocks other than building block 1 take a 

“‘beyond-the-source’ approach” and “impermissibly rely on 

measures that go beyond the boundaries of individual 

affected EGUs and that are not within the control of 

individual EGU owners and operators”); comments by UARG at 

33 (the “system” of emission reduction “can refer only to 

reductions resulting from measures that are incorporated 

into the source itself;” section 111 is “designed to 

improve the emissions performance of new and existing 

sources in specific categories based on the application of 

achievable measures implemented in the design or production 

process of the source at reasonable cost.”); comments by 

American Chemistry Council et al. (“Associations”) at 60-61 

(EPA’s proposed BSER analysis is unlawful because it “looks 

beyond the fence line of the fossil fuel-fired EGUs that 

are the subject of this rulemaking;” “the standard of 

performance must ... be limited to the types of actions 

that can be implemented directly by an existing source 

within [the appropriate] class or category.”). 
3 

is deliberately broad and is capacious enough to include 

actions taken by the owner/operator of a stationary source 

designed to reduce emissions from that affected source, 

including actions that may occur off-site and actions that 

a third party takes pursuant to a commercial relationship 

with the owner/operator, so long as those actions enable 

the affected source to achieve its emission limitation. 

Such actions include the measures in building blocks 2 and 

3, which, when implemented by an affected source, enable 

the source to achieve their emission limits because of the 

unique characteristics of the utility power sector. For 

purposes of this rule, we consider a “system of emission 

reduction” -- as defined under CAA section 111(a)(1) and 

applied under CAA section 111(d)(1) -– to encompass a broad 

range of pollution-reduction actions, which includes the 

measures in building blocks 2 and 3. Furthermore, the 

measures in building blocks 2 and 3 fall squarely within 

EPA’s historical interpretation of section 111, pursuant to 

which the focus for the BSER has been on how to most 

cleanly produce a good, not on how much of the good should 

be produced. 

Our interpretation that a “system of emission 

reduction” is broad enough to include the measures in 

building blocks 2 and 3 is supported by the following: our 
4 

interpretation of the phrase “system of emission reduction” 

is consistent with its plain meaning and statutory context; 

our interpretation accommodates the very design of CAA 

section 111(d)(1), which covers a range of source 

categories and air pollutants;2 our interpretation is 

supported by the legislative history of CAA section 

111(d)(1) and (a)(1), which indicates Congress’s intent to 

give the EPA broad discretion in determining the basis for 

CAA section 111 control requirements, particularly for 

existing sources, and Congress’s intent to authorize the 

EPA to consider measures that could be carried out by 

parties other than the affected sources; and our 

interpretation is reasonable in light of comparisons to CAA 

provisions that give the EPA similar authority to consider 

such measures and to CAA provisions that would preclude the 

EPA from considering such measures. 

In addition to the reasons stated above, the EPA's 

interpretation is also reasonable for the following 

reasons: (i) Building blocks 2 and 3 fit well within the 

structure and economics of the utility power sector. (ii) 

 

2 Because it is designed to apply to a range of air 

pollutants not regulated under other provisions, CAA 

section 111(d) may be described as a “catch-all” or “gapfiller.” As such, a “system of emission reduction” as 

applied under CAA section 111(d) should be interpreted 

flexibly to accommodate this role. 
5 

Fossil fuel-fired EGUs are already implementing the 

measures in these building blocks for various reasons, 

including for purposes of reducing CO2 emissions. (iii) 

Interpreting the phrase “system of emission reduction” to 

incorporate building blocks 2 and 3 is consistent with (a) 

other provisions in the CAA, including the acid rain 

provisions in Title IV and the SIP provisions in CAA 

section 110, along with the EPA’s regulations implementing 

the CAA SIP requirements concerning interstate transport 

and regional haze, each of which is based on at least some 

of the same measures included in building blocks 2 and 3; 

(b) prior EPA action under CAA section 111(d), including 

the 2005 Clean Air Mercury Rule,3 which is based on some of 

the same measures in building blocks 2 and 3; (c) the 

various provisions of the CAA that authorize emissions 

trading, because emissions trading entails a source meeting 

its emission limitation based on the actions of another 

entity; and (d) the pollution prevention provisions of the 

CAA, which make clear that a primary goal of the CAA is to 

encourage federal and state actions that reduce or 

eliminate, through any measures, the amount of pollution 

 

3 This rule was vacated by the D.C. Circuit on other 

grounds. New Jersey v. EPA, 517 F.3d 574, 583-84 (D.C. Cir. 

2008), cert. denied sub nom. Util. Air Reg. Group v. New 

Jersey, 555 U.S. 1169 (2009). 
6 

produced at the source.4 (iv) Lastly, interpreting the 

phrase “system of emission reduction” to authorize the EPA, 

in formulating its BSER determination, to weigh a broad 

range of emission-reducing measures that includes building 

blocks 2 and 3 is consistent with Congress’s intent to 

address urgent environmental problems and to protect public 

health and welfare against risks, as well as Congress’s 

expectation that American industry would be able to develop 

the innovative solutions necessary to protect public health 

and welfare. 

Congress passed the CAA, including its several 

amendments, to protect public health and welfare from 

“mounting dangers,” including “injury to agricultural crops 

and livestock, damage to and the deterioration of property, 

and hazards to air and ground transportation.”5 In doing so, 

Congress established numerous programs to address air 

pollution problems and provided the EPA with guidance and 

flexibility in carrying out many of those programs. In the 

context of this industry and this pollutant it is 

reasonable to reject the narrow interpretation urged by 

 

4 As noted in the Legal Memorandum, in several of these 

rulemakings and in the course of litigation, the fossil 

fuel-fired electric power sector has taken positions that 

are consistent with the EPA’s interpretation that the BSER 

may include building blocks 2 and 3.

5 CAA section 101(a)(2). 
7 

some commenters that the “system of emission reduction” 

applicable to the affected EGUs must be limited to only 

those measures that can be integrated into the design or 

operation of the source itself. The plain language of the 

statute does not support such an interpretation, and to 

adopt it would limit the “system of emission reduction” to 

measures that are either substantially more expensive or 

substantially less effective at reducing emissions than the 

measures in building blocks 2 and 3, notwithstanding the 

absence of any statutory language imposing such a limit. 

Such a result would be contrary to the goals of the CAA and 

would ignore the facts that sources in the electric 

generation industry routinely address planning and 

operating objectives on a broad, multi-source basis using 

the measures in building blocks 2 and 3 and would seek to 

use building blocks 2 and 3 (as well as non-BSER measures) 

to comply with whatever emission standards are set as a 

result of this rule. Indeed, as already observed, building 

blocks 2 and 3 are already being used to reduce emissions, 

and to do so specifically by operation of the industry’s 

inherent multi-source functions. 

 Although the BSER provisions are sufficiently broad to 

include, for affected EGUs, the measures in building blocks 

2 and 3, they also incorporate significant constraints on 
8 

the types of measures that may be included in the BSER. We 

discuss those constraints at the end of this section. They 

include the section 111(d)(1) and (a)(1) requirements that 

emission reductions occur from the affected sources; that 

the emission performance standards for which the BSER forms 

the basis be achievable; that the system of emission 

reduction be adequately demonstrated; and that the EPA 

account for cost, non-air quality impacts, and energy 

requirements in determining the “best” system of emission 

reduction that is adequately demonstrated. These 

constraints do not preclude building blocks 2 and 3 from 

the BSER. In interpreting these statutory constraints, in 

determining the BSER, the EPA is mindful of past practice 

and current policy for section 111 regulatory 

requirements, as well as regulatory requirements under 

other CAA provisions for the electric power sector, under 

which the EPA generally bases regulatory requirements on 

controls and measures designed to reduce air pollutants 

from the production process without constraining the 

aggregate amount of production. While inclusion of building 

blocks 2 and 3 is consistent with our interpretation, 

inclusion of building block 4 is not, and for that reason, 

we are declining to include building block in the BSER. 

Finally, we briefly note additional constraints that focus 
9 

the BSER for new sources under section 111(b) on controls 

that assure that sources are well-controlled at the the 

time of construction. 

b. System of emission reduction as a broad range of 

measures. 

(1) Plain meaning and context of “system of emission 

reduction.” 

 The phrase “system of emission reduction” appears in 

the definition of a “standard of performance” under CAA 

section 111(a)(1). That definition reads: 

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. 

Pursuant to this definition, it is clear that a “system of 

emission reduction” serves as the basis for emission limits 

embodied by CAA section 111 standards. For this reason, 

emission limits must be “achievable” through the 

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

“adequately demonstrated.” Under CAA section 111(d)(1), 

such a limit is established for “any existing source,” 

which is defined as any existing “building, structure, 
10 

facility, or installation which emits or may emit any air 

pollutant.”6 

Although a “system of emission reduction” lays the 

groundwork for CAA section 111 standards, the term “system” 

is not defined in the CAA. As a result, we look first to 

its ordinary meaning. 

