From: Vasu, Amy 

Sent: Friday, July 31, 2015 3:11 PM 

To: nfrey@omb.eop.gov 

Cc: Szabo, Aaron; Culligan, Kevin; Harvey, Reid; Schmidt, Lorie 

Subject: Response to interagency review comments on the CPP final rule 

Nathan, 

Attached are clean and RLSO revisions in response to interagency review comments on the 

discussion of the portfolio approach in Section VIII of the CPP preamble (p. 960 of the clean July 

29th version). 

Thank you. 

 

Amy 

 

~~~~~~~~~~~~~~~~~~~~~~~ 

Amy B. Vasu 

U.S. EPA / OAQPS 

Sector Policies and Programs Division 

email: vasu.amy@epa.gov 

phone: 919.541.0107 

<< portfolio_07-31-15__3pm_clean.docx >> 

<< portfolio_07-31-15__3pm_redline.docx >> 

  
Draft/portfolio_07-31-15__3pm_clean 

d. Legal considerations with proposed portfolio approach. The 

EPA is not finalizing the portfolio approach that was included 

in the proposed rulemaking, 79 FR 34830, 34902 (June 18, 2014). 

In the proposal, the EPA noted that the portfolio approach 

raised legal questions. 79 FR 34830, 34902-03. A number of 

commenters stated that the portfolio approach is unlawful 

because it exceeds the limitations that section 111(d)(1) places 

on state plans. Upon further review, we agree with these 

comments. 

Section 111(d)(1) provides that state plans shall 

“establish[] “standards of performance for any existing source” 

and “provide[] for the implementation and enforcement of . . . 

standards of performance” under CAA section 111(d)(1). Although 

in the proposal we identified possible interpretations of 

section 111(d)(1) that could justify the proposed portfolio 

approach, after reviewing the comments, we are not adopting 

those interpretations. Because section 111(d)(1) specifically 

requires state plans to include only (A) standards for emissions 

imposed on affected sources and (B) measures that implement and 

enforce such standards,1 we interpret it as allowing federal 

enforceability only of requirements or measures that are in 

 

1 Such measures include, for example, in this rule, requirements 

for ERCs.
those two specifically required provisions. Furthermore, we do 

not interpret the term “implementation of ... such standards of 

performance” broadly enough to authorize the EPA to approve 

state plans that impose federally enforceable obligations upon a 

broad array of non-emitting entities. Thus, the EPA is not 

finalizing the portfolio approach, and in the event that states 

submit such measures to the EPA for inclusion in the state plan, 

the EPA would not approve them into the state plan and therefore 

would not make them federally enforceable. 

We note that section 111(d) limits on federal 

enforceability of requirements against non-affected sources do 

not imply that the BSER cannot be based on actions by nonaffected sources. As discussed in section V, the BSER may be 

based on the ability of owners/operators of affected sources to 

engage in commercial relationships with a wide range of other 

entities, from the vendors, installers, and operators of air 

pollution control equipment to, in this rulemaking, 

owners/operators of renewable energy. 

 The EPA notes it is also not finalizing the proposed state 

commitment approach or state crediting approach. The EPA 

believes the finalized state measures plan type provides states 

with the same flexibilities as would have been allowed under 

these two proposed approaches, and does so in a way that is 

legally supportable by the Clean Air Act. Therefore, the EPA 
does not believe it necessary to finalize the state commitment 

approach or state crediting approach. 
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Draft/portfolio_07-31-15_3pm_redline 

d. Legal considerations with proposed portfolio approach. The 

EPA is not finalizing the portfolio approach that was included 

in the proposed rulemaking, 79 FR 34830, 34902 (June 18, 2014). 

In the proposal, the EPA noted that the portfolio approach 

raised legal questions. 79 FR 34830, 34902-03. After reviewing 

comments, the EPA agrees withA number of commenters stated that 

legal questions remain as to whetherthe portfolio approach is 

unlawful because it exceeds the limitations that section 

111(d)(1) places on state plans. Upon further review, we agree 

with these comments. 

Section 111(d)(1) provides that state plans shall 

“establish[] state plans are precluded from including federally 

enforceable measures that are mandatory for entities other than 

affected EGUs eitheron grounds that those measures do not 

constitute “standards of performance for any existing source” or 

and “provide[] for the implementation and enforcement of . . . 

standards of performance” under CAA section 111(d)(1). In 

addition, in Utility Air Regulatory Group v. EPA,1 the U.S. 

Supreme Court cautioned that there are limits to the extension 

of CAA jurisdiction, which raises additional questions as to 

whether the EPA may make federally enforceable in a section 

111(d) plan state measures that are mandates on entities other 

 

1 134 S. Ct. 2427 (2014) (“UARG v. EPA”). 

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than affected EGUs. Commenters stated that these provisions by 

their terms limit federally enforceable state plans to standards 

