1 TABLE OF CONTENTS

CHAPTER 1 LEGAL ...................................

................................................... ............................. 2

1.1 Authority to regulate carbon dioxide ..........

................................................... ....................... 2

1.2 Authority to regulate EGUs ....................

................................................... .......................... 63

1.3 Authority to regulate states' energy markets ..

................................................... .............. 178

1.4 Combined categories and codification in the CFR

.................................................. ........ 232

1.5 Affected sources and applicability ............

................................................... ...................... 244

1.5.1 EGU sources .................................

................................................... ................................. 247

1.5.2 Non-EGU sources .............................

................................................... ............................. 247

1.5.3 Affected entities under Building Block 2 ....

................................................... ................ 322

1.5.4 Affected entities under Building Block 3 ....

................................................... ................ 328

1.5.5 Affected entities under Building Block 4 ....

................................................... ................ 332

1.5.6 Other .......................................

................................................... ....................................... 3372 CHAPTER 1 LEGAL

1.1 AUTHORITY TO REGULATE CARBON DIOXIDE

Comment 1: EPA authority to regulate GHG

Commenters stated that EPA's proposals for major ex pansions of state energy efficiency and renewable energy programs interfere with traditiona l state authority in energy planning and appear to be well beyond the agency's authority und er the CAA. The commenters stated that the Supreme Court's recent decision on the GHG permitti ng rule contains strong cautionary language that the court would take a skeptical view of an ov erly expansive interpretation of EPA's authority to regulate GHG.

Response 1: We disagree with this comment. In section V. of the preamble, we explain that the EPA’s approach in this rulemaking does not interfer e with traditional state authority in energy planning and is not inconsistent with the Supreme C ourt’s recent decision on the GHG permitting rule.

Comment 2: Commenters stated that EPA has the legal mandate a nd the authority to limit the emission of GHG and it certainly has the moral resp onsibility to do so. Commenters stated that first, the Supreme Court has made it quite clear th at EPA does have authority to regulate CO2 emissions and greenhouse gas emissions under the Cl ean Air Act. But, the commenters added, the Supreme Court has not given EPA a roving mandat e to do whatever it thinks best. Commenters stated that in a recent case the Supreme Court again reminded EPA that anything it does to reduce greenhouse gases must fit within the statutory structure. Commenters stated the provision that EPA is now relying on is very clearl y designed to get individual plants to reduce their emission rates. That's the way it's been used for almost 40 years. Commenters stated that's the only way to read the statute. Commenters added that by adopting this very aggressive and expansive interpretation of its own power the court s are almost certainly likely to strike that down. Commenters stated that people will spend an e normous amount of time and effort trying to figure out and comment on this proposal, and at the end of the day it is highly unlikely that it will ever be implemented. Commenters stated the Sup reme Court has upheld the authority of the EPA to regulate carbon emissions on three separate occasions since 2007. Commenters stated the Clean Power Plan is a major policy decision, and id eally, EPA would have a legislature addressing that issue. Nonetheless, it's clear the EPA has the authority to regulate greenhouse gases and pollutants under the Clean Air Act and un der the Massachusetts versus EPA case since the endangerment filing in December, 2009. Commente rs stated they support the Environmental Protection Agency's authority to implement standard s that limit carbon pollution from existing

sources. Commenters stated the EPA is well within i ts right to take such action. It can set standards to reduce carbon pollution from power pla nts. Commenters stated that they support EPA's authority to regulate greenhouse gases under the Clean Air Act, as determined by the3

Supreme Court in Massachusetts v. EPA (2007) and su bsequently affirmed in AEP v. Connecticut (2011).

Response 2: Some of these statements are supportive of the rule and we appreciate them. We disagree with commenters’ statements that section 1 11(d) is limited to getting individual sources to reduce their emission rate. We explain in sectio n V. of the preamble our authority under section 111(d) and (a)(1) to include building block s 2 and 3 as part of the BSER. We also disagree with commenters’ statements that EPA shoul d recommend a preferred path to meet the emission guidelines, such as a revenue neutral carb on tax. The states’ obligation is simply to meet the emission guidelines, and they enjoy broad discretion in choosing the means to do so.

Comment 3: Commenters stated that EPA has authority to regulat e air pollution, including GHG. Commenters cited Massachusetts v. EPA, and com menters stated that after that decision, it was determined that the EPA has t he authority under the Clean Air Act (CAA) to regulate greenhouse gases, including CO2. Commenter s continued, stating that pursuant to the Supreme Court's ruling of Massachusetts v. EPA, it is clear that the EPA has the authority to regulate greenhouse gases since they fit well withi n the CAA's definition of an "air pollutant." Commenters added a number of States, including Mass achusetts, petitioned the EPA to begin regulating CO2 and other greenhouse gases because t hey argued climate change was a problem likely to endanger the public health. However, comm enters stated, the EPA contended that they lacked the authority to regulate greenhouse gases b ecause they were not pollutants as defined under the CAA. Further, commenters stated the EPA argued that even if they did have the authority to regulate greenhouse gasses, it was wit hin the EPA's discretion to choose which pollutants to regulate, and those they chose not to . Finally, commenters stated, the EPA argued that the Petitioners lacked standing to sue because they could not show that greenhouse gases had harmed them. Commenters stated despite the EPA' s assertions, the Supreme Court held that Massachusetts did have standing because, as a sover eign they had a special duty to protect their citizens. Additionally, the commenters added, the S upreme Court found that the Clean Air Act does indeed give the EPA the authority to regulate greenhouse gases and greenhouse gases fit well within the CAA's "capacious definition of air pollutant"(127 S. Ct. 1438 (2007)).

Commenters stated that EPA has the legal authority to regulate GHG emissions, explaining that Massachusetts v. EPA (2007) SCOTUS directs EPA to d etermine whether GHGs endanger public health and welfare, and if so, to regulate t hem pursuant to the Clean Air Act; Endangerment Finding (2009); Supreme Court has uphe ld EPA's authority and obligation to regulate GHGs pursuant to the Clean Air Act in ever y subsequent challenge to date.

Response 3: These comments are supportive of this rule and we appreciate them.

Comment 4: Commenters stated that the Clean Air Act provides a comprehensive scheme for regulating air pollutants from stationary sources. See So. Coast Air Quality Mgmt. Dist. v. EPA, 472 F.3d 882, 886 (D.C. Cir. 2006). Section 111(d) of the Act, 42 U.S.C. 7411(d), plays an important role by enabling EPA and states to contro l existing-source pollution not regulated under the National Ambient Air Quality Standards (N AAQS) program (sections 108-110, 424

U.S.C. 7408-7410) or the National Emissions Standar ds for Hazardous Air Pollutants (NESHAP) program (section 112, id. 7412). Under this scheme, commenters stated, EPA must regulate existing power plant CO2 emissions under section 11 1(d) of the Act because (1) such emissions are not regulated as a NAAQS pollutant or as a hazardous air pollutant; and (2) EPA has moved forward with regulating CO2 emissions from new powe r plants. Commenters remarked that some critics of the Proposed Rule contend that EPA lacks the authority under section 111(d) of the Act to regulate non-hazardous pollutants (such as CO2) from power plants because EPA is regulating hazardous pollutants (such as mercury) f rom power plants under a section 112. (See, e.g., Pet. for Review at 1, 23, 28, West Virginia e t al. v. EPA, No. 14-1146 (D.C. Cir. Aug. 1, 2014); see also Br. for Amici West Virginia et al. at 4-15, In Re: Murray Energy Corp., No. 14- 1112 (D.C. Cir. June 25, 014); see also, e.g., Will iam J. Haun, The Clean Air Act as an Obstacle to the Environmental Protection Agency's Anticipate d Attempt to Regulate Greenhouse Gas Emissions from Existing Power Plants, The Federalis t Soc'y (Mar. 2013); Brian H. Potts, The President's Climate Plan for Power Plants Won't Sig nificantly Lower Emissions, 31 Yale J. Reg. Online 1, 9 (Aug. 22, 2013). Commenters stated not only does such an interpretation defy common sense, it is based on a reading of only partof the 1990 amendments to section 111(d). Commenters stated the flawed nature of this incompl ete reading is further demonstrated by the fact that it effectively would nullify section 111( d), given that section 112 regulates emissions of hazardous pollutants from over one hundred source c ategories. Even the language these critics rely on, when read in proper context, supports EPA' s authority to promulgate the Clean Power Rule. See Whitman v. Am. Trucking Ass'n, 531 U.S. 4 57, 471 (2001) (concluding Clean Air Act provision unambiguous in light of statutory and his torical context); see also, e.g., Zuni Pub. Sch. Dist. No. 89 v. Dep't of Educ., 550 U.S. 81, 89-100 (2007) (considering legislative history and purpose of statute to discern legislative intent)." A. A Proper Interpretation of the Statute Requires Giving Effect to Both of the 1990 Amendmen ts to Section 111(d). Commenters stated that when Congress amended the Clean Air Act in 199 0, it enacted two differently worded amendments to section 111(d)-including one that cle arly authorizes the regulation proposed here. Commenters stated both amendments appear in the Sta tutes at Large, but the U.S. Code language erroneously does not reflect the fact that two amen dments were enacted into law. Commenters stated EPA's proposal to regulate CO2 from existing power plants is lawful under the 1990 amendments, as enacted. Commenters stated understan ding the two amendments requires a brief background on section 111(d)'s place in the Clean A ir Act's comprehensive scheme. Commenters stated Section 111(d) is one of the Act's three pri mary avenues to regulate existing stationary

sources. Commenters stated the two other avenues-th e NAAQS of section 108 and 110; and the hazardous-air-pollutants program of section 112-add ress emissions of certain listed pollutants. Commenters stated Section 111(d), by co ntrast, more broadly authorizes EPA to establish standards for any emissions from existing sources that endanger public health or welfare but that are not regulated under the other two programs. (Section 111(b) mandates standards for new and modified sources, and section 111(d) mandates standards for existing sources if those standards "would apply if [the exi sting sources] were a new source." 42 U.S.C. 7411(b), (d).) Thus, commenters added, these provis ions collectively "establish[] a comprehensive program for controlling and improving the nation's air quality." See Luminant Generation Co. v. EPA, 675 F.3d 917, 921 (5th Cir. 2012) (internal quotation omitted).5

Commenters stated before the 1990 amendments, secti on 111(d)(1) required that state plans address "any air pollutant which is not included on a list published under Section 7408(a)," i.e., NAAQS, "or 7412(b)(1)(A) of this title," a cross-re ference to the previous version of section 112's hazardous-air-pollutants program. See 42 U.S. C. 7411(d) (West 1977). Commenters stated Section 111(d) thus functioned to mandate the regul ation of air pollutants from existing stationary sources that were not otherwise covered by the NAAQS or the hazardous-pollutants program. Commenters stated in 1990, after EPA's del ays in listing (and thereby regulating) hazardous air pollutants "proved to be disappointin g," Sierra Club v. EPA, 353 F.3d 976, 979-80 (D.C. Cir. 2004), Congress extensively amended sect ion 112 to change its regulatory approach. Rather than relying on EPA's listing of hazardous a ir pollutants to trigger their regulation under section 112-something EPA had rarely done-Congress instead listed 189 hazardous air pollutants itself and directed EPA to list categories of major sources and area sources for each of these pollutants and then to establish emission standards for each source category. 42 U.S.C. 7412(b)(1), (c)(1), (d)(1). (EPA retained the autho rity to list additional pollutants for regulation under section 112, either on its own or in response to a petition to modify the list. See 42 U.S.C. 7412(b)(2), (3).) Commenters stated Congress amende d section 111(d)'s preexisting reference to section 112 to conform it to these structural chang es. However, commenter stated, different conforming language from the House and Senate bills amending section 111(d) was included in the final legislation without being reconciled in c onference. Commenters stated both amendments were signed into law by the President an d appear in the Statutes at Large, but only the House amendment appears in the U.S. Code. Comme nters stated the Senate amendment simply replaces the former cross-reference to secti on 7412(b)(1)(A), which was eliminated by the 1990 amendments, with a new cross-reference to that section's replacement, section 7412(b): it thus requires section 111(d) standards for "any air pollutant (i) for which air quality criteria

have not been issued or which is not included on a list published under section 108(a) or section 112(b)." Pub. L. No. 101-549, S. 302(a), 104 Stat. 2399, 2574 (1990). Thus, commenters stated, the Senate amendment preserves section 111(d)'s lon gstanding role as a source of regulation for pollutants (such as CO2) that are not otherwise reg ulated under the NAAQS or the hazardousair-pollutants program. Commenters stated the House amendment replaces the section 112 crossreference with different language: it requires sect ion 111(d) standards for "any air pollutant (i) for which air quality criteria have not been issued or which is not included on a list published under section 108(a) or emitted from a source categ ory which is regulated under section 112 of this title." Pub. L. No. 101-549, S. 108(g), 104 St at. 2399, 2467 (1990). As explained below, commenters stated that language, like the Senate am endment, can be read to preserve section 111(d)'s application to non-NAAQS and non-hazardous air pollutants such as CO2. See infra

Section II.C. Commenters stated that even if the Ho use amendment were interpreted in the way opponents have urged, that language would not contr ol. Commenters stated because both amendments were enacted into law, it is necessary t o consider the effect of the Senate amendment, which, as EPA recognized in the Proposed Rule, would indisputably authorize the Rule. See 79 Fed. Reg. at 34,844; see also Citizens to Save Spencer County v. EPA, 600 F.2d 844, 872 (D.C. Cir. 1979) (where Congress "drew upo n two bills originating in different Houses and containing provisions that, when combined, were inconsistent in respects never reconciled in conference...it was the greater wisdom for [EPA] to devise a middle course...to give maximum6

possible effect to both"). Commenters stated it is well-established that the text of the Statutes at Large (which contains both amendments enacted by Co ngress and signed by the President) governs when it is inconsistent with the U.S. Code. United States Nat'l Bank of Or. v. Indep. Ins. Agents of Am., 508 U.S. 439, 448 (1993) ("[D]espite its omission from the Code [a provision] remains on the books if the Statutes at Large so di ctates.").(See also United States v. Welden, 377 U.S. 95, 98 n.4 (1964), and sources cited (unle ss codification enacted into positive law, where language of Statutes at Large and U.S. Code are inconsistent, "recourse must be had to the original statutes themselves" and discrepancy in U. S. Code "should be given no weight").)

Commenters stated the fact that the Office of Law R evision Counsel simply was unable to

execute the Senate amendment because the House amen dment, which appeared earlier in the legislation, had already resulted in striking the s ame text, (The House Amendment appears one hundred and seven pages before the Senate amendmentin the 1990 legislation. See Pub. L. No. 101-549, S. 108, 302(a), 104 Stat. 2399, 2467, 2574 (1990)) does not change the longstanding principle of law that the Statutes of Large, not th e U.S. Code, controls when the text of the two differs. Additionally, the commenters stated, there is no basis to treat one amendment as more substantive than another. As explained above, the c ommenters stated the substantive changes Congress made in 1990 were to section 112, not to s ection 111(d). Commenters stated the amendments at issue here alter section 111(d)'s cro ss-reference to section 112 in response to the structural changes to section 112, and both amendme nts appeared under similar catch-all headings in the House Conference Report, adopted bythe House and Senate (H.R. Conf. Rep. 101-952, at 50, 122 (1990)): "Conforming Amendments " (Senate) and "Miscellaneous Guidance" (House). See Pub. L. No. 101-549, section s 108, 302(a), 104 Stat. 2399, 2467, 2574 (1990). Commenters added the legislative history in dicates that Congress intended the Senate's amendment to section 111(d) to be in the final bill . Commenters stated that after the House

amended the Senate's bill and deleted the Senate's seven "Conforming Amendments" (including the revision to section 111(d)), the Conference Com mittee added the Senate's conforming amendments back in to the final bill. Compare S. 16 30, 101st Cong. (as passed by House, May 23, 1990) with Pub. L. No. 101-549, section 302(a), 104 Stat. 2399, 2574 (1990). Thus, commenters stated, both the House amendment and Sen ate amendment are law and both authorize the Clean Power Rule EPA has proposed her e. B. Public Policy, EPA's Longstanding Practice, and Other Provisions of the Act Support a n Interpretation of Section 111(d) That

Authorizes the Clean Power Rule. Commenters noted t hat an interpretation that would prohibit regulation of CO2 from power plants and other exist ing stationary sources under section 111(d) would have far-reaching consequences that cannot be reconciled with the Clean Air Act's broad protective purposes. Commenters stated sources thatemit hazardous air pollutants, and that thus could be regulated under section 112, also emit a b road range of other pollutants, including CO2. Commenters stated the implication of a reading thatprecludes 111(d) regulation of any pollutant (here, CO2) that may be emitted from a 112(c)-liste d source category but is not actually regulated under section 112 demonstrates the fallac y of such an interpretation: EPA would have to either choose to use section 112 to address dang ers associated with power plant hazardous air pollutants (such as harm caused by eating mercury-c ontaminated fish) or to use section 111(d) to address the "serious and well recognized" climate-c hange harms caused by CO2 emissions from power plants. See Massachusetts, 549 U.S. at 521; 7 9 Fed. Reg. at 34,833. Commenters stated7

that under such an interpretation it could not choo se to do both. (Such an interpretation could have adverse public health and environmental impact s apart from hampering efforts to curb CO2 from the largest sources of that pollutant because EPA has used section 111(d) to regulate other harmful pollutants, such as sulfuric acid mist and fluoride compounds, that are emitted from sources regulated under section 112. See infra, not e 23.) Commenters stated it makes no sense that Congress would have directed EPA to make such a choice in a statute designed to protect public health and welfare. Commenters stated the Ac t's principal purpose to "protect and enhance the quality of the Nation's air resources," 42 U.S. C. 7401(b)(1), would hardly be served if EPA were limited to regulating only one set of dangerou s pollutants, but not another, from the most serious polluters in the country. In particular, co mmenters stated, such an interpretation would exclude the largest sources of CO2 from regulation under section 111(d) by virtue of the fact that those sources-such as power plants, petroleum refin eries, and cement plants-are already regulated under section 112 due to their emission o f hazardous air pollutants. Commenters stated this new gap in regulation would undermine an obvio us function of section 111(d) that the Supreme Court recognized in AEP v. Connecticut: nam ely, to "provide[] a means to seek limits on emissions of carbon dioxide from domestic power plants." 131 S. Ct. at 2537-38. Commenter stated nothing in the legislative history of the 19 90 amendments suggests that Congress intended such a radical result when it replaced section 111( d)'s cross-reference to the hazardous-airpollutant program. Commenters stated in both the Ho use and the Senate, these minor changes to section 111(d) were made without any debate or disc ussion, strongly suggesting that the purpose of both amendments was to preserve section 111(d)'s role to fill the gap where emissions are unregulated under the other programs. Indeed, comme nters stated, in compiling the legislative history of the 1990 amendments, the Congressional R esearch Service transcribed the Clean Air Act, as amended, by including both the House and Se nate versions of the amendments to section 111(d) with the notation that the amendments are "d uplicative" and simply use "different language [to] change the reference to section 112." A Legislative History of the Clean Air Act Amendments of 1990, vol. 1 at 46 & n.1 (1993). Comm enters stated silence in legislative history accompanying a subtle legislative change indicates that Congress did not intend to alter the preexisting scheme significantly. See United States v. Neville, 82 F.3d 1101, 1105 (D.C. Cir. 1996).(See also Dir. of Revenue of Mo. v. CoBank AC B, 531 U.S. 316, 323 (2001) (declining to conclude conforming amendment substantively altered states' taxing power "because there is no indication Congress intended to change the taxation of banks for cooperatives with the 1985 amendments")). Commenters added as the Supreme Court has stated, Congress "does not...hide elephants in mouse-holes." Whitman, 531 U.S. at 468 . Thus, commenters stated, EPA's interpretation of section 111(d) properly rejects t he "anomalous effect" of the reading proffered by the Proposed Rule's opponents, which would force EPA to select only one set of harmful pollutants to regulate based "simply on the fortuit y that [these pollutants] share [] a source." Desert Citizens Against Pollution v. EPA, 699 F.3d 524, 527-28 (D.C. Cir. 2012) (rejecting petitioners' "linguistically possible" view of stat ute and upholding EPA's interpretation). Commenters stated reading section 111(d) to permit regulation of CO2 from power plants, where CO2 emissions from power plants are not regulated u nder section 112, also is consistent with EPA's longstanding regulation (both before and afte r the 1990 amendments) of source categories under section 111(d) and section 112.(See, e.g., 61 Fed. Reg. 9,905 (Mar. 12, 1996) & 40 C.F.R.8

pt. 63, subpt. AAAA (regulating landfills under sec tion 111(d) for methane and non-methane organic compounds and under section 112 for vinyl c hloride, ethyl benzene, toluene, and benzene); 42 Fed. Reg. 12,022 (Mar. 1, 1977) & 40 C .F.R. pt. 63, subpt. BB (regulating fluorides from phosphate fertilizer plants under section 111( d) and regulating hydrogen fluoride and other pollutants under section 112)) Commenters stated EP A's practice is supported by the plain language of other provisions of section 112 as amen ded in 1990, which further evidences Congress' understanding that different emissions fr om the same source categories could be regulated under both sections 111 and 112.(The D.C. Circuit in New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008), did not reach the question wh ether, if a source is listed under section 112, EPA lacks authority to regulate that source under s ection 111(d). Instead, because the court determined that EPA's delisting of power plants fro m section 112 was improper, and "under EPA's own interpretation" it could not use section 111(d) to regulate mercury (a section 112- listed hazardous air pollutant) from this section 1 12-listed source category, the court concluded that the section 111(d) rule was invalid. Id. at 58 3.) For example, commenters stated, Congress directed EPA to keep its lists of source categories "consistent" between sections 111 and 112. 42 U.S.C. 7412(c)(1); see also id. 7412(d)(7) ("No emi ssion standard or other requirement promulgated under this section shall be interpreted . . . to diminish or replace the requirements of a more stringent emission limitation or other appli cable requirement established pursuant to section 7411"). Commenters stated Congress' intent to avoid duplicative regulation is maintained fully by precluding the use of section 111(d) to re gulate emissions from existing sources if those same emissions are being regulated under section 11 2. Commenters stated Congress simply did not intend to sacrifice comprehensive public health protections by forgoing regulation of harmful but non-hazardous air pollutants from source catego ries that happen to also emit a hazardous air pollutant. Commenters stated the House amendment do es not strip EPA's authority to regulate CO2 emissions under Section 111(d). Commenters stat ed that the House amendment is subject to multiple interpretations and therefore even viewed in isolation would not preclude regulation of CO2 from power plants. Commenters stated, in light of the statutory context, it may be viewed as a shorthand way of preserving section 111(d)'s trad itional role as a source of authority to regulate emissions not covered by the NAAQS or the hazardous -air-pollutant programs. Commenters stated for sources subject to regulation under sect ion 111(b), the House amendment requires performance standards: "for any existing source for any air pollutant (i) for which air quality

criteria have not been issued or which is not inclu ded on a list published under section 7408(a) or emitted from a source category which is regulated u nder section 7412 [i.e., the hazardous-airpollutants program]." Commenters stated the phrase "which is regulated under section 7412" could be read as modifying both "any air pollutant" and "source category," thus referring to those emissions that are actually subject to section 112 emissions standards because (a) the pollutant is "regulated under section 7412"-i.e. listed as a haz ardous air pollutant, and (b) the source category for that pollutant is "regulated under section 112- i.e. listed as a source category subject to section 112 regulation. Read this way, commenters added, th e House amendment is a shorthand way of cross-referencing section 112 to clarify that secti on 111(d) only precludes regulation of a pollutant from a specific source category (e.g., me rcury from power plants) if those emissions are actually regulated under section 112.(So read, the House amendment would even authorize section 111(d) standards for listed hazardous air p ollutants, so long as they are emitted from9

sources that are not regulated under section 112 fo r those pollutants.) Commenters stated consistent with the purpose of the Act and 1990 ame ndments overall, this interpretation of the House amendment would preserve section 111(d)'s rol e in the Act's comprehensive scheme by authorizing standards for emissions not otherwise r egulated under the Act, and there would be no bar to EPA's promulgation of CO2 standards under se ction 111(d). Indeed, commenters stated, any reading of section 111(d) that is consistent wi th its gap-filling role in the Act's comprehensive scheme must authorize EPA to regulate CO2 emissions from existing power plants because those emissions are not otherwise re gulated under the Act. Commenters summarized, stating that because CO2 emissions fromexisting power plants are not regulated as criteria pollutants or hazardous air pollutants, an d because EPA has moved forward with regulation of power plant CO2 emissions under secti on 111(b), EPA has authority to promulgate the Proposed Rule.

Response 4: EPA agrees that it has the authority to promulgate regulations addressing CO2 emissions from existing power plants under section 111(d). EPA’s discussion of this issue is in Section IV of the preamble.

Comment 5: Commenters stated that in light of the recent Supre me Court decision in the UARG v EPA case, they question EPA's authority for the p roposed Clean Power Plan, which would "bring about an enormous and transformative expansi on in EPA's regulatory authority without clear congressional authorization."(UARG v. EPA et al., 134 S. Ct. at 2444.)

Commenters stated EPA can regulate GHGs, but only w ithin the narrow limits of what Congress has authorized under the CAA. Commenters explained that Congress created a number of different regulatory programs with carefully define d limit and some of these programs can be used to regulate GHGs, but EPA may only do so in a way that complies with the limits established by Congress. Commenters added the recen t Supreme Court decision makes this point quite clearly, citing on June 23, 2014, the Court i ssued its UARG v. EPA decision.

Response 5: We disagree with these comments. We discuss our aut hority to promulgate this rule, including why this rule is not inconsistent w ith the U.S. Supreme Court’s decision in UARG

v. EPA , in section IV of the preamble and Section XXII of the Legal Memo.

Comment 6: Commenters stated that the industry interpretation of Section 111(d) is textually and logically flawed, and must be rejected. Commenters explained that the structure and context of the 1990 Amendments signal the opposite concern: th at EPA was not proceeding diligently enough to limit harmful air pollution, and in rejec ting an interpretation put forth by some industry advocates that would prevent EPA from regu lating under section 111(d) all "HAP or non-HAP emitted from a source category regulated un der section 112," EPA has affirmed that [s]uch a reading would be inconsistent with the gen eral thrust of the 1990 amendments, which, on balance, reflects Congress' desire to require EP A to regulate more substances, not to eliminate EPA's ability to regulate large categories of pollu tants like non-HAP. Furthermore, commenters added, EPA has historically regulated non-HAP undersection 111(d), even where those nonHAP were emitted from a source category actually re gulated under section 112. See, e.g., 4010

CFR 62.1100 (California State Plan for Control of F luoride Emissions from Existing Facilities at Phosphate Fertilizer Plants). Commenters stated the y do not believe that Congress sought to eliminate regulation for a large category of source s in the 1990 Amendments and our proposed interpretation of the two amendments to section 111 (d) avoids this result. (70 Fed. Reg. 16,032 (Mar. 29, 2005) Commenters continued, stating that the Supreme Court has held that, where dealing with conflicting statutory provisions, it i s appropriate to adopt a construction that is "more consonant with the functions sought to be ser ved by the Act" and that does not "impute to Congress a purpose to paralyze with one hand what i t sought to promote with the other." Clark v. Uebersee Finanz-Korp, 332 U.S. 480, 489 (1947); see also Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. Ruckelshaus, 719 F.2d 1159, 1165 (D.C.Cir.1 983) ("A statute should ordinarily be read to effectuate its purposes rather than to frustrate th em."). Here, commenters stated, the ends that the Act seek to advance are the protection of public he alth and welfare from air pollution, a goal clearly disserved by an interpretation that would b ar EPA from curbing harmful CO2 pollution under section 111(d). 42 U.S.C. S.7401(b)(1). Comme nters stated to read the statute as foreclosing existing-source standards of performanc e for any pollutant emitted by a source category regulated under section 112 would, as a pr actical matter, render section 111(d) inoperative as to virtually all pollutants, since t he sources regulated under section 112 emit virtually every pollutant imaginable that might be subject to section 111(d) standards. Commenters stated the industry reading would thwartthe Act's - and section 111's - core purpose of protecting public health and welfare, see S. 740 1(b)(1), 7411(b)(1)(A), since it would allow entire classes of pollutants (in this case, CO2) to go unregulated, no matter how harmful to the public health and welfare they may be. Commenters argued that to imply that Congress gave EPA the choice of regulating power plant emissions of either CO2 or mercury, but not both, makes a mockery of the statute and its goal of prot ecting the public health and welfare. Commenters continued, stating that the industry rea ding of section 111(d) would not even serve the purpose that some industry advocates have attri buted to it "avoiding duplicative regulation of pollutants that are already being regulated under s ections 108 or 112" because CO2 is not being regulated under either of those two other sections. Thus, commenters stated, the net result of such a misguided reading would be no regulation of CO2 emissions from existing power plants under any Clean Air Act program. Commenters stated to allow such a harmful pollutant to fall through the regulatory cracks based on the mere fortuity that EPA has decided to control emissions of some other pollutant from that source not only contravenes the Act's and section 111's health-and-welfare protective purpose, but al so makes no sense. Commenters stated time and again, the Supreme Court has declined to interp ret statutes "including the Clean Air Act" in such a fashion. See e.g., Engine Mfrs. Assn. v. Sou th Coast Air Quality Management District, 541 U.S. 246, 255 (2004) (rejecting reading that "w ould make no sense"); Desert Citizens Against Pollution v. EPA, 699 F.3d 524, 527-28 (D.C . Cir. 2012) (EPA permissibly rejected interpretation that "would have the anomalous effec t of changing the required stringency of nonS. 112(c)(6) HAPs at a given area source . . . simp ly on the fortuity that the non-S. 112(c)(6) HAPs in question shared a source with one or more S . 112(c)(6) HAPs") (emphasis added); Roberts v. Sea-Land Services, 132 S. Ct. 1350, 1359 -60 (2012) ("Under Roberts' reading, two employees who earn the same salary and suffer the s ame injury on the same day could be entitled to different rates of compensation based on the hap penstance of their obtaining orders in11

different fiscal years. Commenters closed, stating they can imagine no reason why Congress would have intended, by choosing the words "newly a warded compensation," to differentiate between employees based on such an arbitrary criter ion.").

Response 6: EPA agrees with these comments that the Section 11 2 Exclusion in section 111(d) is not properly read to preclude EPA from promulgat ing regulations addressing CO2 emissions from existing power plants under section 111(d). EP A’s discussion of this issue is in Section IV of the preamble.

Comment 7: Commenters stated that EPA's flexible, cost-minimiz ing approach to setting performance standards for existing power plants is consistent with over thirty years of EPA Clean Air Act practice, under administrations of bo th parties, and opponents of the Clean Power Plan have argued that EPA is taking unprecedented a nd unwarranted steps to regulate carbon dioxide under the Clean Air Act, including: institu ting statewide limits on the rate of emissions, when the statute refers to limits on sources; impos ing regulations that will result in a shift of the balance of fuels used to produce electricity; consi dering demand-side energy efficiency measures in analyzing how states can meet the requirements o f the Act; applying performance standards to existing sources that are regulated under the hazar dous air standards; and accounting for cobenefits, such as the reductions in harmful particu late matter that will occur in tandem with greenhouse gas reductions, in the rule's cost-benef it analysis. However, commenters provided comments they believe will show EPA has repeatedly undertaken similar approaches to Clean Air Act regulation under both Republican and Democr atic administrations, and the comments will also address why the EPA's flexible, cost-mini mizing approach is preferable to a strict, technology-based standard and suggest some ways in which EPA could make the program even
more efficient. Commenters listed 5 themes: I. Subs tantial precedent exists for statewide limits, including trading, where the statue refers to constraints on individual sources II. Substantial precedent exists for programs under Clean Air Act t hat influence the type of fuel used for the production of electricity III. Substantial preceden t exists for Clean Air Act regulatory programs that incorporate energy efficiency, including deman d-side efficiency, into compliance options IV. Substantial precedent exists to interpret the " Section 112 Exclusion" as consistent with the Clean Power Plan V. Consistent with longstanding re gulatory best practices, EPA is justified in counting all significant co-benefits and qualitativ e benefits of the Clean Power Plan. Commenters continued, stating that EPA, scholars, a nd advocates offer a variety of compelling arguments based on the section's text, structure, a nd legislative history - as well as judicial principles of statutory interpretation and agency d eference - that strongly support the agency's authority under Section 111(d) to regulate greenhou se gases from existing power plants, because greenhouse gases from power plants are not hazardou s pollutants regulated under Section 112.(See, e.g., Avi Zevin, Dueling Amendments: The Applicability of Section 111(d) of the Clean Air Act to Greenhouse Gases (Policy IntegrityWorking Paper, 2013) (reviewing the legislative history and implications of various app roaches to statutory interpretation), available at http://policyintegrity.org/files/publications/2014- 5_Zevin.pdf .) These comments build on those compelling arguments in support of the agency's aut hority, by exploring EPA's regulatory history of interpreting the dueling amendments in Section 1 11(d). Commenters added that President12

George H.W. Bush's EPA Viewed the Section 112 Exclu sion as Focused on Pollutants, Not Source Categories. In a May 1991 proposal of emissi ons guidelines for municipal solid waste landfills - just six months after the passage of th e 1990 Clean Air Act Amendments and their dueling provisions - EPA defined the scope of Secti on 111(d) as excluding only certain pollutants, not entire source categories: When an N SPS has been promulgated under section 111(b) for a category of sources, section 111(d) of the CAA requires that States submit plans which establish emission standards for existing sou rces and provide for implementation and enforcement of emission standards for the designate d pollutant. In general, commenters stated, a designated pollutant is one that may cause or contr ibute to endangerment of public health or welfare but is not hazardous within the meaning of section 112 of the CAA and is not controlled under sections 108 through 110 of the CAA.(Standard s of Performance for New Stationary Sources and Guidelines for Control of Existing Sour ces: Municipal Solid Waste Landfills, 56 Fed. Reg. 24,468, 24,469 (May 30, 1991)) Commenters stated the proposed rule never discusses the dueling amendments or any controversy around th e scope of Section 111(d), even though it mentions the option of alternatively regulating lan dfills under Section 112. (Id. at 24,474 ("EPA was cognizant that section 112 of the CAA (which ca n be used to develop NESHAP) could have been used. However, given the uncertainty and diffi culty in setting standards under section 112, EPA decided to proceed with standards development u nder section 111.")) Commenters stated under the Bush Administration's definition, EPA tod ay would clearly have authority to regulate greenhouse gases from existing power plants, since greenhouse gases "contribute to endangerment of public health or welfare but [are] not 'hazardous' within the meaning of section 112 of the CAA and [are] not controlled under secti ons 108 through 110." Commenters continued, stating that President Clinton's EPA Con tinued Reviewing Section 111(d) Plans for categories also regulated under Section 112, and co ntinued a pollutant-focused view of the exclusions. Commenters stated that in 1998, the Cli nton EPA issued hazardous air pollutant standards under Section 112 for pulp and paper prod ucers, including Kraft pulp mills.(National

Emission Standards for Hazardous Air Pollutants for Source Categories: Pulp and Paper Production, 63 Fed. Reg. 18,504 (Apr. 15, 1998); se e 40 C.F.R. pt. 63 subpt. S.) Commenters stated in the rulemaking, EPA did not indicate any potential conflict with its existing Section 111(d) guidelines on total reduced sulfur from Kraf t pulp mills, which EPA had issued in 1979.(Kraft Pulp Mills; Final Guideline Document, 4 4 Fed. Reg. 29,828 (May 22, 1979).) Commenters stated that moreover, President Clinton' s EPA continued to review and approve state implementation plans for Kraft pulp mills and their total reduced sulfur emissions under Section 111(d), as evident by the approval of Maryl and's plan in 1999, despite the separate Section 112 standards applicable to the source cate gory for different pollutants.(Approval and Promulgation of State Air Quality Plans for Designa ted Facilities and Pollutants; Maryland; Proposed Revision to Section 111(d) Plan Controllin g Total Reduced Sulfur Emissions from Existing Kraft Pulp Mills, 64 Fed. Reg. 59,718 (Nov . 3, 1999). The fact that the Section 111(d) regulations predated the Section 112 regulations, a nd not vice versa, could be significant, though the legal grounds for any such distinction are uncl ear.) Commenters stated President Clinton's EPA also continued work on the municipal solid wast e landfill regulation first proposed by the previous administration, and continued to view the scope of Section 111(d) as excluding only certain pollutants, not entire source categories. C ommenters stated that in a 1995 background13

report, EPA's Office of Air Quality Planning and St andards focused on the seemingly more limiting House amendment and initially concluded th at future regulation of landfill gas under Section 112 could preclude the proposed regulation under Section 111(d). Importantly, though, commenters added, "landfill gas" is a complex mix o f pollutants that includes hazardous substances. Commenters stated the report goes on to explain, "Some components of landfill gas are not hazardous air pollutants listed under secti on 112(b) and thus will not be regulated under a section 112(d) emissions standard," implicitly leav ing such non-hazardous pollutants for Section 111(d) regulation.(Office of Air Quality Planning a nd Standards, EPA-453/R-94-021, Air Emissions from Municipal Solid Waste Landfills' Bac kground Information for Final Standards and Guidelines (1995).) Commenters stated when the emissions guidelines on landfill gas were finalized the following year, EPA did not discuss t he scope of Section 111(d), even as the agency indicated that it might issue hazardous air polluta nt standards for landfills in the future.(Standards of Performance for New StationarySources and Guidelines for Control of Existing Sources: Municipal Solid Waste Landfills, 61 Fed. Reg. 9905, 9906 (March 12, 1996) ("[M]ercury might be emitted from landfills. The EP A is still looking at the possibility and will take action as appropriate in the future under [Sec tion 112].")) Commenters stated when EPA finally proposed hazardous air pollutant standards for landfills in the final months of the Clinton administration, the rule explicitly indicated that the Section 111(d) emissions guidelines would continue to apply: "The additional [Section 112] re quirements [are] above and beyond the [Section 111] EG/NSPS....[T]hese landfills continue to remain subject to the provisions of the EG/NSPS as applicable."(National Emission Standards for Hazardous Air Pollutants: Municipal Solid Waste Landfills, 65 Fed. Reg. 66,672, 66,674- 75 (Nov. 7, 2000); see also Id. at 66,678 ("Landfills are already regulated in the EG/NSPS un der authority of section 111. . . . Therefore, the proposed rule contains the provisions of the EG/NSPS, plus the provisions discussed above from section 112.")) Commenters stated the Clinton EPA even more directly continued taking a pollutant-focused approach to the Section 112 exclu sion in proposing Section 111(d) guidelines for medical waste incinerators: [C]ontrol under sec tion 111(d) is appropriate when the pollutant may cause or contribute to endangerment of public h ealth or welfare but is not known to be 'hazardous' within the meaning of section 112 and i s ...not emitted from 'numerous or diverse' sources as required by section 108." (Proposed Stan dards of Performance for New Stationary Sources and Emission Guidelines for Existing Source s: Medical Waste Incinerators, 60 Fed. Reg. 10,654, 10,657 (Feb. 27, 1995). The rule was p roposed jointly under sections 111(d) & 129.) Commenters concluded that under any of the Cl inton administration's interpretations, EPA today could regulate greenhouse gases from existing power plants under Section 111(d). Commenters stated, regarding President George W. Bu sh's EPA Continued the Clinton Administration's Approaches to Sections 111 and 112 , that much like under President Clinton, President George W. Bush's EPA continued to review and approve states' Section 111(d) plans for Kraft pulp mills, even though pulp and paper pl ants were also regulated under Section 112.(Approval and Promulgation of Air Quality Imple mentation Plans; Maine; Total Reduced Sulfur from Kraft Paper Mills, 68 Fed. Reg. 23,209 (May 1, 2003); Approval and Promulgation of State Air Quality Plans for Designated Facilitie s and Pollutants; Commonwealth of Virginia; Control of Total Reduced Sulfur from Pulp and Paper Mills, 72 Fed. Reg. 59,017 (Oct. 18, 2007). Commenters stated under the Bush Administrat ion's view, the continued applicability of14

pre-1990 Section 111(d) guidelines after subsequentregulation under Section 112 may present a different case than what EPA faces today with the C lean Power Plan, when Section 112 regulation of power plants predates the proposal to use Section 111(d) for greenhouse gases. See Regulating Greenhouse Gases under the Clean Air Act , 73 Fed. Reg. 44,354, 44,493 (July 30, 2008) (asking for comments on "the continued validi ty of the section 111(d) regulations" if "we were to promulgate a section 111(d) emission standard and then subsequently take action under sections 108 or 112 such that we could not promulga te a section 111(d) standard had we not already done so."). The grounds for any such legal distinction are unclear.) Commenters stated Bush's EPA also finalized hazardous air pollutant s tandards for landfills, which had been proposed in the Clinton administration's final days . Commenters stated that just as in the Clinton proposal, the final hazardous air pollutant standar d indicated that the Section 111(d) emissions guidelines would continue operating.(National Emiss ion Standards for Hazardous Air Pollutants: Municipal Solid Waste Landfills, 68 Fed. Reg. 2227, 2229 (Jan. 16, 2003) ("[Qualifying sources] would continue to be subject to the EG/NSPS as appl icable, plus additional requirements imposed [under section 112].").) To that end, comme nters added, after the final hazardous air pollutant standard was published, EPA continued rev iewing state plans for landfill gas under Section 111(d), explaining that the approvals were "based on section 111(d) requirements of the Act, not sections 110 and 112."(Approval and Promul gation of State Air Quality Plans for Designated Facilities and Pollutants, Commonwealth of Pennsylvania; Control of Landfill Gas Emissions from Existing Municipal Solid Waste Landf ills, 68 Fed. Reg. 74,868, 74,868 (Dec. 29, 2003); see also 68 Fed. Reg. 37,421, 37,422 (Ju ne 24, 2003) ("A designated pollutant means any air pollutant . . . which is not included on a list published under section 108(a) or section 112(b)(1)(A) of the Act.")) Commenters stated that in 2005, the George W. Bush administration decided to delist power plants from Section 112 and regulate their mercury emissions under Section 111(d) instead. Commenters stated though th e D.C. Circuit eventually struck down the plan on unrelated grounds, the rulemakings show tha t EPA grappled with the dueling amendments and came down firmly in favor of harmoni zing the amendments [Delisting Rule, Revision of December 2000 Regulatory Finding on the Emissions of Hazardous Air Pollutants From Electric Utility Steam Generating Units and th e Removal of Coal- and Oil-Fired Electric Utility Steam Generating Units From the Section 112 (c) List, 70 Fed. Reg. 15,994, 16,031 (Mar. 29, 2005) ("The canon of statutory construction tha t calls for harmonizing conflicting statutory provisions, where possible, and adopting a reading that gives some effect to both provisions is not controlling here because that canon applies whe re two provisions of a statute are in conflict, not where two amendments to the same statutory prov ision are in conflict. Nevertheless, we have attempted to follow the general principles underlyi ng this canon of construction. . . . While it appears that the Senate amendment to section 111(d) is a drafting error and therefore should not be considered, we must attempt to give effect to bo th the House and Senate amendments, as they are both part of the current law.") (emphasis added ).] through a reasonable reading [Id. at 16,032 ("This is a reasonable interpretation of the amendm ents to section 111(d) because it gives some effect to both amendments. . . . [T]he question is not whether commenters have [also] identified a reasonable construction of section 112(d). Rather, the issue is whether our construction is a permissible one.").] of ambiguous language, [Id. at16,031 ("Although we recognize that the phrase 'a source category' is susceptible to differ ent interpretations, in that it could conceivably15

mean one or many source categories, we believe thatour interpretation is a permissible construction.").] offering an interpretation that f ocuses on pollutants, not category-wide exemptions,[Id. at 16,031-32 ("Where a source categ ory is being regulated under section 112, a section 111(d) standard of performance cannot be es tablished to address any HAP listed under section 112(b) that may be emitted from that partic ular source category.").] and that respects both the "general thrust" of congressional intent [ Id. at 16,032 ("[T]he general thrust of the 1990 amendments . . . on balance, reflects Congress' des ire to require EPA to regulate more substances, not to eliminate EPA's ability to regul ate large categories of pollutants like nonHAP.").] and regulatory history.[Id. ("Furthermore, EPA has historically regulated non-HAP under section 111(d), even where those non-HAP were emitted from a source category actually regulated under section 112. See, e.g., 40 CFR 62.1 100 (California State Plan for Control of Fluoride Emissions from Existing Facilities at Phos phate Fertilizer Plants).").] For example, the agency noted that, "EPA has historically regulated non-HAP under section 111(d), even where those non-HAP were emitted from a source category a ctually regulated under section 112."[Id.] Ultimately, EPA changed the definition of "designat ed pollutants" (i.e., those pollutants subject to Section 111(d)), finally replacing the pre-1990 version but maintaining its essential scope and confirming that Section 111(d) can regulate polluta nts emitted by source categories regulated under Section 112 so long as those particular pollu tants are not listed under Section 112.[Standards of Performance for New and Existing Stationary Sources: Electric Utility Steam Generating Units, 70 Fed. Reg. 28,649 (May 18, 2005 ).] Commenters concluded that applying that definition today, EPA would be authorized to r egulate greenhouse gases from existing power plants. Commenters stated as a coda to the Bush adm inistration's work on Section 111(d), in its advanced notice of proposed rulemaking on greenhous e gases in 2008, EPA explained that Section 111(d) "provides a 'regulatory safety net' for pollutants not otherwise subject to major regulatory programs under the CAA. Section 111 prov ides EPA and states with significant discretion concerning the sources to be regulated." [Regulating Greenhouse Gases under the Clean Air Act, 73 Fed. Reg. 44,354, 44,418 (July 30 , 2008); see also Id. at 44,421 ("[L]isting an air pollutant as a HAP under section 112(b) general ly precludes regulation of that air pollutant from existing sources under section 111(d).")] Comm enters stated that President Obama's EPA Continues a Pollutant-Focused Reading of the Sectio n 112 Exclusion and explains that President Obama's EPA already settled on its view of the scop e of Section 111(d), back in 2012. Commenters stated in returning to Section 112 for r egulation of mercury from power plants, EPA changed the definition of "designated pollutant s" but again kept the focus of the exemptions on particular pollutants, and not entire source cat egories.(National Emission Standards for

Hazardous Air Pollutants From Coal- and Oil-Fired E lectric Utility Steam Generating Units and

Standards of Performance for Fossil-Fuel-Fired Elec tric Utility, Industrial-CommercialInstitutional, and Small Industrial-Commercial-Inst itutional Steam Generating Units, 77 Fed. Reg. 9304, 9447 (Feb. 16, 2012) ("(a) Designated po llutant means any air pollutant, the emissions of which are subject to a standard of per formance for new stationary sources, but for which air quality criteria have not been issued and that is not included on a list published under section 108(a) or section 112(b)(1)(A) of the Act." ). Note this reverts back to the pre-1990 definition, and as such refers to a section of the statute (section 112(b)(1)(A)) that in fact no longer exists.) Commenters stated this focus is co nsistent with how each of the previous three16

presidential administrations - going back to just m onths after the dueling amendments were passed - have interpreted the scope of the Section 112 exclusion.

Response 7: EPA agrees that the Section 112 Exclusion in secti on 111(d) is not properly read to preclude EPA from promulgating regulations addressi ng CO2 emissions from existing power plants under section 111(d). EPA’s discussion of th is issue is in Section IV of the preamble.

Comment 8: Commenters stated that EPA has the authority to reg ulate greenhouse gas emissions from existing power plants under section 111(d) of the Clean Air Act, explaining that Section 111 of the Clean Air Act (CAA or Act) autho rizes EPA to promulgate regulations for the categories of stationary sources that EPA determine s contribute significantly to "air pollution which may reasonably be anticipated to endanger pub lic health or welfare."(42 U.S.C. S. 7411(b)(1) Commenters cited the Supreme Court in Ma ssachusetts v. EPA held that greenhouse gases (GHGs) are an "air pollutant" under the CAA.( 549 U.S. 497 (2007)) Commenters also

cited where American Electric Power Co. v. Connecti cut, the Court declined to find a common law of nuisance for power plants upon the recogniti on that EPA was moving forward to exercise its authority to regulate GHGs from power plants un der the appropriate authority of section 111 of the Act.(131 S. Cr. 2527 (2011)) Commenters stat ed that the Court also affirmed EPA's authority to regulate sources of GHGs in Utility Ai r Regulatory Group v. EPA.(134 S. Cr. 2427 (2014)) Under the Act, commenters explained, once E PA promulgates standards of performance for new sources under section 111(b), section 111(d ) requires EPA to establish a procedure similar to the State Implementation Plan (SIP) proc ess, under which each state is required to submit a plan to EPA that "establishes standards of performance for any existing source for any air pollutant (i) for which air quality criteria ha ve not been issued or which is not included on a list published under section 7408 (a) of this title or emitted from a source category which is regulated under section 7412 of this title but (ii) to which a standard of performance under this section would apply if such existing source were a new source."(42 U.S.C. section 7411(d)(1).) Commenters contended that the plan must also provid e for the implementation and enforcement of such standards of performance. (Id.)

Response 8: EPA agrees that it has the authority to promulgate regulations addressing CO2 emissions from existing power plants under section 111(d). EPA’s discussion of this issue is in Section IV of the preamble.

Comment 9: Commenters stated that Section 111(d) requires act ion on GHG emissions from EGUs, regardless of whether EGUs are subject to haz ardous air pollutant ("HAP") regulations. Commenters' explanation for this position follows:

a) The 1990 Clean Air Act Amendments contained two different amendments providing for changes to the same statutory language in secti on 111(d)(1). Prior to 1990, section 111(d) clearly mandated action to control dangerous air po llutants from existing sources if those emissions were not already regulated under section 108 or section 112, for source categories regulated under section 111(b): "The Administrator shall prescribe regulations which shall establish a procedure similar to that provided by s ection 7410 of this title under which each State17

shall submit to the Administrator a plan which (A) establishes standards of performance for any existing source for any air pollutant (i) for which air quality criteria have not been issued or which is not included on a list published under sec tion 7408(a) or 7412(b)(1)(A) of this title, but (ii) to which a standard of performance under this section would apply if such existing source were a new source. In 1990, Congress enacted two am endments to section 111(d)(1)(A)(i) addressing the same issue-when regulation under sec tion 112 would supplant regulation under section 111(d). Some amendment to section 111(d) wa s necessary because the 1990 amendments deleted section 112(b)(1)(A), which was the subsect ion of section 112 that section 111(d)'s had cross-referenced since 1970. Bills originating in e ach chamber amended section 111(d)'s crossreference to section 112(b)(1)(A) in different ways , and Congress ultimately enacted, and the President signed, a conference bill containing both amendments. The amendment originating in the House revised section 111(d)(1)(A)(i) by striki ng the words "or 112(b)(1)(A)" and inserting in their place the following phrase: "or emitted fr om a source category which is regulated under section 112." Congress also enacted an amendment or iginating in the Senate that revised the same subsection by striking the reference to "112(b )(1)(A)" and inserting in its place "112(b)."

The House amendment is located in section 108 of th e Statutes at Large (under "Miscellaneous Guidance"); the Senate amendment is found in sectio n 302 (under "Conforming Amendments").

The text and structure of the Act in the Statutes a t Large (104 Stat. 2399) are the same as in the public law passed by both chambers and signed by Pr esident George H.W. Bush (101 P.L. 549).

The Office of the Law Revision Counsel codified onl y the House amendment in the United States Code, 42 U.S.C. 7411(d)(1)(A)(i). The codifi er's notes to this section state that the Senate amendment "could not be executed." Regardless, the Statutes at Large - not the United States Code - controls here. The Statutes at Large constit ute the legal evidence of the laws for code titles that have not been enacted into positive law . Because Title 42 of the United States Code has not been enacted into positive law, the legal e vidence of the relevant law is the statutes at large, which contains both amendments.

b) The Senate amendment clearly requires 111(d) reg ulation of CO2 from EGUs. The Senate

amendment is clear and consistent with the historic role of section 111(d) as a "backstop" to ensure protection of public health from existing-so urce emissions not regulated under section

112 or section 110. Read with the rest of section 1 11(d), the Senate amendment continues the longstanding policy of covering all non-HAP, non-cr iteria pollutants under section 111(d). The amendment was necessary to conform to the conferenc e committee's amendments to section 112(b). Previously, section 112(b)(1)(A) required E PA to publish a list of HAPs it intended to regulate under section 112. The 1990 amendments rem oved subsection 112(b)(1)(A) entirely. The new section 112(b)(1) establishes an initial li st of over 180 HAPs and section 112(b)(2)-(3) gives EPA authority to both add new HAPs to the lis t and to de-list certain HAPs. The Senate amendment simply updated EPA's section 111(d) autho rity to reflect the amended list of HAPs regulated under section 112.

While some have argued that EPA should disregard th e text of the Senate amendment because its status as a "conforming amendment" renders it a poo r indication of congressional intent and a likely scrivener's error, the Senate amendment cann ot be disregarded. The D.C. Circuit has18

looked to conforming amendments in other statutes a nd given full effect to "the plain meaning of the statutory language in which Congress has direct ly expressed its intentions." Washington Hospital Center v. Bowen, 795 F.2d 139, 149 (D.C. C ir. 1986); see also CBS v. FCC, 453 U.S. 367, 381 ("Perhaps the most telling evidence of con gressional intent, however, is the contemporaneous [conforming] amendment"). Further, the Senate amendment does not resemble

a scrivener's error at all. A scrivener's error is "a mistake made by someone unfamiliar with the law's object and design," United States Nat'l Bank v. Independent Ins. Agents of Am., 508 U.S. 439, 462 (1993), and produces language with "no plausible interpretation," Williams Cos. v. FERC, 345 F.3d 910, 913 n.1 (D.C. Cir. 2003). The S enate amendment is plainly not a scrivener's error. In keeping with the same protect ive statutory structure that Congress first crafted in the 1970 Clean Air Act, the Senate amend ment has the entirely coherent purpose and effect of updating the section 111(d) cross-referen ce in light of amendments to section 112 that rendered the previous cross-reference meaningless b y deleting previous sub-paragraph 112(b)(1)(A). Furthermore, because the text of the Senate amendment is unambiguous, EPA "can remain agnostic on the question whether Congress in tentionally left [that] particular language in [the] statute or simply forgot to take it out. The suggestion that Congress may have 'dropped a stitch,' is not enough to permit [EPA] to ignore th e statutory text." See United States ex rel. Totten v. Bombardier Corp., 380 F.3d 488, 496 (D.C. Cir. 2004) (quotations and citation omitted). There is no exception here to the rule re quiring EPA "to give effect, if possible, to every word Congress used." See Reiter v. Sonotone C orp., 442 U.S. 330, 339 (1979).

c) The House amendment is most reasonably read to r equire regulation of CO2 emissions from EGUs. In contrast to the Senate amendment, the Hous e amendment is subject to multiple interpretations. The ambiguous House amendment woul d require EPA's expert interpretation even if Congress had not also amended identical lan guage in section 111(d) through the Senate amendment. See Chevron, U.S.C., Inc. v. Natural Res ources Defense Council, 467 U.S. 837, 843 (1984). Because the Senate amendment unambiguously commands regulation of non-HAP pollutants such as CO2, and because the House amend ment is reasonably interpreted (even without reference to the Senate Amendment) to permi t such regulation, EPA plainly has authority to regulate CO2 emissions under section 1 11(d), and the agency need not resolve here whether there are scenarios in which some pollutantor source might be regulable under one amendment but not the other, and how to resolve tha t problem. i. The House amendment provides for regulation of emissions that are not c ontrolled under the hazardous air pollution program. The House amendment is subject to multiple readings that would require regulation of CO2 from sources like EGUs. As changed by the House Amendment, section 111(d) requires EPA to prescribe existing source regulations "for a ny air pollutant (i) for which air quality

criteria have not been issued or which is not inclu ded on a list published under section 7408(a) or emitted from a source category which is regulated u nder section 112 of this title." (emphasis added). The most reasonable interpretation of the H ouse amendment is to construe it to not authorize regulation under 111(d) as to particular pollutants that are actually regulated under Section 112(n) as to the source category in questio n. On this interpretation, Congress intended to safeguard section 111(d)'s gap-filling role by expa nding the scope of the section to cover HAP emissions that would otherwise be unregulated under sections 112 or section 111(d). Readings of19

the House amendment offered by parties seeking to b lock regulation of CO2 under Section 111(d) have asserted that the provision necessarily bars regulation of any and all pollutants emitted by any source that is regulated under Secti on 112, even if it the specific pollutant in question is not a HAP and is therefore not regulate d under 112. But the text of section 112 is readily susceptible to reasonable interpretations u nder which the section 112-related exclusion from section 111(d) regulation is pollutant-specifi c. EPA may interpret the House amendment by resolving ambiguity in the phrase "emitted from a s ource category which is regulated under section 112." A source category is "regulated" unde r section 112 not in the abstract, but with respect to particular pollutants. The term "regulat ed" can therefore be read to mean "regulated with respect to that pollutant under section 112," rather than "regulated as to any pollutant under section 112." In other words, the House text could reasonably be understood to mean either (1) that EPA may not use section 111(d) when the source category is "regulated under section 112 for the pollutant in question," i.e., the same poll utant that is the candidate for regulation under section 111(d), or (2) that EPA may not use section 111(d) when the source category is "regulated under section 112 for any pollutant." Th e former is a sensible interpretation of the ambiguous term "regulated," and one that fits with a context that includes pollutant-specific phrasing of section 111(d) and a reference to a sta tutory provision, section 112, that "regulates" only hazardous pollutants. While the latter interpr etation is plausible as a matter of ordinary understanding, it is not inevitable - and, as expla ined below, its practical consequences are starkly discordant with the statutory structure and purpose. Furthermore, it is common and proper under the Clean Air Act to construe potentia lly broad statutory language in light of the context in which the language appears, in order to produce a result that fits with the purpose and mechanics of the particular program in question. Se e Utility Air Regulatory Grp. v. EPA, 134 S. Ct. 2427, 2440 (2014) ("UARG") (citing numerous ins tances in which EPA has narrowed term "any air pollutant" to fit with context). A polluta nt-specific reading of the Section 111(d) exclusion is easily permissible given the context h ere. The House language may also be read to authorize EPA to regulate any air pollutant which i s not a criteria pollutant and "any air pollutant [which is regulated under section 112] . . . which is not . . . emitted from a source category which is regulated under section 112." Under Young v. Com munity Nutrition Institute, an agency has

discretion under Chevron to determine which terms are the object of a dangling modifier. 476 U.S. 974, 891 (1986) (granting Chevron deference to FDA's interpretation concerning which term was modified by a dangling participle in the F ederal Food, Drug, and Cosmetic Act, even though a contrary "reading of the statute may seem to some to be the more natural interpretation"). Here, EPA can effectuate legislat ive intent by reading "which is regulated under section 112" to modify both "any air pollutant" and "source category." Alternatively, the language "any air pollutant . . . emitted from a so urce category which is regulated under section 112" could be read to refer to hazardous air pollut ants. This reading derives from the statutory context, in which hazardous air pollutants are the only pollutants regulated under section 112. As noted above, the Supreme Court has recently emphasi zed that the broad term "any air pollutant" as used in the Clean Air Act can take meaning from the context in which it is used. See UARG, 134 S. Ct. at 2440 (citing instances in which EPA h as narrowed term "any air pollutant" to fit with context, such as EPA's having construed variou s provisions of section 111 that reference "any air pollutant" as limited to pollutants "for w hich EPA has promulgated new source20

performance standards"). Here, it is logical to und erstand Congress to have wanted to preclude section 111(d) regulation based on section 112 regu lation only as to pollutants that are actually (or at least potentially) regulated under section 1 12. Moreover, under this interpretation, the House amendment would have essentially the same mea ning as the Senate amendment and continue Congress' longstanding policy of using sec tion 111(d) to control dangerous pollution that is not controlled under the criteria pollution provisions or section 112 ii. The legislative history of the House amendment supports a narrow re ading of the section 111(d) exclusion. Reading the House version of the section 111(d) exc lusion in a pollutant-specific way is not only consistent with the language of the statute, but al so promotes the purpose that EPA has reasonably attributed to the House amendment, namel y, expand[ing] EPA's authority under section 111(d) for regulating pollutants emitted fr om particular source categories that are not being regulated under section 112, -thereby protect ing against a regulatory gap that would provide no controls against HAP emissions from cert ain sources not regulated under section 112.
The version of the 1990 Clean Air Act Amendments th at initially passed the House clarifies the purpose of the House amendment to section 111(d). A s EPA has explained, the House amendment first passed the House in a bill that inc luded several new opportunities for EPA to exercise discretion in whether to regulate HAP emis sions under section 112. That bill would have provided EPA significant additional discretion regarding when to promulgate regulations under section 112. Perhaps most importantly, the Ho use bill would have allowed EPA to decline to regulate source categories under section 112 if EPA determined they were "already adequately controlled under this Act or any other Federal stat ute or regulation." Furthermore, the House bill would have made regulation of non-major sources und er section 112 entirely discretionary. In this context, EPA reasonably noted the likelihood t hat "the House did not want to preclude EPA from regulating under section 111(d) those pollutan ts emitted from source categories which were not actually being regulated under section 112." Ev en under the conference bill that became law, the prospect of certain HAP emissions not being reg ulated under section 112 may have motivated the expansion of section 111(d) to cover certain dangerous HAP emissions that might otherwise escape regulation, and that would not hav e been subject to section 111(d) standards as it was framed prior to 1990. The purpose of the Hou se amendment is further illuminated by its

context in the House bill as introduced. The House had initially proposed an overhaul of section 112 under which EPA would only be required to promu lgate regulations for half the source categories it determines to be major and area sourc es of HAPs. EPA would have been required to review the remaining fifty percent of listed source categories, and "designate the additional categories and subcategories [the EPA Administrator ] finds, in his discretion, warrant regulation under this section." This proposed system clearly e ntailed the potential for major sources of HAPs to escape regulation under section 112. Aware of this looming gap, the House proposed expanding section 111(d) to avoid leaving HAP emiss ions from numerous major sources unregulated. Interpretations that allow section 111 (d) to continue providing for non-HAP regulation where needed to protect public health an d welfare are true to the Clean Air Act's overarching structure for existing-source regulatio n. In addition to precluding any gaps in the regulatory framework for dangerous pollution from e xisting sources, these readings of the House amendment effectuate Congress desire to make the CA A more protective through each revision. If EPA interprets the House amendment in this fashi on, there will be no conflict in how the21

House and Senate amendments apply to the present ru lemaking. These readings have the benefit of not creating a bizarre and harmful gap in covera ge of harmful pollutants that is entirely out of step with the tenor of the Act's regime and of the 1990 amendments. These interpretations are true to the Clean Air Act's overarching structure f or existing-source regulation, as they allow section 111(d) to continue providing for coverage o f non-HAP emissions where needed to protect public health and welfare. These pollutant- specific readings of the House amendment are also consistent with the Supreme Court's observatio ns about section 111(d) in American Electric Power Company v. Connecticut, 131 S. Ct. 2527 (2011 ). The Court described section 111(d)'s exclusions by stating: "There is an exception: EPA may not employ section[111(d)] if existing stationary sources of the pollutant in question are regulated under the national ambient air quality standard program, sections[108,110], or the hazardo us air pollutants program, section [112]. Id. at 2537, n.7. This statement reflects the understan ding that the exclusion for emissions regulated under section 112 works in parallel with the exclus ion for emissions regulated under the NAAQS program. Indeed, the Court indicated that these exc lusions comprise a single exception to section 111(d). There is no question that sources subject t o regulation for criteria pollutant emissions under the NAAQS program are also subject to regulat ion for other emissions under section 111(d). Similarly, there should be no question thatsources are subject to regulation for pollution that is not controlled by the HAPs program, even wh ere sources are also regulated under section 112. iii. In context, the House amendment cannot pl ausibly be read to end section 111(d)'s application to dangerous pollution that happens to be emitted by source categories regulated under section 112. Although the House amendment mig ht be read-acontextually-to diminish the scope of section 111(d), such a reading is inconsis tent with the structure, purpose, and legislative history of the Clean Air Act. Although, as demonstr ated above, there are multiple ways to read the House amendment to continue 111(d)'s role as a backstop against unregulated, dangerous pollution, other readings of this ambiguous amendme nt have been proposed that would fundamentally alter the role of section 111(d). The most expansive reading of the House amendment would exclude from section 111(d) all pol lutants emitted by sources that are regulated by section 112-even when those pollutants are emitted by a source not regulated under section 112. This reading would effectively nullify section 111(d) because there are few (if any) non-HAP pollutants that are not emitted by sources in one of the dozens of source categories regulated under section 112. More vitally, this wou ld leave a host of dangerous air pollutants wholly unaddressed by the Clean Air Act. This is ma de clear by the fact that none of EPA's pre1990 emission guidelines could now be promulgated u nder such a regime, leaving communities vulnerable to pollutants such as sulfuric acid mist , reduced sulfur compounds, and fluoride. Some have argued that the House amendment must be r ead to exclude any regulation of all source categories regulated under section 112. Even EPA has opined that "a literal" reading of the House amendment would exclude non-HAPs from reg ulation under section 111(d). But no party has offered a plausible explanation for how C ongress could have intended to obliterate the scope of section 111(d) through the House amendment . There is no evidence that it was Congress' intent to drastically roll back the prote ctions in section 111(d). If Congress had intended such a radical departure from the statutor y structure of the CAA, Congress would have made it explicit in the statute or some member woul d have at least mentioned it in the extensive legislative history of the 1990 amendments to the C AA. See Chisom v. Roemer, 501 U.S. 380,22

396 n.23 (statutory interpretation that would work a sweeping and unorthodox change warrants skepticism). There is simply no evidence in the fac e of the statute or its legislative history that Congress intended such a major change in policy. Si nce Congress gave no indication regarding its intention to repeal the protections it establis hed in 1970, reading such a repeal into an ambiguous statute would be strongly disfavored. Her e, as noted above, there are other provisions of the 1990 amendments-including section 112(d)(7)- that affirmatively indicate that Congress did not intend for section 112 regulations to displ ace or alter section 111 standards and Clean Air Act permitting programs. A broad reading of the exc lusion in the House amendment would create a hole in the Clean Air Act that is not onlysweeping, but also highly anomalous. First, it is fanciful to believe Congress silently worked a majo r rollback of section 111(d) that is so jarringly discordant with the protective thrust of the 1990 Clean Air Act Amendments. It is simply not credible that Congress purposefully open ed a major loophole-completely counter to the historic role of section 111(d)-that would leav e dangerous air pollutants entirely unregulated, even as it strengthened environmental controls and systematically limited EPA's discretion to leave air pollution unregulated, purposely opened a n unprecedented gap in the Clean Air Act's framework for stationary-source regulation. This re ading also assumes that Congress created this unprecedented loophole surreptitiously, leaving maj or categories of pollutants wholly unregulated for the first time since 1970, at the s ame time that the supporters of the 1990 amendments uniformly praised the bill for strengthe ning the Clean Air Act. Second, this reading

of the House amendment would insert an exclusion in to section 111(d) that is unlike any other in the Clean Air Act. Congress has never allowed sourc es to release unlimited quantities of some pollutants simply because they must control other p ollutants. Cf. Desert Citizens Against Pollution v. EPA, 699 F.3d 524, 527-28 (D.C. Cir. 2 012) (holding that EPA reasonably rejected petitioners interpretation of the Clean Air Act, wh ich "would have the anomalous effect of changing the required stringency" for certain hazar dous air pollutants at a given source "simply on the fortuity" of the source's other emissions). Third, any attempt to actually implement the

broad exclusion reveals additional anomalies. Even under the most expansive reading of the House amendment, pollutants are only excluded from regulation under 111(d) if EPA happens to regulate a source under section 112 first. If EPA f irst regulates a source category under section 111(d) and then regulates the same source category under section 112, section 112(d)(7) provides that the HAP regulation does not diminish or replac e the existing 111(d) standards. It is inconceivable that Congress would prohibit section 111(d) standards "simply on the fortuity" of EPA's timing for promulgating standards under secti on 112. Accord Desert Citizens Against Pollution, 699 F.3d at 527-28. One company has deve loped a theory that attempts to explain how Congress could have intended to weaken section 111( d) in 1990: that Congress sought to strengthen section 112 without imposing "double reg ulation" on any source category. This account is entirely unfounded. First of all, the Cl ean Air Act is full of examples of instances in which Congress, in the interest of protecting publi c health and welfare, subject pollution sources to multiple, overlapping requirements for the same pollutants. See, e.g., 42 U.S.C. 7475(a) (noting that sources subject to stationary source p ermitting requirements (and "best available control technology" requirement) also must comply w ith applicable increments and air standards under, as well as any applicable performance standards under section 111); Id. section 7416 (expressly preserving state regulation of stationar y sources except where less stringent that Clean23

Air Act requirements). The 1990 legislative historymakes clear that House members were aware that, under the House bill, stationary sources woul d continue to be regulated under multiple sections of the Clean Air Act. Most important, it i s not double regulation for different pollutants from a single source category to be regulated under different regulatory programs. The notion that subjecting a source to regulation for some pol lutant should immunize it from regulation as to other pollutants is odd and altogether alien to the CAA's protective design. The CAA framework often provides separate but complementary regulator y frameworks to address different types of pollution emitted by the same sources. Criteria pol lutant standards also apply to the same sources whose emissions of hazardous air pollution are addr essed by Section 112. For instance, the CAA's Prevention of Significant Deterioration progr am requires new major emitting facilities to use the "best available control technology: for cri teria pollutants, in addition to any standards promulgated under section 111(b) or 112. Nor do anyof the CAA's stationary source provisions exclude sources from regulation because they are re gulated under other federal environmental laws. In summary, there is no reason to believe tha t the House amendment should be read to eviscerate section 111(d) and the House amendment c an easily be read to preserve the gap-filling role of section 111(d) in the Clean Air Act's regul atory framework. 4. EPA can reasonably harmonize the two amendments to section 111(d) by a dopting one of several reasonable interpretations of section 111(d), all of which req uire EPA to regulate non-HAP pollutants like CO2. a. Where one amendment clearly requires regula tion of CO2 emissions from EGUs and

another amendment's treatment of such emissions is ambiguous, EPA must interpret the two amendments harmoniously. The two amendments to sect ion 111(d)(1)(A)(i) created a statutory ambiguity regarding the pollutants regulated under section 111(d). This ambiguity requires EPA's expert interpretation. See Chevron, 467 U.S. at 837. EPA's expert interpretation of section 111(d) must be guided by the rule that "[t]he provi sions of a text should be interpreted in a way that renders them, compatible, not contradictory. E PA can reconcile the two amendments and interpret section 111(d) to require standards to ad dress CO2 emissions from EGUs. b) Any conflict in the section 111(d) can be resolved by r easonably harmonizing the House and Senate amendments. In the proposed rule, EPA has reasonabl y harmonized the text of the House and Senate amendments, through the following interpreta tion: "Where a source category is regulated under section 112, a section 111(d) standard of per formance cannot be established to address any HAP listed under section 112(b) that may be emitted from that particular source category." This interpretation follows the case law regarding when and how to harmonize conflicting statutory provisions. The D.C. Circuit has given EPA detailed instructions on "its responsibility to harmonize the statutory provisions" of the Clean Ai r Act when two provisions conflict and the statute does not plainly indicate which provision s hall prevail. See generally Citizens to Save Spencer Cnty v. EPA, 600 F.2d 844 (D.C. Cir. 1979) (upholding EPA's harmonization of sections 165 and 168 of the 1977 Clean Air Act, whi ch were drawn from "two bills originating in different Houses and containing provisions that, wh en combined, were inconsistent in respects never reconciled in conference); explained in NRDC v. Thomas, 805 F.2d 410, 436 n.39 (D.C. Cir. 1986) ("[T]his court held that the agency had broad latitude to harmonize two Clean Air Act provisions that facially dealt with the same issue differently."); see also Appalachian Power Co. v. EPA, 249 F.3d 1032, 1043-44 (D.C. Cir. 2001) ("L est it obtain a license to rewrite the statute an agency alleging a scrivener's error "may deviate no further from the statute than is needed to24

protect congressional intent.") (quotations and cit ation omitted). The court explained that the maximum possible effect should be afforded to all s tatutory provisions . . .if the inconsistent provisions point generally in a common direction.- Spencer Cnty, 600 F.2d at 870-71; cf. United States v. Colon-Ortiz, 866 F.2d 6 (1st Cir. 1989) ( reading language out of a statute, where language inserted through a drafting error directly required the opposite outcome from what Congress had mandated elsewhere in the text). Harmo nization of the House and Senate amendments to section 111(d) is appropriate because the two amendments point in a common direction. EPA has previously interpreted the House amendment to reflect the "House's apparent desire to increase the scope of EPA's authority und er section 111(d) and to avoid duplicative regulation of HAP for a particular source category. " As EPA explained in its proposal for the Clean Air Mercury Rule, the House amendment can be reasonably interpreted to reflect a desire to expand the pollutants that EPA could regulate un der section 111(d) so that EPA had authority to regulate HAPs emitted from source categories tha t were not actually being regulated under section 112 (such as existing area sources of HAPs that did not meet the statutory criterion in section 112(c)(3)). Similarly, the Senate amendmentserves the general purposes of preserving EPA's authority to regulate non-HAPs under section 111(d) and avoiding duplicative regulation of HAPs. That is, the Senate's conforming amendmentwas necessary to give EPA authority to regulate any delisted HAP under section 111(d). In addition, the Senate amendment avoids duplicative regulation of HAPs because it prevents EPA from regulating any HAP that is listed for regulation under section 112. In harmonizing th e House and Senate amendments to section 111(d), "it is appropriate for the agency . . .to l ook for guidance to the statute as a whole and to consider the underlying goals and purposes of the l egislature in enacting the statute, while avoiding unnecessary hardship or surprise to affect ed parties." Spencer County, 600 F.2d at 871 (footnote omitted). In the proposed rule, EPA has p roperly adhered to these principles in interpreting section 111(d). First, EPA concluded t hat it would be unreasonable to allow an expansive reading of the House amendment to prevail over the Senate amendment because such an interpretation would be inconsistent with "Congr ess' desire in the 1990 CAA Amendments to require the EPA to regulate more substances, and no t to eliminate the EPA's ability to regulate large categories of air pollutants." Further, prohi biting the regulation of non-hazardous but dangerous pollutants from existing sources because hazardous emissions from those sources is appropriately regulated under Section 112 would exp ose American communities to health- and welfare-harming pollutants clearly in conflict with Congress' effort in the Clean Air Act to protect Americans from harmful pollution. Thus, EPA has properly effectuated Congress' underlying goals and purposes in the Clean Air Act and subsequent amendments. Second, EPA reasoned that reading section 111(d) to exclude anyair pollutant from a source category regulated under section 112 would be inconsistent w ith "the fact that the EPA has historically regulated non-hazardous air pollutants under sectio n 111(d), even where those air pollutants were emitted from a source category actually regula ted under section 112." EPA's interpretation ensures the agency's continued ability to effective ly protect public health and the environment, whereas interpreting the 1990 amendments to drastic ally curtail the agency's longstanding authority under section 111(d) would cause unexpect ed harm. EPA's interpretation of section 111(d) is sound for several additional reasons. Fir st, in accord with the interpretative canons against implied amendments and repeals, EPA has notread the 1990 amendments to repeal25

section 111(d)'s application to non-HAP emissions f rom sources regulated under section 112. Reading the House amendment as certain court challe ngers have urged would deprive section 111(d) of most, if not all, of its traditional effe ct as a backstop that allows regulation of harmful pollution not covered under section 110 and 112. In the context of CO2 emissions, this interpretation would not only preclude regulation o f CO2 emissions from the power sector; it would similarly bar any regulation in all other sec tors of the nation's most significant sources of CO2, because, like power plants, these categories t oo are regulated under section 112. EPA data confirms that even outside the power sector-the chi ef emitters of CO2 among stationary sources are subject to HAP regulation under section 112. Ac cording to EPA's Facility Level Information on Greenhouse gases Tool (FLIGHT), the non-power su bsectors of the economy that emitted

more than 10 million metric tons of CO2 in 2013 wer e: Petroleum refineries; natural gas processing; natural gas transmission/compression; o ther petroleum and natural gas systems; petrochemical production; hydrogen production; ammo nia production; other chemicals; iron and steel production, other metals; cement production; lime manufacturing; pulp and paper; other paper products; food processing; manufacturing; eth anol production; and other. All of the major CO2-emitting source categories in the defined subse ctors on this list are regulated under section 112. (The "other" category likely includes many sou rce categories regulated under section 112). Because of the sheer number of section 112-li sted source categories, and the fact that they include most of the largest pollution sources, the suggested readings would likely have similarly dramatic effects on section 111(d)'s coverage as to other dangerous, but not hazardous, pollutants. "[I]t is well settled that amendments b y implication (like repeals by implication) are disfavored." Natural Resources Defense Council, Inc . v. Hodel, 865 F.2d 288, 318 (D.C. Cir. 1988). "[A]bsent a clearly expressed congressional intention, repeals by implication are not favored." See Branch v. Smith, 538 U.S. 254, 273 (2 003); see also Natl Assn of Home Builders v. Defenders of Wildlife, 551 U.S. 644, 664 n.8 (20 07) ("It does not matter whether this alteration is characterized as an amendment or a partial repeal."). Congress expressed no clear intention to drastically narrow the scope of sectio n 111(d), given the plain text of the Senate amendment, the categorization of the House amendmen t as "Miscellaneous Guidance," the legislative history's silence on such a repeal, and the general thrust of the 1990 amendments to broaden regulation of air pollutants. EPA has prope rly refrained from interpreting the House amendment to require such a change because Congress "does not alter the fundamental details of a regulatory scheme in vague terms or ancillary pro visions-it does not, one might say, hide elephants in mouseholes." Whitman v. Am. Trucking A ss'ns, 531 U.S. 457, 468 (2001). Guided by the canon against implied repeals, the Supreme C ourt has held that an agency may read a later-enacted provision to not override an existing , express statutory mandate. See Nat'l Ass'n of Home Builders, 551 U.S. at 666 (approving a harmoni zing interpretation of the Endangered Species Act, where one of the act's provisions dire ctly conflicted with a clear mandate in the Clean Water Act). If there is any conflict between the pre-1990 text of the CAA and the 1990 amendments, EPA cannot assume Congress' intended to repeal longstanding mandates in the Act unless that intention is clearly expressed. In the 1990 amendments, Congress did not clearly signal its intent to repeal section 111(d)'s applic ation to non-HAPs emitted by sources regulated under section 112, as the Senate amendment directs EPA to continue applying section 111(d) to these pollutants. EPA's interpretation of section 1 11(d) appropriately harmonizes the House and26

Senate amendments because it does not allow the Hou se amendment to override the existing, express statutory mandate to regulate under section 111(d) any air pollutant that is not regulated under the NAAQS program or section 112. Similarly, Watt v. Alaska illustrates how the canon against implied repeals can guide EPA in its duty " to give effect to each [amendment] if [it] can do so while preserving their sense and purpose." Se e 451 U.S. 259, 267 (1981). That case examined two statutory provisions that, by their pl ain terms, gave conflicting instructions regarding the distribution of mineral revenue from all federal wildlife refuges. The Court examined the later-enacted statute (the 1964 amendm ents to the Wildlife Refuge Revenue Sharing Act) for "clearly expressed congressional i ntention" to repeal the prior law, and found
none. 451 U.S. at 273. The Court harmonized the con flicting provisions by reading the latterenacted law to apply only to mineral revenues from the class of wildlife refuges that motivated congressional action in 1964. That is, the Court re ad the latter-enacted provision to establish the

revenue-distribution formula for mineral revenues f rom lands acquired for wildlife refuges, reasoning that the purpose of the 1964 amendments w as to facilitate acquisition of lands for wildlife refuges. 451 U.S. at 272. EPA's proposed i nterpretation of section 111(d) is entirely consistent with the Court's approach in Watts. EPA has interpreted the House amendment to refer to the class of pollutants that motivated the amendment: pollutants that were actually regulated under section 112. EPA has previously con cluded that "the House's amendment to section 111(d) could reasonably reflect its effort to expand EPA's authority under section 111(d) for regulating pollutants emitted from particular s ource categories that are not being regulated under section 112." This conclusion is supported byreading the House amendments to section 111(d) together with the House's proposed amendment s to section 112. As discussed above, the House bill proposed giving EPA discretion to not re gulate sources under section 112 in specific circumstances. While the House's proposed amendmentto section 112 might have diminished the scope of regulation under that section, the Hou se expanded the scope of section 111(d) and avoided creating a gap in the statutory framework f or existing-source regulation. In this rulemaking, EPA has harmonized the House and Senate amendments to ensure the section 111(d) exclusion only applies to pollution that is actually regulated under section 112, thus giving an effect to both the House and Senate amend ments that serves their respective purposes. Second, EPA's proposed interpretation of section 11 1(d) is consistent with that section's role in the structure of the Clean Air Act. Section 111(d) provides for controlling dangerous existingsource pollution that would otherwise escape regula tion, where EPA has regulated a source category under section 111(b) after finding that th e category of sources causes, or contributes significantly to, air pollution which may reasonabl y be anticipated to endanger public health or welfare. In short, the section fills gaps in the Ac t's framework for existing stationary sources that cause or contribute significantly to harmful air po llution. Because section 112 does not require EPA to regulate HAPs from all sources, some sources may emit dangerous amounts of hazardous pollutants even after EPA fully implements section 112. EPA's harmonization of the conflicting amendments would allow section 111(d) to play its g ap-filling role for uncontrolled sources of hazardous air pollution (as well as for non-hazardo us but dangerous pollutants emitted by sources that are regulated under Section 112). Thir d, EPA's proposed approach is consistent with the canon that exemptions from regulation should be construed narrowly. See Comm'r v. Clark, 489 U.S. 726 (U.S. 1989). ("In construing provision s . . . in which a general statement of policy27

is qualified by an exception, we usually read the e xception narrowly in order to preserve the primary operation of the provision"); see Phillips, Inc. v. Walling, 324 U.S. 490, 493 (1945) ("To extend an exemption to other than those plainly and unmistakably within its terms and spirit is to abuse the interpretative process and to frustrate t he announced will of the people."). Here, because the amendments exempt certain pollutants fr om regulation, any ambiguity in the amendments should be construed in favor of limiting the range of pollutants that are exempted As the expert agency responsible for imple menting the Clean Air Act, EPA is uniquely aware that narrowing the scope of section 111(d) wo uld significantly harm public health and welfare, and that these harms are contrary to the p urposes of the Act. See 42 U.S.C. 7401(b)(1). A court would properly defer to EPA's regulatory ex pertise in determining whether EPA has reasonably harmonized the differing 1990 amendments to section 111(d). See Nat'l Ass'n of Home Builders, 551 U.S.at 666 (upholding EPA's expe rt harmonization of conflicting statutes, where the agency could not simultaneously obey the differing mandates set forth in [the two provisions and "the statutory language . . . does n ot itself provide clear guidance as to which command must give way"). c. There are additional wa ys to harmonize the amendments that are consistent with the language and purpose of 111(d). The most straightforward way of harmonizing the two amendments is to interpret the ambiguous House amendment to be consistent with the crystal-clear Senate amendment with respect to the question presented herei.e., EPA may, under section 111(d), regulate a non -HAP pollutant that is emitted from source category whose HAP emissions are regulated under se ction 112(d). As demonstrated above, there are multiple reasonable readings of section 1 11(d) as amended by the 1990 House language that would allow EPA to proceed with regulating CO2 emissions from EGUs. An alternative means of doing so would be to interpret the 1990 am endments as having included two different versions of 111(d), one reflecting the direction pr ovided by House amendment and one the Senate amendment. Under this approach, the statute contains, with the Senate amendment, a separate, affirmative command to regulate all non-N AAQS, non-112(b)-listed pollutants. Each amendment mandates that EPA "shall prescribe regula tions" for a set of air pollutants. 42 U.S.C. 7411(d)(1) (emphasis added). Neither purports to ne gate regulatory obligations required by other provisions of the statute. Thus, even if the House amendment is read to exclude EGUs (and to direct regulation of sources not regulated under 11 2), the two amendments set out compatible and additive commands to regulate (EPA must issue g uidelines for all non-NAAQS pollutants not on a 112 pollutant list, and for sources of all non-NAAQS pollutants not regulated under 112). This reading allows EPA to "give effect to bo th" provisions, see Morton v. Mancari, 417 U.S. 535, 551 (1974), by doing what is required by either of the amendments. Some commentators have suggested that the two 1990 amend ments should both be given effect and that, if both are incorporated into the statute, th e resulting language can be read to deny EPA authority to act here. The premise that both amendm ents can be combined together and read as a single statutory command is problematic, since both provisions direct that the same language in the preexisting legislation be stricken; and neithe r amendment refers to or purports to take

account of the other. There is no evidence that eit her house of Congress, in fact, legislated with the expectation that its change to section 111(d) w ould be combined with another change. The statute does not provide any definitive guidance fo r how to incorporate the different chambers, instructions; efforts to combine the language of th e two amendments into a workable whole have28

a kind of artificiality in light of the strong indi cations that Congress did not actually make any decision that the two amendments were meant to oper ate together. But, contrary to the premise of the some supporters of this approach, the properway to combine the amendments yields an approach that is grammatical, that attempts to heed Congress' instructions closely as possible; and that yields a result that is consonant with the statute. The House and Senate amendments can be effectuated together as follows: First, both ame ndments would strike out the preexisting reference to "112(b)(1)(A)." The House amendment wo uld then insert "or emitted from a source category" at the point in the text where "or 112(b) (1)(A)" was removed. The Senate amendment would require "112(b)" to be inserted at the point in the text where "112(b)(1)(A)" was removed, immediately after the original "or" that the House Amendment replaced. The combined section would read: "The Administrator shall [establish emi ssion guidelines] for any existing source for any air pollutant . . . which is not included on a list published under section . . . 112(b) emitted from a source category which is regulated under sec tion 112 of this title." The resulting amended statute would direct EPA to regulate all pollutants that are not criteria pollutants or emitted by source categories listed under section 112 and actu ally regulated under that section. Thus, reading the language added by the House and Senate amendments together yields a meaning that is coherent and maintains section 111(d)'s role in protecting human health and the environment. Any permissible harmonization of the House and Sena te amendments must achieve the purpose of section 111(d), which is ensuring that dangerous pollution from existing industrial sources does not escape regulation. EPA cannot adopt an int erpretation of section 111(d) that creates a gaping, inexplicable hole in the CAA's framework fo r regulating existing industrial sources. The

commentators' alternative "harmonization" fails thi s basic requirement. 5. If harmonizing the amendments were not possible, any reasonable interp retation of section 111(d) would still allow EPA to regulate CO2 emissions from EGUs. If harmoni zing the amendments were impossible, EPA could rely on several canons of statutory inter pretation to resolve any conflict in section 111(d). Under any available rule of construction, s ection 111(d) controls dangerous non-HAP emissions regardless of whether they come from sour ce categories that are subject to regulation under section 112. EPA's application of these canon s to interpret conflicting provisions would be entitled to deference. First, as EPA observed, "[t] he ambiguities stem from apparent drafting errors that occurred during enactment of the 1990 C AA Amendments." If conflicting language in section 111(d) is a result of a mistake, that mistake must have been the House amendment's exclusion of "sources" regulated under section 112 instead of "emissions" regulated under section 112. As described above, the apparent purpo se of the House amendment to section 111(d) was to avoid creating a gap in the statutorystructure for controlling emissions from existing sources; if the conference committee had a dopted the House's amendments to section 112, an amendment to section 111(d) would have been necessary to ensure that EPA had authority to regulate existing-source HAP emissions that EPA chose to not regulate under section 112. Giving effect to the narrow interpretation of the House amendment does not promote the House's (and Congress') manifest intention to contr ol all dangerous air pollution from existing sources. In contrast, the Senate amendment clearly retains EPA's authority to ensure effective regulation of dangerous non-HAP pollutants from exi sting sources under section 111(d) as a complement to regulation of HAPs under section 112. Accordingly, if EPA's attempts at harmonizing the amendments had failed, EPA could ha ve shown that "Congress did not mean29

what it appears to have said" in the House amendmen t and that "as a matter of logic and statutory structure, it almost surely could not have meant it ." See Engine Mfrs. Ass'n v. EPA, 88 F.3d 1075, 1089 (D.C. Cir. 1996). In such situations, EP A can interpret section 111(d) "by disregarding an obvious mistake. See Bohac v. Dept of Agric., 239 F.3d 1334, 1338 (Fed. Cir. 2001); see also Am. Petroleum Inst. v. SEC, 714 F.3 d 1329, 1336-37 (D.C. Cir. 2013) (refusing to interpret a scrivener's error as indication thatCongress intended to depart from a longstanding statutory scheme). If the two amendments were deeme d incompatible, EPA could then choose which amendment is controlling, the agency has disc retion in reading section 111(d) to effectuate congressional intent. See Appalachian Power Co., 24 9 F.3d at 1044 n.3 ("[W]hen there are multiple ways of avoiding a statutory anomaly, all equally consistent with the intentions of the statute's drafters (and equally inconsistent with t he statute's text), we accord standard Chevron step two deference to an agency's choice between su ch alternatives.") (quotation omitted); see also Abdelqadar v. Gonzales, 413 F.3d 668, 673 (7th Cir. 2005) (noting that judges cannot generally engage in "repair work" to rescue Congres s from its drafting errors, "but agencies charged with superintending a comprehensive scheme traditionally have been afforded additional latitude"). In the context of the CAA's carefully c rafted framework for controlling all dangerous emissions from existing sources, it would be implau sible to read section 111(d) to let certain dangerous pollution go unregulated simply because E PA controlled other pollution from the same sources. Second, if one of the amendments mustprevail over the other, the canons against implied repeal and amendment hold that the Senate a mendment must control. EPA cannot presume that Congress intended to repeal its author ity to regulate non-HAPs from sources regulated under section 112 unless Congress intenti on to do so is clear and manifest. See Watt,
451 U.S. at 267. Where there are two amendments to the same language, and those two amendments point in different directions, there is no "clear and manifest" intention. The Senate amendment is substantively similar to prior law and , therefore, should be given effect if EPA cannot discern Congress' clear and manifest intent to substantively change section111(d). Third, "[t]he established rule is that if there exists a c onflict in the provisions of the same act, the last provision in point of arrangement must control." Lo dge 1858, American Fed. of Govt Employees v. Webb, 580 F.2d 496 (D.C. Cir. 1978). This rule applies regardless of whether the conflicting provisions are in the same statutory section. See, e.g., Merchants' Natl Bank v. United States, 214 F. 200, 205 (2d Cir. 1914); Mobile v. GSF Prope rties, Inc., 531 So. 2d 833, 837-38 (Ala. 1988). Under this rule, the Senate amendment contro ls over the House amendment because it appears later in the Statutes at Large. Finally, gi ving effect to the Senate amendment would

allow EPA to avoid an absurd result. See American W ater Works Assn v. EPA, 40 F.3d 1266, 1271 (D.C. Cir. 1994) ("where a literal reading of a statutory term would lead to absurd results, the term simply has no plain meaning and is the pro per subject of construction by the EPA and the courts) (quoting Chemical Mfrs. Assoc. v. Natur al Resources Defense Council, 470 U.S. 116, 126 (1985)). Reading section 111(d) to exclude fromcontrol the dangerous (though not hazardous) emissions from all sources regulated und er section 112 would exclude myriad of the country's most significant sources of air pollution and profoundly undermine one of the Clean Air Act's basic mechanisms for protecting human hea lth and the environment. Regardless of

whether this broad exclusion is a "more natural rea ding" of the House amendment, EPA cannot give 111(d) a meaning that is at odds with Congress ional intent. See id. (citing Young v.30