Abstractly, the term “system” means a set of things or 

parts forming a complex whole; a set of principles or 

procedures according to which something is done; an 

organized scheme or method; and a group of interacting, 

interrelated, or interdependent elements.7 As a phrase, 

“system of emission reduction” takes a broad meaning to 

 

6 See CAA section 111(d)(1) (applying a standard of 

performance to any existing source); (a)(6) (defining the 

term “existing source” as any stationary source other than 

a new source); and (a)(3) (defining the term “stationary 

source” as “any building, structure, facility, or 

installation which emits or may emit any air pollutant,” 

however, explaining that “[n]othing in subchapter II [i.e., 

Title II] of this chapter relating to nonroad engines shall 

be construed to apply to stationary internal combustion 

engines.”) 

7 Oxford Dictionary of English (3rd ed.) (2010), available 

at

http://www.oxforddictionaries.com/us/definition/american_en

glish/system; see also American Heritage Dictionary (5th 

ed.) (2013), available at 

http://www.yourdictionary.com/system#americanheritage; and 

The American College Dictionary (C.L. Barnhart, ed. 1970) 

(“an assemblage or combination of things or parts forming a 

complex or unitary whole”).
11 

serve a singular purpose: it is a set of measures that work 

together to reduce emissions. 

 When read in context, the phrase “system of emission 

reduction” carries important limitations: because the 

“degree of emission limitation” must be “achievable through 

the application of the best system of emission reduction,” 

(emphasis added), the “system of emission reduction” must 

be limited to a set of measures that work together to 

reduce emissions and that are implementable by the sources 

themselves. 

As a practical matter, the “source” includes the 

“owner or operator” of any building, structure, facility, 

or installation for which a standard of performance is 

applicable. For instance, under CAA section 111(e), it is 

the “owner or operator” of a source who is prohibited from 

operating “in violation of any standard of performance 

applicable to such source.”8

Thus, a “system of emission reduction” for purposes of 

CAA section 111(d) means a set of measures that source 

 

8 While this section provides for enforcement in the context 

of new sources, a CAA section 111(d) plan must provide for 

the enforcement of a standard of performance for existing 

sources. 
12 

owners or operators can implement to achieve an emission 

limitation applicable to their existing source.9 

In contrast, a “system of emission reduction” does not 

include actions that only a state or other governmental 

entity could take that would have the effect of reducing 

emissions from the source category, and that are beyond the 

ability of the affected sources’ owners/operators to take 

or control. Additionally, actions that a source owner or 

operator could take that would not have the effect of 

reducing emissions from the source category, such as 

purchasing offsets, would also not qualify as a “system of 

emission reduction.” 

Building blocks 2 and 3 each fall within the meaning 

of a “system of emission reduction” because they consist of 

measures that the owners/operators of the affected EGUs can 

implement to achieve their emission limits. In doing so, 

the affected EGUs will achieve the overall emission 

reductions the EPA identifies in this rule. We describe 

these building block 2 and 3 measures in detail elsewhere 

 

9 Some commenters read the proposed rulemaking as taking the 

position that the phrase “system of emission reduction” 

includes anything whatsoever that reduces emissions, and 

criticized that interpretation as too broad. See UARG 

comment, at 3-4. We are not taking that interpretation 

here. In this final rule, we agree that the phrase should 

be limited to exclude, inter alia, actions beyond the 

ability of the owners/operators to control. 
13 

in this rule, including the specific actions that 

owners/operators of affected EGUs can take to implement the 

measures. 

It should be noted that defining the scope of a 

“system of emission reduction” is not the end of our 

inquiry under CAA section 111(a)(1); rather, as noted 

above, a standard of performance must reflect the 

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

adequately demonstrated.” (Emphasis added.) Thus, in 

determining the BSER, the Administrator must first 

determine whether the available systems of emission 

reduction are “adequately demonstrated,” based on the 

criteria, described above, set out by Congress in the 

legislative history and the D.C. Circuit in case law. After 

identifying the “adequately demonstrated” systems of 

emission reduction, the Administrator then selects the 

“best” of these, based on several factors, including amount 

of emission reduction, cost, non-air quality health and 

environmental impact and energy requirements. Only after 

the Administrator weighs all of these considerations can 

she determine the BSER and, based on that, establish a 

standard of performance under CAA section 111(b) or an 

emission guideline under CAA section 111(d). 

Commented [HH1]: Moved to the end, and edited 
14 

For purposes of this final rule, it is not necessary 

to enumerate all of the types of measures that do or do not 

constitute a “system of emission reduction.” What is 

relevant is that building blocks 2 and 3 each qualify as 

part of the “system of emission reduction.” As noted, they 

focus on supply-side activities and they each constitute 

measures that the affected EGUs can implement that will 

allow those EGUs to achieve the degree of emission 

limitation that the EPA has identified based on those 

building blocks. Further, these building blocks also 

satisfy the other statutory criteria enumerated in CAA 

section 111(a)(1). 

* * * * 

(9) Constraints on the BSER – Treatment of building 

block 4 and response to comments concerning precedent 

Although the BSER provisions are sufficiently broad to 

include, for affected EGUs, the measures in building blocks 

2 and 3, they also incorporate significant constraints on 

the types of measures that may be included in the BSER. We 

discuss those constraints in this section. These constaints 

explain why we are not including building block 4 in the 

BSER. In addition, these constraints explain why our 

reliance on building blocks 2 and 3 will have limited 

Commented [HH2]: We are not proposing to revise sections (2) 

– (8) of this section V.B.3(b), and so we are not including them in 

this excerpt 
15 

precedential effect for other rulemakings, and serve as our 

basis for responding to commenters who expressed concern 

that reliance on building blocks 2 and 3 would set a 

precedent for the EPA to rely on similar measures in 

promulgating future air pollution controls for other 

sectors.10

As discussed above, the emission limits in the CAA 

section 111(d) emission guidelines that this rule 

promulgates are based on the EPA’s determination, for the 

affected EGUs, of the “system of emission reduction” that 

is the “best,” taking into account “cost” and other 

factors, and that is “adequately demonstrated.” Those 

components include certain interpretations and applications 

and provide constraints on the types of measures or 

controls that the EPA may determine to the BSER. 

(i) Emission reductions from affected sources 

The first constraint is that the BSER must assure 

emission reductions from the affected sources. Under 

section 111(d)(1), the states must submit state plans that 

“establish[] standards of performance for any existing 

source,” and, under section 111(a)(1) and the EPA’s 

implementing regulations, those standards are informed by 

 

10 Commenters offered hypothetical examples to illustrate 

their concerns over precedential effects, discussed below. 
16 

the EPA’s determination of the best system of emission 

reduction adequately demonstrated. Because the emission 

standards must apply to the affected sources, actions taken 

by affected sources that do not result in emission 

reductions from the affected sources, –- for example, 

offsets (e.g., the planting of forests to sequester CO2) –- 

do not qualify for inclusion in the BSER. Building blocks 2 

and 3 achieve emission reductions from the affected EGUs, 

and thus are not precluded under this constraint. 

(ii) Controls or measures that affected EGUs can 

implement 

The second constraint is that because the affected 

EGUs must be able to achieve their emission performance 

rates through the application of the BSER, the BSER must be 

controls or measures that the EGUs themselves can 

implement. Moreover, as noted, the D.C. Circuit has 

established criteria for achievability in the section 

111(b) caselaw, e.g., sources must be able to achieve their 

standards under a range of circumstances. If those criteria 

are applicable in a section 111(d) rule, the BSER must be 

of a type that allows sources to meet those achievability 

criteria. As noted, under this rule, affected EGUs may 

achieve their emission performance rates in the various 
17 

circumstances under which they operate, through the 

application of the building blocks. 

(iii) “Adequately demonstrated” 

The third constraint is that the system of emission 

reduction that the EPA determines to the best must be 

“adequately demonstrated.” To qualify as the BSER, controls 

and measures must align with the nature of the regulated 

industry and the nature of the pollutant so that 

implementation of those controls or measures will result in 

emission reductions from the industry and allow the sources 

to achieve their emission performance standards. The 

history of the effectiveness of the controls or other 

measures, or other indications of their effectiveness, are 

important in determining whether they are adequately 

demonstrated. 

More specifically, the application of building blocks 

2 and 3 to affected EGUs has a number of unique 

characteristics. Building blocks 2 and 3 entail the 

production of the same amount of the same product -- 

electricity, a fungible product that can be produced using 

a variety of highly substitutable generation processes -- 

through the cleaner (that is, less CO2-intensive) processes 

of shifting dispatch from steam generators to existing NGCC 
18 

units, and from both steam generators and NGCC units to 

renewable generators. 

The physical properties of electricity and the highly 

integrated nature of the electricity system allow the use 

of these cleaner processes to generate the same amount of 

electricity. In addition, the electricity sector is 

primarily domestic -- little electricity is exported 

outside the U.S. -- and there is low capacity for storage. 

In addition, the electricity sector is highly regulated, 

planned, and coordinated. As a result, holding demand 

constant, an increase in one type of generation will result 

in a decrease in another type of generation. Moreover, the 

higher-emitting generators, which are fossil fuel-fired, 

have higher variable costs than renewable generators, so 

that increased renewable generation will generally back out 

fossil fuel-fired generation. 

Because of these characteristics, the electricity 

sector has a long and well-established history of 

substituting one type of generation for another. This has 

occurred for a wide variety of reasons, many of which are 

directly related to the system’s primary purposes and 

functions, as well as for environmental reasons. As a 

result, at present, there is a well-established network of 

business and operational relationships and past practices 
19 

that supports building blocks 2 and 3. As noted elsewhere, 

a large segment of steam generators already have business 

relationships with existing NGCC units, and a large segment 

of all fossil fuel-fired EGUs already own, co-own, or have 

invested in renewable energy. 