of performance for affected sources, along with implementation 

and enforcement measures for those standards of performance, and 

preclude state plans from including obligations on entities 

other than affected EGUs. AlthoughAlthough in the proposal we 

identified possible interpretations of section 111(d)(1) that 

could justify the proposed portfolio approach, after reviewing 

the comments, we are not adopting those interpretations. Because 

we agree that there are significant questions as to whether 

sSsection 111(d)(1) only specifically requires/authorizes is 

clear by its terms that state plans are limited to include only 

(A) standards for emissions imposed on affected sources and (B) 

measures that implement and enforce such standards,2 we 

interpret it as allowing federal enforceability only of state 

law requirements or measures only for measures that are in those 

two those specifically required/authorized provisions.3 

Furthermore, we do not interpret and that the term “measures 

 

2 Such measures include, for example, in this rule, requirements 

for ERCs.

3

 It should be noted that in a recent rule under section 111(b), 

the EPA imposed federally enforceable standards of performance 

on the manufacturers and sellers of wood stoves. 80 FR 13672 

(March 16, 2015). A similar rule under section 111(d) could 

allow a state to impose controls on those same entities because 

they were involved in the design or operation of the affected 

facility.

Commented [ZE1]: The footnote is deleted. Do we want 

to keep some form of it or do we think that “broad aray” 

gives us room to say that we are fine regulating wood stove 

mans etc. 

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that implementation of ... such standards of performance” is not 

broadly enough to does not thatauthorizes the EPA may not to

approve state plans that that potentially impose federally 

enforceable obligations upon a broad array of non-emitting 

entities.4 that have not been involved in the design or operation 

of the facility. We note that this interpretation concern does 

not imply that the BSER includes the same types of limits. As 

discussed in section V, the BSER may be based on the ability of 

owners/operators of affected sources to engage in commercial 

relationships with a wide range of other entities, from the 

vendors, installers.5 Thus, In light of these concerns, the EPA 

is not finalizing the portfolio approach, and operators of air 

pollution control equipment to, in this rulemaking, 

owners/operators of RE. But for the reasons noted above, the 

federally enforceable state plan may not impose obligations on 

those non-affected source entities. Finally, the EPA notes that 

in the event that states diddo submit such measures to the EPA 

for inclusion in the state plan, the EPA would not take action 

 

4

 It should be noted that in a recent rule under section 111(b), the EPA 

imposed federally enforceable standards of performance on the manufacturers 

and sellers of wood stoves. 80 FR 13672 (March 16, 2015). A similar rule 

under section 111(d) could allow a state to impose controls on 

those same entities because they were involved in the design or 

operation of the affected facility.

5 In a recent rule under section 111(d), the EPA’s emission 

guidelines required the imposition of federally enforceable 

requirements on the manufacturers and sellers of wood stoves. 

80 FR 13672 (March 16, 2015). 

Commented [ZE2]: The footnote is deleted. Do we want 

to keep some form of it or do we think that “broad aray” 

gives us room to say that we are fine regulating wood stove 

mans etc. 

Formatted: Strikethrough

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to approve them into the state plan and therefore would not 

thereby make them federally enforceable. Instead, the EPA is 

finalizing the state measures approach, which would allow states 

to impose obligations upon such entities that are enforceable 

only as a matter of state law. As discussed in sec. VIII.C.6.d, 

the state measures approach achieves the same objective as the 

proposed portfolio approach in a way that comports with the 

statutory requirements of CAA section 111(d). 

We note that section 111(d) limits on federal 

enforceability of requirements against non-affected sources do 

not imply that the BSER cannot be based on actions by nonaffected sources. As discussed in section V, the BSER may be 

based on the ability of owners/operators of affected sources to 

engage in commercial relationships with a wide range of other 

entities, from the vendors, installers, and operators of air 

pollution control equipment to, in this rulemaking, 

owners/operators of renewable energy. 

 The EPA notes it is also not finalizing the proposed state 

commitment approach or state crediting approach. The EPA 

believes the finalized state measures plan type provides states 

with the same flexibilities as would have been allowed under 

these two proposed approaches, and does so in a way that is 

legally supportable by the Clean Air Act. Therefore, the EPA 

does not believe it necessary to finalize the state commitment 
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approach or state crediting approach.