Community Nutrition Inst., 476 U.S. 974, 980 (1986) ). EPA cannot give effect to a reading of

the House amendment that would render the Senate am endment ineffective in nearly any situation. See United States v. Coatoam, 245 F.3d 5 53, 557-58 (6th Cir. 2001) (refusing to adopt a defendant's literal reading of a statutory provis ion, which would have rendered another subsection surplusage in the vast majority of cases , where the government asserted that Congress made a drafting error when it amended the statute). (References 322 Pub. L. 101-549, section 108, 104 Stat. at 2467. Id., section 302, 104 Stat. at 2574. Some commentators have suggested

that codification decisions of the House Office of the Law Revision Counsel are entitled to some form of deference. However, the Office is not the e xpert agency charged with administering the CAA, and therefore not entitled to Chevron deferenc e regarding the interpretation of that statute. Chevron, 467 U.S. at 844 ("We have long recognized that considerable weight should be accorded to an executive department's construction of a statutory scheme it is entrusted to administer, and the principle of deference to admin istrative interpretations has been consistently followed by this Court whenever decision as to the meaning or reach of a statute has involved reconciling conflicting policies, and a full unders tanding of the force of the statutory policy in the given situation has depended upon more than ord inary knowledge respecting the matters subjected to agency regulations."). Accordingly, th e Office does not even purport to interpret or amend the law in the codification process: "The tra nslations and editorial changes made to sections of non-positive law titles are purely tech nical and do not change the meaning of the law." Office of the Law Revision Counsel, Detailed Guide to the United States Code Content and Features, available at http://uscode.house.gov/deta iled_guide.xhtml. Even where there are plain errors in grammar, punctuation, or spelling, the Of fice does not correct them in the text of the code, but merely inserts a footnote indicating the probable error. Id. The Office of the Law Revision Counsel could not purport to determine the text of section 111(d) without running afoul of the Supreme Court's jurisprudence on the separat ion of powers. Expunging the text of the Senate amendment from section 111(d) is a legislati ve act that can only be accomplished through the legislative process. See INS v. Chadha, 462 U.S . 919, 952-54 (1983) ("Amendment and repeal of statutes . . . must conform with [the bic ameralism and presentment requirements of] Art. I.") "Congress must abide by its delegation of authority until that delegation is legislatively
altered or revoked." Id. at 955. 1 U.S.C. sections 112, 204(a); U.S. Nat. Bank of Oregon v. Indep. Ins. Agents of Am., Inc., 508 U.S. 439, 448 (1993); United States v. Welden, 377 U.S. 95, 98 n.4 (1964). Stephan v. United States, 319 U.S. 423, 426 , (1943). See Office of Law Revision Counsel, United States Code, listing titles that ha ve been enacted into positive law with an asterisk, http://uscode.house.gov/browse.xhtml . See, supra, note 325; Clean Air Act Amendments, 104 Stat. 2399, 2467, 2474 (1990). See also Owner-Operator Indep. Drivers Assn v. Landstar Sys., 622 F.3d 1307, 1327 (11th Cir. 20 10) ("There is no reason for this Court to rewrite a statute because of an alleged scrivener e rror unless a literal interpretation would lead to an absurd result."); Lewis v. Alexander, 685 F.3d 3 25, 351-51 (3d Cir. 2012) (regardless of whether statutory text was the result of a drafting error, it was not a mere scrivener's error fit for judicial correction because Congress could have rat ionally chosen to enact the text at issue); Nijjar v. Holder, 689 F.3d 1077, 1084 (9th Cir. 201 2) (same). Pet. for Extraordinary Writ, 6, Murray Energy Corp. v. EPA, No. 14-1112, (D.C. Cir. June 18, 2014) (Doc. 1498341); Brief of Amici Curiae West Virginia, et al., 2, Murray Energ y Corp. v. EPA, No. 14-1112 (D.C. Cir. June31

25, 2014) (Doc. 1499435). Revision of December 2000 Regulatory Finding on the Emissions of Hazardous Air Pollutants From Electric Utility Stea m Generating Units and the Removal of Coal- and Oil-Fired Electric Utility Steam Generati ng Units From the Section 112(c) List, 70 Fed. Reg. 1594, 16031 (Mar. 29, 2005). Id. HR 3030, section 301, reprinted in 1990 CAA Leg. Hist. 3737 at 3933. "The Administrator may designat e a category or subcategory of area sources that he finds, based on actual or estimated aggrega te [sic] emissions of a listed pollutant or pollutants in an area, warrants regulation under th is section." Id., 1990 CAA Leg. Hist. 3737 at 3933. In contrast, the conference bill required EPA to regulate certain "area source emissions of the 30 hazardous air pollutants that present the gr eatest threat to public health in the largest number of urban areas." Pub. L. 101-549, section 30 1, 104 Stat. at 2537 (codified at 42 U.S.C. - 7412(c)(3). 70 Fed. Reg. at 16031. Section 112 does not mandate controls for all source categories that emit HAPs. For instance, section 11 2 does not provide for the regulation of HAPs from oil and gas wells outside of certain metropoli tan areas, unless those sources meet the statutory definition for "major sources." 42 U.S.C. section 7412(n)(4)(B). Also, section 112 requires EPA to regulate non-major sources "represe nting 90 percent of the [non-major] source emissions of the 30 hazardous air pollutants that p resent the greatest threat to public health in the largest number of urban areas," but otherwise only provides for regulation of non-major sources of HAPs if EPA determines they present[] a threat o f adverse effects to human health or the environment (by such sources individually or in the aggregate) warranting regulation under this section. Id. section 7412(c)(3). Major sources are generally stationary sources with the potential to emit "10 tons per year or more of any hazardous air pollutant or 25 tons per year or more of any combination of hazardous air pollutants." Id. 7 412(a)(1). H.R. 3030, - 301 (introduced July 27, 1989, and referred to the Committee on Energy a nd Commerce), reprinted in 1990 CAA Leg. Hist. at 3936-37. Id. at 1990 CAA Leg. Hist. at 393 7. It may also be noteworthy that neither the House bill nor conference bill posed any equivalentneed to expand section 111(d) to cover criteria pollutants. This is likely due to the diff erent nature of HAPs and criteria pollutants. Very small doses of HAPs can cause adverse impacts on pu blic health and sources of HAPs impose the greatest burdens on nearby communities. Consequ ently, addressing HAP impacts requires controlling all major sources of HAPs. In contrast, the NAAQS program gives states discretion over which sources of criteria pollutants should be subject to regulation because states can adequately protect public health so long as they en sure ambient concentrations do not exceed the NAAQS. See EPA, National Emission Standards for Haz ardous Air Pollutants (NESHAP), http://www.epa.gov/ttn/atw/mactfnlalph.html (listin g the nearly 200 source categories and subcategories affected by standards set under secti on 112). When Congress enacted the 1990 Clean Air Act Amendments, EPA had only issued four 111(d) emission guidelines, addressing total reduced sulfur from kraft paper mills, fluori de emissions from aluminum reduction plants, fluoride emissions from phosphate fertilizer plants , and sulfuric acid mist from sulfuric acid production units. Each of these source categories i s now regulated under section 112 except for sulfuric acid production units. Yet sulfuric acid m ist is emitted by other sources regulated under section 112, such as EGUs. See 76 Fed. Reg. 24976, 25,064 (May 3, 2011). Pet. for Extraordinary Writ, 6, Murray Energy Corp. v. EPA, No. 14-1112, (D.C. Cir. June 18, 2014) (Doc. 1498341). Proposed National Emissions Standar ds for Hazardous Air Pollutants; and, in the Alternative, Proposed Standards of Performance for New and Existing Stationary Sources:32

Electric Utility Steam Generating Units, 69 Fed. Re g. 4652, 4685 (Jan. 30, 2004). In fact, however, a "literal" reading of section 111(d), bot h before and after the 1990 amendments would require section 111(d) regulation even for HAPs. Th at is because the exclusions for criteria pollutants and HAPs are structured as a mandate to regulate various classes of pollutants separated by an "or" in the alternative for which a ir quality criteria have not been issued or which is not included on a list published under section 7 408(a) or 7412(b)(1)(A) of this title. The canon disfavoring implied repeals is discussed in section I.N.4.b. See, e.g., Remarks of Rep. Dingell during the House Debate on the Conference Report, r eprinted in 1990 CAA Leg. Hist. at 1187 ("America already has the toughest air quality laws in the world. With this act, we will be raising our standards even higher. We will also be fulfilli ng our responsibility to the American people who have told us that they are willing to make some sacrifices in pursuit of a cleaner environment."); Remarks of Rep. Green during House Debate on the Conference Report, reprinted in 1990 CAA Leg. Hist. at 1180 ("Mr. Speaker, the conference report before us today will help us to fulfill our promise to the American people of a clean, safe environment. Although some . . . may argue that the costs of enacting thi s bill are too great, I contend that the costs of not enacting clean air legislation this year are gr eater still."). Pet. for Extraordinary Writ, 6, Murray Energy Corp. v. EPA, No. 14-1112, (D.C. Cir. June 18, 2014) (Doc. 1498341). "Under H.R. 3030, states would be required to submit to EP A comprehensive permit programs for regulating stationary sources. The permitting requi rements would extend to sources that are subject to new source performance standards, emissi on standards for hazardous air pollutants, requirements for preventing significant deteriorati on (PSD) of air quality, nonattainment new and existing source review, and acid deposition control s under Title V. They also apply to all sources of air pollution emitting over 100 tons a year. Hou se Debate on H.R. 3030 (May 21, 1990), reprinted in 1990 CAA Leg. Hist. at 2566. 42 U.S.C. - 7475(a)(4). For certain sources regulated under other acts, the 1990 amendments required EPA to consider the efficacy of those regulations before issuing regulations under sectio n 112. As amended in 1990, section 112 does not require EPA to regulate sources and substances regulated by the Nuclear Regulatory Commission if "the regulatory program established b y the Nuclear Regulatory Commission pursuant to the Atomic Energy Act for such categoryor subcategory provides an ample margin of safety to protect the public health." 104 Stat. at 2542 (codified at 42 U.S.C. section 7412(d)(9)). In addition, Congress provided that "I n the case of any category or subcategory of sources the air emissions of which are regulated un der subtitle C of the Solid Waste Disposal Act, the Administrator shall take into account any regulations of such emissions which are promulgated under such subtitle and shall, to the m aximum extent practicable and consistent with the provisions of this section, ensure that th e requirements of such subtitle and this section are consistent." 104 Stat. at 2560 (codified at 42 U.S.C. - 7412(n)(7)). See also Scialabba v. Cuellar de Osorio, 134 S. Ct. 2191, 2203 (2014) (pl urality opinion); Id. at 2219 n. 3 (Sotomayor, J., joined by Breyer, J., dissenting). Antonin Scal ia and Bryan A. Garner, Reading Law: The Interpretation of Legal Texts (2012) at 180; id. (" The imperative of harmony among provisions is more categorical than most other canons of construc tion because it is invariably true that intelligent drafters do not contradict themselves ( in the absence of duress). Hence there can be no justification for needlessly rendering provisions i n conflict if they can be interpreted harmoniously."); see also Ricci v. DeStefano, 557 U .S. 557, 579-83 (2009) (where provisions of33

Title VII 'could be in conflict absent a rule to re concile them," Court adopted construction that "allows the [provision at issue] to work in a manne r that is consistent with other provisions of Title VII"); Watt v. Alaska, 451 U.S. 259, 267 (198 1) (construing potentially discordant statutory provisions "to give effect to each if [it] can do s o while preserving their sense and purpose"). EPA, Legal Memorandum for Proposed Carbon Pollution Emission Guidelines for Existing Electric Utility Generating Units' (2014) at 26. Ov er the span of a decade, EPA has interpreted the House and Senate amendments to section 111(d) c onsistently in each of the two rulemakings where they were at issue. Courts should give signif icant weight to EPA's unwavering interpretation of section 111(d). See Good Samarita n Hospital v. Shalala, 508 U.S. 402, 417 (1993) ("[T]he consistency of an agency's position is a factor in assessing the weight that position is due."). 69 Fed. Reg. at 4685. EPA, "Leg al Memorandum for Proposed Carbon Pollution Emission Guidelines for Existing Electric Utility Generating Units" at 26-27. Id. See EPA FLIGHT, available at http://ghgdata.epa.gov/ghgp/main.do . 40 CFR sections 63.640 et seq & 63.1560 et seq (NESHAPs for petroleum refineries, including units used for hydrogen production); sections 63.760 et seq (NESHAP for oil and natural gas production facilities, including facilities that process natural gas and c ertain compressors); sections 63.1270 et seq (NESHAP for natural gas transmission and storage fa cilities); subparts F, G, H & I (NESHAPs for the synthetic organic chemical manufacturing in dustry, including manufacturing of certain petrochemical products); sections 63.11400 et seq ( NESHAP for carbon black production area sources, which manufacture "petrochemical products) ; sections 63.2430 et seq (NESHAP for miscellaneous organic chemical manufacturing, which includes units classified under 1997 NAICS code 325, such as ammonia manufacturing); sec tions 63.11494 et seq (NESHAP for chemical manufacturing area sources, which includes units classified under 1997 NAICS code 325); sections 63.7680 et seq (NESHAP for iron and steel foundries); sections 63.7780 et seq (NESHAP for integrated iron and steel foundries); 6 3.10880 et seq (NESHAP for iron and steel foundries area sources); sections 63.1340 et seq (N ESHAP for the Portland cement manufacturing industry); sections 63.7080 et seq (N ESHAP for lime manufacturing plants); sections 63.440 et seq (NESHAP for the pulp and pap er industry); sections 63.7480 et seq (NESHAP for industrial, commercial, and institution al boilers and process heaters that are major sources of HAPs); sections 63.11193 et seq (NESHAP for industrial, commercial, and institutional boilers and process heaters that are area sources of HAPs); sections 63.6080 et seq (NESHAP for stationary combustion turbines); sectio ns 63.6580 et seq (NESHAP for reciprocating internal combustion engines). Boilers , turbines, engines, and process heaters are the main sources of CO2 emissions from the food pro cessing, manufacturing, and ethanol subsectors. See EPA, Who Reports, ttp://www.ccdsupport.com/confluence/pages/viewpage. action/pageId=93290546 (explaining that facilities in the food processing, manufacturing, a nd ethanol subsectors are required to report emissions from stationary combustion if they meet a n emissions threshold); 40 CFR section 98.30 ("Stationary fuel combustion sources include, but are not limited to, boilers, simple and combined-cycle combustion turbines, engines, incine rators, and process heaters."). For instance sources in the "other chemicals" category may be re gulated under section 112 as part of the Chemical manufacturing Industry (area sources) sour ce category, subpart VVVVVV or Miscellaneous Organic Chemical Production and Proce ssing source category, subpart FFFF.34

Public Law 101,549, 4108(g), 104 Stat. at 2467 (Nov . 15, 1990). Under the Mineral Leasing Act of 1920, ninety percent of federal oil and gas reve nue goes to the states and ten percent to the U.S. Treasury, whereas 1964 amendments to the Wildl ife Refuge Revenue Sharing Act require twenty-five percent of the revenue from refuge reso urces (including "minerals") to goes to counties and seventy-five percent to the Departmentof Interior. The Court explained that the purpose of the 1964 amendments was to distribute mo re revenue to counties "as compensation for loss of taxable properties that have been acqui red by the Federal wildlife refuge system." 451 U.S. at 270. The Court observed that "Congress migh t be expected to have mentioned a change" that would have increased federal revenues, especia lly when Congress was concerned that the Department have sufficient funds to make the increa sed payments mandated by the amendments." 451 U.S. at 271. 70 Fed. Reg. at 16031 . As discussed above, section 112 does not provide for regulation of certain area sources in t he oil and gas sector and regulation of HAPs from many area sources is discretionary under secti on 112. Indeed, the savings clause enacted as part of the 1990 amendments indicates that Congress recognized the importance of section 111(d) in controlling dangerous pollutants and did not want such regulation to be ousted lightly or by mere implication. That savings provision prov ides that "[n]o emission standard or other requirement promulgated under this section [112] sh all be interpreted, construed, or applied to diminish or replace the requirements of a more stri ngent emission limitation or other applicable requirement established pursuant to Section 111 [an d other programs]." 42 U.S.C. 7412(d)(7). See William J. Haun, The Clean Air Act As an Obstac le to the Environmental Protection Agency's Anticipated Attempt to Regulate Greenhouse Gas Emissions from Existing Power Plants 10-11 (Federalist Society 2013), available a t http://www.fedsoc.org/library/doclib/20130311_HaunEPAWP.pdf . In contrast, the approach urged by Haun, supra, results in a formulation that would restrictsection 111(d) to "any air pollutant . . . which i s not included on a list published under section 7408 (a) or 112(b) [Senate amendment] or emitted from a source category which is regulated under sec tion 112 [House amendment] of this title[.]" Haun at 10 (emphasis added by Haun). However such a n interpretation would be properly interpreted, it clearly does not faithfully impleme nt the amendments, since it results in smuggling in an extra "or" that Congress did not enact. The H ouse Amendment struck one "or" (by striking "or section 112(b)(1)(A)"), and the Senate Amendmen t did not add any "or's." Yet the Haun approach manages to yield a new "or," by disregardi ng the instruction in the House amendment to strike the preexisting "or". See Scialabba, 134 S. Ct. at 2203 (plurality opinion); Id. at 2219 n. 3 (Sotomayor, J., joined by Breyer, J., dissenting) (agreeing with plurality that where agency cannot "simultaneously obey" two statutory commands , "it is appropriate to defer to the agency's choice as to which command must give way"). 79 Fed. Reg. at 34853. If the inclusion of the House amendment did not create ambiguity in the sta tutory text, the plain language of the statute would control despite any errors in the drafting pr ocess. See Lamie v. United States Trustee, 540 U.S. 526, 542 (2004) ("If Congress enacted into law something different from what it intended,

then it should amend the statute to conform it to i ts intent. It is beyond our province to rescue Congress from its drafting errors, and to provide f or what we might think . . . is the preferred result."). But here, it is impossible for EPA to gi ve effect to the House amendment without violating the mandate in the Senate amendment. As e xplained above, EPA may also respond to this scrivener's error by interpreting the House am endment in a way that gives it some effect but35

avoids an absurd result. See United States ex rel. Holmes v. Consumer Ins. Group, 318 F.3d 1199, 1209 (10th Cir. 2003) ("Under the doctrine of scrivener's error, a court may give an unusual (though not unheard-of) meaning to a word w hich, if given its normal meaning, would produce an absurd and arguably unconstitutional res ult."). These canons are discussed supra, section I.N.4.b, because they demonstrate that-if h armonization is possible-EPA's harmonization

is reasonable. Both the Senate amendment and then-e ffective law excluded the current list of HAPs from regulation under section 111(d). The rati onale for giving effect to the last provision in order of arrangement is that the last expression of the legislative will must prevail: "[O]ne, for being earlier or later in position, must be deemed to render the other nugatory, or repeal it. The decisions are to the effect that the provision whic h is latest in position repeals the other. Being later in position, the prevailing provision is deem ed a later expression of the legislative will. This rule and the reason for it have been criticized, be cause, all the provisions of an act being adopted at the same time, there is no priority in point of time on account of their relative positions in the statute. This is strictly true; but, in the reading of a bill, matter near the close may be presumed t o revive the last consideration, and, if assented to, is a later conclusion." Sutherland, Statutes and Statutory Construction (2d ed. 1904) vol. 2, sectio n 349. This rationale applies despite the fact

that the two relevant sections of the Statutes at L arge amend the same statutory provision.

Response 9: EPA agrees that it has the authority to promulgate regulations addressing CO2 emissions from existing power plants under section 111(d). EPA’s discussion of this issue is in Section IV of the preamble.

Comment 10: Commenters stated that the EPA has no statutory au thority, granted by Congress, to regulate CO2 or any other "greenhouse gas" as a pollutant.

Response 10: We disagree with this comment. In section IV of the preamble for this rule, we explain EPA’s authority under the CAA to regulate C O 2 and other greenhouse gases.

Comment 11: Commenters stated the proposal is outside the bound s of the Clean Air Act itself and adds that this proposal must be withdrawn.

Response 11: We disagree with this comment. In other parts of th e record for this rulemaking, we explain that this rule’s impacts on electricity consumers are limited, the benefits of this rule in reducing the adverse impacts on climate change o f CO 2 emissions, and the legal authority for

this rule.

Comment 12: Commenters stated that EPA’s attempt to reduce CO2 emissions from existing coal-fired EGUs under Section 111(d) violates the p lain language of that section. As recorded in the official United States Code, Section 111(d) pro hibits EPA from regulating "any pollutant . . . from a source category which is regulated under Sec tion 112." (42 U.S.C. - 7411(d) (2006); see also 1 U.S.C. - Section 204(a) (2006) (providing th at the Code of Laws of the United States current at any time "shall . . . establish prima fa cie the laws of the United States . . . .").)The Supreme Court has expressly recognized this prohibi tion, stating definitively in American Electric Power Co. v. Connecticut that "EPA may notemploy Section [111](d) if existing36

stationary sources of the pollutant in question are regulated under the national ambient air quality standard program, S. [108-110], or the 'hazardous a ir pollutants' program, Section [112]. See Section [112](d)(1).(131 Supreme Court 2527, 2537 n .7 (2011)) This definitive statement from the Supreme Court effectively resolves the matter. In 2012, EPA promulgated the Mercury and Air Toxics Standard,(Fed. Reg. 9304 (February 16, 2 012)) which regulated emissions of mercury and other hazardous pollutants from new and existin g coal- and oil-fired EGUs under Section 112 of the Clean Air Act. According to the plain la nguage of the statute, then, once EPA promulgated the Mercury and Air Toxics Standard, th e Agency relinquished its authority to subject existing coal- and oil-fired EGUs to regula tion under Section 111(d). The Proposed Rule is thus facially invalid because it seeks to regula te sources - existing coal-fired EGUs - that are already subject to regulation under Section 112. To the extent EPA argues that the Supreme Court's definitive statement regarding Section 111( d) is dictum because that issue was not directly before the Court in American Electric Powe r, we note that under the law of the D.C. Circuit, even "dicta of the United States Supreme C ourt should be [considered] very persuasive." (Gabbs Exploration Co. v. Udall, 315 F.2d 37, 39 (D .C. Cir. 1963); see also Bangor Hydro-Elec. Co. v. FERC, 78 F.3d 659, 662 (D.C. Cir. 1996) (sta ting that "Supreme Court dicta ten[d] to have somewhat greater force" that dicta from other courts)) EPA would be bound by the plain language of the Clean Air Act's prohibition even if the Supreme Court had not yet so clearly recognized it. EPA itself correctly acknowledges th at the Proposed Rule is invalid under a "literal reading" of Section 111(d).(Legal Memorand um for Proposed Carbon Pollution Emission Guidelines for Existing Electric Utility Generating Units ("Legal Memo") 26 (June 18, 2014), available at http://www2.epa.gov/sites/production/files/2014-06/documents/20140602-legalmemorandum.pdf.) Nevertheless, EPA apparently belie ves the Section's explicit prohibition is made ambiguous by a clerical mistake in the 1990 Am endments to the Clean Air Act. Before the 1990 Amendments, Section 111(d) barred EPA from reg ulating, under that Section, ": any air pollutant . . . included on a list published under . . . [Section] 112(b)(1)(A)." (42 U.S.C. S.7411(d) (1987)) Two provisions in the 1990 Amendm ents purported to alter that language. The first provision, drafted in the House, replaced the cross-reference to S.112(b)(1)(A) with the language that now appears in the U.S. Code and thatis cited by the Supreme Court in American Electric Power, forbidding EPA from regulating emis sions of "any pollutant . . . from a source category which is regulated under Section 112." (Pu b. L. No. 101-549, S. 108, 104 Stat. 2399 (1990)) The second provision, drafted in the Senate , struck S.[112](b)(1)(A) and inserted "in lieu thereof S. [112](b)." (Id. at S. 302(a)) Rushing to file its conference report after an all-night meeting, the House-Senate Conference Committee incl uded both amendments in the version of the 1990 Amendments that was ultimately passed by b oth houses of Congress and signed into law by the President. The House provision of Sectio n 111(d) prohibiting double regulation of sources is the law under longstanding rules for res olving drafting inconsistencies and clerical errors in federal legislation. A longstanding rule of legislative draftsmanship dictates that conforming amendments be applied after substantive amendments. Congress placed the Senate amendment with other amendments expressly designate d as "Conforming Amendments." Congress's decision to label the Senate amendment a s a "conforming amendment," and to lump the amendment with a host of other conforming amend ments, conclusively demonstrates that the Senate amendment was a clerical revision, not inten ded to affect the substance of Section 111(d).37

The House amendment, on the other hand, is clearly substantive. A close analysis of the text of

the amendment reinforces the conclusion that the Se nate amendment is clerical. Conforming amendments are, by definition, non-substantive. The y are: amendment[s] of a provision of law that [are] necessitated by the substantive amendmen ts or provisions of the bill. The designation includes amendments, such as amendments to the tabl e of contents, that formerly may have been designated as clerical amendments.(Senate Legislati ve Drafting Manual S. 126(b)(2)(A); see, e.g., I.N.S. v. Stevic, 467 U.S. 407, 428 (1984) (" The amendment . . . was explicitly recognized to be a mere conforming amendment, added "for the s ake of clarity," and was plainly not intended to change the standard."); Dir. of Revenue of Mo. v. CoBank ACB, 531 U.S. 316, 323 (2001) (conforming amendment was "merely . . . tech nical," rather than substantive)) The function of the Senate amendment was to update Sect ion 111(d)'s existing language to reflect changes made by other provisions of the 1990 Amendm ents. A few of those provisions replaced Section 112(b)(1)(A) "the subsection cross-referenc ed in Section 111(d)" with Sections 112(b)(1), 112(b)(2), and 112(b)(3). The Senate ame ndment sought to accommodate those changes by "striking" Section 111(d)'s cross-refere nce to Section 112(b)(1)(A) and inserting "in lieu thereof S. [112](b)." (Pub. L. No. 101-549, S. 302(a)) It is thus plainly clerical or conforming. The House amendment significantly and d eliberately alters the scope of Section 111(d). Whereas the pre-amendment version of Sectio n 111(d) allowed EPA to regulate certain emissions from source categories regulated under Se ction 112,(See 42 U.S.C. - Section 7411(d) (1987)) the House amendment expressly precludes EPA from using Section 111(d) to regulate any emissions from source categories regulated unde r Section 112. (Pub. L. No. 101-549, S. 108, 104 Stat. 2399 (1990)) The substantive character of the House amendment is confirmed by its placement amidst a series of other obviously substa ntive amendments in the Statutes at Large.(See Beecham v. United States, 511 U.S. 368, 371 (1994) ("That several items in a list share an attribute counsels in favor of interpretin g the other items as possessing that attribute as well.")) The House's substantive amendment eliminat es the statutory cross-reference that the Senate's conforming amendment was intended to updat e, because it replaces the cross-reference with an entirely new substantive limitation on EPA' s authority. Without a cross-reference to update, the Senate amendment is superfluous, enacti ng nothing. The U.S. Code version of Section 111(d) accordingly notes that the Senate's clerical change "could not be executed."

Inclusion of the Senate amendment in the final vers ion of the 1990 Amendments was thus a

mistake. EPA itself has described the Senate amendm ent as a drafting error" that "should not be considered." (70 Fed. Reg. 15,993, 16,031 (Mar. 29, 2005)) Longstanding judicial and legislative practice support this plain text reading of the U.S . Code. In Chickasaw Nation v. United States, for example, the Supreme Court concluded that "a fa ilure to delete an inappropriate crossreference" in a statute was "simply a drafting mist ake" that "d[id] not warrant rewriting the remainder of the statute's language."(534 U.S. 84, 90-91 (2001); see also U.S. Natl Bank of Or. v. Indep. Ins. Agents of Am., Inc., 508 U.S. 439, 4 62 (1993) (unanimous court disregarded placement of quotation marks in statute when, after reviewing in detail the statute's "structure, language, and subject matter," it concluded that th e statute's "true meaning" was "clear beyond question," and that "the placement of the quotation marks in the [statute] was a simple scrivener's error, a mistake made by someone unfamiliar with th e law's object and design")) Circuit courts across the country have similarly held that, where a mistake in correcting a cross-reference38

conflicts with the statute's substantive provisions , the mistake should be treated as "the result of a scrivener's erro[r] and not construed as "creating an ambiguity." (Am. Petroleum Inst. v. SEC, 714 F.3d 1329, 1336-37 (D.C. Cir. 2013); see also U nited States v. Coatoam, 245 F.3d 553, 557 (6th Cir. 2001) (declining to give effect to errone ous statutory cross-reference); In re Chateaugay Corp., 89 F.3d 942, 954 (2d Cir. 1996) (same); King v. Hous. Auth., 670 F.2d 952, 954 n.4 (11th Cir. 1982) (same).) On the dozens of occasions wher e simultaneously-enacted substantive and conforming amendments have applied to the same stat utory language, the Office of the Revisor of Statutes has refused to give effect to the confo rming amendment, without exception. Indeed, even though such errors are relatively common in co mplicated pieces of legislation, Congress and the courts appear not to have ever given effectto one. Nevertheless, EPA insists the Senate amendment must be given effect on the ground that f ederal agencies are obligated to give substantive effect to all language in the Statutes at Large.(Legal Memo 26) EPA does not attempt to square its reading with the judicial and legisla tive precedents that preclude giving effect to drafting errors.(See supra notes 12-15 and accompan ying text ) Nor does EPA suggest a principled means of distinguishing between the Sena te amendment and the hundreds of other drafting errors interspersed throughout the U.S. Co de.(See supra note 14 and accompanying text.) Although no court or agency has ever given e ffect to such errors, EPA would require courts and agencies to do so for each of the hundreds of e rroneous clerical amendments heretofore denied effect. In light of the foregoing, EPA's att empt to give meaning to both amendments is misguided. Only the House's has any effect. Even ac cepting there is something to reconcile, EPA's attempt goes badly astray, because under any proper harmonization of the two versions, the existence of the House amendment explicitly for ecloses adoption of the Proposed Rule.(Pub. L. No. 101-549, S. 108) It is undisputed that the p lain text of the House amendment curtails EPA's authority to regulate pollutants emitted by s ources regulated under Section 112. Put another way, Section 111(d) cannot provide a statut ory basis for the Proposed Rule unless EPA

demonstrates both that the Senate amendment must be given effect (which, as we have shown, cannot be done), and that giving effect to the Sena te amendment makes it impossible to give full effect at the same time to the House amendment's pl ain language. EPA has not made this showing, and it cannot make this showing, because t he two amendments can be harmonized in way that gives full effect to both. The limitations in the House and Senate amendments are entirely compatible with one another.(See, e.g., Wi lliam J. Haun, The Clean Air Act as an Obstacle to the Environmental Protection Agency's A nticipated Attempt to Regulate Greenhouse Gas Emissions from Existing Power Plants, THE FEDER ALIST SOC'Y (Mar. 2013); Brian H. Potts, The President's Climate Plan for Power Plant s Won't Significantly Lower Emissions, 31 YALE J. REG. ONLINE 1, 9 (Aug. 22, 2013).) The Hous e amendment forbids EPA from regulating, under Section 111(d), any pollutants em itted from sources in a source category already regulated under Section 112 (Pub. L. No. 10 1-549, S. 108); the Senate amendment forbids EPA from regulating, under Section 111(d), any hazardous air pollutants, whether or not they are emitted from a source in a category regula ted under Section 112.(Id. at Section 302(a)) Nothing in either restriction on EPA's authority fo recloses full enforcement of the other. Rather, EPA may give maximum effect to both limitations by reading the two amendments as jointly prohibiting EPA from regulating under Section 111(d ) any hazardous air pollutants already regulated under Section 112, as well as any emissio ns of any pollutants from a source in "a39

source category which is regulated under Section 11 2." (42 U.S.C. - 7411(d)) A venerable maxim of statutory construction requires courts and agencies to give effect, whenever possible, to all of the language in a statute.(Reiter v. Sono tone Corp., 442 U.S. 330, 339 (1979); United States v. Menasche, 348 U.S. 528, 538 (1955); Ward v. Race Horse, 163 U.S. 504, 508 (1896)) EPA's reading gives meaning only to the Senate amen dment (and then only to portions thereof, as we explain next), entirely ignoring the House's. Because it is possible to give concurrent effect to all of the language in the House and Senate amen dments, as we have shown above, EPA must do so. Of course, giving effect to the House amendm ent's express terms renders the Proposed Rule invalid, because the Proposed Rule purports to regulate, under Section 111(d), emissions of pollutants from sources (coal-fired EGUs) in a sour ce category (the category of coal- and oilfired EGUs) already regulated under Section 112 by virtue of the Mercury and Air Toxics Standards. Rather than adopt this straightforward r eading of the two amendments, EPA has propounded its own, novel interpretation of Section 111(d). Under EPA's interpretation, Section 111(d) would prohibit regulation of 'any [hazardous air pollutants] listed under Section 112(b) that may be emitted from a particular source catego ry . . . regulated under Section 112." (Legal Memo 26) Somewhat remarkably, EPA's interpretation ignores the explicit limitations set out in both of the amendments it purports to construe. Con trary to the House's substantive amendment - which explicitly bars any regulation under Section 111(d) of any existing sources already regulated under Section 112 - EPA's interpretation would allow such regulation so long as the pollutant is not regulated under Section 112. Contr ary to the Senate's conforming amendment - which appears to forbid regulation of any hazardous air pollutant under Section 111(d) - EPA's reading would permit such regulation of the hazardo us air pollutant so long as the emitting source is not regulated by Section 112. Without anysupport, EPA suggests the express limitations in the House and Senate amendments nega te one another. But, as the Supreme Court very recently made clear, "an agency may not rewrit e clear statutory terms to suit its own sense of how the statute should operate." (Util. Air Regu latory Grp. v. EPA, 134 S. Ct. 2427, 2446 (2014) Because it is possible to read Section 111(d ) in a way that gives maximum effect to both the House and Senate amendments, EPA must do so. Th e unambiguous effect of such a reading is to prohibit EPA from regulating, under Section 1 11(d), emissions of any air pollutant from sources in a category that is already regulated und er Section 112. The Proposed Rule violates this prohibition, and thus Section 111(d) cannot supply the statutory basis for enacting it. As there is no other source of authority, EPA must abandon the Proposed Rule to the extent that it purports to regulate sources already regulated under Section 112 - here, coal-fired EGUs. To determine whether an agency's interpretation of a statute is valid, courts employ the familiar framework from Chevron, U.S.A. v. Natural Resources Defense C ouncil, Inc.(467 U.S. 837, 842-43 (1984) and its progeny. The first step in that framework a sks "whether Congress has spoken to the precise question at issue." (Id. at 842) If so, the agency must give effect to Congress's expressed intent.(Id.) If the statute is ambiguous or silent on the question at issue, however, courts ask whether the ambiguity or silence is the product of an implicit delegation of interpretive authority to the agency by Congress.(United States v. Mead Co rp., 553 U.S. 218, 226-27 (2001)) If not, courts will afford the agency's interpretation of t he statute only the modest deference outlined in Skidmore v. Swift & Co.(Id. at 234-35 (citing Skidm ore, 323 U.S. 134, 139-40)) If the ambiguity or silence is the product of an implicit delegation of authority to the agency, then and only then,40

under the second Chevron step, will courts defer to the agency's interpretation if that interpretation is reasonable.(Chevron, 467 U.S. at 843) EPA's interpretation of Section 111(d) fails at each step in the Chevron analysis. Even if the House and Senate amendments render Section 111(d) ambiguous, the Proposed Rule is stil l invalid. To justify the Proposed Rule, EPA has adopted an interpretation of Section 111(d) tha t departs substantially from Section 111(d)'s text. For that reason, the validity of EPA's interp retation of Section 111(d) hinges on its receiving

the substantial deference afforded under Chevron. S uch deference, however, is unwarranted here and almost certainly will not be accorded by the re viewing courts. Not every statutory question gives rise to Chevron deference. As Chief Justice R oberts stated just this past Term, "Direct conflict [between statutory provisions] is not ambi guity, and the resolution of such a conflict is not a statutory construction but legislative choice . Chevron is not a license for an agency to repair a statute that does not make sense." ( Scial abba v. Cuellar de Osorio, 134 S. Ct. 2191, 2214 (2014) (Roberts, C.J., concurring)) Rather, Ch evron deference is appropriate only when it is clear Congress meant for the alleged ambiguity i n the statute to "be resolved, first and foremost, by the agency, and desired the agency (ra ther than the courts) to possess whatever degree of discretion the ambiguity allows." (Smileyv. Citibank (S.D.), N.A., 517 U.S. 735, 740- 41 (1996); see also Am. Bar Assn v. F.T.C., 430 F.3 d 457, 469 (D.C. Cir. 2005) ("The deference mandated by Chevron comes into play . . . only if t he reviewing court finds an implicit delegation of authority to the agency.")) In other words, Chevron deference only applies where there is intent to delegate to the agency the autho rity to interpret. In Section 111(d), there is no evidence that Congress drafted and passed the House and Senate amendments with the intention of creating an ambiguity that it meant for EPA to i nterpret. Rather, as EPA has acknowledged,

inclusion of the Senate amendment was an inadverten t "drafting error." (70 Fed. Reg. 15,993, 16,031 (Mar. 29, 2005).) A drafting error cannot su pply a basis for affording Chevron deference, since, by definition, a mistake conveys no congress ional intent at all "delegatory or otherwise.(See Appalachian Power Co. v. EPA, 249 F. 3d 1032, 1043-44 (D.C. Cir. 2001) ("Lest it obtain a license to rewrite the statute, however , we do not give an agency alleging a scrivener's error the benefit of Chevron step two deference, bywhich the court credits any reasonable construction of an ambiguous statute.")) Without Ch evron deference, EPA's interpretation of Section 111(d), which either concededly conflicts w ith the statute's plain language or simply ignores one house's amendment in favor of another's , cannot survive. Cases like National

Association of Home Builders v. Defenders of Wildli fe (551 U.S. 644 (2007)) and Citizens to Save Spencer County v. EPA(600 F.2d 844 (D.C. Cir. 1979)) are not to the contrary. National Association of Homebuilders involved separate statu tes addressing separate problems through "seemingly categorical" and, at first glance, irrec oncilable "legislative commands." (551 U.S. at 661) The Court ultimately deferred to an agency int erpretation reconciling the two statutes, largely because of the interpretive canon disfavori ng repeal by implication.(Id. at 662-69) That canon is not applicable in these circumstances, so neither is the deference afforded under National Association of Homebuilders. Spencer Count y involved two distinct Sections of the Clean Air Act that appeared to set out different ef fective dates affecting construction of major pollution-emitting facilities.(600 F.2d at 852-53) Not only has the D.C. Circuit subsequently cabined that decision,(See Georgetown Univ. Hosp. v . Bowen, 821 F.2d 750, 757 n.11 (D.C. Cir. 1987) ("The decision in Spencer County is not only extremely limited, but the narrow exception41

that it purports to recognize has never been accept ed by any other panel of this court.")) but Spencer County, like National Association of Homebu ilders, addressed circumstances fundamentally dissimilar to those surrounding Secti on 111(d). With Section 111(d), two separate versions of a single section of a public law purpor t to address, in vastly different ways, the very same language in a single subsection of a statute. Those facts bear little resemblance to the facts in National Association of Homebuilders and Spencer County, both of which involved ambiguities created by different sections of the U. S. Code. There is, in short, no basis for affording EPA's interpretation of Section 111(d) Ch evron deference. Without such deference, EPA's interpretation of Section 111(d) cannot be su stained, as it is manifestly contrary to the statute's express terms. Deference under step two o f Chevron would be inappropriate here even had Congress delegated to EPA authority to interpre t any alleged ambiguity in Section 111(d), because EPA's interpretation is profoundly unreason able. "Under the second step of Chevron, [courts] will only defer to [an agency's] interpret ations if they are reasonable and consistent with statutory purpose."(GTE Serv. Corp. v. F.C.C., 205 F.3d 416, 422 (D.C. Cir. 2000); see also FDIC v. Philadelphia Gear Corp., 476 U.S. 426, 439 (1986) (agency interpretation "may certainly stand" where it "is consistent with congr essional purpose")) Yet EPA's construction of

Section 111 contravenes even EPA's own understandin g of congressional intent. As EPA admits, a central purpose of the 1990 Amendments was "to ch ange the focus of Section 111(d) by seeking to preclude [Section 111(d)] regulation of those pollutants that are emitted from a particular source category that is actually regulat ed under Section 112," so as to preclude "duplicative or overlapping regulation." (70 Fed. R eg. 15,993, 16,031 (Mar. 29, 2005)) Despite this understanding, EPA now proffers a reading of S ection 111(d) that contravenes that congressional intent. Section 111(d)'s prohibition against double-regulation of existing sources is part of a carefully considered regulatory scheme co ncerning emissions from stationary sources. The existing scheme avoids subjecting existing sour ces to both new national standards for emissions under Section 112 and new state-by-state standards under Section 111. Unlike newlyconstructed sources, which may be designed and cons tructed in compliance with both Section 111 and Section 112, the imposition of additional r egulatory burdens on existing sources

sacrifices fairness and all but ensures creation of a huge stranded asset problem. The problems presented by double regulation of existing sources are starkly illustrated by this Proposed Rule. As we discuss in Section I.D.3 below, many coal-fir ed EGUs have invested hundreds of millions of dollars in pollution controls to comply with the Mercury and Air Toxics Standard, which was promulgated just two years ago pursuant to Section 112. It has been estimated that implementation of that rule will cost those plants more than $9 billion annually.(EPA, Regulatory Impact Analysis for the Final Mercury an d Air Toxics Standards 3-13 (Dec. 2011),

available at http://www.epa.gov/ttn/ecas/regdata/RIAs/matsriafin al.pdf ) Under the double regulation threatened by this Proposed Rule, howeve r, many of these facilities will be forced to shut down entirely, or curtail their generation so significantly that their continued operation is no longer economically viable. There will be no opport unity to recover the substantial investments made in state-of-the-art pollution controls. This d efies all reason and fairness, and is plainly contrary to congressional intent. Additionally, exi sting sources that were built under a different regulatory regime may lack the technological or fin ancial flexibility to comply with two separate sets of rules - one under Section 111(d) cost of co mpliance against maximum achievable42

reductions.(42 U.S.C. - 7411(a)(1), 7411(d), 7412(d )) By requiring that regulation of existing

sources occur either under Section 112 or under Sec tion 111(d), Congress deliberately avoided imposing two independent regulatory regimes on exis ting sources, recognizing that such duplicative efforts could transform these assets in to liabilities. EPA's proposal to impose double regulatory burdens on existing sources is contrary to existing law and public policy. Section 111(d)(1)(A) directs that EPA require States to est ablish standards of performance for "any existing source for any pollutant . . . to which a standard of performance would apply if such source were a new source." (42 U.S.C. - 7411(d)(1)( A) (emphasis added)) EPA therefore may not issue regulations under Section 111(d) to regul ate emissions from existing sources until it has adopted standards of performance under Section 111( b) for pollutants from new sources within the same source category.

Response 12: EPA disagrees that it may not promulgate regulatio ns addressing CO2 emissions from existing power plants under section 111(d). EP A’s discussion of this issue is in Section IV of the preamble. Further, EPA’s views on arguments presented by the commenters, including commenters’ discussion of the AEP opinion and of th e Senate amendment, are also discussed in EPA’s briefs in the Murray Energy and West Virginia cases, No. 14-1112, No. 14-1146, and No. 14-1151 (D.C. Cir.).

Comment 13: Because no valid predicate Section 111(b) rule exi sts for CO2 emissions from coal- or gas-fired power plants, the Proposed Rule exceeds EPA's authority under Section 111(d). EPA claims that two new proposed rules will independently satisfy Section 111(d)'s predicate rule requirement if they are finalized.(L egal Memo 12-13) The first of the proposed rules (the Proposed New Source Rule) would establis h standards of performance for greenhouse gas emissions from new electric utility generating units.(Standards of Performance for Greenhouse Gas Emissions from new Stationary Source s: Electric Utility Generating Units, 79 Fed. Reg. 1,430 (Jan. 8, 2014)) The second proposed rule (the Proposed Modified and Reconstructed Source Rule) would set standards of p erformance for emissions of greenhouse gases from certain modified and reconstructed electric utility generating units.(Carbon Pollution Standards for Modified and Reconstructed StationarySources: Electric Utility Generating Units, 79 Fed. Reg. 34,960 (June 18, 2014)) These two prop osed rules for new and modified and reconstructed sources, however, are themselves inva lid. EPA first claims that its Proposed New Source Rule is a sufficient Section 111(b) predicat e rule because the Proposed New Source Rule sets standards of performance governing CO2 emissio ns from new coal- and gas-fired power plants. But EPA's analysis on this point is fatally flawed, because the Proposed New Source Rule does not establish a valid: standard of performance " for coal-fired EGUs. Instead, it proposes to require the implementation of a technology "carbon capture and storage (CCS)" that has not been adequately demonstrated as required by statute. Sec tion 111(a)(1) of the Clean Air Act defines "standard of performance" as: A standard for emissi ons of air pollutants which reflects the degree of emission limitation achievable through th e application of the best system of emission reduction which (taking into account the cost of ac hieving such reduction and any non-air quality health and environmental impact and energy requirem ents) the Administrator determines has been adequately demonstrated.(42 U.S.C. - 7411(a)(1 ) (emphasis added)) A system of emission43

reductions is "adequately demonstrated" when it "ha s been shown to be reasonably reliable, reasonably efficient, and . . . reasonably expected to serve the interests of pollution control without becoming exorbitantly costly in an economic or environmental way." (Essex Chem. Corp. v. Ruckelshaus, 486 F.2d 427, 433 (D.C. Cir. 1973)) An emissions standard based on technology not fitting within that definition canno t be a "standard of performance" and, thus, cannot serve as a valid Section 111(b) predicate ru le. EPA's Proposed New Source Rule relies on partial implementation of CCS, a system that has no t been "adequately demonstrated," at coalfired EGUs. That means the Proposed New Source Rule does not set out a valid standard of performance, and thus the whole Proposed New Source Rule is invalid. Because an invalid rule cannot serve as the necessary Section 111(b) predic ate for the Proposed Rule, the Proposed Rule cannot be sustained. EPA must develop a new NSPS be fore it may proceed with any existing source emission guideline. Commenters stated that w ith its proposed regulation of CO2 emissions from existing fossil fuel-fired EGUs, EPA has grossly overstepped its lawful authority under CAA Section 111(d). Fundamentally, EPA has erred in three ways: first, by attempting to define BSER to include things other than technologi cal or operational measures that can be applied to each affected facility in the designated category; second, by going well beyond its statutorily-specified, limited role of defining BSE R; and third, by usurping the States' role of establishing and applying the standards of performa nce and thereby eviscerating the cooperative federalism principles enshrined in CAA Section 111( d).

Response 13: We disagree with these comments. We have valid base s for the section 111(b) rulemaking for CO 2 emissions from newly constructed, modified, and rec onstructed affected EGUs, as we explain in that rulemaking. In section V. of the preamble for this rule, we explain our authority for the BSER we are adopting in this rulemaking, including our and the states’ respective roles. Furthermore, this rule is consist ent with the principles of cooperative federalism embodied in portions of the Clean Air Act, for reas ons discussed in section 1.2 of this response to comments, as well as in the Legal Memorandum acc ompanying the final rule.

Comment 14: Commenters contended that EPA lacks authority to re gulate CO2 under Section 111(d)., explaining that previous EPA rules and cou rt decisions define the limits of EPA's rulemaking authority under section 111(d), and the Clean Power Plan ignores these limits. First, the commenters argued that UARG v. EPA sets guidepo sts for the CPP: In UARG v. EPA, the Supreme Court addressed the validity of a series of rules issued by EPA in regard to its regulation of greenhouse gas ("GHG") under the CAA. (The Supreme Court held in 2007 that EPA could regulate GHG under the CAA. See Massachus etts v. EPA, 549 U.S. 497 (2007). Commenters stated EPA then issued four rules to reg ulate GHGs from motor vehicles and large stationary sources. First, EPA ruled that GHGs may reasonably be anticipated to endanger public health or welfare (the "Endangerment Finding"). See 74 Fed. Reg. 66,496 (Dec. 15, 2009). Second, EPA issued emission standards to regulate G HG emissions from motor vehicles (the "Tailpipe Rule"). Third, EPA ruled that regulating GHGs from motor vehicles triggered the PSD and Title V permitting requirements for stationary sources (the "Triggering Rule"). Fourth, EPA limited the Triggering Rule requirement to larger s tationary sources (the "Tailoring Rule").

Commenters stated the Court held that EPA cannot re gulate CO2 in a way that is inconsistent44

with the CAA. Commenters said that according to the Court, neither the CAA nor Massachusetts v. EPA requires the regulation of GHGs at stationar y sources, and a source cannot trigger certain permitting requirements solely because of GHG emiss ions. Commenters stated the Court held that EPA could not "bring about an enormous and tra nsformative expansion in EPA's regulatory authority without clear congressional authorization ." (134 S. Ct. 2427, 2444 (2014)) Commenters stated the direct holding of UARG was that the CAA does not compel EPA to regulate CO2 as a pollutant for all purposes and any regulation must comport with the statute. Commenters stated

the Court decided it would be unreasonable for EPA to exercise its interpretive authority to regulate CO2 in a way that is inconsistent with the statute. (Id at 2443-44) Commenters stated

the Court identified the New Source Performance. Co mmenters stated standards in section 111(b) as an example of when limitations on the sco pe of pollutants subject to the program are needed to enable sensible regulation and avoid a ra dical transformation in the program that renders it unworkable as written.(Id. at 2440, 2442 ). Second, commenters stated, the CPP violates the limits of statutory interpretation est ablished in UARG v. EPA: EPA's Proposed Rule violates the limits of statutory interpretation ann unciated in UARG because it exceeds any level of authority that can be supported by a fair readin g of section 111(d). Commenters stated that in UARG, the Supreme Court addressed a situation-simil ar to EPA's efforts to promulgate the CPP through a distorted interpretation of section 111(d )-in which EPA attempted to "tailor" an unambiguous provision in the CAA to accommodate EPA 's regulation of CO2 as a pollutant. Commenters stated finding that congressional author ization was needed for this expansion of EPA's authority, the Court further noted that it gr eets "with a measure of skepticism" an agency's attempt" to discover in a long-extant statute an un heralded power to regulate a significant portion of the American economy." (Id.) Commenters stated t he CPP represents a similar effort to expand EPA's authority that should be greeted with an even greater measure of skepticism. Third, commenters stated, the absence of previous s ection 111(d) regulations is telling: Section 111(d) is a little used provision of the CAA. Comme nters stated that although S. 111 was part of the CAA as originally adopted, EPA has regulated po llutants under the provision on only five occasions in the past forty-four years. (EPA has pr omulgated six regulations pursuant to S. 129 of the Clean Air Act pertaining to existing solid w aste incinerators. Section 129 directs EPA to utilize the procedures set forth in section 111(d) to set emission standards for a specific list of pollutants, not including carbon dioxide, that othe rwise could not be regulated under section 111(d). See 42 U.S.C. 7429.) Commenters stated four of these regulations were promulgated within the Act's first ten years, and the most rece nt regulation was adopted nearly two decades ago in 1996. (See 40 C.F.R. 60.30c et seq. (Dec. 19 , 1995) (regulating landfill gases from municipal solid waste landfills); 45 Fed. Reg. 26,2 94 (Apr. 17, 1980) (not codified) (regulating fluoride emissions from primary aluminum plants); 4 4 Fed. Reg. 29,828 (May 22, 1979) (not codified) (regulating total reduced sulfur from kra ft pulp mills); 40 C.F.R. 60.30d et seq. (Dec. 19, 1995) (regulating sulfuric acid mist from sulfu ric acid plants); 42 Fed. Reg. 12,022 (Mar. 1, 1977) (not codified) (regulating fluoride emissions from phosphate fertilizer plants).) Moreover, commenters added, all of these existing section 111 (d) regulations were based on measures achievable by individual units. Commenters stated t he performance standards for each of these five regulations focus on stack emission limits, ex pressly limiting emissions per unit of input or output. Commenters added none of the standards incl ude "outside-the-fence" measures or45

industry-wide "building blocks." Commenters stated none of them imposed state-wide emission targets or were based on a requirement for existing sources to cease or reduce operations. Commenters concluded, stating that this history of EPA's use of its section 111(d) authority shows that the CPP represents an extraordinary expa nsion of the authority actually exercised by EPA under section 111(d).

Response 14: We disagree with these comments. We discuss our aut hority to promulgate this rule, including why this rule is not inconsistent w ith the U.S. Supreme Court’s decision in UARG

v. EPA , in section IV of the preamble. Moreover, for the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, o ur interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history

.

Comment 15: Commenters stated, it appears that legal issues rem ain regarding the EPA's authority to regulate CO2 from existing power plant s under the Clean Air Act (CAA), section 111(d).

Response 15: This comment is not specific enough to merit a res ponse.

Comment 16: Commenters stated that while greenhouse gases ("GHG s") are pollutants for some purposes, they fall outside that term at other poin ts in the statutory scheme. Commenters stated as for the current rulemaking, GHGs are not polluta nts for purposes of Section 111(d) New Source Performance Standards. Commenters explained *(verbatim) that Section 111 is home to the New Source Performance Standards ("NSPS") regul atory scheme. Commenters stated it requires that States submit to the EPA "a procedure for implementing and enforcing standards of performance for new sources located in such State." 42 U.S.C. section 7411(c)(1). Commenters stated the procedure for existing sources is analog ous but follows "a procedure similar to that provided by section 7410," under which the States d evelop performance standards and implementation plans for a covered "air pollutant," taking into account the "remaining useful life of the existing source." Id. section 7411(d)(1). Co mmenters stated Section 111's procedures are inconsistent with the regulation of GHGs. Specifica lly, commenters stated, the focus on Stateby-State regulation is an important indication thatSection 111 is best interpreted as applicable only to pollutants with localized effects. Commente rs stated this feature is especially apparent in

Section 111's cross-reference to Section 110. Comme nters stated as the District of Columbia Circuit has explained, Section 110 "provides the fr amework" for States to adopt plans for implementing National Ambient Air Quality Standards ("NAAQS"). Texas v. EPA, 726 F.3d 180, 183 (D.C. Cir. 2013). Commenters stated that f ramework is inherently and pervasively focused on localized harms. Id. (citing Section 110 to explain how States "determine, based on local conditions and needs, how to implement the NA AQS and related requirements" (emphasis added)). Elsewhere, commenters stated, Section 111 confirms the analogy to the NAAQS structure and its focus on localized pollutants. In describing the process for prioritizing pollutants, commenters stated, Section 111 instruct s EPA to consider "the extent to which each such pollutant may reasonably be anticipated to end anger public health or welfare." 42 U.S.C. section 7411(f)(2)(B). Commenters stated this langu age mirrors the charge in Section 109 to46

consider "anticipated" harm to "public health or we lfare" in setting NAAQS standards. Id. section 7409(b). Commenters stated given the textua l parallel between Sections 109 and 111, which is more meaningful than the CAA's "profligate use" of "air pollutant," UARG, 134 S. Ct. at 2441, the two provisions should be read to addre ss the same type of pollutant. Commenters stated as the NAAQS guidelines make plain, those ar e pollutants with localized impact on health and welfare, not globally-dispersed pollutants like greenhouse gases. Commenters stated reliance on structure to clarify which pollutants fall withi n a CAA provision is a technique drawn directly from UARG. 134 S. Ct. at 2240-41 (citing examples o f EPA narrowing the meaning of "pollutant," including in the context of NSPS regul ations under Section 111). Commenters stated after UARG, the Agency cannot simply rely on its ex isting GHG regulations promulgated under Section 202(a)(1) to assert a similar scope of auth ority under Sections 110 or 111. Commenters

stated the UARG decision is also relevant in severa l further respects. First, commenters stated, UARG held that EPA cannot invoke the general Preven tion of Significant Deterioration ("PSD") provisions of the Act to regulate "millions" of exi sting facilities that simply draw electricity from the grid. Id. at 2444 (holding that such expansive regulation "falls comfortably within the class of

authorizations that we have been reluctant to read into ambiguous statutory text."); Id. at 2448 (explaining that regulation under the PSD program " may not be used to require reductions in a facility's demand for energy from the electric grid ."). Commenters stated this holding regarding the PSD program is important for establishing struc tural limitations on the regulation of pollutants under Section 111 as well. Commenters st ated PSD permits are required for pollutants regulated under the NAAQS provision in Section 110, and Section 111 expressly borrows from the NAAQS provision. Commenters stated given this s tatutory family tree, the UARG Court's "reluctan[ce]" to authorize bold new regulatory str uctures should apply with equal or even greater force to the current proposed rulemaking. S econd, commenters stated, the UARG Court

identified several obstacles based on factual diffe rences between global pollutants like GHGs and traditional localized pollutants. Commenters st ated the Court quoted the Agency's recognition that regulating GHGs would effect an "u nprecedented expansion of EPA authority'" due to the gases' ubiquity. Id. at 2436 (quoting 79 Fed. Reg. at 44,355). Moreover, the commenters added, because the Agency's factual prem ise for regulating greenhouse gases is that they operate on a global scale-combining from sourc es around the world and with effects on the entire planet's climate-the Court highlighted the A gency's recognition that regulation would be "relatively ineffective at reducing greenhouse gas concentrations.'" Id. (quoting 79 Fed. Reg. at 44,355). Commenters stated as a result, the Court n oted the difficulty of applying the Best Available Control Technology ("BACT") provisions of the CAA to greenhouse gases, based on the requirement that the regulator consider "ambien t air quality at the proposed site and in areas which may be effected by emissions." Id. at 2449 n. 9 (quoting 42 U.S.C. section 7475(e)(1); emphasis added). Commenters stated while the Court reserved judgment on that topic, the

obstacle it identified is at the forefront of this case, and it weighs heavily against stretching the location-specific program in Sections 110 and 111 t o include a pollutant that is inherently global, not local, in character. Commenters posited that th e Agency's proposal does not to explain how Section 111(d) allows the regulation of greenhouse gases at all. Commenters stated while GHGs are a pollutant under the Act's most general defini tion, UARG's central holding is that they do not therefore automatically fall within every other use of the term "pollutant" in the statute.47

Commenters stated because Section 111 specifically refers to the location-specific scheme for enforcing NAAQS standards, which expressly involves the States in regulating the conventional pollutants to which it applies, it is best interpre ted to exclude all regulation of GHGs. Commenters closed, stating that these features conf irm that the Supreme Court's reluctance to discover an "unheralded power to regulate a signifi cant portion of the American economy" in long-standing statutes prevents the cornerstone sta tutory discovery underlying the current proposal. UARG, 134 S.Ct. at 2444 (quotation omitte d).

Response 16: We disagree with these comments. We discuss our aut hority to promulgate this rule, including why this rule is not inconsistent w ith the U.S. Supreme Court’s decision in UARG

v. EPA , in section IV of the preamble. Moreover, for the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, o ur interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history

.

Comment 17: Commenters stated with the CPP, EPA has issued whatreally is another ANPR because the brief proposed rule - 9 pages of the th ousands of pages of preamble, legal justification, and technical support documents - do es not provide notice to electric generators as to what this rule requires. Commenters added that f or example, nowhere in the rule does EPA mention "building blocks" or "heat rate improvement " or "redispatch", yet these concepts are key to the CPP, intended to be used and incorporated bystates into state plans, and integral to an understanding of what states and the existing EGU s ource category are expected to do. Relying solely on the proposed rule language, no one could possibly understand the CPP as EPA has

defined it.

Response 17: The discussion in the preamble provides the adequat e notice.

Comment 18: Commenters stated that the 1990 Clean Air Act Amen dments did not change the gap-filling nature of Section 111(d), so as to prec lude EPA's actions here. Commenters explained that Section 111(d) of the Clean Air Act before 199 0 authorized EPA to regulate "any air pollutant which is not included on a list published under section 7408(a) or 7412(b)(1)(A) [112(b)(1)(A)] of this title."(See 42 U.S.C. - 7411 (d).) Commenters stated when Congress amended the Act in 1990, it made a significant overhaul to section 112, to provide for more effective regulation of hazardous air pollutants em itted by stationary sources. Specifically, commenters stated, Congress, dissatisfied with EPA' s delay in regulating toxic air pollutants,

restructured section 112. Commenters stated that am ong other changes, Congress replaced section 112(b)(1)(A), which had required EPA to lis t hazardous air pollutants that it intended to regulate, with new section 112(b), in which Congres s listed 189 substances as hazardous air pollutants.( See Pub. L. 101-549, S 301, 104 Stat. 2531 (1990); see generally White Stallion Energy Ctr., LLC v. E.P.A., 748 F.3d 1222, 1229 (D. C. Cir. 2014) (discussing 1990 amendments to section 112)) Commenters stated that after this amendment, the original reference to section 112(b)(1)(A) in section 111(d) no longer made sense , thereby necessitating a technical update.(See Id.) Commenters stated both Houses of C ongress proposed housekeeping amendments to section 111(d). Commenters stated the Senate bill struck S.112(b)(1)(A) and48

replaced it with S. 112(b), the new section providi ng the list of hazardous air pollutants. (S. 1630, as passed by the Senate on April 3, 1990, S. 305(a), reprinted in U.S. SENATE COMM. ON ENVT. & PUB. WORKS, LEGISLATIVE HISTORY OF THE C LEAN AIR ACT AMENDMENTS OF 1990, at 4534 (1993))) Commenters sta ted the House bill struck S.112(b)(1)(A) and replaced it with the phrase "emi tted from a source category which is regulated under section 112." (S. 1630, as passed b y the House of Representatives on May 23, 1990, S. 108(f), reprinted in VOLUME I: LEGISLATIVE HISTORY OF THE CLEAN AIR ACT AMENDMENTS OF 1990, at 1979 (1993)) Commenters continued, stating that the Senateoriginated language requires EPA to regulate air po llutants subject to regulation under section 111(b), excluding air pollutants regulated under se ction 112(b). Commenters stated the amendment from the House excludes any pollutants "e mitted from a source category which is regulated under section 112." Commenters stated the amendments were not discussed in committee hearings, floor debates, or in conference . Commenters stated that subsequently, both were enacted and signed into law, and only the Hous e amendment appears in the U.S. Code, but Supreme Court precedent accords the codification "n o weight." (United States v. Welden, 377 U.S. 95, 98 n.4 (1964)) Thus, commenters stated, th e Statutes at Large, which include both amendments, control in this situation. (See Stephan v. United States, 319 U.S. 423, 426 (1943) (finding that "the [United States] Code cannot prev ail over the Statutes at Large when the two are inconsistent); U.S. National Bank of Oregon v. Independent Insurance Agents of America, Inc., 508 U.S. 439, 448 (1993)(the Statutes at Larg e are "legal evidence of the laws)) Commenters stated this legislative oddity does not preclude EPA regulation of greenhouse gases under section 111(d). Commenters stated both amendm ents must be given effect unless there is some demonstrable significant defect, such as scriv ener's error. Commenters stated the Senate amendment - which plainly permits greenhouse gas re gulation - cannot be ignored. Commenters stated while language may be disregarded as a scriv ener's error where it has "no plausible interpretation", (Williams Companies v. FERC, 345 F .3d 910, 912 n.1 (D.C. Cir. 2003).) or "produce[s] a result demonstrably at odds with the intentions of its drafters," (Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571 (1982)) the Se nate amendment bears neither of those characteristics, as it reasonably retains EPA's lon gstanding authority under section 111(d) to regulate non-criteria and non-hazardous pollutants. Moreover, commenters remarked, excluding greenhouse gases (or any other pollutant that is ne ither regulated under section 112 nor sections 108-109) is in conflict with the plain language of the statute, as it would render the Senate amendment meaningless.(New York v. EPA, 443 F.3d 88 0, 887 (D.C. Cir. 2006) ([C]ourts must give effect to each word of a statute.)) Commenters stated the Senate amendment mandates EPA to regulate greenhouse gases, as they do not fall u nder section 108 or section 112(b) of the Clean

Air Act. Commenters stated even if the two amendmen ts are interpreted as inconsistent, EPA must attempt to give effect to both, rather than si mply discarding one.(See Morton v. Mancari, 417 U.S. 535, 551 (1974) (quoting United States v. Borden Co., 308 U.S. 188, 198 (1939)) (finding that absent "clear and manifest" congressi onal intention to contrary, the rule is to give effect to both provisions). Commenters stated in Ci tizens to Save Spencer County v. EPA, the agency was confronted with seemingly inconsistent a mendments in the Clean Air Act, and that
also were never reconciled in conference. 600 F.2d at 872. Commenters stated the D.C. Circuit explained that EPA's task, under Chevron, v. NRDC, 467 U.S. 837, 842 (1984), was "to pursue a49

middle course that vitiates neither provision but i mplements to the fullest extent possible the directives of each," and courts needed only to asse ss whether the agency had "effected an appropriate harmonization of the conflicting provis ions while remaining within the bounds of that agency's statutory authority." Spencer County, 600 F.2d at 871. Commenters said the court also noted that "maximum possible effect should be afforded" to both provisions and "none of those provisions rendered null and void". (Id. at 8 70. Section 111(d)'s two amendments also create the type of ambiguity that EPA may reasonabl y resolve.) Commenters continued, stating

that the House amendment can be read as consistent with the Senate amendment, to preclude a source category from regulation under section 111(d ) for a pollutant only when that source category is regulated under section 112 for that sa me pollutant. Thus, commenters stated, because section 112 is not used to regulate sources for their greenhouse gases, EPA is free to regulate those emissions under section 111(d).(Even if the Senate amendment were disregarded, the House amendment by itself has several differentreadings that would permit greenhouse gas regulation. The House amendment excludes pollutants "emitted from a source category which is regulated under section 112." The only reading thatbars greenhouse gas regulation is one that presumes any source category already regulated unde r section 112 for any type of pollutant is foreclosed from regulation under section 111(d). Be cause EPA already regulates the sources that emit greenhouse gases for hazardous air pollutant e missions under section 112, this reading of the House amendment would preclude section 111(d) r egulation for those sources. But such a reading leads to a puzzling result: it wholly exemp ts sources from being regulated for dangerous pollutants based on those sources already being reg ulated for other unrelated pollutants. See Desert Citizens Against Pollution v. EPA, 699 F.3d 524, 527-28 (D.C. Cir. 2012) (rejecting petitioners' interpretation of statute that would h ave had the "anomalous effect of changing the required stringency" for a given source's emissions "simply on the fortuity" of other emissions from that source). More troubling still, this readi ng would essentially strip section 111(d) of any real effect, because many large industrial sources are regulated for hazardous air pollutants under section 112. In theory, then, those sources would b e outside the scope of section 111(d), which would raise the question of what exactly the provis ion is supposed to regulate. Cf. Davis County Solid Waste Management v. EPA, 101 F.3d 1395, 1404 (D.C. Cir. 1996) ([I]t is of course a wellestablished maxim of statutory construction that co urts should avoid interpretations that render a statutory provision superfluous.)) Commenters state d the House amendment therefore can be read merely to state in different terms the same me aning as the Senate amendment. Commenters

stated the overall structure of the Clean Air Act a nd the legislative history of the 1990 Amendments support this reading. Commenters stated the 1990 Amendments - particularly the significant changes made to section 112 - were partof an effort to strengthen and update the air pollution regulatory scheme, marked by increased co ntrols, gap-filling, and decreased EPA authority to allow regulatory evasion; certainly no t a legislative attempt to scale back on regulation, or to create holes or gaps in the regul atory structure for some pollutants. Commenters stated in revising section 111(d), Congress most li kely meant only to update the language to comport with the overhaul of section 112. Indeed, t he House amendment is found under the heading "Miscellaneous Provisions" and the Senate a mendment under "Conforming Amendments."(Pub. L. No. 101-549, S. 108, 302(a), 1 04 Stat. 2399, 2467, 2547 (1990).) Commenters stated coupled with the signed bill cont aining an explanatory footnote describing50

the two amendments as "duplicative," both changes t o section 111(d) appear to be simply different versions of the same technical edit. (ENV IRONMENT AND NATURAL RES. POLICY DIV., LIBRARY OF CONGRESS, A LEGISLATIVE HIS TORY OF THE CLEAN AIR ACT AMENDMENTS OF 1990, at 46 (1998).) Commente rs stated that edit was to ensure continued application of section 111(d) to regulate air pollutants that are neither criteria pollutants nor hazardous pollutants under the new s ection 112(b). Commenters stated that in any event, construing the two amendments as prohibiting greenhouse gas regulation under section 111(d) is the least rational approach as well as th e least reflective of congressional intent. Commenters stated Congress surely could not have de sired to effect a sweeping, substantive change to the provision by exempting a large class of pollutants in an otherwise stylistic updating effort, all without the benefit of any debate or di scussion. Commenters stated this would be especially inconsistent with the general drafting o f the Clean Air Act, given that Congress did make a number of major, substantive changes to the statute in the 1990 Amendments, like section 112, but when it did so, those changes were not quietly tacked on to a housekeeping bill. Commenters stated Congress "does not, one might say , hide elephants in mouseholes." (Whitman v. Am. Trucking Assns, 531 U.S. 457, 468 ( 2001)) Commenters closed, EPA's interpretation maintains the longstanding purpose o f section 111(d) in controlling dangerous pollutants not otherwise regulated under other sect ions of the Clean Air Act. EPA's resolution of this ambiguity sufficiently harmonizes the two amen dments and is a permissible construction

that merits Chevron deference.

Commenters added that Congress' systematic approach to Sections 110, 111(d), and 112 allows these sections to sections to form an orderly frame work. Sections 110 and 112 focus on specific classes of pollutants and section 111(d) acts as a gap-filler, addressing dangerous pollution not regulated under the sections tailored to address ha zardous and ambient air pollution problems. Commenters explained that the legislative history o f the 1970 Clean Air Act confirms that this complementary framework was deliberate: It should b e noted that emission standards for pollutants which cannot be considered hazardous (as defined in section 115 [the precursor to section 112]) could be established under section 11 4 [the precursor to section 111(d)]. Thus, commenters stated, there should be no gaps in contr ol activities pertaining to stationary source emissions that pose any significant danger to publi c health or welfare.

Response 18: EPA agrees that it has the authority to promulgate regulations addressing CO2 emissions from existing power plants under section 111(d). EPA’s discussion of this issue is in Section IV of the preamble.

Comment 19: Commenters stated that while their agency takes no position on whether EPA should establish a NAAQS for greenhouse gas emissio ns, the agency is concerned that a CAA Section 111 (d) action is prohibited because GHGs h ave constructively been listed under CAA

Section 108. As a result of the EPA's Title II rule making, commenters concluded, all of the conditions precedent to list greenhouse gases under CAA Section 108 appear to have already been met. Commenters agreed with arguments made by the Sierra Club in NRDC v. Train (1976) when the Sierra Club succeeded in forcing EPA to de fine a NAAQS for lead under substantially similar facts, explaining that in that case, as is the case now, EPA has made an endangerment51

finding under Title II of the CAA; second, EPA foun d then for lead, and found now for GHGs,

that both are emitted from numerous or diverse mobi le or stationary sources. Commenters added that the court in NRDC v. Train (1976) found that o nce the first two provisions under Section 108(a)(1) are met, the third provision is construct ively satisfied. Commenters concluded that

because all three criteria under Section 108 are sa tisfied, EPA is prohibited from regulating GHGs under Section 111(d).

Commenters stated that carbon dioxide is not listed as a criteria pollutant for regulation under

Clean Air Act section 108. Commenters remarked thatNCDENR next argues that "[s]ection 111(d) also prohibits regulating pollutants listed under section 108," and "all of the conditions necessary to list greenhouse gases under section 10 8 have already been met."(D. van der Vaart Testimony at 6, Attachment 4.), but NCDENR's argume nt is premised on a flawed syllogism and notes that NCDENR has explained its assumption thatEPA's 2009 finding that carbon dioxide (in combination with other greenhouse gasses) endan gers public health and welfare automatically resulted in a section 108 listing in this way: (1) "[s]ection 111(d) prohibits regulating pollutants listed under section 108"; (2 ) "[a] pollutant must be listed under section 108 when three criteria are satisfied"; and (3) "[t]hos e criteria were satisfied when EPA published its endangerment finding under section 202." (Id.) NCDE NR is incorrect legally and factually. Commenters argued that the 2009 "endangerment" find ing was made under the mobile source provisions of section 202 of the Clean Air Act as anecessary first step toward regulating motor vehicle emissions of greenhouse gasses, and the "en dangerment" finding by itself does not cause a pollutant to be listed under section 108, even if all of the other prerequisite criteria necessary for listing a criteria pollutant have been met. (On the other hand, the endangerment finding satisfies one of the criteria for developing new so urce performance standards which is a prerequisite to development of standards of perform ance for existing sources. See Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units, 79 Fed. Reg. 34,829, 34,841-34,844 (June 18, 2014). ) Commenters stated that a listing decision requires a distinct, affirmative action by EPA subj ect to all of the public participation and review requirements of the Administrative Procedures Act, and in this instance, EPA has not, in fact, listed or even proposed listing carbon dioxide or o ther greenhouse gases as criteria pollutants under Clean Air Act section 108. Contrary to NCDENR 's argument, Commenters argued, there is no legal or factual impediment to EPA's proposal to establish performance standards for power plant carbon dioxide emissions.

Response 19: EPA agrees with the commenters who state that listi ng a pollutant under section 108 is a distinct step that cannot occur “construct ively” but only through an affirmative action of the EPA which would be published in the Federal Reg ister. This is in fact confirmed by the case cited by the commenters who believe constructive li sting has occurred. In NRDC v. Train , 545 F.2d 320 (2d Cir. 1976), the court concluded that t he requirements for listing lead as a pollutant under section 108 had been met, and therefore direc ted EPA to take the additional step of listing lead. Current circumstances are further distinguis hable from those of NRDC v. Train because the prerequisites for listing GHG as a pollutant under Section 108 have not been met. For example, the existing endangerment finding for GHG is specif ically for emissions from motor vehicles52

under CAA section 202. See 74 FR 66496 (Dec. 15, 2009), 1 although the scientific record underlying that endangerment finding may be relevan t to future endangerment findings under other statutory provisions. An endangerment finding cannot be made “constructively” but rather is entrusted to the judgment of the Administrator. See Zook v. EPA (D.C. Cir. No. 14-5187, April 24, 2015).

We discuss our authority to promulgate this rule in section IV of the preamble.

Comment 20: Commenters stated that EPA's proposal to regulate e missions of carbon dioxide from existing coal-fired power plants is a permissi ble interpretation of Clean Air Act section 111(d). Commenters stated that in the months leadin g up to and following EPA's June 2, 2014 announcement of the proposed Clean Power Plan, repr esentatives from North Carolina's Department of Environment and Natural Resources ("N CDENR") have questioned the legal basis for the proposal in presentations to various federal and state legislative and executive

committees and in oral and written statements to EP A. Commenters explained that in its legal critiques, NCDENR has raised three basic arguments: (1) EPA cannot regulate power plant

carbon dioxide emissions under Clean Air Act sectio n 111(d) because EPA has promulgated emission standards for power plant hazardous air em issions under section 112; (2) EPA cannot use section 111(d) to limit carbon dioxide emission s because it already is listed as a criteria pollutant under section 108; and (3) section 111(d) requires controls on emission sources only, and does not authorize "beyond the fence line" comp liance flexibility. [NCDENR also has argued that EPA cannot establish guidelines for reg ulating existing power plant sources of carbon dioxide under section 111(d) because EPA's p roposed standards of performance for new power plant sources under section 111(b) are unlawf ul. We do not address this mistaken contention here, but incorporate by reference our c omments in the rulemaking docket for the new source standards under section 111(b).] Commenters stated that each of these arguments is flawed and describes how EPA interprets section 111 (d) to limit development of standards of performance for specific pollutants regulated under section 112, rather than for entire categories of sources regulated under that section and that EP A's interpretation is a permissible construction that, in fact, is the most natural reading of the s tatute and best effectuates each of the statutory provisions. Commenters continued, stating that NCDE NR's argument that carbon dioxide is

listed under section 108 is false EPA has not liste d carbon dioxide as a criteria pollutant. And EPA's broad interpretation of "best system of emiss ion reduction" to include beyond-the-fenceline compliance approaches is a logical and permiss ible reading of these generically defined statutory terms. To demonstrate the flaws in NCDENR 's legal critique, Commenters briefly outlined the applicable statutory and regulatory fr amework for section 111 before addressing NCDENR's specific criticisms: A. Statutory and regu latory framework. Commenters stated that

Clean Air Act section 111 directs EPA to establish "standards of performance" limiting emissions of harmful air pollutants in three phases . First, commenters stated, EPA must identify categories of stationary sources that cause or contribute significantly to "air pollution which may

1 In addition, EPA recently proposed an endangermentfinding for emissions from certain aircraft engines under CAA section 231. See 80 FR 37758 (July 1, 2015).53

reasonably be anticipated to endanger health or wel fare." 42 U.S.C section 7411(b). Second, commenters stated, EPA must establish national stan dards of performance for new sources in each such category. Finally, commenters stated, onc e EPA has developed standards of performance for new sources in a category, it must then prescribe regulations under which states develop standards of performance for existing sourc es in the same source category. Id. section 7411(d). Commenters noted that Section 111(d) provi des that EPA "shall prescribe regulations which shall establish a procedure . . . under which each State shall submit [to EPA] a plan which . . . establishes standards of performance for any air pollutant . . . to which a standard of performance under this section would apply if such existing source were a new source." Id. (emphasis added). Commenters stated Congress exempt ed two categories of air pollutants from this mandate: any air pollutant (1) for which air q uality criteria have been issued or which is listed under section 108(a); or (2) which is emitte d from a source category covered under the hazardous air pollutant provisions of section 112. Id. Commenters stated neither exemption applies here. Commenters stated that the guidelines set minimum required emissions limitations based on the best adequately demonstrated systems o f emission reductions. Id. at section 60.22(b). Commenters said states then have flexibil ity to tailor their own plans to implement the standards of performance, so long as they meet or are equivalent to EPA's emission guideline. Id. Commenters stated EPA's implementing regulations al so provide for case-by-case variances from an emission guideline to allow for "significan tly more reasonable" compliance options, 40 C.F.R. section 60.24(f)(3), such as where necessaryto take into account the remaining useful life of an existing source that would be subject to the performance standard. 42 U.S.C. section 7411(d)(1)(B). Commenters remarked that although EP A promulgated its guidelines for implementing section 111(d) in 1975, the agency has issued few performance standards for existing sources. Thus, commenters stated, while th is is EPA's default approach, it has not been extensively elaborated or refined through a long hi story of prior rulemakings, and nothing in the Clean Air Act requires EPA to adhere rigidly to thi s approach for each air pollutant or each existing source category. In fact, commenters state d, EPA may adopt any reasonable approach to develop, issue, and implement existing source stand ards, so long as they meet the minimum requirements of the Clean Air Act and the agency ad equately explains its approach and rationale through appropriate notice and comment rulemaking. See, e.g., FCC v. Fox Television Stations, Inc. 566 U.S. 502, 515 (2009) (an agency may change its position so long as it provides "good reasons" for doing so). Commenters contended that i n this instance, EPA's rationale for using 111(d) as a legal basis to establish guidelines of performance for existing power plant sources of carbon dioxide is fully consistent with the Clean A ir Act, EPA's implementing regulations, and past practice.

Response 20: We generally agree with this comment.

Comment 21: Commenters stated the CPP is inconsistent with the statutory text of Section 111(d), and that EPA cannot overlook the fact that Section 111(d) actually provides a very specific and unambiguous grant of authority to EPA. (Commenters quoted 42 USC section 7411(d)1()(A) and (B).) Commenters continued, stati ng that EPA's reliance on this provision for implementing CO2 emissions from power plants is pro blematic for a few reasons. First,54

commenters stated, section 111(d)(1)(A) requires th at the use of the language "any air pollutant" was intended to encompass carbon dioxide. Commenter s stated in Massachusetts v. EPA, the United States Supreme Court held that greenhouse ga s ("GHG") emissions from motor vehicles are "air pollutants" under section 202(g) of the Cl ean Air Act, going so far as to say that "air pollutant" included "all airborne compounds of what ever stripe."(549 U.S. 497 (2007)) Commenters stated Massachusetts triggered a heighte ned desire for EPA regulation of CO2 emissions from the power sector and breathed new li fe into efforts to require EPA to undertake such regulation. Previously, commenters stated, thi s agency has declined to regulate GHG emissions, finding that none of the approaches to r educing CO2 were well-suited to regulation by the EPA specifically acknowledging as early as 2003 that the Department of Energy was better equipped to set efficiency standards for products s uch as air conditioners and appliances and that "Any widespread effort to switch away from fossil f uels in either sector would likewise require a wholesale transformation of our methods for produci ng power and transporting goods and people" and it is "hard to overstate the economic s ignificance of making these kinds of fundamental and widespread changes in basic methods of producing and using energy."(68 Fed. Reg. 52,922) Commenters continued, stating that the Supreme Court's decision in Massachusetts and the subsequent "Endangerment Finding"(74 Fed. R eg. 66,496 (2009)) cannot stand for the proposition that the reduction of CO2 emissions is necessary at all costs. Commenters stated what Massachusetts did stand for was the propositio n that EPA could not simply decide not to act for policy reasons but "must ground its reasons for action or inaction in the statute."(Ibid at 535) Commenters stated in Massachusetts, the questi on was one of whether the EPA was fulfilling its duty under CAA section 202. By contr ast, commenters stated, the pendulum has now swung in the other direction and EPA is attempt ing to enact rules that far exceed the statutory text or any statutory duty. Commenters ad ded that relying on the expansive definition of air pollutant found in section 202(g) ("all airb orne compounds of whatever stripe"), the EPA attempted to require best available control technol ogy ("BACT") and "major source" permits on the basis of CO2 emissions pursuant to several enfo rcement provisions that referenced "any air pollutant". Commenters stated in Utility Air Regula tory Group v. EPA (573 U.S.__ (2014)) the Court upheld the EPA's authority to require "anywaysources" to obtain PSD and Title V permits but declined to give EPA the wide latitude it had a ssumed in "tailoring" those statutory provisions to suit its policy objectives. Commenter s stated that in light of UARG, EPA is required to give a "reasonable, context-appropriate meaning" to the regulation it wishes to enforce. (Id.) Commenters remarked it is worthy of note that similar to its BSER analysis conducted by EPA in the proposed CPP, the UARG Court acknowledged EPA's intention that improvements in EE would be the foundation of GHG B ACT pursuant to section 7602. Commenters stated the Court acknowledged this but d id not decide whether BACT could be used to force improvements in EE, stating only that BACT was already limited to control technology that "did not require a fundamental redesign of the facility" and that the record did not reflect that EPA's demands would be of a significantly differentcharacter than those traditionally associated with PSD review or that BACT is "incapable of being sensibly applied to greenhouse gases. (Id.)

Commenters stated LPSC submits that this is indicat ion that EPA's deference is not unlimited on these issues and BSER in section 111(d), likewise, cannot force the type of fundamental changes proposed herein. Commenters stated that assuming fo r arguments sake that CO2 meets the55

definition of any air pollutant for the purposes of section 111(d), EPA still has to overcome a number of statutory hurdles to make the CPP fit wit hin the plain text of the statute. Specifically, commenters stated, section 111(d)(1)(A)(i) explicit ly prohibits the regulation of source category[ies] regulated under section 112. Commente rs said the Supreme Court in Am. Elec. Power, Inc. v. Connecticut, 131 S. Ct. 2527, 2537 n .7 (2011), stated "EPA may not employ [section 111(d)] if existing stationary sources of the pollutant in question are regulated under . . . the 'hazardous air pollutants' program, [section 11 2]. Nevertheless, commenters stated, on February 16, 2012, EPA finalized section 112 regula tions on "stationary sources" that included coal-fired power plants. See 77 Fed. Reg. 9,304 (Fe b. 16, 2012). Commenters stated those very same plants are included in the CPP despite their b eing explicitly prohibited and that such explicit prohibition has been acknowledged by the U nited States Supreme Court. Commenters closed, stating that even if EPA could overcome the aforementioned statutory prohibition, which we do not think it can, there is yet another requir ement: that the source category is one regulated under the new source performance standards found in section 111(b).

Response 21: We disagree with these comments. We discuss our aut hority to promulgate this rule, including why this rule is not inconsistent w ith the U.S. Supreme Court’s decision in UARG

v. EPA , in section IV of the preamble. Moreover, for the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, o ur interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history

.

Comment 22: Commenters stated that according to a study by NERA Economic Consulting (NERA), nineteen states have passed or are consider ing laws or resolutions expressing opposition to the EPA's Clean Power Plan. Commenter s explained that attorneys general from twenty states are on record opposing EPA's proposal , and fifteen governors, including the Governor of North Carolina, have sent letters to th e President stating that the EPA does not have the legal authority to regulate CO2 emissions from coal-fired plants, and it is reported that thirteen states have joined in litigation to challe nge the EPA's proposal. Commenters, which represented and protected the energy interests of s cores of manufacturers with plants throughout North Carolina, shared NC DENR's and Duke's views, as well as the opposition expressed by the aforementioned attorneys general and governors. Com menters remarked that due to the legal flaws of the EPA's plan, court challenges are antic ipated, and commenters explained that states shouldn't be forced to act until all court challeng es are over.

Response 22: For the reasons explained in the preamble, the dead lines established by the Agency are reasonable

Comment 23: Commenters stated that they do not believe that CAA Section 111 provides EPA with the authority to authorize requirements for su ch measures under standards set pursuant to

that section.

Commenters stated that this proposal is an unpreced ented use of an [uncommon] provision of the

CAA.56

Commenters added the unprecedented nature and expan sive scope of the Proposal demonstrate how far from EPA's delegated authority the Agency h as attempted to travel. Commenters stated Section 111(d) does not authorize EPA to regulate e ntire sectors of the economy. Commenters said as the U.S. Supreme Court recently noted "[w]h en an agency claims to discover in a longextant statute an unheralded power to regulate 'a s ignificant portion of the American economy,' ... we typically greet its announcement w ith a measure of skepticism. We expect Congress to speak clearly if it wishes to assign to an agency decisions of vast 'economic and political significance.'"