Many of these characteristics are unique to the 

utility power sector. Moreover, this complex of 

characteristics, ranging from the physical properties of 

electricity and the integrated nature of the grid to the 

institutional mechanisms that assure reliability and the 

existing practices and business relationships in the 

industry, combine to facilitate the implementation of 

building blocks 2 and 3 in a uniquely efficient manner. 

This supports basing the emission limits on the ability of 

owners and operators of fossil fuel-fired EGUs to replace 

their generation with cleaner generation in other 

locations, sometimes owned by other entities. 

As noted above, commenters offered hypothetical 

examples to illustrate their concerns over precedential 

effects. Most of their concerns focused on building block 

4, and most of their hypothetical examples concerned 

reductions in demand for various types of products. These 

concerns are mooted because we are not finalizing building 

block 4. Some commenters offered hypothetical examples for 

Commented [HH3]: Most of this paragraph moved here from 

above 
20 

building blocks 2 and 3 as well. For example, some 

commenters asserted that the EPA could “develop standards 

of performance for tailpipe emissions from motor vehicles” 

by “requiring car owners to shift some of their travel to 

buses,” which the commenters considered analogous to 

building block 2; “or by requiring there to be more 

electric vehicle purchases,” which the commenters 

considered analogous to building block 3.11

Commenters’ concerns over precedential impact cannot 

be taken to mean that the building blocks should not be 

considered to meet the requirements of the BSER or that the 

affected EGUs cannot be considered to meet the emission 

limits by implementing those measures. Moreover, because 

many of these individual characteristics, and their 

inherent complexity, are unique to the utility power 

sector, building blocks 2 and 3 as applied to fossil fuelfired EGUs will have a limited precedent for other 

industries and other types of rulemakings. For example, the 

commenter’s hypothetical examples noted above are 

inapposite for several reasons. The hypotheticals appear to 

be premised on government action mandating actions not 

implementable by emitting sources (e.g., that a government 

 

11 UARG comment at 2-3.
21 

would “require[e] car owners to shift some of their travel 

to buses, or ... require[e] there to be more electric 

vehicle purchases”), whereas the measures in building 

blocks 2 and 3 can be implemented by the affected EGUs. Nor 

have commenters attempted to address how car owners 

shifting travel to buses or purchasing more electric 

vehicles could be translated into lower tailpipe standards 

for motor vehicles..12

(iv) “Best” in light of “cost ... non-air quality 

health and environmental impact and energy 

requirements” and EPA’s past practice and 

current policy 

The fourth constraint, or set of constraints, is that 

the system of emission reduction must be the “best,” 

“taking into account the cost of achieving such reduction, 

non-air quality health and environmental impact and energy 

requirements.” As noted, in light of the D.C. Circuit 

caselaw, the EPA has considered cost and energy factors on 

both an individual source basis and on the basis of the 

nationwide electricity sector. In determining what is 

 

12 In any event, it is questionable whether measures such as 

those hypothesized by the commenters would be consistent 

with the provisions of Title II. 
22 

“best,” the EPA has broad discretion to balance the 

enumerated factors.13 

In interpreting and applying these provisions in this 

rulemaking to regulate CO2 emissions from affected EGUs 

under section 111(d), we remain mindful of our past 

practice and current policy for interpreting and applying 

these provisions in previous section 111 rulemakings and 

for regulating air pollutants from the electricity sector 

under other provisions of the CAA. 

The great majority of our regulations under section 

111 have been 111(b) regulations for new sources. As 

discussed in the Legal Memorandum and briefly below, the 

BSER under section 111(b) is designed to assure that 

affected sources are well controlled at the time of 

construction, and that approach is consistent with the 

design expressed in the legislative history for the 1970 

CAA Amendments that enacted the provision. 

Ttraditionally, CAA section 111 standards have been 

rate-based, allowing as much overall production of a 

particular good as is desired, provided that it is produced 

through an appropriately clean (or low-emitting) process. 

CAA section 111 performance standards have primarily 

 

13 See Lignite Energy Council v. EPA, 198 F.3d 930, 933 

(D.C. Cir. 1999). 

Commented [HH4]: This paragraph is moved here from above 
23 

targeted the means of production in an industry and not 

consumers’ demand for the product. Thus, the focus for the 

BSER has been on how to most cleanly produce a good, not on 

limiting how much of the good can be produced. 

One example of the focus under section 111 on clean 

production, not limitation of product is provided by the 

revised new source performance standards for electric 

utility steam generating units that we promulgated in 1979 

following the 1977 CAA Amendments to limit emissions of 

SO2, particulate matter, and NOx. In relevant part, the 

revised standards limited SO2 emissions to 1.20 lb/million 

BTU heat input and imposed a 90 percent reduction in 

potential SO2 emissions. This was based on the application 

of flue gas desulfurization (FGD) together with coal 

preparation techniques. In the preamble, we explain that 

“[t]he intent of the final standards is to encourage power 

plant owners and operators to install the best available 

FGD systems and to implement effective operation and 

maintenance procedures but not to create power supply 
24 

disruptions.”14 15 EPA has taken the same overall approach in 

its section 111(d) rules,16 including the CAMR rule noted 

below. 

 

14 See, e.g., 44 F.R. 33580, at 33599 (June 11, 1979). In 

this rulemaking, the EPA recognized the ability of the 

integrated grid to minimize power disruptions: “When 

electric load is shifted from a new steam-electric 

generating unit to another electric generating unit, there 

would be no net change in reserves within the power system. 

Thus, the emergency condition provisions prevent a failed 

FGD system from impacting upon the utility company’s 

ability to generate electric power and prevents an impact 

upon reserves needed by the power system to maintain 

reliable electric service.” Id. 15 The EPA’s 1982 revised new source performance standards 

for certain stationary gas turbines provide another example 

of a rulemaking that focused controls on reducing 

emissions, as well as reliance on the integrated grid to 

avoid power disruptions. 44 F.R. 33580 (June 11, 1979). In 

response to comments that requested a NOx emission limit 

exemption for base load utility gas turbines, the EPA 

explained that “for utility turbines ... since other 

electric generators on the grid can restore lost capacity 

caused by turbine down time” the NOx emission limit of 1150 

ppm for such turbines would not be rescinded. 44 F.R. 

33580, at 33597-98.

16 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).
25 

Similarly, in a series of rulemakings regulating air 

pollutants from EGUs under several provisions of the CAA, 

we have focused our efforts on assuring that electricity is 

generated through cleaner or lower-emitting processes, and 

we have not sought to limit the aggregate amount of 

electricity that is generated. We describe those rules in 

section II., elsewhere in this section V.B.3., and in the 

Legal Memorandum. 

For example, as discussed in the Legal Memorandum, in 

the three transport rules promulgated under CAA section 

110(a)(2)(D)(i)(I) – the NOx SIP Call, CAIR, and CSAPR – 

which regulated precursors to ozone-smog and particulate 

matter, the EPA based certain aspects of the regulatory 

requirements on the fact that fossil fuel-fired EGUs could 

shift generation to lower-emitting sources. In CAMR, the 

2005 rulemaking under section 111(d) regulating mercury 

emissions from coal-fired EGUs, the EPA based the first 

phase of control requirements on the actions the affected 

EGUs were required to take under CAIR, including shifting 

generation to lower-emitting sources. In addition, as also 

discussed in the Legal Memorandum, in the EPA’s 2012 MATS 

rule regulating mercury from coal-fired EGUs under section 

112, at industry’s urging, the EPA allowed compliance 

deadlines to be extended for coal-fired EGUs that desired 
26 

to substitute replacement power of any type, including 

NGCC units or renewable energy, for compliance purposes. 

While these and other rulemakings for fossil fuelfired EGUs took different approaches towards lower-emitting 

generation and renewable generation, they all were based on 

control measures that reduced emissions without reducing 

aggregate levels of electricity generation. It should be 

noted that even though some of those rules established 

overall emission limits in the form of budgets implemented 

through a cap-and-trade program, the EPA recognized that 

the fossil fuel-fired EGUs that were subject to the rules 

could comply by shifting generation to lower-emitting EGUs, 

including relying on renewable energy. In this manner, the 

rules limited emissions but on the basis that the industry 

could implement lower-emitting processes, and not 

reductions in overall generation. 

We are applying the same approach to this rulemaking. 

Our basis for this rulemaking is that affected EGUs can 

implement a system of emission reduction that will reduce 

the amount of their emissions without reducing overall 

electricity generation. This approach takes into account 

costs by minimizing economic disruption as well as the 

nation’s energy requirements by avoiding the need for 

environmental-based reductions in the aggregate amount of 
27 

electricity available to the consumer, commercial, and 

industrial sectors. 

This approach is a reasonable exercise of the EPA’s 

discretion under section 111, consistent with the U.S. 

Supreme Court’s statements in its 2011 decision, American 

Electric Power Co. v. Connecticut, that the CAA and the EPA 

actions it authorizes displace any federal common law right 

to seek abatement of CO2 emissions from fossil-fuel fired 

power plants. There, the Court emphasized that CAA section 

111 authorizes the EPA –- which the Court identified as the 

“expert agency” -– to regulate CO2 emissions from fossil 

fuel-fired power plants based an “informed assessment of 

competing interests.... Along with the environmental benefit 

potentially achievable, our Nation's energy needs and the 

possibility of economic disruption must weigh in the 

balance.”17 

Similarly, the D.C. Circuit, in a 1981 decision 

upholding the EPA’s section 111(b) standards for air 

pollutants from fossil fuel-fired EGUs, stated that section 

111 regulations concerning the electric power sector 

“demand a careful weighing of cost, environmental, and 

 

17 American Electric Power Co. v. Connecticut, 131 S. Ct. 

2527, 2539-40 (2011). 
28 

energy considerations.”18 This exercise of policy discretion 

is consistent with Congress’s expectation that the 

Administrator “should determine the achievable limits”19 and 

“would establish guidelines as to what the best system for 

each such category of existing sources is.”20 As the D.C. 

Circuit explained, “[i]t seems likely that if Congress 

meant ... to curtail EPA’s discretion to weigh various 

policy considerations it would have explicitly said so in 

section 111, as it did in other parts of the statute.”21 Our 

interpretation that CAA section 111 targets supply-side 

activities that allow continued production of a product 

through use of a cleaner process, rather than targeting 

consumer-oriented behavior,. also furthers Congress’ intent 

of promoting cleaner production measures “to protect and 

enhance the quality of the Nation’s air resources so as to 

promote the public health and welfare and the productive 

capacity of its population.”22 This principle is also 

 

18 Sierra Club v. EPA, 657 F.2d 298, 406 (D.C. Cir. 1981). 

Id. at 406 n. 526. 19 S. Rep. No. 91-1196, at 15-16 (Sept. 17, 1970), 1970 CAA 

Legis. Hist. at 415-16 (explaining that the 

“[Administrator] should determine the achievable limits and 

let the owner or operator determine the most economic, 

acceptable technique to apply.”). 

20 H.R. Rep. No. 95-294, at 195 (May 12, 1977). 

21 Sierra Club v. Costle, 657 F.2d 298, 330 (D.C. Cir. 

1981). 22 CAA section 101(b)(1). 
29 

consistent with promoting “reasonable ... governmental 

actions ... for pollution prevention.”23

In this rule, we are applying that same overall policy 

approach in interpreting the BSER provisions of section 

111. That is, we are basing the regulatory requirements on 

measures the affected EGUs can implement to assure that 

electricity is generated with lower emissions, taking into 

account the integrated nature of the industry and current 

industry practices. Building blocks 1, 2 and 3 fall 

squarely within this paradigm; they do not require 

reductions in the total amount of electricity produced.

We recognize that commenters have raised extensive 

legal concerns about building block 4. We recognize that 

building block 4 is different from building blocks 1, 2, 

and 3 and the pollution control measures that we have 

considered under CAA section 111. Accordingly, in light of 

our past practice and current policy in implementing 

section 111, as well as the legal concerns raised in public 

comment, today’s final action excludes building block 4 

from the BSER. Building block 4 is outside our policy 

paradigm as it targets consumer-oriented behavior and 

 

23 CAA section 101(c). 
30 

demand for the good, which would reduce the amount of 

electricity to be produced. 

Although numerous commenters urged us to include 

demand-side energy efficiency measures as part of the BSER, 

as we had proposed to do, we conclude that we cannot do so 

under our historical and current policy approach to 

interpretating section 111 and regulating the electricity 

sector under other CAA provisions . While building blocks 2 

and 3 are rooted in our past practice and policy, building 

block 4 is not and would require a change which we are not 

making in our interpretation and implementation of CAA 

section 111. 

Excluding demand-side energy efficiency measures from 

the BSER has the benefit of allaying legal and other 

concerns raised by commenters, including concerns that 

individuals could be “swept into” the regulatory process by 

imposing requirements on “every household in the land.”24

While building block 4 could have been implemented without 

imposing requirements on individual households, this final 

rule resolves any doubt on this matter and is not based on 

the inclusion of demand-side energy efficiency as part of 

the BSER. 

 

24 See Util. Air Reg. Group v. EPA, 134 S. Ct. 2427, 2436 

(2014). 

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31 

 By the same token, we are not finalizing reduced 

generation of electricity overall as the BSER. Instead, 

components of the BSER focus on shifting generation to 

lower- or zero-emitting processes for producing 

electricity.25 

(v) Constraints for new sources 

For new sources, practical and policy concerns support the 

application of basing the BSER on controls that new sources 

can install at the time of construction, so that they will 

be well-controlled throughout their long useful lives. This 

approach is consistent with the legislative history. We 

discuss this a greater length in the Legal Memorandum. 

 

25 As discussed below, however, reduced generation remains 

important to this rule in that it is one of the methods for 

implementing the building blocks. 

Commented [HH7]: This paragraph moved here from above 
1 

Draft/V.B.3.-revisions_BB2-3 v BB4_07-31-15__11am_redline_w-o comments 

[Note for reviewers: This piece has revisions to section 

111(d) preamble section V.B.3.a (adds new material), 

V.B.3.b(1) (deletes some paragraphs) and V.B.3.(b)(9) (adds 

new material; adds the paragraphs deleted from 

V.B.3.(b)(1), with edits; and makes additional edits).] 

3. Building blocks 2 and 3 as a “system of emission 

reduction”

a. Overview. As we explain above, the emission performance 

rates that we include in this rule’s emission guidelines 

are achievable by the affected EGUs through the application 

of the BSER, which includes the three building blocks. 

Commenters object that building blocks 2 (generation shift) 

and 3 (renewable energy) cannot, as a legal matter, be 

considered part of the BSER under CAA section 111(d)(1) and 

(a)(1). These commenters explain that in their view, under 

CAA section 111, the emission performance rates must be 

based on, and therefore the BSER must be limited to, 

methods for emissions control that the owner/operator of 

the affected source can integrate into the design or 

operation of the source itself, and cannot be based on 

actions taken beyond the source or actions involving thirdparty entities.1 For these reasons, these commenters argue 

 

1 See, e.g., comments by UARG at 6-7 (“Standards promulgated 

under section 111 must be source-based and reflect measures 

that the source’s owner can integrate into the design or 

operation of the source itself. A standard cannot be based 

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2 

that the phrase “system of emission reduction” cannot be 

interpreted to include building blocks 2 and 3. 

We disagree with these comments, and note that other 

commenters were supportive of our determination to include 

building blocks 2 and 3. Under CAA section 111(d)(1) and 

(a)(1), the EPA’s emission guidelines must establish 

achievable emission limits based on the “best system of 

emission reduction ... adequately demonstrated.” While some 

commenters assert that emission guidelines must be limited 

in the manner summarized above, the phrase “system of 

emission reduction,” by its terms and when read in context, 

contains no such limits. To the contrary, its plain meaning 

 

on actions taken beyond the source itself that somehow 

reduce the source’s utilization.”); comments by UARG at 31 

(the building blocks other than building block 1 take a 

“‘beyond-the-source’ approach” and “impermissibly rely on 

measures that go beyond the boundaries of individual 

affected EGUs and that are not within the control of 

individual EGU owners and operators”); comments by UARG at 

33 (the “system” of emission reduction “can refer only to 

reductions resulting from measures that are incorporated 

into the source itself;” section 111 is “designed to 

improve the emissions performance of new and existing 

sources in specific categories based on the application of 

achievable measures implemented in the design or production 

process of the source at reasonable cost.”); comments by 

American Chemistry Council et al. (“Associations”) at 60-61 

(EPA’s proposed BSER analysis is unlawful because it “looks 

beyond the fence line of the fossil fuel-fired EGUs that 

are the subject of this rulemaking;” “the standard of 

performance must ... be limited to the types of actions 

that can be implemented directly by an existing source 

within [the appropriate] class or category.”). 
3 

is deliberately broad and is capacious enough to include 

actions taken by the owner/operator of a stationary source 

designed to reduce emissions from that affected source, 

including actions that may occur off-site and actions that 

a third party takes pursuant to a commercial relationship 

with the owner/operator, so long as those actions enable 

the affected source to achieve its emission limitation. 

Such actions include the measures in building blocks 2 and 

3, which, when implemented by an affected source, enable 

the source to achieve their emission limits because of the 

unique characteristics of the utility power sector. For 

purposes of this rule, we consider a “system of emission 

reduction” -- as defined under CAA section 111(a)(1) and 

applied under CAA section 111(d)(1) -– to encompass a broad 

range of pollution-reduction actions, which includes the 

measures in building blocks 2 and 3. Furthermore, the 

measures in building blocks 2 and 3 fall squarely within 

EPA’s historical interpretation of section 111, pursuant to 

which the focus for the BSER has been on how to most 

cleanly produce a good, not on how much of the good should 

be produced. 

Our interpretation that a “system of emission 

reduction” is broad enough to include the measures in 

building blocks 2 and 3 is supported by the following: our 
4 

interpretation of the phrase “system of emission reduction” 

is consistent with its plain meaning and statutory context; 

our interpretation accommodates the very design of CAA 

section 111(d)(1), which covers a range of source 

categories and air pollutants;2 our interpretation is 

supported by the legislative history of CAA section 

111(d)(1) and (a)(1), which indicates Congress’s intent to 

give the EPA broad discretion in determining the basis for 

CAA section 111 control requirements, particularly for 

existing sources, and Congress’s intent to authorize the 

EPA to consider measures that could be carried out by 

parties other than the affected sources; and our 

interpretation is reasonable in light of comparisons to CAA 

provisions that give the EPA similar authority to consider 

such measures and to CAA provisions that would preclude the 

EPA from considering such measures. 