Response 23: We disagree. We discuss our authority to promulgate this rule, i ncluding why this rule is not inconsistent with the U.S. Supreme Court’s decision in UARG v. EPA , in section IV of the preamble. For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

Comment 24: Commenters stated that EPA claims its authority to reduce CO2 emission is

unlimited.

Commenters stated that the Proposed Rule is the fir st time EPA has ever attempted to broaden jurisdiction under the CAA using this 'entity with obligations' legal term and concept. - Emission

standard means in addition to the definition in Sec tion 60.21, any requirement applicable to any affected entity other than an affected source that has the effect of reducing utilization of one or more affected sources, thereby avoiding emissions f rom such sources, including, for example, renewable energy and demand-side energy efficiency measures requirements. Similarly, commenters remarked, this is the first time EPA has ever applied such a broad meaning to the term emissions so as to include 'any standard.' Com menters stated that under these proposed definitions, EPA's authority under the CAA is absol utely unlimited, and anything involved in electric generation and use would be regulated by t he CAA, and any requirement for such 'affected entity' constitutes an 'emission limitati on' over which EPA purports to have authority. Commenters closed, stating that overall, the propos al converts the Section 111(d) requirement that standards of performance be established by sta tes by source category for affected emitting sources, into a mechanism to regulate a combination of emitting sources and non-emitting facilities/entities by means of standards that go f ar beyond limiting emissions.

Response 24: We disagree. As we explain in section V. B. of the preamble and in the Legal Memorandum, we have refined our analysis of the BSE R, and we do not believe our interpretation will lead to unreasonable future act ions for this or any other source category. In accordance with our interpretation, we undertake a pollutant- specific and source- category - specific evaluation. As a result, the BSER is uniqu e to each industry and even may be different for new and existing sources.57

Comment 25: Commenters stated that the CAA is designed to prot ect the environment and promote a strong economy. (See CAA Purposes 42 U.S. C. section 7401), and Congress set forth several clear regulatory paths in the CAA for regul ating stationary sources, and power plants are stationary sources. The primary regulatory paths fo r stationary sources are to: 1. Set ambient air quality standards, requiring each state to address in whatever way makes sense for its local economy the achievement of the ambient standard; an d 2. Set source-specific technology-based limits for industry sectors that contribute signifi cantly to air pollution. Commenters remarked that the source specific standards support the atta inment and maintenance of NAAQS, but the two programs are administered quite differently and that neither pathway can perfectly regulate GHGs but aspects of both can provide a useful frame work for constructing a new pathway. Commenters stated that EPA is legally constrained t o act within those two pathways, separate though they are, and cannot administratively create a hybrid program not authorized by Congress by simply borrowing what "makes sense" for GHGs. Co mmenters posited that the CPP is legally flawed because it attempts to regulate a transition to a lower carbon economy by blending two separate regulatory pathways in the CAA, and by try ing to regulate in this way, EPA has created a rule without the needed legal underpinnings. Comm enters explained that the source of GHG reductions is irrelevant, and a rule that simply ta rgets one sector, without appropriate offsets and true flexibility, cannot pass legal muster. Comment ers stated that allowing states to choose their regulatory pathway supports the rightful balance of power Congress granted in the CAA and protects global resources, allowing for a gradual transformation to a lower carbon economy without unnecessarily jeopardizing a long history o f providing reliable, affordable electricity to power our economy. (The CAA, as amended, gave the A dministrator ... the authority to promulgate national ambient air quality standards ( NAAQS). Primary air quality standards were to be set at a level to protect public health ... . Each state then had to adopt a SIP that provided for the "implementation, maintenance, and enforceme nt" of the primary standard ... For stationary sources, states were expected to set emi ssions limits to be enforced by civil and criminal sanctions. Although the 1970 Amendments em phasized that air pollution prevention and control remained the "primary responsibility of sta tes and local governments, and made the states fully responsible for directing and coordinating al l intrastate control activities, EPA was to be in charge of the air pollution control program... The 1970 CAA Amendments required the federal government to promulgate standards for new stationary sources but the states could regulate existing sources in order to meet SIP requirements. Reitze, Arnold W. Jr., Air Pollution Control Law: Compliance and Enforcement. (Environmental Law Institute. September 2001), p. 16. The CAA Amendments of 1977 made major changes to the CA A while retaining the fundamental approach of the 1970 statute. Under the 1970 Amendm ents, SIPs were required to include emission limitations and other measures necessary t o attain and maintain primary air quality standards... CAA section111, dealing with new sourc e performance standards (NSPS), was modified to require the use of the "best technologi cal system of continuous emissions reduction" ... . This requirement applied to "new sources" [in cluding modifications]. Because new sources are regulated more stringently than existing source s, the point at which a repair becomes a modification and triggers the more stringent regula tions became important. Id. at 18. While the 1977 Amendments made the CAA significantly longer a nd more complex, it continued to use the ambient air quality standards approach. However, th e mandated use of end of the stack58

technology-based controls made the CAA a philosophi cal hybrid with overlapping environmentbased and technology-based requirements. Id. at 19. ) Commenters stated EPA's 2013 Greenhouse Gas Inventory Report, http://epa.gov/climatechange/ghgemissions/usinvento ryreport.html , notes the following five broad sectors and the percentage of U.S. GHG emissi ons: Transportation, 32%; Industry, 20%; Commercial and Residential, 10%; Agriculture, 10%; and Electricity, 32%. Globally, GHG emissions are similarly split among multiple broad sectors: Forestry, 17%; Waste and wastewater, 3%; Energy supply, 26%; Transportation, 13%; Commercial and Residential, 8%; Industry, 19%; and Agriculture, 14%. http://epa.gov/climatechange/ghgemissions/global.ht ml . In short, commenters said, all sectors contribute and control of only one sector, without broad offset options, simply tips a blind eye to the physical re ality of the carbon cycle. Commenters added that unlike the criteria pollutants, EPA has never claimed that CO2 has a direct toxic effect on human health, and although EPA's strategy is bol d, creating a hybrid of NAAQS regulation and source-specific Section 111 regulation, such cr eativity is without legal authority.

Response 25: We disagree. For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history. Moreover, t o the extent this comment objects to the portfolio approach, the EPA is not finalizing the proposed “portfolio” appr oach and will not accept state plans that attempt to impose emission standards or other CAA c ompliance obligations on entities other than affected EGUs. The state measures approach provides a path for a state to achieve the emission performance level as expressed as a state goal in a way that avoids placing enforceable emission standards on affected EGUs (unless and until the ba ckstop is triggered). States will have a wide range of flexibility in choosing how to demonstrate their affected EGUs are meeting a state goal.

Comment 26: Commenters stated CAA Section 111(d) prohibits EPA from issuing regulations governing a pollutant that is "emitted from a sourc e category which is regulated under Section 7412 of this title, ." and because CO2 is emitted f rom coal-fueled EGUs, and because coal-fueled EGUs are regulated by EPA under Section 112 through EPA's Mercury Air Toxics (MATS) regulation, EPA may not regulate CO2 emissions fromcoal-fueled EGUs under CAA Section 111(d).

Response 26: We disagree. We discuss our authority to promulgate this rule, i ncluding why this rule is not inconsistent with the U.S. Supreme Court’s decision in UARG v. EPA , in section IV of the preamble and section XXII of the Legal Memo.

Comment 27: Commenters stated the proposed regulations are alm ost contrary to the Clean Air Act, which requires the EPA to establish a "procedu re" under which each state shall develop a plan for establishing and implementing standards of performance for existing sources within the state. Commenters elaborated, stating that existing EPA regulations provide that states may adopt "less stringent emissions standards" based on facto rs such as "unreasonable cost of control" among other factors, and the Clean Air Act and the EPA's own existing regulations recognize

that the States are best suited to address carbon d ioxide emissions. Commenters urged EPA, in59

developing guidelines for regulating carbon dioxide emissions from existing power plants, to respect Pennsylvania's primacy and to rely on Penns ylvania regulators to develop performance

standards for carbon dioxide emissions that take in to account the unique policies, energy needs, resource mix, and economic priorities of our state.

Response 27: We disagree with this comment. In section V of the preamble for this rule and section VII of the Legal Memo, we discuss the respe ctive roles of the EPA and states under CAA section 111(d).

Comment 28: Commenters stated that even if EPA has the authorit y to issue CAA section 111 (d) regulations governing CO2 emissions from coal-f ueled EGUs, the Proposed Rule impermissibly intrudes upon Colorado's express auth ority under CAA section 111 (d) to "establish" state-specific standards of performance . Commenters stated under CAA section 111(d), EPA's authority is limited to adopting a "p rocedure" under which "each State shall submit to the Administrator a plan which (A) establ ishes standards of performance". Commenters stated the Proposed Rule is far more tha n procedural. Rather, commenters stated, the Proposed Rule would usurp Colorado's CAA and st ate law authority to "establish" performance standards by dictating what the standar ds must be. Additionally, commenters stated, EPA has structured the Proposed Rule in a way that would prevent Colorado from considering "the remaining useful life of the existing source" in applying a state-established performance standard. [CAA 111(d)(1)(B); 79 Fed. Reg. at 34,925 ] Commenters stated that the Proposed Rule is not consistent with the language, context, legis lative history, and consistent past administrative interpretation of CAA section 111(d). Instead, comm enters added, the Proposed Rule is built on new and redefined terminology never before used in the CAA section 111 (d) program. Commenters stated that for the first time, EPA seek s to set state-by-state "goals," which equate to or carry the burden of legally enforceable manda tes for states, including Colorado. However, commenters stated, EPA lacks the authority under ei ther CAA section 111(d) or EPA's CAA section 111(d) regulations to set binding statewide "goals." Notably, commenters stated, the term "goal" is not even used in the CAA or EPA's impleme nting regulations. Similarly, commenters stated, for the first time, EPA defines a "system" of emission reduction in the form of a mandate which governs the amount of time EGUs within the re gulated source category are allowed to operate. Forcing coal-fueled EGUs to retire prematu rely or to reduce operation is not a "system" of emission reduction under CAA section 111 (d). Co mmenters added that the new "interpretation" of CAA section 111(d) set forth in the Proposed Rule encourages Colorado to submit a plan that contains what EPA calls "portfol io" measures. Commenters stated these measures would be used, for instance, to dramatical ly increase the use and deployment of renewable energy and EE throughout the state, targe ting Colorado citizens and businesses as necessary agents in the reduction of electric consu mption. However, commenters stated upon EPA approval of a Colorado CAA section 111(d) Plan, these measures would become "federallyenforceable" against those agents (citizens and bus inesses) required to implement them. Commenters argued that the CAA section 111 (d) does not provide EPA the authority to create federally enforceable obligations on entities that do not own or operate facilities within the regulated source category but rather, CAA section 1 11 authorizes standards to be set for facilities60

within EPA-listed source categories. Commenters urg ed CAA section 111 does not apply to, nor can it permissibly reach, any other facilities or e ntities that are not part of the listed source
category.

Response 28: We disagree. For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history. Moreover, t o the extent this comment objects to the portfolio approach, the EPA is not finalizing the proposed “portfolio” appr oach and will not accept state plans that attempt to impose emission standards or other CAA c ompliance obligations on entities other than affected EGUs. The state measures approach provides a path for a state to achieve the emission performance level as expressed as a state goal in a way that avoids placing enforceable emission standards on affected EGUs (unless and until the ba ckstop is triggered). States will have a wide range of flexibility in choosing how to demonstrate their affected EGUs are meeting a state goal. Lastly, this rule does not establish any emissions standards for

Comment 29: Commenters stated EPA has provided little or no in formation regarding what authority it's relying on to institute such an expa nsive regulatory regime and how it intends to proceed if it is not approved in individual states' implementation plans.

Response 29: We disagree with this comment. As explained in the preamble, we discuss in detail our legal authority for this rule, and we ex plain that we are not authorizing a portfolio approach. We also explain our process concerning a federal plan, and, separately, we have proposed a federal plan.

Comment 30: Commenters stated EPA has the ability to require a contingency plan in accordance with Section 172(c)(9) of the Clean Air Act. According to Section 172(c)(9) of the Clean Air Act, EPA shall require nonattainment plan s to include "implementation of specific

measures to be undertaken if the area fails to make reasonable further progress [in obtaining a NAAQS]." Commenters requested EPA to identify the s pecific authority that allows EPA to require a contingency plan under Section 111(d) of the Clean Air Act. Commenters stated although EPA does not describe this measure as a "c ontingency plan," it appears that "corrective measures" are functionally identical to the conting ency plans provided under Section 172(c)(9) of the Clean Air Act, which is inapplicable to plan s under Section 111(d).

Response 30: The EPA disagrees that corrective measures in this rule are functionally identical to part D contingency measures. Under Part D, conti ngency measures are not expected to fully bring the area into attainment. In fact, this would not be possible given the difficulty of predicting in advance exactly what measures would b e needed to fully attain. A better analogue in Part D for the corrective measures in these guid elines is the primary way Part D addresses failure to attain: the state is required to revise its plan in various ways within a certain time in order to bring about attainment. See, e.g., section 179(d). This is analogous to what we are requiring for corrective measures.61

Comment 31: Commenters stated EPA should be aware that any pla n developed by LDEQ or

the state of Louisiana must be consistent with and will be constrained by Act 726 of the 2014 Regular Legislative Session.

Response 31: We appreciate this information. Under the CAA, Loui siana and all other states and other affected jurisdictions are subject to the req uirements of this rule notwithstanding any state laws that may limit a state’s ability to comply wit h this rule

Comment 32: Commenters stated EPA has not clearly identified i t's authority to require, mandate, or otherwise implement and enforce renewab le energy standards or demand-side energy efficiency standards, i.e., Building Blocks 3 and 4 of EPA's proposed Clean Power Plan. Commenters stated these building blocks are clearlybeyond the fence line of any given electric generating unit, and EPA also has not clearly ident ified for Nebraska where these authorities lie; therefore, it is unclear under what authority pursu ant to the Clean Air Act EPA is using to develop the Best System of Emission Reduction using all of the building blocks. Commenters explained that in Nebraska, the NDEQ does not have the authority to mandate renewable energy standards or demand-side energy efficiency standard s. Commenters stated implementing these measures would require action by the Nebraska Legis lature granting the NDEQ this authority, and there is no guarantee this authority would be g ranted. In fact, commenters stated, the members of the 103rd Nebraska Legislature, Second S ession, approved Legislative Resolution 482, requesting that the EPA issue emission reducti on goals based only on measures achievable within the fence line of regulated sources. [LR 482 http://nebraskalegi lature.gov/] Commenters stated the proposed Clean Power Plan therefore establishes goals that would be unachievable by the NDEQ and the State of Nebraska.

Response 32: We disagree with this comment. As we explain in the preamble, we are not requiring, mandating, or otherwise implementing or enforcing renewable energy standards or demand-side energy efficiency standards.

Comment 33: Commenters stated the authority of FERC is strictl y limited to transmission and wholesale sales of electricity in interstate commer ce, and the State of Utah retains broad and exclusive regulatory authority over retail sales an d service, local distribution service, and the need for, and siting of, generation facilities. Com menters added Utah exercises that authority by (1) direct regulation of the investor owned utility 's facilities, services, and rates, and (2) providing for the creation of state or local public power utilities and electric cooperatives that are largely self-governed and accountable to the custom ers in the communities they serve. Commenters remarked that although without clear aut hority, and in conflict with existing governance and regulatory matters, EPA would assume total autonomy in the electric utility industry with the finalization of the proposed rule , and EPA would be asserting newfound authority to become the primary regulator of electr ic power within the United States, including regulating (i) the dispatch of electric generation, (ii) the amount of renewable power to be constructed and integrated, and (iii) requiring cus tomers to limit their electricity consumption. Commenters contended that the EPA's proposal does n ot appreciate that Utah's utility regulatory62

commission lacks the authority to implement several building blocks with respect to public power utilities and undermines the governance polic ies of public power and local control.

Response 33: We disagree with commenters. CAA section 111(d)(1) requires the EPA to promulgate regulations under which states submit st ate plans regulating “any existing source” of certain pollutants “to which a standard of performa nce would apply if such existing source were a new source” and “provides for the implementation and enforcement of such standards of performance.” Affected EGUs, including municipaliti es and electric cooperatives, are subject to air quality requirements, including meeting such st andards of performance that a state may establish to meet emissions performance levels thatthe EPA determines are achievable under CAA 111(d). We give states and affected EGUs flexib ility determining how they meet these requirements. No state or affected EGU must impleme nt the precise measures included in the building blocks in order to do so. The agency recog nizes that states must have legal authority to implement approvable state plans. In the event thatstates lack the necessary state-law authority to implement a plan, the EPA will implement a feder al plan for that state under section 111(d)(2). Further, we note that we are not includi ng building block 4, demand-side energy efficiency in the final rule. Finally, for reasons that we fully explain in preamble section V.B. and the legal memo, we are within our legal authori ty and the final rule is consistent with past EPA practice and interpretation in setting standard s of performance.

Comment 34: Commenters stated that EPA's inclusion of EE and RE measures is inconsiste nt with the principle of "cooperative federalism," tha t the CAA establishes a cooperative framework whereby EPA and the states work in partnership to a chieve air quality objectives, and that the CAA's "cooperative federalism structure is a defini ng feature of the statute." See, e.g., GenOn REMA, LLC v. EPA, 722 F.3d 513, 516 (3d Cir. 2013). (internal quotations emitted). Commenters added that when enacting this law, Congr ess found that "air pollution prevention ... and air pollution control at its source is the prim ary responsibility of states and local governments" and that federal financial assistance and leadership is essential for the development of cooperative federal, state, regional , and local programs to prevent and control air pollution." 42 U.S.C. Section 7401(a)(3); 42 U.S.C. Section 7401(a)(4). Commenters argued that EPA, in the CPP, does more than encourage or promot e state actions- it federalizes them, and EPA is building bold assumptions regarding EE and R E, beyond-the-unit measures traditionally regulated at the state or regional level, into each state goal calculation, effectively requiring states to utilize these beyond-the-unit measures to achieve the standard. Commenters stated besides being simply unnecessary, another major pro blem exists with it - by requiring states to include their state-regulated EE and RE programs in to its federally-enforceable state plan, EPA effectively subjects state programs to federal enfo rcement. Commenters stated the EE programs and many of the RE programs have to date been wholl y state programs, and by regulating staterun EE and RE programs, which it argues affect CO2 emissions from the source category by reducing demand of electricity generated from fossi l-fuel fired EGUs, EPA is not respecting the state's explicit authority to regulate its own reta il electricity demand.

Response 34: We disagree with this comment. In section V of the preamble for this rule, we discuss the respective roles of the EPA and the sta tes under CAA section 111(d). In addition,63

under this rule, the EPA would not exert CAA enforc ement authority over any entity other than affected EGUs and would be limited to enforcing the emission standards applicable to the affected EGUs, and thus this rule does not require that states make their EE or RE programs federally enforceable.

With regard to the inclusion of EE and RE programs in BSER, we first note that we are no longer including building block 4, demand-side EE, in the BSER. While affected EGUs can utilize EE as a compliance measure to meet required emission r eductions, it is not a component of BSER. Next, we reiterate that states and affected EGUs ar e not required to implement the building blocks in order to meet the required emission reduc tions. States have considerable flexibility in how they design state plans. As we explain in sections V.A. and V.B. of the prea mble, our emission guidelines simply reflect an achievable em issions limit through the application of the BSER and do not in themselves require states or sou rces to implement the BSER. That is, EPA is responsible for determining the level of emission l imitation from the source category, while states have the responsibility of assigning emissio n requirements to their sources that will ensure

their achievement of that level of emission limitat ion. States may fulfil their responsibility by establishing emission standards or creating plans c onsistent with the guidelines. In doing so, states will be able to choose from a wide range of emission reduction measures, including measures that are not part of the BSER. For the rea sons discussed in section 1.2 of this response to comments, as well as in the Legal Memorandum acc ompanying the final rule, this approach is consistent with the principles of cooperative feder alism embodied in some portions of the Clean

Air Act.

1.2 AUTHORITY TO REGULATE EGUS

Comment 1: Commenters stated, EPA correctly concludes that se ction 111(d) requires the regulation of carbon pollution from any existing EG U that would, if it were "new", be covered by any 111(b) rulemaking establishing carbon pollut ion standards for EGUs. Commenters said, notwithstanding the unambiguous statutory language supporting EPA's conclusion, some industry commenters question whether the section 11 1(b) standards for modified and reconstructed EGUs would independently require regu lation of carbon pollution from existing EGUs under section 111(d). Commenters said, in a jo int comment filed in this docket, a number

of trade and business associations claim that the s tructure of section 111 demonstrates that Congress intended that existing sources would not b e regulated unless EPA first established standards of performance for all new sources (newlyconstructed, modified, and reconstructed). Commenters said, these commenters further assert th at such an interpretation of the statute is necessary to avoid the "nonsensical outcome" where existing sources become subject to regulation before EPA finalizes standards for newlyconstructed sources.

Commenters stated, such arguments ignore the text o f section 111(d), which compels EPA to regulate existing sources that would be covered by a section 111(b) standard if they were "new sources" - a term that expressly encompasses modifi ed or newly constructed sources, and encompasses "reconstructed" sources under EPA's wel l-settled interpretation of the term64

"construction" in the statutory definition of "new source." Commenters said, nothing in the text of section 111(d) states or implies that EPA must d efer regulation of existing sources that would be subject to a section 111(b) standard if they und ertook modification or reconstruction until such time as EPA has established a section 111(b) s tandard for newly constructed sources in the same category. Commenters said, on the contrary, th e text and structure of section 111 demonstrate that Congress was urgently concerned wi th identifying and regulating categories of sources contributing significantly to air pollution reasonably "anticipated to endanger public health or welfare." Commenters said, delaying regul ation of existing sources until after the promulgation of standards for all possible forms of "new" sources within a category would be inconsistent with ensuring that all sources of dang erous pollution-even existing sources-are controlled once identified. Commenters said, finall y, the regulation of existing sources under 111(d) while 111(b) standards for newly constructed sources are pending does not produce a
"nonsensical outcome."

Commenters stated, the text and structure of sectio n 111 demonstrate that a category of sources must be subject to 111(d) regulation if the categor y would be subject to any 111(b) standard. Commenters said, as noted above, section 111(a) exp licitly provides that a "new source" includes "any stationary source" that undertakes "constructi on or modification" after the proposal date of a standard of performance applicable to that source . Commenters said, section 111(d), in turn, directs EPA to ensure that state plans establish st andards of performance for "any existing source . . . to which a standard of performance . . . woul d apply if [that] existing source were a new source." Commenters said, this structure clearly co ntemplates that the regulation of existing sources in a category is triggered by the potential applicability of section 111(b) standards to either newly constructed or modified sources in tha t same category. Commenters said, although Congress did not expressly include reconstructions in the definition of "new source," it is nonetheless clear that Congress contemplated more t han one type of "new" source would be subject to 111(b) standards, and therefore that 111 (d) standards for a category could be required as a result of EPA establishing 111(b) standards fo r any of the multiple possible types of "new source." Commenters said, consequently, now that EP A has proposed standards of performance for modified and reconstructed EGUs, existing EGUs would satisfy the statutory and regulatory definitions of a "new source" if they were to under take modification or reconstruction. Commenters said, the modified and reconstructed sou rce standards thus serve as a separate and wholly sufficient predicate for the 111(d) standard s for existing sources.

Commenters stated, by contrast, the statutory text provides no support for the alternative view advanced by some industry commenters, which is thatstate plans may only regulate existing EGUs after promulgation of standards for new, modif ied, and reconstructed sources of the same type. Commenters said, if Congress had intended tha t section 111(d) requirements only apply to sources for which all possible section 111(b) stand ards have been promulgated, it would have so stated. Commenters said, instead, Congress provided that a "new source" is one that undertakes "construction or modification" after the proposal o f an applicable standard of performance, and did not require that EPA establish a single standar d of performance for the different contemplated forms of "new" sources. Commenters sai d, on the contrary, the statute expressly65

provides EPA with discretion to establish differentstandards under section 111(b) for the multiple possible types of "new" sources, by author izing EPA to distinguish between different types and classes of sources within a category. Com menters said, thus, because Congress clearly established that there are multiple avenues through which a source may be "new" for the purpose of applicability of a 111(b) standard, the mandate in section 111(d) to regulate existing sources that would be subject to 111(b) standards if they a re "new" is triggered by an applicable standard of performance for either newly constructed, recons tructed, or modified sources.

Commenters stated, EPA's position is also fully con sistent with the purpose of section 111, whereas the position advanced by industry commenter s would undermine the statutory purpose. Commenters said, the purpose of section 111, as dem onstrated by its text and structure, is curbing the emission of harmful pollutants from cat egories of stationary sources identified as significantly contributing to dangerous pollution; this purpose is fulfilled through a statutory structure that ensures that air pollution emitted b y both new and existing sources in those categories are regulated. Commenters said, to addre ss pollution from the category effectively, and to fulfill Section 111's technology-forcing man date, EPA must promptly establish standards under section 111(b) for newly constructed, reconstructed, and modified sources in each listed category. Commenters said, yet where existing sourc es are responsible for the vast majority of the pollution generated by the category, as is the case with respect to carbon pollution from power plants (and many other source types), establi shing section 111(d) regulation is an even more urgent task to fulfill the Act's fundamental p urpose of protecting human health and welfare. Commenters said, for this reason, section 111(d) re quires EPA to ensure that standards of performance under section 111(d) are established fo r existing sources, which are defined as "any stationary source other than a new source." Comment ers said, because the goal of this statutory framework is ultimately to ensure that Americans ar e protected from dangerous air pollution through standards addressing the entire category, i t would frustrate that purpose to delay the regulation of existing sources until standards of p erformance have been established for all forms of new sources. Commenters said, conversely, interp reting section 111(d) as requiring the regulation of existing sources that would be subjec t to a 111(b) standard of performance if they were any form of "new source" is consistent with se ction 111's clear purpose of ensuring that emissions from the entire category become subject t o pollution standards.

Commenters stated, contrary to industry assertions, the regulation of existing sources under 111(d) while 111(b) standards for newly constructed sources are pending does not produce a "nonsensical outcome." Commenters said, EPA's appro ach ensures that existing sources, responsible for the vast majority of the carbon pol lution generated by this category of sources, would be subject to standards requiring the abateme nt of that pollution once there is a section 111(b) standard for any "new source" of the same ty pe. Commenters said, this approach is wholly consistent with the unambiguous text of sect ion 111(d) and comports with the Act's fundamental purpose of protecting Americans from da ngerous air pollution.

Commenters stated, the text, structure, and purpose of Section 111 unambiguously require state plans to cover any existing EGU that would be subje ct to a section 111(b) standard if it were to66

be newly built, modified, or reconstructed. Comment ers said, industry commenters' misguided view that EPA is barred from issuing emission guide lines for existing EGUs until it promulgates

standards for all new sources is inconsistent with the statute and would frustrate the core purposes of section 111.

Commenters stated, because EPA' interpretation that111(d) requirements continue to apply to sources that later modify or reconstruct does not r ely on defining those sources as continuing to be "existing" sources, the proposed 111(b) standard s of performance for modified and reconstructed EGUs are in no way standards for "exi sting" sources. Commenters said, thus, because the proposed standards are clearly standard s of performance for "new" sources, fitting the definition of section 111(a)(2), the standards for modified and reconstructed EGUs are a sufficient predicate for the regulation of existing sources under section 111(d).

Response 1: EPA agrees that a standard of performance for eith er modified sources or reconstructed sources may serve as a sufficient pre dicate for regulation under section 111(d). This issue is discussed more fully elsewhere in thi s Chapter in response to comments stating that such standards are not a sufficient predicate.

Comment 2: Commenters stated that the statutory language of Se ction 111(d) is a product of differing House and Senate versions and that under the Senate version, unless a particular air pollutant emitted by existing sources was regulated by one of several other listed CAA provisions, existing sources emitting that pollutan t could be regulated under Section 111(d). The commenters stated that in contrast, the House versi on prohibits existing sources from being regulated under Section 111(d) if the existing sour ces are regulated under Section 112; under prevailing rules of legislative construction and ca se law regarding harmonization of conflicting statutory provisions, the House provision controls. The commenters stated that effective in 2012, EPA already regulates coal-fired power plants under section 112 in the Mercury and Air Toxics Standard; therefore, EPA has no authority to regula te existing coal-fired power plants a second time under Section 111(d). The commenters stated th at, also, section 111(d) requires EPA to issue a valid new source performance standard under Section 111(b) before issuing an existing

source standard.

Response 2: We disagree with this comment. We respond to the tw o arguments made by commenters in our responses to other comments in th is section and in section 1.1 of the RTC.

Comment 3: EPA prohibited from setting ESPS for sources regul ated under section 112

Several commenters stated that 111(d) prohibits EPA from promulgating existing source performance standards for source categories that ha ve already been regulated under Section 112.

Commenters stated that despite the clarity provide d in a literal reading of 111(d), EPA argues that the statute's prohibition is ambiguous due to a clerical mistake in the 1990 CAA Amendments. The commenters stated that although bot h the House and Senate versions were included in the 1990 Amendments, the Senate's versi on contained the error and it was the House67

version that was published in the U.S. Code. The co mmenters stated that the House version controls over the Senate's because of longstanding and well-established rules for resolving legislative drafting inconsistencies and clerical e rrors in federal legislation. The commenters

stated that in direct conflict with the House amend ment version that bans any regulation under Section 111(d) of existing sources already regulate d under Section 112, EPA's interpretation would permit regulation as long as the pollutant it self is not regulated under Section 112 because CO2 was not itself regulated under the Mercury and Air Toxics Standard, only hazardous air pollutants from coal- and oil-fired EGUs. The comme nters stated that additionally, in direct conflict with the Senate's version, which prohibits regulation of any HAP under Section 111(d), EPA's interpretation would permit regulation of a H AP under Section 111(d) if Section 112 does not regulate the HAP and the emitting source. The c ommenters stated that despite EPA's erroneous attempt at claiming that the limitations in these amendments negate each other, it is possible, and therefore mandatory, to read the vers ions as prohibiting EPA from regulating emissions of any pollutant from sources in a catego ry that is already regulated under Section 112 under its authority in Section 111(d).

Commenters stated that 111(d) prohibits EPA from pr omulgating existing source performance standards for source categories that have already b een regulated under Section 112. Commenters stated that in 2012, EPA issued the Mercury and Air Toxics Standards under section 112 to regulate emissions from coal-fired EGUs; thus, the CPP attempts to unlawfully and duplicatively regulate coal-fired EGUs.

Response 3: EPA disagrees that it may not promulgate regulation s addressing CO2 emissions from existing power plants under section 111(d). EP A’s discussion of this issue is in Section IV of the preamble.

Comment 4: Commenters disagreed that EPA has the authority to enforce emission rate goals at

individual affected sources. The commenters stated that the Act reserves to the States the authority to establish, implement, and enforce stan dards of performance at individual affected sources. [42 USC 7411(d)(1)(A),(B)] The commenters stated that the EPA only has the authority to "prescribe" and "enforce" a State plan when a St ate fails to submit a "satisfactory" plan. [42 USC 7411(d)(2)(A),(B)]

Response 4: We disagree with this comment. CAA sections 111(d) (2)(B) and 113(a) – (h) authorize the EPA to enforce the provisions of a st ate plan, regardless of whether the state fails to submit a satisfactory plan or fails to enforce thatplan. Section 113 does not distinguish between implementation plans under Sections 110 and 111(d). Section 304 of the CAA provides similar enforcement authority to citizens.

Comment 5: Commenters stated that the regulatory framework th e EPA has established is very workable and that the regulations are on solid tech nical and legal footing.

Response 5 : We appreciate this comment.68

Comment 6: Commenters stated that the Clean Power Plan is cle arly legal. The 1970 Clean Air Act, as interpreted by the Supreme Court in both 20 07 and 2014, clearly gives the EPA, you all, the authority to regulate carbon pollution from exi sting power plants. Commenters added that although the two versions of CAA section 111 passed by the House and Senate introduce potential ambiguity, the EPA is entitled to substan tial deference in interpretation of that ambiguity, and Commenters agreed with the EPA's int erpretation that it can regulate CO2 emissions from EGUs under section 111(d) given thatCO2 is not listed as a HAP or otherwise regulated under section 112.

Commenters stated that the EPA reasonably interpret s the provisions identifying which air pollutants are covered under Section 111(d) to auth orize the EPA to regulate carbon emissions from fossil fuel-fired EGUs, that the drafting erro rs that occurred during enactment of the 1990 CAA Amendments do not call EPA's legal authority in to question. Commenters said both houses of Congress passed an amendment to Section 111(d) ( 166 Pub. L. No. 101-549, 108(g), 104 Stat. at 2467 (Nov. 15, 1990)) and the two versions diffe red from and conflicted with each other, creating ambiguity. Commenters stated as they were not reconciled during the House-Senate Conference Committee, both were approved by both ho uses and enacted into law - one in title I of the bill, the other in title III of the bill (bo th amendments were to be codified in Section 111(d)).(167 The Senate version would exclude the r egulation of any pollutant which is included on a list published under [Section] 112(b). Pub. L. No. 101-549, 302(a), 104 Stat. at 2574 (Nov. 15, 1990)) Commenters agreed with the EPA that the enacted law, with both conflicting and thus ambiguous amendments, signed by the President (as r ecorded in the U.S. Statutes at Large) is controlling, not the U.S. Code that inaccurately pr esents only one of the two amendments. Commenters said under such circumstances, the EPA m ay reasonably construe the provisions of Section 111(d) to authorize regulation of carbon th ereunder. Commenters stated before the 1990 CAA Amendments, Section 111(d)(1) read: The Adminis trator shall prescribe regulations . . . for any existing source for any air pollutant for which air quality criteria have not been issued or which is not included on a list published under Sec tion 7408(a) or 7412(b)(1)(A) [S. 112(b)(1)(A)] of this title, but to which a standar d of performance under this Section would apply if such existing source were a new source. . .(168 42 U.S.C. 7411(d) (1970)) Commenters stated that in this version, there was a provision (Section 112 Exclusion) excluding from regulation, pollutants that were provided in Sectio n 112. Commenters said the 1990 CAA Amendments altered the Section 112 Exclusion ambigu ously because there were two different

versions both enacted into law. Commenters stated a s presented in the U.S. Code, the House written version of Section 111(d)(1) reads: The Adm inistrator shall prescribe regulations . . . for any existing source for any air pollutant for which air quality criteria have not been issued or which is not included on a list published under Sec tion 7408(a) of this title or emitted from a source category which is regulated under Section 74 12 [Section 112] of this title but to which a standard of performance under this Section would ap ply if such existing source were a new source, and provides for the implementation and enf orcement. . .(169 42 U.S.C. 7411, 111(d)(1)) Commenters continued, stating that the conflict in interpreting the statute comes from the revision of the Section 112 Exclusion defining one category of air pollutants that are emitted from a source category which is regulated under [Se ction 112] as excluded from regulation.69

Commenters said this alters the Section 112 Exclusi on from applying to Section 112 pollutants to categories of sources that emit those pollutants. C ommenters stated therefore, the U.S. Code version can be constructed to read that the provisi on (Section 112 Exclusion) precludes GHGs because they are emitted from EGUs and those regula ted entities are a source category regulated under Section 112. ("Electric utility steam generat ing unit - The term "electric utility steam generating unit" means any fossil fuel fired combus tion unit of more than 25 megawatts that serves a generator that produces electricity for sa le.) Commenters stated a unit that cogenerates steam and electricity and supplies more than one-th ird of its potential electric output capacity and more than 25 megawatts electrical output to any uti lity power distribution system for sale shall be considered an electric utility steam generating unit." 42 U.S.C. 7412(8) (1970)) Commenters said that under this construction, the Section 112 Exclusion would be read to exclude almost every pollutant from regulation under Section 111(d ), as it would be challenging to identify any pollutant that is not emitted from at least one sou rce category that is regulated under Section 112.

Commenters stated this circular construction of Sec tion 111(d) would render itself ineffective, and as such, can be neither a reasonable constructi on nor the intent of Congress. Commenters said such an unreasonable construction can only be derived by looking at only the text of Section 111(d) as presented in the U.S. Code, but this does not accurately reproduce the Section 112 Exclusion as enacted by Congress and signed by the President in the 1990 CAA Amendments.

Commenters said the Senate written version reads as follows: The Administrator shall prescribe regulations . . . for any existing source for any a ir pollutant for which air quality criteria have no t been issued or which is not included on a list publ ished under Section 7408(a) or 7412(b) [Section 112(b)] of this title, but to which a stan dard of performance under this Section would apply if such existing source were a new source. . . S.1630.ENR, 101st Cong. (1990). Commenters believed this version simply revises the list of pollutants to which it refers because in the 1990 CAA Amendments, Congress amended Sectio n 112 to include a statutory list of hazardous air pollutants for EPA to regulate, as op posed to relying on the EPA to develop its own list and states that as shown, these two versio ns conflict and are thus ambiguous. Commenters said the controlling statement of the Se ction 112 Exclusion, found in the U.S. Statutes at Large, has both conflicting versions (e ach passed by each house of Congress) and is thus ambiguous. Commenters stated under these circu mstances, the EPA may reasonably

construe the Section 112 Exclusion to allow for and authorize the regulation of GHGs under Section 111(d). Commenters stated in doing so, it w ould not be reasonable to give little or no

effect to the Senate version and instead defer enti rely or almost entirely to the House version because a strict reading of the House version would mean that the EPA could not regulate any air pollutant from a source category regulated under Se ction 112 and would render Section 111(d) ineffective, which was not the intent of Congress. Commenters stated moreover, Congress desired the 1990 CAA Amendments to require the EPA to regulate more substances, and not eliminate the EPA's ability to regulate large categ ories of air pollutants.(See 70 Fed. Reg. 16031- 32) Commenters further said, the EPA has historical ly regulated non-hazardous air pollutants under Section 111(d), even where those air pollutan ts were emitted from a source category actually regulated under Section 112. Commenters re marked that the EPA reasonably interprets the provisions identifying which air pollutants are covered under Section 111(d) to authorize the EPA to regulate carbon emissions from fossil fuel-f ired EGUs, and the EPA has reasonably70

interpreted the ambiguous Section 112 Exclusion in a manner to give effect to both amendments, and thus the apparent intent of Congress. Commenter s stated specifically, the EPA has interpreted the Section 112 Exclusion to mean that [w]here a source category is regulated under Section 112, as Section 111(d) standard of performa nce cannot be established to address any hazardous air pollutants listed under Section 112(b ) that may be emitted from that particular source category. Commenters concluded, stating thatEGUs are a source category that is regulated under Section 112, but GHGs are not a haz ardous air pollutant regulated under Section 112, and accordingly, the Section 112 exclusion in Section 111(d) does not apply to GHGs, and 111(d) does not preclude the EPA from establishing guidelines covering GHGs from EGUs, and, therefore, this interpretation authorizes the EPA t o establish Section 111(d) guidelines for GHG emissions from EGUs, and this interpretation is rea sonable and entitled to deference. Commenters stated this authority is not divested bythe fact that the EPA has regulated EGU emissions of mercury and other hazardous air pollut ants under Section 112 under the agency's established construction of the ambiguous provision s in Section 111(d)(1)(A)(i) that identify air pollutants subject to Section 111(d).

Response 6: EPA agrees that it has the authority to promulgate regulations addressing CO2 emissions from existing power plants under section 111(d). EPA’s discussion of this issue is in Section IV of the preamble.

Comment 7: Commenters stated that while section 111(d) gives s tates broad flexibility in implementing standards applicable to existing sourc es, the EPA is ultimately responsible for ensuring that state programs will achieve the stand ards of performance specified in the section 111(d) emission guideline document. Commenters said Section 111(a) of the CAA defines the term "standard of performance" as: "[A] standard fo r emissions of air pollutants which reflects the degree of emission limitation achievable throug h the application of the best system of emission reduction [(BSER)] which (taking into acco unt the cost of achieving such reduction and any non-air quality health and environmental impactand energy requirements) the Administrator determines has been adequately demonstrated."42 U.S .C. S. 7411(a)(1). Commenters explained that this definition applies to both new sources (g overned by section 111(b)) and existing sources (governed by section 111(d)), and thus, while there are no judicial decisions interpreting the term "standard of performance" in the context of section 111(d), case law interpreting it in the context of section 111(b) is instructive. Commenters cited the D.C. Circuit's interpretation of section 111(a), summarizing that "the system [] must be ade quately demonstrated, and the standard [] must be achievable." Essex Chemical Corp. v. Ruckel shaus, 486 F.2d 427, 433 (D.C. Cir. 1973), cert. denied, 416 U.S. 969 (1974). In determining w hether a system of emission limitation is "adequately demonstrated," the D.C. Circuit has clarified that "[s]ection 111 looks toward what may fairly be projected for the regulated future, r ather than the state of the art at present . . . ." Portland Cement Assn v. Ruckelshaus, 486 F.2d 375, 391 (D.C. Cir. 1973). Commenters stated "'Adequately demonstrated;' does not mean that exis ting [plants] must be capable of meeting the standard." Nat'l Asphalt Pavement Assn v. Train, 53 9 F.2d 775, 785 (D.C. Cir. 1976) (citing Portland Cement Assn, 486 F.2d at 391). Commenters said the standard "does not require that a [facility] be currently in operation which can at a ll times and under all circumstances meet the71

standards." Essex Chemical Corp., 486 F.2d at 433, 436 (identifying BSER as a technology that had only been implemented at one plant in the U.S. at the time of testing, but that found support in literature and in foreign implementation). Comme nters concluded that the EPA may specify a standard of performance which is not routinely in u se within the industry, provided the effectiveness of the system may reasonably be expec ted based on the performance of its component parts in other settings.

Response 7: These comments are supportive of this rule, we appr eciate them, and to the extent we agree with the points made, we have incorporated those points into our rationale.

Comment 8: Commenters stated that the proposed Clean Power Pla n is consistent with Section 111(d) and other applicable provisions of the CAA, along with the EPA's implementing regulations at 40 CFR 60.22(a). Commenters stated t hat recent court cases, including rulings by the U.S. Supreme Court in Massachusetts v. EPA and American Electric Power Co. v. Connecticut, affirm that the EPA has the authority to regulate GHG emissions from EGUs. Commenters stated Congress also gave the EPA author ity under Section 111(d) to determine the

BSER and directed the EPA to evaluate whether state implementation plans are "satisfactory."

Commenters stated that the EPA makes it clear in th e preamble that the proposed rule only establishes a state emission target rate and that t he states have flexibility to implement any combination of the measures that constitute BSER, o r include measures that were not part of the EPA's BSER determination, as long as the state can demonstrate that the applicable target rate will be met or exceeded with equivalent measures. C ommenters stated that the proposed Clean Power Plan satisfies the emission guideline require ments contained in the existing regulations by including information for states to develop complia nce plans, analysis of the building blocks that comprise BSER, state goals based on BSER, the time in which compliance can be achieved, as

well as other information. Commenters referred to a more detailed discussion of NEE's views on the consistency of the proposed Clean Power Plan wi th the EPA's authority under the CAA in

their comments.

Commenters stated that in earlier comments to the E PA, Alabama's Governor's office and the Alabama Department of Environmental Management (col lectively, "the Administration") questioned the legal basis for the proposal.(See, e .g., Alabama's Opposition to U.S. EPA's Clean Power Plan, Testimony by Blaine Galliher, Senior Ad visor to Governor Robert Bentley,

available at http://governor.alabama.gov/newsroom/2014/07/govern or-bentley-sends-senioradvisor-testify-epas-public-hearing-clean-power-pla n-regulations/ ). Commenters remarked that Alabama is one of 12 states that brought suit again st the proposal, notwithstanding the legal hurdles to challenging a non-final rule.(Neela Bane rjee, 12 States sue the EPA over proposed power plant regulations, L.A. Times (Aug. 4, 2014), available at http://www.latimes.com/business/la-fi-epa-lawsuit-2 0140805-story.html , and that the Administration's legal critique involves two basic arguments: (1) the EPA cannot regulate power plant carbon dioxide emissions under Clean Air Act section 111(d) because the EPA has promulgated emission standards for power plant hazardous air emissions under section 112; and (2) section 111(d) requires controls on emission so urces only, and does not authorize "beyond the fence line" compliance flexibility. (Id.) Comme nters stated first, the EPA interprets section72

111(d) to limit development of standards of perform ance for specific pollutants regulated under section 112, rather than for entire categories of s ources regulated under that section. Commenters stated the EPA's interpretation is a permissible co nstruction that, in fact, is the most natural reading of the statute and best effectuates each of the statutory provisions, and second, that the EPA's broad interpretation of "best system of emiss ion reduction" to include beyond-the-fenceline compliance approaches is a logical and permiss ible reading of these generically defined statutory terms. Commenters explained that Section 111(d) provides that the EPA "shall prescribe regulations which shall establish a proce dure . . . under which each State shall submit [to the EPA] a plan which . . . establishes standar ds of performance for any air pollutant . . . to which a standard of performance under this section would apply if such existing source were a new source."(Id.) Commenters continued, explaining that Congress exempted two categories of air pollutants from this mandate: any air pollutant(1) for which air quality criteria have been issued or which is listed under section 108(a); or (2) emitted from a source category covered under the hazardous air pollutant provisions of sec tion 112.(Id.), and neither exemption applies

here.

Commenters continued, stating that the EPA has for some time encouraged states to include energy efficiency programs that reduce emissions in to their State Implementation Plans (SIPs).(See the EPA Roadmap for Incorporating Energ y Efficiency and Renewable Energy (EE/RE) Policies and Programs in State Implementati on Plans (SIPs) and Tribal Implementation Plans (TIPs). Incorporating and explaining a number of previous EPA guidance documents: "SIP

Credits for Emission Reductions from Electric-Secto r Energy Efficiency and Renewable Energy Measures" (August 2004), which explains how to quan tify and include emission reductions from EE/RE measures in SIPs; "Incorporating Emerging and Voluntary Measures in State Implementation Plans" (September 2004), which encou rages the development of voluntary and emerging measures that can be included in SIPs; and "Incorporating Bundled Measures in a State Implementation Plan" (August 2005), which explains how states can identify individual voluntary and emerging measures and "bundle" them i n a single SIP submission.), and these SIPapproved programs are an example of an outside the fence tool used by states across the country to cost effectively reduce not only greenhouse gase s, but other pollutants as well. Commenters said state and regional programs, such as the Regio nal Greenhouse Gas Initiative, which create CO2 budget trading programs are another example of outside the fence line programs that have been incorporated in the EPA-approved SIPs. Comment ers said clearly states have the authority to adopt and implement these kinds of programs and the EPA has the authority to recognize these SIP programs under the concept of best system of em ission reduction. Commenters stated furthermore, utilities and ratepayers should embrac e these programs as a lower cost alternative to within the fence line regulation.

Response 8: These comments are supportive of this rule, we app reciate them, and to the extent we agree with the points made, we have incorporated those points into our rationale.

Comment 9: Commenters stated case law interpreting the term ' standard of performance' is thus far limited to cases involving new source performan ce standards, and the commenters agree with the EPA's assessment that standards for existing so urces must be sensitive to the relatively73

greater costs that existing facilities may face in implementing pollution control technology, as compared to new sources. Nonetheless, the commenter s believed that the EPA would be within its statutory authority to promulgate more stringen t limits than those contained in the Proposed Rule while allowing industry sufficient flexibility to absorb costs.

Response 9: We appreciate this comment. We have determined thatthe limits promulgated are consistent with the BSER, as discussed in the pream ble for this rule.

Comment 10: Commenters stated that the EPA is faced with a con undrum. Commenters said it cannot, in one fell swoop, regulate the grid. Comme nters stated that first, the Agency's authority under the regulatory framework of the CAA focuses o n 'new' sources and 'existing' sources.

Commenters stated the EPA provides no statutory sup port or Congressional directive for its affirmative action energy policies. Commenters said also undefined is how such incentive encouragement becomes legally enforceable. (Presumably, the state would financially penalize certain activities so as to encourage the EPA-favor ed activities, or the state would have to financially incentivize the EPA-favored activities, which is certainly beyond the scope of the CAA, let alone Section 111(d).)

Commenters stated that further, the EPA sets aside all of the historic Section 111 concepts, principles, rules, and interpretations reached over 45 years of practice. Commenters said under the CPP, emission units are not subject to a source -specific emissions standard; states are.

Commenters stated that such enforcement would effec tively 'federalize' state initiatives and policy decisions that are beyond the EPA's direct r each under the CAA. Commenters stated the actions of non-emitting unit owners and consumers ' reduce' emissions from emitting units. Commenters said the 'standard of performance' becom es a suite of actions mandated by the states to change behavior of the general public rather tha n a rate or mass cap imposed on specific existing units or even a technology, which one migh t expect from a 'standard of performance.'

Commenters said in short, the EPA cannot find in it s historic practice a way to turn the entire 'integrated grid' into a single source category. Co mmenters stated so it just creates a new way of thinking. Commenters stated as the Supreme Court no ted in Utility Air Regulatory Group v. EPA, 573 U.S. 2427 (2014), new regulatory powers ar e simply not discovered in a 45-year-old

statute.

Commenters stated that when the CAA was promulgated in 1970 or even, perhaps, in 1990, when Congress amended the CAA, Congress did not for esee the perceived need to define and regulate greenhouse gas emissions, a global polluta nt, and did not draft a statute to accommodate

such a rule. Commenters said this unforeseen circum stance does not allow the EPA to bend the Act to suit its needs nor to expand the congression ally-mandated scope of the agency's authority. Commenters stated in evaluating the validity of the Federal Reserve's interpretation of the Bank Holding Company Act in Dimension Financial, the Sup reme Court observed that:74

Congress defined with specificity certain transacti ons that constitute banking subject to regulation. The statute may be imperfect, but the [ Federal Reserve] Board has no power to correct flaws that it perceives in the statute it i s empowered to administer. Its rulemaking power is limited to adopting regulations to carry into ef fect the will of Congress as expressed in the statute. If the Bank Holding Company Act falls short of providing safeguards desirable or necessary to protect the public interest, that is a problem for Congress, not the Board or the courts, to address.

Commenters stated that similarly here, just because the Clean Air Act is an imperfect vehicle for the regulation of greenhouse gases does not give th e EPA the right to expand its authority to include wholesale energy market regulation that is the sole domain of FERC. Commenters said by granting itself this authority, it is essentiall y "fixing" the statute so that it may shoehorn a regulatory policy into an act that Congress did notdesign for such a policy. Commenters stated that according to the Supreme Court in Dimension Fi nancial, if the Clean Air Act "falls short of providing safeguards desirable or necessary to prot ect the public interest, that is a problem for Congress," not for the EPA to address.

Response 10: We disagree. We discuss our authority to promulgate this rule, i ncluding why this rule is not inconsistent with the U.S. Supreme Court’s decision in UARG v. EPA , in section IV of the preamble and section XXII of the Legal Memo. Fo r the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, o ur interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history . To the extent this comment objects to the portfolio approach, which the EPA is not finalizing , the comment is moot.

We also disagree that we are expanding our authorit y to include wholesale energy market regulation. Our emission guidelines simply reflect an achievable emissions limit through the application of the BSER and do not in themselves re quire states or sources to implement the BSER. Moreover, these emission guidelines provide s tates with the flexibility to establish, implement, and enforce standards of performance and do not intrude on the regulatory domain of

FERC or the states. It cannot be said that because environmental requirements may have an effect on the wholesale energy market that the EPA is therefore intruding into energy regulation. Certainly, in the legislative history of the 1970 C AA Amendments, Congress expressly identified power plants as a priority source category for regu lation under CAA section 111.

Comment 11: Commenters stated that the CAA gives the EPA power to regulate new sources; however, the proposed rule is establishing jurisdic tion over existing sources and by extending its jurisdiction over existing sources, the EPA is viol ating the Tenth Amendment of the U.S. Constitution, which reserves powers not delegated t o the U.S. to the States. Commenters added that since the existing sources were not regulated by the federal government originally, then the States are protected by the Constitution from regul ation now, and therefore, the proposed rule violates the 5 U.S. Code - 706(2)(B) because it is contrary to a constitutional right.75

Commenters stated that the Proposed Rule relies upo n states to implement far-reaching emission

reduction measures that the EPA itself has no autho rity to implement, and that the EPA is forcing states to adopt these emission reduction measures i n two ways: 1) the EPA proposes to impose state goals that are so stringent that states will have no choice but to implement beyond-the-fence emission reduction measures to attain the goals, an d 2) if a state submits a plan that the EPA finds unsatisfactory, the EPA proposes to impose a federal plan on the state. 79 Fed. Reg. at 34,900. Commenters remarked that because of the str ingency of the state goals, the federal plans will require state legislative action to establish the beyond-the-fence emission reduction measures necessary to achieve the state goals. Comm enters stated both scenarios constitute an unlawful commandeering of state resources, renderin g the Proposed Rule illegal. Commenters explained that it is well-established that the Tent h Amendment prohibits federal agencies from usurping the authority of states, Printz v. United States, 521 U.S. 898, 925 (1997); states also may not be forced to administer federal programs. N ew York v. United States, 505 U.S. 144, 188 (1992). Indeed, commenters stated, courts have reje cted a previous attempt by the EPA to hijack state action. Commenters stated that in the 1970s, EPA attempted to commandeer states into implementing federal transportation control plans. Commenters said courts rejected the EPA's regulations, holding that the EPA could not require states to prescribe auto emissions testing, monitoring and retrofit programs, or to designate p referential bus and carpool lanes. Commenters stated the U.S. Courts of Appeals for the Fourth an d Ninth Circuits invalidated the EPA's regulations on statutory grounds to avoid constitut ional issues(EPA's interpretation of the CAA is contrary to the doctrine of constitutional avoid ance, dictating that federal statutes should not be interpreted so broadly as to raise constitutiona l concerns about Congress' authority under the Commerce Clause. See Solid Waste Agency of Northern Cook County v. United States Army Corps of Engineers ("SWANCC"), 531 U.S. 159, 173 (2 001)) see Maryland v. EPA, 530 F. 2d 215, 226 (4th Cir. 1975); Brown v. EPA, 521 F. 2d 8 27, 838-42 (9th Cir. 1975); and the U.S. Court of Appeals for the District of Columbia Circu it ("D.C. Circuit") invalidated the regulations on both constitutional and statutory grounds, see D istrict of Columbia v. Train, 521 F. 2d 971, 994 (D.C. Cir. 1975).(Commenters stated after the U .S. Supreme Court granted certiorari to review the statutory and constitutional validity of the regulations, the EPA declined to defend them. Commenters said instead, the EPA rescinded so me of the regulations and conceded the invalidity of those that remained. Commenters state d accordingly, the Supreme Court vacated the opinions below and remand for consideration of moot ness. See EPA v. Brown, 431 U. S. 99 (1977)). Commenters stated that in striking down th e EPA's transportation regulations, which were promulgated as Federal Implementation Plans un der Section 110 of the CAA, the D.C. Circuit observed that, "[h]ad Congress intended to adopt the novel approach of empowering a federal agency to order unconsenting states to enac t state statutes and regulations, thereby converting state legislatures into arms of the EPA, it most likely would have made that intent clear in the statute." Train, 521 F.2d at 984. Comm enters said just as Congress authorized no such approach under Section 110, it authorized no s uch approach under Section 111. Commenters said to the contrary, the EPA's authorit y under Section 111(d) is based on its authority under Section 110: the EPA must "establis h a procedure similar to that provided by

section 7410 of this title under which each State s hall submit to the Administrator a plan which (A) establishes standards of performance and (B) pr ovides for the implementation and76

enforcement of such standards of performance," 42 U .S.C. section 7411(d)(1) (emphasis added), and "prescribe a plan for a State in cases where th e State fails to submit a satisfactory plan as he would have under section 7410(c) of this title in t he case of failure to submit an implementation plan." Id. section 7411(d)(2)(A) (emphasis added). Commenters stated that not only would the Proposed Rule commandeer state action as a result o f the stringency of the goals, courts already have specifically rejected the EPA efforts to effec tuate state legislative and regulatory action through the imposition of a state plan under Sectio n 110, upon which EPA's Section 111(d) plans would be modeled. Commenters stated that the Propos ed Rule is an improper and illegal commandeering of state authority, and cannot be fin alized as proposed.

Commenters stated that applying Section 111(d) to t hese source categories will impose unprecedented burdens on State permitting agencies given the large number of existing sources. The Section 111(d) program would be implemented pri marily by the States, which would have to address all covered sources within their jurisdicti on. Commenters stated that this would be a significant undertaking, as the EPA envisions that States will adopt a "portfolio approach" that extends far beyond the regulated source categories, and, in addition to regulating existing fossil fuel-fired EGUs, States will be obligated to develo p implementation plans that address the entire electricity sector, including renewable energy, nuc lear energy, and even consumer choices through demand-side energy efficiency programs. By doing so, commenters remarked, the EPA would effectively be commandeering States programs such as RPSs and EERSs that are based on traditional powers exercised by the States, and it is fundamentally inconsistent with the principles of cooperative federalism on which the C AA is based -as well as the Tenth Amendment - for the EPA to effectively mandate the manner in which States exercise their own authority. See Sections VI.B.-C., infra. Commenters added that even putting this aside, State permitting agencies are already struggling under th e administrative burdens of existing federal programs including GHG permitting programs, NESHAPs , and revised NAAQS and, in many cases, the agencies lack the capacity and resources to implement an additional complex and expansive permitting program such as that envisione d by EPA in the proposed Section 111(d)

standards. Commenters contended that it would be irresponsible for the EPA to impose such a regulatory burden on the States, particularly witho ut a clear mandate from Congress to do so.

Commenters stated even if the EPA has the authorityto regulate existing electric generating units ("EGUs") under Section 111(d) of the Clean Air Act, the proposed rule is a complicated system of various implementation measures that makes the d evelopment of a legally enforceable state plan difficult, if not impossible.

Commenters stated if the EPA were granted legislati ve authority by Congress to preempt state regulation of these matters, the method of implemen tation presented within the Proposed Carbon

Rule would be deficient because it thrusts the burd en of regulation back upon the states.

Response 11: The EPA disagrees with these commenters’ assertion s that this action violates the
federal-state balances embodied in either the U.S. Constitution or the Clean Air Act. As an initial matter, to the extent this comment objects to the p ortfolio approach, which the EPA is not finalizing, the comment is moot.77

With respect the constitutional issue, for reasons discussed in the Legal Memorandum, this rule does not violate constitutional principles of feder alism embodied in the Tenth Amendment. Additionally, a federal plan would not unconstituti onally “commandeer” state policies such as RPSs because the existence of a federal plan does n ot inherently require state governments to continue implementing those policies. Furthermore, commenters are incorrect in their claim that regulation of CO2 emissions of affected EGUs—or of existing EGUs at all—is beyond the constitutional reach of the federal government. 2

With respect to comments that this rule violates pr inciples of cooperative federalism under the Clean Air Act, the EPA believes that commenters are similarly mistaken. The EPA agrees that the CAA—particularly section 110—establishes a stat e-federal partnership based on cooperative federalism. The EPA has explained its view of the c ooperative-federalism structure of the CAA
in other actions. 3 EPA also believes that many of the principles embo died in section 110 are reflected in section 111(d). For example, both sect ions provide states the initial opportunity to develop a plan that satisfies applicable requiremen ts, and for EPA to review the sufficiency of those plans and prescribe a federal plan applicable in states where the state plan is insufficient.

In the context of section 110, the D.C. Circuit has described the Train-Virginia line of cases as erecting a “federalism bar” that constrains EPA’s authority with respect to evaluation of SIPs. 4 Some of the commenters selectively quote Train for the proposition that under section 110, the EPA is relegated to a secondary role with little ab ility to ensure that SIPs meet statutory requirements. Setting aside the fact that Train predated substantive revisions to the CAA that altered the Act in ways relevant to that case’s int erpretation of section 110, 5 the Train Court noted that EPA has the authority under section 110 to ensure a SIP complies with CAA

2 See, e.g.

, FERC v. Mississippi , 456 U.S. 742, 757–58, 766–67 (1982) (citing Nat’l League of Cities v. Usery , 426 U.S. 833, 845 (1976)) (noting that private bu sinesses “necessarily are subject to the dual sovereignty of the government o f the Nation and of the State in which they reside,” and upholding the federal government’s Com merce Clause authority against a Tenth Amendment challenge); Hodel v. Va. Surface Mining & Reclamation Ass’n , 452 U.S. 264, 282 (1981) (“the power conferred by the Commerce Clause [is] broad enough to permit congressional regulation of activities causing air . . . pollution . . . that may have effects in more than one State”); United States v. Lopez , 514 U.S. 549 (1995) (“[w]here economic activity substantially affects interstate commerce, [federal ] legislation regulating that activity will be sustained”).

3 See, e.g. , 80 FR 33840, 33876–79 (June 12, 2015).

4 See, e.g.

, Michigan v. EPA , 213 F.3d 663, 687 (D.C. Cir. 2000). The Train-Virginia line of cases are named for the U.S. Supreme Court case Train v. Natural Resources Defense Council,

Inc. , 421 U.S. 60 (1975), and the D.C. Circuit case Virginia v. EPA , 108 F.3d 1397 (D.C. Cir. 1997).

5 See 80 FR at 33877 & n.82.78

requirements. 6 Furthermore, interpreting the current version of C AA section 110, the U.S. Supreme Court recently noted that the cooperative f ederalism embodied in section 110 is not a free-floating principle, but rather is grounded in the text of section 110 itself. 7 The Court affirmed EPA’s authority to reasonably interpret th e requirements of SIPs contained in the Act, and to evaluate the sufficiency of those SIPs again st the relevant requirements. 8

The touchstone of the cooperative-federalism concep t outlined in the Train-Virginia is that, under the authority of section 110, the EPA may notlegally or functionally require a state to adopt a “specific” control measure in its SIP. 9 The cases do not stand for the broader proposition that 110 imposes no limits on state discretion, or that EPA is prohibited from interpreting basic requirements of the Act or reviewing SIP submission s for compliance with those requirements.

This view of what cooperative federalism requires u nder section 110 is consistent with Train

, where the U.S. Supreme Court stated that the EPA “i s relegated by the [1970] Act to a secondary role in the process of determining and enforcing th e specific, source-by-source emission
limitations which are necessary if the national standards it h as set are to be met.” 10 It is also
consistent with the Virginia decision, where the D.C. Circuit held that the EPA cannot under section 110 functionally require states to “adopt[] particular control measures” in a SIP but must rather ensure that states have a meaningful choice among alternatives. 11 Moreover, it is
consistent with the D.C. Circuit’s view in Michigan v. EPA , interpreted and applied those precedents to require that the budgets established by EPA in an emission trading program must provide “ the covered states real choice with regard to the c ontrol measure options available to
them to meet the budget requirements.” 12 It is similarly consistent with the D.C. Circuit’ s opinion in Appalachian Power Co. v. EPA , that Virginia “ disapproved the EPA’s plan to reject SIPs that did not incorporate particular limits upon emissions from new cars.” 13

6 See 80 FR at 33877–78 (discussing Train , 421 U.S. at 79).

7 EPA v. EME Homer City Generation, L.P. , 134 S. Ct. 1584, 1600–01 (2014).

8 See id. at 1593 (2014) (citing Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc. , 467 U.S. 837 (1984)); see also Mich. Dep’t of Envtl. Quality v. Browner , 230 F.3d 181, 184–85 (6th Cir. 2000) (“Although states are given broad authority t o design programs, the EPA has the final authority to determine whether a SIP meets the requ irements of the CAA.”).

9 See 78 FR 12460 at 12489 & nn.89–90.

10 421 U.S. at 79 (emphasis added).

11 Virginia v. EPA , 108 F.3d 1397, 1415 (D.C. Cir. 1997) (holding tha t functionally, in that case, “EPA’s alternative is no alternative at all”); see also Appalachian Power Co. v. EPA , 249 F.3d 1032, 1047 (D.C. Cir. 2001) (citing Virginia , 108 F.3d at 1406, 1410) (“We did not suggest [in Virginia ] that under § 110 states may develop their plans f ree of extrinsic legal constraints. Indeed, SIP development . . . commonly involves dec isionmaking subject to various legal constraints.”).

12 213 F.3d 663, 687 (D.C. Cir. 2000) (emphasis added ).

13 249 F.3d 1032, 1047 (D.C. Cir. 2001) (citing Virginia , 108 F.3d at 1410) (emphasis added).79

Setting aside the different focuses of sections 110 and 111(d), it is clear that this rule would does not transgress those cooperative federalism princip les. As described throughout the final rule preamble of the CPP, the types of state plans descr ibed in this rule provide each state significant flexibility in assigning the emission performance o bligations to its affected EGUs in the form of standards of performance as long as the required em ission performance level is met. This flexibility allows states to take local circumstanc es and state policy goals into account in determining how to reduce emissions from their affe cted sources, provided the plan meets minimum federal requirements. Each state has discre tion to determine the appropriate measures to rely upon for its plan. The state may adopt mea sures that assure achievement of the requisite CO2 emission performance rate or state goal by the affected EGUs, and is not limited to the measures that the EPA identifies as part of the BSE R.

Simply put, this rule does not establish specific e mission standards for sources, and leaves states “real choice” in how to apply the broad goals of se ction 111(d) to the specific sources in their states. Far from encroaching upon or trampling the principles of cooperative federalism underlying the CAA, this rule provides a paradigmat ic example of cooperative federalism. This issue is further addressed in VIII of the Legal Mem orandum accompanying the final rule.

Comment 12: Commenters stated that regulated performance standard can only be imposed on the "sources" that actually emit a regulated pollut ant. Commenters said emissions from any aspect of the source are to be controlled by perfor mance standards at the source. Commenters stated that the approach in the Proposed Plan dimin ishes demand, prematurely terminates operational useful life of a generating facility, i mposes performance standards on the entire energy supply chain and does not lie within the aut hority of the EPA, but rather the legislative and regulatory of the United States Congress.

Response 12: The final rule addresses concerns of this comment b y limiting regulatory requirements to affected EGUs. The final rule does not include demand-side energy efficiency as part of the BSER, and takes steps, described in the proposal preamble, to minimize the problem

of stranded assets.

Comment 13: Commenters stated Congress intended Section 111(d) to be a state-driven process, rather than be the subject of federal command-and-c ontrol dictate. Commenters said the Section 111(d) proposal is unlawful because it abrogates st ates' right under Section 111(d) to state-driven

emission standards.

Commenters stated section 111(d) grants states the prerogative of 'submit[ting] to the Administrator a plan which . . . . establishes stan dards of performance for . . . existing source[s] . . . .' C.A.A. 7411(d)(1)(A), 42 U.S.C. 7411(d)(1)(A ). Commenters said in so doing, Congress unquestionably intended for states to be the regula tors exercising discretion in establishing emission standards, specifically authorizing states to consider such factors as the remaining useful life of a given source in the standard-setti ng process. See Id. Commenters stated in contrast, Congress limited the EPA's role to a subs idiary procedural role 'prescrib[ing] regulations which shall establish a procedure' for plan submission and determining whether a state's submitted plan is satisfactory. See Id.; se e also C.A.A. 111(d)(2), 42 U.S.C. 7411(d)(2).80

Commenters stated the proposal exceeds the proper s cope of the EPA's authority by proposing binding, inflexible emission rate limits in the agg regate for a state's entire power sector. Commenters said pursuant to the Section 111(d) prop osal, once these 'goals' are finalized, states will have no authority to change them, despite Sect ion 111(d)'s express grant of authority to the states to consider factors such as the remaining us eful life of sources in establishing standards.

Commenters said the EPA does not and cannot identif y anything in Section 111(d) or elsewhere

in the text of the Clean Air Act that authorizes itto displace states' legal authority to establish emission standards. Commenters stated as a result, the Section 111(d) proposal cannot be reconciled with the EPA's limited statutory authori ty and the statutory rights specifically

afforded to states.

Response 13: We disagree with this comment. In the preamble for this rule, we discuss the respective roles of the EPA and the states under CA A section 111(d), the application of the “remaining useful life” provision in section 111(d) (1), and the state goals.

Comment 14: Commenters stated the proposed rule exceeds Congre ss' authority under the commerce clause, citing in Sebelius, the United Sta tes argued that an individual mandate to buy health insurance falls within the Commerce Clause p ower because "the uninsured as a class are active in the market for health care, which they re gularly seek and obtain," and the mandate regulates how individuals finance their participati on in that market. 132 S.Ct. at 2589. Commenters continued verbatim, the Court disagreed, finding that the federal government cannot regulate such individuals as a class because most individuals subject to the mandate "are not currently engaged in any commercial activity in volving health care." Sebelius at 2590; see also Id. at 2589 ("[t]he Framers gave Congress the power to regulate commerce, not to compel it.") (emphasis in original). Commenters stated tha t in another case, the Court explained that "[w]here economic activity substantially affects in terstate commerce, legislation regulating that activity will be sustained." United States v. Morri son, 529 U.S. 598, 610 (2000) (emphasis added) (citation and punctuation omitted). Commente rs stated there is a substantial difference between regulating activities underway and compelli ng new investments. Commenters stated EPA may regulate emissions from new or existing sou rces, but EPA may not constitutionally require companies to build new generation not other wise planned. Commenters stated although EPA argues that affected EGUs may be compelled to p articipate in the markets for redispatch, renewable energy and demand-side efficiency because the electric power industry is integrated, 79 Fed. Reg. at 34836; EPA Legal Memorandum at 71, this is the same argument rejected in Sebelius that Congress may compel individuals to participate in the health insurance market because those individuals do or will participate in the health care market. Commenters stated that as the Court in Sebelius explained, "that does not mean the compelled purchase of the first is properly regarded as a regulation of the second. No matter how "inherently integrated" health insurance and health care consumption may be, they are not the same thing . . ." Sebelius, 132 S.Ct. at 2591. Commenters stated that just as healt h care and health insurance are different activities, the construction, operation or funding of NGCC, renewable generation facilities, and demand-side efficiency programs are different activ ities than operating an affected facility. The Proposed Rule compels [commenters] to engage in com merce by effectively requiring it81

to install new generating units or purchase additio nal capacity from NGCC, nuclear or renewable sources. Commenters stated they are obligated by th eir requirements contracts with their members to provide certain amounts of electricity, and they have sufficient generation capacity to do so. By restricting commenters' ability to ope rate fossil fuel- based generation units, the rule impairs their ability to satisfy their contractual obligations. Commenters stated they may not have sufficient NGCC, nuclear or renewable capacityto replace generation that becomes unavailable as a result of the pending rule, and, a s noted in Section IV of these comments, the commenters may be constrained in their ability to r edispatch those resources across the eastern

and western connections. Commenters stated to have no plans to add capacity serving the western connection because they have excess fossil fuel-based capacity there. Commenters may nonetheless be forced to engage in compelled commer ce to avoid breaching its contracts, which Congress has no authority to compel and EPA has no authority to impose. The fact that commenters already have some NGCC, nuclear and rene wable capacity does not bring the compelled purchase of additional capacity within th e bounds of the Commerce Clause because participation in the markets for NGCC, nuclear and renewable electricity would not be triggered by commenters' activity in those markets but rather because of their activity in the markets for fossil fuel-based generation.

In addition to unlawfully compelling commerce, comm enters stated the proposal to regulate beyond the fence line lacks a reasonable connection between the regulatory means selected by EPA and the asserted goal of reducing pollution fro m existing sources, and this presents a separate violation of the Commerce Clause. FERC v. Mississippi, 456 U.S. 742, 754 (1982).

Response 14: We disagree with this comment. With respect to comm enters’ first argument that the proposed rule “exceeds Congress’ authority unde r the Commerce Clause,” we reiterate that CAA section 111(d) emission guidelines do not requi re affected sources to implement any particular system of emission reduction, let alone the BSER. As we explain in section V. of the preamble for this rule, an emission guideline refle cts the degree of emission limitation achievable through the application of the BSER and is provided to states for the development of state plans. State plans establish standards of performance for existing sources and may take into account (among other factors) the remaining useful life of an existing source when applying a standard of performance to any particular source. Even if a particular control technology, such as a scrubber, were identified as the BSER, the EPA could not requ ire affected sources to install that particular control technology as a requirement of an emission guideline. The same is true here. The final rule does not compel affected sources to implement any one of the building blocks, let alone all

three.

We also disagree that the situation in National Federation of Independent Business v. Sebe lius

, 132 S. Ct. 2566 (2012), is analogous to regulation under CAA section 111. Sebelius concerns the scope of Congress’ authority under the Commerce Clause to enact legislation that requires, in part, most individuals to maintain “minimum essenti al” health insurance coverage. Id. at 2580. Importantly, the Court observed that “[t]he individ ual mandate, however, does not regulate existing commercial activity. It instead compels in dividuals to become active in commerce by purchasing a product, on the ground that their fail ure to do so affects interstate commerce.” Id. at82

2587. This, the Court explained, was not granted to Congress through the Commerce Clause. Id.
at 2589.

The Court also rejected the Government’s argument t hat health insurance and health care financing are “inherently integrated,” which the Go vernment argued justified the individual mandate as within the scope of regulation of health care markets. The Court explained that “[t]he proximity and degree of connection between the mand ate and the subsequent commercial activity is too lacking to justify an exception of the sort urged by the Government. The individual mandate forces individuals into commerce precisely because they elected to refrain from commercial activity.” Id. at 2591. Therefore, “[s]uch a law cannot be sustain ed under a clause authorizing Congress to ‘regulate Commerce.’” Id.

The regulation of air pollution under the CAA, on t he other hand, is well within the scope of Congress’ powers to authorize. See, e.g.

, Miss. Comm’n on Envtl. Quality v. EPA , No. 12-1309, pp. 74-80 (D.C. Cir. June 2, 2015) (“[t]here is no doubt that the general regulatory s cheme of the

Clean Air Act has a substantial relation to interst ate commerce.”). Further, whereas the Court in
Sebelius was concerned about compelling individuals to “ become active in commerce,” each of the affected sources subject to regulation in accor dance with this rule are already engaged in existing commercial activity – specifically, it is not their failure to engage in interstate commerce that is at issue here, rather it is the manner in which they engage in it that is subject to regu lation under CAA section 111(d).

As an additional matter, the fact that the utility power sector is physically interconnected is not used to justify the scope of Congress’ Commerce Clause authority; instead, the unique characteristics of the industry are relevant in eva luating whether the building blocks are adequately demonstrated for this source category. N othing in Sebelius precludes the EPA from considering the physical interconnectedness of the utility power sector when evaluating pollution

reduction measures that are available to sources fo r purposes of CAA section 111(d). With respect to commenters’ second argument that the pro posal to regulate beyond the fence line lacks a reasonable connection between the regulatory mean s selected by EPA and the asserted goal of reducing pollution from existing sources, in sectio n V. of the preamble for this rule we explain

how the BSER is related to emission reductions fromthe affected EGUs. Finally, for the reasons stated in section V of the preamble for this rule, the regulatory means identified by EPA and permitted by Congress under section 111(d) (establi shing state-specific CO 2 goals reflecting CO 2 performance rates based on the BSER) are more than reasonably connected to the ends of reducing CO 2 emissions. As a matter of federal constitutional authority, it is sufficient to note that CAA section 111(d) is directed at reducing emi ssions, and that CO 2 emissions in particular have substantial interstate impacts as described in section II.A of the final rule preamble. See
Hodel v. Va. Surface Mining & Reclamation Ass’n , 452 U.S. 264, 282 (1981) (“the power conferred by the Commerce Clause [is] broad enough to permit congressional regulation of activities causing air . . . pollution . . . that m ay have effects in more than one State”). Accordingly, there is clearly a rational basis for concluding that the BSER as defined in section V of the preamble will reduce CO2 emissions from af fected EGUs. Even assuming arguendo that some individual component of the emission guid elines was not directly related to a valid83

congressional goal—a concern not actually present h ere—“[i]t is enough that the challenged provisions are an integral part of the regulatory p rogram and that the regulatory scheme when

considered as a whole satisfies this test.” FERC v. Mississippi , 456 U.S. 742, 757 n.22 (1982) (quoting Hodel v. Indiana , 452 U.S. 314, 329 n.17 (1981)); Miss. Comm’n on Envtl. Quality v.

EPA , No. 12-1309, pp. 74-80 (D.C. Cir. June 2, 2015) (“[t]here is no doubt that the general regulatory scheme of the Clean Air Act has a substa ntial relation to interstate commerce.”).

Comment 15: Commenters stated case law interpreting section 11 0 of the Act, which governs the requirements of state implementation plans (SIP s) to attain and maintain national ambient air quality standards (NAAQS), helps illustrate why the Proposed Rule exceeds the Agency's authority. Commenters continued, stating that court s have explained that states are "given wide discretion in formulating" their SIPs under section 110, Union Elec. Co. v. EPA, 427 U.S. 246, 250 (1976), and made clear that EPA's role is "conf ine[d] - to the ministerial function of reviewing [SIPs] for consistency with the Act's req uirements," Luminant Generation Co. v. EPA, 675 F.3d 917 (5th Cir. 2012). Commenters added thatEPA, on the other hand has "no authority to question the wisdom of a State's choices of emis sion limitations if they are part of a plan which satisfies the standards of 110(a)(2)." Train v. NRDC, 421 U.S. 60, 79 (1975), and Section 110 places more constraints on state discretion tha n does Section 111(d). Commenters stated yet

not even Section 110 would allow EPA to establish s tate-specific CO2 emission goals as part of a SIP. Commenters concluded that the Agency certain ly cannot establish such binding emission requirements for the states under Section 111(d), a nd believes the Proposed Rule is plainly

inconsistent with the Act.

Response 15: We disagree with this comment for the reasons stat ed in our response in section 1.2 regarding cooperative federalism under the CAA, as well as in section VIII of the Legal Memorandum accompanying the final rule. Furthermore , commenters are simply incorrect that

section 110 categorically prohibits the EPA from interpreting the permissible end goals states

must meet. See, e.g.

, EPA v. EME Homer City Generation, L.P. , 134 S. Ct. 1584, 1600–01 (2014); Michigan v. EPA , 213 F.3d 663, 687 (D.C. Cir. 2000). However, the EPA agrees that CO2 is not a criteria pollutant regulated under sec tion 110.

Comment 16: Commenters stated notwithstanding the EPA's apparen t recognition (consistent with the statutory framework) of the determination of performance standards on the one hand and alternative compliance measures available to th e states on the other, the EPA has suggested, particularly through the NODA, that any technology or other emission reduction strategies that may be relied upon by a state in meeting its compli ance obligation must in turn be incorporated

into the BSER determination. Commenters said such a nalysis (which may be reflective of distinct state policy objectives or compliance alte rnatives) cannot comport with the statutory requirements governing the determination of BSER fo r a source category based on the standards of performance that are achievable by the sources i n that category on a national level.

Commenters stated to ensure adherence to the framew ork mandated by Section 111(d), the EPA must ensure that the final CPP rule preserves to th e states the flexibility to find creative solutions for curtailing GHG emissions without a correspondin g adjustment to the initial BSER determination because of the availability of such s trategies. Commenters stated therefore, it is84

essential that the EPA clarify through the CPP thatstates shall have the full range of flexibility afforded by the CAA in developing their state plans . Commenters said this flexibility should include an allowance for emerging measures involvin g the voluntary participation of sources of

GHG emissions that are not affected sources under t he CPP. Commenters acknowledged that Section 111(d) contemplates that state plans implem enting the emission guidelines must establish regulatory obligations for the affected s ource category, and does not afford the states the flexibility to instead impose on distinct sourc es or source groups the obligation to satisfy the

emission reduction burden intended for the sources subject to the BSER determination. Commenters stated however, Section 111(d) in no waylimits the flexibility otherwise available to states under Title I of the CAA to allow regulat ed sources to satisfy their compliance obligations through voluntary emission reductions f rom non-regulated sources. Commenters said indeed, Section 111(d) of the CAA specifically refe rences Section 110 of the statute, and notes that, once the EPA determines BSER for the given so urce category and establishes standards of performance reflective of the BSER, the states are to follow a "procedure similar to that provided by [CAA section 110] which each State shall submit to [EPA] a plan." 42 U.S.C. section 7411(d)(1).

Response 16: EPA is not finalizing the proposed “portfolio” app roach, and will not accept state plans that attempt to impose emission standards or other CAA compliance obligations on entities other than affected EGUs. The state measures approa ch provides a path for a state to achieve the emission performance level as expressed as a state goal in a way that avoids placing enforceable emission standards on affected EGUs (unless and unt il the backstop is triggered). States will have a wide range of flexibility in choosing how to demonstrate their affected EGUs are meeting a state goal.

Comment 17: Commenters stated EPA's proposal does not set fort h guidelines applicable to existing sources at all but instead, EPA seeks to c reate a state-wide emission bubble by reviewing the generation mix in each state and establishing an emission rate limit applicable to each state, not to the sources themselves. As a res ult, commenters continued, EPA is actually proposing to regulate the state, not the source butstates are not an "existing source" as defined by CAA section 111(a)(3) and (6). Commenters stated they are not a "building, structure, facility, or installation which emits or may emit a ny air pollutant..." 42 U.S.C. section 7411(a)(3). Commenters stated EPA is attempting to "change the basic unit to which the [standard applies]...from a single building, struct ure, facility, or installation the unit prescribed in

the statute" to a state-wide bubble. ASARCO Inc. v. EPA, 578 F.2d 319, 327 (D.C. Cir. 1978) but the "agency has no authority to rewrite the sta tute in this fashion." Id. Commenters stated in ASARCO, the Court expressly rejected EPA's attempt to regulate emissions from an entire plant by creating a bubble around it and placing a cap, r ather than just the emitting source. Commenters continued, stating that now, in its Prop osed Rule, EPA is attempting to expand the bubble concept rejected in ASARCO to encompass each state, and in fact the entire country under the assumed interconnection of the national g rid, and this effort is unlawful under ASARCO, a case EPA does not mention, much less dist inguish, in its Legal Memorandum. See EPA Legal Memorandum.85

Response 17: We disagree. Commenters misconstrue the mechanisms by which standards of performance are applied to individual sources under CAA section 111(d). Pursuant to section 111(d), the EPA develops emission guidelines that r eflect the degree of emission limitation achievable through the application of the BSER dete rmined in accordance with section 111(a)(1). These guidelines do not impose any requi rements on an existing source. Instead, they are used by the states to develop plans, which establish standards of performance for existing sources within a state’s jurisdiction and provides for the implementation and enforcement of such standards. In applying a standard of performan ce to any particular source, state plans may consider the remaining useful life, among other fac tors, of an existing source. States may also establish more stringent standards as authorized un der section 116.

State plans are then provided to the EPA for review as indicated in section 111(d)(2). While section 111(d)(2) explains that such plans must be “satisfactory,” Congress did not provide any explicit criteria to guide our review. Nevertheless , we explained in the preamble to our section 111(d) implementing regulations that “it seems clear that some substantive criterion was intended to govern not only the Administrator’s pro mulgation of standards but also [her] review of State plans.” 40 F.R. at 53342. We believe that providing each state with an emissions budget is consistent with ensuring maximum flexibility in assigning standards of performance to individual sources but also provides states with gu idelines for submitting a satisfactory plan. In this way, a satisfactory state plan may adjust emis sion limits for each affected facility on a caseby-case basis so long as the overall state emission s budget is not exceeded. This ensures that the overriding purpose of section 111 to protect public health and welfare is properly balanced with the cooperative intent of section 111(d).

Commenters appeal to Asarco, Inc. v. EPA , 578 F.2d 319 (D.C. Cir. 1978), is also without me rit.

Asarco neither construed the definition of standard of pe rformance nor did it address the regulation of existing sources under section 111(d) . Specifically, in Asarco , the D.C. Circuit held only that the CAA precluded the EPA from allowing sources to avoid regulation under section 111(b) by employing the so-called “bubble concept,” i.e. , an approach that “treat[s] a combination of facilities as a single source” in or der to “allow a facility whose emissions are increased by alterations to avoid complying with th e applicable NSPS as long as emission

decreases from other facilities within the same ‘so urce’ cancel out the increase from the altered facility.” Id. , at 326. Asarco did not address whether an emission guideline prom ulgated in accordance with section 111(d) could include a stat e emissions budget. Moreover, this rule neither combines sources nor directly imposes any r equirements on the sources themselves.

Furthermore, Asarco was decided before the Supreme Court’s decision in Chevron v. NRDC

, which held that EPA’s plantwide definition is a per missible construction of the statutory term “stationary source.” In Chevron , the Court reversed the D.C. Circuit’s rejection o f the bubbling concept in which the D.C. Circuit based its decisio n on two of its precedents, including Asarco

. Accordingly, we do not agree that Asarco is persuasive in light of the Supreme Court’s deci sion

in Chevron . Nevertheless, this rule does not combine sources or impose any requirements on other entities. The only entities subject to this rule are the individual sources themselves.86

Comment 18: Commenters stated that the proposed rule disregard s the FPA, and therefore, an additional reason for rejecting EPA's expansive rea ding of Section 111(d) is the conflict it

creates with other federal statutes. Commenters sta ted among those is the Federal Power Act ("FPA"), which regulates the interstate electricitymarket and assigns responsibility for that market to either the Federal Energy Regulatory Comm ission ("FERC") or the States.

Commenters stated that the FPA does not authorize E PA to regulate which producers may sell electricity and in what quantity, explaining that t he FPA designates FERC as the agency responsible for regulating interstate trade in elec tricity. 16 U.S.C. section 824. Commenters continued (verbatim) as the DC Circuit has explaine d, "[u]nder the Federal Power Act ... the [Federal Energy Regulatory] Commission is generallycharged with regulating the transmission and sale of electric power in interstate commerce." Electric Power Supply Ass'n v. Fed. Energy Reg. Comm'n, 753 F.3d 216, 219 (D.C. Cir. 2014). Co mmenters said that it shares that authority only with the States, which retain authority to reg ulate retail transactions in electricity under the FPA. Id. at 221 ("States retain exclusive authorityto regulate the retail market."). Accordingly, commenters stated the Supreme Court has recognized that FERC has "exclusive authority" over the wholesale power market, and its "exclusive juri sdiction applies not only to rates but also to power allocations that affect wholesale rates." Mis s. Power & Light Co. v. Mississippi, 487 U.S. 354, 371 (1988) (emphasis added). Commenters stated EPA's proposed rule disregards the FPA's assignment of authority. Commenters stated the focu s of the proposed rule's so-called BSER is on changing the supply of energy, with the recogniz ed effect of changing its price. Commenters stated the very premise for EPA's proposed rule is that "[t]he electricity system is physically interconnected ... and operated on an integrated ba sis," 79 Fed. Reg. 34,857, thus allowing the Agency to alter the entire supply of electricity th rough seemingly abstract rules imposed at the highest level of generality. Commenters stated thatas the proposal's routine references to substitution between EGUs (including non-use) revea l, the proposed rule's essence is regulation of the entire "electricity system" of generation, transmission, and consumption. For example, commenters stated EPA anticipates that "constructio n and operation of new NGCC capacity will be undertaken as a method of responding to the prop osal's requirements," Id. at 34,876 (emphasis added), and it also recognizes that this change to electricity generation will raise the cost of electricity, id. At 34,876-77. At the very least, c ommenters stated, FERC must confirm that EPA's proposed rule will not have a negative impacton grid reliability and the supply of electricity. EPA has attempted no such coordination , preferring instead to rely on an overly generous interpretation of Section 111(d). Commente rs stated where federal statutes confer authority on one agency, others may not functionall y usurp it through ambitious interpretations of their own governing statutes. See, e.g., Hunter v. FERC, 711 F.3d 155, 157-60 (D.C. Cir. 2013) (rejecting FERC's attempt to regulate matters committed to the CFTC's exclusive jurisdiction); Chamber of Commerce v. Reich, 74 F.3 d 1322, 1333-34 (D.C. Cir. 1996) (rejecting agency action purportedly based on the Procurement Act when it conflicted with the longerstanding and more topical National Labor Relations Act). Commenters stated this is particularly true where the assertion of new power allegedly lie s in a later-enacted law that does not87

expressly repeal or curtail the older provision. Hu nter, 711 F.3d at 160; see also Traynor v. Turnage, 485 U.S. 535, 547 (1988) (citing the "card inal rule ... that repeals by implication are not favored"). In the current situation, commenters sta ted, the "cardinal rule" is in full effect: Congress enacted the FPA in 1920, and the CAA in 19 55. Commenters stated the two laws can coexist peacefully, and they have for decades, and added that only EPA's new interpretation of Section 111(d) threatens to encroach on FERC's resp onsibility for regulating the electricity market. Cf. Hunter, 711 F.3d at 160 ("But [the latt er-enacted statute's] text fails to answer the question whether FERC may intrude upon the CFTC's e xclusive jurisdiction. Commenters said because FERC is free to prohibit manipulative tradi ng in markets outside the CFTC's exclusive jurisdiction, there is no irreconcilable conflict b etween the two statutes and therefore no repeal by implication"). Commenters stated this unnecessar y conflict within the federal government is further evidence that EPA lacks authority to admini ster a system of state-level regulations governing the production, transmission, and consump tion of electricity. In addition, commenters stated that creating a different federal agency cha rged with regulating the nation's electricity supply, the FPA poses another obstacle to EPA's current proposal: it expressly preserves States' authority to regulate the consumer energy market. 1 6 U.S.C. section 824(a) (confining federal regulation of the electricity market "only to those matters which are not subject to regulation by the States"). Commenters stated that like the Clean Air Act, the FPA creates a federal-state partnership for the accomplishment of its goals. Co mmenters stated the FPA gives to the federal government (FERC) control of the wholesale market f or electricity, while States retain authority to regulate consumer-level transactions. Id. (citin g 16 U.S.C. section 824(b)(1)). Commenters stated that in Electric Power Supply, the federal g overnment attempted to regulate consumers' decisions regarding electricity consumption by "lur ing" additional electricity to market with subsidies funded by additional charges during peak hours. Id. at 223. Commenters stated despite FERC's effort to fit within its regulatory mandate, the court concluded that the "lures" at issue were "part of the retail market" because they "invo lve[d] retail customers ... and the levels of retail electricity consumption." Id. Commenters sta ted the same reasoning applies to EPA's effort to regulate the actions of retail electricity custo mers by encouraging them to buy less electricity. Commenters stated that in fact, the proposed rule a ims to accomplish its goals through the same mechanism as Electric Power Supply, namely creating regulatory burdens intended to entice energy producers to supply electricity from differe nt EGUs. E.g., 79 Fed. Reg. 34,857.