In addition to the reasons stated above, the EPA's 

interpretation is also reasonable for the following 

reasons: (i) Building blocks 2 and 3 fit well within the 

structure and economics of the utility power sector. (ii) 

 

2 Because it is designed to apply to a range of air 

pollutants not regulated under other provisions, CAA 

section 111(d) may be described as a “catch-all” or “gapfiller.” As such, a “system of emission reduction” as 

applied under CAA section 111(d) should be interpreted 

flexibly to accommodate this role. 
5 

Fossil fuel-fired EGUs are already implementing the 

measures in these building blocks for various reasons, 

including for purposes of reducing CO2 emissions. (iii) 

Interpreting the phrase “system of emission reduction” to 

incorporate building blocks 2 and 3 is consistent with (a) 

other provisions in the CAA, including the acid rain 

provisions in Title IV and the SIP provisions in CAA 

section 110, along with the EPA’s regulations implementing 

the CAA SIP requirements concerning interstate transport 

and regional haze, each of which is based on at least some 

of the same measures included in building blocks 2 and 3; 

(b) prior EPA action under CAA section 111(d), including 

the 2005 Clean Air Mercury Rule,3 which is based on some of 

the same measures in building blocks 2 and 3; (c) the 

various provisions of the CAA that authorize emissions 

trading, because emissions trading entails a source meeting 

its emission limitation based on the actions of another 

entity; and (d) the pollution prevention provisions of the 

CAA, which make clear that a primary goal of the CAA is to 

encourage federal and state actions that reduce or 

eliminate, through any measures, the amount of pollution 

 

3 This rule was vacated by the D.C. Circuit on other 

grounds. New Jersey v. EPA, 517 F.3d 574, 583-84 (D.C. Cir. 

2008), cert. denied sub nom. Util. Air Reg. Group v. New 

Jersey, 555 U.S. 1169 (2009). 
6 

produced at the source.4 (iv) Lastly, interpreting the 

phrase “system of emission reduction” to authorize the EPA, 

in formulating its BSER determination, to weigh a broad 

range of emission-reducing measures that includes building 

blocks 2 and 3 is consistent with Congress’s intent to 

address urgent environmental problems and to protect public 

health and welfare against risks, as well as Congress’s 

expectation that American industry would be able to develop 

the innovative solutions necessary to protect public health 

and welfare. 

Congress passed the CAA, including its several 

amendments, to protect public health and welfare from 

“mounting dangers,” including “injury to agricultural crops 

and livestock, damage to and the deterioration of property, 

and hazards to air and ground transportation.”5 In doing so, 

Congress established numerous programs to address air 

pollution problems and provided the EPA with guidance and 

flexibility in carrying out many of those programs. In the 

context of this industry and this pollutant it is 

reasonable to reject the narrow interpretation urged by 

 

4 As noted in the Legal Memorandum, in several of these 

rulemakings and in the course of litigation, the fossil 

fuel-fired electric power sector has taken positions that 

are consistent with the EPA’s interpretation that the BSER 

may include building blocks 2 and 3.

5 CAA section 101(a)(2). 

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7 

some commenters that the “system of emission reduction” 

applicable to the affected EGUs must be limited to only 

those measures that can be integrated into the design or 

operation of the source itself. The plain language of the 

statute does not support such an interpretation, and to 

adopt it would limit the “system of emission reduction” to 

measures that are either substantially more expensive or 

substantially less effective at reducing emissions than the 

measures in building blocks 2 and 3, notwithstanding the 

absence of any statutory language imposing such a limit. 

Such a result would be contrary to the goals of the CAA and 

would ignore the facts that sources in the electric 

generation industry routinely address planning and 

operating objectives on a broad, multi-source basis using 

the measures in building blocks 2 and 3 and would seek to 

use building blocks 2 and 3 (as well as non-BSER measures) 

to comply with whatever emission standards are set as a 

result of this rule. Indeed, as already observed, building 

blocks 2 and 3 are already being used to reduce emissions, 

and to do so specifically by operation of the industry’s 

inherent multi-source functions. 

Although the BSER provisions are sufficiently broad to 

include, for affected EGUs, the measures in building blocks 

2 and 3, they also incorporate significant constraints on 
8 

the types of measures that may be included in the BSER. We 

discuss those constraints at the end of this section. They 

include the section 111(d)(1) and (a)(1) requirements that 

emission reductions occur from the affected sources; that 

the emission performance standards for which the BSER forms 

the basis be achievable; that the system of emission 

reduction be adequately demonstrated; and that the EPA 

account for cost, non-air quality impacts, and energy 

requirements in determining the “best” system of emission 

reduction that is adequately demonstrated. These 

constraints do not preclude building blocks 2 and 3 from 

the BSER. In interpreting these statutory constraints, in 

determining the BSER, the EPA is mindful of past practice 

and current policy for both section 111 regulatory 

requirements, as well as and regulatory requirements under 

other CAA provisions for the electric power sector, under 

which the EPA generally bases regulatory requirements on 

controls and measures designed to reduce air pollutants 

from the production process without constraining the 

aggregate amount of production. While inclusion of building 

blocks 2 and 3 is consistent with our interpretation, 

inclusion of building block 4 is not, and for that reason, 

we are declining to include building block in the BSER. 

Finally, we briefly note additional constraints that focus 
9 

the BSER for new sources under section 111(b) on controls 

that assure that sources are well-controlled at the the 

time of construction. 

b. System of emission reduction as a broad range of 

measures. 

(1) Plain meaning and context of “system of emission 

reduction.” 

 The phrase “system of emission reduction” appears in 

the definition of a “standard of performance” under CAA 

section 111(a)(1). That definition reads: 

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. 

Pursuant to this definition, it is clear that a “system of 

emission reduction” serves as the basis for emission limits 

embodied by CAA section 111 standards. For this reason, 

emission limits must be “achievable” through the 

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

“adequately demonstrated.” Under CAA section 111(d)(1), 

such a limit is established for “any existing source,” 

which is defined as any existing “building, structure, 
10 

facility, or installation which emits or may emit any air 

pollutant.”6 

Although a “system of emission reduction” lays the 

groundwork for CAA section 111 standards, the term “system” 

is not defined in the CAA. As a result, we look first to 

its ordinary meaning. 

Abstractly, the term “system” means a set of things or 

parts forming a complex whole; a set of principles or 

procedures according to which something is done; an 

organized scheme or method; and a group of interacting, 

interrelated, or interdependent elements.7 As a phrase, 

“system of emission reduction” takes a broad meaning to 

 

6 See CAA section 111(d)(1) (applying a standard of 

performance to any existing source); (a)(6) (defining the 

term “existing source” as any stationary source other than 

a new source); and (a)(3) (defining the term “stationary 

source” as “any building, structure, facility, or 

installation which emits or may emit any air pollutant,” 

however, explaining that “[n]othing in subchapter II [i.e., 

Title II] of this chapter relating to nonroad engines shall 

be construed to apply to stationary internal combustion 

engines.”) 

7 Oxford Dictionary of English (3rd ed.) (2010), available 

at

http://www.oxforddictionaries.com/us/definition/american_en

glish/system; see also American Heritage Dictionary (5th 

ed.) (2013), available at 

http://www.yourdictionary.com/system#americanheritage; and 

The American College Dictionary (C.L. Barnhart, ed. 1970) 

(“an assemblage or combination of things or parts forming a 

complex or unitary whole”).
11 

serve a singular purpose: it is a set of measures that work 

together to reduce emissions. 

 When read in context, the phrase “system of emission 

reduction” carries important limitations: because the 

“degree of emission limitation” must be “achievable through 

the application of the best system of emission reduction,” 

(emphasis added), the “system of emission reduction” must 

be limited to a set of measures that work together to 

reduce emissions and that are implementable by the sources 

themselves. 

As a practical matter, the “source” includes the 

“owner or operator” of any building, structure, facility, 

or installation for which a standard of performance is 

applicable. For instance, under CAA section 111(e), it is 

the “owner or operator” of a source who is prohibited from 

operating “in violation of any standard of performance 

applicable to such source.”8

Thus, a “system of emission reduction” for purposes of 

CAA section 111(d) means a set of measures that source 

 

8 While this section provides for enforcement in the context 

of new sources, a CAA section 111(d) plan must provide for 

the enforcement of a standard of performance for existing 

sources. 
12 

owners or operators can implement to achieve an emission 

limitation applicable to their existing source.9 

In contrast, a “system of emission reduction” does not 

include actions that only a state or other governmental 

entity could take that would have the effect of reducing 

emissions from the source category, and that are beyond the 

ability of the affected sources’ owners/operators to take 

or control. Additionally, actions that a source owner or 

operator could take that would not have the effect of 

reducing emissions from the source category, such as 

purchasing offsets, would also not qualify as a “system of 

emission reduction.” 