Commenters stated that while the earlier case invol ved luring additional energy onto the grid at certain times of day, the current rule attempts to lure energy from preferred sources. Commenters stated that in both instances, that conduct encroac hes on States' regulatory domain under the FPA, and if not the domain of state regulators then certainly the domain of FERC. Indeed, EPA recognizes that its proposed rule duplicates measur es already taken by the States. E.g., Id. at 34,858 (admitting that "[m]ore than half the states already have established some form of statelevel renewable energy requirements," 30 States hav e nuclear EGUs, and "[m]ore than 40 states already have established some form of demand-side e nergy efficiency polices"); Id. at 34,851 (describing the purpose of "block 4" as "increasing state demand-side energy efficiency efforts" (emphasis added)). Commenters stated the proposed rulemaking therefore crosses lines not only

between EPA and FERC but also between the federal a nd state governments. Commenters said where, as here, such lines are drawn by statute, th ey cannot be redrawn via agency regulations.88

Commenters stated under the Federal Power Act, Stat es have the primary authority to regulate the generation and sale of electricity to consumers . Commenters stated where the federal government is involved, its authority runs through FERC, not EPA. Commenters stated the latter agency must confine itself to traditional end-of-st ack BSER rather than imposing macro-level regulations that functionally usurp authority left to FERC and to the States.

Commenters stated that the EPA lacks the statutory authority to regulate electricity generation, transmission or distribution, explaining that Congr ess granted these authorities to the Federal Energy Regulatory Commission (FERC) and to the stat es under the Federal Power Act. Commenters stated EPA's statutory authorities under Title I of the CAA are limited to regulation of air pollutants, and by establishing mandatory go als that presume the application of state authority over non-emitting electric generators, EP A has overstepped the bounds of the CAA and encroached upon legal authorities the Congress has clearly left to the states.

Response 18: We disagree that we are expanding our authority to include wholesale energy market regulation or state retail regulation. Our e mission guidelines simply reflect an achievable emissions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. Moreover, these emis sion guidelines provide states with the flexibility to establish, implement, and enforce st andards of performance and do not intrude on the regulatory domain of FERC or the states. It can not be said that because environmental requirements may have an effect on the wholesale en ergy or retail markets that the EPA is therefore intruding into energy regulation. Certain ly, in the legislative history of the 1970 CAA Amendments, Congress expressly identified power pla nts as a priority source category for regulation under CAA section 111. Further, we note that the EPA is not including building block 4, demand-side energy efficiency, as a component of BSER in the final rule. Additionally, this rule does not regulate renewable energy sources. It identifies the BSER for affected sources, which entails substitute generation to zero-emittin g generators, but it does not impose emissions requirements on such sources. Finally, we note thatthe EPA has considered reliability issues in developing this final rule. For a more comprehensiv e discussion of reliability issues, as well as the EPA’s coordination with both FERC and DOE, plea se see preamble section VIII.G.2.

Comment 19: Commenters stated the EPA's use of beyond-the-unit measurements appears to be outside the scope of Section 111(d). Commenters sai d for example, the rule would regulate renewable energy sources and energy efficiency alth ough neither are a source category nor meet the definition of "stationary source" because they do not emit any air pollutant. Commenters stated accordingly, the EPA should address these qu estions regarding the use of beyond-the-unit

measures.

Response 19: We disagree with this comment. In the preamble for this rule, we explain that this rule does not regulate renewable energy sources or energy efficiency, and that the BSER may include measures that are not subject to regulation

.

Comment 20: Commenters said the EPA is not authorized by Congr ess under the CAA to pick winners and losers in the energy markets.89

Response 20: We disagree that we are expanding our authority to include wholesale energy market regulation nor are we picking winners or los ers in energy markets. Our emission guidelines simply reflect an achievable emissions l imit through the application of the BSER and do not in themselves require states or sources to i mplement the BSER. Moreover, these emission guidelines provide states with the flexibility to e stablish, implement, and enforce standards of performance and do not intrude on the regulatory do main of FERC or the states. It cannot be said that because environmental requirements may have an effect on the wholesale energy market that the EPA is therefore intruding into energy regulati on. Certainly, in the legislative history of the 1970 CAA Amendments, Congress expressly identified power plants as a priority source category for regulation under CAA section 111.

Comment 21: Commenters stated the Clean Air Act does not allow the EPA to regulate greenhouse gas emissions from existing coal-fired p ower plants under Section 111(d) because coal-fired power plants are already regulated by th e EPA under Section 112 of the Clean Air Act. Commenters stated that recently, attorneys general from nine states filed an amicus brief to stop EPA's proposal for this very reason, saying that th e proposal violates the literal terms of the

Clean Air Act. Commenters added that even if the EP A believes it has the basic authority to regulate, Section 111(d) allows EPA to set emission standards based solely on emission reductions that can be achieved inside the fence; h owever, this proposal requires substantial

reductions outside the fence. Commenters closed sta ting that last year, before the proposal was issued, attorneys general from 17 states warned EPA that the agency does not have authority to require emission reductions outside the fence.

Commenters stated EPA lacks the legal authority to adopt that Rule. . . . EPA offers only one legal basis for the Rule: the rarely invoked Sectio n 111(d) of the Clean Air Act ("CAA"). See 42 U.S.C; 7411(d). Commenters stated the problem is th at Section 111(d) affirmatively excludes precisely what EPA is attempting to do in the Propo sed Rule. Commenters explained that EPA lacks authority under the plain text of Section 111 (d), as it appears in the US Code, to promulgate the Proposed Rule. Commenters stated Sec tion 111(d) expressly prohibits EPA from regulating "any air pollutant... emitted from a[n] [existing] source category which is regulated under [the national emission regime in Section 112 of the CAA]." 42 U.S.C. 7411(d). Commenters stated given that EPA has imposed extens ive and onerous regulations on existing coal-fired power plants under Section 112, the agen cy cannot now use Section 111(d) to require regulation of CO 2 emissions from those same existi ng plants. Commenters continued that this conclusion is apparent and EPA concedes in its Lega l Memorandum that a "literal reading" of Section 111(d) prohibits the Proposed Rule. Mern. 2 6; see also 70 Fed. Reg. 15,994, 16,032 (Mar. 29, 2005) (EPA making the same admission in a prior rulemaking). Commenters continued stating that the only textual justification that EP A's Legal Memorandum offers for departing from the "literal" terms of Section 111(d) is unper suasive. Commenters explained that the Agency relies entirely on a one sentence clerical e ntry in the 1990 Amendments to the Clean Air Act that was not codified in the U.S. Code but appe ars in the Statutes at Large and that EPA has admitted that entry was clearly a mistake because i t sought to make a technical correction rendered moot by another amendment. See 70 Fed. Reg . at 16,031 (describing the entry as a90

"drafting error"), Nevertheless, commenters said, E PA now claims that it must give meaning to this mistake and, as a result, has announced an int erpretation of Section 111(d) that directly conflicts with the language in the U.S. Code. Comme nters stated EPA's interpretation rewrites Section 111(d) from a prohibition on the regulation of "any air pollutant . . . emitted from a source category which is regulated under [Section 1 12]," as stated in the U.S. Code, to a more limited prohibition on the regulation of "any hazar dous air pollutant" emitted from such a source category. Commenters explained that this sort of re asoning would be wrong under any circumstance, but it is particularly improper here, where it is being offered as the justification for what commenters stated is one of the most costly re gulations in this Nation's history.

Commenters stated that the only authority invoked b y EPA for the requirements in the Proposed Rule is Section 111(d) of the Clean Air Act, a litt le-used provision that grants EPA limited power to require States to regulate air pollutants from existing sources. Mem. 11-12. Commenters continued that as it appears in the U.S. Code, Section 111(d) requires the EPA Administrator under narrow circumstances to "prescr ibe regulations which shall establish a procedure . . , under which each State shall submitto the Administrator a plan which establishes standards of performance" for certain existing sour ces and certain air pollutants. Among other things, commenters stated, the statutory provision specifically excludes from the Administrator's authority the power to prescribe regulations relati ng to "standards of performance for any existing source for any air pollutant ... emitted f rom a source category which is regulated under section 7412 of this title [i.e., Section 112 of th e CAA]." 42 U.S.C. 7411(d), EPA admits in its Legal Memorandum for the Proposed Rule that "a lite ral reading of that language" means that "EPA c[an] not regulate any air pollutant from a so urce category regulated under section 112" of the Clean Air Act. Mem. 26 (emphasis added); accord 70 Fed. Reg. at 16,032 (EPA reaching the same conclusion). Commenters stated that Section 11 1(d)'s plain text provides that if an existing source category is regulated under Section 112, tha t source category may not also be regulated under Section 111(d). Commenters added that the reg ime codified in Sections 112 and 111 is part of a measured, coherent approach to regulating air pollutants from new and existing pollution sources. Section 112 of the Clean Air Actconcerns national emissions standards for hazardous air pollutants ("HAPs") emitted from any number of new and existing sources. See 42 U.S.C. 7412. Whether a source category is regulated under Section 112 is generally dependent upon a number of factors. Id. 7412(c). With regard to coal-fired power plants, commenters posited that Congress specially provided that those sources need only be regulated under Section 112 if the Administrator finds such regulation to b e "appropriate and necessary." Id. 7412(n). Commenters stated Section 111(d) in turn addresses the emission of air pollutants emitted from existing sources not regulated under Section 112. S pecifically, commenters stated, when EPA has chosen not to regulate a source category nation ally under Section 112, emissions from existing sources within that category must be subje ct instead to state-by-state emission standards under Section 111(d), assuming certain other predic ates have been satisfied. Commenters stated the rest of Section 111, which is not at issue here , is not restricted by the scope of Section 112 and concerns national emissions standards for air p ollutants emitted from new sources. Commenters added that in the present case, it is cl ear that EPA has no authority under Section 111(d) to regulate any "emission from coal-fired po wer plants, including CO2 emissions. EPA91

categorized coal-fired power plants as part of a "s ource category" under Section 112 in 2000, see 65 Fed. Reg. 79,825, 79,826 (Dec. 20, 2000), and th e D.C. Circuit in 2008 rejected EPA's attempt to withdraw that finding, see New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008). Then, commenters stated that in 2012, EPA imposed signifi cant Section 112 restrictions on coal-fired power plants, see 77 Fed. Reg. 9,304 (Feb. 16, 2012 ); 40 C.F.R. Part 63 subpart UUUUU, which the D.C. Circuit recently upheld, see also White St allion Energv Ctr., LLC v. EPA, * F.3d._, 2014 WL 1420294 (D.C. Cir. Apr. 15, 2014). Commente rs stated that under the "literal" reading of Section 111(d), Mem. 26, these rules regulating existing coal-fired power plants under Section 112 prohibit EPA from invoking Section 111(d) to ad opt the Proposed Rule.

Commenters stated EPA's other policy argument is "t he fact that the EPA has historically regulated non-HAPs under Section 111(d), even where those air pollutants were emitted from a source category actually regulated under section 11 2." Mem. 26. Commenters stated it is no answer to the unambiguous textual requirement in th e 1990 Amendments to point to EPA's preamendment practice of regulating non-HAPs under Sec tion 111(d), explaining EPA once had the power of regulating existing source categories on s eparate regulatory tracks, See Mem. 9-10 & n. 17, and when Congress amended the Clean Air Act in 1990 to require EPA to regulate more HAPs under Section 112, it paired that increased po wer with a textual limitation----embodied in Section 111(d) against using that enhanced authorit y to impose duplicative regulations on the same existing source categories. Commenters stated that EPA's argument that the "literal" terms of Section 111(d) would prevent it from using a pro vision that it has only used to regulate "four pollutants from five source categories" in "forty y ears," Mem. 9, cannot provide a basis for disregarding the literal terms of the Clean Air Act

.

Commenters questioned EPA's authority under 111(d) to undertake such drastic measures to alter the manner in which electric energy is produced in the US: this concern is heightened Section 112 regarding regulation of major sources, such as power plants.

Commenters stated the Clean Air Act forbids regulat ing sources under Section 111(d) if they are regulated under Section 112 of the Act, and existin g electric utility generating units are regulated

under Section 112.

Commenters stated the proposed rule is unlawful bec ause EPA has chosen to regulate coal-fired power plants under Section 112 of the Clean Air Act , 42 U.S.C., 7412. Commenters stated Section 111(d) specifically prohibits EPA from invo king Section 111(d) where the "source category . . . is regulated under section [112]. . . ." 42 U.S.C., 7411(d)(1)(A)(i). Commenters stated EPA should abandon its cynical attempt to ev ade this specific prohibition on its authority found in the Clean Air Act's plain text.

Commenters stated the Supreme Court has explained, "EPA may not employ [Section 111(d)] if existing stationary sources of the pollutant in que stion are regulated under . . . the hazardous air pollutants program, [Section 112]." Am. Elec. Power Co., Inc. v. Connecticut, 131 S. Ct. 2527, 2537 n.7 (2011). Commenters stated this unambiguous statutory prohibition is grounded in Congress's understanding that existing sources - un like new sources - should not be subject to92

double regulation, under two different regulatory r egimes, in light of special concerns such as reliance and sunk costs. Commenters continued, stat ing that in 2000, EPA took the discretionary step of classifying power plants as part of a "sour ce category" under Section 112. 65 Fed. Reg. 79,825, 79,830 (Dec. 20, 2000). Then, in 2012, EPA imposed regulations on these power plants under Section 112. 77 Fed. Reg. 9,304 (Feb. 16, 201 2). Commenters stated that given that existing coal-fired power plants are now extensivel y regulated under Section 112, what EPA has

admitted are the "literal" terms of the Clean Air A ct prohibit EPA's present effort to impose yet more onerous regulations on these same plants under Section 111(d). Mem. at 26.

Commenters stated if one were to accept EPA's assertion that it must give meaning to an impossible-to-execute clerical amendment, Mem. at 2 6, the proposed rule would still be unlawful. Commenters stated that if the conforming amendment is executed separately from the substantive amendment, two different prohibitions o n EPA's Section 111(d) authority would arise. Commenters stated that under one prohibition - in text of the Clean Air Act as reflected in the United States Code - EPA would be prohibited fr om regulating under Section 111(d) any emissions from any source categories actually regul ated under Section 112. Commenters stated that under the "other" prohibition - the one embodi ed by the conforming amendment - Section 111(d) could not be used to regulate pollutants sub ject to regulation under Section 112, even if EPA has chosen not to regulate the particular sourc e category at issue. (Given that EPA is not required to regulate all sources of Section 112-reg ulated hazardous air pollutants under Section 112, 42 U.S.C. - 7412(k)(3)(B)(ii), this category w ould almost certainly leave some sources of hazardous air pollutants unregulated. Indeed, a spe cial provision of Section 112 permits EPA significant leeway not to regulate power plants at all under Section 112. Id. - 7412(n)(1)) Thus, commenters added, if EPA "give[s] effect, if possib le, to every word Congress used," Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979), it would be prohibited from invoking Section 111(d) both to regulate any source categories actually reg ulated under Section 112 and to regulate any pollutants subject to regulation under Section 112. Accordingly, commenters stated, even if EPA's approach of executing the conforming amendmen t into a separate "version" of Section 111(d) were permissible -which, to be clear, it is not - this would not salvage the proposed rule.

Commenters stated the Clean Air Act expressly prohi bits EPA from regulating GHG emissions from fossil fuel-fired power plants under Section 1 11(d) because those source categories are already regulated under Section 112. Commenters sta ted Section 112 authorizes EPA to establish NEHSAPs to regulate hazardous air pollutants ("HAPs ") from specific source categories. Commenters explained that the authority to regulate emissions from certain sources under Section 111(d) is, in turn, defined by the scope of Section 112., and the plain meaning of this provision prohibits EPA from promulgating emissions guidelines for existing sources under Section 111(d) if the source category is regulated under Section 112. Commenters stated this straightforward interpretation of Section 111(d) ha s been supported by the courts and consistently implemented by EPA. Commenters stated EPA is proposing to regulate through this action "existing electric generating units". Commen ters closed, stating that these same units are already regulated under 40 CFR 63 Subpart UUUUU, an d as such, EPA is not allowed to regulate those same affected units under the provis ions of 111(d).93

Commenters stated that the plain text of Section 11 1(d) expressly prohibits the agency from regulating any air pollutant emitted from a source category regulated under Section 112 of the CAA. "Given that EPA has imposed extensive and oner ous regulations on existing coal-fired power plants under Section 112, the agency cannot n ow use Section 111(d) to require regulation of CO2 emissions from those same existing plants. T his conclusion is so apparent," commenters wrote, "that even EPA concedes in its Legal Memoran dum that a literal reading of Section 111(d) prohibits the proposed rule."

Commenters stated first that the statutory language of Section 111(d) is a product of differing

House and Senate versions. Commenters said under th e Senate version, unless a particular air pollutant emitted by existing sources was regulated by one of several other listed Clean Air Act provisions, existing sources emitting that pollutan t could be regulated under Section 111(d). Commenters stated in contrast, the House version pr ohibits existing sources from being regulated under Section 111(d) if the existing sources are re gulated under Section 112. Commenters stated that under prevailing rules of legislative construc tion and case law regarding harmonization of conflicting statutory provisions, the House provisi on controls. Commenters said effective in 2012, the EPA already regulates coal-fired power pl ants under Section 112 air toxics authority in the Mercury and Air Toxics Standard. Commenters sta ted that therefore, the EPA has no authority to regulate existing coal-fired power pla nts a second time under Section 111(d). Commenters said that second, Section 111(d) require s the EPA to issue a valid new source performance standard under Section 111(b) before is suing an existing source standard. Commenters stated that based on flaws in the propos ed NSPS and modified/reconstructed source standard, it is doubtful that either of the provisi ons will be lawfully finalized. Commenters said that therefore, the EPA has not satisfied this prer equisite to issue the Section 111(d) rule.

Commenters stated Section 111(d) prohibits EPA fromadopting emission guidelines for existing sources from a source category when the Agency has already regulated that source category under section 112, adding EPA listed coal- and oil- fired EGUs as a "source category" under section 112 in 2000, and regulated emissions from t hese sources in 2012 under the Mercury and Air Toxics Standards ("MATS"). Commenters stated Se ction 111 is not ambiguous, and EPA therefore is not entitled to deference in interpret ing that provision. Commenters stated the plain language of the Act prevents EPA from regulating EG Us under section 111(d). Commenters ended, stating a drafting error in the 1990 CAA ame ndments does not vest the Agency with the authority it claims.

Commenters stated because EPA has already promulgat ed a national emission standard for existing coal-fired power plants under section 112, it may not promulgate the emission guidelines it has proposed here.

Commenters stated that DEP questions EPA's authorit y to regulate CO2 emissions from fossilfuel fired EGUs under CAA Section 111(d). Commenter s stated existing fossil fuel plants are currently regulated under Section 112 of the CAA. C ommenters stated that in February 2012, EPA promulgated a standard for mercury and certain other air toxins from fossil fuel power plants under the National Emission Standards for Ha zardous Air Pollutants program authorized94

under Section 112 of the CAA. Commenters stated Sec tion 111(d) allows EPA to mandate

standards for emissions that are not "from a source category which is regulated under [Section 112]." Commenters stated DEP questions whether EPA has the authority to promulgate the proposed Clean Power Plan because the source catego ry of fossil fuel power plants is now regulated under Section 112.

Commenters stated that the EPA does not have the le gal authority to promulgate this proposed regulation. Commenters said Section 111(d) of the C lean Air Act, as it appears in the United States Code, clearly prohibits EPA from regulating "any air pollutant emitted from a source category which is regulated under [section 112 of t he Clean Air Act]." In fact, commenters stated the EPA conceded this fact in New Jersey v. E.P.A.: This requires vacation of CAMR's regulations for both new and existing EGUs. Comment ers stated EPA promulgated the CAMR regulations for existing EGUs under section 111(d), but under EPA's own interpretation of the section, it cannot be used to regulate sources list ed under section 112; EPA thus concedes that if EGUs remain listed under section 112, as the commen ters hold, then the CAMR regulations for existing sources must fall.

Commenters stated the court clearly states that the EPA conceded the issue that section 111(d) could not be used to regulate air pollutants emitte d from the regulated source category. Commenters said therefore, the EPA is legally barre d by statute and by the legal theories of collateral estoppel or res judicata from now regula ting greenhouse gas emissions from existing

sources covered under section.

Response 21: EPA disagrees that it may not promulgate regulation s addressing CO2 emissions from existing power plants under section 111(d). EP A’s discussion of this issue is in Section IV of the preamble. Further, EPA’s views on arguments presented by the commenters, including commenters’ discussion of the AEP opinion and of th e Senate amendment, are also discussed in EPA’s briefs in the Murray Energy and West Virginia cases, No. 14-1112, No. 14-1146, and No. 14-1151 (D.C. Cir.).

Comment 22: Commenters stated that by going "outside the fence line" in setting standards, EPA developed standards for existing units that are more stringent than new source performance standards (NSPS) for new generating units, and this approach establishes a policy with no basis in the statute or regulatory guidance.

Response 22: We disagree with this comment. In section V. of th e preamble for this rule we discuss the relative stringency of the section 111( b) and (d) rules. Further, EPA’s views on the argument presented by the commenters, including com menters’ discussion of the AEP opinion and of the Senate amendment, are also With respect to commenters discussion of the AEP opinion, EPA disagrees with the commenters reading of this opinion, as discussed in EPA’s briefs in the consolidated Murray Energy and West V irginia cases, No. 14-1112, No. 14-1146, and No. 14-1151 (and consolidated cases) (D.C. Cir. ).[SJJ]95

Comment 23: Commenters stated EPA limit its BSER finding to mea sures that have been demonstrated as capable of being undertaken, achiev ed, and enforced by individual coal-fired EGUs acting alone, and EPA should not consider, as part of the BSER, anything that would require sources to obtain or rely on offsite emissi on reductions to achieve compliance. Accordingly, commenters concluded, EPA should remov e and/or replace the Proposed Rule's Building Blocks 2-4.

Response 23: We disagree with this comment. We address this poin t in discussing our basis for building blocks 2 and 3 in section V of the preambl e for this rule.

Comment 24: Commenters stated Section 111 governs 'affected sou rces,' not 'affected entities,' a

term that exists nowhere in Section 111. Commenters said the EPA's authority extends to setting procedures for states to set standards of performan ce for affected sources, not re-engineering the entire electric supply system in the U.S. The comme nters stated that the D.C. Circuit Court in 1978 limited Section 111 regulation to a single sta tionary source, ruling against even allowing the 'bubble' approach of including the entire plantas the 'source' to be regulated. If the courts have opined that a 'bubble' approach is illegal und er 111, the commenters called into question the EPA's assertion of authority to regulate 'outside t he fence' entities.

Response 24: We disagree with this comment. The final rule limit s the regulatory requirements

to affected EGUs. As discussed in section V of the preamble for this rule, the EPA is establishing emission guidelines for states and is not overstepp ing its authority because it is not reengineering the entire electric supply system in the U.S.

Commenters appeal to Asarco, Inc. v. EPA , 578 F.2d 319 (D.C. Cir. 1978), is without merit.

Asarco neither construed the definition of standard of pe rformance nor did it address the regulation of existing sources under section 111(d) . Furthermore, Asarco was decided before the Supreme Court’s decision in Chevron v. NRDC , which held that EPA’s plantwide definition is a permissible construction of the statutory term “sta tionary source.” In Chevron , the Court reversed the D.C. Circuit’s rejection of the bubbli ng concept in which the D.C. Circuit based its decision on two of its precedents, including Asarco . Accordingly, we do not agree that Asarco is persuasive in light of the Supreme Court’s decision in Chevron

.

Even assuming arguendo that Asarco remains good law, the D.C. Circuit held only that the CAA precluded the EPA from allowing sources to avoid regulation under section 111(b) by employing the so-called “bubble concept,” i.e. , an approach that “treat[s] a combination of facil ities as a single source” in order to “allow a facility whose emissions are increased by alterations to avoid complying with the applicable NSPS as long as emiss ion decreases from other facilities within

the same ‘source’ cancel out the increase from the altered facility.” Id. , at 326. Asarco did not address whether a standard of performance could be based on a source’s ability to achieve onsite emission reductions by availing itself to off- site measures. Nevertheless, this rule does not combine affected EGUs or impose any requirements on other “affected entities.”96

Comment 25: Commenters stated that paradoxically for a rule gov erning existing coal-fired generation, three of the four "building blocks" use d to identify state-specific reduction targets consist of reductions projected from non-coal gener ation options or other reduction measures.

Commenters also addressed the issue of whether EPA may properly consider such "outside the fence" reductions in developing emission guidelines for coal-fired power plants under Section 111(d). Commenters added if one sets that issue asi de, these particular building blocks provide scant basis for setting realistic emission reductio n targets for Kentucky. Commenters closed, stating EPA's reliance upon these flawed factors ex ceeds its statutory authority

Commenters stated EPA has chosen an unprecedented a nd legally unsupportable interpretation of the Clean Air Act. Commenters' organizations sup ported the legal position enumerated by the Governors of 18 states in their 9 September 2014 le tter to President Obama, which reads: "The unambiguous language of the CAA expressly prohibits EPA from using Section 111(d) to regulate power plants because EPA already regulates these sources under another section of the Act. Moreover, even if the Agency did have legal au thority to regulate power plants under 111(d), it overstepped this hypothetical authority when it acted to coerce states to adopt compliance measures that do not reduce emissions atthe entities EPA has set out to regulate. Under federal law, EPA has the authority to regulat e emissions from specific sources, but that authority does not extend outside the physical boun daries of such sources (i.e., "outside the fence"). In attempting to regulate outside the fenc e, the Agency's proposal not only exceeds the scope of federal law, but also, in some cases, dire ctly conflicts with established state law."

Commenters stated the fact is that in the proposed ESPS, the EPA asserts for the first time that it can look "beyond the fenceline" of "affected facili ties" when it conducts a BSER analysis and incorporate emissions reduction opportunities that can be implemented by unrelated third parties. Commenters said the EPA's interpretation here is un lawful, arbitrary, and capricious because the EPA fails to provide a reasoned basis for changing its interpretation. See Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto, Ins. Co., 463 U.S. 2 9, 43 (1983) (In deciding whether an agency action is arbitrary and capricious, this Court cons iders whether "the agency [examined] the relevant data and articulate[d] a satisfactory expl anation for its action including a 'rational'

connection between the facts found and the choice m ade.") Commenters stated although courts have acknowledged that "an agency is not locked int o the first interpretation of a statute it embraces," see Ramaprakashc v. FAA 346 F.3d 1122, a t 1125 ("Agencies are free to change course as their expertise and experience may sugges t or require."), the Supreme Court also has made clear that when an agency changes its course, it is "obligated to supply a reasoned analysis for the change." State Farm, 463 U.S. at 42. Commen ters said if an agency without explanation were to make an adjudication which is not consisten t with the agency's previously established standards, the troubling question would arise wheth er the agency has lawfully changed its standard, or whether it has arbitrarily failed to a dhere to its standard, which it may not lawfully do. See Huntington Hosp., 319 F.3d at 79; see also Fox Television Stations, Inc. v. Fed. Commc'ns Comm'n, 489 F.3d 444, 461 (2d Cir. 2007) r ev'd and remanded on other grounds sub nom. F.C.C. v. Fox Television Stations, Inc., 556 U .S. 502 (2009). Commenters stated in the97

proposed ESPS, the EPA fails to offer such a reason ed analysis and would be hard pressed to do so given the Clean Air Act's definition of "source" in Section 111.

Commenters stated the EPA reaches far beyond the af fected source category and requires emissions reductions that can only be met by lookin g beyond the sources that are the actual subject of the regulation (fossil fuel-fired EGUs) to the rest of the energy sector as well as consumer demand for electricity. Commenters said in implementing this regulation, the EPA seeks to elevate itself to be the country's preemin ent regulator of energy, which is not only well beyond its institutional competence, but also well beyond its authority in the Clean Air Act to address air pollution and in violation of numerous other federal and state laws.

Commenters state that EPA has intruded into regulat ory spheres where it has not jurisdiction and no expertise which has resulted in a proposal that will seriously harm markets and electricity reliability if implemented. For example, building b lock 2 is an unprecedented intrusion into areas that the FPA has made exclusively subject to FERC’s jurisdiction.

Commenters state that the proposed rule is unlawful because it ignores a fundamental requirement of Section 111: that its standards regu late the emissions performance of (and are achievable by) individual sources based on measures that can be incorporated into the design or operation of the source itself. This basic focus on individual sources is evident in the text of the
statute itself and is a characteristic feature of e very other Section 111 rulemaking.

Response 25: We disagree with these comments. We discuss our bas is for including the measures in building blocks 2 and 3 in the BSER in section V of the preamble for this rule, including our reasons for not limiting the BSER to the measures in building block 1, as well as why relying on these measures as the BSER does not represent over-reaching. Further, the EPA is not intruding into FERC’s exclusive jurisdictionunder the FPA. Our emission guidelines simply reflect an achievable emissions limit throug h the application of the BSER and do not in themselves require states or sources to implement t he BSER. Moreover, these emission guidelines provide states with the flexibility to e stablish, implement, and enforce standards of performance and do not intrude on the regulatory do main of FERC or the states. It cannot be said that because environmental requirements may have an effect on the wholesale energy market that the EPA is therefore intruding into energy regulati on. Certainly, in the legislative history of the 1970 CAA Amendments, Congress expressly identified power plants as a priority source category for regulation under CAA section 111.

Comment 26: Commenters stated while the EPA has the authority t o provide flexible compliance options, the EPA's enforcement authorityunder Section 111 is clearly limited to new and existing sources in the listed source categorie s. Commenters said Section 111 certainly does not provide the EPA with the authority to impose en forceable obligations on entities that may be98

involved in implementation of the "outside the fenc e" measures considered by the EPA in setting its proposed performance goals. Commenters said the refore, to the extent that a regulated source adopts a compliance strategy involving implementati on of "outside the fence" measures by nonjurisdictional entities, it is sufficient for a sta te implementation plan to provide federal enforceability for the performance goal imposed on the regulated source, rather than compliance measures performed by non-jurisdictional entities. Commenters said the source (or state) relying on outside the fence reductions has the ability to make measures performed by non-jurisdictional entities legally enforceable through the mechanisms of contract or agreed order. Commenters stated however, any requirements for federal enforc eability should be deemed satisfied so long as federally enforceable obligations in the nature of performance goals are placed on the state and regulated sources subject to the statutory requirem ents. Commenters stated to expand federal enforceability beyond those entities would exceed t he scope of EPA's authority under Section

111.

Response 26: In this rule, the EPA is not requiring or authorizi ng state plans to impose requirements on entities other than affected EGUs.

Comment 27: Commenters stated that a ''standard of performance " is a source-specific limit, and the CAA defines "standard of performance" generallyas "a requirement of continuous emission reduction, including any requirement relating to th e operation or maintenance of a source to

assure continuous emission reduction." Commenters s tated that in section 111 specifically, a "standard of performance" is defined as "a standard for emissions of air pollutants which reflects the degree of emission limitation achievable throug h the application of the best system of emission reduction which (taking into account the c ost of achieving such reduction and any nonair quality health and environmental impact and ene rgy requirements) the Administrator determines has been adequately demonstrated." Comme nters stated consistent with the interpretation of "standard of performance" as a so urce specific requirement, Congress directed that "in applying a standard of performance to any particular source" states may "take into consideration, among other factors, the remaining u seful life of the existing source to which such standard applies. " Commenters stated that a standard of performance is "a requirement" which 111(d) contemplates states ''applying" to a "partic ular source." Commenters then explained that this Proposed Rule would require compliance measure s beyond the physical or legal control of the emission sources, and of the four measures, or BSER "building blocks" used by EPA to establish statewide standards of performance, only the first- heat-rate improvements at coal-fired steam generating units- may be executed at an affec ted source. Commenters stated the remaining three "building blocks" involve shifting generation function from coal- to gas-fired plants, replacing fossil fuel generation with renewable ene rgy resources, and avoiding generation through end-use efficiency measures. Commenters con tinued, stating that in the Proposed Rule, EPA interprets the use of "system" in "best system of emission reduction" to encompass

''outside-the-fenceline" measures. Commenters state d EPA reasons that a "system" is a ''set of things"; and, in turn, a "system of emission reduct ion" is a ''set of things" which an affected source may utilize to reduce CO2 emissions. Comment ers stated EPA presumes that reducing generation and fuel use at an "affected EGU" would reduce the CO2 emissions from an affected99

source. Commenters argued that EPA's interpretation of "system" conflicts with standard canons of statutory interpretation. Commenters said "The d efinition of words in isolation ... is not necessarily controlling." Rather, commenters added, interpretation of a word or phrase depends upon reading the whole statutory text, considering the purpose and context of the statute, and consulting any precedents or authorities that infor m the analysis." Here, in the context of emission controls, commenters contended, the Clean Air Act consistently refers to "systems" as source-specific measures. There is no basis for dep arting from this usage in section 111(d). Commenters stated EPA's interpretation of "system" conflicts with the agency's past application of section 111(d). Commenters remarked that EPA's i nterpretation of "system" conflicts with precedent defining the scope of compliance measures contemplated by the CAA. Commenters stated the D.C. Circuit previously rejected interpr etations of "best system of emission reduction" that resulted in aggregate, facility-wide, emission limits rather than an emission limit for

individual sources. Commenters cited in ASARCO v. E PA, the court invalidated EPA regulations that would "allow a plant operator who alters an existing facility in a way that increases its emissions to avoid application of the NSPSs by decreasing emissions from other facilities within the plant." Commenters stated the court rejected EPA's assertion of " 'discretion' to define a stationary source as either a single fa cility or a combination of facilities," reasoning: EPA has attempted to change the basic unit to which the NSPSs apply from a single building, structure, facility or installation the unit prescr ibed in the statute to a combination of such units. Commenters stated the agency has no authority to re write the statute in this fashion. Commenters added that here, by applying standards of performan ce to the entire power sector rather than individual "existing sources," EPA has asserted eve n broader authority. Commenters added if EPA cannot apply performance standards to several s ources at a single industrial site collectively, the narrower "best system of emission reduction" cannot be interpreted to encompass measures and emission limits applied to t he entire electric utility sector. Commenters noted that since the publication of this Proposed R ule, the Supreme Court issued a decision noting limits on EPA's authority expand the scope o f measures that may be required to achieve

an emission limit. Commenters stated that in Utilit y Air, the Court upheld EPA's decision to require "best available control technology" (BACT) for greenhouse gases emitted by sources already otherwise subject to prevention of signific ant deterioration (PSD) review. Commenters stated the Court observed that the petitioners' con cerns about unbounded regulatory authority were mitigated by limitations on what EPA could rea sonably require as BACT stating, "for one, BACT is based on 'control technology' for the appli cant's "proposed facility," therefore it has long been held that BACT cannot be used to order a fundamental redesign of the facility." Commenters stated the Court's reasoning hinged on t he petitioners' failure to demonstrate that EPA would implement its proposal broadly and that t he relevant emission standard, BACT, was limited. For several reasons, commenters remarked, the Supreme Court's observations with respect to BACT should inform the scope of section 111 (d) "standards of performance."

Commenters stated both terms are "emission limitati ons." But, commenters added, BACT represents the most stringent limitation achievable , whereas "performance standards" represent the "best system ... adequately demonstrated" aftertaking into consideration a number of

additional factors. Commenters stated BACT is stric ter, authorizing EPA to apply more burdensome requirements, than a "standard of perfor mance." Similarly, commenters stated, the100

statutory definitions of "emission limitation" and "standard of performance" indicate that BACT "emission limitations" encompass a broader range of measures than "standards of performance." Thus, commenters stated, any constraint on "emissio n limitation," and therefore on BACT, to inside-the-fenceline measures must apply to "standards of performance" as well. Commenters posited that if EPA cannot define BACT to include m easures applied to an entity other than the source, EPA cannot define section 111(d) standard o f performance to include a broader universe of compliance strategies.

Response 27: We disagree. For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history. To the extent this comment obj ects to the portfolio approach, which the EPA is not finalizing, the comment is moot. Moreover, While EPA has generally recommended conducting a BACT analysis for each emissions unit, EPA stated clearly that “the CAA and EPA rules provide discretion for permitting authorities to evaluate BACT on a facility-wide basis by taking into account operation and equipment which m ay affect the environmental performance of the overall facility.” GHG Permitting Guidance at23. Thus, EPA does not interpret the BACT provisions of the Clean Air Act to preclude conside ring beyond-the-unit control techniques. Moreover, in this context, EPA was con sidering the use of the term “facility” and “source” in the PSD provisions, not the term “syste m.”

This section of EPA’s guidance also explains that “ a BACT analysis should not include (in Step 1 of the process) energy efficient options that mayachieve reductions in a facility’s demand for energy from the electrical grid but that cannot be demonstrated to achieve reduction in emission released from the stationary source (e.g. within th e property boundary.” Id. at 24. However, this statement is based on EPA’s historical interpr etation that the BACT requirement is “inapplicable to secondary emissions, which are def ined to include emissions that may occur as a result of the construction or operation of a major stationary source but do not come from the source itself.” Id. This part of EPA’s guidance describes sources that consume power produced by other sources, where that power and the associat ed emissions are produced and released outside of the property boundary of the facility co nsuming the power. This guidance thus generally covers product manufacturing facilities, not facilities that produce electrical power for

consumers. This element of EPA’s PSD guidance does not discour age PSD permitting authorities and applicants from considering measure s that may be implemented outside of the fenceline of a stationary source but that result in a reduction of emissions inside the fenceline. There may be other reasons for not exam ining such measures closely or selecting them as BACT in a given case, but EPA has not inter preted the Act to preclude consideration of such options in the PSD program. Further, the focus of the PSD permitting is on co nstruction of individual sources and the BACT analysis examines m ethods that can be applied by a particular source on a case-by-case basis. The BSER analysis considers an entire category of sources. Thus, EPA’s interpretation of the PSD pro visions does necessitate reading section 111101

to encompass only emission control measure that can be applied inside the property boundary, or fence line, of a facility.

Comment 28: Commenters stated of the five source categories re gulated solely under Section 111(d) (phosphate fertilizer plants, sulfuric acid plants, kraft pulp mills, primary aluminum plants, and municipal solid waste landfills), all o f the emission guidelines were based on a BSER that was technological in nature. Commenters said f or example, the guideline for fluoride emissions from existing phosphate fertilizer plants was based on the application of spray crossflow packed scrubbers, and the guidelines for sulfu ric acid mist emissions from sulfuric acid plants were based on the use of fiber mist eliminat ors. Commenters stated in the preamble to the final rule for sulfuric acid mist, the U.S. EPA sta ted that: "Section 111(d) requires emission controls based on the general principle of the appl ication of the best adequately demonstrated control technology, considering cost." [42 FR 55796 (Oct. 18, 1977)]

Commenters stated four source categories have also been regulated under Section 129, which requires the U.S. EPA to establish guidelines under Section 111(d) for certain solid waste

incineration units. Commenters said under Section 1 29, the U.S. EPA must base the emission guidelines on levels reflecting the maximum degree of reduction in emissions and, similar to the previous Section 111(d) rules, the Section 129 emis sion guidelines were derived from the installation of control technologies on-site. Comme nters said for example, the guideline for municipal waste combustors is based on the applicat ion of various controls including spray dryers, fabric filters, and electrostatic precipita tors, and the guideline for commercial and

industrial solid waste incineration units is based on the use of wet scrubbers. [60 FR 65387 (Dec. 19, 1995); 65 FR 75338 (Dec. 1, 2000)] Commenters s tated the U.S. EPA allows municipal waste combustors to participate in averaging and tr ading programs to meet the nitrogen oxide emission requirements and thus look for control met hods beyond the fenceline, the actual requirements themselves were set on what could be a chieved at the facility, unlike the current proposed guidelines. [See 60 FR 65402]

Commenters stated other examples of beyond the fenc eline controls that can be taken into account to meet emission guidelines are the guideli nes for hospital/medical/infectious waste incinerators and the guidelines for commercial and industrial solid waste incineration units, both of which require that affected facilities submit a waste management plan that identifies both the feasibility and the methods used to reduce or separ ate certain components of solid waste from the

waste stream to reduce or eliminate toxic emissions from incinerated waste. Commenters said while it is true that material separation is not a pollution control device and would be implemented off-site, the U.S. EPA did not make mat erial separation a part of the BSER and it was not used to calculate the emission guideline. C ommenters said instead, it is more akin to other Section 111(d) procedural requirements such a s performance testing and monitoring that are often included in Section 111(d) rules. Comment ers stated as with municipal waste combustor NSPS, this is unlike the current proposed emission guideline for CO2 where the U.S.102

EPA factored in expansive measures such as re-dispa tching, increased renewables, and demandside EE as part of the BSER itself.

Commenters stated the U.S. EPA's most expansive int erpretation of the meaning of standard of performance under Section 111(d) was for mercury em issions from EGUs. [70 FR 28606 (May 18, 2005)] Commenters said after delisting EGUs fro m Section 112(c), the U.S. EPA promulgated the Clean Air Mercury Rule (CAMR). Comm enters stated CAMR established a national mercury emissions cap for new and existing EGUs. Commenters stated the federal appeals court later held that U.S. EPA could not re gulate mercury emissions under Section 111 because the initial delisting of EGUs under Section 112 was unlawful. New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008) Commenters said while def ining a cap and trade program as the BSER seems a broad enough interpretation of standard of performance to justify the proposed emission guideline for CO2, there are important differences between the two.

Commenters stated first, the cap and trade program created by CAMR was based on the availability and installation of control technology . Commenters said the preamble to the final rule emphasized the fact that the BSER was a combin ation of the cap and trade mechanism and the technology needed to achieve the chosen cap lev el. In justifying the emission limits in CAMR, the U.S. EPA explained in the preamble that " the technologies necessary to achieve the emission cap limits . . . have been adequately demo nstrated." Commenters said therefore, CAMR maintained the source-specific technology-based app roach that is the foundation of Section 111. Commenters stated this is unlike the proposed emiss ion guideline for CO2 that defines the BSER as the four building blocks, which include measures such as demand-side EE and re-dispatching that have no underlying basis in the installation o f control technologies onsite.

Commenters stated secondly, the affected source und er CAMR was defined as coal-fired utility units for both Section 111(b) and Section 111(d). C ommenters said it was only the emission limits achievable by applying BSER to the affected sources that were used to calculate the emission guideline in the form of a state emission cap. Commenters stated and the cap and trade program, including the transfers of credits, was li mited to affected sources. Commenters said in the proposed emission guideline for CO2, the U.S. E PA has broadened who the rule applies to by including affected entities that are not a part of the Section 111(b) performance standard. Commenters said additionally, the U.S. EPA imposed obligations on sources comprising the entire power system in determining the BSER and the individual state emission guidelines; sources which it has no authority to regulate underSection 111.

Commenters stated it is clear that CAMR, while broa der than previous Section 111(d) rules, was still within the traditional interpretation of stan dard of performance based on source-specific control technologies and limited to affected facili ties. Commenters said it in no way supports the U.S. EPA's current proposed emission guideline for CO2 that is based on measures imposed on entities beyond the scope of the proposed Section 1 11(b) performance standard and outside of

the control of affected EGUs.103

Response 28: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

We disagree with commenters’ characterization of th e BSER in the Clean Air Mercury Rule (CAMR). As discussed in the preamble to this rule, CAMR was promulgated in 2005 under the EPA administration in place under President George W. Bush. The rule as commenters noted was based on the combination of the cap-and-trade m echanism and available control technologies. We disagree, however, that this combi nation maintains a “source-specific technology-based approach.”

Compliance with CAMR was designed to go into effectover two phases. The first phase established a mercury emissions cap at 38 tons per year based on a co-benefit of compliance with the Clean Air Interstate Rule (CAIR). 70 Fed. Reg. 28606, 28618 (May 18, 2005). CAIR established a cap-and-trade program that would have significantly limited SO 2 and NO x emissions from the power sector. EPA determined tha t by regulating mercury along with CAIR, significant mercury reductions would be achieved byair pollution controls designed to reduce

SO 2 and NO x . Id. at 28617.

The second phase established a mercury emissions cap at 15 tons per year, which exceeds the level achievable solely as a co-benefit of CAIR. Id. at 28619. By using an integrated planning

model that looked at the national and unit levels o f utility mercury emissions under different control scenarios, the EPA projected that sources w ould “install SCR [selective catalytic reduction] to meet their SO 2 and NO x requirements and take additional steps to address the remaining Hg [mercury] reduction requirements underCAA section 111, including adding Hgspecific control technologies (model applies ACI [a ctivated carbon injection]), additional scrubbers and SCR, dispatch changes, and coal switc hing.” Id. Further, “[u]nder the cap-andtrade approach,” the EPA projected “that Hg reducti ons result from units that are most cost effective to control, which enables those units tha t are not cost effective to install controls to use other approaches for compliance including buying al lowances, switching fuels, or making dispatch changes.” Id. Based on this analysis, the EPA determined that th e BSER “refers to the combination of the cap-and-trade mechanism and the technology needed to achieve the chosen cap level.” Id. at 28620. By basing the cap in part on the trading program, EPA set the Phase II cap at a level commensurate with widespread impleme ntation, including through dispatch changes; whereas if the cap were based solely on th e installation of control technologies, then the Phase II cap would not be cost-effective for the so urce category and the emission limit could not be justified.

Lastly, because the final rule limits the regulator y requirements to affected EGUs we do not

address commenters’ assertions that the rule includ es “sources which [the EPA] has no authority to regulate under Section 111.”

Comment 29: Commenters stated that power plant carbon dioxide emissions are not regulated as hazardous air pollutants under Clean Air Act Sectio n 112. Commenters explained that the104

Alabama Governor's Office and Dept. of Environmenta l Management ("the Administration") mistakenly contend that EPA is foreclosed from prom ulgating performance standards for power plant carbon dioxide emissions because power plant hazardous air pollutant emissions already are regulated under section 112. Commenters stated under the Administration's erroneous reading of the Clean Air Act, "[s]ection 111(d) exp ressly states that the EPA is prohibited from regulating any air pollutant emitted from an existi ng source category that is regulated under Section 112 of the Clean Air Act."(Galliher testimo ny, supra note 7, at 4) but this interpretation is not compelled by the language of the Act, its le gislative history, or by fundamental principles of statutory construction. Commenters stated to the contrary, the language, structure, and history of the Act support EPA's longstanding interpretatio n that the limitation in section 111(d) applies to hazardous air pollutants regulated under section 112, and not more broadly to the sources that emit both hazardous and non-hazardous air pollutant s. Commenters continued, stating that the text of section 111(d) does not compel the result t he Administration advocates. Commenters stated two separate versions of section 111(d) were enacted into law during the 1990 amendments to the Clean Air Act, explaining that th e House version prohibited using section 111(d) to set standards for existing sources regula ted under section 112.(See Brief of Respondent EPA, Part V, New Jersey v. EPA, 517 F.3d 574, 582 ( D.C. Cir. 2008), available at 2007 WL 2155494). In contrast, commenters explained, the Se nate version did not refer to sources regulated under section 112 at all. Commenters said that instead, it prohibited using section 111(d) to set standards for denominated hazardous a ir pollutants regulated under section 112.(Id.) Commenters stated that despite the differ ences between the two versions, both were included in the Statutes at Large and became part o f the Clean Air Act (Pub. L. No. 101-549, sections 108(g), 302(a)). Commenters stated that EP A has consistently and appropriately adopted
the Senate version of the 1990 amendment to section 111(d) to preclude regulation of existing sources only with respect to hazardous air pollutan ts emitted from a source category covered under section 112.(See, e.g., Brief of Respondent E PA, Part V, New Jersey v. EPA, 517 F.3d 574, 582 (D.C. Cir. 2008) ("The section 111(d) excl usion only extends to hazardous air pollutants"), available at 2007 WL2155494. In dicta , the D.C. Circuit Court of Appeals mistakenly characterized EPA as having conceded tha t section 111(d) precludes regulation of source categories regulated under section 112. New Jersey v. EPA, 517 F.3d at 582. The Court's observation was neither necessary to its decision n or was it accurate). Thus, commenters concluded, according to EPA's reasonable and unifor m interpretation, regulation of carbon dioxide emissions from power plants under section 1 11(d) is appropriate, even though power plant hazardous air pollutant emissions are covered under section 112. Commenters stated that EPA's interpretation is also appropriate under the House version of section 111(d), which requires, in pertinent part, that: "each State shal l submit to [EPA] a plan which (A) establishes standards of performance for any existing source fo r any air pollutant (i) for which air quality

criteria have not been issued or which is not inclu ded on a list published under section 7408(a) of this title or emitted from a source category which is regulated under section 7412 of this title." (42 U.S.C. section 7411(d)(1) (emphasis added)) Com menters remarked that it is true that the mandate of the statute is not entirely clear based on its terms, as it refers to any air pollutant as well as source categories of such air pollutants; t he Administration appears to have seized on this ambiguity. However, commenters continued, where, as here, Congress's intent is not clear on the105

face of a statute, EPA has discretion to interpret the statutory directives, and the agency's interpretation governs so long as it is reasonable (Chevron U.S.A. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 863 (1984)), and EPA's interpre tation of section 111(d) in the Clean Power Plan is both reasonable and consistent with the age ncy's prior construction of the statute. Commenters added that when interpreting a statute t hat is not clear based on its plain terms, it is appropriate to examine the legislative history to d iscern Congress' intent in enacting it. Commenters stated the legislative history for the 1 990 amendments to section 111(d) supports EPA's reasonable interpretation of the statutory pr ovision (The 1990 amendments to section 112 responded to the failure of the original risk-based approach in the 1970-version of section 112. S. Rep. No. 101-228, reprinted in 1990 U.S.C.C.A.N. 33 85, 3517. The 1990 amendments thus replaced the risk-based system with a technology-ba sed approach that seeks to protect public health by ensuring that all new sources of hazardou s air pollutants meet the same level of emission control that is achieved by the best-perfo rming sources for new sources, and the average level of emission control achieved by the t op-performers for existing sources. Id. at 3788-89). Commenters stated that well-established p rinciples of statutory construction further demonstrate the propriety of EPA's construction of these statutory provisions and offers the following reasons. Commenters stated first, EPA's i nterpretation of section 111(d) to limit regulation of hazardous air pollutants rather than source categories is a reasonable approach to harmonizing the House and Senate versions of the st atute (See Citizens to Save Spencer County v. EPA, 600 F.2d 844, 872 (D.C. Cir. 1979)). Commen ters stated that in instances such as this, where EPA is interpreting a jurisdictional provisio n of a statute it administers, Chevron deference is especially appropriate (See City of Ar lington v. FCC, 133 S. Ct. 1863, 1871 (2013)). Commenters stated EPA's interpretation of section 1 11(d) to authorize standards of performance for air pollutants that would otherwise remain unre gulated, while prohibiting duplicative regulation of hazardous air pollutants, is a "permi ssible construction of the statute" that should withstand review (Id. at 1874). Moreover, commenter s continued, stating the Administration's proffered interpretation of section 111(d) creates an unnecessary and undesirable Hobson's choice, in which EPA would be forced to decide betw een regulating categories of sources that emit hazardous air pollutants and regulating danger ous, non-hazardous air pollutants that are also emitted by those source categories. In fact, commen ters added, the Administration's approach would essentially nullify section 111(d). Given the long list of hazardous air pollutants in section 112(b), and the large numbers of source categories that emit them, commenters continued stating, it is hard to think of an air pollutant th at would fall within the scope of section 111 that is not also emitted by a source category subject to se ction 112 standards for hazardous air

emissions. Commenters stated that in contrast to th is untenable construction, EPA's interpretation construes the statute as a whole to give meaning an d effect to each provision (See FDA v. Brown and Williamson Tobacco Corp., 529 U.S. 120, 133 (20 00)). Finally, commenters concluded, the Administration's reading of section 111(d) would yi eld absurd results by rendering that section superfluous, explaining that here again, EPA's cons istently applied interpretation of section 111(d) reconciles a potential but avoidable conflic t in a manner that gives meaning and effect to all pertinent provisions(See, e.g., Appalachian Pow er Co. v. EPA, 249 F.3d 1032, 1041-42 (D.C. Cir. 2001) (affirming EPA's reconciliation of poten tially conflicting provisions of the Clean Air Act under the doctrine against producing absurd res ults)). Thus, commenters stated, the Mercury106

and Air Toxics standards promulgated under section 112 are not an impediment to EPA's proposal to establish standards of performance for emissions of non-hazardous greenhouse gases like carbon dioxide from existing coal-fired power plants.

Response 29: EPA agrees with these comments that the Section 112 Exclusion in section 111(d) is not properly read to preclude EPA from promulgat ing regulations addressing CO2 emissions from existing power plants under section 111(d). EP A’s discussion of this issue is in Section IV of the preamble.

Comment 30: Commenters stated Chevron addressed whether the EP A reasonably constructed the term 'stationary source' when it 'allow[ed] Sta tes to treat all of the pollution-emitting devices within the same industrial grouping as though they were encased within a single 'bubble'. Commenters said at issue was an EPA rule, intended to incorporate an amendment to the Clean Air Act, that allowed State[s] to adopt a plant-wid e definition of the term 'stationary source.'

Commenters stated in determining whether the EPA's definition was proper, the Supreme Court articulated a test for 'review[ing] an agency's con struction of the statute which it administers.' Commenters said first, the reviewing court must det ermine 'whether Congress has directly spoken to the precise question at issue.' If so, co mmenters added, the statute is unambiguous and both the agency and the court 'must give effect to the . . . expressed intent of Congress.' Commenters said Congressional intent can be discern ed from either the plain language of the statute in question or the statute's legislative hi story. Therefore, the commenters said it is necessary to scrutinize a statute's legislative his tory to determine whether the statute is unambiguous on a particular point. Commenters state d in Chevron, however, after looking to the statutory language as well as the legislative histo ry, the Court found that "Congress did not have a specific intention on the applicability of the 'b ubble' concept in these cases".

Commenters stated the Court then proceeded to the s econd part of the test. Commenters said the second step mandates that if 'Congress has not dire ctly addressed the precise question at issue' - in other words, 'if the statute is silent or ambigu ous with respect to the specific issue' - the court should determine 'whether the agency's answer is ba sed on a permissible construction of the statute.' Commenters stated the Court explained tha t '[i]f Congress has explicitly left a gap for the agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation. Commenters said such legislative regulations are given controlling weight unless they are arbitrary, capri cious, or manifestly contrary to the statute.' Commenters stated in other words, if Congress's int ent is unclear, the agency may exercise its authority in accordance with any reasonable underst anding of the statute.

Commenters said to determine what would be a reason able or permissible construction, a court looks to the purposes of and policies behind the st atute (or part of the statute at issue) and whether the agency's definition addresses competing interests. Commenters stated the Chevron Court found that EPA's 'definition is fully consist ent with one of [the] concerns . . . that motivated the enactment' of the amendment, and that'the Administrator's interpretation represents a reasonable accommodation of manifestly competing interests and is entitled to107

deference: the regulatory scheme is technical and c omplex, the agency considered the matter in a detailed and reasoned fashion, and the decision inv olves reconciling conflicting policies.' Therefore, the commenters said the Court held that "the EPA's definition of the term 'source' is a permissible construction of the statute."

Commenters stated in sum, Chevron requires that if congressional intent can be discerned from either the statute itself or the legislative histor y, the statute is unambiguous and an agency must follow Congress's intent. Commenters said if, howev er, Congress's intent cannot be determined either from a plain reading of the statute or the l egislative history (with the importance of legislative history being hotly debated), the statu te is ambiguous and the agency's reasonable interpretation must be honored, where the term 'rea sonable' is defined in accordance with the purposes and policies behind the statute in questio n.

Response 30: This part of the commenters’ comment does not requi re a response.

Comment 31: Commenters stated that the ESPS Proposal is prohib ited by the plain text of Section 111(d); EPA's interpretation of the Statute s at Large as providing a means to circumvent the plain text of Section 111(d) in the U.S. Code i s incorrect; a proper interpretation of the Statutes at Large shows that, as is reflected in th e plain text of the U.S. Code, EPA lacks authority to promulgate the ESPS Proposal; and EPA' s policy arguments for its interpretation of Section 111(d) are without merit. Commenters supported comments submitted by State of West Virginia, Office of the Attorney General.

Response 31: EPA disagrees that it may not promulgate regulation s addressing CO2 emissions from existing power plants under section 111(d). EP A’s discussion of this issue is in Section IV of the preamble.

Comment 32: Commenters stated Section 111(d) limits EPA's role to one of procedure. Commenters stated EPA may promulgate regulations to establish a "procedure" under which states submit implementation plans that establish s tandards of performance for existing sources subject to regulation under Section 111(d). Comment ers stated that however, the states, in developing their implementation plans, are the ones on whom Congress conferred authority to actually establish "standards of performance" for e xisting sources. See 42 U.S.C. section 7411(d)(1) (directing EPA to "prescribe regulations which shall establish a procedure . . . under

which each State shall submit to the Administrator a plan" that establishes standards of performance) (emphasis added). Commenters compared section 7411(b)(1)(B) (directing EPA to "establish[] Federal standards of performance for n ew sources" directly) (emphasis added). Commenters continued that the states are expressly authorized by the Clean Air Act to apply less stringent standards to individual sources or classe s of sources. 42 U.S.C. section 7411(d)(1). In so doing, commenters added, states -not the EPA- co nsider cost, practical achievability, a source's "remaining useful life," and other source- specific factors when applying these standards to particular sources. Id.; see also 40 C.F.R. sect ion 60.24(f). Commenters stated further that only when a state fails to submit a satisfactory im plementation plan that is, one that is unreasonable or fails to comport with the Act's sta tutory criteria is EPA authorized to perform its108

second function under 111(d)(2): directly prescribi ng binding standards for sources. See 42 U.S.C. section 7411(d)(2); see also 40 C.F.R. secti on 60.27(c)(3). Cf. Alaska Dept. of Envtl. Conservation v. EPA, 540 U.S. 461, 494 (2004) (ulti mate issue in Prevention of Significant Deterioration program is whether state agency's det erminations are "reasonable, in light of the statutory guides and the state administrative recor d"). Comments posited that EPA's proposal sets a mandatory, binding "goal" for each state, in the form of an emission rate for the state's entire power sector. Under EPA's proposal, commenters stat ed, once these "goals" are finalized, states will have no discretion to alter them. See, e.g., P roposal, 79 Fed. Reg. at 34,835 ("Once the final goals have been promulgated, a state would no longe r have an opportunity to request that the EPA adjust its CO2 goal."), 34,897-98 (rejecting st akeholder suggestion that states be allowed to quantify levels of emission reduction or otherwise treat EPA's goals "as advisory rather than binding"), 34,892 ("As promulgated in the final rul e following consideration of comments received, the interim and final goals will be bindi ng emission guidelines for state plans."). Commenters continued, stating that even if a state can demonstrate that it cannot meet EPA's projected emission reductions by implementing a particular aspect of the proposed "best system of emission reduction," EPA will not adjust the state's "goal" unless the state demonstrates that it cannot realize additional reductions from applying the other aspects of that "system" more aggressively, or from "related, comparable measures ." Id. at 34,893. Commenters stated the proposal thus violates Congress's unambiguously exp ressed intent in Section 111(d).

Commenters stated that as the states exercise their authority to appropriately adjust EPA's "guidelines" for certain sources and classes of sou rces, the sources across a given state may in the end collectively emit a substance at a greater or lesser rate. Commenters stated there is nothing unusual about this result, because before n ow EPA has properly restricted its 111(d) regulations to set guidelines for source emissions not total state emissions. Commenters continued, stating that EPA attempts to justify thi s by reference to the statutory definition of "standard of performance" as "a standard for emissi ons which reflects the degree of emission limitation achievable through the application of th e best system of emission reduction." 42 U.S.C. section 7411(a)(1) (emphasis added). Comment ers stated EPA reads "degree" to mean "portion," and offers the interpretation that "[t]h at degree or portion of the required emission performance level is, in effect, the portion of the state's obligation to limit its affected sources [aggregate, statewide] emissions that the state has assigned to each particular affected source." Proposal, 79 Fed. Reg. at 34,891. Commenters state d that the concept of a predetermined aggregate cap under which the state parcels out "po rtions" of its limitation obligation has no basis in the implementing regulations or EPA's pastpractice under 111(d), let alone in the Act itself. In essence, commenters concluded, here [rul e] treats each state as nothing more than a giant source of carbon dioxide, and imposes on each state binding, inflexible emission limits. Commenters stated the so-called "flexibility" offer ed to states here [rule] is no greater than the flexibility a regulated source always enjoys under the Clean Air Act, because individual sources

can devise alternative methods to reach emission le vels prescribed by EPA. See, e.g., 42 U.S.C. section 7411(b)(5), (h) (forbidding EPA to require installation of particular technological systems absent narrowly specified circumstances). C ommenters said that states are entitled to flexibility not only in procedural means but also i n substantive ends. Commenters stated EPA's proposal reverses this statutory scheme, promoting the agency to the role of setting binding,109

substantive standards in the first instance and rel egating the states to a ministerial, administrative role. In this, commenters stated, EPA claims the au thority to strip states of their statutory discretion to take account of their unique circumst ances, needs, and interests.

Response 32: We disagree. As we explain in section VIII.D of the final rule p reamble of the CPP, our emission guidelines provide the substantiv e criteria that are intended to govern the review of the Administrator’s review of state plans . The interim and final goals are intended to

reflect such substantive criteria.

Comment 33: Commenters stated if EPA can ever issue lawful Sec tion 111(d) rules regulating coal-fired power plants - that is, after first havi ng withdrawn its regulation of those power plants under Section 112, and then having issued lawful re gulations for new power plants under Section 111(b) - EPA still must adopt a wholly different ap proach to Section 111(d) regulation than the one it takes in the present proposal. Commenters st ated under this alternative, lawful approach, EPA would analyze the types of projects that could reduce greenhouse gas reduction at existing sources of coal-fired power plants by reference to Section 111's criteria, which considers such factors as cost and performance in arriving at guid elines about what emission rates are actually achievable as the "best system of emission reductio n" for various categories and subcategories of fossil-fuel-fired power plants. Commenters stated E PA has completed some of this work with its first "building block," efficiency improvements at power plants, but even that proposal is flawed because it overestimates the efficiency improvement s that are available at individual power plants by considering this matter on a statewide ba sis. Commenters stated under this lawful approach, states would then establish and apply sta ndards of performance to existing power plants, drawing on their local knowledge and consid ering the individual sources and classes of sources within their jurisdictions. Commenters stat ed this approach would honor the proper roles of the federal and state governments and result in performance standards that are appropriate for and achievable by regulated sources.

Response 33: We discuss our authority to promulgate this rule in section IV of the preamble. For

the reasons discussed in section V.A. and V.B. of t he preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and wi thin the scope of EPA’s authority in light of the statutory text, statutory context, statutory pu rpose, and legislative history.

Comment 34: Commenters stated EPA should honor the Act's core statutory limitations on its authority and formally determine that Section 111(d ) standards are not appropriate for fossil fuelfired power plants.

Response 34: As discussed elsewhere, section 111(d) provides the EPA with authority to regulate CO 2 from affected EGUs notwithstanding that EPA has re gulated emissions from those

sources under section 112.

Comment 35: Commenters stated EPA's authority under Section 11 1(d) is limited. Commenters continued, stating that EPA is empowered to "establ ish a procedure similar to that provided by [section 110 of the Act (8 42 U.S.C. section 7410)] under which each state shall submit to [EPA]110

a plan which "establishes standards of performance" for existing sources within the state (emphasis added).(9 42 U.S.C. section 7411(d)(1)) E PA can set substantive standards of performance only when a state fails to submit a "sa tisfactory" plan.(Id. section 7411(d)(2)(A).) Commenters stated the Act gives states, on the othe r hand, broad discretion to develop plans to implement section 111(d) standards of performance s ubject to a general requirement that the state's exercise of discretion be "satisfactory."(I d.) Commenters continued that for a plan to be satisfactory, it must include performance standards that are consistent with the definition of standard of performance in Section 111(a)(1), Id. s ection 7411(a)(1), and it must "provide[ ] for the implementation and enforcement" of the standard s, Id. U.S.C. sections 7411(d)(1)(B). Moreover, commenters added, EPA must permit the sta te in applying a standard "to take into consideration, among other factors, the remaining u seful life of the existing source to which the standard applies."(Id. Commenters comments on remai ning useful life here and in other sections of these comments address economic and practical op erational issues. Commenters also incorporated by reference the detailed comments pro vided by UARG on remaining useful life issues as identified from the Proposed Rule and the Oct. 28 Notice of Data Availability, Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units, 79 Fed. Reg. 64,543 (Oct. 30, 2014) (NODA).) Commen ters stated that apart from those statutory requirements, states have significant dis cretion to develop their plans, including discretion to adopt state plans that differ from EP A's emission guidelines.(See 40 C.F.R. - 60.24(f) (2014).) Commenters stated the regulations make clear, however, that in contrast to the "emission standards" that states adopt, EPA's emiss ion guidelines are not "legally enforceable."(State Plans for the Control of Certai n Pollutants from Existing Facilities, 40 Fed. Reg. 53,340, 53,341 (Nov. 17, 1975).) Instead, comm enters stated, EPA's emission guidelines are "only criteria for judging the adequacy of Stat e plans."(Id. at 53,343.) Thus, commenters concluded, the EPA cannot prescribe to states a sta ndard of performance. Commenters added, the binding state emission rates in the Proposal do pre cisely that.

Response 35: As we explain in section VIII.D of the final rule p reamble of the CPP, our emission guidelines provide the substantive criteri a that are intended to govern the review of the Administrator’s review of state plans. The interim and final goals are intended to reflect such

substantive criteria.

Comment 36: Commenters stated that EPA does not have the autho rity to disregard the Clean Air Act's basic structure and eliminate the primacyand the discretion Congress afforded to the states in implementing any binding emission standar ds under Section 111(d). Commenters stated that while touting the flexibility available to sta tes, EPA provides only a bare bones description of how states might develop "satisfactory" plans to implement Section 111(d) requirements for existing EGUs. Commenters added that this approach, which leaves states without sufficient guidance on many practical matters, also obscures t he fact that the Proposed Rule would, in reality, improperly constrain state discretion unde r Section 111(d).

Response 36: We disagree with this comment. Section VIII. of the preamble for this rule provides more detailed guidance to the states. For the reasons discussed elsewhere, this rule does not improperly constrain state discretion.111

Comment 37: Commenters stated EPA does not have authority for the proposed beyond-thefence-line approach, lacking the legal authority un der the CAA to implement Building Blocks 2- 4. Under Section 111(d)(2), EPA must develop an imp lementation plan to achieve the emission reduction targets in the event that a State fails t o submit an implementation plan or submits a plan that EPA deems unsatisfactory. 42 U.S.C. - 741 1(d)(2). Commenters stated that however, as a federal agency, EPA has limited regulatory author ity and can only exercise the power that has been delegated to it by Congress. See North Carolin a v. EPA, 531 F.3d 896, 922 (D.C. Cir. 2008) ('Lest EPA forget, it is 'a creature of statu te,' and has 'only those authorities conferred upon it by Congress'; 'if there is no statute conferring authority, a federal agency has none.' "(quoting Michigan, 268 F.3d at 1081)). Commenters concluded it is not enough for EPA to outline a plan showing how CO2 emissions from the electricity sect or might be reduced. Commenters stated EPA must also demonstrate that it has the legal aut hority to implement the specific emission

reduction measures that it identifies. Commenters s tated EPA cannot do so here. Commenters stated while the CAA gives EPA authority to impose emission reduction obligations on affected EGUs that are part of the regulated source category , it does not give EPA authority to implement

the emission reductions that would be achieved thro ugh the other Building Blocks. Specifically, commenters stated, EPA lacks authority to make disp atching decisions for a States' EGUs, to mandate the continued operation of nuclear faciliti es, to impose state-specific RPS programs, or to impose demand-side energy efficiency requirement s on electricity consumers. Because, as EPA acknowledges, commenters added, some combinatio n of these actions are necessary to achieve each States' emission reduction target, it is clear that EPA lacks the legal authority to develop an implementation plan that can achieve the proposed standards of performance. Thus, to comply with its obligations under Section 111, c ommenters added, EPA must withdraw the rule and propose alternative emission reduction goa ls that can be achieved through emission reductions that EPA has the legal authority to impl ement. Nor, commenters added, can EPA rely on the more expansive authority retained by States as a means of achieving the proposed emission reduction targets. Commenters stated first , and most fundamentally, there is no guarantee that each State will submit an implementa tion plan, let alone one that EPA deems satisfactory. Given the complexities in EPA's propo sal, commenters stated there is a significant

likelihood that States will not be able to submit s atisfactory implementation plans within the proposed time frames. Likewise, commenters stated g iven the controversial nature of this rule, it is possible that some States may simply refuse to p repare an implementation plan at all. Under either scenario, commenters stated EPA has a statut ory obligation to establish standards of performance and a federal implementation plan and, therefore, must design emission reduction targets that it is capable of implementing. Comment ers stated second, EPA cannot use the CAA to require States to adopt implementation plans tha t include provisions that EPA lacks authority to impose. See North Carolina, 531 F.3d at 922 (EPA cannot require States to have SIP provisions mandating the retirement of Title IV tra ding allowances when EPA lacks the authority to terminate or limit such allowances). Commenters concluded that even if the States do have the authority to implement Building Blocks 2-4, EPA can not use the NSPS program to commandeer the States' authority by requiring them to do so.112

Commenters stated, in the context of the NODA, EPA identifies comments and related issues that could have the effect of magnifying the concer ns implicated by the Proposed Rule, virtually ensuring that the ultimate standards would (a) not meet the statutory requirement that the standards reflect demonstrated technology, (b) elim inate the flexibility necessary in the development of state plans, and (c) dissociate the regulation from EPA's underlying statutory authority. Commenters said the NODA seeks comment o n the opportunity for the displacement of fossil generation by RE and EE in a manner that could materially reduce certain state emission goals. Commenters said any such suggestion ignores the statutory concepts underlying section 111(d) that require Emission Guidelines to reflect the BSER that has been adequately demonstrated for the category of regulated sources. Commenters said theoretical implications for fossil generation are wholly unsupported by the rec ord established by EPA in support of the Proposed Rule, and contrary to available facts fromthe energy sector. Commenters said for these reasons, the suggestion through the NODA of further reducing state targets by effectively requiring RE sources and EE to reduce fossil genera tion cannot be reconciled with the statutory directive that a system of emission reduction upon which the emission guidelines are based must be adequately demonstrated. Commenters said relianc e on such theoretical displacement would all but eliminate any flexibility otherwise availab le to states in developing state plans because there can be no alternative compliance measures suf ficient to achieve the required state level
targets.

Response 37: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

As we explain in sections V.A. and V.B. of the prea mble, our emission guidelines simply reflect an achievable emissions limit through the applicati on of the BSER and do not in themselves require states or sources to implement the BSER. Th at is, EPA is responsible for determining the level of emission limitation from the source catego ry, while states have the responsibility of assigning emission requirements to their sources th at will ensure their achievement of that level of emission limitation. States may fulfil their res ponsibility by establishing emission standards or creating plans consistent with the guidelines. In d oing so, states will be able to choose from a wide range of emission reduction measures, includin g measures that are not part of the BSER.

EPA is not finalizing the proposed “portfolio” appr oach, and will not accept state plans that attempt to impose emission standards or other CAA c ompliance obligations on entities other than affected EGUs. The state measures approach provides a path for a state to achieve the emission performance level as expressed as a state goal in a way that avoids placing enforceable emission standards on affected EGUs (unless and until the ba ckstop is triggered). States will have a wide range of flexibility in choosing how to demonstrate their affected EGUs are meeting a state goal.

Comment 38: Commenters stated that even if EPA possessed the r equisite statutory authority, the agency lacks the utility industry expertise to successfully remake an entire industry in its113

preferred image. Commenters added that EPA's minima l coordination with FERC,(FERC cannot supply the missing jurisdiction as it is barred by statute from ordering any entity to construct a generator or from intruding into matters reserved f or the states. 16 U.S.C. Section 824(a)-(b); see, e.g., Elec. Power Supply Ass'n v. FERC, 753 F. 3d 216, 224 (D.C. Cir. 2014); Conn. Dep't of Pub. Util. v. FERC, 569 F.3d 477, 481 (D.C. Cir. 20 09); Transmission Access Policy Study Grp. v. FERC, 225 F.3d 667, 718 (D.C. Cir. 2000) which d oes regulate the wholesale power industry,

has been insufficient to craft a rule that will ach ieve its goals while ensuring continued electric reliability.

Response 38: The EPA disagrees with this comment. The EPA explai ns in the preamble for this rule why it is acting within its statutory and is n ot attempting to remake an entire industry in its preferred image, along with the substantial consult ations it has had with FERC and others concerning reliability and other matters concerning the industry. For a more comprehensive discussion of reliability issues, please see preamb le section VIII.G.2.

Comment 39: Commenters stated in its Proposed Rule, the EPA ha s far exceeded its statutory authority granted by Congress in regulating existin g source emissions under Section 111(d) of

the CAA. Commenters said the EPA claims that Sectio n 111(d) provides the necessary authority for it to promulgate the Proposed Rule, but this is plainly erroneous. Commenters stated Section 111(d)'s plain language does not provide the EPA authority for the Proposed Rule and its accompanying interpretation of BSER and drastic eff ect on the nation's electric power generation system but instead Section 111(d) clearly prohibits the EPA's proposal. Commenters stated in its grant of authority, Congress has clearly and succin ctly outlined the EPA's authority to regulate emissions from existing sources. Commenters said fi rst, the EPA must establish performance standards regulating CO2 emissions from new units i n the source category before it may establish performance standards regulating existing sources in the same source category under Section 111(d). Commenters said additionally, in th is case, the EPA may not regulate coal-fired EGUs under the Proposed Rule because the EPA is pro hibited by Section 111(d) from regulating source categories that are already regulated under Section 112. Commenters stated when reviewing whether an agency's interpretation of a s tatute and its authority under the statute is valid, courts apply the framework from Chevron, U.S.A. v. NRDC , 467 U.S. 837, 842-43 (1984). Commenters said the courts will apply Chevron's fam iliar framework to determine if Congress has spoken to the specific issue at hand or whether the statute is ambiguous or silent on the question at issue and if that is the product of an implicit delegation of interpretative authority to the agency. United States v. Mead Corp. , 553 U.S. 218, 226-27 (2001). Commenters stated th at despite the EPA's best effort, under Chevron , the EPA's interpretation of Congressional languag e and the EPA's self-proclaimed authority under Secti on 111(d) should not be granted deference.

Response 39: We disagree with this comment. We discuss in the pr eamble for this rule the timing of promulgation for a section 111(b) rule to serve as a predicate for a section 111(d) rule, the reasons why we have authority to promulgate thi s rule notwithstanding the fact that we have previously promulgated a rule under CAA section 112 for affected EGUs.114

Comment 40: Commenters stated that 1) EPA has never (validly) set section 111(d) requirements as anything other than specific emissi on rates for narrowly defined designated facilities; 2) even had that approach been validate d, still it would have compelled no more than source-by-source compliance with adjusted BSER: The rule, in effect, amalgamated the BSER performance of the designated facilities only; and 3) the "other grounds" on which the D.C. Circuit vacated CAMR was its holding that mercury ( a pervasive HAP) should have been regulated under section 112, not section 111(d). An d so as in New Jersey, commenters concluded, EPA appears to have detoured into sectio n 111 by misreading the statutory map,

which directs EPA instead to use sections 108-110 i f and as appropriate to deal with pervasive air pollutants emitted from "numerous and diverse m obile and stationary sources." Commenters added that never before has EPA used Section 111(d) for a ubiquitous pollutant. Its previous uses over the last forty years have been directed at pol lutants emitted by a few specialized industries (such as fluorides and landfill gases).

Response 40: We disagree. We discuss our authority to promulgate this rule in section IV of the preamble. For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reaso nable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

Comment 41: Commenters urged EPA to reconsider the scope of it s authority under Section 111(d)

Response 41: The preamble and other supporting documents for thi s rule reflect our careful consideration of the scope of authority under secti on 111(d) and the implications of this rule for states such as Kentucky that rely on coal-fired gen eration equipped with the latest pollution control technology.

Comment 42: Commenters stated the limited scope of section 111 is confirmed by comparing that provision to other sections of the Act. Commen ters said where Congress has established other programs to create standards for new and exis ting sources, it has required that those standards apply on a source-by-source basis. Commen ters stated this is true for hazardous air pollutants regulated under section 112 of the Act, for visibility-impairing pollutants regulated pursuant to the BART provisions of the regional haz e program, and it is true of the CAA's prevention of significant deterioration program, wh ich requires new and modified sources to install "best available control technology" (BACT). Commenters stated not only do these programs all apply on a source-by-source basis, the y cannot require suspension or curtailment of operation.

Response 42: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

Comment 43: Commenters said where Congress has authorized broa der programs that do not rely on source-specific standards, it has spoken cl early and in ways that fundamentally differ115

from the approach it took in section 111. Commenter s stated the Title IV acid rain program, for instance, created a cap-and-trade program for sulfu r dioxide emissions that included express directions as to how sources could comply with the program's avoided emission and renewable and efficiency-based emission reduction requirement s. Commenters said similarly, the Act's NAAQS program requires EPA to set general standards to protect human health and the environment and expressly authorizes states to impo se any measures needed to achieve those

standards. Commenters stated Section 111 contains n othing like the broad authorizations that characterize Title IV or the NAAQS provisions of th e Act.

Response 43: We disagree. For the reasons discussed in section V .A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history.

Comment 44: Commenters stated the CAA gives states, not the EP A, the authority to impose standards of performance under 111(d). Commenters s tated the EPA's regulatory authority under CAA section 111(d) is limited to "establishing proc edures" by which States establish standards of performance for existing sources. Commenters sai d this stands in stark contrast to CAA section 111(b), where the Administrator was giv en express authority to promulgate substantive standards of performance for new source s. Commenters said the EPA's authority to prescribe a plan that establishes standards of perf ormance is limited to situations where a state fails to submit a satisfactory plan to EPA. Comment ers stated by proposing binding state emission rate targets, the EPA is usurping the Stat es' authority, violating the cooperative federalism principles on which the CAA is based, an d raising serious questions regarding state sovereignty under the 10th Amendment. Commenters st ated by attempting to regulate electricity generation, including nuclear generation and renewable portfolio standards; electricity dispatching; and electricity consumers, the EPA is unlawfully exercising authority given to the

States in the Federal Power Act.

Response 44: We disagree with these comments. We have responded to each of them in the preamble for this rule. The EPA also disagrees with these commenters’ assertions that this action violates or even encroaches upon the federal-state balances embodied in either the U.S.

Constitution or the Clean Air Act. As discussed in the response in the above response in section 1.2 on cooperative federalism, and also in the Lega l Memorandum sections VIII and X, this rule

is consistent with the traditional balance of feder al-state authority under the CAA and

Constitution.

Comment 45: Commenters stated to the extent that the EPA's regu lations purport to give the agency broad authority to set binding emissions tar gets, those regulations are inconsistent with the plain meaning of CAA section 111(d) and, theref ore, unlawful. Commenters said because the vast majority of the Associations' members have nev er been subject to regulation under CAA section 111(d), they have not previously been i njured by the EPA's CAA section 111(d) regulations and have had no opportunity to challeng e them.116

Response 45: We disagree with this comment concerning our author ity. While we are not reopening the 1975 regulations, in response to commen ts, we explain in the preamble why they give the EPA broad authority to determine the BSER and, based on that, statewide emission

limitations for sources in the state.

Comment 46: Commenters stated EPA falls back in its Legal Memo randum to an erroneous prior analysis that the Agency conducted in 2005, i n which it concluded that Section 111(d) is actually "ambiguous" and therefore subject to the a gency's "reasonable" interpretation. Mem. 8, 26. Commenters explained that 2005 analysis which w as part of a rule under Section 111(d) that the D.C. Circuit vacated in New Jersey v. EPA, 517 F.3d 574 based its conclusion entirely upon a clerical entry in the 1990 Amendments to the Clea n Air Act that was not codified in the U.S. Code but appears in the Statutes at Large. Accordin g to EPA, commenters added, the 1990

Amendments included two entries relevant to Section 111(d), and both entries appear in the Statutes at Large, but only the first amendment des cribed by EPA as the "substantive" one was incorporated into the U.S. Code, and EPA argues tha t the mere existence of the second, clerical amendment creates an ambiguity sufficient to call i nto doubt the language of Section 111(d) in the U.S. Code. Commenters believed EPA's attempt to displace the plain terms of Section 111(d) was wrong in 2005 and remains so today. Commenters described why they believe the clerical "Drafting Error" in the 1990 Clean Air Act Amendmen ts does not create an ambiguity in the terms of Section 111(d). They explain that the one- sentence clerical entry referred to by EPA falls far short of the showing necessary to cast do ubt on the plain terms of Section 111(d) as they appear in the U.S. Code. Commenters stated the "Cod e of Laws of the United States current at any time shall . . . establish prima facie the laws of the United States." l U.S.C. 204(a). Commenters stated as "prima facie" evidence, the la nguage of Section 111(d) in the U.S. Code is displaced only where the U.S. Code is "inconsistent " with the Statutes at Large. [See Stephan v. United States, 319 U.S. 423, 426 (1943).], and ther e is no inconsistency here. Commenters

continued that a review of the two relevant entries in the Statutes at Large reveals that the clerical entry does not create an ambiguity or inco nsistency, but rather is - as even EPA has admitted - a "drafting error [that] should not be c onsidered." [70 Fed. Reg. at 16,031.] Commenters stated that the first relevant entry app ears in the Statutes at Large among a list of other entries making substantive amendments to Sect ion 111 prior to these amendments in 1990, Section 111(d) had prohibited EPA from requiring st ate-by-state regulation of any air pollutant on the list of HAPs published under Section 112(b)( 1 )(A); this particular amendment made a significant substantive change by replacing the ref erence to "112(b)(1)(A)" with the language that now appears in the U.S. Code emitted from a so urce category which is regulated under section 112." Pub. L. No. 101-549, 108(g), 104 Stat . 2399, 2467 (1990); and as a result, the restriction in Section 111(d) changed from one focu sed on HAPs regulated under Section 112 to one focused instead on source categories regulated under that section. Commenters continued that the second relevant entry appears much later i n the Statutes at Large among a list of purely clerical changes entitled "Conforming Amendments." (Pub, L. No. 101-549, 302(a), 104 Stat. 2399, 2474 1990). Commenters cited the Senate's Leg islative Drafting Manual, stating the "Conforming Amendment[s]" are "amendment[s] of a pr ovision of law that [are] necessitated by the substantive amendments or provisions of the bil l." Senate Legislative Drafting Manual117

126(h)(2)(A); they effectuate the sorts of minister ial changes required to clean up a statute after it has been substantively amended; and thus, confor ming amendments "include[] amendments, such as amendments to the table of contents, that f ormerly may have been designated as clerical

amendments." Id. Commenters continued that consiste nt with its description as a conforming amendment, this particular entry sought simply to b ring up to date the cross-reference in Section 111(d) to Section 112(b)(1)(A); other amendments to the Clean Air Act in 1990 had eliminated Section 112(b)(1)(A) entirely and replaced it with Sections 112(b)(1), 112(b)(2), and 112(b)(3).

Commenters contended that this clerical amendment w as designed solely to account for those changes, and specifically, it provided that "Sectio n 111(d)(1) of the Clean Air Act is amended by striking '[112](b)(1)(A)' and inserting in lieu the reof '[112](b)." Pub. L. No. 101-549. 302(a).

Commenters concluded that unlike the substantive am endment described above, this nonsubstantive amendment would not have changed the re striction in Section 111(d) from its pre1990 focus on hazardous air pollutants regulated un der Section 112. Commenters continued, stating that in light of the substantive amendment, however, the second non-substantive amendment was clearly an unnecessary mistake or, as EPA has put it, a "drafting error", and when the conforming amendment is applied after the substantive amendment, as is required by the very nature of conforming amendments, there is no clerical correction left to make because the cross-reference to 112(b)(1)(A) has already bee n removed by the substantive amendment.

Commenters stated that this is consistent with the codifier's notation in the U.S. Code that the clerical amendment "could not be executed," Revisor 's Note, 42 U.S.C. 7411. Commenters concluded that where a conforming amendment is enti rely unnecessary, it is rightly understood as a clerical mistake that need not be given any ef fect. See Am, Petroleum Inst. v. SEC, 714 F.3d 1329, 1336-37 (D.C. Cir. 2013). Commenters posited that EPA has correctly recognized as much, - noting in 2005, for example, that the cleri cal entry "is a drafting error and therefore should not be considered" - but it then wrongly det ermined that it nevertheless "must attempt to give effect to both the [substantive] and [clerical ] [entries], as they are both part of the current law." 70 Fed. Reg. at 16,031; accord Mem. 21 (recog nizing "apparent drafting errors during enactment of the 1990 CAA Amendments"). Commenters stated this is a fundamental flaw impacting EPA's analysis. As the D.C. Circuit recen tly explained, commenters continued, where a mistake in renumbering a statute and correcting a cross-reference conflicts with substantive provisions of that statute, the mistake should be c onsidered most likely "the result of a scrivener's error" and should not be treated as "creating an am biguity." Am. Petroleum, 714 F.3d at 1336-37, and under this reasoning, commenters stated it is c lear that the clerical entry simply "should not be considered," as EPA originally concluded. 70 Fed . Reg. at 16,031. At the very minimum,

commenters stated the existence of such a non-subst antive, "drafting error" is not enough to overcome the fact that language codified in the U.S . Code is "prima facie" evidence of "the laws of the United States." I U.S.C. 204(a). Commenters stated that EPA asserts that the nonsubstantive and substantive amendments-- if each we re implemented into Section 111(d)'s prior text standing alone - would create two separate ver sions of Section 111(d). Mem. 24. Commenters explained that the first version incorpo rates only the non-substantive amendment and, therefore, retains the pre-1990 prohibition on regulating HAPs under Section 111(d), regardless of whether the source category emitting those HAPs is regulated under Section 112, and the second version is the one that actually app ears in the U.S. Code and substantively118

changes the prohibition to forbidding EPA from regu lating under Section 111(d) any air pollutants emitted by any existing source regulated under Section 112. Mem. 24. Commenters argued that this approach of treating both amendmen ts as, in effect, creating two different version of 111(d) directly contradicts EPA's conces sion that the inclusion of the non-substantive entry in the Statutes at Large was merely a clerica l "drafting error." Commenters stated that critically, the only evidence EPA may use in its at tempt to rebut the terms of Section 111(d) as expressed in the U.S. Code is the Statutes at Large , see Stephan, 319 U.S. at 426, and the Statutes at Large simply do not reflect two separat e versions of Section 111(d). Rather, commenters argued these reflect only two amendments - one a substantive change and one a mere clerical entry - and the clerical entry is ren dered moot by the substantive amendment.

Commenters added that EPA's final conclusion from i ts line of reasoning is not sound, explaining that EPA erroneously concludes that sinc e the Senate language was included in the final bill even if by mistake, the Agency must "con sider" that language. Commenters continued that as seen, however, EPA is free-indeed, is compe lled-to disregard the Senate language precisely because it was a "drafting error."(66 Am. Petroleum Inst., 714 F.3d at 1336-37) In any event, commenters remarked, EPA did not realize tha t it could have given both the House and Senate language meaning in the manner posited by th e Federalist Society paper without eviscerating the House language, and in sum, EPA ca nnot manufacture ambiguity where it does not exist, it cannot invent meaning for statutory t ext which is not based on the text itself, and EPA does not have authority to regulate EGU emissio ns of CO2 under Section 111(d).