Building blocks 2 and 3 each fall within the meaning 

of a “system of emission reduction” because they consist of 

measures that the owners/operators of the affected EGUs can 

implement to achieve their emission limits. In doing so, 

the affected EGUs will achieve the overall emission 

reductions the EPA identifies in this rule. We describe 

these building block 2 and 3 measures in detail elsewhere 

 

9 Some commenters read the proposed rulemaking as taking the 

position that the phrase “system of emission reduction” 

includes anything whatsoever that reduces emissions, and 

criticized that interpretation as too broad. See UARG 

comment, at 3-4. We are not taking that interpretation 

here. In this final rule, we agree that the phrase should 

be limited to exclude, inter alia, actions beyond the 

ability of the owners/operators to control. 
13 

in this rule, including the specific actions that 

owners/operators of affected EGUs can take to implement the 

measures. 

It should be noted that defining the scope of a 

“system of emission reduction” is not the end of our 

inquiry under CAA section 111(a)(1); rather, as noted 

above, a standard of performance must reflect the 

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

adequately demonstrated.” (Emphasis added.) Thus, in 

determining the BSER, the Administrator must first 

determine whether the available systems of emission 

reduction are “adequately demonstrated,” based on the 

criteria, described above, set out by Congress in the 

legislative history and the D.C. Circuit in case law. After 

identifying the “adequately demonstrated” systems of 

emission reduction, the Administrator then selects the 

“best” of these, based on several factors, including amount 

of emission reduction, cost, non-air quality health and 

environmental impact and energy requirements. Only after 

the Administrator weighs all of these considerations can 

she determine the BSER and, based on that, establish a 

standard of performance under CAA section 111(b) or an 

emission guideline under CAA section 111(d). 
14 

Although we do not need to determine the overall scope 

of the phrase “system of emission reduction,” we recognize 

that commenters have raised extensive legal concerns about 

building block 4. We recognize that building block 4 is 

different from building blocks 1, 2, and 3 and the 

pollution control measures that we have considered under 

CAA section 111. Accordingly, in light of our past practice 

and current policy in implementing section 111, as well as 

the legal concerns raised in public comment, today’s final 

action excludes building block 4 from the BSER. 

Traditionally, CAA section 111 standards have been 

rate-based, allowing regulated entities to produce as much 

of a particular good as they desire provided that they do 

so through an appropriately clean (or low-emitting) 

process. CAA section 111 performance standards have 

primarily targeted the means of production in an industry 

and not consumers’ demand for the product. Thus, the focus 

for the BSER has been on how to most cleanly produce a 

good, not on how much of the good should be produced. 

Building blocks 1, 2 and 3 fall squarely within this 

paradigm; they do not require reductions in the total 

amount of electricity produced. Building block 4, however, 

is outside this paradigm as it targets consumer-oriented 

Commented [HH1]: Moved to the end, and edited 
15 

behavior and demand for the good, which would reduce the 

amount of electricity to be produced. 

Although numerous commenters urged us to include 

demand-side energy efficiency measures as part of the BSER, 

as we had proposed to do, we conclude that we cannot do so 

under our historical and current interpretation of section 

111. While building blocks 2 and 3 are rooted in our past 

practice and policy, building block 4 is not and would 

require a change which we are not making in our 

interpretation and implementation of CAA section 111. 

Excluding demand-side energy efficiency measures from 

the BSER has the benefit of allaying legal and other 

concerns raised by commenters, including concerns that 

individuals could be “swept into” the regulatory process by 

imposing requirements on “every household in the land.”10

While building block 4 could have been implemented without 

imposing requirements on individual households, this final 

rule resolves any doubt on this matter and is not based on 

the inclusion of demand-side energy efficiency as part of 

the BSER. 

Strong policy reasons also support our interpretation 

that CAA section 111 targets supply-side activities that 

 

10 See Util. Air Reg. Group v. EPA, 134 S. Ct. 2427, 2436 

(2014). 
16 

allow continued production of a product through use of a 

cleaner process, rather than targeting consumer-oriented 

behavior. This continues our long-standing practice and 

furthers Congress’ intent of promoting cleaner production 

measures “to protect and enhance the quality of the 

Nation’s air resources so as to promote the public health 

and welfare and the productive capacity of its 

population.”11 This principle is also consistent with 

promoting “reasonable ... governmental actions ... for 

pollution prevention.”12

The statute is clear, moreover, that the Administrator 

has discretion to interpret CAA section 111. Specifically, 

as we describe in detail above, Congress expected that the 

Administrator “should determine the achievable limits”13 and 

“would establish guidelines as to what the best system for 

each such category of existing sources is.”14 As the D.C. 

Circuit explained, “[i]t seems likely that if Congress 

meant ... to curtail EPA’s discretion to weigh various 

policy considerations it would have explicitly said so in 

 

11 CAA section 101(b)(1). 

12 CAA section 101(c). 

13 S. Rep. No. 91-1196, at 15-16 (Sept. 17, 1970), 1970 CAA 

Legis. Hist. at 415-16 (explaining that the 

“[Administrator] should determine the achievable limits and 

let the owner or operator determine the most economic, 

acceptable technique to apply.”). 

14 H.R. Rep. No. 95-294, at 195 (May 12, 1977). 
17 

section 111, as it did in other parts of the statute.”15 The 

D.C. Circuit case law, discussed in section V.A., also is 

clear that the EPA has broad discretion to determine the 

appropriate BSER. 

 By the same token, we are not finalizing our proposed 

alternative identification of the BSER as reduced 

generation. Reduced generation focuses on the amount of 

electricity generation, rather than lower-emitting 

processes for producing electricity.16

For purposes of this final rule, it is not necessary 

to enumerate all of the types of measures that do or do not 

constitute a “system of emission reduction.” What is 

relevant is that building blocks 2 and 3 each qualify as 

part of the “system of emission reduction.” As noted, they 

focus on supply-side activities and they each constitute 

measures that the affected EGUs can implement that will 

allow those EGUs to achieve the degree of emission 

limitation that the EPA has identified based on those 

building blocks. Further, these building blocks also 

 

15 Sierra Club v. Costle, 657 F.2d 298, 330 (D.C. Cir. 

1981). 

16 As discussed below, however, reduced generation remains 

important to this rule in that it is one of the methods for 

implementing the building blocks. 
18 

satisfy the other statutory criteria enumerated in CAA 

section 111(a)(1). 

* * * * 

(9) Constraints on the BSER – Treatment of building 

block 4 and rResponse to comments concerning building 

blocks 2 and 3 as precedents. 

Although the BSER provisions are sufficiently broad to 

include, for affected EGUs, the measures in building blocks 

2 and 3, they also incorporate significant constraints on 

the types of measures that may be included in the BSER. We 

discuss those constraints in this section. These constaints 

explain why we are not including building block 4 in the 

BSER. In addition, these constraints explain why our 

reliance on building blocks 2 and 3 will have limited 

precedential effect for other rulemakings, and serve as our 

basis for responding to Some commenters who expressed 

concern that reliance on building blocks 2 and 3 would set 

a precedent for the EPA to rely on similar measures in 

promulgating future air pollution controls for other 

sectors., and offered hypothetical examples to illustrate 

their concerns.17 For example, commenters asserted that the 

 

17 Commenters offered hypothetical examples to illustrate 

their concerns over precedential effects, discussed 

below.Most of the commenters’ concerns over what they 

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this excerpt 

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EPA could “develop standards of performance for tailpipe 

emissions from motor vehicles” by “requiring car owners to 

shift some of their travel to buses,” which the commenters 

considered analogous to building block 2; “or by requiring 

there to be more electric vehicle purchases,” which the 

commenters considered analogous to building block 3.18

As discussed above, the emission limits in the CAA 

section 111(d) emission guidelines that this rule 

promulgates are based on the EPA’s determination, for the 

affected EGUs, of the “system of emission reduction” that 

is the “best,” taking into account “cost” and other 

factors, and that is “adequately demonstrated.” Those 

components include certain interpretations and applications

and provide constraints on the types of measures or 

controls that the EPA may determine to the BSER. 

(i) Emission reductions from affected sources 

The first constraint is that the BSER must assure 

emission reductions from the affected sources. Under 

section 111(d)(1), the states must submit state plans that 

 

viewed as the precedential effects of the building blocks 

concerned building block 4, and most of their hypothetical 

examples concerned reductions in demand for various types 

of products. Because the EPA is not finalizing building 

block 4 as part of the BSER, it is not necessary to address 

those concerns.

18 UARG comment at 2-3. 

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“establish[] standards of performance for any existing 

source,” and, under section 111(a)(1) and the EPA’s 

implementing regulations, those standards are informed by 

the EPA’s determination of the best system of emission 

reduction adequately demonstrated. For example, because the 

affected EGUs must be able to achieve their emission 

standards through application of the BSER, the BSER must be 

something that the EGUs themselves can implement. Likewise, 

bBecause the emission standards must apply to the affected 

sources category, actions taken by affected sources that do 

not result in emission reductions from the affected 

sources, category –- for example, that is, offsets (e.g., 

the planting of forests to sequester CO2) –- do not qualify 

for inclusion in the BSER. Building blocks 2 and 3 achieve 

emission reductions from the affected EGUs, and thus are 

not precluded under this constraint. 