Commenters stated that EPA's policy arguments creat e no ambiguity in Section 111(d), explaining that EPA's policy arguments against the "literal" terms of Section 111(d) also cannot generate an ambiguity where none exists in the plai n statutory text. Commenters explained that as a threshold matter, even if EPA were correct, th e "literal" terms of Section 111(d) produce overly harsh results for EPA's regulatory authority , and EPA may not "redraft a statute in order to avoid what the agency characterized as the 'absu rd results' that would flow from the statute's language" where it is, as here, "not inconceivable that Congress meant what the statute says." Assn of Am. RRs, V. Surface Tramp, Rd, 162 F.3d 101 , 105 (D.C. Cir. 1998) (quoting Mova Pharmaceutical Corp. v. Shalala, 140 F.3d 1060, 107 2 (D.C. Cir. 1998)). Commenters concluded that EPA's policy arguments miss the mark because t he "literal" terms of Section 111(d) are part of a rational regulatory scheme. Commenters continu ed that this regime avoids subjecting existing sources to both new national standards forhazardous pollutants under Section 112 as well as new state-by-state standards under Section 111, while permitting regulation under both

Section 111 and Section 112 of new sources. Unlike with new sources, commenters explained, the imposition of additional regulatory burdens on existing sources raises questions of fairness and lost investments, as existing sources that were built under a different regulatory regime may or may not have the technological or financial abil ity to come into compliance with two sets of new rules, and both Sections 112 and 111(d) recogni ze that the cost of compliance must be weighed against maximum achievable reductions. See 42 U.S.C. 741 i(a)(l), 7411(d), 7412(d). In establishing this regime, under which regulation of existing sources occurs either under Section 112 or Section 111(d), commenters contended that Co ngress properly determined that requiring119

the same existing source categories to comply with two functionally-independent regulatory regimes would threaten these sources' economic viab ility, and cites EPA's recent regulations on coal-fired power plants which will cost those plant s more than $9 billion dollars per year, See EPA, Regulatory Impact Analysis for the Final Mercu ry and Air Toxics Standards at 3-13 (Dec. 2011). Commenters stated that the Proposed Rule wou ld subject those same plants to billions of dollars of additional costs, through the imposition of duplicative regulatory requirements, forcing many of those plants to close, and that is the exac t scenario Congress intended to avoid when it amended Section 111(d). Commenters closed, stating that in light of this understanding, EPA's policy arguments in favor of ignoring Section 111(d )'s plain language are insubstantial, EPA first claims that a "literal reading" of Section 111(d) w ould be contrary to "Congress' desire in the 1990 CAA Amendments to require EPA to regulate more substances." Mem. 25-26. Commenters argued that the mere fact that one of the broad pur poses behind the 1990 Amendments was to require EPA to regulate more substances under Secti on 112 does not mean that Congress was not cognizant of other values, such as the need to avoi d costly double regulation, and - as EPA stated in its 2005 analysis - the text, structure, and his tory of the 1990 Amendments indicates a desire by Congress to limit EPA's ability to doubly regula te coal-fired power plants. The discussion and ultimate adoption of Section 112(n)(1)(A) "reveals" that Congress did not want to subject coalfired power plants to "duplicative or otherwise ine fficient regulation." 70 Fed. Reg. at 15,999.

Commenters stated it is reasonable to understand Se ction 111(d) as seeking to forward this same general goal of avoiding duplicative regulation.

Commenters stated EPA's effort to resolve the ambig uity is impermissible, explaining that even if the clerical error created an ambiguity in Secti on 111(d)'s "literal" text, EPA's analysis would still fail. Commenters argued that the Agency's cla im to some form of "deference" for its attempt to rewrite Section 111(d) is meritless, Mem. 12, ex plaining that courts defer to agencies under the test set forth in Chevron USA., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), because there is reason to believe that when Congress "left ambiguity in a statute," it "understood that the ambiguity would be resolved, f irst and foremost, by the agency, and desired the agency (rather than the courts) to possess what ever degree of discretion the ambiguity allows." Smiley v, Citibank (South Dakota, NA., 517 U.S. 735, 740-741 (1996). Commenters stated that EPA could not argue that Congress inten ded EPA to resolve the import of Congress's inadvertent clerical "drafting error", and EPA does not so argue. Commenters stated that EPA offers no justification for its assertion that it i s entitled to deference on this issue, and does not

cite to Chevron in its discussion of the issue. Com menters continued that EPA could not prevail

under some other similar form of deference because it offers an "impermissible construction" of the supposedly ambiguous statute. Aid Ass'n for Lut herans v, US Postal Serv., 321 F.3d 1166, 1178 (D.C. Cir. 2003). Commenters argued that EPA's interpretation of Section 111(d) as follows: "Where a source category is regulated unde r Section 112, a Section 111(d) standard of performance cannot be established to address any HA Ps listed under section 112(b) that may be emitted from that particular source category" Mein. 26. is inconsistent with the substantive provision embodied in the U.S. Code, that EPA may n ot "establish[] standards of performance for any existing source for any air pollutant emitt ed from a source category which is regulated under [Section 112 of the CAA]." 42 U.S.C. 7411(d) (emphasis added). Commenters stated that120

EPA's proffered interpretation effectively replaces the term 'any air pollutant" with the term "hazardous air pollutant." Commenters cited in Chev ron that an agency is not entitled to deference when its interpretation is so "manifestly contrary to the statute." Mayo Found, for Med. Eluc. & Research v. United States, 131 S. Ct. 704, 711 (2011); accord Petit v. U.S. Dept. of Educ., 675 F.3d 769, 785 (D.C. Cir. 2012). Commente rs closed, stating that if EPA wanted to give effect to its view of both the substantive and the clerical entries in the Statutes at Large - which, as explained above, EPA claims create two ve rsions of Section 111(d) - without impermissibly changing the text of either, it could have done so. Commenters stated one commentator has explained, all of EPA's textual con cerns could be satisfied by interpreting Section 111(d) to prohibit the regulation of "any a ir pollutant ... which is not included on a list published under ...112(b) [revision of the prior ve rsion of Section 111(d) after inputting the clerical entry] or emitted from a source category w hich is regulated under section 112 [revision of the prior version of Section 111(d) after inputt ing the substantive entry]." [William J. Haun,

The Clean Air Act as an Obstacle to the Environment al Protection Agency s Anticipated Attempt to Regulate Greenhouse Gas Emissions from Existing Power Plants, 14 Engage: J. Federalist Soc'y Prac. Groups 35, 38 (Mar. 2013) (parenthetica ls revised).] Commenters stated EPA does not and could not dispute that this is the only int erpretation that gives full effect and meaning to every word of both "versions" of Section 111(d) tha t it believes the Statutes at Large embodies. Accordingly, commenters stated, to the extent EPA c ontinues to reject the position that the nonsubstantive entry must be discarded as an inadverte nt "scrivener's error[]"(see Am. Petroleum, 714 F.3d at 1337) the agency is to adopt this alter native interpretation. Commenters stated that EPA's refusal to advance or acknowledge this altern ative is unsurprising because under this approach, the Proposed Rule would still be unlawful and under this alternative interpretation, EPA would be prohibited from using Section 111 (d) both: (1) to require regulation of any HAP listed in Section 112(b), regardless of whether the HAP is being emitted from a source regulated under Section 112; and (2) to require regulation of any pollutant emitted from a source category that is regulated under Section 112. Commenters sta ted even under this alternative reading EPA still cannot rely on Section 111(d) as a basis for the Proposed Rule because of the regulatory

scheme established under Section 112.

Commenters stated EPA's only legal justification fo r departing from the Clean Air Act's "literal" text is based upon what EPA has admitted was "a dra fting error," see 70 Fed. Reg. 15,994, 16,031 (Mar. 29, 2005), which was properly excluded from the U.S. Code. Specifically, commenters stated, EPA claims that a single clerica l entry in the 1990 Amendments to the Clean Air Act somehow renders the plain text of the Act a mbiguous and thus permits EPA to regulate. Mem. at 25-27. Commenters stated this argument cann ot withstand scrutiny. Commenters stated the clerical entry upon which EPA bases its entire rule was a non-substantive "conforming amendment," which was erroneously included in the 1 990 Amendments to update a crossreference to Section 112, tracking the rearrangemen t of that section elsewhere in the
Amendments. Commenters stated the 1990 Amendments a lso fundamentally altered Section 111(d) and, in doing so, made the "conforming amend ment" impossible to execute. Unsurprisingly, commenters stated EPA has not cited a single decision, from any area of law, giving any meaning to a clerical change that was re ndered moot by a substantive amendment.121

See Mem. at 26-27. To the contrary, commenters stat ed controlling caselaw provides that where a mistake in renumbering a statute and correcting a cross-reference conflicts with a substantive change, the mistake should not be considered when c onstruing the substantive provision. See, e.g., Am. Petroleum Inst. v. SEC, 714 F.3d 1329, 13 36-37 (D.C. Cir. 2013).

Commenters stated that the Legal Memorandum asserts that the inclusion of two conflicting amendments creates an ambiguity such that the agenc y is permitted to "reasonably construe the Section 112 Exclusion to authorize the regulation o f GHGs under section 111(d)." (See Legal Memorandum at (See National Emission Standards for Hazardous Air Pollutants From Coal- and Oil-Fired Electric Utility Steam Generating Units a nd Standards of Performance for Fossil-FuelFired Electric Utility, Industrial-Commercial-Insti tutional, and Small Industrial-CommercialInstitutional Steam Generating Units, 77 Fed. Reg. 9,304 (Feb. 16, 2012)) Commenters continued, stating that EPA's confidence that both amendments must be given legal effect is misplaced, explaining that while substantive confli cts within a statute should be harmonized, it is not clear that both the amendment in section 108(g) and the amendment in section 302(a) are substantive. Further, commenters stated that the am endment originating in the House is
contained in section 108 of the 1990 Amendments wit h a collection of substantive amendments titled "Miscellaneous Provisions", and that this is contrasted to section 109, which is titled "Conforming Amendments." Commenters stated that the amendment originating in the Senate is contained at section 302, titled "Conforming Amendm ents", and a mere conforming amendment does not have true substantive effect, and so it sh ould not be given equal weight to the clearly

substantive amendment at section 108. Commenters ad ded that the reading giving effect to only the House amendment is, in fact, supported by EPA's initial interpretation of this statutory issue years ago. Commenters stated that in 1994, in a sup porting document on regulation of Municipal Solid Waste Landfills under section 111(d), EPA had its first opportunity to interpret the amendments and determined that "section 108(g) is t he correct amendment" (EPA, Air Emissions from Municipal Solid Waste Landfills - Ba ckground Information for Final Standards and Guidelines, Pub. No. EPA-453/R-94-021, at 1-5 ( 1994).) Commenters remarked that the Agency reasoned that section 302(a) was intended me rely as a "simple substitution of one subsection citation for another, without considerat ion of other amendments of the section." (Id.) In other words, commenters said EPA prioritized the section 108(g) amendment over the section 302(a) amendment. However, commenters stated even i f the appropriate treatment of two amendments to the same section is to attempt to rea d them together, it is also not clear that EPA's reading is reasonable. Commenters stated each amend ment could be read as intended to place a specific limit on the scope of section 111(d). When read together, therefore, commenters stated it is only reasonable that they should each be viewed as placing independent limits on section 111(d). Commenters stated the reading advanced by t he Agency, however, reads the two amendments together to expand the scope of section 111(d) beyond what either of the individual amendments would have allowed individually. Comment ers stated that, in short, EPA reads the amendments in such a way that if a pollutant is on the section 112 pollutant list and the relevant category is regulated under section 112 that only t hen will the Section 112 Exclusion apply, and Congress quite clearly did not intend to limit the effect of either amendment, and so any reasonable harmonization must read each as independ ent exclusions. Commenters posited that122

there is no affirmative judicial precedent on if an d how the conflicting amendments to section 111(d) should be harmonized,(EPA cites Supreme Court decisions in Massachusetts v. EPA, 549 U.S. 497 (2007), and Am. Elec. Power v. Conn., 131 S.Ct. 2527 (2011), in support of its authority to issue this regulation. Commenters stat ed neither opinion contains a holding clearly resolving this issue. Moreover, commenters stated, both opinions were issued before EPA's regulation of EGUs under section 112 and so were no t required to consider the impact of the Section 112 Exclusion on the applicability of secti on 111(d).)), nor any clear precedent as to how to treat conflicting amendments generally. Commente rs concluded that significant legal questions remain regarding EPA's authority to issue the proposed guidelines in the first instance.

Commenters stated the only textual justification th at EPA's Legal Memorandum offers for departing from the literal terms of Section 111(d) is unpersuasive, explaining the agency relies entirely on a one-sentence clerical entry in the 19 90 Amendments to the Clean Air Act that was not codified in the U.S. Code but appears in the St atutes at Large. That entry, commenters said, even EPA has admitted, was clearly a mistake becaus e it sought to make a technical correction rendered moot by another amendment. See 70 Fed. Reg . at 16,031 (describing the entry as a drafting error). Nevertheless, commenters stated EP A now claims that it must give meaning to this mistake and, as a result, has announced an int erpretation of Section 111(d) that directly conflicts with the language in the U.S. Code. Comme nters stated EPA's interpretation rewrites Section 111(d) from a prohibition on the regulation of any air pollutant emitted from a source category which is regulated under [Section 112], as stated in the U.S. Code, to a more limited prohibition on the regulation of any hazardous air pollutant emitted from such a source category. Commenters remarked that this sort of reasoning wou ld be wrong under any circumstance, but it is particularly improper here, where it is being of fered as the justification for one of the most costly regulations in this Nation's history. (Id.) Commenters continued, stating that West Virginia and 11 other states have since sued EPA; to date, t he agency has declined comment, and urged EPA to address the specific arguments against the l egality of the proposed rule.

Commenters stated EPA's interpretation of the Act i s inconsistent with the plain language of Section 111(d), which contains no ambiguity. Commen ters stated courts grant agencies deference in interpreting the meaning of ambiguous statutes. See, e.g., Chevron, U.S.A., Inc. v. Natural Res. Defense Council, 467 U.S. 837 (1984). Commenters added there is no ambiguity in section 111(d). Commenters stated Section 111(d) sa ys plainly that EPA has no authority to regulate a source category already regulated under section 112. Commenters explained that the basis of EPA's argument that section 111(d) is ambi guous is the existence in the Statutes at Large of two amendments to section 111(d) in the 1990 ame ndments to the Clean Air Act. Commenters

stated one amendment was a technical amendment not codified in the U.S. Code because it was

obvious to the codifier that the substantive amendm ent that was enacted superseded and rendered unnecessary the technical amendment. Commenters sta ted the U.S. Code therefore notes that the clerical entry "could not be executed." Revisor's N ote, 42 U.S.C. section 7411. Commenters

stated the technical amendment included in the Stat utes at Large sought to update a crossreference to section 112(b)(1)(A) after section 112 (b)(1)(A) was eliminated by another 1990

amendment to the Act. Commenters stated this non-su bstantive, ministerial revision was123

included in a section in the Statutes at Large enti tled "Conforming Amendments." Clean Air Act Amendments, Pub. L. No. 101-549, section 302(a), 10 4 Stat. 2399, 2574 (1990). But, commenters added, this revision was superseded and became moot when the second, substantive amendment to section 111(d) passed nearly two month s later. H.R. 3030 (containing the substantive provision) passed on May 23, 1990, whil e S. 1630 (containing the ministerial crossreference) passed on April 3, 1990. See H.R. REP. N O. 101-490, at 454 (1990), reprinted in 2 A

LEGISLATIVE HISTORY OF THE CLEAN AIR ACT AMENDMENTS OF 1990 ("Leg. History"), at 3021, 3478 (1993) (report to accompan y H.R. 3030); S. 1630, 101st Cong. section 112(e)(4)-(5)(D) (as passed by Senate, Apr. 3, 1990 ), reprinted in 3 Leg. History, at 4119, 4431- 33. Commenters remarked that although the technical amendment had a role to play prior to the substantive amendment to section 111(d) that was ev entually adopted, once that amendment was adopted, inclusion of the technical amendment in th e Statutes at Large was simply a "drafting error," as EPA has properly recognized. 70 Fed. Reg . 15,994, 16,031 (Mar. 29, 2005). Commenters stated as EPA stated, it was "hard to co nceive that Congress would have adopted section 112(n)(1)(A), yet retained the [clerical] a mendment to section 111(d)." Id. at 16,031.

Commenters stated it does not conflict with and nee d not be reconciled with the substantive amendment which, in "a literal reading," EPA admits , means that the Agency "c[an] not regulate any air pollutant from a source category regulated under section 112." EPA Legal Memorandum at 26 (emphasis added). Commenters stated the Supre me Court has interpreted the provision in the same way: "EPA may not employ section 7411(d) i f existing stationary sources of the pollutant in question are regulated under . . . the hazardous air pollutants program, section 7412." Am. Elec. Power Co. v. Connecticut, 131 S. Ct. 2527 , 2537 n.7 (2011). And yet, commenters added, in an effort to expand its regulatory reach and to invoke judicial deference in doing so, the Agency attempts to fabricate ambiguity in the statu te. Commenters noted that the D.C. Circuit has explained that it will not "read[] too much int o a mere clerical error" and notes that incorrect conforming amendments (or the lack thereof) are com mon and can often be "the result of a scrivener's error." Am. Petroleum Inst. v. SEC, 714 F.3d 1329, 1336, 1337 (D.C. Cir. 2013).

Commenters stated such errors should thus not be in terpreted as giving rise to an "ambiguity." Id. at 1336. Commenters stated EPA is not required to reconcile obvious mistakes - editorial vestiges that were never executed in the U.S. Code - with substantive, intentional amendments to the Act. Commenters stated EPA should simply disreg ard obvious mistakes in the Statutes at Large that, because they were mistakes, "could not be executed" in the U.S. Code. Commenters stated even if there were ambiguity in the presence of the two provisions in the Statutes at Large, however, agencies have deference only to interpret the ambiguous meaning of a statute, not to divine what the text of a statute actually is. In t his case, commenters added, if there is any uncertainty at all (which there is not), it centers on what the language of the statute actually is: why Congress neglected to reconcile both a substant ive and a superseded clerical provision before they were entered in the Statutes at Large. Commenters stated the meaning of each of the substantive and clerical amendments is clear, not a mbiguous. Commenters stated EPA inexplicably argues that both amendments should be read together even when there is no doubt that Congress did not intend for a superseded techn ical amendment to remain in the statute. Disregarding this obvious intent, commenters stated the Agency insists it should "give some effect to both amendments." EPA Legal Memorandum at26. But, commenters stated, even if124

two provisions in a statute are irreconcilable, "Ch evron is not a license for an agency to repair a

statute that does not make sense." Scialabba v. Cue llar de Osorio, 134 S. Ct. 2191, 2214 (2014) (Roberts, C.J., concurring). Commenters stated thatin other words, "[d]irect conflict is not ambiguity, and the resolution of such a conflict is not statutory construction but legislative choice." Id. Commenters stated Courts will grant ag encies deference only "because we presume that Congress intended to assign responsibility to resolve the ambiguity to the agency." Id. Commenters stated if it is clear that Congress did not assign such responsibility to an agency, but merely made a drafting mistake (which it does with some frequency), it is equally clear that such mistakes do not confer to agencies the license to r ewrite the statute. UARG v. EPA, 134 S. Ct. at 2446 ("[A]n agency may not rewrite clear statutory terms to suit its own sense of how the statute should operate."). Commenters stated EPA in fact ci tes no authority for the deference it implies it

should receive to reconcile the "conflict" in secti on 111(d) it purports to have discovered. Commenters stated that in the litigation challengin g CAMR, however, which also attempted to regulate coal-fired EGUs under section 111(d), EPA cited Citizens to Save Spencer County v. EPA, 600 F.2d 844 (D.C. Cir. 1979), to support its creative interpretation of section 111(d). Final Br. of Resp't EPA at 102-03, New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008) (No. 05-1097). Commenters stated that this is a very different sit uation from Citizens to Save Spencer County, where two different statutory provisions had differ ent, mutually exclusive dates for regulatory action. Commenters stated those provisions could no t be reconciled and the Agency was found to have reasonably "pursue[d] a middle course." Citize ns to Save Spencer Cnty., 600 F.2d at 871. By contrast, commenters stated, the amendments at i ssue here can easily be reconciled, first and foremost by recognizing that the clerical amendmentwas inserted in the Statutes at Large by mistake and, therefore, should be disregarded. Comm enters posited that even if one desires to

infuse the clerical amendment with substantive inte nt, the two provisions are most clearly read as prohibiting the duplicative regulation of sources u nder both section 111(d) and section 112.

Commenters stated that EPA's proposed construction does not accord with either provision or with legislative intent. Commenters remarked that e ven if one were to attempt to treat the clerical amendment as substantive, as EPA does, the two prov isions can be read in harmony, and one can easily give effect to both provisions, which when r ead together simply say that no source category and no pollutant that are regulated under section 112 can be regulated under section 111. Commenters stated that in other words, reading both amendments together, EPA is prohibited from regulating under section 111(d) anypollutant or any source category that is regulated under section 112. Commenters stated this construction is the only one that construes both provisions substantively and that is also fait hful to the plain text of both. Commenters stated the substantive amendment in the Statutes at Large reads: "Regulation of Existing Sources. Section 111(d)(1)(A)(i) of the Clean Air Act . . . is amended by striking or 112(b)(1)(A) and inserting or emitted from a source category which i s regulated under section 112. " Clean Air Act Amendments, Pub. L. No. 101-549, section 108(g), 10 4 Stat. 2399, 2467 (1990). Commenters stated the clerical amendment reads: "Conforming Am endments. (a) Section 111(d)(1) of the Clean Air Act is amended by striking 112(b)(1)(A) a nd inserting in lieu thereof 112(b)." Id. section 302(a), 104 Stat. at 2574. Commenters state d that in the CAMR rulemaking, the Agency adopted an interpretation of the two amendments in its attempt "to give some effect to both."125

EPA Legal Memorandum at 26. Commenters stated it pr oposes to do so again here, though with a slightly different hurdle to maneuver. Commenters stated in CAMR, EPA sought to regulate a hazardous air pollutant under section 111(d), and a s part of that effort, "delisted" the source category of coal- and oil-fired EGUs from regulatio n under section 112. Commenters stated that in 2005, EPA interpreted the two amendments togethe r to mean: "Where a source category is being regulated under section 112, a section 111(d) standard of performance cannot be established to address any HAP listed under section 112(b) that may be emitted from that particular source category. Thus, commenters stated , if EPA is regulating source category X under section 112, section 111(d) could not be used to regulate any HAP emissions from that particular source category." 70 Fed. Reg. at 16,031 -32. Commenters stated that in this interpretation, rather than giving effect to both a mendments, the Agency in fact limited the reach of each and constrained its authority to regulate t o a world much smaller than either the clerical or substantive amendment alone contemplated.(The su bstantive amendment addresses source categories, without regard to pollutant ("Universe A"). The clerical amendment, read substantively, addresses pollutants, without regard to source category ("Universe B"). By artificially merging the two, EPA created not Unive rse A + B, but Universe C, a potential regulated universe much smaller than either Univers e A or Universe B, thereby ignoring the intents of both amendments rather than choosing to give effect to both or at least one.) Commenters stated EPA thus gave effect to neither p rovision and proposes the same interpretation now. Commenters stated EPA ignores t he statutory text, despite being required "to give effect, if possible, to every word Congress us ed." Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979). Commenters stated EPA did not then and does not now explain how altering the intent of both amendments by limiting their individ ual reaches "gave effect" to each amendment. Commenters stated EPA's interpretation expressly co ntravenes the first amendment (under section 108(g) of the Statutes at Large, 104 Stat. at 2467) because it would allow EPA to regulate the same source category it is regulating under sec tion 112. Commenters stated EPA's approach would also expressly contravene the second amendmen t (under section 302(a) of the Statutes at Large, 104 Stat. at 2574) because it would allow th e Agency to use section 111(d) to regulate hazardous air pollutants from a source category tha t is not already subject to section 112 standards. But, commenters stated, perceived ambigu ity or conflict "gives no license to a court or agency to indulge in unrestrained and fanciful flig hts of constructional imagination to arrive at artful but artificially consistent interpretations. " Citizens to Save Spencer Cnty., 600 F.2d at 870. Commenters stated besides limiting the universe of sources and gases that EPA can regulate under section 111(d) beyond what either the House o r Senate intended with their amendments alone, Commenters added, the Agency's interpretatio n also unreasonably constrains the plain meaning of the substantive amendment in the mistake n interest of giving some meaning to the clerical amendment, which again EPA admits was like ly a non-substantive "drafting error." 70 Fed. Reg. at 16,031. Commenters stated although EPA argued that its 2005 interpretation "gives effect to the House's desire to increase the scope of EPA's authority under section 111(d) and to avoid duplicative regulation of [hazardous air poll utants] for a particular source category," id. at 16,032 (citing 136 Cong. Rec. H12911, 12934 (daily ed. Oct. 26, 1990)), it also acknowledged the interpretation "does not give full effect to th e [substantive amendment], because a literal reading . . . would mean that EPA could not regulat e [hazardous air pollutants] or non-126

[hazardous air pollutants] emitted from a source ca tegory regulated under section 112," Id. Commenters stated that it is not surprising that Co ngress would have confirmed and clarified the limited reach of section 111(d). Commenters stated prior to the 1990 Amendments, section 111(d) looked solely to whether the pollutant at is sue was already regulated under section 108 or
section 112. Commenters stated with the 1990 amendm ents, section 112 was transformed from a little used provision into a comprehensive control technology program. See EPA, "Summary of the Clean Air Act," http://www2.epa.gov/ laws-regul ations/summary-clean-air-act; H.R. REP. NO. 101-490, at 151 (1990), reprinted in 2 Leg. His tory, at 3175; S. REP. NO. 101-228, at 148 (1990), reprinted in 5 Leg. History, at 8338, 8488. Commenters stated Congress fundamentally changed section 112 so that those standards now "ap ply to sources in a category . . . rather than to pollutants individually." S. REP. NO. 101-228, a t 148 (1990), reprinted in 5 Leg. History at 8488. Commenters added that to avoid onerous dupli cation, Congress then amended section 111, which is also technology-based and also applie s to source categories rather than to pollutants. Commenters stated if an entity is regul ated under section 112, it cannot also be regulated under section 111(d). Commenters stated t hat for all the reasons discussed above, EPA's interpretation of section 111(d) does not acc ord with either the plain statutory language or its legislative history. Commenters stated EPA lack s authority to regulate coal- and oil-fired EGUs under section 111(d). EPA must withdraw the Pr oposed Guidelines because they violate both the text and Congress's clear intent in the 19 90 Amendments.

Commenters added that even if it were appropriate f or EPA to assume now that despite being a drafting error, the Senate amendment must be incorp orated into Section 111(d), that does not mean that the House amendment cannot be given full effect, and even when faced with two equally applicable provisions, full effect should b e given to each to the extent possible. See Watt v. Alaska, 451 U.S. 259, 267 (1981). Commenters sta ted EPA could give full effect to each provision by excluding from Section 111(d) any sour ce category regulated under Section 112 and any pollutant listed in Section 112(b). Comment ers stated that by reading the two amendments in this light, EPA could give full effec t to the plain meaning of each amendment in a manner consistent with Congress' intent. Commente rs continued, stating when there are two acts upon the same subject, the rule is to give eff ect to both if possible. - United States v. Borden Co., 308 U.S. 188, 198 (1939); see also Watt, 451 U .S. at 267 (an agency or court must read [two allegedly conflicting] statutes to give effect to e ach if [it] can do so while preserving their sense and purpose); Morton v. Mancari, 417 U.S. 353, 551 (1974).

Commenters stated that the House amendment is consi stent with the co-benefits associated with regulating source under Section 112. Commenters rem arked it is clear as a policy matter that Congress, in the 1990 CAA amendments, was focused o n avoiding unnecessary and duplicative regulation of emissions from stationary sources. Co mmenters stated that as EPA has recognized, this is particularly true for EGUs. See 70 Fed. Reg . at 15,999 (asserting that Congress treatment of EGUs reveals Congress recognition that Utility U nits are a broad, diverse source category that is subject to numerous CAA requirements, including requirements under both Title I and Title IV, and that such sources should not be subject to duplicative or otherwise inefficient regulation). Commenters stated prohibiting EPA from regulating e xisting sources under both Sections 111(d)127

and 112 is consistent with the broader policy objec tive of avoiding duplicative regulation. Commenters stated emission controls designed to red uce emissions of one pollutant typically have the effect of reducing emissions of a much bro ader suite of pollutants. Thus, commenters stated, when EPA requires a facility to install the maximum achievable control technology (MACT) required under Section 112 to reduce target pollutants, there can frequently be little or no need for additional regulatory obligations for o ther pollutants under section 111(d) because applying the stringent MACT standard can have the e ffect of controlling many other common pollutants. Commenters stated that the correlation between emission reductions of multiple pollutants is also central to EPA's practice of usi ng surrogates as a means of controlling emissions of hazardous air pollutants. Commenters s tated that under this approach, EPA may regulate [a] pollutant indirectly when its emission s are controllable by regulation of other pollutants.- Natl Lime Assn v. EPA, 233 F.3d 625, 6 37 (D.C. Cir. 2000) (citing NRDC v. EPA, 822 F.2d 104, 125 (D.C. Cir. 1987). Thus, with resp ect to Section 112, commenters added, courts have held that EPA may use a surrogate to regulate hazardous air pollutants if it is reasonable to do so, and have repeatedly held that EPA can use no n-HAP criteria pollutants such as PM2.5 as surrogates for HAP pollutants under Section 112. Id . at 637-40; Sierra Club v. EPA, 353 F.3d 976, 984 (D.C. Cir. 2004). Commenters posited that EPA's frequent reliance on co-benefits and surrogates under Section 112 is consistent with pol icy underlying Congress' decision to foreclose regulation under Section 111(d) where a source cate gory is regulated under Section 112 regulation of hazardous air pollutants from a sourc e category under Section 112 can have the ancillary effect of reducing emissions of other non -HAP pollutants that might otherwise be regulated under Section 111(d). (Congress' decision to forbid additional regulation of Section 112 sources is also supported by the fact the preem ption applies only to existing sources. Retrofitting existing sources with new pollution co ntrol technology is extremely costly and will provide limited benefits since, in many cases, exis ting sources have a limited remaining useful life. In contrast, new sources, which have more fle xibility to install pollution controls and longer projected useful lives, can be subject to both Sect ion 112 MACT standards and standards of performance under Section 111(b). Likewise, existin g sources that are regulated under Section 112 and elect to undergo a modification or reconstruction can also be subject to standards of performance under Section 111(b).)

Commenters stated that units are already regulated under Section 112 of the Clean Air Act, and any difference in the Act's Section 111(d) provisio ns are due to a clerical error in the drafting of the Senate version of the language. Commenters expl ained that the House version found in the 1990 CAA Amendments substantively changes and expan ds the limitation on EPA's authority to propose rules under Section 111(d) on source catego ries already regulated under Section 112.

Commenters stated the House Amendment can be found in the Statutes at Large, among all the other substantive amendments to the Act, and in con trast, the Senate version is merely a clerical amendment to reflect drafting changes in other prov isions of the 1990 CAA Amendments in order to accurately reflect cross references. Furth er, commenters added, the Senate Amendment can be found in a section of amendments specificall y designated as "Conforming Amendments,"

which are non-substantive. Commenters concluded tha t the House amendment, being a substantive amendment, ultimately eliminates the cr oss-reference that the Senate's conforming128

amendment was intending to update, and therefore, o nce the House amendment is applied, the Senate amendment is rendered unnecessary.

Commenters remarked verbatim "As a matter of legisl ative history, the 1990 Clean Air Act Amendments began with the announcement of a Bush I administration proposal on June 12,
1989." "The Administration bill was introduced in t he House as H.R. 3030 on July 27, 1989, by Representative Dingell," with many co-sponsors, "an d in the Senate as S1490 on August 3, 1989, by Senator Chafee." S. 1490 did not advance. As fir st introduced, H.R. 3030 had both what became Public Law 101-549, section 108(f) and secti on 112(n). In the July 24, 1989 draft, what became section 108(g) of the CAA was numbered as se ction 108(d). What ultimately became 42 U.S.C. 7412(n)(1)(A) was numbered at that time sect ion 301(m). Thus, it can be seen that these two sections were substantively unchanged in H.R. 3 030 from its introduction on July 27, 1989 through its passage on May 23, 1990. The most important committee report on H.R. 3030 is Report 101-490, dated May 17, 1990. Section 108(f) and section 301(l) of H.R. 3030, as passed on May 23, 1990, were reported on May 17, 1990 as p reviously quoted. In the title-by-title analysis, there was no discussion of section 108(f) . Section 301(l) was discussed in these terms: Electric utilities. Under new section 112(l), the A dministrator is directed to perform an assessment of the hazards to public health which ma y reasonably be anticipated to result from

emissions listed under this section from certain el ectric utilities after imposition of the requirements of this Act. The Administrator is dire cted to report the results of this study to the Congress within three years after enactment. The Ad ministrator shall develop and describe in his report to the Congress alternative control strategi es for emissions from affected sources warranting regulation under this section. The Admin istrator is required to regulate such sources if he finds such regulation appropriate and necessary after considering results of the study. The report set forth the textual effect of section 108( f) on section 111(d) of the CAA using brackets and italics. Likewise, the addition of the language in section 301(l) to section 112 of the CAA was set forth in italics. Although there were floor Amendments on May 23, 1990, none of them pertained to sections 108(f) or 301(l) of H.R. 3030 . However, it should be noted that the House, at the same time it was forbidding regulation of so urce categories under section 111(d) of the CAA that are regulated under section 112, passed a floor amendment entitled "INFORMATION GATHERING ON GREENHOUSE CASES [sic] CONTRIBUTING TO GLOBAL CLIMATE CHANGE" which became section 715 of H.R. 3030 as pa ssed. Consequently, it cannot be said that Congress was unaware of the possibility that o ther pollutants, such as GHGs, might warrant regulation under the CAA someday, even as Congress was opting to foreclose regulation under section 111 of source categories regulated under se ction 112, including, depending on EPA's decision with respect to section 112(n), electric u tility generating units. On the Senate side, S. 1490 at sections 108(d) and 301(m) tracked the prov isions in H.R. 3030 that we have been considering. "The Senate Environmental Protection S ubcommittee of the Committee on Environment and Public Works used S1630, an alterna tive clean air proposal introduced by Senator Baucus on September 14, 1989, as its markup vehicle." Entitled "The Clean Air Restoration and Standards Attainment Act," S. 1630, as introduced, did not amend the CAA to broadly authorize national emission standards for e xisting sources under section 112, so there was no occasion to reference sections 111(d) or 112 of the CAA. As characterized by Senator129

Baucus: "As a first major step toward controlling g reenhouse gases, the bill require[d] cars to

meet 'for the first time' a carbon monoxide standar d." After markup, S. 1630 did have a section taken from S. 816 to address section 112. S. 816, i ntroduced April 18, 1989, replaced the criteria for section 112 addressing extreme hazards with bro ader criteria and an initial statutory list like that now found at section 112(b) of the CAA. S. 816 also introduced the concept of regulating major and area sources. Boilers generally were inte nded to be within the regulated major source categories or subcategories. Section 4(c) provided a conforming amendment that updated the section 111(d) reference to section 112: "Section 1 11(d)(1) of the Clean Air Act is amended by striking '112(b)(1)(A)' and inserting in lieu there of '112(b).'" By continuing to exclude from section 111(d) of the CAA those pollutants regulate d by section 112 while expanding the number of those pollutants and the criteria for adding new pollutants, S. 816 significantly reduced the reach of the section 111(b) program. S. 1630 was re ported out of the Senate Environmental and

Public Works Committee as an omnibus clean air bill on November 16, 1989. That committee issued its Report 101-228 on December 20, 1989. The report contained the additional views of Senator Warner in which he regretted that the bill did not contain the utility study provisions of S. 1490. Senator Symms in his statement of minorityviews likewise regretted the additional duplicative regulation that S. 1630 would impose on utility power plant emissions without the benefit of the study proposed by the administration . The report depicted the textual change in sections 111(d)(1) from "112(b)(1)(A)" to "112(b)." That change appeared in S. 1630 at section 305(a) under the heading "Conforming Amendments." S . 1630 was removed from the Senate floor on February 1, 1990 in the face of a veto thr eat. A redrafted S. 1630 was returned to the Senate floor on March 5, 1990. Under the title "Con forming Amendments," the following appeared: "Sec. 305(a) Section 111(d)(1) of the Cle an Air Act is amended by striking '112(b)(1)(A)' and inserting in lieu thereof '112(b ).'" This was necessary because the section 112(b)(1)(A) r'gime was going away under S. 1630. S ection 112(b)(1)(A) of the CAA had provided: "The Administrator shall, within 90 days after the date of the enactment of the Clean Air Act Amendments of 1970, publish (and shall fromtime to time thereafter revise) a list which includes each hazardous air pollutant for which he intends to establish an emission standard under this section." In its place, S. 1630 enacted a lengthy list of pollutants for EPA to regulate under the revamped section 112 and established broa d criteria that covered pollutants that negatively affected human health or the environment , even if those pollutants were not extremely hazardous as previously required. "Debate on the co mpromise S1630 began on March 5 and continued to April 3, 1990." Over that period "the bill was changed substantially by 111 amendments," none of which were significant for thi s discussion. "S.1630, as amended, passed the Senate by a vote of 89 to 11 on April 3, 1990." Under the caption "Conforming Amendments," section 305(a) provided "Section 111(d ) of the Clean Air Act is amended by striking '112(b)(1)(A)' and inserting in lieu there of '112(b).'" There was no equivalent to what became section 112(n) of the CAA. In conference, "[ t]he House amendment to the text of the bill

struck out all of the Senate bill after the enactin g clause and inserted a substitute text." The Senate receded from its disagreement with the House by offering a substitute amendment as "a

substitute for the Senate bill and the House amendm ent." The Conference Committee Report expressly noted engagement with the electric utilit y requirement that became section 112(n) of the CAA. The revamped section 112 national emission standard program enacted by Public Law130

101-549, found in title III, "is a mixture of provi sions from the House and Senate bills, with amendments." Section 302, entitled "Conforming Amen dments," contained, as subsection (a), these provisions: "Section 111(d)(1) of the Clean A ir Act is amended by striking '112(b)(1)(A)' and inserting in lieu thereof '112(b).'" Section 82 1 of Public Law 101-549 required information gathering on CO2. It is apparent from the legislati ve history that sections 108(g) and 301(n) of Public Law 101-549 had been substantively related i n the House bill since being first proposed by the administration. It is also clear that, in co nference, the Senate accepted the substantive policy reflected in those two provisions. The agree d policy was that regulation of existing EGU

sources under section 112 of the CAA would be studi ed with a decision to follow. The policy also included the intent not to regulate existing s ources under section 111(d) if a decision were made to regulate those sources under section 112. T his applied to existing sources in general and existing EGU sources in particular. The importance of the policy difference between H.R. 3030 and S. 1630 could not have been overlooked given th e statements of Senators Warner and Symms in S. Rep. 101-228. Nor can it be said to hav e been overlooked when the Senate adopted the House provision regarding the utility study in section 112(n). Indeed, Senator Chafee noted that in "amending section 111 of the Clean Air Act relating to new and existing stationary sources . . . [t]he Senate recedes to the House exc ept that with respect to the requirement regarding judicial review of reports, the House rec edes to the Senate and with respect to transportation planning, the House recedes to the S enate with certain modifications." Senator Durenberger also described the "3-year study of uti lity emissions followed by regulations to the extent the Administrator finds them necessary." Furthermore, given the requirement to gather data on CO2 "an historical precursor of regulation" Congress was on notice that section 108(g) of Public Law 101-549 would prevent regulation of C O2 from existing sources of EGUs under section 111(d) of the CAA if the decision were made to regulate those sources under section

112."

Commenters continued verbatim "What then is the leg al significance of the inclusion of section 302(a) in Public Law 101-549, providing: "Section 1 11(d) of the Clean Air Act is amended by striking 112(b)(1)(A) and inserting in lieu thereof 112(b)"" Section 302(a) of Public Law 101- 549 must be regarded as a mere conforming amendment , held over by inadvertence. Once the Senate consciously agreed to the policy reflected i n sections 108(g) and 301(n), Congress could not have intended to adopt 302(a) instead of those two provisions. Hence the retention of section 302(a) was a drafting error, as EPA has previously said. Furthermore, the revisers' note to 42 U.S.C. S. 7411(d) correctly indicates that the comm and contained in section 302(a) cannot be executed. This is clearly right because the conform ing amendment of section 302(a) cannot be given effect once the substantive amendment in sect ion 108(g) is effectuated. As a consequence, with or without explicit drafting error analysis, 1 08(g) should be given effect because technical or conforming amendments are not to be deemed of eq ual dignity for purposes of statutory interpretation with the substantive provisions of a statute. In United States v. Electronic Data Systems Federal Corp., the Federal Circuit emphasiz ed that it was inappropriate "to give a

technical amendment substantive effect that would u ndermine" the clearly expressed substantive intent of Congress. Rather, "[c]ongressional design ation of an amendment as a 'conforming amendment' evidences legislative intent that the am endment should be read as non-substantive,"131

and so should not be given an interpretation that w orks a substantive change to the law. The issue in Electronic Data Systems was "[w]hether the Brook s Act, 40 U.S.C. S. 759 (1982 & Supp. IV 1986), provides the Board with jurisdiction over Po stal Service procurements of [automatic data processing equipment or] ADPE." The Brooks Act, ena cted in 1965, gave the General Services Administration broad authority over procurement of ADPE on behalf of the federal government," including the Post Office Department and all other agencies listed in 40 U.S.C. S. 474. At the time of the Post Office Department's re-organizatio n as the Postal Service in 1970, Congress saw fit to provide generally that federal contracting l aw would not "apply to the exercise of the powers of the Postal Service," without reference to the Brooks Act. However, a "technical amendment" in the very re-organization act that pro vided the Postal Service this independence substituted the "Postal Service" in place of "the P ost Office Department" in 40 U.S.C. S. 474's list of agencies to which the Brooks Act applied. R eading the "technical amendment's" addition

of Postal Service to the list in section 474 to be merely "an attempt to conform a previously existing statute that mentioned the Post Office Dep artment," without substantive intent, the court noted "[t]he Postal Reorganization Act, moreover, i tself contravenes the Board's reading of the

technical amendment because that Act omits the Broo ks Act from the list of enumerated statutes applicable to the Postal Service" that were provide d elsewhere in the Act. So the Federal Circuit resolved this plain language conflict by granting p riority to the clearly expressed intent of Congress in the substantive amendments over any con trary apparent meaning suggested by the

technical amendments."

Commenters continued verbatim "With respect to draf ting errors, the Supreme Court has held that the plain language of a provision may be ignor ed, for example, where "common sense suggests that the cross-reference is simply a draft ing mistake, a failure to delete an inappropriate cross-reference in the bill that Congress later ena cted into law," concluding that the language would not necessarily "creat[e] ambiguity, but [mer ely] reflect[] a mistake" by Congress. Where a conforming provision related to a portion of a bi ll that was substantively rejected is incongruently held over in the resulting Act, it ma y be fairly held that the legislative intention was to strike that conforming provision but that itwas overlooked in error. The D.C. Circuit has previously dealt with scrivener's errors in the con text of the Clean Air Act Amendments of 1990 and EPA's claim of Chevron deference. The portion o f the 1990 Amendments scrutinized Appalachian Power had made various substitutions to cross-referenced sections of the Clean Air

Act and in one had altered the cross-reference to d esignate a subsection that had not previously been cross-referenced. Despite the plain language o f the CAA, the court recognized that "[r]eading a statute contrary to its seemingly clear meaning is permissible "[i]f "the literal application of a statute will produce a result demo nstrably at odds with the intentions of its

drafters."" " Because the statute "as written is atodds with congressional intent" and there is "a convincing account of how [the error] came to be en acted" "there inadvertent substitution "in the course of a routine renumbering of statutory cross- references"" the Court permitted EPA to

construe the amendments "as if this 'inadvertence' had not occurred." An earlier opinion of the D.C. Circuit had adopted Step One analysis for anal yzing the existence and effect of scrivener's errors, reserving Chevron step two for instances in which "there are multiple ways of avoiding a statutory anomaly, all equally consistent with the intentions of the statute's drafters (and equally132

inconsistent with the statute's text)." Under eithe r approach, EPA may not nullify the unambiguous language of section 108(g), a substanti ve amendment that changes the pre-1990 law in anticipation of regulating EGUs under sectio n 112, merely because of the presence of a left-over conforming amendment that was drafted pri or to the Senate's acceptance of the House's approach to EGUs."

Commenters continued verbatim "At section III of it s Legal Memorandum, EPA again seeks to explain away the legal obstacles to regulating sour ce categories under section 111(d) of the CAA which are regulated under section 112. EPA begins b y citing Massachusetts v. EPA for the proposition "that greenhouse gases (including CO2) are an air pollutant under the CAA." EPA then asserts that in American Electric Power, the C ourt expressed an "understanding that section 111, including section 111(d), applies to carbon di oxide emissions from those sources." This is an odd assertion to make given the fact that the Co urt assumed the very thing that EPA now takes such pains to attempt to refute; namely that "EPA may not employ 7411(d) if existing stationary sources of the pollutant in question are regulated under the National Ambient Air Quality Program, 7408-7410, or the hazardous air po llutants program, 7412. See 7411(d)(1)." Furthermore, the Supreme Court in UARG at footnote 5 of the majority opinion carefully noted that whether CO2 may be regulated under section 111 (d) is an open question. In discussing the drafting history of the 1990 Amendments to the CAA, EPA first says that the passage of both the

House substantive amendments and the Senate conform ing amendment "stem from apparent drafting errors that occurred during enactment of t he 1990 CAA Amendments, which revised section 111(d)." Then, EPA says this gives rise to "ambiguities" to a "conflict" allowing EPA to "reasonably construe the section 112 exclusion to authorize the regulation of GHCs under section 111(d)." But as demonstrated above, where a draftin g error can be identified, there is no conflict or ambiguity. Instead, the drafting error should be disregarded. EPA seeks to bolster its position by appealing to its statements from March 29, 2005. According to EPA, its interpretation best comports with congressional intent because "giv[ing ] full effect to the House language" by accepting "a literal reading of that language would mean that the EPA could not regulate any air pollutant from a source category regulated under se ction 112, a result that would be inconsistent with (i) Congress' desire in the 1990 CAA Amendment s to require the EPA to regulate more substances, and not to eliminate the EPA's ability to regulate large categories of air pollutants, and (ii) the fact that the EPA has historically reg ulated non-hazardous air pollutants under section 111(d), even where those air pollutants wer e emitted from a source category actually regulated under section 112." But this misapprehend s clear congressional intent. Congress did not simply want "EPA to regulate more substances." Congress wanted EPA to regulate more substances under section 112 using national standar ds other than substances from EGUs. It left open the question whether to regulate EGUs under se ction 112 at all. As a part of that legislative bargain, it was substantively agreed that source ca tegories regulated under section 112 would not be regulated under section 111(d). This was Congres s' substantive intent. In light of that intent, the conforming amendment was no longer conforming, but became a drafting error that is now due to be disregarded."133

Commenters stated that even if these two versions are deemed to exist, the proposed rule fails principles of statutory construction. Courts and ag encies must "give effect, if possible, to every word Congress used." Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979). Applying that standard to the present case would require an inter pretation that gives effect to "every word" of both limitations. Here, the two limitations can be read together to prohibit EPA from regulating under Section 111(d) both any pollutant emitted fro m any source category already regulated under Section 112 and any hazardous air pollutant r egardless of its source. See, e.g. Letter from

National Association of Manufacturers et al. to EPA 26-27 (July 25, 2012), available at http://www.nam.org/~/media/53e86e050c7a495a9cc84f977 8balf10/association_ghg_nsps_co mments_june_25_2012.pdf. If EPA's erroneous view of the Statutes at Large is accepted, that would be the only proper interpretation and the pro posed rule would still be prohibited. Commenters continued, stating that EPA instead has constructed a new interpretation of Section 111(d), which improperly seeks to cut back on each limitation rather than incorporating both.

Commenters added that the Senate amendment is only a clerical change and therefore must yield to the House version. Commenters stated conforming amendments are applied only after substantive amendments, which renders the Senate am endment superfluous.

Commenters stated even if it were appropriate to tr eat the House and Senate amendments as in direct conflict, this would not create an ambiguity that EPA would be empowered to resolve, as there is no implied delegation from Congress to do so. "Direct conflict [between statutory provisions] is not ambiguity, and the resolution of such a conflict is not statutory construction but legislative choice. Chevron is not a license for an agency to repair a statute that does not make sense." Scialabba v. Cuellar de Osorio, 134 S.Ct. 2 191, 2214 (2014) (Roberts, C.J., concurring). Commenters stated that EPA must therefore give effe ct the version of the statute published in the United States Code, which provides that "the Code o f Laws of the United States current at any time shall...establish prima facie the laws of the United States..." 1 U.S.C. section 204(a) (2006). This prima facie evidence is displaced only where t he U.S. Code is 'inconsistent' with the Statutes at Large. Here, commenters remarked, that is not true, when both the House and Senate amendments are given effect. Stephan v. United Stat es, 319 U.S. 23, 426 (1943).

Response 46: EPA disagrees that it may not promulgate regulation s addressing CO2 emissions from existing power plants under section 111(d). EP A’s discussion of this issue is in Section IV of the preamble. Further, EPA’s views on arguments presented by the commenters, including commenters’ discussion of the AEP opinion and of th e Senate amendment, are also discussed in EPA’s briefs in the Murray Energy and West Virginia cases, No. 14-1112, No. 14-1146, and No. 14-1151 (D.C. Cir.).

Comment 47: Commenters stated that EPA's Legal Memorandum corre ctly describes the history

of the different House and Senate-enacted versions of Section 111(d)(1) (EPA, Legal Memorandum for Proposed Carbon Pollution Emission G uidelines for Existing Electric Utility Generating Units (June 2014), available at http://w ww2.epa.gov/sites/production/files/2014- 06/documents/20140602-legal-memorandum.pdf, at 20-2 7)). Commenters remarked (verbatim) The House version (which is the version presented i n the U.S. Code) provides for standards of134

performance for existing sources "for any air pollu tant (i) [1] for which air quality criteria have

not been issued or which is not included on a list published under [CAA section 108(a)] or [2] emitted from a source category which is regulated u nder [section 112]." Because power plants are a source category regulated under section 112 f or mercury and other hazardous air pollutant ("HAP") emissions, see 77 Fed. Reg. 9,304 (Feb. 16, 2012) (final Mercury and Air Toxics ["MATS"] rule), some industry groups have argued th at the foregoing language precludes EPA from issuing section 111(d) performance standards o f performance for emissions of any pollutants (including CO2) from existing power plan ts. The Senate version, which also appears in the enacted (i.e., Statutes at Large) version of the 1990 amendments, requires standards of performance "for any air pollutant . . . which is n ot included on a list published under section 108(a) or 112(b) (1)(A)" of the Act. In the Legal M emorandum, EPA correctly concludes that the enactment of these conflicting versions creates an ambiguity that EPA is authorized to resolve under step 2 of the test articulated in Chevron U.S .A., Inc. v. NRDC, 467 U.S. 837, 842-844 (1984) (Id. at 25). The agency then offers a reason able interpretation of the provisions as together excluding from regulation under section 11 1(d) not all pollutants, but only and specifically HAPs that are both listed under sectio n 112(b) and emitted by sources (such as power plants) that are regulated under section 112 (Id. At 26-27). Under EPA's construction, therefore, the agency may not regulate power plant mercury emissions under section 111(d), since mercury is a listed HAP and power plants are regulated under section 112 by the MATS rule, but it must regulate power plant CO2 emission s under section 111(d), since CO2 is not a HAP listed under section 112(b), notwithstanding th e MATS rule. EPA's proposed construction

is consistent with the context and evolution of sec tion 111(d), and it is necessary to consider the 1990 Clean Air Act Amendments against this legal ba ckdrop. See McFarland v. Scott, 512 U.S. 849, 856 (1994) ("Congress legislated against this legal backdrop . . . and we safely assume that it did not intend for the express requirement of co unsel to be defeated in this manner"). Historically, section 111 has served a gap-filling function to ensure that EPA had a mechanism to regulate dangerous air pollutants that were not alr eady covered under the criteria pollutant or HAP programs. Prior to the 1990 Amendments, the HAP exclusion under section 111(d) applied only to pollutants "not included on a list publishe d under" Section 112" not to categories of sources that emitted those pollutants. 42 U.S.C. 74 11(d)(1)(1977); Public Law 95-95. There is nothing in the structure or history of the 1990 Ame ndments to suggest that Congress meant to drastically broaden that exclusion, which has alway s functioned simply to ensure that EPA's section 111(d) rules do not encompass pollutant emi ssions already subject to regulation under Act's criteria pollutant or air toxics provisions f or existing sources. EPA is therefore well within its authority to interpret the Amendments as preser ving the function and scope of section 111(d) that existed prior to 1990, and is correct to interpret the statute to permit regulation of CO2 emissions from existing EGUs under section 111(d).

The industry reading also ignores clear statutory e vidence that Congress intended sections 111 and 112 to work in unison, not disharmony. Congress expressly directed that the source categories to be regulated under section 112 be con sistent with the list of source categories regulated under section 111. 42 U.S.C. 7412(c)(1). This cross-reference would serve no purpose if Congress had intended that HAP regulations under section 112 would prohibit EPA from135

regulating any and all emissions, HAP and non-HAP a like, from those sources under section 111(d). In this regard - and in effectively dismant ling an entire Clean Air Act program - the industry reading would contravene the fundamental c anon that statutes are to be construed to give all words and provisions effect. See, e.g., No rthwest Austin Mun. Utility Dist. No. One v. Holder, 557 U.S. 193, 211 (2009) (rejecting statuto ry interpretation that would render a provision "all but a nullity . . . It is unlikely that Congre ss intended the provision to have such limited effect.") (citation omitted); TRW v. Andrews, 534 U .S. 19, 29, 31 (2001) (rejecting reading that would "in practical effect" render statutory provis ion "entirely superfluous in all but the most unusual circumstances . . . . It is a cardinal prin ciple of statutory construction that a statute ough t, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant. Were we to adopt Andrews' construction of the statute, the express exception would be rendered insignificant, if not wholly superfluous.") (citations and internal quotation marks omitted); Mayle v. Felix, 545 U.S. 644, 662 (2005) (rejects reading under which statutory limitations period "would hav e slim significance"). Along these same lines, the industry reading would effectively treatthe 1990 Amendments as an implied repeal of section 111(d). Courts generally reject claims of i mplied repeal, and will only accept them when there is "overwhelming evidence" and "when the earl ier and later statutes are irreconcilable." E.M. AG Supply v. Pioneer Hi-Bred International, 53 4 U.S. 124, 137, 141-42 (2001) (citations and internal quotation marks omitted). Neither cond ition applies in this instance. Nor is there any evidence that Congress meant to strip section 111(d ) of its utility in such a cryptic manner. If Congress had meant to significantly restrict the ap plicability of section 111(d)(1), it would have said so clearly. See Board of Trustees v. Roche Mol ecular Systems, 131 S. Ct. 2188, 2198-99 (2011) ("[I]f Congress has intended such a sea chan ge . . . it would have said so clearly"); Whitman v. Am. Trucking Assns, 531 U.S. 457, 468 (2 001) ("Congress . . . does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions -- it does not, one might say, hide elephants in mouseholes."). Thi s point is particularly salient in the case of the 1990 Clean Air Act Amendments, which were unive rsally understood to tighten, not loosen, the statute's pollution control measures. See, e.g. , Remarks of President Bush Upon Signing S. 1630, 26 Weekly Comp. Pres. Doc. 1824 (Nov. 19, 199 0) (reprinting the President's signing statement of Nov. 15, 1990) ("This legislation isn' t just the centerpiece of our environmental agenda. It is simply the most significant air pollu tion legislation in our nation's history, and it restores America's place as the global leader in en vironmental protection."). To assert that a landmark bill praised for its environmental stringe ncy actually eviscerates key provisions of the statute sub silentio borders on the absurd, and EPA is correct to reject this flawed reasoning in favor of a construction that actually advances the statute's goals. See Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 575 ("[I]nterpreta tions of a statute which would produce absurd results are to be avoided if alternative interpreta tions consistent with the legislative purpose are available."); American Water Works Assn v. EPA, 40 F.3d 1266, 1271 (D.C. Cir. 1994) (where reading of statute would lead to absurd results, st atute has no plain meaning and is proper subject of construction by agency and courts). In short, gi ven the conflicting amendments, EPA is authorized to adopt a reasonable interpretation of the statute. Northeast Hosp. Corp. v. Sebelius, 657 F.3d 1, 11 (D.C. Cir. 2011) ("We are thus faced with two inconsistent sets of statutory provisions. Northeast points us to provisions that tie entitlement to payment and state that once a136

person enrolls in Part C, payments are no longer ma de under Part A. The Secretary points us to other provisions that assume it is possible to be b oth entitled to benefits under Part A and enrolled in Part C. Under these circumstances, we c onclude that the Medicare statute does not unambiguously foreclose the Secretary's interpretat ion."); Chevron, 467 U.S at 842-43. And, for reasons stated above, EPA's interpretation comports with the context, history, structure, and purpose of the Clean Air Act. As such, its construc tion should merit judicial deference in any legal proceeding challenging its authority to regul ate CO2 emissions from existing EGUs under section 111(d).

Alternatively, if the 1990 House and Senate languag e were to be deemed in irreconcilable conflict (i.e., if the conflicting amendments canno t both be given literal effect, and if EPA lacks authority to adopt a reasonable interpretation to r esolve the conflict), then both chambers' 1990 amendments to section 111(d) must fail. In that sce nario the language would revert to the pre1990 version, which authorizes S.111(d) regulation of any air pollutant "for which air quality

criteria have not been issued or which is not inclu ded on a list published under section 7408(a) or 7412(b)(1)(A) of this title." Since CO2 are listed neither under S. 7408(a) nor S.7412(b), under this scenario as well EPA would be authorized to pr omulgate section 111(d) guidelines for power-plant CO2 emissions. Finally, even if the Hou se amendment were deemed to be the only applicable amendment, the same outcome should obtai n. First, the Supreme Court has recently noted EPA's practice of adopting context-appropriat e interpretation of the Clean Air Act phrase "air pollutant." Utility Air Regulatory Group v. EP A ("UARG"), 134 S. Ct. 2427, 2439-42 (2014). For example, [t]he Act authorizes EPA to en force new source performance standards (NSPS) against a pre-existing source if, after prom ulgation of the standards, the source undergoes a physical or operational change that inc reases its emission of "any air pollutant." S. 7411(a)(2), (4), (b)(1)(B). EPA interprets that pro vision as limited to air pollutants for which EPA has promulgated new source performance standard s. 36 Fed.Reg. 24877 (1971), codified, as amended, 40 C.F.R. 60.2; 40 Fed.Reg. 58419 (1975 ), codified, as amended, 40 C.F.R. 60.14(a). Id. 2440 (emphasis in original). Similarl y here, a context-appropriate reading of "any air pollutant," when used with the phrase "emitted from a source category which is regulated under section 7412," would encompass only an air po llutant listed under section 112 that is emitted from such a source category. Considered fro m another angle, sources are not regulated in the abstract, but regulated with regard to specific pollutants. Hence, any interpretation of the phrase "regulated under section 7412" must include an implied phrase indicating what the source in question is being regulated with regard to. Unde r the industry interpretation, this implied phrase is "with regard to any pollutant," i.e., "em itted from a source category which is regulated under section 7412 [with regard to any pollutant]." A much more rational interpretation would include the implied phrase "with regard to HAPs," i .e., "emitted from a source category which is regulated under section 7412 [with regard to any HA Ps]," which not only effectuates rather than frustrates the purpose of the statute, as discussed above, but accords with the kind of contextually-appropriate reading of the statute des cribed in UARG. An examination of the historical context surrounding the House language m ilitates in the same direction. Prior to the 1990 Amendments, EPA had been tasked with listing h azardous air pollutants for regulation under section 112. The pre-1990 language of section 111(d) reflected this fact insofar as it137

referenced the "list published under section . . . 7412(b)(1)(A)." Frustrated with the agency's slow progress on this front, Congress took it upon itself to list 190 HAPs by statute and then delegated to EPA the authority and responsibility t o regulate emissions of those HAPs on a source-by-source basis. It is for this reason that the House amendment deleted the pre-1990 references to the list of HAPs, which was now defin ed by statute rather than EPA regulation, and replaced it with a reference to source categories, which were now the subject of EPA regulation

for the HAP emissions. Given this historical contex t, it is clear that the House language was meant to preserve the status quo, under which EPA c ould not regulate a source's HAP emissions under section 111(d) if it was already doing so und er section 112, rather than silently introduce a

new and massive exclusion into the statute that eff ectively rendered section 111(d) a dead letter.

Second, the literal language of the House amendmentfavors EPA's interpretation of the statute. As EPA recently observed in a legal brief opposing the industry interpretation of section 111(d), even if one disregards the Senate amendment and con siders only the House amendment, as Petitioner and amici advocate, that text does not u nambiguously say what Petitioner and amici believe it says. In fact, a truly "literal" reading (see Amici Br. at 4) results in precisely the opposite conclusion (Response to Petition at 28, In re: Murray Energy Corp., No. 14-1112 (D.C. Cir. Nov. 3, 2014)). The relevant portion of secti on 111(d), as amended by the House, contains a string of three exclusionary clauses, separated fro m each other by "or": The Administrator shall prescribe regulations . . . under which each State shall submit to the Administrator a plan which establishes standards of performance for any existi ng source for any air pollutant [1] for which air quality criteria have not been issued or [2] wh ich is not included on a list published under section 7408(a) of this title or [3] emitted from a source category which is regulated under

section 7412 of this title . . . . 42 U.S.C. S. 741 1(d)(1) (emphasis and internal numbering added). Because Congress used the conjunction "or" rather t han "and," the three exclusions arguably should be viewed as alternatives, rather than requi rements to be imposed simultaneously. See U.S. v. Woods, 134 S.Ct. 557, 567 (2013) ("Moreover , the operative terms are connected by the conjunction "or." While that can sometimes introduc e an appositive . . . its ordinary use is almost always disjunctive, that is, the words it connects are to 'be given separate meanings.'") (Merriam Webster's Dictionary defines "or" as "a function wo rd [used] to indicate an alternative <coffee or tea> <sink or swim>." See Merriam Webster, Definiti on of "Or," http://www.merriamwebster.com/dictionary/or (last v isited Nov. 19, 2014)). In other words, section 111(d) "literally" provides that the Admini strator may require states to establish standards for an air pollutant so long as either ai r quality criteria have not been established for that pollutant, or one of the other two remaining c riteria is met. Air quality criteria have not been issued for CO2. Thus, under a truly literal reading of section 111(d)(1) as amended by the House, whether power plants have been regulated under sect ion 7412 - and for what pollutant - is irrelevant: the CO2 regulations at issue are author ized. To compound the ambiguity, the third exclusionary clause in the House's version of secti on 7411(d)(1), which provides the basis for the industry interpretation of section 111(d), differs from the first two in that it does not contain a negative: [EPA may require states to submit plans e stablishing standards for] any air pollutant [1] for which air quality criteria have not been is sued or [2] which is not included on a list published under section 7408(a) of this title or [3 ] emitted from a source category which is138

regulated under section 7412 of this title . . . . 42 U.S.C. 7411(d)(1) (emphasis and internal numbering added). The industry argument presumes th at the negative from the second clause was intended to carry over into the third (i.e., im plicitly inserting another "which is not" before "emitted from a source category"), but that is not what the text actually says; instead, it states tha t EPA may require standards for "any air pollutant . . . emitted from a source category which is regulated under section 7412." 42 U.S.C. 7411(d)(1) . Thus, read literally, the House's version of section 7411(d) means the exact opposite of what pe titioners and amici argue, and provides that EPA may regulate emissions of a pollutant from a so urce category where that category is regulated under section 7412. Other observers have made this argument as well: As amended by the House amendment language, S.111(d) would directEPA to regulate, through state plans, "any air pollutant (i) for which air quality criter ia have not been issued or which is not included on a list published under Section 7408(a) of this t itle or emitted from a source category which is regulated under Section 7412 of this title . . . ." The use of the conjunction "or" to join the two "which" clauses in (i) is most naturally read such that only one of the "which" conditions must be met in order for EPA to have regulatory authority u nder S. 111(d). This reading would provide EPA authority to regulate an existing source for an y air pollutant that is not a criteria pollutant, regardless of the meaning of the "or emitted" claus e that is the subject of the two competing 1990 CAA Amendments (Nordhaus & Gutherz, Regulation of C O2 Emissions From Existing Power Plants Under S. 111(d) of the Clean Air Act: Progra m Design and Statutory Authority, 44 ELR 10,366, 10,377 n.89 (May 2014). Additional support for construing section 111(d) to permit standards of performance for such emissions appears in Konschnik, K., EPA's 111(d) Authority Follow Homer and Avoid the Sirens, LegalPlanet (May28, 2014), http://legalplanet.org/2014/05/28/guest-blogger-kate-konschnik- epas-111d-authority-follow-homer-andavoid-the-sirens/ (incorporated herein by reference )). As discussed above, the history, purpose, and structure of the Clean Air Act, of the 1990 Ame ndments, and of section 111(d) all persuasively show that EPA may regulate CO2 emissio ns from existing EGUs under section 111(d). Accordingly, under any acceptable heuristic , the Clean Power Plan is an appropriate exercise of EPA's authority under that provision of the statute and is on firm legal footing.

Response 47: EPA agrees that it has the authority to promulgate regulations addressing CO2 emissions from existing power plants under section 111(d). EPA’s discussion of this issue is in Section IV of the preamble.

Comment 48: Commenters stated the decision to regulate existin g power plants under Section 111(d) of the Clean Air act is not lawful because i t violates the previsions set forth in the 5 U.S. Code - 706(2)(A),(B),(C), and (E). Commenters stat ed that 5 U.S. Code - 706(2)(A) requires that the law not be arbitrary or capricious. Commen ters stated that, generally, laws require specific guidelines of how the regulated body shoul d act in order to comply appropriately so to avoid any violations. However, commenters added, th e proposed rule is not clear as to what the states should specifically do in order to meet the goals of the EPA. Commenters stated that, for example, the EPA reads, "While this proposal lays o ut state-specific CO2 goals that each state is required to meet, it does not prescribe how a state should meet its goal." Commenters stated that before issuing any type of regulation under Section 111, the EPA must first identify specific139

types of facilities (which are generally known as s ources under the CAA) that, in the EPA's judgment, emit air pollution that endangers public health. Commenters stated that as part of this process, the EPA creates source categories and care fully defines the type of facilities that fall within these categories; however, specific types of facilities in the proposed rule that endanger public health were not mentioned. Commenters added that climate change should be addressed by Congress and not by regulatory fiat via the EPA.

Response 48: The EPA disagrees with this comment. The commenters assert in a conclusory fashion that the proposed rule violates each one of the standards of review in the APA. Not only does the APA not apply to his action, but the EPA’s final rule is reasonable, thorough, wellexplained and well within the EPA’s statutory autho rity. The final rule provides ample guidance to states on ways to comply with the emission guide lines, including application of the BSER, other systems of emission reduction, trading, and t he state measures approach. The commenters’ assertion that the EPA did not identify specific ty pes of facilities that endanger public health is absurd. The final rule applies to existing steam el ectric generators and stationary combustion turbines, the largest sources of CO 2 emissions in the U.S. The final rule’s applicabili ty provisions

further describe which facilities are affected sour ces subject to the rule’s requirements.

Comment 49: Commenters cautioned EPA from reading the Supreme Court's decision in AEP v. Connecticut to grant EPA the authority to regula te GHGs under section 111(d), explaining that dicta in that case regarding the suitability of Sec tion 111(d) in regulating GHGs was based on an erroneous paraphrase of the relevant statute. Comme nters added that decision was issued prior to EPA's regulation of electric generating units under Section 112.

Commenters stated that the legal position stated bythe 18 Governors is more fully developed in the challenge brought against EPA in the US Court o f Appeals for the District of Columbia Circuit by a group of 12 State Attorneys General, l ed by Attorney General Patrick Morrisey of West Virginia [see Case No. 14-1146]. Commenters st ated in their suit the AG's referred to the guidance rendered by the Supreme Court on June 20, 2011, in American Electric Power, Inc. v. Connecticut, 131 S. Ct. 2527 (2011) ("AEP"), that E PA could not regulate the same sources under both Section 112 and Section 111(d) of the Cl ean Air Act. Commenters continued, stating Section 112 permits national regulations of sources of hazardous air pollutants. Commenters stated Section 111(d), on the other hand, is a rare ly used provision that grants EPA authority to require States to regulate emissions from existing sources on a state-by-state basis under certain narrow circumstances, but that expressly excludes f rom EPA's authority the power to regulate "any air pollutant ... emitted from a source catego ry which is regulated under [Section 112]." 42 U.S.C. section 7411(d). Commenters noted that in AE P, several parties brought a common law public nuisance action, seeking abatement of emissi ons of carbon dioxide. Commenters stated

the Court held "that the Clean Air Act and the EPA actions it authorizes displace any federal common law right to seek abatement" of such emissio ns. Commenters stated in the course of explaining that EPA is required under Section 111(d ) to regulate carbon dioxide emissions from existing sources under certain circumstances, the C ourt noted the Section 112 "exception" to the regulation of such existing sources under Section 1 11(d): "EPA may not employ ... 111(d) if existing stationary sources of the pollutant in que stion are regulated under ... the ' hazardous air140

pollutants' program, [Section 112]." Commenters add ed that on February 16, 2012, EPA

finalized a national emission standard for new and existing power plants under Section 112. Specifically, commenters stated EPA reaffirmed thatpower plants should be listed as a "source category" under Section 112. Commenters stated thatit then proceeded to impose under Section 112 onerous regulations on those plants, with which compliance will cost over $9 billion per year. As a result, commenters stated, the Clean Air Act in Section 111, as interpreted by the Supreme Court in the AEP case, precludes additional regulation of existing power plants under Section 111(d).

Response 49: EPA disagrees that it may not promulgate regulation s addressing CO2 emissions from existing power plants under section 111(d). EP A’s discussion of this issue is in Section IV of the preamble. Further, EPA’s views on arguments presented by the commenters, including commenters’ discussion of the AEP opinion, are also discussed in EPA’s briefs in the Murray Energy and West Virginia cases, No. 14-1112, No. 14 -1146, and No. 14-1151 (D.C. Cir.).

Comment 50: Commenters stated that in the 1990 Clean Air Act a mendments, Congress took pains to ensure that its strengthening of section 1 12 would not inadvertently impair any of the Clean Air Act's other vital protections, and Congre ss explicitly provided in section 112 that "No emission standard or other requirement promulgated under this section shall be interpreted, construed or applied to diminish or replace the req uirements of a more stringent emission limitation or other applicable requirement establis hed pursuant to section [111] of this title, part C or D of this subchapter, or other authority of th is chapter or a standard issued under State authority." (31542 U.S.C. - 7412(d)(7).) Consequent ly, commenters stated, EPA retains its obligation to-for example-regulate non-HAPs as well as HAPs from new stationary sources under section 111(b), regardless of whether those s ources are also regulated under section 112. Commenters stated that similarly, states and EPA ar e required to ensure that state implementation plans under section 110 achieve atta inment with National Ambient Air Quality Standards for criteria pollutants, even if those pl ans include requirements for existing sources that are also subject to section 112 standards. Com menters stated Congress unambiguously intended for the requirements of section 110, 111 a nd 112 to continue operating in careful coordination to protect the public from all harmful pollutants emitted by stationary sources. Also, commenters added that in the 1990 amendments, Congr ess also carved out one categorical exception from the seamless threefold framework for controlling stationary source emissions. Commenters stated that by enacting section 129, Con gress crafted a unique regime for one type

of source: solid waste incineration units. Commente rs stated Congress decided to exclude these units from regulation under section 112 and instead subject them to tailored regulation under sections 129 and 111. (Clean Air Act Amendments, Pu b. L. 101-549, -S. 305, 104 Stat. 2399, 2583 (1990) (codified at 42 U.S.C. - 7429(h)(2)). T hus, commenters stated that in the only case where Congress excluded a class of sources from reg ulation under sections 110, 111(d), or 112 because other CAA controls were sufficient, it prov ided for rigorous, source category-specific regulation elsewhere in the CAA. Commenters stated that the treatment of EGUs is entirely different, explaining that Congress authorized regu lation of EGUs under section 112 if EPA "finds such regulation is appropriate and necessaryafter considering the results of" a study of the141

health risks of EGU HAP emissions after the impleme ntation of other CAA requirements. 42 U.S.C. section 7411(n)(1)(A). Commenters stated Con gress did not remove EGUs from the tripartite framework for stationary source regulati on, but allowed EPA to forego regulation of

EGU HAP emissions if incidental control of HAPs thr ough other CAA programs (such as the CAA cap-and-trade program to reduce acid rain, whic h only affects EGUs) rendered that regulation unnecessary. Commenters stated that in d eciding whether to regulate EGUs' HAP emissions, EPA was required to consider its study o f the public health impacts of those HAP emissions; (42 U.S.C. - 7412(n)(1)(A). Section 112( n) mandates three studies: EPA's study of the hazards EGU HAP emissions pose to public health aft er the imposition of other Clean Air Act requirements, which the agency must consider in its "appropriate and necessary" finding, S. 7412(n)(1)(A); an EPA study of EGU mercury emission s and technologies for controlling such emissions, S. 7412(n)(1)(B); and a National Institu te of Environmental Health Sciences study on the threshold level of mercury exposure below which adverse human health effects are not expected, S. 7412(n)(1)(C). None of these studies n on-HAP emissions.) Commenters stated Congress did not require this study to analyze the public health impacts of non-HAP pollution

from EGUs because the Act does not force EPA to cho ose between regulating non-HAP emissions from EGUs under 111(d) or regulating HAP emissions under 112. Commenters continued, stating that the 1990 Clean Air Act Amen dments also revised the Act to more effectively protect human health and the environmen t in several other important ways. For instance, commenters stated, Congress amended secti on 110 to authorize EPA to require SIP revisions that are necessary to adequately mitigate interstate pollution transport, (Id., S. 101, 104 Stat. at 2407 (codified at 42 U.S.C. - 7410(k)(5))) and authorized EPA to apply certain sanctions if a state submits an inadequate SIP. (Id., S. 101, 104 Stat. at 2407-08 (codified at 42 U.S.C. S. 7410(m))) Commenters stated the legislation introdu ced new landmark programs and strengthened existing programs, prompting PresidentGeorge H.W. Bush to declare: "This legislation isn't just the centerpiece of our envir onmental agenda. It is simply the most significant air pollution legislation in our nation's history, and it restores America's place as the global leader in environmental protection." (Remarks of Pr esident George H.W. Bush Upon Signing S. 1630, 26 Weekly Comp. Pres. Doc. 1824 (Nov. 19, 199 0) (reprinting the President's signing statement of Nov. 15, 1990))

Response 50: EPA agrees that it has the authority to promulgate regulations addressing CO2 emissions from existing power plants under section 111(d). EPA’s discussion of this issue is in Section IV of the preamble.

Comment 51: Commenters stated the proposed rule is unlawful be cause EPA has not finalized Section 111(b) "new source" regulation of carbon di oxide emission from coal-fired power plants, which is legally necessary before any Section 111(d ) regulation of those plants. And given that the proposed Section 111(b) new source standards ar e patently unlawful, no such predicate is likely forthcoming.

Commenters stated that the Proposed Section 111(d) Rule Is Illegal Because EPA Has Not Finalized any Lawful Rule for Equivalent New Source s, explaining that as EPA has acknowledged since 1975, this provision prohibits E PA from invoking Section 111(d) unless and142

until it has completed and finalized a lawful rule for "new sources of the same type." 40 Fed. Reg. 53, 340, 53,340 (Nov. 17, 1975); see also 39 F ed. Reg. 36,102, 36,102 (Oct. 7, 1974) (proposed rule) (predicates for use of 111(d) inclu de "[a] standard of performance for affected facilities has been promulgated under section 111(b ) of the Act") (emphasis added). Commenters continued that put another way, promulgation of law ful new source performance standards is "a necessary predicate for the regulation of existing sources" under Section 111(d). 79 Fed. Reg. 1,430, 1,496 (Jan. 8, 2014). Commenters stated thatin the present rulemaking, EPA claims that it will satisfy that "necessary predicate" through two proposed rulemakings, once they are finalized: (1) the proposed new source performance standards for new fossil fuel-fired power plants ("New Source Rule"), 79 Fed. Reg. 1,430 (Jan . 8, 2014); and (2) performance standards for modified and reconstructed fossil fuel-fired po wer plants ("Modified Source Rule"). See Proposal, 79 Fed. Reg. 34,852 (June 18, 2014). Comm enters posited that EPA's arguments are flawed as a matter of law, and as a result the prop osed Section 111(d) rule will be entirely

unlawful.

Commenters stated they do not believe EPA promulgat ed an appropriate Section 111(b) standard of performance that is a necessary prerequisite for proposed Section 111(d) standards. Commenters stated EPA does not have the legal autho rity to propose Section 111(d) standards without properly establishing Section 111(b) standards of performance.

Commenters stated EPA lacks the sufficient legal pr erequisites to propose and finalize the proposed guidelines, explaining that Section 111(d) makes clear that EPA may not finalize guidelines for an existing source unless new source s of the same type of entity are already subject to a section 111(b) performance standard. C AA section 111(d)(1). Commenters explained that EPA's Subpart B regulations spell th is requirement out in more detail and extend it to the proposal stage: Only "[c]oncurrently upon or after" standards have been proposed for "a designated pollutant from [new] facilities" may EPA propose draft emission guidelines for the same pollutant for "designated facilities." 40 C.F. R. section 60.22(a). Commenters stated that a "designated facility" is an "existing facility" of the "same type" that is subject to a standard of performance under section 111(b). Id. Section 60.21 (b); 40 Fed. Reg. at 53,341, and thus, in order for EPA to lawfully propose and finalize sect ion 111(d) emission guidelines for EGUs, it first must have lawfully proposed and finalized sta ndards of performance for new EGUs of the same type. Commenters concluded that the legal prer equisites for lawful emission guidelines governing CO2 emissions from EGUs have not been met , and the Proposed Guidelines are therefore unlawful and may not be finalized.

Response 51: We disagree with these comments. We explain in the preamble to the final rule the timing considerations for promulgation of a rule un der section 111(b) for that rule to serve as a predicate for a section 111(d) rule and why this se ction 111(d) rule has a valid predicate.

Comment 52: Commenters stated that the proposed Section 111 (b) rule for new sources raises serious legal and technical questions about whether carbon capture and sequestration, explaining that. Commenters stated if the Section 111(b) rule fails, the necessary predicate for Section 111(d) rule for existing sources fails with it, and therefore, EPA must wait until the federal courts143

have assured the agency that its Section 111(b) app roach for new EGU s is legally sound before it can finalize its Section 111(d) proposal.

Commenters stated that in order for the EPA to requ ire states to submit Section 111(d) plans to control emissions from existing sources in a partic ular industrial categories, the EPA must first

have established lawful standards under Section 111 (b) for new sources in that category. Commenters said the Section 111(d) proposal identif ies two pending 111(b) proposals that have

not been finalized and are unlawful. Commenters als o said the new-source proposal is unlawful because it violates express restrictions on Section 111(b) rulemakings imposed by the Energy Policy Act of 2005 by inappropriately considering c ertain government-subsidized projects in the Section 111 standard-setting process. (See generally Comments of the Competitive Enterpri se Institute on Clear Air Act section 111(b) Carbon Po llution Standards (May 9, 2014).

Commenters stated the legal implication is critical since the EPA is barred from implementing an existing source rule under 111(d) without having su ccessfully promulgated a new source standard under 111(b).

Response 52: We disagree with these comments. We explain the leg al basis for the section 111(b) rule for newly constructed sources in the pr eamble for that rule, including addressing the
commenters’ concerns about EPA05 and CCS.

Comment 53: Commenters also remarked that EPA states that any EGU that becomes subject to a state plan under section 111(d) that subsequently undergoes a modification or a reconstruction must remain subject to the regulatory requirements of the state plan in addition to having to comply with EPA's requirements for modified and rec onstructed EGUs under section 111(b). 79 Fed. Reg. at 34,962-63, 34,965, 34,969, 34,974-75, 34,987. Commenters strongly disagreed with

EPA's statement. Commenters stated the CAA does notallow EPA to regulate the same source as both an existing and new source. Commenters said although a state may have authority under section 116 of the CAA to impose additional regulat ory requirements on a modified or reconstructed source as a matter of state law, EPA cannot compel states to regulate a given unit as both an existing and new source. Commenters stat ed under the plain language of the CAA, a source that is regulated under section 111(b) becau se it is a "new" source cannot simultaneously be subject to regulation under section 111(d) as an "existing" source under federal law, and vice versa. Commenters continued, stating that in this r ulemaking, EPA states that "a modified or reconstructed source would be subject to both (1) t he CAA section 111(d) requirements that it had previously been subject to and (2) the modified source or reconstructed source standard being promulgated under CAA section 111(b)." 79 Fed . Reg. at 34,903. Likewise, commenters stated that in its proposed standards for modified and reconstructed EGUs under section 111(b), EPA asserts that "existing sources that are subject to requirements under an approved CAA section 111(d) plan would remain subject to those r equirements after undertaking a modification or reconstruction." 79 Fed. Reg. at 34,974. Comment ers stated EPA claims that it can adopt this position because section 111 "is silent on whether requirements imposed under a CAA section 111(d) plan continue for a source that ceases to be an existing source because it modifies or reconstructs." 79 Fed. Reg. at 34,904. Commenters s tated that this is simply incorrect, and states144

that Section 111 speaks clearly and directly to the issue. Commenters stated the CAA states that "[t]he term "new source" means any stationary sourc e, the construction or modification of which is commenced after the publication of regulations ( or, if earlier, proposed regulations) prescribing a standard of performance under this se ction which will be applicable to such source." CAA section 111(a)(2). Commenters said Sec tion 111(a)(6) states that "[t]he term "existing source" means any stationary source other than a new source." Commenters posited that these definitions, by their own terms, are mut ually exclusive, and thus, under section 111, an existing source is one that has commenced construct ion before the publication of regulations (or proposed regulations) applicable to new sources of the same type. Commenters stated such existing sources are subject to standards promulgat ed pursuant to section 111(d) of the Act.

Commenters stated a new source can come into existe nce either through greenfield construction that commences after publication of proposed rules applicable to such new sources or through commencing at such time a reconstruction or modific ation of what would otherwise be an existing source. (A physical or operational change that increases the capacity of an existing source to emit may trigger a "modification" analysi s. See, e.g., 40 C.F.R. section 60.14. Replacement of components that involves investments exceeding 50 percent of the fixed capital costs of a comparable, entirely new facility trigge rs the reconstruction analysis. See Id. section 60.15(d)) Commenters stated the critical fact here is that once a modification or reconstruction commences, the "existing" source ceases to exist an d a "new" source takes its place. Commenters remarked that new sources are subject to regulation pursuant to section 111(b), and under the CAA's explicit terms, section 111(d) cannot apply t o sources subject to section 111(b). Commenters continued, stating that EPA has long cod ified this strict division between existing and new sources in binding legislative rules govern ing CAA programs. Commenters stated that for instance, modified and reconstructed sources ar e regulated as new sources under the CAA's new source "maximum achievable control technology" program pursuant to section 112(g)(2). Commenters stated in finalizing NSPS for Subpart Da units in 1998, the Agency emphasized that

the inclusion of modified sources in the definition of "new source" in section 111(a)(2) is a "clear statutory mandate." 63 Fed. Reg. at 49,448. Comment ers stated EPA's newfound discovery of supposed statutory ambiguity cannot be reconciled w ith the Agency's longstanding implementation of the CAA. Ignoring this clear stat utory division, commenters remarked, the Agency offers two policy reasons to justify some ne wly found statutory ambiguity and its proposal to subject new sources to both existing an d new source regulatory requirements. Commenters stated first, EPA claims that modified o r reconstructed units should remain subject to the existing source program because "[u]ncertain ty about whether units would remain in the program could be very disruptive to the operation o f the program." 79 Fed. Reg. at 34,904. Commenters stated second, EPA argues that it should continue to apply the existing source program to modified and reconstructed sources becau se "potential discrepancies in the stringency of the two programs" might "creat[e] incentives for sources to seek to avoid their obligations under a CAA section 111(d) plan by undertaking modi fications." Id. Commenters stated both of EPA's concerns would be resolved by withdrawing the proposed standards for modified and

reconstructed EGUs. Commenters stated EPA has discr etion not to impose NSPS for modified or reconstructed units and by choosing not to do so in this instance, it would avoid the concerns it has raised. Moreover, commenters stated, even assum ing that EPA's concerns are valid regarding145

disruption and uncertainty to the section 111(d) pr ogram over whether units would leave the program, this does not justify ignoring the plain l anguage of the statute. Commenters said state plans devised with the correct statutory interpreta tion in mind can include provisions to accommodate such changes. Indeed, commenters stated , EPA envisions many sources shutting down as a result of the Proposed Guidelines. RIA at3-34, Tbl. 3-12. Commenters stated if state plans can accommodate units leaving the program thr ough cessation of operations, there is no reason why they cannot accommodate the transition o f modified or reconstructed units from the existing source program to the section 111(b) progr am for new sources. In addition, commenters stated, to the extent EPA has designed a section 11 1(d) program that cannot function while adhering to the requirements of section 111(a)(2) a nd section 111(a)(6), it is EPA's proposal, not the CAA, that must be revised. See, e.g., ASARCO, 5 78 F.2d at 329 (where EPA is concerned about practical application of proposed rule, solut ion is to alter standard). Commenters finally stated, although states can opt to impose additiona l requirements on modified and reconstructed
EGUs as a matter of state law under section 116 of the Act, EPA cannot require the states to regulate a unit as both a new and existing source a s this would violate the CAA. Commenters stated it should also be noted that newly construct ed EGUs that commence construction after January 8, 2014 (the date of publication of the pro posed NSPS rule for new EGUs under section 111(b)) are outside of the section 111(d) program. Commenters stated to the extent these newly constructed EGUs displace higher-emitting generatio n units (such as an NGCC unit that replaces a coal-fired EGU), however, it would be permissible for a state that employs the rate-based approach under section 111(d) to allow the megawatthours generated by these newly

constructed units to be included in the denominator for a state's rate, and this approach would be similar to how renewable energy and new nuclear uni ts are treated in the Proposed Guidelines. For states that use the mass-based approach, the em issions from newly constructed units would not be included in the program at all. Commenters c ontinued, stating that with regard to EPA's

concern that there could be an incentive for source s to modify or reconstruct "to avoid their obligations under a CAA section 111(d) plan," 79 Fe d. Reg. at 34,904, for the reasons explained above, a source that undertakes modifications or un dergoes reconstruction after the date of the proposal of the applicable NSPS has no obligations under a section 111(d) plan by operation of the CAA; it could only have such obligations as a m atter of state law at the state's discretion. Commenters further stated, to the extent EPA has pr oposed discrepancies in the new source and existing source programs that might create incentiv es the Agency dislikes, the solution is not rewriting the terms of the CAA. See UARG v. EPA, 13 4 S. Ct. at 2445 ("An agency has no power to "tailor" legislation to bureaucratic polic y goals by rewriting unambiguous statutory terms."), and the reason for this discrepancy is EP A's decision to propose a section 111(d) program that bears no relationship to the requireme nts of section 111 or to any section 111 standard EPA has previously written. See, e.g., 61 Fed. Reg. 9905 (Mar. 12, 1996) (municipal solid waste landfills); 42 Fed. Reg. 55,796 (Oct. 1 8, 1977) (sulfuric acid production units).

Commenters stated if EPA were to write a section 11 1(d) standard that complied with the CAA, this discrepancy would disappear. Commenters conclu ded, stating EPA's proposed interpretation of the CAA is inconsistent with the statutory text of sections 111(a)(2) and 111(a)(6) and is unsupported by rational policy considerations. Comm enters stated EPA must, therefore, revise the Proposed Guidelines to conform to the CAA requi rement that new sources subject to section146

111(b) requirements (including modified and reconstructed sources) cannot also be required to comply with section 111(d) state plans under the CA A.

Commenters recommended EPA provide further justific ation for its position that existing EGUs initially subject to the Section 111(d) requirement s would remain subject to these requirements if

later a unit is modified or reconstructed and becom es subject to the 111(b) rules governing

modifications and reconstructions.