(ii) Controls or measures that affected EGUs can 

implement 

The second constraint is that because the affected 

EGUs must be able to achieve their emission performance 

rates through the application of the BSER, the BSER must be 

controls or measures that the EGUs themselves can 

implement. Moreover, as noted, the D.C. Circuit has 

established criteria for achievability in the section 

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111(b) caselaw, e.g., sources must be able to achieve their 

standards under athe range of circumstances. If those 

criteria are applicable in a section 111(d) rule, the BSER 

must be of a type that allows sources to meet those 

achievability criteria. As noted, under this rule, affected 

EGUs may achieve their emission performance rates in the 

various circumstances under which they operateion, through 

the application of the building blocksBSER, including 

building blocks 2 and 3. 

(iii) “Adequately demonstrated” 

The third constraint is that the system of emission 

reduction that the EPA determines to the best must be 

“adequately demonstrated.” To qualify as the BSER, controls 

and measures must align with the nature of the regulated 

industry and the nature of the pollutant so that 

implementation of those controls or measures will both 

result in the emission reductions from the industry and 

allow the sources to achieve their emission performance 

standards. The history of the effectiveness of the controls 

or other measures, or other indications of their 

effectiveness, are important in determining whether they 

are adequately demonstrated. the 

Furthermore, under the EPA’s historical and continuing 

interpretation of section 111, BSER focuses on supply-side, 

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not demand-side, measures for reducing emissions. 

Additionally, under this rule, the affected sources that 

are the subject of the emission guidelines can employ the 

BSER to achieve the emission limits that the guidelines 

prescribe. 

For the reasons discussed, building blocks 2 and 3 

meet the definition of the BSER, as it has been interpreted 

and applied. As a result, they qualify as part of the basis 

for the emission limits in the emission guidelines 

promulgated in this rule. Moreover, as also discussed, the 

affected EGUs may meet those limits by implementing the 

BSER, including the measures in building blocks 2 and 3. 

Commenters’ concerns over precedential impact cannot be 

taken to mean that the building blocks should not be 

considered to meet the requirements of the BSER or that the 

affected EGUs cannot be considered to meet the emission 

limits by implementing those measures.

Moreover specifically, the application of building 

blocks 2 and 3 to affected EGUs has a number of unique 

characteristics that negate, or at least significantly 

limit their precedential impact. Building blocks 2 and 3 

entail the production of the same amount of the same 

product -- electricity, a fungible product that can be 

produced using a variety of highly substitutable generation 
23 

processes -- through the cleaner (that is, less CO2-

intensive) processes of shifting dispatch from steam 

generators to existing NGCC units, and from both steam 

generators and NGCC units to renewable generators. 

The physical properties of electricity and the highly 

integrated nature of the electricity system allow the use 

of these cleaner processes to generate the same amount of 

electricity. In addition, the electricity sector is 

primarily domestic -- little electricity is exported 

outside the U.S. -- and there is low capacity for storage. 

In addition, the electricity sector is highly regulated, 

planned, and coordinated. As a result, holding demand 

constant, an increase in one type of generation will result 

in a decrease in another type of generation. Moreover, the 

higher-emitting generators, which are fossil fuel-fired, 

have higher variable costs than renewable generators, so 

that increased renewable generation will generally back out 

fossil fuel-fired generation. 

Because of these characteristics, the electricity 

sector has a long and well-established history of 

substituting one type of generation for another. This has 

occurred for a wide variety of reasons, many of which are 

directly related to the system’s primary purposes and 

functions, as well as for environmental reasons. As a 
24 

result, at present, there is a well-established network of 

business and operational relationships and past practices 

that supports building blocks 2 and 3. As noted elsewhere, 

a large segment of steam generators already have business 

relationships with existing NGCC units, and a large segment 

of all fossil fuel-fired EGUs already own, co-own, or have 

invested in renewable energy. 

Many of these characteristics are unique to the 

utility power sector. Moreover, this complex of 

characteristics, ranging from the physical properties of 

electricity and the integrated nature of the grid to the 

institutional mechanisms that assure reliability and the 

existing practices and business relationships in the 

industry, combine to facilitate the implementation of 

building blocks 2 and 3 in a uniquely efficient manner. 

This supports basing the emission limits on the ability of 

owners and operators of fossil fuel-fired EGUs to replace 

their generation with cleaner generation in other 

locations, sometimes owned by other entities. 

As noted above, commenters offered hypothetical 

examples to illustrate their concerns over precedential 

effects. Most of their concerns focused on building block 

4, and most of their hypothetical examples concerned 

reductions in demand for various types of products. These 

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concerns are mooted because we are not finalizing building 

block 4. Some commenters offered hypothetical examples for 

building blocks 2 and 3 as well. For example, some 

commenters asserted that the EPA could “develop standards 

of performance for tailpipe emissions from motor vehicles” 

by “requiring car owners to shift some of their travel to 

buses,” which the commenters considered analogous to 

building block 2; “or by requiring there to be more 

electric vehicle purchases,” which the commenters 

considered analogous to building block 3.19

Commenters’ concerns over precedential impact cannot 

be taken to mean that the building blocks should not be 

considered to meet the requirements of the BSER or that the 

affected EGUs cannot be considered to meet the emission 

limits by implementing those measures. Moreover, Bbecause 

many of these individual characteristics, and their 

inherent complexity, are unique to the utility power 

sector, building blocks 2 and 3 as applied to fossil fuelfired EGUs will have a limited precedent for other 

industries and other types of rulemakings. For example, the 

commenter’s hypothetical examples noted above are 

inapposite for several reasons. The hypotheticals appear to 

 

19 UARG comment at 2-3.
26 

be premised on government action mandating actions not 

implementable by emitting sources (e.g., that a government 

would “require[e] car owners to shift some of their travel 

to buses, or ... require[e] there to be more electric 

vehicle purchases”), whereas the measures in building 

blocks 2 and 3 can be implemented by the affected EGUs. Nor 

have commenters attempted to address how car owners 

shifting travel to buses or purchasing more electric 

vehicles could be translated into lower tailpipe standards 

for motor vehicles., especially in light of the large 

numbers of motor vehicles that are imported and exported.20

(iv) “Best” in light of “cost ... non-air quality 

health and environmental impact and energy 

requirements” and EPA’s past practice and 

current policy 

The fourth constraint, or set of constraints, is that 

the system of emission reduction must be the “best,” 

“taking into account the cost of achieving such reduction, 

non-air quality health and environmental impact and energy 

 

20 In any event, it is questionable whether measures such as 

those hypothesized by the commenters would be consistent 

with the provisions of Title II. Title II standards are 

based on “the application of technology which the 

Administrator determines will be available for the model 

year...,” which is a narrower standard than the “best 

system of emission reduction ... adequately demonstrated.”

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requirements.” As noted, in light of the D.C. Circuit 

caselaw, the EPA has considered cost and energy factors on 

both an individual source basis and on the basis of the 

nationwide electricity sector. In determining what is 

“best,” the EPA has broad discretion to balance the 

enumerated factors.21 

In interpreting and applying these provisions in this 

rulemaking to regulate CO2 emissions from affected EGUs 

under section 111(d), we remain mindful of our past 

practice and current policy in for interpreting and 

applying BSER for promulgating regulations these provisions 

in previous section 111 rulemakings and for regulating air 

pollutants from the electricity sector under other 

provisions of the CAA. 

Under section 111, we have promulgated tThe great 

majority of our regulations under section 111 have been 

111(b) regulations , for new sources. As discussed in the 

Legal Memorandum and briefly below, the BSER under section 

111(b) is designed to assure that affected sources are well 

controlled at the time of construction, and that approach 

is consistent with the design expressed in the legislative 

 

21 See Lignite Energy Council v. EPA, 198 F.3d 930, 933 

(D.C. Cir. 1999). 

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history for the 1970 CAA Amendments that enacted the 

provision. 

For this reason, TTtraditionally, CAA section 111 

standards have been rate-based, allowing regulated entities 

to produce as much overall production of a particular good 

as is they desired, provided that it is produced they do so 

through an appropriately clean (or low-emitting) process. 

CAA section 111 performance standards have primarily 

targeted the means of production in an industry and not 

consumers’ demand for the product. Thus, the focus for the 

BSER has been on how to most cleanly produce a good, not on 

limiting how much of the good can should be produced. 

One For example of the focus under section 111 on 

clean production, not limitation of product is provided by 

the , we promulgated revised new source performance 

standards for electric utility steam generating units that 

we promulgated in 1979 following the 1977 CAA Amendments to 

limit emissions of SO2, particulate matter, and NOx. In 

relevant part, the revised standards limited SO2 emissions 

to 1.20 lb/million BTU heat input and imposed a 90 percent 

reduction in potential SO2 emissions. This was based on the 

application of flue gas desulfurization (FGD) together with 

coal preparation techniques. In the preamble, we explain 

that “[t]he intent of the final standards is to encourage 

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29 

power plant owners and operators to install the best 

available FGD systems and to implement effective operation 

and maintenance procedures but not to create power supply 

disruptions.”22 23 EPA has taken the same overall approach in 

its section 111(d) rules,24 including the CAMR rule noted 

below. 

 

22 See, e.g., 44 F.R. 33580, at 33599 (June 11, 1979). In 

this rulemaking, the EPA recognized the ability of the 

integrated grid to minimize power disruptions: “When 

electric load is shifted from a new steam-electric 

generating unit to another electric generating unit, there 

would be no net change in reserves within the power system. 