Commenters stated that in EPA's June 2014 proposed modification and reconstruction rule, the Agency proposes to keep modified and reconstructed sources in a state's section 111(d) plan if at

the time of modification and reconstruction the sou rce was subject to the state's section 111(d) plan: "For the reasons discussed in the Legal Memor andum . . . all existing sources that become

modified or reconstructed sources and which are sub ject to a CAA section 111(d) plan at the time of the modification or reconstruction, will re main in the CAA section 111(d) plan and remain subject to any applicable regulatory require ments in the plan, in addition to being subject to regulatory requirements under CAA section 111(b) ".(79 Fed. Reg. at 34,963/col. 1) Similarly, commenters observed, in the proposed Section 111(d) guidelines, EPA restates this proposal, reiterating that the modified and reconstructed uni t would be subject to Section 111(d) and Section 111(b) requirements simultaneously: "The EP A is proposing that an existing source that becomes subject to requirements under CAA section 1 11(d) will continue to be subject to those requirements even after it undertakes a modificatio n or reconstruction. Commenters stated under this interpretation, a modified or reconstructed so urce would be subject to both (1) the CAA section 111(d) requirements that it had previously been subject to and (2) the modified source or reconstructed source standard being promulgated und er CAA section 111(b) simultaneously with this rulemaking. Commenters stated that it should b e noted that this proposal applies to any existing source subject to any CAA section 111(d) p lan, and not only existing sources subject to the CAA section 111(d) plans promulgated under this rulemaking."(79 Fed. Reg. at 34,903/col. 3) While commenters understand the initial appeal o f this proposal for purposes of ensuring continued emission reductions from existing units, commenters stated EPA's proposal creates significant legal risk under the CAA. Commenters ex plained that Section 111(a) is clear in defining a new source as "any stationary source, th e construction or modification of which is commenced after the publication of regulations (or, if earlier, proposed regulations) prescribing a standard of performance under this section which wi ll be applicable to such source." Commenters stated Section 111(b)(1)(B) further requ ires EPA to establish separate standards for new sources within one year of listing the source c ategory: "Within one year after the inclusion of a category of stationary sources in a list under subparagraph (A), the Administrator shall publish proposed regulations, establishing Federal standards of performance for new sources within such category." In contrast, commenters remarked, existing sources are clearly regulated under Section 111(d), which requires EPA to establi sh "standards of performance for any existing source for any air pollutant" for which ai r quality criteria have not been issued or which is not included on a list published under Section 1 08 of the CAA or emitted from a source category which is regulated under Section 112 of th e CAA, but "to which a standard of performance under this section would apply if such existing source were a new source."147

Commenters argued that EPA cannot regulate the same sources under both provisions, stating

that the statute is clear "either a source is new s ubject to standards under Section 111(b), or a source is an existing source subject to standards u nder Section 111(d). Commenters stated this separation is reinforced by the different criteria guiding standard setting for new versus existing sources in each provision. Commenters stated that E PA ignores the plain meaning and structure of section 111 by attempting to subject sources to both existing and new standards at the same time, and instead of proposing dual, simultaneous r egulation of modified and reconstructed units that would increase legal risk for the rule, EPA sh ould simply clarify that any physical or operational change undertaken to improve efficiencyor comply with a state's Section 111(d) plan represents a pollution control project and is thus excluded from triggering modification. Commenters stated this would greatly simplify the p rogram and largely address the problem of dual regulation. Commenters stated that while exist ing sources traditionally have not triggered reconstruction as often as modification, Commenters anticipated that many existing sources will opt to repower rather than build a new Greenfield p lant. Commenters' October 16, 2014, comments submitted in response to EPA's proposed ru le for modified and reconstructed sources recommended that the Agency finalize standards thatare reflective of what repowered sources

can achieve. Commenters remarked that if EPA insist s on proceeding with the more legally vulnerable approach of keeping reconstructed source s in Section 111(d), the Agency could simplify compliance by establishing that a reconstructed source's compliance with a state's 111(d) plan also satisfies Section 111(b) standards for reconstructed units. Alternatively, commenters stated, as noted above in the PSD/NNSR d iscussion, EPA has similar discretion not to impose NSPS for modified or reconstructed units, and in fact, EPA has previously decided not

to establish certain NSPS for modified or reconstru cted units in specific source categories, including Asphalt Processing and Asphalt Roofing Ma nufacture (which exempts modified

sources from the visible emission standard 40 C.F.R . 60.472(a)(3)) and Synthetic Fiber Production Facilities (that does not apply to modif ied facilities 40 C.F. R. 60.600(c)). Commenters posited that deciding not to impose stan dards on these units would prevent dual regulation.

Commenters stated the Proposal indicates that 'an e xisting source that becomes subject to requirements under CAA 111(d) will continue to be s ubject to those requirements even after it

undertakes a modification or reconstruction.' Comme nters said however, Section 111 is clear that (1) 'modified' units must be regulated as a 'new so urce' and (2) the definitions of 'new source' and 'existing source' are mutually exclusive - one unitcannot be both. Commenters stated a 'new source' is clearly defined as 'any stationary sourc e, the construction or modification of which is commenced after the publication of regulations (or, if earlier, proposed regulations) prescribing a standard of performance under this section which wi ll be applicable to such source.' Commenters said once an existing source is modified, it become s a 'new source' by virtue of the language in Section 111(a)(1) that deems modified sources to be 'new sources.' Commenters said under the EPA's own longstanding regulations, the same would ordinarily be true of any reconstructed source an 'existing source,' on the other hand, is not defined directly, but only as 'any stationary

source other than a new source.' Commenters stated Congressional intent to make these terms mutually exclusive could not be clearer. Commenters said to suggest that a source can be both is148

therefore directly inconsistent with the statute. C ommenters said the EPA offers nothing to support its interpretation that a source can be reg ulated as both a 'new source' and an 'existing source' simultaneously. Commenters stated never in the history of the Clean Air Act has a source been classified under both 'new' and 'existing' cat egories at the same time, and the EPA should withdraw its attempt to do so from this Proposal.

Commenters continued that duplicative regulation un der Sections 111(b) and 111(d) is not permitted by the CAA, and EPA cannot regulate the s ame source under both CAA Section 111(b) and CAA Section 111(d). Commenters explained that an EGU regulated under CAA Section 111(b) because it is a "new source"-which m odified and reconstructed sources are defined to be - cannot simultaneously be subject to regulation under CAA Section 111(d) as an existing source and vice versa. Commenters stated m odified or reconstructed sources that were previously subject to a state plan under CAA Sectio n 111(d) cannot be required to continue to be covered by CAA Section 111(d), although states do h ave discretion to keep those sources in their CAA Section 111(d) plans if the states choose to do so.

Commenters stated EPA asked for comment on bringing Section 111(b) Standards into the Section 111(d) Program. Commenters stated Section 1 11 specifically prohibits combining the two programs when it states, "The term 'existing so urces' means any stationary source other than a new source." Commenters stated they believe that this provision is dispositive.

Commenters stated that the EPA should not attempt t o regulate CO2 emissions for the same source under both section 111(b) and section 111(d) of the Clean Air Act. The commenters said considering how modified and reconstructed sources may already be drawn from the group of existing units that the EPA has proposed to regulat e for CO2 emissions under Section 111(d), the commenters recommended that the EPA simply exempt m odified and reconstructed sources from CAA Section 111(b) regulation. The commenters said that states should retain the flexibility to exempt or assign regulatory applicability to modifi ed and reconstructed sources for CO2 emissions. The commenters stated that if necessary, these state-driven, flexible assignments could be proposed by the states in their 111(d) Sta te Implementation Plans. The commenters said new NGCC or coal generating units regulated under S ection 111(b) and subject to CO2 New Source Performance Standard (NSPS) requirements sho uld not also be subject to regulation under Section 111(d) existing unit requirements.

Commenters stated the CAA is clear that the EPA's c hoice of regulations under Section 111 is binary: the EPA may either (1) promulgate a federal standard of performance for new sources pursuant to CAA Section 111(b)(1)(B); or (2) prescr ibe regulations pursuant to Clean Air Act Section 111(d)(1)(A) requiring states to submit a p lan 'similar to Section 110' that adopts standards of performance for existing sources . Commenters said a source can be a 'new source' or an 'existing source,' but it cannot be both at t he same time. Commenters stated the Act's binary division is then reemphasized in the definitions se ction of Section 111, which provides: (2) The term 'new source' means any stationary source, the construction or modification of which is commenced after the publication of regulations (or, if earlier, proposed regulations) prescribing a standard of performance under this section which wi ll be applicable to such source. (6) The term149

'existing source' means any stationary source other than a new source. 42 U.S.C. Section 7411(a)(4) & (6). Commenters stated the definitions are clear that an 'existing source' cannot be a 'new source' and therefore, regulation of the same source under Section 111, subsections (b) and (d) at the same time cannot be squared with the exp ress language of the CAA. Commenters said this means that the suggestion in the Proposed Rule that: ' The EPA is proposing that an existing source that becomes subject to requirements under C AA section 111(d) will continue to be subject to those requirements even after it underta kes a modification or reconstruction. Under this interpretation, a modified or reconstructed so urce would be subject to both (1) the CAA section 111(d) requirements that it had previously been subject to and (2) the modified source or reconstructed source standard being promulgated under CAA section 111(b) simultaneously with this rulemaking.' Commenters stated that 79 Fed. Reg. 34,903, col. 3, cannot be reconciled with the plain text of Section 111. Commenters said 'an agency has no power to 'tailor' legislation to bureaucratic policy goals by rewriting unambiguous statutory terms,' regardless of how desirable the agency believes such an interpretation may be. See UARG v. EPA, 573 U.S. ---, slip op. at 21 (2014). Commenters stated the EPA's existing NSPS r egulations also make this point. Commenters said they state, flatly, that 'an existi ng facility, upon reconstruction, becomes an affected facility,' 40 C.F.R. Section 60.15(a), and an 'affected facility means, with reference to a stationary source, any apparatus to which [an NSPS] standard is applicable,' 40 C.F.R. Section
60.2 Affected facility . Commenters stated by contrast, the 111(d) impleme nting regulations in 40 C.F.R. Part 60, Subpart B provide that a "designate d facility means any existing facility (see Section 60.2(aa)) which emits a designated pollutan t and which would be subject to a standard of performance for that pollutant if the existing facility were an affected facility (see Section 60.2(e))." 40 C.F.R. Section 60.21(b) (emphasis add ed). Commenters said it is thus clear that a designated facility cannot also be an affected faci lity at the same time. Commenters stated the EPA has nowhere justified its sweeping change in in terpretation that upends years of consistent application of Section 111 of the CAA. Commenters s tated similarly, the EPA has nowhere supported its novel contention that a 'reconstructe d facility' is still an existing facility. Commenters said this interpretation flatly contradi cts 40 C.F.R. Section 60.15(a), which states that a facility that is reconstructed is an 'affect ed facility' (i.e., one subject to the NSPS standar ds, and not a 'designated facility'). Commenters stated the EPA's interpretation requires disregard of its own regulations - regulations that the agency s pecifically stated are not open for comment and hence are not subject to change in this rulemaking.

Response 53: The EPA is not finalizing the proposed one-in-alway s-in approach, so these comments are moot. Also see Section XXII of the leg al memo regarding UARG.

Comment 54: Commenters stated EPA's authority under section 111 (d) is limited to issuing "emission guidelines" addressing factors relevant t o the states' implementation of the BSER that has been adequately demonstrated to reduce CO2 emis sions at a source (inside the fence). Commenters noted that Section 111(d) specifically d irects EPA to establish a procedure for states to submit plans establishing performance sta ndards for existing sources. States possess considerable discretion and flexibility under the A ct in developing standards of performance based on EPA's emission guidelines. Commenters stat ed to the extent EPA's guidelines are based150

on replacing equipment to improve the efficiency of the generating unit, EPA should clearly exempt such activities from being considered a "mod ification" for purposes of NSR permitting, particularly in light of EPA's Office of Enforcemen t and Compliance Assurance's previous focus on these type of projects in their enforcement case s. Commenters stated these projects have also been the target of third party citizen suits conten ding they represent violations of the NSR rules.

Response 54: We disagree with this comment. We discuss in the pr eamble for this rule the implications of affected EGUs’ compliance actions, including implementing building block 1 measures, for NSR.

Comment 55: Commenters stated EPA's fallback attempt to argue the Modified Source Rule could provide the "necessary predicate" for its sec tion 111(d) proposal when the New Source Rule is held unlawful is a transparent and illegal end-run around Section 111's text and structure. See 79 Fed. Reg. at 34,852. Unsurprisingly, comment ers stated EPA can point to no authority or prior examples to support such an approach, because it is plainly unlawful. Commenters stated under Section 111(d)'s plain text, the predicate ru lemaking must lawfully regulate equivalent "new" sources not simply equivalent modified or rec onstructed sources only. See 42 U.S.C. section 7411(d)(1)(A)(ii). Commenters stated the te rm "new source" is not ambiguous in this context. Instead, Section 111(a)(2) of the Act defi nes it as "any stationary source, the

construction or modification of which is commenced after the publication of regulations (or, if earlier, proposed regulations) prescribing a standa rd of performance under this section which will be applicable to such source." 42 U.S.C. secti on 7411(a)(2). Commenters explained that as multiple submitted comments on the modified-source proposal demonstrate, the EPA's position

that Section 111's ostensible silence as to whether a source that undergoes modifications ceases to be an existing source subject to 111(d) standard s allows it to subject sources to both the 111(b) modified-source and 111(d) existing-source regimes is unlawful. But commenters added such arguments from silence are an "untenable" means of proving agency authority. See infra Section III; see also Aid Ass'n for Lutherans v. U.S. Posta l Serv., 321 F.3d 1166, 1174-75 (D.C. Cir. 2003). Commenters continued that both the structure of Section 111 and its subsections defining "new" and "existing" sources make perfectly clear t hat these are mutually exclusive terms: an "existing" source that undergoes modifications beco mes a "modified" source, which is treated as a "new" source for Section 111's purposes, and ther efore falls under 111(b) alone. Commenters concluded that because EPA may not lawfully issue a Section 111(b) modified source rule that covers only modified sources, let alone impose both that rule and a 111(d) rule on existing sources that undergo modifications, the modified-so urce rule will not and cannot provide a lawful predicate for the existing-source rule.

Commenters stated the proposed NSPS is flawed with EPA suggesting that the Proposed

Modified and Reconstructed Source Rule can serve as the requisite Section 111(b) predicate rule for the Proposed Rule. (42 U.S.C. - 7411(a)(2); Id. at S. 7411(a)(6)(emphasis added); Id. at S. 7411(a)(2); EPA expressly recognizes the perverse i ncentives its suite of proposed rules creates. 79 Fed. Reg. at 34,904 (explaining that one reason for EPA's otherwise inexplicable attempt to subject modified and reconstructed sources to the S ection 111(d) standard "is to avoid creating incentives for sources to seek to avoid their oblig ations under a CAA section 111(d) plan by151

undertaking modifications. Commenters stated the EP A is concerned that owners or operators of units might have incentives to modify purely becaus e of potential discrepancies in the stringency of the two programs, which would undermine the emis sion reduction goals of CAA section 111(d).").) Commenters explained that EPA proposes to treat modified and reconstructed sources as being both new sources and existing sources at t he same time and states this is impermissible under the plain terms of the statute, noting that u nder Section 111(a), the categories of new sources and existing sources are mutually exclusive , and a source may not belong to both categories at once. Commenters concluded that to th e extent that EPA wishes to treat modified and reconstructed sources as existing sources subje ct to the proposed Section 111(d) standard, it may not at the same time contend that they are new sources subject to a Section 111(b) standard, and that because this is hat EPA does, the modified/reconstructed source rule cannot serve as a predicate for issuance of the very same Section 111 (d) standard to which those sources would be subject. Commenters stated that the crux of the mat ter is that EPA may only categorize modified sources as either new or as existing; it may not tr eat such sources as both; and more specifically, the Agency may not choose and treat modified source s as "new" for establishing a predicate rule, yet "existing" for purposes of subjecting them to c ontinued regulation under the existing source rule. Commenters stated that if EPA opts to treat m odified and reconstructed sources as existing sources, then, contrary to EPA's assertions, the Pr oposed Modified and Reconstructed Source Rule cannot serve as the requisite Section 111(b), new-source predicate rule for the Proposed Rule, and in either case, EPA cannot regulate modif ied and reconstructed sources under the Proposed Rule.

Response 55: EPA disagrees with these comments. Under section 111(d), EPA “shall prescribe regulations” with respect to emissions from existin g sources if certain predicates are met. One of the predicates for regulation of a pollutant under 111(d) is that the pollutant be one “to which a standard of performance under this section would ap ply if such existing source were a new source.” See section 111(d)(1)(A)(ii). Clearly, a standard for newly constructed sources is a “new source” standard that is a predicate for 111(d ) regulation. But “new source” is defined to

also include a source “the modification of which is commenced after the publication of regulations (or, if earlier, proposed regulations) prescribing a standard of performance under this section which will be applicable to such source.” Further, under EPA regulations in 40 CFR 60.15, sources that meet the definition of “reconstruction” in 40 CFR 60.15(b) are considered to be new sources. Thus, standards for any of these t hree types of sources are properly considered to be “new source” standards, and any of these can serve as the predicate “new source” standard under section 111(d)(1)(A)(ii).

Further, with respect to the portions of this comme nt that concern the regulation of modified or reconstructed sources under section 111(d) after th ey became subject to standards under 111(b), as explained in section VIII of the preamble, the E PA is not finalizing its proposal on that point.

Comment 56: Commenters stated that EPA's authority under Secti on 111 (d) of the Clean Air Act (the Act) is limited to regulating sources thatwould be regulated under Section 111 (b) of the Act if they were "new" sources.(See 42 U.S.C.A Section 7411 (d)(1) ("The Administrator shall prescribe regulations which shall establish a procedure ... under which each State shall ...152

establish[] standards of performance for any existi ng source ... to which a standard of performance under this section would apply if such existing source were a new source ... ")) Commenters state that the source category subject t o regulation under Section 111 is coal-fired electric generating units. EPA's methodology sets e mission reduction targets based on reductions purportedly achievable through re-dispatch from coa l to gas (Block 2), development of renewable energy (Block 3), and implementation of e nergy efficiency measures (Block 4).

Commenters state that these reductions cannot be ac hieved by actions taken at sources within the source category at issue and, thus, should not be c onsidered in determining the best system of emission reductions or as the basis for State-speci fic emission goals under Section 111 (d).

Response 56: We disagree with this comment. We discuss in sectio n V. of the preamble for this rule our justification for including the measures i n building blocks 2 and 3 as part of the BSER, including responding to the commenters’ comments.

Comment 57: Existing guidelines under 111(d) should not be setat a level more stringent than new source performance standards established for th e same source category under section 111(b)

Commenters stated the Proposed Emission Guidelines compound the problem created by establishing inequitable state carbon emissions goa ls by setting those goals for some states, including Virginia, at a level well below that whic h the EPA has proposed for new fossil fuelfired electric generating units as NSPS under secti on 111(b) of the Act. Commenters said the second paragraph of the EPA's "The Clean Air Act in a Nutshell: How It Works" from 2013 says, "The law calls for new stationary sources to be built with best technology, and allows less stringent standards for existing stationary sources ." Commenters stated an examination of the Congressional record indicates that this is how Con gress intended section 111 to operate all along.

Commenters stated the legislative history of sectio n 111 implicitly makes clear that NSPS for new sources under section 111(b) were intended to b e more stringent than existing source Emission Guidelines under section 111(d), not the o ther way around. Commenters said the legislative history discusses in depth several reas ons why NSPS should be more stringent than Emission Guidelines for existing sources under sect ion 111(d). Commenters stated these reasons include: 1) the fact it is more economical to insta ll state-of-the-art pollution control equipment on new sources than to retrofit it onto existing plant s; 2) to spur the development of new technologies, and; 3) not to unduly hasten the shut -down of existing facilities. Congress stated:

[I]n establishing standards of performance based up on emission reduction realizable with the best technological system of continuous emission re duction, believes that it is prudent public policy to require achievement of the maximum degree of emission reduction from new sources, while encouraging the development of innovative tec hnological means of achieving equal or better degrees of control. (Emphasis added.)153

Commenters stated Congress reiterated its directive to the EPA that new sources should be more stringently regulated in the following Clarifying S tatement to the legislative history of the 1977

Clean Air Act Amendments:

Clarification of Section 111(d). This section is al so intended to clarify the basis for standardsetting for existing sources under section 111(d) o f the Act. Under the committee bill, the standards in the section 111(d) State plan would be based on the best available means (not necessarily technological) for categories of existi ng sources to reduce emissions.

Commenters stated taken in the context of the rest of section 111's legislative history, this statement clearly implies that the "best available means" requirement of section 111(d) did not have to include section 111(b)'s more rigorous tech nology mandate. Commenters said Congress never contemplated a situation where it would be ac ceptable to impose a more stringent standard under section 111(d) than under section 111(b).

Commenters stated the Proposed Emission Guidelines, however, fall into the trap Congress meant section 111 to avoid. Commenters said by sett ing the carbon emissions goals for some states at a level far below what the EPA has propos ed for natural gas combined cycle (NGCC) units under section 111(b), the Proposed Emission G uidelines will hasten the shutdown of existing section 111(d) affected units and spur the construction of new NGCC plants. Commenters said this is not the result Congress int ended when it drafted section 111. Commenters urged the EPA to revise the Proposed Emi ssion Guidelines so that no state goal is

set at a level lower than the rate established for new NGCC units under section 111(b).

Response 57: We disagree that the section 111(d) standards are more stringent than the section 111(b) standards. We explain in the Legal Memorandu m why the section 111(b) and (d)

standards are based on different determinations of the BSER.

Comment 58: Commenters stated EPA's proposed guidelines for ex isting power plant performance standards under the Clean Air Act Secti on 111(d) are simply the most recent example of the Federal Government's usurping author ities properly delegated to the states. Commenters concurred that EPA's proposal interferes with traditional state authority and energy planning and appears to be well beyond the agency's authority under the CAA.

Commenters stated that EPA has improperly attempted to limit Section 111(d)'s expressed statutory authority, delegation of authority to the states, and in doing so, EPA's proposal not only rejects state discretion under the Clean Air Act bu t jettisons decades of unquestioned precedent establishing state jurisdiction over electricity ma rkets.

Commenters stated the CPP interprets the contours o f Section 111(d) in a way wholly unsupported by the text of the statute. Commenters said the CPP seeks to bring about major changes to Indiana's electricity sector using progr ams that have nothing to do with existing power plants. Commenters provided examples includin g: uneconomic dispatch of natural gasfired power plants, new investments in renewable en ergy, and overall reductions in electricity154

demand by Indiana businesses and households. Commen ters said each of these policies may or may not have merit, but they cannot be authorized b y the federal CAA at the EPA's insistence. Commenters said rather, decades of consistent law a nd precedent demonstrate that such policies are the exclusive province of the Indiana State Leg islature and Indiana regulators as delegated. Commenters stated the CAA merely authorizes the EPA to craft a "best system of emissions reduction" at "existing sources," not to craft a st atewide system to reduce emissions of a pollutant that happens to originate at power plants.

Commenters stated that this rule bypasses the feder al and state legislature, ties the hand of the Governor, and usurps my authority as a constitution al officer. Commenters concurred.

Commenters continued, stating "The EPA's proposals for major expansions of state energy efficiency, renewable energy programs interfere wit h traditional state authority and energy planning and appear to be well beyond the agency's authority under the Clean Air Act." The commenters closed by stating they also feel that th is should be in the hands of the President and the Congress and the Senate, not the EPA.

Commenters stated, these consequences, moreover, wo uld all stem from a patently unlawful application of the Clean Air Act. Commenters stated EPA's proposal seeks to expand the scope of Section 111(d) in an unprecedented manner. Comme nters stated it would do so at the expense of state authority that is expressly identified and preserved in the Clean Air Act and in the unquestionable jurisdiction of states over intra-st ate electricity markets. Commenters stated that it would do all of these things for no discernible benefit.

Commenters stated that EPA's proposals for major ex pansion of state energy efficiency and renewable energy programs interfere with the tradit ional state authority to manage the plan and appear to be well beyond the agency's authority und er the Clean Air Act. Commenters continue that State legislatures have set renewable energy g oals based on balancing local economic and

environmental considerations now and find that thos e judgments had been second guessed by EPA. Commenters added that Congress itself is not able to agree on national renewable energy targets. The EPA focused the rule only on actions t o reducing emissions within plant programs.

Commenters stated EPA has improperly attempted to l imit Section 111(d)'s expressed statutory authority, delegation of authority to the states, a nd in doing so, EPA's proposal not only rejects state discretion under the Clean Air Act but jettis ons decades of unquestioned precedent establishing state jurisdiction over electricity ma rkets.

Commenters stated this rule bypasses the federal an d state legislature, ties the hand of the Governor and usurps my authority as a constitutiona l officer.

Response 58: We disagree. For the reasons discussed in section V .A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and155

legislative history. In section V. of the preamble for this rule, we also explain the respective roles of the EPA and the states under CAA section 111(d).

We disagree that we are expanding our authority to include wholesale energy market regulation. Our emission guidelines simply reflect an achievabl e emissions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. Moreover, these emission guidelines provide states with the f lexibility to establish, implement, and enforce standards of performance and do not intrude on the regulatory domain of FERC or the states. It cannot be said that because environmental requireme nts may have an effect on the wholesale energy market that the EPA is therefore intruding i nto energy regulation. Certainly, in the legislative history of the 1970 CAA Amendments, Con gress expressly identified power plants as a priority source category for regulation under CAA section 111. Finally, we note that, with respect to comments regarding demand-side energy ef ficiency, the EPA is not including building block 4 as a component of BSER.

Comment 59 : Commenters stated that states must have the opportunity to exercise the same authority as EPA, explaining that under Section 111 (b), traditional canons of statutory

construction dictate that States exercise the same authority with respect to existing sources under Section 111(d) as EPA exercises with respect to new sources under Section 111(b). Commenters stated Section 111(b) directs EPA to establish[] Fe deral standards of performance for new sources within such category, while Section 111(d) directs States to establish standards of performance for any existing source to which a stan dard of performance would apply if such existing source were a new source. Commenters state d when identical words such as the direction to establish standards of performance are used in different subparts of the same statutory provision, they must be given the same me aning. See Gustafson, 513 U.S. at 570; ACF Indus., Inc., 510 U.S. at 342; Retzlaf, 510 U.S. at143. Thus, commenters concluded that when establishing standards of performance for existing sources under Section 111(d), States must be permitted to exercise the same authority that EPA e xercises under Section 111(b): namely to conduct a BSER analysis, select the best system of emission reduction for a source category or subcategory, and then translate that into a source- specific emission standard.

Commenters stated the Proposed Rule disrupts the co ngressionally established and judicially recognized division of responsibility for implement ing existing source standards under Section 111(d) of the Clean Air Act, and it conflicts with the Act by reducing states to secondary partners with EPA, when, in fact, Congress intended states t o take the lead. Commenters explained that this flaw is evident in the general approach EPA pr oposes to take: first, in establishing the CO2 emission rate limits applicable to each state; and second, in the specific details of state plan implementation discussed throughout the Proposal.

Response 59 : We disagree with these comments for the reasons s tated in our response to the previous comment in this section regarding cooperat ive federalism under the CAA, as well as in section VIII of the Legal Memorandum accompanying t he final rule. Furthermore, in section V. of the preamble for this rule, we also explain the respective roles of the EPA and the states under CAA section 111(d).156

Comment 60: Commenters stated that the U.S. EPA's proposed exis ting-source rule overreaches far beyond the bounds established by the Clean Air Act, and it endeavors to impose "beyond the fenceline" regulations to revamp Ohio's entire elec tricity infrastructure -- from power generation, to transmission, and even to consumption. Commenter s stated Congress did not intend for the Clean Air Act's relatively-narrow Section 111(d) to be used as a mechanism for far-reaching regulatory overhaul of the Nation's energy-generati on sector. Cf Whitman v. Am. Trucking Assn., Inc., 531 U.S. 457, 468 (2001) (EPA may not exercise broad regulatory control absent explicit statutory authority: "Congress, we have he ld, does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provi sions-it does not, one might say, hide elephants in mouseholes."). Commenters continued, s tating that the United States Supreme Court has echoed its concern with EPA overreach specifica lly in the context of U.S. EPA's desire to regulate greenhouse gas emissions. UA.R.G. v. EPA, 134 S.Ct. 2427 (2014), explaining that in UA.R.G., the Supreme Court again emphasized that va st regulatory expansions should not arise from an agency's interpretation of an arguably ambi guous statute, but must instead derive from "clear congressional authorization." Id. at 2444; a ccord Whitman, supra. Commenters contended that the proposed rule ranges far beyond the author ity that Congress has provided to U.S. EPA. Commenters continued that as set forth more fully i n the Brief for Petitioners recently filed by

Ohio and its fellow Petitioners in State of West Vi rginia, et al. v. United States Environmental Protection Agency (D.C. Cir. No. 14-1146), U.S. EPA purports to rest its rulemaking authority on a section of the Clean Air Act (section 111(d)) that the EPA previously has described as designed to confront specific problems involving po llutants that are "highly localized and thus [where] an extensive procedure, such as the SIPS re quire, is not justified." 40 Fed. Reg. at 53,340; 53,342 (Nov. 17, 1975). Commenters stated u nder Section 111(d), "the number of designated facilities per state should be few," and the resulting state plans "much less complex than the SIPs" for criteria pollutants under Clean Air Act section 110. Id. at 53,345. Commenters argued that Congress has not conferred upon U.S. EP A the power it seeks to wield here. Indeed, not only has Congress withheld such a sweeping gran t of authority, it explicitly has outlawed what U.S. EPA now proposes - the double regulation of sources under both Clean Air Act section 112 and section 111(d).

Response 60: EPA’s implementing regulations were issued pursuantto CAA section 111(d), which required the Administrator to establish a CAA section 110-like procedure for states to submit plans, which establish, implement, and enfor ce standards of performance for existing sources in a CAA section 111(b) regulated source ca tegory. In accordance with CAA section 111(d) and pursuant to these implementing regulatio ns, the EPA develops emission guidelines to assist states in preparing and submitting such stat e plans.

In the preamble to EPA’s implementing regulations, the EPA explained that “Section 111(d) of the Act was specifically designed to require contro l of pollutants which are not presently considered ‘hazardous’ within the meaning of sectio n 112 and for which ambient air quality standards have not been promulgated.” 40 Fed. Reg. at 53341. Thus, “Congress specifically recognized the need for control of a third category of pollutants” even though “these pollutants might later be reclassified as hazardous or criteri a pollutants.” Id. at 53342. Although the EPA157

observed that sometimes health and welfare problems caused by such pollutants may be “highly localized,” neither CAA section 111(d) nor the EPA’ s implementing regulations restrict CAA section 111(d) to “localized” pollutants.

In response to comments that “argued that the nine months provided for development of State plans after promulgation of an emission guideline b y EPA would be insufficient,” the EPA noted that CAA section 111(d) plans would “[i]n most case s” be “less complex than the SIPs” and that “the number of designated facilities per State shou ld be few.” Id. at 53345. Nevertheless, because “Congress provided only nine months for SIP develop ment,” the EPA saw no reason to lengthen the nine-month provision for purposes of CAA sectio n 111(d). That said, EPA’s implementing regulations authorize the Administrator to extend the period for submission of any plan, and she has exercised that authority for this rule.

Comment 61: Commenters stated that without direct Congressional authorization, EPA cannot exercise authority over state Public Utility Commis sions (PUCs), state energy offices, or state energy policy, and EPA does not have the authority to dictate fuel use, require reduced utilization of units or require re-dispatch as a co mpliance mechanism, mandate rules governing end use or mandate renewable requirements for state s. Commenters contended that EPA's authority is limited to authorities provided by the CAA over pollution control at source specific fossil fuel units that "may emit any air pollutant. "(42 USC Section 7411(a)(3))

Response 61: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

We disagree that we are expanding our authority to include wholesale energy market regulation nor state retail regulation. Our emission guideline s simply reflect an achievable emissions limit through the application of the BSER and do not in t hemselves require states or sources to implement the BSER. Moreover, these emission guidel ines provide states with the flexibility to establish, implement, and enforce standards of perf ormance and do not intrude on the regulatory

domain of FERC or the states. It cannot be said tha t because environmental requirements may have an effect on the wholesale energy market that the EPA is therefore intruding into energy regulation. Certainly, in the legislative history o f the 1970 CAA Amendments, Congress expressly identified power plants as a priority sou rce category for regulation under CAA section

111.

Comment 62: Commenters stated that EPA's use of the words "guid ance" and "information" throughout this regulation indicates that informati on is all that EPA is authorized to provide the States but EPA is not authorized by that regulation to issue emission "guidelines," like the present proposal, that contain binding state-wide e mission reduction goals and that are thus "guidelines" only in name. Commenters stated that e ven if EPA has the authority to issue CAA section 111(d) regulations governing CO2 emissi ons from coal-fueled EGUs, the Proposed Rule impermissibly intrudes upon Wyoming's express authority under CAA section 111(d) to "establish" state-specific standards of performance . Commenters explained that under158

CAA section 111(d), EPA's authority is limited to a dopting a "procedure" under which "each State shall submit to the Administrator a plan whic h (A) establishes standards of performance .... ", and the Proposed Rule is far more than procedura l. Rather, commenters contended, the Proposed Rule would usurp Wyoming's CAA and state l aw authority to "establish" performance standards by dictating what the standards must be, and additionally, EPA has structured the Proposed Rule in a way that would prevent Wyoming f rom considering "the remaining useful life of the existing source" in applying a state-es tablished performance standard.

Commenters stated what EPA calls "standards of perf ormance" that it leaves to states to determine are not standards of performance within t he meaning of CAA Section 111(a) and (d). Rather, commenters remarked, they are akin to state implementation plan measures that states must adopt to attain an EPA-established NAAQS. Comm enters continued, stating that under the Proposed Rule, whatever plan the state submits, how ever, must ensure that emissions from the regulated source category must decline to the level of EPA's specific goals, and thus, directly or indirectly, EPA is dictating the level of emission reduction regulated sources must make, and it has determined that level by applying the BSER fact ors. Commenters concluded that EPA is promulgating performance standards within the meani ng of CAA Section l11(a) but commenters explained that under CAA Section 111(d), however, C ongress gave states, not EPA, authority to establish those standards. Commenters stated that g iven that the Proposed Rule gives EPA primary decision making at the expense of North Dak ota, EPA claims of "state flexibility" are

not accurate.

Commenters added the EPA must recognize its own narrow authority to establish emissions guidelines under section 111(d) and, consistent wit h the cooperative federalism principle inherent in the CAA, state primacy to establish per formance standards and develop state plans to satisfy the guidelines.

Response 62: We disagree with these comments. In the preamble fo r this rule, we explain the respective roles of the EPA and the states under se ction 111(d) and we explain the interpretation of the “remaining useful life” provision of section 111(d)(1) and how the states may rely on it.

Comment 63: Commenters stated these proposed rules leave no do ubt that EPA's action under

Clean Air Act section 111- and the Clean Air Act in general- usurps Congressional authority and contravenes Congress's manifest commitment to keepi ng coal as an important component of the nation's electricity mix

Response 63: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

EPA also disagrees with the characterization that c oal will not remain an important part of the nation’s energy mix.159

Comment 64: Commenters stated that the proposed rule's "outside -the-fence" emission

reductions from non-affected sources and measures i ncluding re-dispatching NGCC, RE, and EE would be necessary to meet the targets proposed for Pennsylvania. Commenters said because of the potential effects on fuel diversity, energy pri ces, and other consumer effects, commenters believe that such policy decisions are better left to the United States Congress or other elected officials. Commenters stated clearly, this is a con cern of the Pennsylvania House of Representatives and Senate, both of which passed le gislation that was signed into law by the Governor of Pennsylvania. Commenters said this legi slation mandates that commenters submit the proposed Section 111 (d) State Plan to the Gene ral Assembly for their review and approval.

Response 64: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y. As explained in section VIII.B.1 of the preamble, w e have provided adequate time for necessary state legislative processes.

Comment 65: Commenters stated that in Utility Air Regulatory Gr oup v. EPA, the Supreme Court cautioned against the kind of expansive interpretation of the CAA that pervades the CPP. Commenters explained that the Court has noted that an EPA interpretation of its authority would be unreasonable if "it would bring about an enormou s and transformative expansion" in the EPA's regulatory authority without "clear congressi onal intent."(134 S. Ct. 2427,2444 (2014).) "When an agency claims to discover in a long-extantstatute an unheralded power to regulate a significant portion of the American economy, we typ ically greet its announcement with a measure of skepticism."(Id. (quoting FDA v. Brown & Williamson, 529 U.S. 120, 159, 188 (2000)) (internal quotation marks omitted)) "We exp ect Congress to speak clearly if it wishes to assign to an agency decisions of vast 'economic and political significance."(Id.) Commenters contended that the CPP seeks to do precisely what t he Court has already rejected: to vastly expand the EPA's regulatory authority without Congr essional approval by discovering in a "long extant statute an unheralded" power in section 111( d) of the Act. Commenters said one of the Court's prior decisions addressing this issue offer s the following caution to such an expansive interpretation of the Act: "[I]n [the] EPA's assert ion of that authority, we confront a singular situation: an agency laying claim to extravagant st atutory power over the national economy while at the same time strenuously asserting that t he authority claimed would render the statute 'unrecognizable to the Congress that designed' it." (Utility Air Regulatory Group, 134 S. Ct. at 2444)" Commenters stated further still, it is incon ceivable that Congress would have intended for this rarely used provision of the Clean Air Act to empower the EPA to usurp state oversight of electricity markets. Commenters stated as the Supre me Court explained, "Congress . . . does not alter the fundamental details of a regulatory schem e in vague terms or ancillary provision-it does not, one might say, hide elephants in mouse holes." (Whitman v. Am. Trucking Assns., Inc., 531 U.S. 457,468 (2001).

Response 65: We disagree with this comment. In sections IV and V . of the preamble to this rule, and the Legal Memo, we explain our legal basis and, in light of the U.S. Supreme Court160

jurisprudence the commenters cite, why this rule is consistent with CAA authority and does not overstep the bounds of that authority.

Comment 66: The commenters have identified other legal issues raised by the Clean Power Plan that EPA should consider. Commenters said specifica lly, the regulation of existing sources through the Clean Power Plan seems to be premature; see CAA section 111(d)(1)(A), 42 U.S.C. section 7411(d)(1)(A). Commenters said Secti on 111(d)(1)(A)(ii) requires EPA to first finalize standards of performance for new sources b efore developing procedures for the submission of state plans for existing sources. Id. Commenters said moreover, EPA has not yet made an endangerment finding as required by Section 111(b)(1)(A) to support the proposed Clean Power Plan; see CAA section 111(b)(1)(A); 42 U.S.C. section 7411(b)(1)(A).

Response 66: We disagree with these comments. We respond to each of the points raised in the preamble for this rule.

Comment 67: Commenters disputed EPA's suggestion that the ESPS can be revised to require

further reductions in the future. Commenters stated that Section 111(d) standards to date have been interpreted as a one-time standard but EPA sug gests in the Preamble that it can continually re-visit the existing unit standard in the future t o obtain lower state emissions rates and tougher standards. Commenters explained that while Section 111(b) calls for revisiting new unit standards every 8 years, there is no such provision concerning existing units under Section 111(d), and EPA does not have the authority to cont inually force states to tighten the existing

unit standards.

Response 67: This comment is outside the scope of this rulemakin g.

Comment 68: Commenters remarked about alternatives to federal enforcement of PUCN regulatory actions. Commenters stated that to addre ss the concerns set forth above, the Nevada Agencies suggest that the USEPA could avoid these i ssues by clarifying that its authority is limited to controlling emissions from affected sour ces. Commenters believed that an approach that is more aligned with the federal-state partner ship embodied in the Clean Air Act will make the final goal federally enforceable, but would lea ve matters traditionally within state purview to

state enforcement. Commenters added that States nee d the flexibility to be able to commit to achieving the targeted emission reduction goals wit hout making the programs to achieve reductions themselves federally enforceable. Commen ters closed, stating that an implementation plan such as the state commitment approach outlined in the preamble (79 FR at 34901) would allow states the ability to timely react to ever-ch anging markets or other circumstances.

Response 68: The final rule limits federal enforceability to emi ssion standards for affected EGUs, whether in the context of an emission standar d type plan, a state measure type plan, the federal backstop, or a federal plan.

Comment 69: Commenters remarked that states cannot be subject to citizen suits solely for failure to meet their state goals, citing Sierra Cl ub v. Korleski, in which the Sixth Circuit161

explained that a state is liable to citizen suits w hen it acts as a polluter rather than a regulator.(Sierra Club v. Korleski, 681 F.3d 342 (6 th Cir. 2012); see Bennett v. Spear, 520 U.S. 154 (1997). In implementing state plans pursuant to the Proposed Rule, commenters explained that states are acting as regulators and, therefore , would not be subject to citizen suits for failure to implement their state plans. Furthermore, commen ters stated if a state has implemented all the measures in its state plan, the state has implement ed the performance standard envisioned under Section 111 regardless of whether the state achieve s all of its expected emission reductions. Commenters posited that Section 111 of the CAA, unl ike Section 110, does mandate that a state

attain a uniform numeric emissions standard. Accord ingly, commenters stated there would be no violation of a standard to support a citizen suit. Commenters stated that courts may only enforce specific state plan strategies, and may not enforce a state plan's overall objectives or aspirational goals, which would bar citizen suits against states for failing to meet their state goals (See, e.g., Bayview Hunters Point Community Advocates v. Metro. Trans., 366 F.3d 692 (9th Cir. 2003); Trustees for Alaska v. Fink, 17 F.3d 1209, 1212 (9t h Cir. 1994)), and thus, citizen suits may be brought against entities regulated under the plan t o enforce the measures in the plan, but citizens

could not sue a state due to the failure of the sta te to meet its state emission reduction goal.

Response 69: Section 304 of the CAA authorizes citizens to brin g civil actions against any person who is alleged to have violated or to be in violation of “an emission standard or

limitation” but does not authorize citizens to dire ctly compel state action to implement the requirements of CAA section 111(d). The EPA therefo re agrees with commenters that section 304 does not allow for a citizen suit against a sta te that fails to implement a section 111(d) state plan or fails to meet its emission goal, where the state has not itself taken on the obligation to

meet an “emission standard or limitation.” Under th e “emissions standards” approach, affected EGUs—and not states—will be subject to citizen enfo rcement through section 304. Although states will be obligated to take corrective measure s for certain emission standards plan approaches if an implemented state plan fails to ac hieve required emission reductions, the EPA

does not believe this would constitute a “violation ” of an “emission standard or limitation” for purposes of section 304. Under the “state measures” approach, if the state plan fails to achieve required emissions reductions it will trigger a fed erally enforceable “backstop.” Emissions standards imposed under the backstop would be enfor ceable against affected EGUs under section 304. In the event a state fails to submit an approv able state plan, the EPA is authorized to impose a federal plan in the state’s place.

Comment 70: Commenters stated that in order to draft a FIP tha t incorporates EPA's proposed building blocks, EPA would have to order utility co mpanies to dispatch their power plants differently than they do now; it would have to orde r utilities - and likely others - to build renewable resources in place of lower cost resource s; it would have to order utilities to build or retain nuclear plants, and require state commission s to allow cost recovery for such plants in utility rates (or require the state legislature and governor's office to commit to subsidize such resources) - actions backed by authority that is qu estionable, at best, and with federalism implications.162

Response 70: This comment is beyond the scope of this rulemaking , which establishes EGs for state plans in the first instance. The EPA is propo sing a federal plan to implement the EGs in a separate action. While this comment is out of scope , we note that we disagree with the commenters that these are the types of actions thatthe EGs would compel the agency to take in order to achieve the emission performance rates in the EGs. The proposed federal plan will be designed to achieve emissions reductions through th e application of emission standards that apply to, and are enforceable against, the affected EGUs.

Comment 71: Commenters stated that inflexible emission limits are inconsistent with the state role defined by Congress in section 111(d). Comment ers explained that Section 111(d) establishes specific roles for EPA and states. Comm enters noted that EPA proposes specific mandatory "goals," or target emission rates, for ea ch state characterizing these numerical limits as 4'emission guidelines,"(EPA Legal Memorandum at 32. Compare 40 C.F.R. section 60.21(d), discussed in EPA's Legal Memorandum at 31, with 42 U.S.C. section 7411(a) (EPA's definition of "emission guideline" is nearly identical to the statutory definition of "standard of performance" in section 111 of the Clean Air Act)) and EPA will not adjust the mandated emission rate where a state cannot implement one of the building blocks, unless the state demonstrates that it cannot achieve the rate by oth er means- by applying the other BSER building blocks more aggressively or through some o ther "related, comparable measures."(Proposed Rule, 79 Fed. Reg. at 34,893) C ommenters stated that once finalized, EPA does not intend to allow states to alter the targetemission rates, (Proposed Rule, 79 Fed. Reg. at 34,835 ("Once the final goals have been promulgated , a state would no longer have an opportunity to request that the EPA adjust its CO2 goal."); Id at 34,897-98 (rejecting suggestion that states be allowed to treat EPA's goals "as adv isory rather than binding"); Id. at 34,892 (noting that the emission rates promulgated in the final rule will be binding emission guidelines for state plans)) , and these inflexible emission l imits are inconsistent with the state role defined by Congress in section 111(d).

Response 71: We disagree with this comment. We discuss the state goals and our legal authority for them in the preamble for this rule.

Comment 72: Commenters stated EPA's ability to craft a rule th at accounts for regional differences and the disproportionate impacts on coa l producing states of regulating CO2 emissions from power plants is limited by its Clean Air Act authority.

Response 72: We disagree. As we explain in section V of the prea mble, section 111, including as interpreted by the D.C. Circuit, may be reasonab ly interpreted to authorize the EPA to take regional differences into account.

Comment 73: Commenters stated that the proposed NSPS for new s ources does not address the same type of facilities as the proposed guidelines. Commenters explained that even if EPA could demonstrate that it proposed a lawful NSPS for new EGUs, which it cannot do, its Proposed Guidelines do not address the "same type" of facili ty that the proposed NSPS for new EGUs

would address. Commenters stated on this basis alon e the Proposed Guidelines lack the legal163

prerequisite that a standard of performance for the same type of facility will have been proposed concurrently with or before the section 111(d) prop osal. Id. Commenters stated under the Agency's own Subpart B regulations, emissions guide lines may apply only to designated facilities - the same type of facility regulated un der the new source NSPS rule. In this context, commenters stated that would mean that EPA could pr opose emission guidelines only for fossil fuel-fired EGUs that meet the threshold requirement s set forth in the new source NSPS proposal. Commenters stated that in the Proposed Guidelines, however, EPA never defines what the regulated "designated facility" would be. Commenter s stated that in an attempt to accomplish its novel, systems-based approach to BSER, EPA dodges t he question of what the "designated facility" is and instead has introduced a new term: "affected entity." See, e.g., 79 Fed. Reg. at 34,951, Proposed 40 C.F.R. section 60.5740(a)(3) (S tate plans must identify "the state emission performance level for affected entities that will b e achieved through implementation of the plan."); Id., Proposed 40 C.F.R. section 60.5740(a) (3)(ii)(B) ("For a mass-based CO2 emission performance level, the identified level of performa nce must represent the total tons of CO2 that will be emitted by affected entities during each pl an performance period."). Commenters stated EPA defines "[a]ffected [e]ntities" to mean "any of the following: An affected EGU, or another entity with obligations under this subpart for the purpose of meeting the emissions performance goal requirements in these emission guidelines." Id . at 34,956, Proposed 40 C.F.R. section 60.5820 (emphasis added). Commenters stated the CAA and EPA's Subpart B regulations prohibit EPA from expanding the universe of covered sources under section 111(d) beyond those regulated as new sources under section 111(b). CAA section 111(d)(1); 40 C.F.R. section 60.22(a). Commenters remarked that the Subpart B re gulations limit EPA to proposing and finalizing emission guidelines for "designated faci lities," not "affected entities," which EPA has defined to be a world much larger than "designated facilities." See, e.g., 40 C.F.R. section 60.21(e) ("Emission guideline means a guideline setforth in subpart C of this part, or in a final guideline document published under section 60.22(a) , which reflects the degree of emission reduction achievable through the application of the best system of emission reduction which (taking into account the cost of such reduction) th e Administrator has determined has been adequately demonstrated for designated facilities." ) (second emphasis added); Id. section 60.22 (a) ("Concurrently upon or after proposal of standards of performance for the control of a designated pollutant from affected facilities, the Administrator will publish a draft guideline document containing information pertinent to contro l of the designated pollutant [from] designated facilities."); Id. section 60.22(b)(5) ( "The Administrator will specify different emission guidelines or compliance times or both for different sizes, types, and classes of designated facilities when costs of control, physic al limitations, geographical location, or similar factors make subcategorization appropriate."). Comm enters continued, stating that EPA insists it is "following the requirements of" the Subpart B re gulations and is not amending or reopening them, 79 Fed. Reg. at 34,844, and yet it fails to a dhere to the most basic of the Subpart B requirements: identifying the regulated source cate gory, which by law must be identical to the source category regulated under the section 111(b) NSPS. In fact, commenters stated the very first non-definitional sentence of the Subpart B re gulations states that EPA's guideline document must contain "information pertinent to control of t he designated pollutant [from] designated facilities." 40 C.F.R. section 60.22(a). Indeed, co mmenters remarked, the Proposed Guidelines164

would regulate sources that extend far beyond the c oal- and gas-fired EGUs EPA would regulate under its January 2014 NSPS Proposal. Commenters st ated EPA does at times use the term "affected EGU" but such term is not used interchang eably or as a synonym with the term "affected entity." Commenters stated it is clear th at EPA intends for the section 111(d) emission guidelines to apply to "affected entities," not onl y to "affected EGUs." See, e.g., 79 Fed. Reg. at 34,953, Proposed 40 C.F.R. section 60.5780(a) ("You r state plan shall include emission standard(s) that are quantifiable, verifiable, non- duplicative, permanent, and enforceable with respect to each affected entity."); id. at 34,953-5 4, Proposed C.F.R. section 60.5780(f) ("An emission standard is enforceable against an affecte d entity if: (1) A technically accurate limitation or requirement and the time period for t he limitation or requirement is specified; (2) Compliance requirements are clearly defined; (3) Th e affected entities responsible for compliance and liable for violations can be identif ied; (4) Each compliance activity or measure is enforceable as a practical matter; and (5) The Admi nistrator and the state maintain the ability to enforce violations and secure appropriate correctiv e actions . . . ."). Commenters stated only after EPA discusses the requirement that state plans appl y standards to "affected entities," EPA inserts a separate section in its proposed regulatory langu age discussing the "Applicability of State Plans to Affected EGUs." Id. at 34,954. Commenters said s tates must address emissions from affected EGUs in their state plans, but it is abundantly cle ar that EPA's design envisions emissions-related requirements under section 111(d) applying to a muc h broader range of sources than the sources that would be regulated under its section 111(b) NS PS proposal. Commenters stated EPA explains in the preamble that state plans may apply"enforceable measures" that "are implemented by the state or by another entity" in a ddition to EGUs. Id. at 34,837; see also Id. at 34,853 ("Based on requests from stakeholders, the E PA is proposing that states be authorized to submit state plans that do not impose legal respons ibility on the affected EGUs for the entirety of the emission performance level, but instead, by ado pting what this preamble refers to as a portfolio approach, impose requirements on other af fected entities (e.g., renewable energy and demand-side energy efficiency measures) that would reduce CO2 emissions from the affected EGUs."). Thus, commenters concluded, under EPA's Pr oposed Guidelines, the "designated facility" would be EGUs, the state (the entity to w hich EPA is in fact applying a numeric ratebased emissions goal), and other entities, includin g any "private or public third-party entity." Id. at 34,917. Moreover, commenters stated, EPA has no authority, under either section 111(d) or the Subpart B regulations, to adopt nonnegotiable, binding "emission goals" for states as it proposes to do. Subpart B does not even mention the term "emission goal." Commenters stated that both Subpart B and section 111(d) speak in ter ms of "standards of performance." Commenters stated under section 111(a)(1), the stan dard of performance must reflect the degree

of "emission limitation" that is achievable with th e BSER. Commenters stated under section 111(d), states are to establish standards of perfor mance applicable to sources. Commenters stated EPA's convoluted approach disregards both the statu te and its own implementing regulations and would apply to states a binding emission limitation , and states would then be free to apply standards of performance to any "affected entity" i t wishes, without fealty to the restriction that the regulated entity must be identical in the secti on 111(b) and section 111(d) regulations. Commenters stated EPA's interpretation of its own r egulations does not accord with the statute. Moreover, commenters added, because EPA acts contrary even to its own regulations, it is165

entitled to no deference in interpreting them. Fina lly, commenters stated, for the same reasons, EPA's proposal for modified and reconstructed sourc es under section 111(b) is also not sufficient to justify the section 111(d) proposal. See 79 Fed. Reg. at 34,852 ("The EPA intends to complete two CAA section 111(b) rulemakings regulating CO2 f rom new fossil fuel-fired EGUs and from

modified and reconstructed fossil fuel-fired EGUs b efore it finalizes this rulemaking, and either of those section 111(b) rulemakings will provide th e requisite predicate for this rulemaking."). Commenters stated although the CAA defines the term"new source" to include a modified source, CAA section 111(a)(2), the Proposed Guideli nes seek to regulate systems, states, and

sources other than individual EGUs. Commenters stat ed the Proposed Guidelines define an "Affected Entity" as any entity with an enforceable obligation under a state plan. 79 Fed. Reg. at 34,956, Proposed 40 C.F.R. section 60.5820. Comment ers stated this could include nearly any type of entity, "e.g., an entity that is regulated by the state, such as an electric distribution util ity, or a private or public third-party entity." Id. at 34,917. By contrast, commenters stated, the section 111(b) proposals for modified, and reconstructed facilities define the designated facility

as a fossil fuel-fired EGU. Commenters stated this is a mismatch, and added EPA cannot regulate a different type of source under section 1 11(d) than the type of source that is regulated as a new (or modified or reconstructed) source unde r section 111(b). Commenters stated that

because EPA has failed to meet these fundamental le gal prerequisites for proposing and finalizing section 111(d) emission guidelines for C O2 emissions, the Proposed Guidelines are

unlawful and must be withdrawn.

Response 73: The final rule does not authorize state plans to im pose section 111(d) state plan requirements on entities other than affected EGUs; accordingly, the concerns commenters expressed in this comment do not apply to this rule

.

Comment 74: Commenters stated that by making regulation of exi sting sources contingent upon the promulgation of standards of performance for ne w sources, Congress made it clear that Section 111(d) is a supplementary program that buil ds off of the standards of performance and BSER analysis applied to new sources. Yet, commente rs contended, EPA's Proposed Rule for existing sources diverges substantially from the fr amework created in its Section 111(b) proposal, and explain that because Section 111(b) a nd Section 111(d) both cross-reference the same definition of "standard of performance" includ ed in Section 111(a), EPA must apply the same methodology when conducting the BSER analysis for both existing and new sources.

Commenters stated that this is not what EPA did in the proposed rule for existing sources, and EPA's proposed rule for new sources did not rely on the broad-based portfolio approach presented by EPA in this proposed rulemaking but, i nstead, EPA's proposed rule for new sources appropriately limited itself to source specific tec hnological means of reducing CO2 emissions-it contained no "plant to plug" proposals like those i ncluded in Building Blocks 2, 3, and 4 of the current proposal.

Response 74: We disagree. We explain in the Legal Memorandum why the section 111(b) and (d) standards are based on different determinations of the BSER.166

Comment 75: Commenters stated that requiring greater reduction s from states that have already

reduced emissions is not consistent with the struct ure of the CAA. Nowhere in the Act is EPA authorized to require additional reductions from a source simply because it had already achieved the desired level of emission performance. Commente rs stated in a more traditional approach to section 111 standards, EPA would base standards on the emission rate achievable through the use of a particular control technology. Commenters stated if a unit already had installed that control technology, it would be deemed compliant. C ommenters stated this would not be a free pass to the contrary, it would recognize that the s ource had invested in achieving the required emission performance goal early and, therefore, was achieving that goal. Commenters stated in the proposed section 111(d) guidelines, however, re ductions already achieved through state and utility investments in clean energy are not deemed compliant, but are, instead, met with standards that require additional, more stringent r eductions.

Response 75: The EPA recognizes the importance of early actions taken by states and industries to reduce emissions of greenhouse gases and the eff ect these actions have had on global emissions. However, the CAA does not require that e mission guidelines under section 111 provide credit for actions that predate the EPA’s d ecision to regulate emissions from a source category – and commenters have not identified any p rovisions of the CAA to support this contention. While technology-based standards may so metimes result in early-acting facilities being deemed in compliance without further action, this is not a mandatory feature of emissions regulations generally or emission guidelines under section 111(d). Furthermore, trying to account for all actions pre-dating the emission guidelines that may have reduced a state’s or facility’s emissions would be impracticable here. In the final rule, the EPA is establishing uniform emission rates and state targets tailored to emissi on reduction opportunities available to states and sources through the application of the BSER. Fo r a discussion of the EPA’s approach to early actions taken by states or affected entities after promulgation of the final rule but before the first compliance period, see the final rule preambl e at section VIII.B.2.

Comment 76: Commenters stated the New Source Rule - if finaliz ed in anything like its proposed form - will not be a lawful predicate for the proposed Section 111(d) rule. Commenters explained that the New Source Rule is based upon EP A's claim that the "best system of emission

reduction" for carbon dioxide emission from coal-fi red power plants is partial carbon capture and storage (CCS). 79 Fed. Reg. at 1,430 but as 16 Stat es explained in their comment letter to EPA, CCS is not the "best system of emission reduction" because CCS has not been shown to be reasonably reliable, efficient, broadly available, or economically feasible in any commercial setting. Commenters added that, as the States also explained, the proposed New Source Rule violates the Energy Policy Act of 2005 because EPA' s claim that CCS technologies have been "adequately demonstrated" is based on government-fu nded projects that would not be economically viable without government funds; the 2 005 Act expressly forbids EPA from relying on these projects when setting standards un der Section 111. Finally, commenters stated, the New Source Rule is arbitrary and capricious, as the States' comment letter articulated, because EPA's justifications for the rule are contr ary to the agency's own predictions.167

Commenters explained that EPA may not finalize guid elines for existing sources unless new sources of the same type of entity are already subj ect to a section 111(b) performance standard. Commenters stated EPA's proposed NSPS for new coal- fired EGUs fails to meet the statutory requirements for a standard of performance under se ction 111(b) of the Act because partial carbon capture and storage is not adequately demons trated and the proposed NSPS does not actually require a reduction in CO2 emissions. Comm enters stated as a result, the NSPS does not satisfy the legal prerequisite for the Proposed Gui delines.

Commenters stated EPA's proposed NSPS for new Coal- Fired EGUs is unlawful and cannot support Section 111(d) emission guidelines and expl ains that because EPA's proposed NSPS for new coal-fired EGUs fails to meet the statutory req uirements for a "standard of performance" under section 111(b) of the Act, it cannot satisfy the legal prerequisite for the Proposed Guidelines. Commenters stated that the CAA requires a "standard of performance" to be "achievable" and based on a "best system of emissio n reduction" that must be "adequately demonstrated" for sources within a category or subc ategory. CAA section 111(a)(1). Commenters stated the BSER must be a design or proc ess measure that is available for each source type to which the standard will apply. Comme nters stated EPA's proposed NSPS for new Subpart Da fossil-fired units is based on the use o f carbon capture and storage ("CCS"), a technology that, as UARG exhaustively demonstrated in its May 2014 comments to EPA on that proposed rule, is neither available nor adequately demonstrated. Furthermore, commenters added, an NSPS must reduce emissions from a source by incorporating a system of continuous emission reduction into the design of the source it self. Commenters stated EPA's proposed NSPS for new Subpart Da sources failed this most basic t est; the proposed Subpart Da standard would not reduce emissions. Commenters stated the propose d NSPS for new Subpart Da sources, which is based on one element of CCS, would mandate no re duction in the CO2 generated by a source. Instead, it merely requires that a new source separ ate some percentage of the CO2 from its flue gas stream, without imposing any requirements regar ding the CO2's ultimate fate. Commenters stated the proposed NSPS for new Subpart Da units i s a "carbon separation" system, not a "carbon capture and sequestration" system, and ther efore it does not reduce emissions. Commenters stated the proposed 1,100 lb CO2/MWh sta ndard merely reflects the amount of unseparated CO2 a source would be limited to releas ing from its stack. Yet, commenters stated, the total CO2 generated by the source would not cha nge. Commenters stated the remainder of the CO2 generated by the source and not emitted from th e stack would be sent off-site with the expectation that it would be sequestered. Commenter s stated that it would not violate the proposed NSPS if 100 percent of the CO2 separated b y the capture technology subsequently were released to the atmosphere. Thus, commenters s tated, the proposed NSPS for Subpart Da units would not reduce emissions. Moreover, comment ers stated, in the proposed NSPS for new EGUs, EPA failed to show that the proposed separati on-based standard is achievable for sources within the category as a whole because its limited discussion of achievability considers only integrated gasification combined cycle ("IGCC") uni ts, which make up only one type of source covered by the proposed standard. Commenters state d a standard based solely on "IGCC with a single-stage [water gas shift] reactor and a two-st age acid gas removal system," 79 Fed. Reg. at 1470, a form of pre-combustion CO2 separation, cann ot support a standard for pulverized coal168

("PC") or circulating fluidized bed units, which re quire post-combustion separation. Commenters stated EPA did not analyze or even assert that the proposed separation standard is achievable for coal-fired units using post-combusti on capture methods. Commenters stated any standard that applies to PC units based on a findin g that it is achievable with a technology that only IGCC units can use is contrary to law. Comment ers continued that because there is no lawful proposed standard of performance for new coa l-fired EGUs, EPA lacks the legal prerequisite to propose or promulgate the Proposed Guidelines for those sources. Commenters stated a standard of performance under section 111( b) of the Act must be "achievable" and "adequately demonstrated" for sources in a source c ategory. Commenters stated because EPA's January 2014 NSPS Proposal for new sources is neith er, the section 111(b) new source rule does not meet the requirements to be a standard of perfo rmance for new coal-fired units. Commenters

concluded that without an effective standard for ne w units, EPA cannot propose a standard for existing units. See CAA section 111(d)(1); 40 C.F.R . section 60.22(a).

Response 76: We disagree with these comments. We explain in the section 111(b) rule our basis for the standards of performance we finalize in tha t rule and respond to all comments submitted on that rule. It is not necessary to respond substa ntively to comments concerning the validity of the section 111(b) rule in this rule.

Comment 77: Commenters stated that Section 111(d) of the Clean Air Act (CAA) contains clear and explicit language limiting EPA's regulatory aut hority to the EGU source(s) that 'emit or may emit any air pollutant'. The commenters added that the plain understanding of this statutory requirement of the CAA is that performance standard s are to be only imposed on 'sources' that actually emit a regulated pollutant, i.e. fossil fu el-fired EGU's. By historic regulatory precedent, the public, the commission and the industry have un derstood the source to be composed of the boiler, the turbine-generator, prime movers, pollut ion controls and other associated auxiliary equipment generally situated within the fence line of a generating unit. Correspondingly, commenters stated emissions from any aspect of the source are to be controlled by imposing performance standards on the source at the source. Commenters stated this rule proposes and expects their commission to implement actions that go beyond the commission's authority as an entity created by statute. While EPA has insisted there is flexibility beyond the 4 Building Blocks, the commenters stated the authority granted under the CAA and an understanding that commission's authority and the Florida Department o f Environmental Protection statutory authority leave us to achieve compliance with the rule only within the fence line of our generation facilities. Reviewing the policy models of EPA, along with our statutory requirements, the commenters believed that implemen tation of the Proposed Rule will require premature closure of our fossil fuel-fired plants, will result in stranded costs of a very young fleet and will directly impact our ratepayers and will pu t the commission in conflict with the Clean Water Act (CWA) and the proposed Waters of the Unit ed States Rule (WOTUS).

Response 77: The final rule limits the federally enforceable emi ssion limits to affected EGUs. We discuss in the preamble for this rule the steps we took in this rule to minimize the problem of169

stranded assets. With respect to concerns that some methods of compliance would implicate the Clean Water Act, this rule provides states with sig nificant flexibility in developing emission standards for affected EGUs, and envisions that EGU s will have significant flexibility in determining how to comply with those emission stand ards.

Comment 78: Commenters stated that is effectively mandating fu el and generation unit design

choices for new EGUs constructed in the United Stat es. Commenters stated that the Clean Air Act enables EPA only to regulate pollution, not dic tate fuel or design choices by industry, much less to the point of declaring coal- and petcoke-fi red EGUs to be obsolete or banning new construction outright, and Congress never intended for the Clean Air Act to authorize EPA's extraordinary policy decisions to phase out entire sources of energy as proposed in this rulemaking. Commenters contended that EPA seeks to assert regulatory authority over not only pollution, but energy as well.

Response 78: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

Moreover, we disagree that we are expanding our aut hority to include wholesale energy market regulation. Our emission guidelines simply reflect an achievable emissions limit through the application of the BSER and do not in themselves re quire states or sources to implement the BSER. Moreover, these emission guidelines provide s tates with the flexibility to establish, implement, and enforce standards of performance and do not intrude on the regulatory domain of

FERC or the states. It cannot be said that because environmental requirements may have an effect on the wholesale energy market that the EPA is therefore intruding into energy regulation. Certainly, in the legislative history of the 1970 C AA Amendments, Congress expressly identified power plants as a priority source category for regu lation under CAA section 111.

Comment 79: Commenters stated verbatim EPA's policy against mak ing Best Available Control Technology ("BACT") determinations that would "fund amentally redefine the nature of the

source" also demonstrates the extent to which EPA's effort to use the word "system" to expand its authority into a nationwide bubble is unreasona ble. EPA Office of Air Quality Planning and Standards, "PSD and Title V Permitting Guidance for Greenhouse Gases," EPA-457/B-11-001 at 26 (March 2011), citing In re Prairie State Generat ing Co., 13 E.A.D. 1, 23 (EAB 2006). Commenters stated that according to EPA's guidance, "the option of using natural gas as a primary fuel would fundamentally redefine a coal-fi red electric generating unit" in most cases. Id. at 27. Commenters stated the permitting agency therefore should not require an entity that plans to construct or modify a coal-based power pla nt to switch to natural gas. Id. Yet, commenters stated the Proposed Rule would require o wners and operators of existing fossil fuelbased plants to substitute NGCC, nuclear or renewab le generation capacity for their existing capacity, in whole or in part. Commenters stated th is effectively redefines the source, even if the new primary fuel is used at a different location. C ommenters stated EPA's proposal therefore represents a sharp departure from its own prior gui dance, demonstrating the unreasonableness of EPA's interpretation of the word "system" in CAA Se ction 111(a)(1).170

Commenters stated that BSER must be applied directl y to EGUs, explaining that EPA does not consider the BACT requirement as a means to redefin e the basic design of a source or change the fundamental scope of a project when considering ava ilable control alternatives. For example, commenters offered, EPA does not require applicants proposing to construct a coal-fired EGU to consider building a NGCC unit instead, and yet, bui lding blocks 2 and 3 essentially constitute a fundamental change to coal-fired EGUs by compelling states to shift generation to NGCC and

renewable sources.

Response 79: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

Nevertheless, commenters that contend this rule imp ermissibly “redefines” stationary sources

have not demonstrated that the Clean Air Act contai ns a general prohibition on requiring a “redesign” or “redefinition” of individual regulate d sources, or a category of sources, through administrative rulemaking. The commenters have not cited an example where EPA applied such a limitation when setting emissions standards for a n entire category of sources under section 111 or another provision of the Act. The commenters cit e only EPA’s guidance and past practice with respect to the issue of “redefining the source” in the distinct context of the PSD program, which involves the case-by-case review of the constructio n of an individual stationary source. EPA does not agree that its approach to the “redefining the source” question in the context of PSD permitting makes it impermissible or unreasonable f or EPA to determine that building blocks 1, 2, and 3 constitute the BSER for existing sources c overed by this rule. As other commenters have pointed out, there are distinctions between the PSD program and the CAA program EPA is implementing in this rule and the statutory provisi ons on which these programs are based. In addition, commenters that oppose the rule on this b asis have not accurately described EPA’s interpretation of the PSD provisions in the Act.

The CAA’s PSD program is administered primarily by state and local permitting authorities as individualized preconstruction requirement under CA A section 165. Pursuant to this program, proposed new or modified major facilities in attain ment/unclassifiable areas must undergo a case-by-case permitting analysis to establish an ac hievable “emission limitation based on the maximum degree of reduction” for each pollutant reg ulated under the CAA, taking into account “energy, environmental, and economic impacts and ot her costs.” 42 U.S.C. § 7479(3). The BACT analysis also considers the “application of pr oduction processes and available methods, systems, and techniques, including fuel combustion techniques for control of each such pollutant.” Id. BACT is not applicable to unmodifie d existing sources nor is it applied on a source category basis.

The PSD BACT analysis typically proceeds in five st eps. Commenters’ assertions relate to the first of these steps.

In the EPA’s PSD and Title V Permitting Guidance for Greenhouse Gases , we explain that the first step of the BACT analysis “is to cast a wide net and identify all control options with171

potential application to the emissions unit under r eview” and that this step “need not necessarily include inherently lower polluting processes that w ould fundamentally redefine the nature of the source proposed by the permit applicant.” Id. at 26. We also explain that “BACT should generally not be applied to regulate the applicant’ s purpose or objective for the proposed facility.” Under this framework, our GHG Guidance states that “a permitting authority should

look first at the administrative record to see how the applicant defined its goal, objectives, purpose or basic design for the proposed facility i n its application.” Id. However, we clarify that the “EPA does not interpret the CAA to prohibit fun damentally redefining the source and has recognized that permitting authorities have the dis cretion to conduct a broader BACT analysis if they desire. The ‘redefining the source’ issue is u ltimately a question of degree that is within the discretion of the permitting authority.” Id. at 26-27. Thus, Commenters’ assertion that EPA has a policy “against making [BACT] determinations that w ould ‘fundamentally redefine the nature of the source’” overstates the nature of EPA’s guidanc e on this issue.

EPA agrees with the commenters who point out that t he Agency’s policy concerning redefining the source in the context of the PSD BACT analysis is not relevant for purposes of CAA section 111(d), which calls for a determination of BSER for a category of existing sources. As noted above, BACT determinations are case-by-case precons truction requirements that require the

installation of the “best available control technol ogy” at the time of construction of a new major emitting facility or as part of a major modificatio n of an existing facility. Because BACT applies at the preconstruction stage on a case-by-case basi s and generally requires the installation of control technology, it is appropriate (though not r equired) for a permitting authority to limit the scope of BACT to take into account the proposed purpose and design of such projects on a caseby-case basis.

In contrast, section 111(d) expressly applies to “e xisting sources.” Developing an emission guideline generally applicable to existing sources within an entire category under CAA section 111(d) differs from the five-step case-specific ana lysis under CAA section 165 for assessing whether the best available pollution controls can b e incorporated into a particular facility at the time it is newly constructed or undergoes a major m odification.

Under CAA section 111(d), the Administrator identif ies a list of adequately demonstrated control options in use by the industry, selects the best of those control options after considering cost and other factors, then selects an achievable limit for the category through the application of the BSER across the industry. States are subsequently r esponsible for developing plans based on an emission guideline and may take into account a sour ce’s remaining useful life, among “other factors,” in applying a standard of performance to any particular source. The BSER for purposes of section 111(d) is not limited to technology thatcan be built into a specific source because affected sources have already been constructed. Rat her, it is generally based on pollution control systems that can be implemented by an existing sour ce and need not necessarily include retrofit

controls.

As we discuss at length in the preamble, owners/ope rators of existing steam EGUs have for many years employed generation shifts that are simi lar to building block 2, and, in fact, have in172

recent years shifted generation to NGCC units as a means of reducing emissions of air pollutants, including CO2. As we also discuss at length in the preamble, owners/operators of existing steam EGUs and NGCC units have also for many years invest ed in renewable energy and, in recent years, have done so for the purpose of reducing air pollutants, including CO2. Moreover, a survey of IRPs notes that many owners and operators of steam EGUs are planning to continue to shift more to NGCC generation and renewable energy in the future, and many owners and operators of NGCC generation are planning to investmore in renewable energy. In light of this history and current practice of EGUs implementing t he same measures that are in building blocks 2 and 3, it is apparent that those measures are part of the business purposes and objectives within the power sector. Accordingly, the BSER, which inco rporates building blocks 2 and 3, cannot be

said to force a fundamental redefinition of the bus iness of generating electric-power. Likewise,

it cannot be said that this rule forces a fundament al redefinition of the design of any particular

source.

EPA agrees that the requirements of section 111 and the PSD program are linked together in various ways. However, this linkage reflects Congre ss’ intention that these two programs work together to address different aspects of the air po llution problem. The linkage reflects Congressional intent for these program to complemen t each other, not for EPA to implement them in exactly the same way. The latter would be redundant, and frustrate the distinct purpose for which each program was created. Notwithstandin g the statutory linkages cited by commenters, the PSD provisions and section 111 are phrased fundamentally differently. BACT is prescriptive and BSER is open-ended. For that re ason alone, there is no basis to claim that they must be interpreted in the same way to limit contro ls to measures that can be implemented into the design or operations of the source. In addition , while standards promulgated under section

111 serve as the floor for BACT limits established under section 169(3), nothing in the Act requires that BACT limitations serve as the floor f or emission guidelines under section 111.

Thus, EPA’s policies under CAA section 165 regardin g the construction of individual sources are not controlling for purposes of establishing ca tegory-wide standards for existing sources under CAA section 111(d). Even if the PSD “redefin ing the source” policies were applicable in this context, it would be within the Administrator’ s discretion to consider requiring a fundamental redesign of a newly constructed or modi fied sources. EPA’s case-by-case application of CAA section 165 in the PSD program d oes not limit the Administrator’s discretion in establishing an emission guideline for an entire category of existing sources under CAA section 111(d).

Comment 80: Commenters stated they read ESPS provisions on defi nition of standard of performance, source, and stationary source and auth ority specific to ESPS as limiting EPA's authority associated with ESPS limits to requiring certain measures that derive from the design and operation of a facility's air pollution control systems, but not to include measures designed to limit emissions primarily by the reduced operation of the affected stationary source

Response 80: We disagree with this comment. We discuss this comm ent in section V. of the preamble for this rule.173

Comment 81: Commenters stated as the EPA acknowledges, a perfor mance standard cannot impose unreasonable costs on industry. See Legal Me morandum at 37-38. Commenters said the costs of performance standards under Section 111 ca nnot be "exorbitant," Essex Chemical Corp. v. Ruckleshaus, 486 F.2d 427, 433 (D.C. Cir. 1973), and cannot be "greater than the industry could bear and survive," Portland Cement Ass'n v. E PA, 513 F.2d 506, 508 (D.C. Cir. 1975) (cited in Legal Memorandum at 38 n. 34). Commenters said the Clean Air Act does not intend such a result. Commenters stated Section 111(d) is specifically directed at balancing costs of controls and the remaining useful life of existing sources against the benefits to be gained by regulation. Commenters said this statutorily-requir ed balancing reflects Congress' intent to limit regulation of existing sources under the Act unless there are important health risks - for example, the regulation of existing sources under Section 11 2's hazardous air pollutant provisions. Commenters said the pollutants regulated under Sect ion 111(d) are not hazardous air pollutants, or even criteria pollutants, and the structure of t he statutory provisions recognizes that in the hierarchy of regulated pollutants, Section 111(d) p ollutants are of a lesser priority. Commenters stated thus, Congress certainly did not intend for the EPA to wield Section 111(d) in a manner that would prematurely shutter existing, especiallynewly-built, facilities.

Response 81: We disagree that this rule imposes unreasonable cos ts on industry for the reasons discussed in the preamble.

Comment 82: Commenters stated for the first time, the EPA seeks to set state-by-state "goals," which are really legally enforceable mandates for a ll states, including Wyoming. Commenters said however, the EPA lacks the authority under eit her CAA section 111(d) or the EPA's CAA section 111(d) regulations to set binding state wide "goals." Commenters stated notably, the term "goal" is not even used in the CAA or the EPA' s implementing regulations.

Response 82: We disagree with this comment. We address the issue s concerning state goals in the preamble. In addition, we note that the impleme nting regulations do refer to the ability of states to set standards that are “equivalent” to th e degree of emission limitation achieved by the BSER, which the agency is providing for here throug h the provision of “goals,” see 40 CFR 60.22(b)(5), so contrary to the commenter, this rul e is consistent with the implementing regulations.

Comment 83: Commenters said similarly, for the first time, the EPA defines a "system" of

emission reduction to be mandated reductions in the amount of time facilities within the regulated source category are allowed to operate. C ommenters stated forcing coal-fueled EGUs to reduce operation (or retire) is not a "system" o f emission reduction under CAA section 111(d).

Response 83: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

Comment 84: Commenters stated the CAA envisions a far greater r ole for the states in designing and implementing Section 111(d) existing unit standards than has been afforded to the174

states by the EPA. Commenters said the EPA's role i s to establish a procedure, not a standard or state goal. Commenters stated the statute assigns t o the states specific authorities to "when applying a standard of performance to any particular source under a plan submitted" to take into consideration, among other factors, the remaining u seful life of the existing source to which such standard applies." Commenters said this does not li mit states to providing less stringent standards to plants that only have a few years left to operat e. Commenters stated it just as logically allows states to modify or postpone regulation of CO2 for plants that have long operating lives remaining or where applying the standards would res ult in an expensive, unwarranted plant closure that could compromise electric reliability and result in far higher consumer costs. Commenters stated forcing plants with useful remain ing operating lives to close is completely contrary to the statutory requirement that directs the EPA Administrator to take into account "the remaining useful lives of the sources in the catego ry of sources to which such standard applies." Commenters stated it is worth noting that this sect ion, in addition to directing the EPA to take this into account, also states that the EPA regulat ions "shall permit the state" to take these factors into account. Commenters said the EPA has inappropr iately eliminated this statutory authority to allow states to take important factors into accountconcerning specific plant conditions in developing the state plan.

Response 84: As we explain in section VIII.D of the final rule p reamble of the CPP, our emission guidelines provide the substantive criteri a that are intended to govern the review of the Administrator’s review of state plans. The interim and final goals are intended to reflect such

substantive criteria.

Comment 85: Commenters stated the EPA has not issued "guideline s" to the states. Commenters

said the EPA asserts in the rule that the standards imposed on the states are mandatory, cannot be changed during the course of the program, and each state is required to develop a "federally enforceable" plan that must be achieved in the time table set forth by the EPA. Commenters stated the building blocks upon which the EPA bases the standards for most states are simply unachievable, and as importantly, leave no room for states to treat certain units differently or otherwise to modify the standards in a meaningful m anner as provided by the statute.

Response 85: As we explain in section VIII.D of the final rule p reamble of the CPP, our emission guidelines provide the substantive criteri a that are intended to govern the review of the Administrator’s review of state plans. The interim and final goals are intended to reflect such

substantive criteria. Moreover, as explained in sections V.A. and V.B. of the preamble, our emission guidelines simply reflect an achievable em issions limit through the application of the BSER and do not in themselves require states or sou rces to implement the BSER. That is, EPA is responsible for determining the level of emission l imitation from the source category, while states have the responsibility of assigning emissio n requirements to their sources that will ensure

their achievement of that level of emission limitat ion. States may fulfil their responsibility by establishing emission standards or creating plans c onsistent with the guidelines. In doing so, states will be able to choose from a wide range of emission reduction measures, including measures that are not part of the BSER.175

Comment 86: Commenters stated the EPA's proposed system is not a definite or specific system but instead a listing of disparate items that large ly do not even relate to the regulate source
category -- coal-fired EGUs . Commenters stated this attempt to regulate outsid e its authoritative grant of Section 111(d) is a clear attempt to regul ate the electric generation, transmission and consumption market in the United States and has bee n plainly prohibited by the Supreme Court.

See UARG v. EPA , 134 S.Ct. 2427, 2444 (2014) (quoting FDA v. Brown & Williamson Tobacco Corp ., 529 U.S. 120, 159 (2000)) ("When an agency claim s to discover in a long-extant statute an unheralded power to regulate 'a significant port ion of the American economy,' we typically greet its announcement with a measure of skepticism " and the Court will expect "Congress to speak clearly if it wishes to assign an agency deci sions of vast economic and political significance.") Commenters added this concept is strengthened when an agency lays claim to authority to regulate subjects traditionally left t o States because "[a]bsent a clear statement of that purpose, [the court] will not presume Congress to have authorized such a stark intrusion into traditional state authority." Bond v. United States , 134 S. Ct. 2077, 2083 (2014).

Response 86: EPA disagrees with this comment. For the reasons di scussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, o ur interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history . Furthermore, we disagree that we are expanding our authority to include wholesale energymarket regulation. Our emission guidelines simply reflect an achievable emissions limit throug h the application of the BSER and do not in themselves require states or sources to implement t he BSER. Moreover, these emission guidelines provide states with the flexibility to e stablish, implement, and enforce standards of performance and do not intrude on the regulatory do main of the states. It cannot be said that because environmental requirements may have an effe ct on the wholesale energy market that the EPA is therefore intruding into energy regulation. Certainly, in the legislative history of the 1970 CAA Amendments, Congress expressly identified power plants as a priority source category for regulation under CAA section 111.

Comment 87: Commenters stated the new "interpretation" of CAA S ection 111(d) set forth in the Proposed Rule encourages the states to submit a plan that contain what the EPA calls "portfolio" measures. Commenters said the measures would be undertaken by states or third parties and, upon the EPA's approval, would become enforceable against those entities. Commenters stated CAA Section 111(d), however, does not provide the EPA the authority to create federally enforceable obligations on entitie s that do not own or operate facilities within the regulated source category. Commenters stated rather , CAA Section 111 authorizes standards to

be set for facilities within the EPA-listed source categories. Commenters said it does not apply to any other facilities or entities that are not part of the listed source category.

Response 87: To the extent that this comment relates to the pro posed portfolio approach, this comment is moot. The EPA is not finalizing the port folio approach. Furthermore, under the final rule, EPA would be limited to enforcing the e mission standards applicable to the affected

EGUs .176

Comment 88: Commenters noted that fundamental to this propose d rulemaking is the EPA's authority to regulate CO 2 from EGUs under Section 111(d) of the CAA. The com menters described that Section 111(d) requires states to su bmit plans that establish standards of performance for any existing source for any air pol lutant for which air quality criteria have not been issued or which is not included on a list publ ished under Section 7408(a) or emitted from a source category which is regulated under Section 74 12, but to which a standard of performance under Section 111 would apply if such existing sour ce were a new source. The commenters noted that air quality criteria have not been issue d for CO 2 and CO 2 has not been included on a list published under Section 7408(a), so this leave s Section 7412, codified as Section 112 to be considered. The commenters noted that EPA recognize s that CO 2 is emitted from EGUs, which are also regulated under Section 112, and the EPA s tated in its Legal Memorandum in support of the proposed rule:

"As presented in the U.S. Code, the Section 112 Exc lusion appears by its terms to preclude from section 111(d) any pollutant if it is emitted from a source category that is regulated under section 112. The U.S. Code version of 111(d) can be read to provide that the provision would not cover GHGs because GHGs are emitted from EGUs and EGUs are a source category regulated under section 112." (Legal Memorandum at 22.)

The commenters noted that the EPA argued that this provision is ambiguous due to drafting errors arising from the 1990 CAA amendments (79 Fed . Reg. at 34853) and un-reconciled

differences between the Senate and House versions. Commenters stated the EPA stated that the Senate amendment excluded regulation of any polluta nt included on a list published under Section 112(b). Id. Commenters stated this would me an that CO 2 is not excluded from regulation under Section 111(d) because it is not a hazardous air pollutant listed under Section 112, i.e.,

CO 2 is not a pollutant listed under Section 112(b). On the other hand, commenters stated, the House amendment excluded the regulation of any poll utant which is "emitted from a source category which is regulated under Section 112." Id. The commenters argued that the house

version would exclude CO 2 from Section 111(d) regulation because CO 2 is emitted from EGUs which are also regulated under Section 112. The com menters noted that the EPA concludes that

these amendments "conflict with each other and thus are ambiguous." Id. Then, commenters stated, the EPA states that it "may reasonably cons true the provision to authorize the regulation of GHGs under CAA section 111(d)." Id.

The commenters asserted that the EPA's discussion o f its authority under this proposed rule states that the plain language of Section 111(d) ca n be interpreted to exclude regulation of CO 2 emissions from EGUs. The commenters argued that the EPA has chosen to ignore that issue and move forward, referring to the U.S. Supreme Court's decision in American Electric Power Co. v.

Connecticut. See American Electric Power Co. v. Con necticut, 131 S. Ct. at 2527 (2011). There, commenters stated, the Court found that the Clean A ir Act and the EPA actions it authorizes displace any federal common law right to seek abate ment of carbon-dioxide emissions from fossil fuel-fired power plants." American Electric, 131 S. Ct. at 2537.177

Commenters argued that the EPA contends that this d ecision was "premised on the Court's understanding that CAA section 111, including CAA s ection 111(d), applies to carbon dioxide emissions from those sources." 79 Fed. Reg. at 3485 3. Commenters stated the Court discussed the requirements of Section 111 and stated that if the EPA "does not set emissions limits for a particular pollutant or source of pollution, States and private parties may petition for a rulemaking on the matter, and EPA's response will b e reviewable in federal court." American Electric, 131 S. Ct. at 2538. Commenters stated the Court then noted that the EPA was engaged in a Section 111 rulemaking to set standards for gr eenhouse gas emissions from fossil-fuel fired power plants to settle litigation brought by the pl aintiffs. Id. Commenters stated, the Court stated that the CAA "provides a means to seek limits on em issions of carbon dioxide from domestic power plants - the same relief the plaintiffs seek by invoking federal common law." Id.

Commenters stated the Court here did not conclude t hat such regulation was appropriate, only that the EPA had agreed to pursue regulation at the plaintiffs' behest and as such, federal common law was preempted.

The commenters noted that in further discussion of its position on preemption of common law,

the Court stated:

"The critical point is that Congress delegated to E PA the decision whether and how to regulate carbon-dioxide emissions from power plants ; the delegation is what displaces federal common law. Indeed, were EPA to decline to regulate carbon-dioxide emissions altogether at the conclusion of its ongoing section 7411 rulemaking, the federal courts would have no warrant to employ the federal common law of nuisance to upset the agency's expert determination." Id. at 2538-2539. ( Emphasis added.)

Commenters argued that the Court's focus here is on displacement of nuisance common law, not on the propriety of the EPA's current proposed regu lation. Commenters stated the Court even states that the EPA may decide not to regulate CO 2 from EGUs at all. The commenters argued that recognized conflict in the statutory authorityfor such regulation is a good reason to make such a decision, and suggested that Congress can th en decide whether it needs to change the statute to provide a path for regulation and, if su ch statutory action is taken, Congress can give the EPA direction on how to pursue that path. The c ommenters argued that the EPA should not attempt to regulate in the way that it has until su ch Congressional action takes place.

Response 88: EPA has concluded that it has the authority to prom ulgate regulations addressing CO2 emissions from existing power plants under sect ion 111(d). Further, EPA disagrees that it is required or appropriate for EPA to delay promulgati ng regulations addressing CO2 emissions from existing power plants until after Congress pas ses further legislation.

Comment 89: Commenters argued that the EPA lacks statutory aut hority to issue the rule for several reasons. First, the commenters noted that s tatutory language of Section 111(d) is a product of differing House and Senate versions. Com menters stated under the Senate version, unless a particular air pollutant emitted by existi ng sources was regulated by one of several other listed Clean Air Act provisions, existing sources e mitting that pollutant could be regulated under178

Section 111(d). Commenters stated that in contrast, the House version prohibits existing sources from being regulated under Section 111(d) if the ex isting sources are regulated under Section 112. The commenters argued that under prevailing ru les of legislative construction and case law regarding harmonization of conflicting statutory pr ovisions, the House provision controls. The commenters argued that because, effective in 2012, EPA already regulates coal-fired power plants under Section 112 in the Mercury and Air Tox ics Standard, the EPA has no authority to regulate existing coal-fired power plants a second time under Section 111(d).

Response 89: EPA disagrees that it may not promulgate regulatio ns addressing CO2 emissions from existing power plants under section 111(d). EP A’s discussion of this issue is in Section IV of the preamble. Further, EPA’s views on arguments presented by the commenters, including

commenters’ discussion of how to reconcile the Hous e amendment and the Senate amendment, are also discussed in EPA’s briefs in the Murray En ergy and West Virginia cases, No. 14-1112, No. 14-1146, and No. 14-1151 (D.C. Cir.).

Comment 90: Commenters argued that Section 111(d) requires EPA to issue a valid new source performance standard (NSPS) under Section 111(b) be fore issuing an existing source standard. Based on flaws in the proposed NSPS and modified/re constructed source standard, the

commenters asserted that it is doubtful that either of the provisions will be lawfully finalized, and therefore, EPA has not satisfied this prerequisite to issue the Section 111(d) rule.

Response 90: Comments on the validity of the section 111(b) rule making for CO2 emissions from newly constructed, modified, and reconstructed sources are discussed in that rulemaking, and are not relevant for this rulemaking.

Comment 91: Some commenters stated there is nothing in CAA 111 (d) that suggests that the EPA has the authority to set limits or require emis sion reductions for existing sources premised

on the construction of new sources nor does EPA hav e the authority to require redispatch. Accordingly, the commenters asserted that the EPA i s precluded from applying this approach in any final rule.

Response 91: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

1.3 AUTHORITY TO REGULATE STATES' ENERGY MARKETS

Comment 1: Commenters stated because the EPA maintains that ithas the authority to implement a federal plan in the event that the stat e does not produce a compliant plan within the proposed rule's timeframe, and because compliance w ith both the Arizona interim and final goals is impossible without resorting to not only Buildin g Block 2 but also Building Blocks 3 and 4, any plan produced by the EPA utilizing the stated c ompliance targets will necessarily require the179

EPA to venture into regulating renewables, demand s ide management, and resource portfolio planning. Commenters said none of these measures in volve the emission of any sort of air pollutant and are, therefore, beyond the EPA's auth ority to regulate under the CAA.

Response 1: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reaso nable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

As we explain in sections V.A. and V.B. of the prea mble, our emission guidelines simply reflect an achievable emissions limit through the applicati on of the BSER and do not in themselves require states or sources to implement the BSER. Th at is, EPA is responsible for determining the level of emission limitation from the source catego ry, while states have the responsibility of assigning emission requirements to their sources th at will ensure their achievement of that level of emission limitation. States may fulfil their res ponsibility by establishing emission standards or creating plans consistent with the guidelines. In d oing so, states will be able to choose from a wide range of emission reduction measures, includin g measures that are not part of the BSER.

EPA recognizes that each state has unique factual c ircumstances that will shape the development of a state’s plan. We look forward to working with the states to account for these factual circumstances in developing satisfactory state plan s.

Comment 2: Commenters stated Building Blocks 2, 3, and 4 of th e proposed BSER contain measures well beyond the EPA's statutory authority. Commenters said yet, once the EPA approves a state plan, all of those measures will n onetheless become federally enforceable. 42 U.S.C. section 4711(d)(2)(B). Commenters stated wit h this Proposed Rule, the EPA seeks to gain control over aspects of the economy that are not wi thin its jurisdiction. Commenters stated Building Blocks 2 and 3 relate to replacing electri city produced by coal-fired units with energy produced by natural gas-fired units and RE faciliti es. Commenters said the EPA seeks to use these building blocks as a means to remove states' ability to control intrastate electricity markets and to mandate that utilities dispatch electricity based on lowest carbon emissions. Commenters stated the EPA further uses these building blocks t o exert authority over company-level decisions regarding whether to invest resources in developing specific types of energy resources. Commenters stated with Building Block 4, the EPA in tends to reduce carbon emissions through energy efficiency improvements made by end-use cons umers of electricity. Commenters said reductions in consumer energy consumption are perso nal choices made outside the purview of

the CAA. Commenters stated the EPA cannot reasonabl y argue that Congress intended to allow the EPA to control such minutia about the personal lives of ordinary people when it drafted legislation to allow the EPA to control emissions f rom existing stationary sources.

Commenters stated the Supreme Court has shown no to lerance for agency overreach without clear Congressional approval. Commenters said Utili ty Air Regulatory Group at 2444 ("EPA's interpretation is ... unreasonable because it would bring about an enormous and transformative expansion in EPA's regulatory authority without cle ar congressional authorization.")180

Commenters said the proposed BSER is beyond the jur isdiction of EPA and does not comport with Section 111(d).

Response 2: For the reasons discussed in section V.A. and V.B . of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

To the extent this comment objects to the portfolio approach, which the EPA is not finalizing, the comment is moot. Likewise EPA is not including bui lding block 4 in its BSER determination.

Comment 3: Commenters stated the EPA cannot set a performance standard for States that the agency itself lacks the authority to implement shou ld States fail to submit a satisfactory implementation plan. Commenters stated the EPA cann ot implement building block two because it does not have authority to make electricity disp atching decisions - under the Federal Power Act ("FPA"), States are given authority to regulate electricity within their borders and have exclusive jurisdiction over the distribution of ele ctricity to end-use customers. Commenters said states also retain the authority to determine the rules for the operation of power plants within their borders. Commenters stated the EPA cannot imp lement the nuclear component of building block three because the National Regulatory Commiss ion ("NRC") has authority over permitting, re-permitting and commissioning of nuclear power pl ants and the EPA has no authority to extend the permitting life of a nuclear power plant and is equally misguided to assume that all existing nuclear plants will ultimately be relicensed by the NRC. Commenters stated the EPA cannot implement the renewable energy component of buildin g block three because States, and not the federal government, have the authority to establish renewable portfolio standards ("RPS").

Commenters said the decision of whether or not to a dopt, change, or abandon an RPS is reserved exclusively to the States and cannot be usurped by the EPA via the CAA. Commenters stated the EPA lacks authority to mandate demand-side energy e fficiency programs within States. Demandside energy efficiency programs such as Energy Effi ciency and Resource Standards (EERE) are programs that States have the sole authority to imp lement within their borders.

Response 3: For the reasons explained in the preamble, inclusio n of building block 3 is consistent with EPA’s statutory authority. EPA has included neither EE or nuclear in the final

BSER.

Comment 4: Commenters stated that EPA cannot set a performance standard for states that the agency itself lacks the authority to implement shou ld states fail to submit a satisfactory implementation plan. Commenters asserted that EPA d oes not have the authority to implement building blocks two, three or four in a state and t hus cannot impose these requirements. Commenters explained that EPA cannot implement buil ding block two because it does not have authority to make electricity dispatching decisions . Commenters stated, under the Federal Power Act, states are given authority to regulate electri city within their borders. Commenters noted, along these lines, states have exclusive jurisdicti on over the distribution of electricity to end-use

customers. Commenters said states also retain the authority to determine the rules for the181

operation of power plants within their borders. Thu s, commenters stated that EPA's reliance on building block two in setting performance standards exceeds its CAA authority. Commenters continued, stating that EPA cannot implement the nu clear component of building block three because the National Regulatory Commission (NRC) ha s authority over permitting, re-permitting and commissioning of nuclear power plants. Commente rs asserted that EPA has no authority to extend the permitting life of a nuclear power plantand is equally misguided to assume that all existing nuclear plants will ultimately be relicens ed by the NRC. Commenters said, equally, EPA cannot implement the renewable energy component of building block three because states, and not the federal government, have the authority to e stablish renewable portfolio standards (RPS).

Commenters noted that the decision of whether or no t to adopt, change, or abandon an RPS is reserved exclusively to the states and cannot be us urped by the EPA via the CAA. Commenters continued, stating that EPA lacks authority to mand ate demand-side energy efficiency programs

within states. Commenters added that demand-side en ergy efficiency programs such as Energy Efficiency and Resource Standards are programs thatstates have the sole authority to implement within their borders, and EPA's reliance on buildin g block four in setting performance standards exceeds its CAA authority.

Commenters stated that EPA cannot implement the nuc lear component of building block three because the National Regulatory Commission ("NRC") has authority over permitting, repermitting and commissioning of nuclear power plant s. Commenters explained that EPA has no authority to extend the permitting life of a nuclear power plant and is equally misguided to assume that all existing nuclear plants will ultima tely be relicensed by the NRC, and equally, EPA cannot implement the renewable energy componentof building block three because states, and not the federal government, have the authority to establish renewable portfolio standards ("RPS"). Commenters believed the decision of whethe r or not to adopt, change, or abandon an RPS is reserved exclusively to the states and canno t be usurped by the EPA via the CAA. Commenters stated that EPA's reliance on building b lock three in setting performance standards also exceeds its CAA authority. Commenters added th at EPA lacks authority to mandate demand-side energy efficiency programs within state s, explaining that demand-side energy efficiency programs such as Energy Efficiency and R esource Standards (EERE) are programs that states have the sole authority to implement wi thin their borders. Commenters concluded this portion of their remarks, stating EPA's reliance on building block four in setting performance standards exceeds its CAA authority.

Response 4: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reaso nable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y. We also explain in section V.B. of the preamble whythe BSER does not including demand-side energy efficiency measures, accordingly, comments r elating to building block 4 are moot.

As we explain in sections V.A. and V.B. of the prea mble, our emission guidelines simply reflect an achievable emissions limit through the applicati on of the BSER and do not in themselves require states or sources to implement the BSER. Th at is, EPA is responsible for determining the182

level of emission limitation from the source catego ry, while states have the responsibility of assigning emission requirements to their sources th at will ensure their achievement of that level of emission limitation. States may fulfil their res ponsibility by establishing emission standards or creating plans consistent with the guidelines. In d oing so, states will be able to choose from a wide range of emission reduction measures, includin g measures that are not part of the BSER.

Comment 5: Commenters stated that EPA must fully understand an d base its rulemaking on the facts regarding this complex system. Commenters sai d that for the first time, EPA is proposing to move beyond its established precedent of basing per formance standards under Section 111 on "behind the fence" systems of emission reductions, to the "beyond the fence" system that take effect through and because of the integrated electr ic grid and its connected generators and loads - that is, the bulk electric system. Commenters said EPA explicitly acknowledges that it is depending on the BES and its integrated nature, bot h to operate the elements of EPA's BSER, and to be able to characterize them as a "system," as is required under Section 111(a). Commenters stated that in so doing, EPA has taken o n the statutory burden outlined in the definitions of Section 111 (a). Commenters said tha t EPA must understand the interconnected and complex nature of the BES - a system that somet imes is referred to as encompassing "the world's largest machine" [See, e.g., the United Nat ion's Sustainability Development Goal Working Group, "Technical Aspects of Grid Interconn ection." 2006, available online: http://www.un.org/esa/sustdev/publications/energy/c hapter2.pdf . Also see The National Energy Technology Laboratory's (NETL) series, "Power Marke t Primers," which explores the complexity of the BES, focusing on the interaction between reliability, markets, and technology. NETL published the report in June 2013, publication # NETL/DOE-2013/1617, available online

at www.netl.doe.gov/ .] - well enough to take into account the myriad co sts of using it to achieve such significant emission reductions, along with th e many non-air quality health and environmental impacts and energy requirements that are implicated by the modifications to it. Commenters said that an incomplete or inadequate un derstanding of the BES's reliability, system dynamics, interconnected grid operations, markets a nd the challenges of building, maintaining and coordinating power plant and energy transmissio n and delivery infrastructure cannot support a reasoned use of the BSER for the purpose of setti ng performance standards.

Response 5: We agree with the commenter that it is important f or the agency to have an understanding of the interconnected nature of the g rid. This rule is based on just such an understanding.

Comment 6: Commenters argued that Congress has granted the au thority to regulate the electric system to FERC as the primary federal regulator of interstate wholesale rates, terms and conditions of operating the interconnected bulk pow er system. In addition, commenters said reliability is so important that in 2005 Congress approved the establishment of an independent North American electric reliability organization (u ltimately NERC) under the supervision of FERC. Commenters noted that NERC, together with eig ht regional reliability entities, develops reliability standards and conducts compliance and e nforcement for the entire interconnected bulk183

power system. Therefore, commenters stated, the sco pe of BSER should not be defined so broadly that it extends into areas to which Congres s has clearly delegated authority to other agencies.

Response 6 : As we explain in sections V.A. and V.B. of the p reamble, our emission guidelines simply reflect an achievable emissions limit throug h the application of the BSER and do not in themselves require states or sources to implement t he BSER. That is, EPA is responsible for determining the level of emission limitation from t he source category, while states have the responsibility of assigning emission requirements t o their sources that will ensure their
achievement of that level of emission limitation. S tates may fulfil their responsibility by establishing emission standards or creating plans c onsistent with the guidelines. In doing so, states will be able to choose from a wide range of emission reduction measures, including measures that are not part of the BSER. Finally, wi th respect to the nuclear issues that commenter raises, we note that we have not included nuclear generation as a component of building block 3 in the final rule. Further, we not e that the EPA considered the interconnected nature of the electricity grid in structuring the f inal rule. For a comprehensive discussion of this issue, please see preamble section I.A., II.C., and discussions throughout preamble of the interconnected nature of the electricity grid.

Comment 7:

Commenters stated that EPA should re-propose and ad dress the concern that nothing in the Clean Air Act gives EPA the authority to specify the type s of new generation resources that should be constructed to fulfill a utility's obligation to se rve. Commenters said this authority has been specifically reserved to the states under the FPA, and no Congress has yet passed laws to establish national renewable portfolio standards. C ommenters said however, EPA should allow states to examine the planned additions of renewabl e and other low- or non-emitting resources under existing integrated resource plans and other siting or certification requirements, and use any approved, cost-effective resource additions as creditable emission reductions, to facilitate the transition of the existing fleet to a cleaner, more modern system.

Response 7: As we explain in sections V.A. and V.B. of the prea mble, our emission guidelines simply reflect an achievable emissions limit throug h the application of the BSER and do not in themselves require states or sources to implement t he BSER. That is, EPA is responsible for determining the level of emission limitation from t he source category, while states have the responsibility of assigning emission requirements t o their sources that will ensure their

achievement of that level of emission limitation. S tates may fulfil their responsibility by establishing emission standards or creating plans c onsistent with the guidelines. In doing so, states will be able to choose from a wide range of emission reduction measures, including measures that are not part of the BSER. Further, th e EPA is in not determining what types of generation should be constructed to fulfill a utili ty’s obligation to serve. Rather, the EPA is determining the level of emission limitations from the source category.

Comment 8: Commenters stated nuclear and renewable generation cannot be part of BSER for several compelling legal reasons. Commenters said n either nuclear nor renewable sources fall184

within the target source category, and EPA's author ity under Section 111 does extend beyond that category. Commenters said BSER must reduce emi ssions within a source category and that replacing source category generation with zero-emit ting generation outside the source category is not BSER. Commenters said BSER cannot lawfully be " applied" outside of the "affected facility" within the specified source category-here , fossil fuel-fired EGUs. Commenters said fundamentally, BSER is directed at reducing emissio ns at an operating facility within a source category; therefore, BSER targeting facilities outs ide of the specified source category cannot serve as BSER for the source category. Commenters s aid EPA's inclusion of Building Block 3 as part of a BSER for fossil fuel-fired EGUs is plainl y unlawful.

Response 8: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reaso nable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y. EPA has not include nuclear in the final BSER.

Comment 9: Commenters urged EPA not to include energy efficie ncy as part of the emission rate goal setting methodology. Commenters said the ability to require reductions through energy efficiency measures is well outside the scope of EP A's authority under the CAA, which is limited to imposing controls at affected sources. Commenter s said EPA fails to consider regional and state limitations on the potential for energy effic iency measures to achieve emission rate reductions. Commenters said EPA's assumption that s tates can achieve a 1.5 percent annual energy efficiency improvement rate is erroneous and results in arbitrarily low emission rate goals.

Response 9: As explained in section V.B. of the preamble, EPA h as not included EE in the final

BSER.

Comment 10: Commenters stated the decision to regulate existin g power plants under Section 111(d) of the Clean Air act is not lawful because i t violates the previsions set forth in the 5 U.S. Code - 706(2)(A),(B),(C), and (E). Commenters stat ed the 5 U.S. Code - 706(2)(A) requires that the law not be arbitrary or capricious. Commenters stated that generally, laws require specific guidelines of how the regulated body should act in order to comply appropriately so to avoid any violations. However, commenters added, the proposed rule is not clear as to what the states should specifically do in order to meet the goals of the E PA. Commenters stated that for example, the EPA reads, "While this proposal lays out state-spec ific CO 2 goals that each state is required to meet, it does not prescribe how a state should meetits goal." Commenters stated before issuing any type of regulation under Section 111, the EPA m ust first identify specific types of facilities (which are generally known as sources under the CAA ) that, in the EPA's judgment, emit air pollution that endangers public health. Commenters stated that as part of this process, the EPA creates source categories and carefully defines the type of facilities that fall within these185

categories; however, specific types of facilities i n the proposed rule that endanger public health
were not mentioned. Commenters added that climate c hange should be addressed by Congress an don't by regulatory fiat via the EPA.

Response 10: EPA disagrees with commenters contention that this rule is arbitrary and capricious or otherwise a violation of the provisio ns in 5 USC 706, and with commenters views on what is required in this rule. As discussed in various places in the preamble and elsewhere in response to comments, this rule establishes certain requirements but also leaves states with significant flexibility in the development of their state plans, which is consistent with Congress's intent under section 111(d).

Comment 11: Commenters stated that the radical nature of its p roposal becomes all the more

evident when one considers what will occur if a sta te does not submit an implementation plan, or if EPA finds a submitted plan unsatisfactory. Comme nters said the Agency will then prescribe a federal implementation plan for that state, as auth orized by 42 U.S.C. section 7411(d)(2). Commenters said this plan would apply the range of "building blocks" to the state. Commenters said it would set binding emission limits for coal- and gas-fired power plants that would switch the way that sources are allowed to dispatch, set r enewable portfolio requirements that would force electric utilities and others to develop rene wable resources against their will in order to be allowed to continue operating existing coal-fired a ssets, and set the same type of efficiency standards for consumers of electricity that the D.C . Circuit recently invalidated when FERC attempted to do so. Commenters said this total fede ral invasion of a state power sector would remove all pretexts and expose the true extent of this proposal's violation of state authority. Commenters said while this would provide clarity, s uch a catastrophe for federalism is antithetical to the Constitution and cannot be just ified under any provision of federal law.

Response 11: With regard to energy efficiency, we are not includ ing building block 4 as a component of BSER in the final rule. Additionally, we note that renewable energy is one potential measure that may be employed, consistent with the state flexibility principle that is central to this program. This rule does not regulat e renewable energy sources. It identifies the BSER for affected sources, which entails substitute generation to zero-emitting generators, but it does not impose emissions requirements on such sour ces. At the point of implementation of the emission standard, either in a state or federal pla n under section 111(d), the source still retains the flexibility to determine how it will meet the s tandard. Neither the state air regulator, nor the agency, will need to or be required to regulate spe cific dispatch decisions in order to meet the requirements of the final rule. For example, in a s tate implementing a mass-based emission trading program, the agency’s determined emission p erformance levels may set the mass budget, but the primary compliance obligation on the source is simply to hold allowances sufficient to cover emissions. Failure to do so could subject a s ource to state or federal CAA enforcement. But that need not involve the air regulator in any of the other choices the owners and operators of the affected EGUs make regarding their operations o r level of generation.

Comment 12: Commenters stated EPA's reliance on demand response as part of the source of BB4 reductions is especially untimely since the D.C . Court of Appeals has recently found that186

the Federal Power Act does not grant the FERC autho rities over demand response. Commenters stated for EPA to establish an enforceable goal, ba sed on the expected exercise of authority that Congress has reserved exclusively for states, is hi ghly legally vulnerable.

Response 12: We appreciate these comments but it is not necessar y to substantively respond or make changes to the rule because the rule does not include demand-side energy efficiency (building block 4) as part of the BSER or, therefor e, as part of the goal calculations.

Comment 13: Commenters described the allocation under the FPA o f authority for overseeing the generation, transmission, distribution, and sal e of electric energy. Commenters stated that FERC is responsible for transmission and sale at wh olesale in interstate commerce, as specified in Section 201(a) of the FPA. Commenters indicated that the states have authority over electric generation facilities, local distribution, retail s ales of electricity, and intrastate transmission pursuant to section 201(b) of the FPA. Commenters s tated that Section 201(a) of the FPA also expressly states that federal authority "extend[s] only to those matters which are not subject to regulation by the States." Commenters also referenc ed Fed. Power Comm'n v. S. Cal. Edison Co., 376 U.S. 205, 218 (1964) and Ark. Elec. Co-op. Corp. v. Ark. Pub. Serv. Comm'n, 461 U.S. 375, 377-78 (1983).

Commenters stated that the FPA establishes a "brigh t line" between federal and state roles governing the electric utility industry. Commenters referenced FPC v. SCE, 376 U.S. at 215 and quoted the court's finding: "Congress meant to draw a bright line easily ascertained, between state and federal jurisdiction . . . ." Commenters stated that the FPA's preservation of state regulatory authority of the electric utility industry is consistent with the Tenth Amendment to the US Constitution, which declares that "[t]he powers not delegated to the US by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

Commenters concluded that under the proposed CPP, E PA has attempted to erase the "bright line" between state and federal authority in regula ting electricity and therefore the EPA's proposal exceeds the Agency's authority.

Commenters stated that the local-interstate divisio n of responsibility between the States and FERC makes perfect sense; no central federal regula tor can effectively regulate local generation and distribution throughout the US, and electricityservice is not perfectly fungible or uniform. Commenters believed that even if the FPA did not gr ant the States primacy over local electricity markets, EPA's proposal would be ill-advised and th at because the States retain authority over the electric system, the proposed rule is unlawful.

Commenters claimed that the EPA has "read Section 1 11(d) to eliminate that bright line divide, and would confer upon the EPA the broad authority o ver matter long left to the States' authority that Congress has specifically chosen not to confer on FERC?" Commenters claimed that the proposed rule would improperly dictate to the State s what mix of electric generating resources must be built, maintained, and operated. Commenters believed the proposal "flouts" the wellestablished division between retail and wholesale e lectric markets by, for instance, attempting to187

regulate the end-use consume retail activity under building block 4. Commenters claimed that nothing in the D.C. Circuit's EPSA ruling delegates to the EPA the authority over retail activities that are currently solely within state jurisdiction . Commenters concluded that the proposed rule would eviscerate the regulatory compact between the federal government and states undergirding energy regulation for nearly 100 years, further con firming that the proposed rule is "improper."

Commenters stated that EPA's Proposed Guidelines ig nore the division of responsibilities embodied in the FPA and attempts to claim state aut hority over generation, resource planning,

and other matters for EPA. Commenters stated that t he Proposed Guidelines would impermissibly inject EPA into the separate spheres that the FPA has assigned to the states and to FERC. Commenters stated that EPA's Proposed Rule im permissibly interjects EPA into federal, state, and local regulatory spheres. The commenters concluded that the proposed rule is invalid
and should be withdrawn.

Response 13: We disagree that we are expanding our authority to include wholesale energy market regulation or state retail regulation. Addit ionally, we are not changing well-established divisions between retail and wholesale electricity markets. Our emission guidelines simply reflect an achievable emissions limit through the a pplication of the BSER and do not in themselves require states or sources to implement t he BSER. Moreover, these emission guidelines provide states with the flexibility to e stablish, implement, and enforce standards of performance and do not intrude on the regulatory do main of FERC or the states. It cannot be said that because environmental requirements may have an effect on the wholesale energy market that the EPA is therefore intruding into energy regulati on. Certainly, in the legislative history of the 1970 CAA Amendments, Congress expressly identified power plants as a priority source category for regulation under CAA section 111.

Comment 14: Commenters asserted that the proposed CPP does not conflict with the FPA. Commenters said that no provision of the FPA limits the authority of EPA under the CAA to establish emission guidelines (or other emission st andards or limitations) for EGUs and that no such limitation should be implied. Commenters noted that the D.C. Circuit court has dismissed past claims that the FPA exempts or displaces the n ation's federal environmental laws. [See Monongahela Power Co. v. Marsh , 809 F.2d 41, 50 (D.C. Cir. 1987) (holding that hy droelectric facilities licensed by FERC are still subject to Cl ean Water Act permitting requirements, because "...the Power Act does not provide adequate justifi cation for ignoring the express and unambiguous directive of the subsequently-adopted P ollution Control Act Amendments."); cf. PUD No. 1 v. Wash. Dep't of Ecology , 511 U.S. 700, 723 (1994) (refusing to limit appli cability of Clean Water Act requirements to hydroelectric pr ojects licensed by FERC on the basis of "hypothetical" conflicts between the Clean Water Ac t and FERC's authority under the FPA)].

Commenters noted that no aspect of the CPP requires EPA or the states to interfere with rates established by FERC. Commenters said the CPP guidel ines, once implemented by the states, may have the effect of altering the generating cost s of fossil fuel EGUs, with indirect or incidental impacts on wholesale sales or transmissi on rates that are subject to FERC jurisdiction.188

Commenters indicated that this is true of most poll ution limitations placed on power plants, and such effects do not present conflicts with FERC's authority under the FPA. Commenters said, FERC's recent Order No. 1000 recognizes that state and federal public policy requirements, such as renewable portfolio standards and emission limit ations, can impact jurisdictional transmission rates, and requires that the impacts of those polic ies be taken into account in for regional transmission planning.

Commenters believed that policies to promote renewable energy or energy efficiency, or integrated resource plans, which lie within the tra ditional authority reserved to the states under the FPA, have already been implemented in many stat es over the last several years. Commenters said, there is no doubt that such policies are full y consistent with the FPA, given the high standard that the Supreme Court has articulated for preemption under the FPA and the Natural Gas Act (NGA). Commenters further noted that the Su preme Court has held state regulations are only preempted by these statutes if "it is impossib le to comply with both state and federal law; [a] state regulation prevents attainment of FERC's goals; or [] a state regulation's impact on

matters within federal control is not an incident o f efforts to achieve a proper state purpose." [ Northwest Cent. Pipeline Corp. v. State Corp. Comm' n, 109 S.Ct. 1262, 1277 (1989). Although the holding in this case pertains to the Natural Ga s Act, the federal courts typically interpret and apply the Natural Gas Act and the FPA in identical fashion. See Ark. La. Gas Co. v. Hall, 453 U.S. 571.] Commenters also said the Supreme Court h as recognized that "every state statute that

has some indirect effect on rates and facilities of natural gas companies is not preempted." Schneidewind v. ANR Pipeline Co ., 485 U.S. 293, 309 (1988).

Commenters also noted that the lower courts have fo und that states retain broad authority to regulate the type, quantity, and location of electr icity generating resources within their borders. Commenters said FERC has repeatedly affirmed that s tates have the authority to dictate the generation resources from which utilities may procu re electric energy and, FERC's own administrative precedents have recognized that stat es retain authority to use a variety of regulatory tools, including taxes and subsidies for particular fuels or generating types, to meet their electricity needs. Commenters said, Congress intended the FPA "to supplement, not limit, the reach of state regulation." Kentucky West Virginia Gas Co. v. Pennsylvania Pub. Util. Com'n

, 837 F.2d 600, 606 (3rd Cir. 1988).

Response 14: We appreciate these comments and agree with commen ters that the EPA’s actions
in this final rule do not conflict with the Federal Power Act or FERC and state jurisdiction.

Comment 15: Commenters believed the proposal is based on author ity that Congress has not granted to the EPA.

Commenters stated that the CPP goes beyond EPA's re gulatory authority under the CAA. Commenters claimed that Congress never intended for the nation's energy resources, the production and distribution of electricity, or ener gy policy to be set through the CAA.189

Commenters stated that the CPP would dramatically e xpand EPA's authority. Commenters contended that "such a comprehensive alteration of the regulatory framework" must be addressed by Congress before its implementation. Commenters s tated that Congress is required to provide an extremely clear statement of its intent to autho rize such an intrusion on the state's traditional police powers.

Commenters quoted and/or cited the Supreme Court de cision on the Tailoring Rule [Utility Air Regulatory Group v EPA, 134 S. Ct. 2427, 2444 (2014 ) (quoting FDA v. Brown & Williamson Tobacco Co., 529 U.S. 120, 159 (2000))]. Commenters drew parallels between the expansion of authority under the Tailoring Rule and the perceive d expansion of authority under the CPP. Commenters quoted a portion or all of the foll owing from the Tailoring Rule decision:

" EPA's interpretation is also unreasonable because i t would bring about an enormous and transformative expansion in EPA's regulatory author ity without clear congressional authorization. When an agency claims to discover a long extant statue an unheralded power to regulate a 'significant portion of the American eco nomy' we typically greet this announcement with a measure of skepticism." Commenters also included further explanation from t he Court's Tailoring Rule decision: "We expect Congress to speak clearly if it wishes to assign to an agency decisions of vast 'economic and political si gnificance' ." Commenters also quoted the following cases as shown: Chisom v. Roemer, 501 U.S . 380, 396 n.23 (1991) (["In a case where the construction of legislative language such as th is makes so sweeping and so relatively unorthodox a change as that made here, . . . judges as well as detectives may take into consideration the fact that a watchdog did not barkin the night.") (quoting Harrison v. PPG Indus., Inc., 446 U.S. 578, 602 (1980) (Rehnquist, J., dissenting)); Aid Ass'n for Lutherans, 321 F.3d at 1175 ("Given the extremity of the effect th at results from the Postal Service's interpretation, we would expect to see some indicat ion that Congress intended such an effect, but we find no[ne] in the statute . . . ."]).

Commenters indicated that the proposed CPP Rule's n atural gas redispatch, energy efficiency, and renewable energy "building blocks" are areas tr aditionally reserved to the sovereign authority of the states and that, to date, Congress has been unwilling to develop national renewable energy standards, recognizing the wide di versity of state laws in existence, and the disparate capability to deploy renewable resources among states.

Commenters indicated that States exercise virtuallyexclusive authority to regulate electricity generation, distribution, and consumption within th eir borders. Commenters stated that if Congress intends to alter the 'usual constitutional balance between the States an d the Federal Government,'

it must make its intention to do so 'unmistakably clear in the language of the

statute.' [See e.g. Gregory v. Ashcroft, 501 U.S. 452, 460-6 1, 111 S. Ct. 2395, 2401, 115 L. Ed. 2d 410 (1991) ((quoting Atascadero State Hospital v . Scanlon, 473 U.S. 234, 242 (1985)); see also Bond v. U.S., 134 S. Ct. 2077, 2089 (2014); Gr egory v. Ashcroft, 501 U.S. 452, 460-61 (1991); City of Abilene v. FCC, 164 F.3d 49, 52 (19 99)]. Commenters stated that there is no "plain statement" by Congress that it intended EPA to have authority to interfere with State sovereign authority over electricity markets. Comme nters stated that to the contrary, Congress190

expressly provided that States should determine per formance standards in the first instance and that the States had substantial flexibility to acco unt for the economic impact such standards would have on existing sources. Commuters stated th at in the absence of such clarity, courts "refer to basic principles of federalism embodied i n the Constitution to resolve ambiguity in a federal statute."

Bond, 134 S. Ct. at 2090. Commenters further state d that in the absence of a clear congressional authorization, which does not e xist here, EPA cannot infringe upon traditional state sovereign functions.

Commenters stated that Congress has not left any ro om for EPA to have anything whatsoever to do with the bulk-power system or the grid, not to m ention to regulate, or redesign, or to affect the electric energy system.

Commenters indicated that the CAA allows EPA to reg ulate emissions of pollutants at their sources - but under Section 111(d) it must share th at authority with the states. Commenters indicated that EPA's authority to regulate air poll ution from stationary sources should not be read to cut across this complex scheme of federal and st ate regulations.

Commenters claimed that the proposed rule is intend ed to establish a National Energy Policy and that establishing an energy policy is the responsib ility of Congress, and not the EPA. Commenters questioned the validity of the EPA's aut hority to establish a nationwide energy policy.

Commenters stated that EPA cannot require a fundame ntal redesign of the electricity generation and distribution system. Commenters stated that bec ause, under Prevention of Significant Deterioration BACT requirements, a source cannot be required to fundamentally redesign their facility, then, the EPA should not have the authori ty to fundamentally redesign the electricity generation and distribution system. Commenters cite d the Supreme Court decision on the Tailoring rule at 18 134 S. Ct. 2427, 2448 (2014).

Commenters stated that Congress did not implicitly authorize EPA under the CAA to establish national and state energy policy. Commenters indica ted that when Congress added the Acid Rain Program to the CAA in 1990 that Congress was carefu l to preserve the existing authority of states and FERC over energy policy and that Congres s explicitly prohibited EPA from intruding on the processes already in place for managing elec tricity rates and reliability. Commenters quoted: "Nothing in this section shall be construed as requ iring a change of any kind in any State law regulating electric utility rates and charges o r affecting any State law regarding such State regulation or as limiting State regulation (includi ng any prudency review) under such a State law. Nothing in this section shall be construed as modifying the Federal Power Act or as affecting the authority of the Federal Energy Regul atory Commission under that Act. Nothing in this subchapter shall be construed to interfere with or impair any program for competitive bidding for power supply in a State in which such p rogram is established." (42 U.S.C. section 7651b(f)). Commenters stated that Congress' explici t prohibition of authority over energy rates and reliability to EPA in Title IV of the CAA prove s the absurdity of any claim that EPA has the191

authority to regulate these same issues under the g eneric terms of Section 111(d) that say nothing
about these matters.

Commenters contended that federal law may be interp reted to "reach into areas of State sovereignty" only where "the language of the federa l law compels the intrusion" (i.e., City of Abilene v FCC, 164 F.3d 49, 52 (D.C. Cir. 1999), an d Gregory v. Ashcroft, 501 U.S. 452, 460) and that there is nothing that can be gleaned from the text of Section 111 compelling such a result. Commenters also cited the Supreme Court fin ding (EDF v. EPA, 467 F.3d 1329, 1334 (D.C. Cir. 2006)) that in the context of applying B ACT, the states have the authority because they are best positioned to account for local circu mstances that make a technology "unavailable" in a certain area; thus, the commenters claimed tha t the same holds true for establishing source

emission standards based on BSER. The commenters cl aimed that the states' role in applying the BSER is a critical "safeguard" against overly-strin gent regulation of existing sources.

Commenters stated the CAA establishes the right of states to set their own emission standards based on the EPA guidelines, and the EPA oversteps its authority by setting "binding" emission goals and compliance mechanisms. Commenters stated the EPA is barred by U.S. Supreme Court precedent from infringing upon a traditional state sovereign function unless Congress has adopted clear statutory language expressly authoriz ing the Agency to do so. Arkansas Elec. Coop., 461 U.S. at 377. See New York v. United State s, 505 U.S. 144, 112 S.Ct. 2408, 120 L.Ed.2d 120 (1992); see also "Federalism, State Sovereigntyand the Constitution: Basis and Limits of Congressional Power," Kenneth R. Thomas, Congres sional Research Service (Updated June 17, 2005) at CRS-1.[7] Commenters said nothing in the CAA expressly authorizes the EPA to regulate the generation of electricity, the type of electricity, or other such energy regulatory matters traditionally reserved to states. Commente rs stated the CAA delegates to the EPA the authority to establish procedures only, and reserve s to the states the authority to set emission standards. 42 U.S.C. 7411(d)(1)(A).

Commenters described how Section 111 confines EPA's authority to areas in which its expertise is greatest: emission reduction technologies, techn ology applicability, technology costs, and energy and environmental impacts associated with te chnology implementation.

Commenters stated that Congress delegated to EPA on ly the authority to regulate sources of air pollution under Section 111(d). Commenters quoted o ther court cases supporting their contention that EPA has assumed authority that Congress did no t intend. Commenters cited Michigan v. EPA, 268 F.3d 1075, 1082 (D.C. Cir. 2001): "Agency authority may not be lightly presumed." Also commenters quoted Ethyl Corp. v. EPA, 51 F.3d 1030, 1060 (D.C. Cir. 1995); Michigan, 268 F.3d at 1082: "Were courts to presume a delegat ion of power absent an express withholding of such power, agencies would enjoy virtually limit less hegemony, a result plainly out of keeping with Chevron and quite likely with the Constitution as well."

Commenters stated that courts recognize an implicitdelegation of rulemaking authority only when Congress has not spoken directly to the extentof such authority, or has "intentionally left192

[competing policy interest] to be resolved by the a gency charged with administration of the statute" quoting Chevron U.S.A. v. Natural Resource s Defense Council, 467 U.S. 837, 865-866 (1984). Commenters also stated that the court in Bo wen v. Georgetown Univ. Hosp. [Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208 (1988)] s poke clearly to this point, stating that "it is axiomatic that an administrative agency's power to promulgate legislative regulations is limited to the authority delegated by Congress."

Commenters stated that any power given to EPA must be defined by statute and quoted Elec. Power Supply Ass'n v. FERC , 753 F.3d 216, 220 (D.C. Cir. 2014), stating that EPA "has no power to act unless and until Congress confers powe r upon it." Commenters stated that when EPA acts outside its statutory reach, its action is "plainly contrary to law and cannot stand, "[ Michigan v. EPA , 268 F.3d 1075, 1081 (D.C. Cir. 2001)].

Commenters stated that even assuming the statute is ambiguous enough to allow EPA to take such an expansive approach to its power over statio nary source emissions, the presumption against federal intrusion onto a traditional state power requires that EPA proffer a clear statement to support its authority. Commenters contended thatthe CAA supplies no such clear statement and concludes that EPA's assertion of authority is therefore impermissible in light of state responsibilities over electricity generation, distr ibution, and consumption.

Commenters stated that EPA argued in the proposal t hat Section 111(d) authorizes EPA to regulate inter - and intrastate generation, sale, a nd transmission of electric power because Congress did not expressly constrain it from doing so. Commenters countered by quoting U.S. v. Stauffer Chern. Co., 684 F.2d 1174, 1187 (6th Cir. 1982) and Erlenbaugh v. United States, 409 U.S. 239, 245 ( 1972): "[w]here a problem of interpretation was apparently not foreseen by Congress, it is appropriate to consult and be guide d by those areas covering the same subject where the expression of legislative intent is clear." Commenters summarized these cases by stating that "statutes 'intended to serve the same function' are construed together." Commenters stated that when Congress passes new legislation, " it acts aware of all previous statutes on the same subject," quoting from Erlenbaugh, 409 U.S. at244. Commenters contended that presumably Congress was aware of the FPA when subse quently enacting the CAA and Congress would not have granted EPA broader regulatory autho rity than that given to FERC without an explicit statement.

Commenters stated that EPA's proposal attempts to u se the CAA to override states' energy policies and impose a national energy and resource- planning policy that picks winners and losers based solely on EPA's policy choices, forcing state s to favor renewable energy sources and

demand-reduction measures over fossil fuel-fired el ectric production. However, commenters stated that the CAA generally and Section 111(d) sp ecifically do not give EPA broad authority to reorganize states' economies.

Commenters stated that Congress clearly intended th at the CAA be confined to the regulation of air pollution and not the energy sector writ large, which is under the statutory jurisdiction of193

FERC and the states. Commenters stated that until t he CPP, the EPA has never attempted to use the CAA to compel States to pass specific energy st atutes.

Commenters stated, the proposed rule is much differ ent than EPA's preceding rules in the degree to which it intrudes into traditional utility syste m planning and its lack of flexibility. Commenters said, we are concerned that the dictates of this proposed rule will frustrate TVA's least-cost energy resource planning activities and make the energy TVA provides less affordable and less reliable. Commenters said, EPA has propose d a construct for this rule that necessitates the involvement of the states and EPA in energy res ource planning and the operation and dispatch of energy resources. Commenters said, whil e some State entities may have experience in these matters, EPA does not. Commenters said, fu rther, if the definition of "emission standard" is modified as EPA proposes, these activi ties will be made subject to enforcement by advocacy groups with agendas that ignore or are ant agonistic to TVA's and other utilities' goal of providing reliable and affordable electricity.

Response 15: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y. We do not agree that the EPA is setting a national energy policy through the Clean Air Act. We also disagree that we are interfering with FERC or state jurisdiction.

The EPA disagrees with commenters’ assertions that this rule violates the federal-state balances

embodied in either the U.S. Constitution or federal statutes. This rule does not upset traditional balances between state and federal authority. Our e mission guidelines simply reflect an achievable emissions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. Moreover, these emission guidelines provide states with the flexibility to establish, implement, and e nforce standards of performance and do not intrude on the regulatory domain of FERC or the sta tes. It cannot be said that because environmental requirements may have an effect on th e wholesale energy market or state retail regulation that the EPA is therefore intruding into energy regulation. Certainly, in the legislative history of the 1970 CAA Amendments, Congress expres sly identified power plants as a priority source category for regulation under CAA section 11 1. Finally, as a matter of constitutional law,

this rule does not alter the balance between state and federal authority any more than already provided in the Clean Air Act and in countless othe r cooperative federalism regimes that have routinely been upheld as constitutional. The Legal Memorandum accompanying the final rule discusses this constitutional aspect.

The federal enforceability considerations raised in the comment arose primarily under the proposed portfolio approach for state plans. As exp lained in section VIII.C of the preamble, the EPA is not finalizing the portfolio approach, which would have allowed state plan submittals to include federally enforceable measures that apply t o entities that are not affected EGUs. However, as further explained in section VIII.D, if the state is adopting the state measures type plan, the state plan submittal will need to specify , in the supporting materials, the state194

enforceable measures that the state is relying upon in conjunction with any federally enforceable

emission standards for affected EGUs to meet the em ission guidelines. The final rule provides considerable discretion to the states in setting em ission standards and related plan requirements for its affected EGUs. Consistent with longstandin g practice under the Clean Air Act, if a regulated entity does not meet a requirement, the E PA will address the matter on a case-by-case basis, to determine the appropriate response and re solution. Third parties have authority under

section 304 of the CAA that is similar to the EPA’s authority under section 113(a)-(h) of the

CAA.

Our rule does not conflict with section 403(f) unde r Title IV. We disagree that we are expanding our authority to include wholesale energy market re gulation. Our emission guidelines simply reflect an achievable emissions limit through the a pplication of the BSER and do not in themselves require states or sources to implement t he BSER. Moreover, these emission guidelines provide states with the flexibility to e stablish, implement, and enforce standards of performance and do not intrude on the regulatory do main of FERC or the states. It cannot be said that because environmental requirements may have an effect on the wholesale energy market that the EPA is therefore intruding into energy regulati on. Certainly, in the legislative history of the 1970 CAA Amendments, Congress expressly identified power plants as a priority source category for regulation under CAA section 111. Last ly, we note that section 403(f) is only relevant to construing “subchapter” IV, i.e., Title IV.

Comment 16: Commenters referred to and applied the rules of th e "Chevron Deference" or "Chevron doctrine" (Chevron, 467 U.S. at 865-866) f or assessing any conflict between the CAA and FPA. Commenters stated that Congressional inten t under the FPA is clear and that there is no conflict, and concluded the EPA "impermissibly" interprets a conflict between the Acts. Commenters claimed that following the principles of the "implied repeal" process, EPA does not have authority under the CAA to regulate the power grid.

Commenters claimed that Congress clearly intended t here to be no conflict between these two acts [CAA and FPA] because it unequivocally granted FERC exclusive authority to regulate the bulk power system as recently as 2005 without so mu ch as alluding to the CAA; therefore, for this reason, it effectively repealed any implied au thority the EPA could possibly glean from the CAA that it too may regulate the power grid.

Commenters contended that if the EPA implements its CAA authority lawfully, by regulating only the source category at issue in the rule and n ot the entire electricity grid, the CAA would
not be in conflict with the FPA and the two acts ca n be reconciled.

Commenters claimed that because the proposed rule " impermissibly interprets the CAA to conflict with the FPA," then validity of the rule m ust be analyzed. Commenters claimed that employing the Chevron standard, EPA's reconfiguring energy markets and risking grid reliability
is inconsistent with the administrative structure t hat Congress has enacted.195

Commenters claimed that using the first step of an "implied repeal" analysis, it is clear that the FPA and CAA can be reconciled, and that the CAA doe s not explicitly provide EPA with any authority to regulate the bulk power system. Also, commenters claimed that EPA has merely granted itself this authority through the CPP.

Commenters stated that even if the EPA is entitled to Chevron Deference, the proposal is an expansion of the EPA's regulatory authority withoutclear Congressional approval.

Commenters stated that the final rule should be wel l within the reasonable deference the federal courts would grant the EPA to interpret the CAA acc ording to the Chevron standard of review.

Commenters stated that at "Chevron step one", it sh ould be recognized that a "system" does not really mean "virtually any set of things" and they defined the meaning of "system" in terms of its Latin and Greek systema. Commenters stated that "th e integrated grid" and the "interconnected electricity sector" (as defined in the Legal Memora ndum at 50 and 54, respectively) in and of themselves are systems different from the statutori ly derived "system of emission reduction."

Commenters concluded that the EPA's interpretation [of 111(d)] fails at Chevron step two, and asserted that a claim of agency authority lacking p rincipled limits will not be deemed reasonable (American Library Association, 406 F.3d at 702-03).

Commenters contended that the EPA's CPP rendering a wholesale energy market regulation does not pass Chevron step two because it does not reaso nably effectuate Congress' intent for the CAA (i.e., Chevron, 467 U.S. at 845; United States v. Shimer, 367 U.S. 374, 382-383 (1961)).

Commenters concluded that "the judiciary is the fin al authority on issues of statutory construction and must reject administrative constru ctions which are contrary to clear congressional intent"; therefore, commenters claime d that Chevron step two compels a judicial evaluation of congressional intent.

Commenters stated that if a court determined the tw o acts could not be reconciled as they pertained to the power regulation, the courts will utilize the second step of the "implied repeal" analysis by analyzing the later statute (i.e., FPA) to determine if it repealed the prior statute.

Commenters claimed that even assuming that the EPA is entitled to Chevron Deference, the EPA's interpretation is unreasonable because it wou ld bring about enormous and transformative expansion of the EPA's regulatory authority withoutclear congressional authorization; the commenters quoted Brown & Williamson Tobacco, 529 U .S. at 159 ("when an agency claims to discover in a long-extant statute an unheralded pow er to regulation "a significant portion of the American economy" then agency must provide an espec ially convincing explanation of its legal authority").

Commenters stated that EPA's reliance on Chevron (d eference) does not consider the interplay with other implicated statutes, and has lead the EP A to overstep its authority and encroach upon196

authority reserved exclusively to the States (build ing blocks 3 and 4) and FERC (building block 2).

Response 16: The EPA disagrees with commenters. For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandu m, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history

. Furthermore, we disagree that we are expanding our authority to include wholesale energy market regulation or state retail regulation. Our e mission guidelines simply reflect an achievable emissions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. Moreover, these emis sion guidelines provide states with the flexibility to establish, implement, and enforce st andards of performance and do not intrude on the regulatory domain of FERC or the states. It can not be said that because environmental requirements may have an effect on wholesale energyor retail markets that the EPA is therefore intruding into energy regulation. Certainly, in the legislative history of the 1970 CAA Amendments, Congress expressly identified power pla nts as a priority source category for regulation under CAA section 111.

Comment 17: Commenters indicated that the states have authorityover electric generation facilities, local distribution, retail sales of ele ctricity, and intrastate transmission pursuant to Section 201(b) of the FPA.

Commenters stated that states alone, not the federa l government or FERC, have the authority over electric generation resources and fuel mix det ermination. Commenters provided several references to support this statement (i.e., John E. Nowack & Ronald D. Rotunda, CONSTITUTIONAL LAW 138 (7 th ed., 20014); Munn v. Illinois, 94 U.S. 113, 124 (1 877); Richard J. Pierce, Jr. and Ernest Gellhorn, REGULAT ED INDUSTRIES IN A NUTSHELL 78- 83 (1999); and, 221 16 U.S.C. 791a, et seq.) Commen ters stated that State regulation of electricity generation is "one of the most importan t functions traditionally associated with the police powers of the States." [Arkansas Elec. Coop. , 461 U.S. at 377] Commenters stated that one of a state's core powers is to promote the heal th and economic well-being of its citizens, including through the management of its energy and air quality resources.

Commenters also spoke to the specific authorities c onferred to states. Commenters stated that retail energy markets and local service issues (inc luding the siting and construction of electric generating units, closure of existing units, operat ional limitations, distribution, ratemaking, demand-side management, and renewable and efficienc y requirements) are within the exclusive purview of the state and local authorities and enti ties cannot be regulated under the CAA. Commenters stated that Integrated Resource Plans (I RPs) unquestionably fall on the state side of the "bright line". Commenters indicated that EPA is required to allow states to regulate and determine the need for additional generating capaci ty through the IRP procedure, which is a legally mandated and highly structured public proce ss. Commenters indicated that the state197

Public Service Commission balances electric resourc es to meet the needs of electric consumers and uses the IRP process to set long-term resource portfolios for regulated electric utilities.

Commenters argued that state PUCs retain considerab le authority over utility operations, including regulation of rates and terms and conditi ons of retail sales of power and distribution service, siting of utility facilities, and programs designed to increase renewable generation and promote demand side and end use efficiency. Comment ers stated that under state laws, most, if not all, of the emission-reducing measures contempl ated in building blocks 2, 3, and 4 fall under the exclusive authority of state utility regulators or the governing boards of local public power utilities or rural electric cooperatives establishe d pursuant to state law, not state environmental agencies or EPA. Commenters claimed that the CAA do es not give EPA sweeping authority over the electricity system, and, specifically for Texas , the authority rests with the PUC of Texas (PUCT) and the Electric Reliability Council of Texa s (ERCOT). Commenters indicated that even though TCEQ regulates source emissions, the PUCT re gulates transmission and limited portions of the wholesale and retail markets, and ERCOT mana ges the dispatch of electricity into the market. Commenters concluded that no state regulato ry agency would be able to implement the proposed rule.

Commenters stated that EPA should ensure in the fin al rule that the 111(d) guidelines to states are not prescribing or mandating these types of ene rgy policy requirements that are exclusively the authority of states.

Commenters stated that the States should retain the ir power to regulate electric utilities concerning questions of need, reliability, cost and other related concerns including determining resource portfolios that might not favor the select ion of higher cost resources over lower cost resources. Commenters cited several cases in support of their argument: New England Power Generators Ass'n v. FERC, 757 F.3d 283, 290 (D.C. C ir. 2014; New York v. FERC, 535 U.S. 1, 24; and Pacific Gas & Elec. Co. v. State Energy Re s. Conservation & Dev. Comm'n, 461 U.S. 190, 205 (1983).

Commenters provided Court decisions that they state d supports the states authority set up under the FPA. Commenters referenced or quoted the Suprem e Court in New York v. FERC, 535 U.S. at 22-23, stating that the FPA's "legislative histo ry is replete with statements describing Congress' intent to preserve state jurisdiction ove r local facilities." Commenters also stated that the Supreme Court has noted that FERC itself "has r ecognized that the States retain significant

control over local matters even when retail transmi ssions are unbundled", and referred to FERC's own acknowledgments of the limits on its jurisdicti on in Order No. 888 [New York v. FERC, 535 U.S. 1, 24 (quoting Order No. 888 at 31,782, n. 543 ("'Among other things, Congress left to the States authority to regulate generation and tra nsmission siting'"), and n.544 ("'This Final Rule will not affect or encroach upon state authority in such traditional areas as the authority over local service issues, including reliability of loca l service; administration of integrated resource planning and utility buy-side and demand-side decis ions, including DSM [demand-side management]; authority over utility generation and resource portfolios; and authority to impose198

non-by-passable distribution or retail stranded cos t charges.'") (2002)).] Commenters also

referred to New York and cited New York v. FERC, 535 U.S. 1, 20 (2002) ( "FERC's jurisdiction over the sale of power has been specifically confin ed to the wholesale market." (emphasis omitted)

Commenters stated that numerous judicial decisions have read the FPA and the other federal energy statutes as retaining the States' "tradition al responsibility in the field of regulating electrical utilities for determining questions of n eed, reliability, cost and other related state concerns" and "traditional authority over the need for additional generating capacity, the type of generating facilities to be licensed, land use, rat emaking, and the like" [Pac. Gas & Elec. Co. v. State Energy Res. Conservation & Dev. Comm'n, 461 U .S. 190, 205 and 212 (1983)]. Commenters stated that the Supreme Court has also e mphasized that federal regulation by agencies other than FERC may not invade the domain that the FPA has preserved for the states.

Commenters stated that in Pacific Gas & Electric Co . v. State Energy Resources Conservation & Development Commission, [461 U.S. 190 (1983)], the Court concluded that federal regulation of the safety of nuclear power plants did not override state authority over "the regulation of electricity production." Commenters stated that the Court noted that the only exception to state regulation of these activities was FERC's authority under the FPA over interstate wholesale sales and transmission by FERC-jurisdictional utilities. [Pac. Gas & Elec. Co. v. State Energy Res. Conservation & Dev. Comm'n, 461 U.S. 205]

Commenters provided additional court decisions thatmaintained states authority, see also [Niagara Mohawk Power Corp. v. FERC, 452 F.3d 822, 824 (D.C. Cir. 2006) ("States retain jurisdiction over retail sales of electricity and o ver local distribution facilities.")]; [Duke Energy Trading & Mktg., L.L.C. v. Davis, 267 F.3d 1042, 10 56 (9th Cir. 2001) ("Retail sales of electricity are within the exclusive jurisdiction o f the States")]. Commenters also referenced court decisions that upheld the division of authori ty, see also Chemehuevi Tribe of Indians v. Fed. Power Comm'n, 420 U.S. 395, 408, 409-10 (1975) ; First Iowa Hydro-Elec. Coop. v. Fed. Power Comm'n, 328 U.S. 152, 168 (1946).]. Commenter s stated that the courts have consistently rejected federal attempts to intrude on the States' authority in these areas [See, e.g., S. Cal. Edison Co. v. FERC, 603 F.3d 996, 1000-02 (D.C. Cir . 2010) (FERC lacked jurisdiction to preempt State authority to "set the netting period for station power" i.e., the pricing mechanism "in the retail market")]; [Piedmont Envtl. Council v. FERC, 558 F.3d 304, 315 (4th Cir. 2009) (FERC lacked permitting authority where a State com mission "engage[d] in a legitimate use of its traditional powers")]; [Detroit Edison Co. v. F ERC, 334 F.3d 48, 54 (D.C. Cir. 2003) (ruling that FERC actions infringed on State retail jurisdi ction)]. Commenters also referenced PPL EnergyPlus, LLC v. Nazarian, 753 F.3d 467 (4th Cir. 2014) (emphasizing the need to preserve "the division of the regulatory field that Congress went to so much trouble to establish" by respecting "Congress specific grant of power to the States to regulate production.")].

Commenters stated that Congress chose to confine FE RC's sphere of regulation to preserve traditional state regulatory authority over all oth er sales - including retail sales - and over generation and local distribution facilities. Thus, commenters stated, Congress intended to "tak[e] no authority from State Commissions" [New E ngland Power, 455 U.S. at 341 (quoting199

H.R. Rep. No. 1318, 74th Cong.,1st Sess. 8 (1935)) (emphasis omitted).], and Congress specifically preserved the autonomy of state and lo cal public power utilities from plenary FERC regulation. Commenters stated that for state and lo cal public power utilities, Congress expressly stated that FERC's general FPA authority does not apply to states and subdivisions of states, unless the FPA provision expressly so provides. Com menters stated that Congress has confirmed this division of authority between states and FERC, in the PURPA of 1978, PURPA amendments in 1992, and most recently in the Energy Policy Actof 2005, which granted FERC authority to create an Electric Reliability Organization (known as NERC) to help develop and enforce reliability standards for the U.S. Bulk Power Syste m. Commenters stated that the statute "does not authorize the ERO [Electric Reliability Organiz ation] or the Commission to order the construction of additional generation or transmissi on capacity or to set and enforce compliance with standards for adequacy or safety of electric f acilities or services." Commenters stated that it would be wholly inappropriate for EPA to rely on a purportedly ambiguous environmental provision to claim authority over electricity marke ts that Congress has even expressly denied

FERC. Commenters also stated that Congress did not intend for FERC to regulate intrastate electricity transactions or mandate that states und ertake specific programs designed to foster increased renewable generation or end-use efficienc y measures. Commenters believed if FERC has limited authority in these areas, EPA must also , and as a policy matter, EPA should not intrude into areas that are appropriately left to t he state to regulate.

Commenters stated that FERC itself has recognized t he authority of states. Commenters noted that FERC has acknowledged that the FPA "explicitlyremoves from Commission jurisdiction facilities used for the generation of electric ener gy (except as specifically provided)" leaving those matters to the States [Middle South Servs., I nc., 32 FERC Section 61,425, at 61,946 (1986).]; and commenters noted that FERC itself has expressly acknowledged the rights of states to encourage the development of particular generati on resources as a legitimate policy interest that is within their jurisdiction under the FPA [se e, e.g., Order Accepting Proposed Tariff Revisions, Subject to Conditions, and Addressing Re lated Complaint, PJM Interconnection, L.L.C., 135 FERC paragraph 61,022, at 61,106 (Apr. 12, 2011) (a state may "act within its borders to ensure resource adequacy or to favor particular types of new generation").] Commenters stated that FERC has recognized that sta te law does not intrude on federal jurisdiction to the extent that a state is directin g the planning and resource decisions of electric utilities under its jurisdiction [see Order on Comp laint and Petition for Declaratory Order and on Petition for Enforcement, Midwest Power Sys., Inc., 78 FERC paragraph 61,067, at 61,246 (Jan. 29, 1997) (Iowa statute not preempted "to the exten t that [it] require[s] [state utilities] . . . to purchase from certain types of generating facilitie s"); see also Order on Requests for Reconsideration, S. Cal. Edison Co., 71 FERC paragr aph 61,269 (June 2, 1995) (states have broad powers to direct the planning and resource de cisions of utilities under their jurisdiction)]. Commenters quoted FERC Commissioner Tony Clark in r ecent Congressional testimony [FERC Perspectives: Questions Concerning EPA's Proposed C lean Power Plan and other Grid Reliability Challenges: Hearing Before the Subcomm. on Energy and Power of the H. Comm. on Energy & Commerce, 113th Cong. 4, 7 (July 29, 2014) (written testimony of Tony Clark, Comm'r, FERC), available at http://energycommerce.house.gov/hearing/ferc-perspe ctives-200

questions-concerning-epa%27s-proposed-clean-power-p lan-and-other-grid ], stating that the Proposed Guidelines would "dramatically alter the traditional lines of authority by creating a new paradigm of oversight of net carbon emission from a state" and potentially result in states "ceding ultimate authority of the regulation of the ir state's public utilities and energy development to the EPA."

Commenters cited Electric Power Supply Association (EPSA) vs. Fed. Energy Regulatory Comm’n, 753 F.3d at 216, and stated it is not credi ble for the EPA to assert that, even though the federal agency that is actually tasked with oversee ing interstate energy markets cannot engage in demand-side regulation, the federal pollution contr ol agency is "sub silentio" empowered to do so by Section 111(d). Commenters reiterated that th e division of authority was upheld by EPSA, 753 F.3d at 216; commenters stated that courts reje cted attempts by FERC to use indirect means to regulate in areas that the FPA reserves to the s tates, referencing EPSA, 753 F.3d at 221. Commenters further explained EPSA, 753 F.3d at 216, stating that the court vacated FERC
Order No. 745 which established revised rules for c ompensating demand-side resources in FERC-jurisdictional markets, because demand reducti ons did not constitute wholesale sales of energy and "the Federal Power Act unambiguously res tricts FERC from regulating the retail market . . . ." [753 F.3d at at 224]. Commenters al so referenced Duke Power Co. v. Fed. Power Comm'n, 401 F.2d 930, 935 (D.C. Cir. 1968) (explain ing that the "major emphasis" of the FPA "is upon federal regulation of those aspects of the industry which - for reasons either legal or practical - are beyond the pale of effective state supervision"); Conn. Dep't of Pub. Util. Control v. FERC, 569 F.3d 477, 481 (D.C. Cir. 2009) (reiter ating established principle that FERC may not "directly regulat[e]" electric generation).

Commenters specifically noted that the D.C. Circuit 's recent decision in EPSA v. FERC has significant ramifications for Building Block 4 of t he Proposed Rule. Specifically, commenters stated that in EPSA, the court ruled that FERC's wh olesale jurisdiction does not extend to the regulation of putative "wholesale sales" by demand- response resources because that would constitute "direct regulation" of state-jurisdictio nal retail markets [EPSA, 753 F.3d at 222, 224].

Commenters contended that EPSA v. FERC thus holds t hat demand-response resources may not be permitted to participate as sellers of wholesale energy in FERC jurisdictional, RTOadministered markets. Commenters stated that some h ave argued that this holding would also apply to demand-response resources participating as sellers in RTO capacity markets. Commenters stated, however, that the EPSA decision does not disturb state-administered demand-response programs and does not foreclose the recognition in wholesale markets of such demand-response programs in wholesale demand. Comme nters believed that the EPSA decision respects state and local authority over demand-resp onse resources and will, in the long run, better enable the development of demand response in wholes ale markets. Thus, commenters stated that the EPSA decision is not an impediment to EPA's lon g-term goals, but since the decision has vacated FERC's attempt to supplant state and local authority over retail demand response, EPA may need to reevaluate this building block and appr opriately adjust each state's emission goals.201

Commenters stated EPA must defer to existing federa l and state-specific policies in its calculation of renewable energy potential for Flori da and other states. According to the commenters, the Florida Legislature has established policies to encourage the development of renewable energy resources and to ensure these reso urces contribute to reliable electric service at a reasonable cost. The commenters provided informat ion on Florida laws and The Public Utility Regulatory Policies Act (PURPA), stating that they provide the legal framework for the interconnection and economic parameters to develop renewable energy and therefore Floridaspecific policies should be inherent to the Propose d Rule.

Response 17: We disagree with commenters. As an initial matter, we note that the final rule does not include building block 4 – demand-side energy e fficiency – as a component of BSER. Therefore, we will not address comments on building block 4. As we explain in sections V.A. and V.B. of the preamble, our emission guidelines s imply reflect an achievable emissions limit through the application of the BSER and do not in t hemselves require states or sources to implement the BSER. That is, EPA is responsible for determining the level of emission limitation from the source category, while states h ave the responsibility of assigning emission requirements to their sources that will ensure thei r achievement of that level of emission limitation. States may fulfil their responsibility by establishing emission standards or creating plans consistent with the guidelines. In doing so, states will be able to choose from a wide range of emission reduction measures, including measures that are not part of the BSER.

We disagree that we are expanding our authority to include wholesale energy market regulation. Our emission guidelines simply reflect an achievabl e emissions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. Moreover, these emission guidelines provide states with the f lexibility to establish, implement, and enforce standards of performance and do not intrude on the regulatory domain of FERC or the states. It cannot be said that because environmental requireme nts may have an effect on the wholesale energy market that the EPA is therefore intruding i nto energy regulation. Certainly, in the legislative history of the 1970 CAA Amendments, Con gress expressly identified power plants as a priority source category for regulation under CAA section 111.

Comment 18: Commenters claimed the proposed rule interferes wit h or usurps state responsibilities under the FAA and would inappropri ately assign oversight of electric generation to the EPA. Commenters believed the proposed rule e ffectively limits the state regulator's ability to implement appropriate and balanced resource plan ning, interferes with the state utility regulators' ability to manage electricity rates, an d gives the EPA oversight of electric generation dispatch, construction and integration of renewable power, and customer electricity consumption. Commenters argued the proposed rule wo uld usurp the state utility regulator's authority by limiting the availability of certain e lectric generating resources, forcing the premature retirement and replacement of existing ge nerating resources, requiring the implementation of renewable energy and costly energ y efficiency standards, requiring the state to construct new generation units, and increasing e lectricity rates for customers. Commenters argued that the EPA has no jurisdictional authorityunder section 111(d) to assume this role. Commenters believed the EPA would need clear Congre ssional authorization to usurp state's202

authority over utility rates, fuels and generation choices and stated that "it is hard to imagine that Congress intended to give EPA authority to regulate the entire electric system by the use of the general term "system." Commenters stated that the environmental regulation has been limited to specific requirements on specific plants, and has n ever been interpreted to grant EPA broad authority to dictate the operation of the entire el ectricity system.

Commenters argued that the proposal overrides state prerogatives by forcing them to prioritize natural gas-fired generation over coal-fired genera tion and non-fossil-fuel generation or energy efficiency over fossil-fueled generation. Commenter s felt that the renewable portfolio standard would severely infringe on state's regulatory juris diction. Commenters referenced Detroit Edison Co., 334 F.3d at 49 ("Retail service [subject to St ate authority] - denotes transmission or distribution to end users."); see also In re S. Cal . Edison Co., D. 05-01-054, 2005 WL 350964 (Cal. P.U.C. Jan. 27, 2005) (discussing State regul ation of dispatch). Commenters stated that the unlawfulness of EPA's approach applies equally to E PA's proposal to prioritize the dispatch of existing NGCC facilities and EPA's suggestion in th e NODA that its BSER analysis could be expanded to include new NGCC facilities. Commenters stated that, likewise, requiring the construction of new renewable power plants to serve retail demand is clearly not within the federal government's limited authority over "wholes ale" transmission. Commenters stated that in Building Block 4, by seeking to regulate local and intrastate electricity markets in the name of reducing demand, EPA is usurping the States' tradit ional authority over those markets. Commenters stated that the FPA clearly recognizes S tates' authority with respect to the generation and dispatch of electricity, and nothing in the CAA suggests that Congress has independently given EPA authority to compel fuel sw itching within the electricity sector.

Commenters argued that the proposed rule overrides each state's prerogative to determine its own electricity policies. Commenters noted that state u tility regulators are responsible for ensuring the lowest possible electricity prices for ratepaye rs and claimed that by forcing coal-fired generating plants to shut down several years before the end of their remaining useful life and consequently causing electricity prices to increase , the EPA would be improperly usurping the state utility commission's authority to ensure low electricity prices. Similarly, commenters argued that the CPP's environmental dispatch requir ement for utility electric generating units would interfere with a state's utility commission's ability to comply with its duty to ensure that utility services are provided to the ratepayers at the "lowest reasonable cost."

Commenters noted that the states and FERC have expertise in public utilit y ratemaking and in understanding the complexity of the electric grid a nd electric reliability and argued that the EPA would not only exceed its authority but lacks the n ecessary experience and expertise to oversee the electric system. Commenters expressed similar concern regarding expa nsion of EPA's authority and noted that electric coops are governe d by locally elected boards that are in a better position to understand the dynamics of their local power systems and the desire of their member

owners than the EPA.203

Commenters contended that after an implementation i s approved by EPA, a state will have lost its ability to chart its own course as to how it re gulates public utilities and its energy sector as a whole, and further claimed that the several ISOs ar e warning that the grid cannot operate reliably under the EPA's proposal and electric costs will sk yrocket.

Commenters claimed that the CPP effectively reverse s Ohio's decision to restructure its electricity market. Commenters indicated that in 19 99 Ohio restructured the electricity market to tap into the decentralized forces of supplier compe tition and consumer choice. Commenters

described how consumers can choose between differen t prices, contract terms, generation resources, and incentives. Commenters claimed that the CPP would induce a "soft re-integration"

of Ohio's market which would undermine the state's restructuring decision.

Commenters stated that the EPA's CPP would force th e State Corporation and/or Public Utility Commission to oversee utility resource planning in order to further the EPA's climate change goals. Commenters quoted National Association of Re gulatory utility Commissioners Chairman Joshua Epel who said the proposal's renewable gener ation goals and end-use efficiency programs ". . . concerns me more than just about anything el se in the rule."

Commenters expressed concern that state energy poli cy making would become subject to federal oversight and that the EPA would order states to bo ost their renewable generation goals or increase their end-use efficiency programs.

Commenters stated that policies such as renewable e nergy portfolio standards, energy efficiency standards, and cap-and-trade carbon emissions syste ms have always been implemented by deliberation in state legislatures or public utilit y commissions. Commenters noted that the American Clean Energy and Security Act of 2009 was an attempt by the U.S. Congress to authorize these policies [see H.R. 2454 of the 111t h U.S. Congress; this legislation, also known as the Waxman-Markey Bill, was passed by the U.S. H ouse, but failed in the Senate] and stated that "the EPA cannot now do what the elected repres entatives of the American people declined to authorize simply by reinterpreting long-extant stat utes to suddenly provide such authorization."

Commenters claimed that the EPA's "asserted authori ty could dramatically overhaul the choices made by Colorado officials" related to their RPS. C ommenters explained that the Colorado law allows state officials discretion regarding enforce ment of a 2% rate cap when it comes into conflict with the green energy production quota. Co mmenters asked whether the EPA would allow this choice to be made by the State.

Commenters requested the proposed rule be withdrawn because it inappropriately usurps state authority.

Commenters noted that the United States Court of Ap peals for the District of Columbia recently prohibited efforts made by FERC that sought to enco urage demand side management programs.

Commenters stated that the court found that these e fforts encroached upon powers that are within the exclusive purview of the states [see Electric P ower Supply Ass'n v. FERC, 753 F.3d 216204

(D.C. Cir. 2014)]. Commenters stated that the Propo sed Rule impermissibly encroaches on these same powers. Commenters also said that the FPA spli ts jurisdiction over the sale and delivery of electricity between the federal government and the states on the basis of the type of service being provided and the nature of the energy sale. Comment ers quoted from Congressional testimony by FERC Commissioner Tony Clark who warned that states risk losing autonomy to EPA. Specifically, commenters quoted Mr. Clark stating t hat to the extent the state plan "becomes blessed by EPA and submitted and approved by EPA . . . [the state] will have lost that opportunity [to modify its plan] because it will ha ve become a part of a Federally-approved plan and [the state] would then need to seek approval fr om the EPA." (See FERC Perspectives: Questions Concerning EPA's Proposed Clean Power Pla n and Other Grid Reliability Challenges: Hearing Before the H. Subcomm. on Energy & Power of the H. Comm. on Energy, (2014) (statement of Tony Clark, Chairman, FERC), availabl e at http://energycommerce.house.gov/hearing/fercperspec tives-questions-concerning-epa%27sproposed-clean-power-plan-and-other-grid ). Commenters, also citing ESPA, 753 F.3d at 216, stated that EPA should not be able to take a greate r amount of power from the states than the

D.C. Circuit allowed FERC to take. Commenters claim ed that building block 4 conflicts with state authority over regulation of energy, stating that EPSA, 753 F.3d at 218 upholds that not even FERC has authority to induce a reduction in th e consumption of electricity by consumers.

Commenters further claimed that neither the EPA nor the federal government as a whole has authority to restrict the use or purchase of electr icity, or impose heat rate improvements.

Commenters stated that EPA should certainly have no more ability to "do indirectly what it could not do directly" (Altamont Gas Transmission Co. v. FERC, 92 F.3d 1239, 1248, D.C. Cir. 1996) than FERC would with respect to matters that the FP A left to the states. Commenters believed that the limitations placed on EPA's authority by t he Constitution and the CAA were confirmed almost 40 years ago (see Dist. of Columbia v. Train , 521 F.2d 971, 974 (D.C. Cir. 1975)) and believes the Supreme Court will exercise its author ity to prevent any unconstitutional coercion of state power and authority by the federal government(see Nat'l Fed'n of Indep. Bus. v. Sebelius, 132 S. Ct. 2566, 2601-04, 2656-66 (2012)).

Commenters stated that the proposed rule's attempt to federalize control over state energy policy

is inconsistent with the FPA. Commenters stated tha t it is unreasonable for EPA to propose regulation under Section 111(d) that would allow pr ecisely the type of federal control over state decision-making that Congress denied to the federal government in the context of the FPA. Commenters claimed that the jurisdictional question turns on whether the Agency action "constitutes[s] direct regulation" of an area that is subject to state regulation (Connecticut Dept. of Public Utility Control v. FERC, 569 F.3d 477, 47 8 (D.C. Cir. 2009)).

Commenters stated that the rule's unprecedented rea ch extends past New Mexico's utilities and even beyond the Public Service Commission - all the way to the state legislature. Commenters further stated that EPA's CPP would require New Mex ico lawmakers to enact energy laws that mandate the usage of certain types of energy and se rvices in the retail electricity market.205

Commenters stated that EPA infringes upon state leg islatures and public service commissions by attempting to set state energy policy at the federa l level.

Commenters argued that the proposal combines a rene wable energy portfolio with demand-side

control measures to create a de facto national ener gy policy at the expense of state authority and
economic freedom.

Commenters believed that the EPA was attempting to federalize electric system that has been under the purview of the states or open markets. Co mmenters stated that the proposed rule dictates what both state environmental regulatory a gencies and state energy commissions must adopt as policy choices, effectively choosing the w inners and losers for electricity generation rather than leaving those decisions up to states an d the market. Moreover, commenters stated that the process requires these policy choices to be mad e federally enforceable, taking any future decision to change that policy out the states' hand s. Commenters argued that the CAA does not empower EPA to take over state decision-making auth ority regarding electric production, delivery, and use.

Commenters claimed that the proposal requires state plans must be federally enforceable and argued that this demonstrates the EPA is usurping s tates' authority under the FPA.

Commenters noted that the operation of EGUs at a pu blic power utility are assigned under state and local laws to the public power utility and stat ed that the proposed rule intrudes upon the local control of public power utilities.

Response 18: We disagree with commenters. As an initial matter, the final rule does not include building block 4 – demand-side energy efficiency – as a component of BSER. Therefore, we will not address comments on building block 4. Additiona lly, we note that we are not requiring affected EGUs to invest in renewable energy sources . Renewable energy is one potential measure that may be employed, consistent with the s tate flexibility principle that is central to this

program.

As we explain in sections V.A. and V.B. of the prea mble, our emission guidelines simply reflect an achievable emissions limit through the applicati on of the BSER and do not in themselves require states or sources to implement the BSER. Th at is, EPA is responsible for determining the level of emission limitation from the source catego ry, while states have the responsibility of assigning emission requirements to their sources th at will ensure their achievement of that level of emission limitation. States may fulfil their res ponsibility by establishing emission standards or creating plans consistent with the guidelines. In d oing so, states will be able to choose from a wide range of emission reduction measures, includin g measures that are not part of the BSER.

We disagree that we are expanding our authority to include wholesale energy market regulation, state retail regulation, or federalizing state deci sions over energy policy. Our emission guidelines simply reflect an achievable emissions limit throug h the application of the BSER and do not in themselves require states or sources to implement t he BSER. Moreover, these emission guidelines provide states with the flexibility to e stablish, implement, and enforce standards of206

performance and do not intrude on the regulatory do main of FERC or the states. It cannot be said that because environmental requirements may have an effect on the wholesale energy market that the EPA is therefore intruding into energy regulati on. Certainly, in the legislative history of the 1970 CAA Amendments, Congress expressly identified power plants as a priority source category for regulation under CAA section 111.

We note that the federal enforceability considerati ons raised in the comment arose primarily under the proposed portfolio approach for state pla ns. As explained in section VIII.C of the preamble, the EPA is not finalizing the portfolio a pproach, which would have allowed state plan submittals to include federally enforceable measure s that apply to entities that are not affected EGUs. However, as further explained in section VIII .D, if the state is adopting the state measures type plan, the state plan submittal will need to sp ecify, in the supporting materials, the state enforceable measures that the state is relying upon in conjunction with any federally enforceable

emission standards for affected EGUs to meet the em ission guidelines. The final rule provides considerable discretion to the states in setting em ission standards and related plan requirements for its affected EGUs. Consistent with longstandin g practice under the Clean Air Act, if a regulated entity does not meet a requirement, the E PA will address the matter on a case-by-case basis, to determine the appropriate response and re solution.

Comment 19: Several commenters said that electricity is not ge nerated on a state-by-state basis. Commenters also state that the EPA is unlawfully in truding on FERC’s authority under Federal Power Act 215 to ensure reliability of the bulk pow er system. Commenters also say that the EPA failed to consult with FERC about the 111(d) rule’s technical feasibility and impacts on reliability and markets.

Commenters stated that the title of the proposed ru le, the Clean Power Plan, makes it clear that EPA is creating national electricity policy. Commen ters said EPA's proposal sets emission standards on a state-by-state basis with initial co mpliance levels mandated in 2020, ongoing to 2030. Commenters said that FERC has a responsibilit y to promote the reliability of our nation's bulk power system under section 215 of the Federal Power Act. Commenters said FERC must analyze the reliability impacts of the proposed rul es. Commenters said because FERC is the economic regulator of the nation's wholesale electr icity markets and is directed by statute to assure just and reasonable rates, the Commission al so has a duty to analyze the economic consequences of the proposal.

Response 19: We disagree with commenters. The EPA is not setting a national electricity policy. Further, we are not expanding our authority to incl ude wholesale energy market regulation. Our emission guidelines simply reflect an achievable em issions limit through the application of the BSER and do not in themselves require states or sou rces to implement the BSER. Moreover, these emission guidelines provide states with the f lexibility to establish, implement, and enforce standards of performance and do not intrude on the regulatory domain of FERC or the states. It cannot be said that because environmental requireme nts may have an effect on the wholesale energy market that the EPA is therefore intruding i nto energy regulation. Certainly, in the legislative history of the 1970 CAA Amendments, Con gress expressly identified power plants as207

a priority source category for regulation under CAA section 111. For a comprehensive discussion of how we considered reliability in developing the final rule, please see preamble section

VIII.G.2.

Further, we disagree with commenters that EPA is in truding on FERC’s authority under FPA section 215 to ensure bulk power system reliability . The EPA is setting achievable emission limits. We are not asserting authority over issues that Congress has exclusively reserved for another. As noted in the final rule preamble, EPA o fficials worked closely with DOE and FERC officials to ensure, to the greatest extent possibl e, that actions taken by states and affected EGUs to comply with the final rule mitigate potential el ectric system reliability issues. Senior EPA

officials met with each of the FERC Commissioners a nd EPA staff had frequent contact with FERC staff throughout the development the rule. FER C held four technical conferences to discuss implications of compliance approaches to th e rule for electric reliability, infrastructure, and electricity markets. EPA staff attended the fou r conferences and EPA leadership spoke at all of them. The EPA, DOE, and FERC will continue to wo rk together to ensure electric grid reliability in the development and implementation o f state plans. The EPA has considered the input of FERC, DOE, and multiple stakeholders regar ding reliability, infrastructure, and market issues as it developed the final rule. For a more c omprehensive discussion of reliability issues, as

well as the EPA’s coordination with both FERC and D OE, please see preamble section VIII.G.2.

This section also includes a discussion of reliabil ity analysis and reports regarding the 111(d)

rule. For a discussion of infrastructure and marketissues, please see preamble section V and the GHG Mitigation Measures TSD. Finally, we note that the agency has addressed concerns about time needed to develop state plans and meet interimperformance levels. Thus, with initial submittals, all states will have until September 6, 2018 to submit final plans, and the interim performance period will not begin until 2022. Addit ionally, the final rule adjusts the interim goals to provide a gradually phased-in initial redu ction requirement and a more gradual glide path to the final 2030 goals. This more gradual app lication of the BSER over the 2022-2029 interim period provides the state with substantial latitude in selecting the emission reduction glide path for affected EGUs over that period.

Comment 20: Comments stating that the EPA is attempting to us urp state authority over renewable energy, energy efficiency, and similar pr ograms through the extension provision in proposed 40 Code of Federal Regulations (CFR) secti on 60.5760(a)(3), and furthermore, that no state agency can make such a federally enforceable commitment for measures in state law.

Commenters stated, the EPA is attempting to usurp s tate authority over renewable energy, energy efficiency, and similar programs through the extension provision in proposed 40 Code of Federal Regulations (CFR) section 60.5760(a)(3). Co mmenters said, the EPA does not have the legal authority under FCAA section 111(d) to make a ny demands regarding a state's current programs that are not already federally enforceable . Commenters said, furthermore, the constitutions of Texas and most other states prohib it a state agency from making a federally enforceable commitment binding the state legislatur e from changing state law.208

Commenters stated, in section 60.5760(a)(3), the EP A is proposing that in exchange for an extension, the state must commit to not remove any existing CO2 measures. Commenters said, furthermore, the state must make the commitment in a way that allows the EPA to still enforce

the measure even if the state fails to submit a fin al plan or EPA does not approve the final plan. Commenters said, unless a state program, such as re newable energy standard, is already federally enforceable under a state plan or a SIP, the EPA do es not have the authority to make any demands of the states regarding such a program. Com menters said, the EPA is attempting to force states to surrender that authority through se ction 60.5760(a)(3). Commenters said, for the

EPA to threaten to withhold an extension unless the state surrenders authority of these programs
to the EPA is blatant extortion of the states.

Commenters stated, furthermore, no state agency can make such a federally enforceable

commitment for measures in state law. Commenters sa id, the rule, as proposed, applies to the administrator of the air quality program in a state . Commenters said, state agencies cannot bind their legislative process in the manner EPA is requ iring. Commenters said, the TCEQ is no more capable of making such a commitment than the EPA ca n commit that a provision of the FCAA will not change. Commenters said, even a state legi slature may not be able to restrict a future legislature from changing state law. Commenters sai d, the provision in section 60.5760(a)(3) makes it impossible for a state to qualify for an e xtension. Commenters said, this provision is illegal and unnecessary and should be removed from the rule.

Response 20: We disagree that we are expanding our authority to include wholesale energy market regulation or state retail regulation. Our e mission guidelines simply reflect an achievable emissions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. Moreover, these emis sion guidelines provide states with the flexibility to establish, implement, and enforce st andards of performance and do not intrude on the regulatory domain of FERC or the states. It can not be said that because environmental requirements may have an effect on the wholesale en ergy market that the EPA is therefore intruding into energy regulation. Certainly, in the legislative history of the 1970 CAA Amendments, Congress expressly identified power pla nts as a priority source category for regulation under CAA section 111.

The federal enforceability considerations raised in the comment arose primarily under the proposed portfolio approach for state plans. As exp lained in section VIII.C of the preamble, the EPA is not finalizing the portfolio approach, which would have allowed state plan submittals to include federally enforceable measures that apply t o entities that are not affected EGUs. However, as further explained in section VIII.D, if the state is adopting the state measures type plan, the state plan submittal will need to specify , in the supporting materials, the state enforceable measures that the state is relying upon in conjunction with any federally enforceable

emission standards for affected EGUs to meet the em ission guidelines. The final rule provides considerable discretion to the states in setting em ission standards and related plan requirements for its affected EGUs. Consistent with longstandin g practice under the Clean Air Act, if a209

regulated entity does not meet a requirement, the E PA will address the matter on a case-by-case basis, to determine the appropriate response and re solution.

Comment 21: Commenters stated that nothing in the CAA authorize s or hints at providing authority to EPA to redesign the nation's electrici ty supply system.

Commenters stated that the EPA does not possess law ful authority to regulate electricity, power markets, the transmission and sale of energy into w holesale and retail markets, determine resource mix, or regulate operation or construction of the electric grid; Commenters asserted that this authority resides with FERC (for wholesale tra nsactions) and the states' Public Utilities Commissions (for retail transactions).

Commenters quoted FERC Commissioner's Tony Clark an d Phillip Moeller (written testimonies before the Committee on Energy and Commerce, Subcom mittee on Energy and Power, U.S. House of Representatives, July 29, 2014) to supporttheir argument that the proposal would require extensive changes to the operation of the n ation's power grid, and that this proposal usurps states' authority over the electricity grid.

Commenters stated that EPA does not have the author ity to order states to implement, and lacks the authority itself to implement, Building Blocks 2, 3, and/or 4. Commenters reiterated that states, and not the federal government, have author ity to implement Building Block 3 and/or 4.

Commenters indicated that EPA's reliance on buildin g block two in setting performance standards exceeds its CAA authority because the sta tes have authority to regulate electricity under the FPA programs. Commenters stated that buil ding block 3 would displace the roles traditionally performed by state legislatures and s tate regulatory agencies. Commenters claimed that EPA's portfolio approach (through Building Blo cks 2, 3 & 4) would have the states regulate activities that remain the exclusive province of FE RC. Commenters asked the question of whether, under the proposed rule, states would be r equired to regulate dispatch in contravention of FERC authority.

Commenters stated that if a state chooses to includ e increased dispatch of NGCC plants, renewable energy, or energy efficiency in its compl iance plan under 111(d), the jurisdiction over

these activities remains with FERC and the state ut ility commissions. Commenters agreed that although using renewable energy and energy efficien cy for the purpose of complying with CO 2 emissions reduction goals is good public policy, en forceability by EPA is problematic, as it may usurp the authority of FERC and state public utility commissions over these activities. Commenters concluded by stating that EPA's oversigh t could lead to unintended consequences in terms of costs and reliability issues.

Commenters stated that the regulation of CO 2 emissions is beyond the authority of the ISOs and

RTOs.210

Commenters said that the proposed guidelines do notaddress the D.C. Circuit's decision in

EPSA that was decided less than a month before the Proposed Guidelines were published in the Federal Register ( Elec. Power Supply Ass'n v. FERC , 753 F.3d 216 (D.C. Cir. 2014)).

Commenters stated that the decision both vacated FE RC Order No. 745 and prohibits some demand-side resources from directly participating i n FERC-jurisdictional markets, although it does not affect state-administered demand-response programs. Commenters quoted from FERC and argued it would be inconsistent for EPA to cont inue to assume that demand-side resources will play an expanded role in supporting emissions reductions given EPSA's potential implications. ("Whether the Opinion is read narrowl y or broadly, its implementation will involve both setting new prospective rules and unwinding de mand response participation in certain wholesale markets - a task with significant market and financial implications that go far beyond the typical burdens of litigation . . . ." [See Mot . of FERC to Stay Issuance of Mandate at 11, Elec. Power Supply Ass'n v. FERC ]).

Commenters stated that the authority to require Sta tes to implement discrete energy policies is denied to the federal government under the FPA. Com menters also referred to Elec. Power Supply Ass'n v. FERC, noting that the FERC order was struck down for viol ating the states' exclusive jurisdiction over retail electricity mark ets. Commenters stated that it is unclear how the EPA would exercise this claimed jurisdiction (i.e., the authority to state lawmakers to enact energy statutes).

Commenters stated that a federal agency may not ass ert authority over issues that Congress has exclusively reserved for another. Commenters cited Hunter v. FERC, 711 F.3d 155, 156 (D.C. Cir. 2013) as an example, stating that the court re jected FERC's attempts to regulate matters that the court believed were exclusively subject to the jurisdiction of the Commodity Futures Trading

Commission. Commenters also stated that it is clear that "jurisdiction cannot arise from the absence of objection, or even from affirmative agre ement" by a regulatory body, [see Columbia Gas Transmission Corp. v. FERC, 404 F.3d 459, 463 ( D.C. Cir. 2005)], any more than it can be created by the consent of a private party [see, e.g ., Weinberger v. Bentex Pharms., Inc., 412 U.S. 645, 652 (1973) ("Parties . . . cannot confer juris diction; only Congress can."); Cal. Indep. Sys. Operator Corp. v. FERC, 372 F.3d 395, 398 (D.C. Cir . 2004); Michigan v. EPA, 268 F.3d 1075, 1081 (D.C. Cir. 2001) ("EPA is a federal agency - a creature of statute. It has no constitutional or common law existence or authority, but only those authorities conferred upon it by Congress. 'It is axiomatic that an administrative agency's power to promulgate legislative regulations is limited to the authority delegated by Congress.' Bo wen v. Georgetown Univ. Hosp., 488 U.S. 204, 208 . . . (1988). Thus, if there is no statute conferring authority, a federal agency has none.").]

Commenters stated that states do not have the autho rity to implement building block 2.

Commenters stated that the EPA does not have author ity under the FPA to modify dispatch rules under building block 2. Commenters contended that o perators also do not have control over dispatch. Commenters stated that it appears that on ly FERC has the authority under the FPA to211

approve changes to dispatch rules and that any "red ispatch" mechanism developed by EPA would require FERC approval.

Commenters stated that the regulators in their resp ective states do not have the authority to require the minimum amounts of renewable energy and energy savings stipulated by their states' CPP target, and therefore the proposed rule would r equire enabling legislation in order to comport with the EPA's CPP. Commenters stated that there is no statutory authority in Texas to empower an agency to require and regulate demand si de management.

Commenters stated that the states face significant jurisdictional uncertainty about their ability to achieve compliance through environmental permit lim itations and the re-dispatch necessary to operate within such limitations.

Commenters quoted FERC Commissioner Clark: "States do not have authority to unilaterally compel dispatch of a unit in a FERC jurisdictional wholesale market." Commenters further quoted FERC Commissioner Moeller who said that it i s not clear "how an RTO could prioritize version State Implementation Plans over its own market dispatch."

Commenters stated that the Proposed Rule assumes th at states can regulate dispatch and require environmental dispatch to implement the measures co ntemplated in building block 2. Commenters stated that in RTO regions, however, suc h matters are managed by RTOs pursuant to FERC-approved rules or directly through FERC-app roved tariffs. Commenters stated that the Proposal is arbitrary and capricious because, in fa iling to recognize FERC's role and its statutory obligations when regulating dispatch, it would crea te serious regulatory conflicts, as explained by FERC Commissioner Tony Clark:

"[E]ven if all states in a region band together under the regional grid operator, any changes in the wholesale markets must necessarily b e vetted and approved by FERC. The Commission would be charged with the awkward task o f evaluating fundamental wholesale market design changes driven by environme ntal priorities approved by EPA. Yet FERC is an economic and reliability regulator. Any decisions made by FERC must be rooted not in the CAA, but in our 'just and reasona ble' and not 'unduly discriminatory or preferential' rate standard in the FPA. FERC's abil ity to alter or reject an RTO-proposed compliance mechanism would present a conflict with EPA's evaluation of the compliance plans. Absent Congress stepping in and clearly defi ning FERC authority and EPA authority, it is hard not to envision a future juri sdictional train wreck " [Clark Testimony].