Thus, the emergency condition provisions prevent a failed 

FGD system from impacting upon the utility company’s 

ability to generate electric power and prevents an impact 

upon reserves needed by the power system to maintain 

reliable electric service.” Id. 23 The EPA’s 1982 revised new source performance standards 

for certain stationary gas turbines provide another example 

of a rulemaking that focused controls on reducing 

emissions, as well as reliance on the integrated grid to 

avoid power disruptions. 44 F.R. 33580 (June 11, 1979). In 

response to comments that requested a NOx emission limit 

exemption for base load utility gas turbines, the EPA 

explained that “for utility turbines ... since other 

electric generators on the grid can restore lost capacity 

caused by turbine down time” the NOx emission limit of 1150 

ppm for such turbines would not be rescinded. 44 F.R. 

33580, at 33597-98.

24 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 

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Another example of our practice under section 111 of 

not limiting how much of a good (in this case, electricity) 

could be produced are the 1982 By the same token,

Similarly, in a series of rulemakings regulating air 

pollutants from EGUs under several provisions of the CAA, 

we have focused our efforts on assuring that electricity is 

generated through cleaner or lower-emitting processes, and 

we have not sought to limit the aggregate amount of 

electricity that is generated. We describe those rules in 

section II., elsewhere in this section V.B.3., and in the 

Legal Memorandum. 

For example, as discussed in the Legal Memorandum, in 

the three transport rules promulgated under CAA section 

110(a)(2)(D)(i)(I) – the NOx SIP Call, CAIR, and CSAPR – 

which regulated precursors to ozone-smog and particulate 

matter, the EPA based certain aspects of the regulatory 

requirements on the fact that fossil fuel-fired EGUs could 

shift generation to lower-emitting sources. In CAMR, the 

2005 rulemaking under section 111(d) regulating mercury 

emissions from coal-fired EGUs, the EPA based the first 

phase of control requirements on the actions the affected 

EGUs were required to take under CAIR, including shift ing

 

Sources: Municipal Solid Waste Landfills, Final Rule,” 61 

Fed. Reg. 9905 (Mar. 12, 1996).
31 

generation to lower-emitting sources. In addition, as also 

discussed in the Legal Memorandum, in the EPA’s 2012 MATS 

rule regulating mercury from coal-fired EGUs under section 

112, at industry’s urging, the EPA allowed compliance 

deadlines to be extended based compliance requirements for

on the ability of coal-fired EGUs that desired to o

substitute replacement power of any type, including NGCC 

units or or renewable energy, for compliance purposes. 

While these and other rulemakings for fossil fuelfired EGUs took different approaches towards lower-emitting 

generation and renewable generation, they all were based on 

control measures that reduced emissions without reducing 

aggregate levels of electricity generation. It should be 

noted that even though some of those rules established 

overall emission limits in the form of budgets implemented 

through a cap-and-trade program, the EPA recognized that 

the fossil fuel-fired EGUs that were subject to the rules 

could comply by shifting generation to lower-emitting EGUs, 

including relying on renewable energy. In this manner, the 

rules limited emissions but on the basis that the industry 

could implement lower-emitting processes, and not 

reductions in overall generation. 

We are applying the same approach to this rulemaking. 

Our basis for this rulemaking is that affected EGUs can 
32 

implement a system of emission reduction that will reduce 

the amount of their emissions without reducing overall 

electricity generation. This approach takes into account 

costs by minimizing economic disruption as well as the 

nation’s energy requirements by, again, avoiding the need 

for environmental-based reductions in the aggregate amount 

of electricity available to the consumer, commercial, and 

industrial sectors. 

This approach is a reasonable exercise of the EPA’s 

discretion under section 111, consistent with the U.S. 

Supreme Court’s statements in its 2011 decision, American 

Electric Power Co. v. Connecticut, that the CAA and the EPA 

actions it authorizes displace any federal common law right 

to seek abatement of CO2 emissions from fossil-fuel fired 

power plants. There, the Court emphasized that CAA section 

111 authorizes the EPA –- which the Court identified as the 

“expert agency” -– to regulate CO2 emissions from fossil 

fuel-fired power plants based an “informed assessment of 

competing interests.... Along with the environmental benefit 

potentially achievable, our Nation's energy needs and the 

possibility of economic disruption must weigh in the 

balance.”25 

 

25 American Electric Power Co. v. Connecticut, 131 S. Ct. 

2527, 2539-40 (2011).

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Similarly, the D.C. Circuit, in a 1981 decision 

upholding the EPA’s section 111(b) standards for air 

pollutants from fossil fuel-fired EGUs, stated that section 

111 regulations concerning the electric power sector 

“demand a careful weighing of cost, environmental, and 

energy considerations.”26 This exercise of policy discretion 

is consistent with Congress’s The statute is clear, 

moreover, that the Administrator has discretion to 

interpret CAA section 111. Specifically, as we describe in 

detail above, Congress expectationed that the Administrator 

“should determine the achievable limits”27 and “would 

establish guidelines as to what the best system for each 

such category of existing sources is.”28 As the D.C. Circuit 

explained, “[i]t seems likely that if Congress meant ... to 

curtail EPA’s discretion to weigh various policy 

considerations it would have explicitly said so in section 

111, as it did in other parts of the statute.”29 The D.C. 

Circuit case law, discussed in section V.A., also is clear 

 

26 Sierra Club v. EPA, 657 F.2d 298, 406 (D.C. Cir. 1981). 

Id. at 406 n. 526. 27 S. Rep. No. 91-1196, at 15-16 (Sept. 17, 1970), 1970 CAA 

Legis. Hist. at 415-16 (explaining that the 

“[Administrator] should determine the achievable limits and 

let the owner or operator determine the most economic, 

acceptable technique to apply.”). 

28 H.R. Rep. No. 95-294, at 195 (May 12, 1977). 

29 Sierra Club v. Costle, 657 F.2d 298, 330 (D.C. Cir. 

1981). 
34 

that the EPA has broad discretion to determine the 

appropriate BSER. 

Strong policy reasons also support oOur interpretation 

that CAA section 111 targets supply-side activities that 

allow continued production of a product through use of a 

cleaner process, rather than targeting consumer-oriented 

behavior,. This continues our long-standing practice 

andalso furthers Congress’ intent of promoting cleaner 

production measures “to protect and enhance the quality of 

the Nation’s air resources so as to promote the public 

health and welfare and the productive capacity of its 

population.”30 This principle is also consistent with 

promoting “reasonable ... governmental actions ... for 

pollution prevention.”31

In this rule, we are applying that same overall policy 

approach in interpreting the BSER provisions of section 

111. That is, we are basing the regulatory requirements on 

measures the affected EGUs can implement to assure that 

electricity is generated with lower emissions, taking into 

account the integrated nature of the industry and current 

industry practices. Building blocks 1, 2 and 3 fall 

 

30 CAA section 101(b)(1). 

31 CAA section 101(c). 
35 

squarely within this paradigm; they do not require 

reductions in the total amount of electricity produced.

Although we do not need to determine the overall scope 

of the phrase “system of emission reduction,” wWe recognize 

that commenters have raised extensive legal concerns about 

building block 4. We recognize that building block 4 is 

different from building blocks 1, 2, and 3 and the 

pollution control measures that we have considered under 

CAA section 111. Accordingly, in light of our past practice 

and current policy in implementing section 111, as well as 

the legal concerns raised in public comment, today’s final 

action excludes building block 4 from the BSER. Building 

block 4, however, is outside thisour policy paradigm as it 

targets consumer-oriented behavior and demand for the good, 

which would reduce the amount of electricity to be 

produced. 

Although numerous commenters urged us to include 

demand-side energy efficiency measures as part of the BSER, 

as we had proposed to do, we conclude that we cannot do so 

under our historical and current policy approach to 

interpretatingon of section 111 and regulating the 

electricity sector under other CAA provisions . While 

building blocks 2 and 3 are rooted in our past practice and 

policy, building block 4 is not and would require a change 

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36 

which we are not making in our interpretation and 

implementation of CAA section 111. 

Excluding demand-side energy efficiency measures from 

the BSER has the benefit of allaying legal and other 

concerns raised by commenters, including concerns that 

individuals could be “swept into” the regulatory process by 

imposing requirements on “every household in the land.”32

While building block 4 could have been implemented without 

imposing requirements on individual households, this final 

rule resolves any doubt on this matter and is not based on 

the inclusion of demand-side energy efficiency as part of 

the BSER. 

 By the same token, we are not finalizing reduced 

generation of electricity overall as the BSER. Instead, 

components of the BSER focus on shifting generation to our 

proposed alternative identification of the BSER as reduced 

generation. Reduced generation focuses on the amount of 

electricity generation, rather than lower- or zero-emitting 

processes for producing electricity.33 

(v) Constraints for new sources 

 

32 See Util. Air Reg. Group v. EPA, 134 S. Ct. 2427, 2436 

(2014). 

33 As discussed below, however, reduced generation remains 

important to this rule in that it is one of the methods for 

implementing the building blocks. 

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For new sources, practical and policy concerns support 

the application of basing the BSER on controls that new 

sources can install at the time of construction, so that 

they will be well-controlled throughout their long useful 

lives. This approach is consistent with the legislative 

history. We discuss this a greater length in the Legal 

Memorandum. 

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