Commenters stated that the Proposal assigns impleme ntation of the portfolio-based emissionreducing measures in building blocks 2, 3, and 4 to the states, and EPA does not specify whether the state utility commission or the state environme ntal regulatory agency is charged with implementing building blocks 2, 3, and 4. However, commenters noted, state environmental agencies generally do not have authority under stat e law to implement these building blocks - or212

have any experience in integrated resource planning - and thus they may be ill-suited to the task in comparison to the state utility commission. Comm enters stated the Proposal fails to appreciate that state utility commissions can implement buildi ng blocks 2, 3, and 4 only for the utilities they regulate under state law, and nearly all state util ity commissions lack the authority to implement these building blocks with respect to their state's public power utilities; thus, EPA oversimplifies the difficulty of implementation of the Proposal's portfolio-based building blocks under existing

state laws.

Commenters stated that the courts have also made cl ear that ambiguous statutory language is not sufficient to authorize an agency to regulate an ar ea that has been traditionally subject to State regulatory authority. [See Am. Bar Ass'n, 430 F.3d at 472 (finding it unreasonable for federal agency to regulate area traditionally subject to St ate regulation when Congress has not spoken in clear terms)].

Commenters stated that the dispatch provisions of b uilding block 2 of the proposed rule also violate federal law. Commenters stated that dispatc h of Southwestern Electric Power Company's (SWEPCO's) EGUs within Texas is controlled by the S outhwest Power Pool (SPP), according to market-based tariffs and operating agreements that are intended to capture the benefits of security constrained market-based economic dispatch across wide regions of the US in order to secure more cost-effective operation for the benefi t of wholesale and retail customers. Commenters stated that the operations of SPP are ba sed on agreements of the system owners and operators, and are subject to oversight by FERC, bu t even FERC has no ability to compel any particular technique of coordination [Atlantic CityElec. Co. v. FERC, 295 F.3d 1 (D.C. Cir. 2002).]. Commenters stated that SWEPCO is aware of no provision of state or federal law that would allow EPA or the state to alter those arrange ments and dictate a specific technique to achieve this arbitrary level of dispatch for a spec ific type of unit. Commenters stated that energy markets recently developed in SPP have been careful ly structured to achieve the least cost dispatch operation of committed generation, and to allow operators of the individual units the flexibility to respond to dynamic and constantly ch anging circumstances in both the supply of and demand for electricity [PUCT Project No. 42636- --Commission Comments on Proposed EPA Rule on Greenhouse Gas Emissions for Existing G enerating Units, Comments of SWEPCO at 7-8 (Sept. 5, 2014)].

Commenters also cited California Independent SystemOperator Corp. (CAISO) v. FERC, 372 F.3d 395, 399 (D.C. Cir. 2004), stating that the D. C. Circuit rejected FERC's attempt to replace the CAISO's governing board under its authority to regulate "practice[s]" affecting "rates and charges" in the wholesale electric markets. Comment ers stated that the court concluded that FERC's construction of "practice in this context is . . . a sufficiently poor fit with the apparent meaning of the statute that the statute is not ambi guous on the very question before us." [CAISO at 401] (citing Brown, 513 U.S. at 120). Commenters stated that, in that case, too, the court found the lack of a limiting principle on FERC's as sertion of authority critical because of the "staggering" and "drastic implications of [FERC's] overreaching," noting that the agency's reasoning would "apply to its regulation of all oth er jurisdictional utilities," allowing it213

"tomorrow without any further precedent or any furt her claim of expanded power" to, for instance, remove and replace Duke's or Dynegy's boards of directors. But, commenters stated, in the case of Section 111(d), the agency proposes to create a new regulatory program from whole cloth that applies without limitation to all fossil fuel-fired power plants and any other source "roped in" by a state or EPA in a manner that const itutes centralized energy and economic reorganization. Commenters stated that to say the l east, "skepticism" is all the more appropriate in the face of such a sweeping proposal, UARG, 134 S. Ct. at 2444. Commenters stated that whatever gaps or ambiguities EPA purports to discov er and interpret in the CAA, the agency cannot bootstrap them into providing it "an unheral ded power to regulate" the states' energy sectors, [Id.]

Commenters stated that the extent to which EPA's pr oposal would impact national energy policy is most directly illustrated by the effect of the p roposal on coal-fired EGUs; EPA's own (likely understated) projections indicate that coal generat ion will cease entirely in eleven states. Commenters stated that given the importance of the energy sector to the economy, only the legislature should determine whether, as a matter o f energy, economic, security, or environmental policy, one type of fuel should essen tially be banned. Commenters stated that in enacting CAA Section 111, Congress spoke directly t o the importance of coal-fired EGUs [see H. Rep. No. 95-294 at 192 ("The committee has desig ned this section and the entire bill, to encourage and facilitate the increased use of coal . . . .")]. In addition, commenters stated that Section 111(d)(12) of the Public Utilities Regulato ry Policies Act of 1978 ("PURPA"), as set forth in Section 1251 of the Energy Policy Act of 2 005 ("EPAct 2005"), requires each electric utility to develop a plan for "minimizing dependenc e on one fuel source and ensuring that the electric energy it sells to consumers is generated using a diverse range of fuels and technologies including renewable technologies." Commenters state d that EPA's proposal contravenes PURPA's endorsement of fuel diversity and the requi rement that each utility maintain a diverse mix of generation resources.

Commenters stated that the EPA does not address how the CAA interacts with other laws, and thus whether the EPA has the authority or expertise to formulate enforceable goals for matters that fall within the exclusive jurisdiction of othe r federal and state agencies (i.e., states' retail electricity regulation).

Commenters asked EPA to explain the legal and regul atory mechanisms it has under the CAA to require the Arizona Corporation Commission to direc t merchant NGCCs to increase generation to replace generation from existing coal-fired plan ts.

Response 21: We disagree with commenters. As an initial matter , we note that the final rule does not include building block 4 – demand-side ene rgy efficiency – as a component of BSER. As we explain in sections V.A. and V.B. of the prea mble, our emission guidelines simply reflect an achievable emissions limit through the applicati on of the BSER and do not in themselves require states or sources to implement the BSER. Th at is, EPA is responsible for determining the level of emission limitation from the source catego ry, while states have the responsibility of214

assigning emission requirements to their sources th at will ensure their achievement of that level of emission limitation. States may fulfil their res ponsibility by establishing emission standards or creating plans consistent with the guidelines. In d oing so, states will be able to choose from a wide range of emission reduction measures, includin g measures that are not part of the BSER.

We disagree that we are expanding our authority to include wholesale energy market regulation or state retail regulation. Our emission guidelines simply reflect an achievable emissions limit through the application of the BSER and do not in t hemselves require states or sources to implement the BSER. Moreover, these emission guidel ines provide states with the flexibility to establish, implement, and enforce standards of perf ormance and do not intrude on the regulatory

domain of FERC or the states. It cannot be said tha t because environmental requirements may have an effect on the wholesale energy market that the EPA is therefore intruding into energy regulation. Certainly, in the legislative history o f the 1970 CAA Amendments, Congress expressly identified power plants as a priority sou rce category for regulation under CAA section

111.

We also disagree with commenters that the final rul e interferes with economic dispatch. Instead, the potential to shift generation identified in bui lding block 2 is entirely consistent with the existing economic dispatch protocols. Environmental policies can shift generation in two ways. The first is operational restrictions, such as perm it limits on the number of hours that an EGU can operate in order to limit emissions. The second is changes in the relative costs of generation among different types of affected EGUs related to p ollution reduction measures. For example, a regulation that necessitates the use of a control t echnology that requires the application of a reagent in a certain kind of EGU will increase the variable cost of operating that plant, which in turn may reduce the amount of generation it is call ed upon to deliver to the grid through securityconstrained economic dispatch procedures. This is c onsistent with economic dispatch.

The federal enforceability considerations raised in the comment arose primarily under the proposed portfolio approach for state plans. As exp lained in section VIII.C of the preamble, the EPA is not finalizing the portfolio approach, which would have allowed state plan submittals to include federally enforceable measures that apply t o entities that are not affected EGUs. However, as further explained in section VIII.D, if the state is adopting the state measures type plan, the state plan submittal will need to specify , in the supporting materials, the state enforceable measures that the state is relying upon in conjunction with any federally enforceable

emission standards for affected EGUs to meet the em ission guidelines. The final rule provides considerable discretion to the states in setting em ission standards and related plan requirements for its affected EGUs. Consistent with longstandin g practice under the Clean Air Act, if a regulated entity does not meet a requirement, the E PA will address the matter on a case-by-case basis, to determine the appropriate response and re solution.

Comment 22: Commenters stated that critics of EPA's proposal ar gue that the plan would, for the first time, allow EPA to set policies that infl uence the types of fuels used as inputs in electricity production, a role that has traditional ly been played by state utility regulators, either215

directly in regulated states or in conjunction with energy markets in deregulated states. Commenters contended, however, that impleme ntation of the CAA has repeatedly resulted

in fundamental shifts in the fuel balance used in t he power sector. Commenters described the history of Section 111 regulations and legislative changes that have impacted the fuel that power plants have used. Commenters referenced the sulfur dioxide regulation for power plants based on the 1970 CAA, which encouraged low sulfur coal. Com menters noted that high sulfur coal was encouraged after Congress' 1977 Amendments to the C AA and low sulfur coal was again encouraged after the 1990 CAA Amendments with the T itle IV cap-and-trade provisions for

sulfur dioxide. Commenters stated that EPA has also altered the mix of fuel used for the production of energy through its regulatory authori ty, giving both the Cross-State Air Pollution Rule under Section 110 and the Mercury and Air Toxi cs Standards rule under Section 112 as examples. Commenters stated that these rules are ex pected to encourage a shift from coal to natural gas in the electricity sector.

Response 22: We appreciate these comments.

Comment 23: Commenters stated that Congress gave FERC the autho rity to regulate interstate electricity transactions and wholesale energy marke ts through the FPA and the Energy Policy Act, and that the EPA's proposal encroaches on thatauthority. Commenters contended that the CPP violates section 310(a) of the CAA because it i nterferes with FERC's exclusive authority to (1) regulate interstate transmission and the wholes ale sale of electric energy (sections 205 and 206 of the FPA); (2) promote the voluntary regional coordination of generation and transmission facilities (section 202(a) of the FPA); and (3) ens ure reliability of the BPS (section 215 of the FPA). Commenters stated that Congress has explicitly proh ibited EPA from interfering with FERC's jurisdiction and cited section 310(a) of the CAA, stating that the Act "shall not be construed as superseding or limiting the authoritie s and responsibilities, under any other provision of law, of the Administrator or any other Federal officer, department, or agency."

Commenters asserted that FERC's mission is to assis t consumers in obtaining reliable, efficient and sustainable energy services at a reasonable cos t through appropriate regulatory means, while EPA's mission is to protect human health and the en vironment by issuing and enforcing antipollution standards.

Commenters stated that the FPA vests FERC with auth ority to ensure that the rates, terms, and conditions for jurisdictional sales and transmissio n are "just and reasonable" and "not unduly discriminatory" or preferential. Commenters stated the FPA vests FERC with jurisdiction over "public utilities" (a term that the commenters indi cated generally excludes publicly-owned utilities and rural electric cooperatives). Comment ers provided details on how FERC establishes "just and reasonable" rates, terms and conditions r egarding the sale at wholesale of electric energy in interstate commerce and transmission of e lectric energy in interstate commerce. Commenters said that FERC specifically regulates th e rates, terms and conditions under which
the RTOs and ISOs offer service as well as other in terstate transmission services.216

Commenters stated that courts have affirmed that th e section 205 filing requirement applies broadly to all classifications, practices, and proc edures that "significantly affect" the price or non-price terms and conditions of FERC jurisdiction al services. Commenters cited City of Cleveland v. FERC, 773 F.2d 1368, 1376 (D.C. Cir. 1 985): "There is an infinitude of practices affecting rates and service. The statutory directiv e must reasonably be read to require the recitation of only those practices that affect rate s and service significantly . . . ." (emphasis omitted). According to the commenters, under sectio n 205(a), FERC may only accept filed rates, rules, and practices if it determines that they are "just and reasonable" [16 U.S.C. 824d(a)].

Commenters stated this EPA proposed rule has the po tential to comprehensively reorder the jurisdictional relationship between the federal gov ernment and states as it relates to the regulation of public utilities and energy developme nt.

Commenters stated that although the FPA preserves s tate and local control over generation resource facilities; their development and procurem ent; generation resource adequacy; and generation resource portfolio diversity, a long lin e of cases makes clear that FERC has exclusive jurisdiction over interstate transmission and whole sale sales of electricity. Commenters cited PPL EnergyPlus, LLC v. Nazarian, Nos. 13-2419, 13-2 424 (4 th Cir. 2014). Commenters referenced New York v. FERC, 535 U.S. at 6-7; Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953, 966 (1986) (quoting FPC v. SCE, 376 U .S. at 215-16 ("Congress meant to draw a bright line easily ascertained, between state and f ederal jurisdiction.... This was done in the [FPA] by making [FERC] jurisdiction plenary and ext ending it to all wholesale sales in interstate commerce except those which Congress has made expli citly subject to regulation by the States."). Commenters stated that because the Propo sed Rule also would interfere with areas that fall squarely within FERC's FPA purview, it must be withdrawn and re-proposed.

Commenters stated that the Supreme Court has repeat edly held that FERC's exclusive jurisdiction over interstate transmission is extrao rdinarily broad because of the integrated nature of the interstate transmission grid and the laws of physics. Commenters stated, for example, in New York v. FERC, 535 U.S. 1 (2002), the Court endo rsed an earlier ruling, Federal Power Commission v. Florida Power & Light Co., 404 U.S. 4 53, 469 (1972), confirming FERC's exclusive jurisdiction over the Florida Power & Lig ht Company's ("FPL") transmission facilities. Commenters cited the Court recounting:

"[S]ince electric energy can be delivered virtually instantaneously when needed on a system at a speed of 186,000 miles per second, such energy can be and is transmitted to FPL when needed from out-of-state generators, and i n turn can be and is transmitted from FPL to help meet out-of-state demands; . . . there is a cause and effect relationship in electric energy occurring throughout every gener ator and point on the FPL, Corp, Georgia, and Southern systems which constitutes int erstate transmission of electric energy by, to, and from FPL ." New York v. FERC, 535 U.S. at 7 n.5 (internal qu otation marks omitted).217

Commenters cited Mississippi Power & Light Co. v. M ississippi as evidence that Congress made it clear that where FERC has lawfully acted to ensu re just and reasonable rates, states no longer have the power to act. Commenters stated that the S upreme Court has consistently held that states may not infringe on FERC's exclusive authori ty over wholesale sales and markets, explaining that:

" Congress has drawn a bright line between state and federal authority in the setting of wholesale rates and in the regulation of agreements that affect wholesale rates. States may not regulate in areas where FERC has properly exercised its jurisdiction to determine just and reasonable wholesale rates or to insure that agreements affecting

wholesale rates are reasonable " [Mississippi Power & Light Co. v. Mississippi, 48 7 U.S. 354, 374 (1988).].

Commenters stated that following Nantahala [Nantaha la Power & Light Co. v. Thornburg, 476 U.S. 953, 963 (1986)], the Court concluded that: (1 ) FERC has exclusive jurisdiction over wholesale rates, and utilities cannot be ordered to charge rates not on file with FERC; (2) "FERC's exclusive jurisdiction applies not only to rates but also to capacity allocations that affect wholesale rates;" and (3) states may not bar regula ted utilities from passing through to retail

customers FERC-mandated wholesale rates. Commenters stated that it would follow that, under the Proposed Rule, a state could not use its econom ic regulatory authority to block purchases of power from higher-emitting resources where contract s for the purchase of that power had already been approved by FERC. Commenters stated that state s might also have trouble directing utilities to invest in lower emitting resources where those i nvestments could hurt the investment interests of independent owners of higher-emitting resources in FERC-jurisdictional wholesale markets. Commenters stated that in New England Power Generat ors Association, Inc. v. FERC, the D.C. Circuit held that FERC could lawfully approve a tar iff for the ISO-NE market that would have had the effect of significantly burdening state RPS s [757 F.3d 283 (D.C. Cir. 2014)]. Commenters stated that under the ISO-NE tariff appr oved by FERC, utilities that invested in renewable resources in compliance with state RPS re quirements could not use the capacity from those resources to demonstrate that they had enough capacity to meet their consumers' demand

unless those resources were bid into and cleared in the ISO-NE capacity market; because the new renewable resources cost significantly more than th e already depreciated fossil resources in that market, it was highly unlikely they would clear. Co mmenters stated that the utilities, therefore, could not only have to pay for the renewable resour ces to meet their RPS requirement but could also have to pay for duplicate capacity in the mark et.

Commenters stated that the Fourth Circuit's decisio n in PPL EnergyPlus, LLC v. Douglas R.M. Nazarian [753 F.3d 467 (4th Cir. 2014)] upheld a di strict court order striking down a Maryland law that directed state jurisdictional retail utili ties to contract with a select generator to purchas e the generator's output at a specified price to enco urage new gas-fired generation in the state. Commenters noted that, in addition, a district cour t in New Jersey struck down a similar New Jersey law last year with a "Contract for Differenc es" scheme [see PPL EnergyPlus, LLC v. Hanna, 977 F. Supp. 2d 372 (D.N.J. 2013]. Commenter s stated that the Third Circuit upheld the218

district court decision on appeal [see PPL EnergyPl us, LLC v. Solomon, No. 13-4330 (3d Cir. Sept. 11, 2014)]. Commenters stated that in this ca se, the state was addressing concerns that insufficient generation was available to meet local needs, but it could have equally been designed to ensure that new lower-emitting resources would b e built to replace existing higher-emitting resources pursuant to the Proposed Rule. Commenters stated that the court concluded that the laws interfered with wholesale ratemaking because t he new capacity would "affect" prices for capacity in a FERC-regulated market. Commenters quo ted the Fourth Circuit: "Although states plainly retain substantial latitude in directly reg ulating generation facilities, they may not exercise this authority in a way that impinges on F ERC's exclusive power to specify wholesale rates." Commenters quoted the Supreme Court in a si milar context: "[T]he problem of this case is not as to the existence or even the scope of a S tate's power to [regulate generation facilities]; the problem is only whether the Constitution sancti ons the particular means chosen by [the state] to exercise the conceded power if those means threa ten effectuation of the federal regulatory scheme". Commenters stated that in this regard, the Fourth Circuit found that Maryland law impermissibly eroded the FERC-determined price and undermined FERC's exclusive authority.

Commenters stated that state actions that undermine a FERC tariff could be found to violate the Supremacy Clause, even if undertaken to advance a p ermissible state objective, including attempts to comply with the Proposed Rule. Commente rs stated that the environmental dispatch of generation that would be required under the Prop osed Rule could be found beyond the States' authority to implement, because FERC - not the Stat es - establishes the rules governing how generation is dispatched in wholesale markets, and any attempt by the States to impose requirements contrary to FERC approved tarif f and market rules could be found to violate the Supremacy Clause of the Constitution.

Commenters stated that Section 202(a) of the FPA au thorizes FERC to "divide the country into regional districts for the voluntary interconnectio n and coordination of facilities for the generation, transmission, and sale of electric ener gy" in order to ensure "an abundant supply of electric energy" with "the greatest possible econom y" and with regard to the "proper

conservation and utilization of natural resources". Commenters stated that it is "definitively" clear that such coordination must be voluntary and that FERC has no power to compel any particular "technique of coordination" [Atl. City E lec. Co., 295 F.3d at 12 (quoting Duke Power Co. v. Fed. Power Comm'n, 401 F.2d 930, 943 (D.C. C ir. 1968)]. Commenters also referenced Cent. Iowa Power Coop. v. FERC, 606 F.2d 1156, 1161 (D.C. Cir. 1979) and stated that the court held that the voluntariness requirement of se ction 202(a) prevented FERC from revising a proposed power-pooling agreement that "provide[d] a mechanism for coordinated daily operation of generation facilities" to create an ev en more "fully integrated electric system with central dispatch of generating units". Commenters s tated, for example, that FERC may not force utilities to form or join an RTO under section 202( a).

Commenters stated that to ensure non-discriminatorytransmission service and to separate the operation of the transmission grid from the economi c interests of generators, FERC has also encouraged the creation of ISOs and RTOs [See Midwe st ISO Transmission Owners v. FERC, 373 F.3d 1361, 1364 (D.C. Cir. 2004)]. Commenters s tated that these entities, "provide open219

access to the regional transmission system to all e lectricity generators at rates established in a single, unbundled, grid-wide tariff that applies to all eligible users in a non-discriminatory manner" [see Midwest ISO Transmission Owners v. FER C, 373 F.3d 1364 (D.C. Cir. 2004) (internal quotations omitted)]. Commenters stated t hat these ISOs and RTOs are FERCjurisdictional public utilities, subject to compreh ensive FERC regulation under the FPA.

Commenters described the role of ISOs and RTOs in s electing the generation with the least cost, as well as the procedures in non-RTO/ISO areas. Com menters stated that for purposes of the Proposed Rule the important point is not what rates and terms are in the tariffs governing the different power markets, but that all of these term s and conditions are filed with and approved by FERC and FERC alone; neither EPA nor the states hav e any power to alter them. Commenters also stated that under the Filed Rate Doctrine, ope rators are bound to what FERC has approved and have no choice but to implement the rates, term s, and conditions of their FERC tariffs.

Commenters stated that Section 206 requires FERC to revise any filed "rate, charge, or classification," or "any rule, regulation, practice , or contract" affecting them, if it determines tha t they are "unjust, unreasonable, unduly discriminato ry or preferential”. Commenters stated that in recent decades, FERC has generally relied on the in terplay of competitive market forces, subject to its oversight, to ensure that wholesale prices f or electric energy are just and reasonable. Commenters stated that EPA's proposed Building Bloc k 2 calls for reducing emissions from

affected EGUs in the amount that results from subst ituting generation at those EGUs with expanded low- or zero-carbon generation. Commenters stated that the Proposed Guidelines assert that it would be technically feasible for states to use redispatch to achieve substantial emissions reductions. Commenters stated that EPA posit that i t would be technically feasible to increase the average utilization rates of NGCCs to seventy perce nt via redispatch. Commenters stated that EPA estimates the cost and economic impacts of achi eving that NGCC utilization rate and concludes that they would be reasonable.

Commenters stated that FERC's jurisdiction over who lesale sales is comparably expansive, [see, e.g., Schneidewind v. ANR Pipeline Co., 485 U.S. 29 3, 300 (1988)]. Commenters stated that

Schneidewind dealt with the Natural Gas Act rather than the FPA. Commenters said that because "the relevant provisions of the two statutes are in all material respects substantially identical," however, the Supreme Court has adopted an "establis hed practice of citing interchangeably decisions interpreting the pertinent sections of th e two statutes." [Ark. La. Gas Co. v. Hall, 453 U.S. 571, 577 n.7 (1981) (internal quotation marks omitted)] ("The [FPA] long has been recognized as a comprehensive scheme of federal reg ulation of all wholesales of [energy] in interstate commerce.") (internal quotation marks om itted); Appalachian Power Co. v. Pub. Serv. Comm'n, 812 F.2d 898, 902 (4th Cir. 1987) ("FERC's jurisdiction over interstate wholesale rates is exclusive . . . .")].

Commenters stated that to the extent that there is a federal role to play in regulating dispatch or demand side energy efficiency, that role has been a ssigned to FERC and not to EPA. Commenters stated that EPA's role with respect to e nergy efficiency is limited to promoting220

voluntary programs. Commenters stated that regardle ss of EPA's general authority under Section 111(d), Congress, in the FPA, made FERC the sole fe deral agency with authority over the generation, dispatch, and consumption of electricit y [see Morton, 417 U.S. at 550-51 ("Where there is no clear intention otherwise, a specific s tatute will not be controlled or nullified by a general one, regardless of the priority of enactmen t."); see also Hunter v. FERC, 711 F.3d 155 (D.C. Cir. 2013) (holding that a federal agency has no authority to exercise jurisdiction over subject matter reserved exclusively to another agen cy)]. Commenters stated that, at a minimum, given the demarcation of authority adopted in the F PA and Congress' decision to limit the role of the federal government in regulating electricity markets, Section 111(d) cannot be read as giving EPA authority to mandate a fundamental restructurin g of those markets, as the proposed rule
seeks to do.

Commenters stated that ERCOT is the only ISO in the country that is wholly contained within one state and is not synchronously interconnected t o the remainder of the US. Commenters stated that ERCOT is unique among the nation's ISOs in tha t it is subject to very limited and specific jurisdiction by FERC under the FPA. Commenters stat ed that transmission of electric energy occurring wholly within ERCOT is not subject to FER C's rate setting authority under FPA Sections 205 or 206 nor is it subject to FERC's sal e, transfer and merger authority under Section 203 of the FPA (see: http://www.ferc.gov/industries /electric/indus-act/rto/ercot.asp). Commenters stated that pursuant to FPA Section 215, FERC does have jurisdiction to establish and enforce reliability standards for users of the bulk power system within ERCOT. Commenters stated that under FPA Sections 210, 211 and 212, FE RC has limited jurisdiction to order certain entities within ERCOT to interconnect and provide transmission service. Commenters stated that historically, FERC orders issued under FPA Section 212 that are applicable to entities in ERCOT have expressly stated that the utilities in ERCOT that are not currently public utilities under the FPA will not become public utilities and therefore subject to FERC jurisdiction for any purpose other than carrying out the provisions of FPA Secti ons 210, 211 and 212 [see e.g., Kiowa Power Partners, LLC, 99 FERC Para 61,251 (May 31, 2002).]

Commenters stated that provisions of the FPA also g enerally do not apply to the U.S. and federal agencies (including federal power marketing adminis trations), states and municipalities and their agencies (including state and local public power ut ilities), and most rural electric cooperatives.

Commenters stated that FERC has no authority to ord er the construction of generation facilities, and has only very limited authority regarding construction of transmission facilities. Commenters said, with the exception of licensing hydro facilit ies, FERC also has no authority to address the siting of generation facilities. Commenters also st ated that DOE has virtually no regulatory authority over utility generating, dispatch or cust omer business practices outside emergency situations [see Section 202 of the FPA]. Commenters stated the DOE also has limited authority to try to expedite the siting of utility facilities on federal land or otherwise requiring a federal approval [see FPA section 216(h)]. Finally, comment ers stated that DOE establishes efficiency standards for utility transformers and for many ele ctric powered customer appliances [see221

generally Title III, Part B of the Energy Policy an d Conservation Act of 1975, Pub. L. 94-163], but DOE has no authority to require the purchase an d use of such equipment.

Commenters stated that the Definition of BSER imper missibly intrudes into wholesale electricity

markets. Commenters said states do not have the aut hority to promulgate the laws and regulations that would be necessary to achieve the full redispatch, and associated emissions reductions, anticipated under Building Block 2. Com menters said the regulatory scheme governing the transmission and sale of power is a c omplex combination of both state and Federal law. Commenters said the FPA embodies Congress' att empt "to reconcile the claims of federal and local authorities and to apportion federal and state jurisdiction over the industry." Commenters said under the FPA, FERC has exclusive j urisdiction over "the transmission of electricity in interstate commerce and the sale of such energy at wholesale in interstate commerce." Commenters said states retain jurisdicti on only over retail sales of electricity, generating facilities, facilities used for local di stribution, and facilities used for transmission of energy wholly consumed by the transmitter. Comment ers said the Federal scheme "leaves no room either for direct state regulation of the pric es of interstate wholesales of [energy], or for state regulations which would indirectly achieve th e same result."

Commenters stated that the outside-the-fence provis ions of the proposed guidelines are based on novel legal theories that could change the scope of air regulation more than any prior act of Congress because commenters believed that the propo sal primarily relied on demand-side energy efficiency measures that lower demand for electrici ty and measures that mandate electricity system operators to dispatch EGUs powered by natura l gas and renewable resources prior to dispatching EGUs that burn coal. Commenters asserte d that the proposal contravenes section 310

of the Clean Air Act which states that the Act "sha ll not be construed as superseding or limiting the authorities and responsibilities, under any oth er provision of law, of ... any other Federal officer, department, or agency[,]" but commenters b elieved that is exactly what the proposed guidelines are attempting to do by superseding the authorities over electricity regulation granted by Congress to the United States Department of Ener gy, and particularly the Federal Energy Regulatory Commission (FERC). Commenters asserted that FERC, through its oversight of the North American Electric Reliability Corporation (NE RC), is responsible for ensuring the reliability, security, and adequacy of the U.S. bul k power system.

Response 23: We disagree that we are expanding our authority to include wholesale energy market regulation or state retail regulation. The E PA is not interfering with the FERC’s exclusive authority under Federal Power Act 205 and 206 to re gulate interstate transmission and wholesale sales of electric energy. Our emission guidelines s imply reflect an achievable emissions limit through the application of the BSER and do not in t hemselves require states or sources to implement the BSER. Moreover, these emission guidel ines provide states with the flexibility to establish, implement, and enforce standards of perf ormance and do not intrude on the regulatory

domain of FERC or the states. It cannot be said tha t because environmental requirements may have an effect on the wholesale energy or retail en ergy markets that the EPA is therefore intruding into energy regulation. Certainly, in the legislative history of the 1970 CAA222

Amendments, Congress expressly identified power pla nts as a priority source category for regulation under CAA section 111. Additionally, we note that we are not including building block 4 – demand-side energy efficiency – as a comp onent of the building blocks. Additionally, we note that the final rule does not require FERC o r states to exercise jurisdiction over entities or areas over which it does not have jurisdiction.

We disagree with commenters that the final rule req uires environmental dispatch. Instead, the potential to shift generation identified in buildin g block 2 is entirely consistent with the existing economic dispatch protocols. Environmental policies can shift generation in two ways. The first is operational restrictions, such as permit limits on the number of hours that an EGU can operate in order to limit emissions. The second is changes in the relative costs of generation among different types of affected EGUs related to polluti on reduction measures. For example, a regulation that necessitates the use of a control t echnology that requires the application of a reagent in a certain kind of EGU will increase the variable cost of operating that plant, which in turn may reduce the amount of generation it is call ed upon to deliver to the grid through securityconstrained economic dispatch procedures. This is c onsistent with the principle of economic dispatch. Further, we are not requiring states and affected EGUs to implement building block 2, or any of the building blocks for that matter, in o rder to meet the final rule requirements. Therefore, the EPA is not interfering with FERC’s e xclusive jurisdiction under FPA sections 205 and 206 by regulating interstate transmission and w holesale sales of electric energy.

Further, there are many actions that states can tak e to fulfil the 111(d) final rule requirements without running afoul of FERC’s exclusive jurisdict ion over wholesale electricity rates under the Federal Power Act to regulated interstate transmiss ion and the wholesale sale of electric

energy. 14

Commenters assert that the final rule conflicts wit h the voluntariness requirement of Section 202(a) of the FPA, intrudes into an area of FERC au thority, and constitute an unlawful EPA attempt to exercise even greater power over the coo rdination of transmission and sale of electricity than the FPA gives to FERC. Commenters claim that the final rule intrude on FERC’s jurisdiction under FPA section 202(a) by promoting the development of state plans for the coordinated operation and dispatch of EGUs and by s pecifying rules to govern the development and evaluation of such plans. We disagree. While we believe that multi-state approaches can lead

14 See, e.g. , Brief for the United States and the Federal Energ y Regulatory Commission as Amici Curiae, at 17-20, PPL Energy Plus, LLC v. Solomon , No. 13-4330 (3 rd Cir. filed Mar. 20, 2014) (citations omitted) (providing examples of valid st ate actions including the ability of states to “`use any resource they wish to secure the capacitythey need’”, the ability “of states to promote particular generation resources as a legitimate pol icy interest within their jurisdiction”, state actions “directing the planning and resource decisi ons of electric utilities under its jurisdiction”, and the ability of states to “subsidize particular resources provided the implementation of the subsidy does not interfere with the Commission’s st atutory responsibility to maintain the reliable operation of wholesale energy markets at just and r easonable rates”).223

to more efficient implementation with lower complia nce costs for affected EGUs and lower impacts on electricity ratepayer, the final rule do es not require multi-state plans. We view the ability of a state to implement an individual plan or a multi-state plan as a significant flexibility that allows a state to tailor implementation of its state policy objectives and circumstances. In fact, the final rule makes clear that participation on multi-state plans is voluntary. States have flexibility to determine how they will design their state plans – whether that be on an individual state basis or participating in a regional effort. We do not agree with commenters that the rule, as a practical matter, effectively requires multi-stat e coordination nor do we agree that the final rule expands the scope of existing RTO dispatch. The fin al rule sets emission limits by apply the BSER. It is up to state and affected EGUs to determ ine how to meet the rule’s requirements. There is no requirements that they utilize the buil ding blocks to do so. There is no requirement that they change their market structures or expand RTOs to do so. For a comprehensive discussion of how affected EGUs can implement the b uilding blocks see the preamble section V and the Legal Memorandum. We discuss the multi-stat e plan issue in greater detail in preamble
section VIII.C.5.

Further, we disagree with commenters that EPA is in truding on FERC’s authority under FPA section 215 to ensure bulk power system reliability . The EPA is setting achievable emission limits. We are not asserting authority over issues that Congress has exclusively reserved for another. As noted in the final rule preamble, EPA o fficials worked closely with DOE and FERC officials to ensure, to the greatest extent possibl e, that actions taken by states and affected EGUs to comply with the final rule mitigate potential el ectric system reliability issues. Senior EPA

officials met with each of the FERC Commissioners a nd EPA staff had frequent contact with FERC staff throughout the development the rule. FER C held four technical conferences to discuss implications of compliance approaches to th e rule for electric reliability, infrastructure, and electricity markets. EPA staff attended the fou r conferences and EPA leadership spoke at all of them. The EPA, DOE, and FERC will continue to wo rk together to ensure electric grid reliability in the development and implementation o f state plans. The EPA has considered the input of FERC, DOE, and multiple stakeholders regar ding reliability, infrastructure, and market issues as it developed the final rule. For a more c omprehensive discussion of reliability issues, as

well as the EPA’s coordination with both FERC and D OE, please see preamble section VIII.G.2.

For a discussion of infrastructure and market issue s, please see preamble section V and the GHG Mitigation Measures TSD. Finally, we note that the agency has addressed concerns about time needed to develop state plans and meet interim perf ormance levels. Thus, with initial submittals, all states will have until September 6, 2018 to sub mit final plans, and the interim performance period will not begin until 2022. Additionally, the final rule adjusts the interim goals to provide a gradually phased-in initial reduction requirement a nd a more gradual glide path to the final 2030 goals. This more gradual application of the BSER ov er the 2022-2029 interim period provides the state with substantial latitude in selecting th e emission reduction glide path for affected EGUs over that period.224

Comment 24: Commenters stated that the EPA's proposal encroache s on FERC's authority to regulate interstate transmission and wholesale sale of electric energy.

Commenters believed that EPA did not give enough co nsideration and deference to the role of the FERC, FERC's FPA-imposed authority, the functio ning of wholesale capacity markets, and the potential for the proposal, if implemented, to undermine the effective operation of organized wholesale electricity markets. Commenters stated th at the Proposal reflects fundamental misunderstandings of FERC-regulated wholesale electricity markets in RTO regions and the bulk power system. In developing the Proposal, commenter s stated, EPA failed to consider the legal implications of ISOs and RTOs dispatch, all the ass ociated rules and requirements, and the complexity of changing all the rules to accommodate environmental dispatch instead of economic dispatch.

Commenters stated that neither the preamble nor the Legal Memorandum attempted to reconcile the obvious conflicting directive contained within the EPA proposal and the authority conferred

on the FERC under the FPA. Commenters also stated t hat the proposed regulation fails to provide states with meaningful guidance on how to r econcile the federal environmental requirements of the proposed regulation that confli ct with federally approved markets, ratemaking standards, and reliability requirements implemented under the FPA.

Commenters stated that the proposal interferes with FERC's jurisdiction by promoting the development of multi-state plans to implement EPA's environmental dispatch policies in regions effectively established by EPA based on other crite ria and by specifying rules to govern the development and evaluation of such plans. Commenter s claimed that the EPA cannot exercise greater power to force regional coordination than t he FPA allows FERC, nor can it indirectly render mandatory regional coordination that the Con gress has otherwise determined must remain a purely voluntary state option. Commenters stated that FERC's Section 202(a) authority to "divide the country into regional districts" is for the "voluntary coordination" of generation facilities in utility operations. Commenters stated that to the extent the Proposed Rule requires the regional, coordinated operation of FERC-regulat ed generation facilities, EPA would be supplanting Congress' judgment that these matters b e left to administration by FERC.

Commenters claimed that the proposal, particularly requirements to shut down significant amounts of installed capacity and pushing capacity far below target reserve margins, would place states and electric generators in direct conflict w ith responsibilities under the FPA and in direct
conflict with FERC.

Commenters stated that any state action that EPA in cludes in its redefinition of BSER that directly or indirectly modifies the way that electr icity is sold at wholesale or transmitted in interstate commerce could impermissibly intrude on FERC's exclusive jurisdiction and is inconsistent with the Supremacy Clause of the Const itution [see Mississippi Power & Light Co. v. Mississippi, 487 U.S. 377 (1988). ("Consequently , a state agency's 'efforts to regulate commerce must fall when they conflict with or inter fere with federal authority over the same225

activity.'" Chicago & North Western Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 318- 319 (1981))]. Commenters stated that the rates, ter ms, and conditions of power sales and service provided in FERC-regulated wholesale markets (both ISO/RTO and non-ISO/RTO) constitute FERC-approved tariffs. Commenters stated that the " Filed Rate Doctrine" provides that a utility must strictly adhere to the rates, terms, and condi tions for service that were filed with and approved by FERC [see Nantahala Power & Light Co. v . Thornburg, 476 U.S. 953, 963 (1986)].

Commenters stated that under the Filed Rate Doctrin e, only rates that have been fixed or accepted by FERC may be charged; not even the state or federal courts can authorize a utility to charge a different rate [see Nantahala Power & Ligh t Co. v. Thornburg, 476 U.S. 963 (1986)]. Therefore, commenters stated, any attempt by the st ates to force specific utilities and/or generators to depart from the dispatch and curtailm ent provisions in their FERC-approved tariffs and service agreements to comply with a state-manda ted environmental dispatch will be an impermissible intrusion on FERC's authority.

Commenters stated that in South Carolina Public Ser vice Authority v. FERC, 762 F.3d 41, 59 (D.C. Cir. 2014) (per curiam), the court held that FERC's mandatory transmission planning

reforms under Order No. 1000 were lawful because se ction 202(a) only governed the "coordinated operation of existing transmission fac ilities, not to the planning of future facilities" and was "textually limited to coordination for purp oses of generation, transmission and sale, all activities that require operating facilities." Comm enters stated that the decision thus affirmed that Section 202(a) does not permit FERC to impose great er involuntary coordination involving existing facilities, such as operational EGUs.

Commenters stated that the CPP would also impermiss ibly interfere with FERC-approved generation dispatch and re-dispatch rules in these RTO regions; in these regions, which encompass nearly two thirds of the load in the U.S. , the dispatch of generation resources is largely governed by RTO operating rules and RTO tar iffs that are on file with FERC as required by Section 205 of the FPA and subject to modificati on by FERC under Section 206 of the FPA [see, e.g., Security Constrained Economic Dispatch: Definition, Practices, Issues, and Recommendations: A Report to Congress Regarding the Recommendations of Regional Joint Boards for the Study of Economic Dispatch Pursuant to Section 223 of the FPA, FERC (July 31, 2006) (describing existing dispatch regimes, their emphasis on security-constrained economic dispatch, and the role of RTOs in administering the m)]. According to the commenters, building block 2 requires "environmental dispatch" of genera tion from higher emitting sources to favor "EGUs with expanded low- or zero-carbon generation" . Commenters noted that the Proposed

Rule states that EPA has determined that environmen tal dispatch is feasible and that its costs are reasonable. But, according to the commenters, under Sections 205 and 206 of the FPA, FERC must determine if practices that significantly affe ct the price of its jurisdictional wholesale and transmission services are just and reasonable, and EPA has no role to play and cannot create one
for itself.

Commenters stated that proposed Building Block 2 in terferes with FERC's authority under Sections 205 and 206 in several critical ways, incl uding by effectively determining that the price226

increases necessary to achieve a seventy percent NG CC utilization rate would be “just and reasonable,” requiring changes to the dispatch and redispatch rules approved by FERC; only FERC has authority to modify (or approve modificati ons).

Commenters stated that Building Block 2 would also require changes to the dispatch and redispatch rules applicable to EGUs. Commenters sta ted that EPA fails to consider the legal implications of the fact that ISOs and RTOs dispatc h EGUs and other resources pursuant to

voluminous and detailed rules filed with FERC under Section 205 [see, e.g., FERC, Security Constrained Economic Dispatch: Definition, Practice s, Issues, and Recommendations: A Report to Congress Regarding the Recommendations of Region al Joint Boards for the Study of Economic Dispatch Pursuant to Section 223 of the FP A As Added by Section 1298 of the Energy Policy Act of 2005 (July 31, 2006) (describing exis ting dispatch regimes, their emphasis on security-constrained economic dispatch, and the rol e of ISOs and RTOs in administering them),

available at http://www.ferc.gov/industries/electric/indus-act/j oint-boards/final-cong-rpt.pdf ; Section III of the ISO New England Inc. Transmissio n, Markets, and Services Tariff ("Market Rule 1") ("govern[ing] the operation of New England 's wholesale electricity markets and includes detailed information on pricing, schedulin g, offering, bidding, settlement, and other procedures related to the purchase and sale of elec tricity"), available at http://www.isone.com/participate/

rules-procedures/tariff/market-rule-1].

Commenters stated that FERC-approved RTO dispatch rules may be amended only by: (1) the RTOs, which must voluntarily submit amendments and persuade FERC to accept them under the standards of section 205; or (3) by FERC, on its ow n initiative or in response to a third party complaint, under section 206. Commenters stated tha t EPA and individual states have no authority to modify these dispatch rules. Commenter s asserted that states also may not compel utilities, including ISOs and RTOs, to make involun tary section 205 filings [see, e.g., Atl. City Elec. Co. v. FERC, 295 F.3d 1 (D.C. Cir. 2002)]. Co mmenters stated that the Guidelines directly invade FERC's core jurisdictional function by effec tively determining that the price increases necessary to achieve a seventy percent NGCC utiliza tion rate would be "just and reasonable."
Commenters contended that this determination is for FERC, not EPA, to make.

Commenters also stated that EPA has ignored the fac t that modifying redispatch rules to provide for the "environmental redispatch" contemplated by Building Block 2 would necessitate fundamental changes to existing ISO and RTO dispatc h procedures that could conflict with FERC policies and with FERC's FPA authority.

Commenters also stated that the CPP imposes a syste m of environmental dispatch that negates states' long-held prerogative to rely on economic d ispatch. Commenters claimed that this would
affect wholesale rates in contravention of FERC's e xclusive authority.

Commenters recognized the lack of analysis that EPA employed. Commenters quoted FERC Commissioner Tony Clark that " EPA's self-determined role as an environmental disp atcher of227

energy in a wholesale energy marketplace has placed FERC and EPA on track for a jurisdictional 'train wreck' absent Congressional i ntervention. "

Commenters stated that EPA has no authority to modi fy RTO tariffs or generation-dispatch rules [see, e.g., Atlantic City Electric Co. v. FERC, 295 F.3d 1 (D.C. Cir. 2002)], but that is precisely what the Proposed Rule attempts to do through build ing block 2. Commenters stated that these are regulatory determinations that only FERC can make under the FPA with respect to FERCjurisdictional RTOs.

Commenters stated that the same legal consideration s apply to FERC-jurisdictional public

utilities that have not transferred control of thei r transmission facilities to an RTO (i.e., principally utilities in the southeastern and weste rn states). Commenters stated that these utilities provide transmission service under tariffs that are modeled closely on FERC's pro forma openaccess transmission tariff (OATT) [see Preventing U ndue Discrimination and Preference in Transmission Service, Order No. 890, FERC Stats. & Regs. - 31,241, order on reh'g, Order No. 890-A, FERC Stats. & Regs. 31,261 (2007), order on reh'g, Order No. 890-B, 123 FERC - 61,299 (2008), order on reh'g, Order No. 890-C, 126 FERC 61,228, order on clarification, Order No. 890-D, 129 FERC - 61,126 (2009) (establishing t he current version of the pro forma OATT used by most FERC-jurisdictional utilities that are not participating in RTOs)]. The commenters stated that non-RTO tariffs also include provisions governing redispatch of EGUs, and the curtailment of transmission customers, in certain s ituations [see, e.g., Id. sections 13.3, 13.6, 15.4, 27, 30.5, and 33]. Commenters stated that, li ke RTO tariffs, non-RTO tariffs are filed with, and approved by FERC, and can be amended only by th e filing public utilities or by FERC - not EPA or state regulators - under Sections 205 or 206 ; and the generation portfolios of these public utilities, and the dispatch of the units in these p ortfolios to provide retail service, are subject to comprehensive oversight by state utility regulatoryauthorities - not by state environmental officials and not by EPA.

Commenters stated the proposal would conflict with the voluntariness requirement of Section 202(a) of the FPA, intrude into an area of FERC aut hority, and constitute an unlawful EPA attempt to exercise even greater power over the coo rdination of transmission and sale of electricity than the FPA gives to FERC.

Commenters stated that aspects of the proposed rule , including proposed Building Block 2, represent an unprecedented intrusion by EPA into ar eas that the FPA has made exclusively subject to FERC's jurisdiction. Commenters claimed that because of FERC's exclusive jurisdiction, many states will be unable to achieve the EPA's estimates of possible reductions under building block 2 without adopting laws and re gulations that impermissibly intrude upon the exclusive jurisdiction of FERC.

Commenters stated that the proposed rule directly c onflicts with FERC's regulatory authority and gave examples, including : 1) building block 2, whi ch provides for EGU carbon emissions reductions through re-dispatch conflicts with the F PA because it effectively determines that the228

price increases needed to achieve a 70% NGCC utiliz ation rate would be "reasonable" but the EPA lacks the authority to make this decision; and 2) building block 2 would require changes to the dispatch/redispatch rules applicable to EGUs, b ut these can only be amended as provided under the FPA. Commenters claimed that the proposal would require a significant change to dispatching based on environmental considerations r ather than the least-cost economic dispatch
rules.

Commenters stated that by building a 70% capacity f actor into state targets, the EPA has stepped

into an arena that is dedicated to the states and F ERC by the FPA. Also, commenters stated that the FPA creates a significant role for FERC, but no t for EPA.

According to the commenters, Building Block 2 repre sents an attempt by EPA to substitute its judgment for that of the competitive market on whic h generation plants should be utilized in ERCOT; commenters urged that EPA has no authority u nder the CAA to require this.

Commenters stated that in the non-ERCOT areas of th e state, the wholesale rates of electric utilities operating in Texas are market-based, but are subject to the oversight of FERC. Commenters stated that EPA similarly lacks authorit y to usurp FERC's authority over the wholesale rates of utilities operating in the non-E RCOT portions of Texas. Commenters stated

that the retail rates of non-ERCOT utilities are se t by the PUCT based on traditional cost of service principles. Commenters stated that Building Block 2 also conflicts with current Texas law that requires utilities to provide power to the ir customers at a just and reasonable rate [see Tex. Util. Code Ann. Section 36.003 (West 2007 & Su pp. 2014)].

Commenters stated that even if EPA's proposed overh aul of RTO dispatch mechanisms were technically feasible, it could be approved only by FERC, not mandated by EPA or by states acting at EPA's behest. Commenters stated that FERC , not EPA, would have to conclude that environmental dispatch is just, reasonable, and notunduly discriminatory; commenters stated that the Proposed Guidelines' usurpation of these d ecisions from FERC interferes with the authority given to FERC by Congress in the FPA.

Response 24: We disagree with commenters. As an initial matter, the final rule does not interfere with federal wholesale energy market regu lation or state retail regulation. As we explain in sections V.A. and V.B. of the preamble, our emis sion guidelines simply reflect an achievable emissions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. Further, the final rule does not require entities to utilize environmental dispatch in electricity markets. Inst ead, the potential to shift generation identified in building block 2 is entirely consistent with the existing economic dispatch protocols. Environmental policies can shift generation in two ways. The first is operational restrictions, such as permit limits on the number of hours that a n EGU can operate in order to limit emissions. The second is changes in the relative costs of gene ration among different types of affected EGUs related to pollution reduction measures. For exampl e, a regulation that necessitates the use of a control technology that requires the application of a reagent in a certain kind of EGU will increase the variable cost of operating that plant, which in turn may reduce the amount of229

generation it is called upon to deliver to the grid through security-constrained economic dispatch procedures. This is consistent with economic dispat ch.

The EPA is responsible for determining the level of emission limitation from the source category, while states have the responsibility of a ssigning emission requirements to their sources

that will ensure their achievement of that level of emission limitation. States may fulfil their responsibility by establishing emission standards o r creating plans consistent with the guidelines. In doing so, states will be able to choose from a w ide range of emission reduction measures, including measures that are not part of the BSER.

Commenters assert that the final rule conflicts wit h the voluntariness requirement of Section 202(a) of the FPA, intrudes into an area of FERC au thority, and constitute an unlawful EPA attempt to exercise even greater power over the coo rdination of transmission and sale of electricity than the FPA gives to FERC. Commenters claim that the final rule intrude on FERC’s jurisdiction under FPA section 202(a) by promoting the development of state plans for the coordinated operation and dispatch of EGUs and by s pecifying rules to govern the development and evaluation of such plans. We disagree. While we believe that multi-state approaches can lead to more efficient implementation with lower complia nce costs for affected EGUs and lower impacts on electricity ratepayer, the final rule do es not require multi-state plans. We view the ability of a state to implement an individual plan or a multi-state plan as a significant flexibility that allows a state to tailor implementation of its state policy objectives and circumstances. In fact, the final rule makes clear that participation on multi-state plans is voluntary. States have flexibility to determine how they will design their state plans – whether that be on an individual state basis or participating in a regional effort. We do not agree with commenters that the rule, as a practical matter, effectively requires multi-stat e coordination nor do we agree that the final rule expands the scope of existing RTO dispatch. The fin al rule sets emission limits by apply the BSER. It is up to state and affected EGUs to determ ine how to meet the rule’s requirements. There is no requirements that they utilize the buil ding blocks to do so. There is no requirement that they change their market structures or expand RTOs to do so. For a comprehensive discussion of how affected EGUs can implement the b uilding blocks see the preamble section V and the Legal Memorandum. We discuss the multi-stat e plan issue in greater detail in preamble
section VIII.C.5.

Comment 25: Commenters argued the CPP would require Montana l awmakers to enact energy laws, which is forbidden by the Federal Power Act.

Commenters stated this subsection explains how the rule's unprecedented reach extends past Montana's utilities and even beyond the Public Serv ice Commission - all the way the state legislature. Commenters added indeed, if finalized in its current form, EPA's Clean Power Plan would require Montana lawmakers to enact energy law s that mandate the usage of certain types of energy and services in the retail electricity market.230

Commenters stated Montana's Clean Power Plan targetis based on the assumption that the state's utilities would achieve 1.5 percent annual reductio ns in demand. Commenters stated of course, state regulators do not possess an independent basi s of authority to require minimum amounts of energy savings; rather, the Montana legislature mus t delegate such authority to state regulators. Commenters stated currently, they do not possess su ch a delegation. Commenters concluded because the energy efficiency goals established by the Clean Power Plan have no statutory basis in Montana, the rule almost certainly would require the state legislature to enact enabling legislation.

Commenters added notably, the D.C. Circuit recentlystruck down a FERC order that indirectly regulated utility energy efficiency programs, becau se the program violated the states' exclusive jurisdiction over retail electricity markets. Electric Power Supply Association v. FERC, WL___(D.C. Cir. May 23, 2014). Commenters stated bycontrast, EPA's Clean Power Plan asserts direct authority over Montana's energy effi ciency program, as is made clear in a technical support document attendant to the rule: the EPA is proposing that states be authorized to submit state plans that do not impose legal responsibilityon the affected EGUs for the entirety of the emission performance level, but instead, by adoptin g what this preamble refers to as a "portfolio approach," impose requirements on other affected en tities - e.g., renewable energy and demandside energy efficiency measures - that would reduce CO2 emissions from the affected EGUs. [Formatting added] Legal Memorandum for Proposed Carbon Pollution Emission Guidelines for Existing Utility Generating Units, at 16.

Commenters stated of course, EPA's de facto require ment that Montana enact energy laws is expressly forbidden by the Federal Power Act. Comme nters stated and until the proposed Clean Power Plan, the agency never has attempted to use t he Clean Air Act to compel States to pass energy statutes. Commenters concluded furthermore, it is wholly unclear how the agency would exercise this claimed jurisdiction - i.e., the auth ority to require Montana lawmakers to enact energy statutes - were the agency to impose a Clean Air Act section 111(d) federal implementation plan.

Response 25: We disagree that this rule is inconsistent with th e Federal Power Act as we are not expanding our authority to include wholesale energymarket regulation. Our emission guidelines simply reflect an achievable emissions limit throug h the application of the BSER and do not in themselves require states or sources to implement t he BSER. Moreover, these emission guidelines provide states with the flexibility to e stablish, implement, and enforce standards of performance and do not intrude on the regulatory do main of FERC or the states. It cannot be said that because environmental requirements may have an effect on the wholesale energy market that the EPA is therefore intruding into energy regulati on. Certainly, in the legislative history of the 1970 CAA Amendments, Congress expressly identified power plants as a priority source category for regulation under CAA section 111. We also disagree that we requiring states to pass energy statutes that are inconsistent with the Federal Power Act or FERC’s exclusive jurisdiction over wholesale electricity rates.231

Moreover, EPA is not finalizing the proposed “portf olio” approach, and will not accept state plans that attempt to impose emission standards or other CAA compliance obligations on entities other than affected EGUs. The state measures approa ch provides a path for a state to achieve the emission performance level as expressed as a state goal in a way that avoids placing enforceable emission standards on affected EGUs (unless and unt il the backstop is triggered). States will have a wide range of flexibility in choosing how to demonstrate their affected EGUs are meeting a state goal.

Also, as discussed in section V.B., the BSER does n ot include demand-side energy efficiency measures, which were proposed as building block 4.

Comment 26: Proposed CPP does not regulate state energy market s.

Commenters asserted that the Clean Power Rule would not "federalize" state regulation of utility markets, as some commenters have suggested. Comment ers said that fundamentally, the concern expressed over EPA considering energy efficiency an d renewable energy in setting state goals fails to differentiate between the federal governme nt "influencing" state energy policy and the federal government "regulating" in areas reserved f or the states. While it is true that states exercise authority to regulate generation and distr ibution for their state markets, the commenters asserted that states exercise that authority within a broader federally-regulated interstate market. Commenters added that state authority already is co nstrained by the requirements of federal law, and the Proposed Rule would not alter the relations hip between the federal and state government with respect to regulation of electricity generatio n. Commenters noted that generators currently have to comply with federal and state environmental laws, including the Clean Air and Clean Water Acts, and states must devise plans to impleme nt federal environmental laws with respect to a variety of criteria pollutant sources, includi ng power plants. Commenters further noted that

several recent federal court decisions have determi ned that FERC has the sole authority to regulate the wholesale electricity market. Commente rs said that economic dispatch decisions already reflect environmental regulatory mandates, and that electricity markets also already integrate state and regional environmental requirem ents into their economic dispatch.

Commenters also noted that states consider federal environmental requirements when making decisions about electricity generation, and that ma ny states use integrated resource planning (IRP), which often requires utilities, for purposes of long term planning to meet projected energy demand, to consider the costs for energy sources to comply with existing and potential future environmental regulations, demand side options, and/or environmental impacts associated with

energy sources.

Response 26: We appreciate commenters’ comment. We agree that the final rule would not “federalize” state regulation of utility markets.

Comment 27: Comments stating that the proposed rule goes beyon d any federal agency's authority or expertise because of regional imbalanc e.

Commenters said that, the Proposed Rule goes beyond any federal agency's authority or expertise because of regional imbalance. Commenter s said, the cap-and-trade-like system that232

the Proposed Rule would mandate requires balancing a multitude of interests well beyond EPA's charge of addressing environmental impacts of speci fic emissions. Commenters said that, Congress has the sole power to authorize and debate issues that implicate state's rights, energy planning and policy, and our national interests wit h respect to other countries.

Commenters said that, the Proposed Rule and the Wax man-Markey bill were pushed by states that do not generate electricity from coal-fired pl ants. Commenters said, such policies are not in the best interests of a majority of states, which i s why the Waxman-Markey bill was not passed by Congress several years ago. Commenters said thatif EPA presented this Proposed Rule to Congress, it too would not pass. Commenters said th e Proposed Rule ignores the policy-making process. Commenters said EPA's proposal should be s ubmitted to Congress for its consideration and debate, not unilaterally imposed by an unelecte d agency.

Response 27: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

Comment 28: Commenters argued that Congress did not empower EP A to determine the appropriate products, producers, or level of consum ption as part of its authorities under the CAA, and Congress did not empower EPA to regulate the en ergy marketplace for the purpose of regulating emissions. Commenters argued that the de cisions on the dispatch of specific EGUs and other measures affecting energy consumption, su ch as programs to require energy efficiency or propose generation from renewable sources (i.e., measures in building blocks 2 to 4), are beyond the control of the individual EGU operator.

Response 28: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y. We disagree with commenters’ characterization of ou r proposal and note that we have excluded building block 4 from the final BSER.

1.4 COMBINED CATEGORIES AND CODIFICATION IN THE CFR

Comment 1: Commenters said EPA correctly states that it has c lear legal authority to consolidate or reorganize an already-listed source category without making new regulatory findings that would be required for the listing of an entirely new source category under section 111(b)(1). Commenters noted that Section 111(b)(1)( A) directs EPA to publish, "and from time to time thereafter revise," a list of stationary so urce categories that in the Administrator's judgment cause or significantly contribute to pollu tion that endangers public health and welfare. Apart from the finding of endangerment req uired for the listing of a new, not previously-listed source category, commenters belie ved the statute places no particular limits on EPA's authority to "revise" the list of stationary sources over time, adding that EPA's proposed233

consolidation of the source categories for steam el ectric generating units and fossil fuel-fired combustion turbines would neither expand nor otherw ise alter in any way the universe of sources comprising those source categories, and would there fore not constitute the listing of a new source category, nor would it somehow alter the pre dicate endangerment finding that EPA made when it originally listed both source categories in the 1970's. (Although the statute does not require that EPA make a new finding of endangermentwhen regulating additional pollutants from an already-listed source category, EPA has pro vided more than ample evidence to support such a finding in its pending proposals to regulate carbon pollution from new and existing EGUs.)

Response 1: The EPA agrees that it has the legal authority to consolidate or re-organize already listed source categories without making the finding s required to list new categories under section 111(b)(1)(A). EPA does not, however, consider such consolidation or reorganization of already listed categories to be a “revision” to the list un der section 111(b)(1)(A). Instead, the EPA considers any such consolidation or reorganization as part of its authority to establish standards under section 111(b)(1)(B). Section 111(b)(1)(B) d oes not specify that EPA must establish standards for the listed “source category.” Instea d, the requirement is to establish standards for “new sources” within the listed categories. EPA con cludes that this phrasing focusing on the sources rather than the source categories provides EPA with the flexibility to establish standards for new sources within groups that consolidate or r eorganize the listed source categories where that is appropriate. EPA notes that the phrasing fo cusing on sources contrasts with the phrasing in CAA 129(a)(1), which expressly provides for EPA to establish standards and other requirements “for each category of solid waste inc ineration units.”

Comment 2: Commenters stated, the courts have held that this d iscretion gives EPA the ability to reasonably subcategorize, or not subcategorize, depending on the characteristics of the source category and pollutant at hand. (See Lignite EnergyCouncil, 198 F.3d 930, 933 (D.C. Cir. 1999) (deferring to EPA's judgment that it was feasible a nd cost-effective to require all new utility boilers to meet the same NOx emission standards reg ardless of fuel type, despite past practice establishing varying NOx standards for different su bcategories of units).) Commenters stated that this discretion should logically extend to the establishment of emission guidelines under section 111(d). Commenters noted, indeed, nothing in the te xt of section 111(d) requires that standards for existing sources replicate the category framewo rk into which EPA organizes new sources, so long as the sources covered by section 111(d) would be subject to "a standard of performance under this section [111]" if they were new sources. (42 USC - 7411(d)(1)(A)(ii)).

Response 2: The EPA agrees that the CAA and applicable case la w support the Agency’s discretion to categorize and subcategorize (or not) and that this discretion applies when EPA exercises its authority under section 111(d).

Comment 3: Further, commenters stated that EPA's 1975 Federal Register notice implementing section 111(d) also explicitly recognized that the categorization systems adopted under section 111(b) and (d) need not be identical. (See 40 Fed. Reg. at 53,341 ("while there may be only one standard of performance for new sources of designat ed pollutants, there may be several emission234

guidelines specified for designated facilities base d on plant configuration, size, and other factors peculiar to existing facilities.").) Commenters con cluded that combining steam electric generating units and fossil fuel-fired combustion t urbines into one source category under section 111 would not limit EPA's authority to establish se parate performance standards for distinct subcategories of new and modified coal and natural gas-fired EGUs. Commenters supported this subcategorization approach in the rulemaking propos ing standards for new EGUs, as well as the June 18, 2014 proposal for modified and reconstruct ed EGUs.

Response 3: EPA agrees with the commenters that the CAA provid es EPA with significant flexibility as to how it may combine categories and subcategorize under sections 111(b) and 111(d).

Comment 4: Commenters agreed that because the two categories are pre-existing, and EPA would not be subjecting any additional sources to r egulation, that the combined category should not be considered a new category that EPA must listunder Section 111(b)(1)(A). Therefore, commenters believed EPA should not be required to m ake a finding that the combined category causes or contributes significantly to air pollutio n which may be reasonably anticipated to endanger public health or welfare.

Response 4: The EPA agrees that it is not required to make a n ew listing decision, or otherwise invoke the provisions in section 111(b)(1)(A), to c ombine previously listed categories into a combined category.

Comment 5: Commenters stated that under section 111(b)(1)(A), EPA is expressly authorized (and in fact required) to "revise" those categories of sources subject to standards of performance under section 111. [42 U.S.C. section 7411(b)(1)(A) ], and pursuant to this authority, and as described in EPA's 2012 proposed new source perform ance standards, EPA has already repeatedly revised its source categories for electr ic utility generating units. [77 Fed. Reg. 22392, 22397 (Apr. 13, 2012)]

Response 5: As noted above, EPA does not consider the consoli dation or reorganization of existing categories that may occur when sources fro m those categories are regulated under section 111(b)(1)(B) as a “revision” to the list un der section 111(b)(1)(A). The cited discussion in EPA’s 2012 proposed new source performance stand ards (at 77 FR 22392, 22397 (Apr. 13, 2012) should not be read to suggest that it does.

Comment 6: Commenters stated EPA's BSER unlawfully combines t wo source categories' fossil fuel-fired steam generating boilers and NGCC units. Commenters remarked that the plain language of Section 111, however, requires EPA to d evelop emission guidelines for existing sources based on the individual source category for those sources; there is nothing in the CAA that provides EPA with the authority to lump source categories together for the purpose of developing these emission guidelines. Commenters ad ded that Section 111(b) of the CAA requires the administrator to establish "Federal st andards of performance for new sources within such category" listed under Section 111(b)(1)(A), a nd based on the standards developed for new235

sources in that individual category, existing sourc e standards can then be developed under Section 111(d) for the same category. Commenters sp ecified that Section 111(d) requires states to develop plans which establish "standards of perf ormance for any existing source for any air pollutant . . . to which a standard of performance under this section would apply if such existing source were a new source," and a plain reading of t hese provisions leads to the conclusion that new source and existing source standards are based on "such category" listed under Section 111(b)(1)(A). Commenters concluded that a single em ission standard and guideline cannot lawfully be developed for multiple source categorie s that are grouped together by EPA.

Response 6: As discussed above [assuming that we include the “ do we also want to say” text on pp. 1-2], the text in section 111(b)(1)(B) provides that EPA will establish standards for “new sources within such category” but does not mandate that the standards have to be set for the source category. EPA concludes that this phrasing focusing on the sources rather than the source categories provides EPA with the flexibility to est ablish standards for new sources within groups that consolidate or reorganize the listed source ca tegories where that is appropriate.]

Comment 7: Commenters stated that Section 111 does not authori ze combining source categories into a single category for setting stand ards.

Response 7: As discussed above, EPA concludes that the phrasin g of section 111(b)(1)(B) focusing on the sources rather than the source cate gories provides EPA with the flexibility to establish standards for new sources within groups t hat consolidate or reorganize the listed source categories where that is appropriate.

Comment 8: Commenters stated EPA has proposed new unit standar ds of performance for two source categories - fossil steam generating units a nd stationary combustion turbines (and particularly, NGCC facilities). Commenters believed EPA must issue a re-proposed Section 111(d) regulation that mirrors the same two separat e source categories.

Response 8: For the reasons discussed above and elsewhere, EP A disagrees that it must issue a re-proposed section 111(d) regulation to mirror the categories regulated under section 111(b).

Comment 9: Commenters stated that EPA aggregates disparate ca tegories of stationary sources into a regulated entity that incorporates virtuallyall power plants, regardless of technology type or fuel source, and this action directly contravene s Section 111(d) implementing regulations requiring the agency to "subcategorize" within indu stries. Commenters explained that because the implementing regulations that mandate subcatego rization are extant and therefore carry the force of law, EPA would have to amend them with a l egislative rule before the agency could permissibly pursue its Clean Power Plan strategy of combining categories. Commenters continued, stating that until the agency does so, t he proposed Clean Power Plan will remain impermissibly inconsistent with its underlying regu lations. Commenters also stated that in promulgating 40 C.F.R. [Section]60.22(b)(5), it was the agency's avowed intent in to provide flexibility to States implementing [section]111(d) emissions guidelines by subcategorizing236

within industrial classes. Commenters noted that th is legislative rule has been neither amended nor rescinded since its promulgation. Commenters no ted, as such, the "Executive Branch is bound by it, and indeed the United States as the so vereign composed of three branches is bound to respect and enforce it." U.S. v. Nixon at 697. C ommenter added that crucially, the 111(d) implementing regulations define the applicability o f existing source standards by referring to the applicability of new source standards. (Existing so urce standards apply to "designated facilities," which are defined by Section 60.21(b) as being "anyexisting facility (see [Section]60.2(aa)) which emits a designated pollutant and which would be subject to a standard of performance for that pollutant if the existing facility were an aff ected facility (see [Section]60.2(e))." Commenters noted, the references attendant to the d efinitions of both "existing facility" and "affected facility" direct the reader to the implem enting regulations for new source standards. Commenters stated that an "affected facility" is "a ny [stationary source] to which a standard is applicable," while an "existing facility" is "any [ stationary source] of the type for which a standard is promulgated in this part." Finally, as commenters noted, the definition of "standard" is "a standard of performance proposed or promulgat ed under this part" (i.e., the New Source Performance Standards).) Accordingly, commenters re marked, because the Carbon Pollution Standards apply to subparts Da and KKKK, the Clean Power Plan can apply no more broadly than to subparts Da and KKKK, and from there, the [ Section]111(d) implementing regulations require EPA to "subcategorize" when appropriate, bu t there is no such authorization for aggregating categories. Commenters summarized, stat ing that the [Section]111(d) implementing rules grant EPA's only one option: subcategorizing within subparts Da and KKKK. Instead, the agency amalgamated these subparts into a meta-categ ory, known as "affected EGUs." Commenters continued, stating that the EPA is requi red to address the Clean Power Plan's incompatibility with its underlying implementing, b y either amending or rescinding 40 C.F. R. [Section]60.22(b)(5), and in so doing, the agency i s required to conduct a legislative rulemaking and also to provide a "reasoned analysis." Commente rs argued that until such actions are performed, the Clean Power Plan's inconsistency wit h the [Section] 111(d) implementing regulations evidences arbitrary and capricious deci sion making by the EPA.

Response 9: EPA’s authority to subcategorize within a source c ategory consistent with the CAA and EPA’s implementing regulations does not limit o r impact EPA’s discretion to combine categories. As discussed above, EPA concludes that the phrasing in section 111(b)(1)(B) focusing on the sources rather than the source cate gories provides EPA with the flexibility to establish standards for new sources within groups t hat consolidate or reorganize the listed source categories where that is appropriate.

Comment 10: Commenters stated that Section 111(d) does not give the EPA direct regulatory authority over existing sources but instead, sectio n 111(d) directs the EPA to establish a "procedure" for states to submit plans establishing performance standards for existing sources. Commenters continued (verbatim), stating that Section 111(d) gives the states broad discretion to develop such plans and to implement a nd enforce them based on specific state

concerns and needs. Commenters asserted that the EP A recognized this in 1975 when it promulgated the Subpart B regulations to interpret and implement section 111(d): "States will237

have primary responsibility for developing and enfo rcing control plans under section 111(d)."(40 Fed. Reg. 53,340, 53,343 (Nov. 17, 1975) The EPA's proposal to establish firm CO2 intensity caps infringes on that intent. (79 Fed. Reg. at 34, 953; Proposed 40 C.F.R. 60.5765, Table 1)

Response 10: EPA is authorized by section 111(a)(1) and (d) to determine the degree of emission limitation achievable by application of th e BSER, and to provide this information as criteria for approvable state plans in an emissions guideline document. The Agency does not directly impose standards of performance on units, but gives states the flexibility to establish such standards in a manner that is appropriate for their state, and their sources. However, the agency is responsible for substantively reviewing s tate plans to ensure they are satisfactory, that is, that they meet the criteria or requirements of the guidelines. If a state plan does not do that, then the EPA may implement a federal plan that dire ctly imposes standards of performance on
the affected EGUs.

Comment 11: Commenters stated that the EPA may require states t o submit plans that contain performance standards for emissions of certain poll utants from designated facilities, but it does not have the authority to dictate the form and cont ent of those performance standards.

Response 11: EPA recognizes this as true to some extent. EPA’s guidelines give states considerable flexibility in the design of standards of performance actually applied to units.

Comment 12: As commenters noted, Section 111(d)(2)(A) authoriz es the EPA to set substantive standards of performance only in situations where a state has failed to submit an acceptable plan.

Commenters stated, Congress limited the EPA's autho rity to establish substantive standards of performance for existing sources to those limited s ituations where a state fails to act. Thus, commenters asserted, unlike the very different lang uage in section 111(b) governing the standards of performance for new sources, section 1 11(d) gives the EPA no direct regulatory authority over existing sources, and instead gives states broad discretion to develop such plans subject to a general requirement that the state's e xercise of discretion be "satisfactory." (CAA Section 111(d)(2)(A))

Response 12: It is unclear what the commenter means by “substan tive.” EPA is not directly setting standards of performance for affected EGUs under the emission guidelines. EPA may determine the degree of emission limitation achievable in the emission guidelines and may review the standards of performance provided in sta te plans against that criterion.

Comment 13: Commenters stated that the CAA gives the states sub stantial freedom to

determine the factors to be considered in formulati ng a state plan and how those factors are to be weighed, and it does not dictate any particular out come for the state. Commenters noted that states thus have significant discretion to adopt st ate plans that vary from the EPA's emission guidelines. Commenters noted, in the Proposed Guide lines, however, the EPA is imposing "binding" emission rates on each state. (79 Fed. Re g. at 34,844, 34,892)238

Response 13: Section 111(d), similar to section 110 of the stat ute, provides states the opportunity in the first instance to develop state plans to implement the agency’s emission guidelines. The EPA has recognized in the past, and provides in these emission guidelines, significant flexibility for the states in the desig n of their programs. However, the BSER and the degree of emission limitation achievable are determ inations that rest with the administrator under section 111(a)(1). Ultimately, under section 111(d) (2), the EPA may disapprove a state plan that does not meet the criteria of the emission guidelin es.

Comment 14: Commenters stated that the EPA is proposing not to give states the flexibility to which they are entitled under the statute. Moreover , as discussed in greater detail elsewhere in these comments, commenters stated that the EPA woul d force states to violate the terms of the CAA by regulating sources that may not be regulated under a section 111(d) rule for existing fossil fuel-fired EGUs. (79 Fed. Reg. at 34,853 ("E PA is proposing that states be authorized to submit state plans that do not impose legal respons ibility on the affected EGUs for the entirety of the emission performance level, but instead, by ado pting what this preamble refers to as a 'portfolio approach,' impose requirements on other affected entities (e.g., renewable energy and demand-side energy efficiency measures) that would reduce CO2 emissions from the affected EGUs.")).

Response 14: EPA is not finalizing the proposed “portfolio” app roach, and will not accept state plans that attempt to impose emission standards or other CAA compliance obligations on entities other than affected EGUs. The state measures approa ch provides a path for a state to achieve the emission performance level as expressed as a state goal in a way that avoids placing enforceable emission standards on affected EGUs (unless and unt il the backstop is triggered). States will have a wide range of flexibility in choosing how to demonstrate their affected EGUs are meeting a state goal.

Comment 15: Commenters noted, although the EPA asserts countles s times in its Proposed Guidelines that it is giving states flexibility to adopt whatever "building blocks" it sees fit,(Id. a t 34,859) in reality, because the standard of perform ance is an emission intensity cap applied to the state based on application of the four proposed building blocks rather than on what the affected facilities are capable of achieving, state s in most cases will have little choice but to impose requirements on facilities that are not foss il fuel-fired EGUs in order to meet their EPAmandated state-level emissions limits. In fact, com menters stated, in many states, it may be infeasible to adopt sufficient measures to achieve the EPA-mandated emissions limits, and therefore the EPA is in effect forcing such states either to go beyond their borders and enter into an emissions compact or trading program with other states or to tell the EPA it cannot meet the mandate and turn the program over to the EPA under the section 111(d)(2) provisions.

Response 15: The final rule lays out a number of options, variat ions and flexibilities that are intended to provide states and affected EGUs the ab ility to design state plans that accorded with states’ specific situations and policies (now and i n the future), and to ensure reliability and affordability of electricity across the system and for all ratepayers

. As described in detail in239

Section VIII of the preamble, the EPA is finalizing state plan options such as individual state plans, multi state plans, individual state plans th at contemplate multi-state ties, and a number of compliance options for affected EGUs that provide s tates and affected EGUs with flexibilities to develop a state plan to achieve the necessary emiss ions reductions. The EPA believes these options will not force states to enter into emissio ns compacts or trading programs, but gives the states the opportunity to do so if they so choose, but otherwise provides affected EGUs sufficient

flexibilities if a state chooses to submit an indiv idual state plan.

Comment 16: Commenters stated, in fact, despite the EPA's claimto the contrary, it is clear that these proposed standards are set to meet a nationwi de target, allocated among the states, rather than a general guideline based on the EPA's evaluat ion of what sources can achieve at the state level. Commenters noted, the EPA states that "This approach would mean that overall, the same nationwide level of emission reductions as proposed would be achieved."(Id. at 34,893) Commenters asserted that nothing in section 111(d) requires or authorizes the EPA to

achieve a nationwide level of emissions reductions. Commenters noted that Section 111(d) does

not allow the EPA to set a nationwide limit on emis sions, but rather to set guidelines for states to consider when they adopt their own rules. Commenter s stated, it seems clear that the Proposed Guidelines are an attempt to set a national reducti on target for CO2 emissions.

Response 16: The EPA disagrees with this commenter in that this commenter has misunderstood the nature of the state goals. The EPA established the BSER according to the statute, by focusing on technology and measures available to reduce emis sions. This allowed the agency to determine the “degree of emissions limitation achievable,” pu rsuant to 111(a)(1), which in turn the agency has translated into state goals. The state goals ar e an accounting device – an arithmetic expression of the BSER’s degree of emission limitat ion achievable for each state, based on the unique mix of affected EGUs in that state. The stat e goals are not directly enforceable against the state. Rather, they provide a criterion against whi ch a submitted state plan may be reviewed for approvability by the agency. The agency disagrees w ith the commenter to the extent the commenter is suggesting the agency used a top-down rather than bottom-up approach to determining the BSER. The agency’s BSER analysis is rooted in what is achievable, and that comports with the statute. Once this has been done, it is possible to determine the “degree of emission limitation achievable.” The fact is, emiss ions under any prior 111(d) rule can be aggregated and reported in such a way as to lay cla im to the notion that the agency is establishing a “national” emission reduction target via its dete rmination of the BSER and oversight of state plans. See 40 CFR 60.25(a). That is a function of the statute (the purpose of which is, in any case, “to protect and enhance the quality of the Nation’s air resources ...” CAA section 101(b)(1) (emphasis added)). Further, the agency’s emission p erformance rate is just that, a rate. The mass goal is simply an equivalent expression of the rate . States may choose to implement a rate system. Given these available tools in the EGs, it cannot be said that the EPA is mandating a particular nationwide reduction.

Comment 17: Commenters stated, as demonstrated by the numerous flaws inherent in EPA's attempt to use the CAA to establish a utility secto r CO2 reduction program, it is clear that240

Congressional action would be a more appropriate ve hicle for establishing national climate policy. Commenters stated the emission guidelines a nd BSER determinations the EPA establishes are supposed to be largely procedural, and contain only nonbinding factors and descriptions of demonstrated systems of emission re ductions for states to consider as the states set their own standards. Commenters noted, they are not, as the EPA has proposed, supposed to be binding emission rate limitations on states. Com menters said, what the Agency determines to be BSER is merely one of the many factors states mu st consider in determining the level and form of any existing source performance standard as applied to a specific EGU. Commenters noted, similarly, under the Subpart B rules, states have considerable flexibility to deviate from the EPA's emission guidelines in adopting plans and emission standards. For example, commenters noted that states may apply "less string ent emission standards or longer compliance schedules" to particular facilities or classes of f acilities if the costs of adopting the standards suggested by the emission guidelines would be unrea sonably costly, physically impossible, or for other reasons. (40 C.F.R. 60.24(f)(1)-(3)) Commente rs stated that states have significant discretion in designing their own plans and determi ning how individual sources or classes of sources may demonstrate compliance, including takin g into account the "remaining useful life of the existing source." (CAA 111(d)(1)) Commenters no ted, in applying this criterion, states may grant individual sources or types of sources longer periods of time to comply, or may apply less stringent standards than set forth in the EPA's emi ssion guidelines. Commenters stated that the Agency underscored as early as 1975 that "emission guidelines will reflect subcategorization within source categories where appropriate," and th e guidelines 'will in effect be tailored to what is reasonably achievable by particular classes of e xisting sources . . . ." (40 Fed. Reg. at 53,343) Commenters stated, because a standard of performanc e must be "adequately demonstrated" for each source, the EPA has an obligation in accordanc e with its Subpart B rules to establish highly subcategorized emission guidelines within a broad s ource category like existing fossil fuel-fired EGUs. (40 C.F.R. 60.22(b)(5)) Commenters stated tha t the fact that the EPA has not done so may in fact reflect the reality that there is no ap propriate standard of performance that can be set for existing sources. Commenters noted, while Build ing Block 1 is based on achieving efficiency improvements at the affected sources, because the e fficiency of an individual generating unit is to a large extent driven by the unit's inherent des ign, there is little room for improvement and it is impossible to come up with a "standard" of performa nce for efficiency that could apply equally even within tight subcategories. Commenters stated lacking any other feasible measures to control CO2 emissions, the EPA has instead turned t o actions which fall entirely outside of the direct control of the affected sources, by its reli ance on Building Blocks 2, 3 and 4 which are not a "system of control," but a limitation on the prod uctive output of the regulated sources. (The EPA determines that Building Blocks 2, 3 and 4 are feasible because a source "has the ability to limit its own operations." The EPA also states that Building Blocks 2, 3 and 4 are equally valid under either its "primary" approach to BSER or the "alternative" approach because "building blocks 2, 3, and 4 would not be components of the s ystem of emission reduction but instead would serve as bases for quantifying the reduced ge neration (and therefore emissions) at affected EGUs" 40 FR 34,889.) Commenters stated that bringin g non-affected sources into the proposed section 111(d) BSER determination and emissions gui delines is contrary to the EPA's obligation to adopt measures that have been adequately demonstrated for the tightly defined subcategories241

of existing sources. Commenters asserted, somehow, the EPA interprets the provisions in section 111(d) and Subpart B to actually go the opposite di rection in categorizing the source - rather than addressing the significant differences among the wi de range of EGU sources (as it has done in numerous other regulations) by establishing appropr iate subcategories, the EPA is making an entirely new argument here that it can wash over th e differences among affected EGUs by instead declaring a super-category which is "all of the affected EGUs in the State." ("the EPA may apply the BSER to all of the affected EGUs in t he state as a group.) Commenters stated, similarly, the implementing regulations give the EP A broad discretion to identify the group of sources to which the BSER is applied. Commenters no ted that the regulations provide that the EPA "will specify different emission guidelines or compliance times or both for different sizes, types, and classes of designated facilities when co sts of control, physical limitations, geographical location, or similar factors make subc ategorization appropriate." Commenters stated that applying the BSER to the affected EGUs in each state as a group is appropriate, and therefore is consistent with these regulations." Co mmenters noted, EPA is saying here that after considering all of the differences among the source s in the EGU category, the answer is to "subcategorize" by grouping all of the facilities t ogether in one state. 79 Fed. Reg. at 34,891.) Commenters noted that this reasoning essen tially renders the Subpart B language meaningless where it directs the EPA to develop app ropriate categories and subcategories. "The Administrator will specify different emission guide lines or compliance times or both for different sizes, types, and classes of designated facilities when costs of control, physical limitations, geographical location, or similar factors make subc ategorization appropriate." (40 CFR 60.22(b)(5) Rather than address the differences bet ween the affected EGU sources which would be subject to these requirements, commenters noted that the EPA has instead chosen to create a single broad category of "all sources within the st ate" and has ignored the fact that such broad categorization will in effect cause inequities amon g sources within the state which should have been addressed through the analysis of guidelines a nd compliance times applicable within appropriate subcategories. Commenters asserted, by its proposed actions, the EPA has completely eliminated the flexibility embedded in s ection 111(d). In the Proposed Guidelines, commenters stated that the EPA would set binding st ate emission reduction targets that cannot be adjusted by states once promulgated. Commenters clo sed, stating that the EPA's aggressive assumptions in the building blocks further erode st ate flexibility and disregards the primacy that Congress explicitly gave to the states over the EPA under section 111(d).

Commenters stated that rather than recognizing the significant differences between natural gas and coal generation, EPA is attempting to combine n atural gas and coal generation into a single category. Commenters remarked that violating the CA A and a basic understanding of these types of generation technologies, that action also direct ly conflicts with the New-Source 111(b) Rule Proposal, which serves as the foundation for this R ule Proposal. Commenters explained that while the New-Source 111(b) Rule Proposal is flawed in numerous ways (as discussed in Part III of this letter), EPA was correct in realizing that it is unable to establish a single standard for bot h coal and NGCC facilities when it revised and re-pro posed its New-Source 111(b) Rule Proposal; however, despite making this correction in the New- Source 111(b) Rule Proposal, EPA has242

apparently decided to proceed in this Rule Proposal under the false and illegal assumption of combining the generation technologies into one cate gory.

Response 17: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

As we explain in sections V.A. and V.B. of the prea mble, our emission guidelines simply reflect an achievable emissions limit through the applicati on of the BSER and do not in themselves require states or sources to implement the BSER. Th at is, EPA is responsible for determining the level of emission limitation from the source catego ry, while states have the responsibility of assigning emission requirements to their sources th at will ensure their achievement of that level of emission limitation. States may fulfil their res ponsibility by establishing emission standards or creating plans consistent with the guidelines. In d oing so, states will be able to choose from a wide range of emission reduction measures, includin g measures that are not part of the BSER.

While we are not re-opening the 1975 regulations, i n response to comments, we explain in the preamble why they give the EPA broad authority to d etermine the BSER and, based on that,
statewide emission limitations for sources in the s tate.

As we explain in section VIII.D of the final rule preamble of the CPP, our emission guidelines provide the substantive criteria that are intended to govern the review of the Administrator’s review of state plans. The interim and final goals are intended to reflect such substantive criteria.

EPA is not finalizing the proposed “portfolio” appr oach, and will not accept state plans that attempt to impose emission standards or other CAA c ompliance obligations on entities other than affected EGUs. The state measures approach provides a path for a state to achieve the emission performance level as expressed as a state goal in a way that avoids placing enforceable emission standards on affected EGUs (unless and until the ba ckstop is triggered). States will have a wide range of flexibility in choosing how to demonstrate their affected EGUs are meeting a state goal.

Comment 18: Commenters stated that EPA does not subcategorize w hen commenters believe it must, and EPA proposes to lump different sources (a nd even non-sources) into one category

which commenters believe is unlawful. Commenters co ntinued that EPA's BSER combines two source categories' fossil fuel-fired steam generati ng boilers and NGCC units. Commenters said Section 111(d) specifically requires that the state take into consideration the "remaining useful lives of the sources in the category of sources to which such standard applies. [Id. Section 7411(d) (emphasis added).] Commenters stated that t he continued use of "category" in the singular in Section 111 indicates that the standard s are to be developed by EPA for a single source category, not for multiple categories that a re lumped together. Commenters argued that the CAA simply does not authorize this lumping mech anism that EPA has proposed here. Commenters explained that EPA's preamble for the re gulations that implement Section 111(d) confirm that the development of emission standards for new sources applies to a single source243

category, and the subsequent development of emissio n guidelines for existing sources applies to that same single category. [See 40 Fed. Reg. at 53, 340 ("Section 111(d) requires control of existing sources of such pollutants whenever standards of performance (for those pollutants) are established under section 111(b) for new sources of the same type.") (emphasis added); id at 53,343 (Commenters explained that Section 111(d) st andards are "techniques for the control of the same pollutants from the same types of sources under section 111(b).).] Commenters stated that the preamble to the regulations illustrates ho w the development of emission guidelines hinges on individual source categories. Commenters noted, action under section 111(d) is subject to a number of significant safeguards: (1) Before a cting under section 111(d) the Administrator must have found under section 111(b) that a source category may significantly contribute to air pollution which causes or contributes to the endang erment of public health or welfare, and this finding must be technically supportable. [Id. at 53 ,341 (emphasis added); see also id. at 53,342 ("[T]he Administrator must find under section 111(b ) that the source category covered by such standards may contribute significantly to air pollu tion which causes or contributes to the endangerment of public health or welfare.") (emphas is added).] Accordingly, commenters concluded, EPA's regulations and the preamble promu lgating such regulations provide no indication that lumping of source categories is per missible.

Response 18: EPA disagrees that the singular “category” is used consistently in section 111 or that the various passages cited by the commenter ha ve any import on EPA’s authority to combine categories. In section 111(b), the singula r “category” is used to (1) state that the endangerment/cause-contribute finding is to be made with respect to each specific category ([The Administrator] shall include a category of sources in such list if....”), and (2) state the timing of when publication of proposed standards is to occur (“[w]ithin one year after the inclusion of a category of stationary sources in a list under [sec tion 111(b)(1)(A).” But, the plural “categories” is also used in 111(b): to state EPA’s authority t o subcategorize in section 111(b)(2) and to issue information on pollution control techniques in sect ion 111(b)(3). In section 111(d), the word “category” appears as part of the House amendment t o the Section 112 Exclusion, which is discussed extensively in the preamble for this rule . Further, as the commenter notes, the use of the singular “category” appears in 111(d)(2) in the “remaining useful life” text, but that text has the same substantive meaning as the “remaining usef ul life” text in 111(d)(1), which simply refers to “the existing source to which the standar d applies” and does not use either the singular “category” or plural “categories.” Thus, contrary to this comment, the singular “category” is not used consistently. Moreover, the use of the singular “category” or plural “categories” in section 111 varies by context and does not indicate anythin g concerning EPA’s authority to combine categories when it promulgates regulations under 11 1(b) or 111(d).

Comment 19: Commenters cited case law interpreting other CAA p rovisions illustrates EPA's error in collapsing two source categories into one as described in the following sentences. [See Ne. Md. Waste Disposal Auth. v. EPA, 358 F.3d 936, 943 (D.C. Cir. 2004) (stating that Davis Cnty. Solid Waste Mgmt. v. EPA, 101 F.3d 1395 (D.C. Cir. 1996) involved "an attempt by the Agency to collapse two statutory categories into on e").] Commenters added that in Davis County Solid Waste Management v. EPA, the D.C. Circuit was tasked with determining whether the standards for municipal solid waste combustion exce eded EPA's authority under S. 129 of the244

CAA. [Davis Cnty. Solid Waste Mgmt. v. EPA, 101 F.3 d 1395, 1396-97 (D.C. Cir. 1996).] Commenters also added EPA's regulations had categor ized "units by aggregate plant [municipal solid waste] capacity."[Id. at 1401]. Commenters no ted that the petitioners, however, argued that Section 129(a)(1) established separate source categories that EPA was required to separately develop standards for "large [municipal solid waste (MSW)] units (units with unit MSW capacities above 250 tons/day) and small [municipal waste combustor] units (units with unit MSW capacities of 250 tons/day or less)." [Id. at 1 403.] Commenters said the court agreed with the petitioners, first noting that "Section 129(a)( 1) begins by stating that the EPA shall promulgate standards and guidelines for 'each categ ory of solid waste incineration units,' and then proceeds to identify specific types of units a nd the date by which standards shall be issued for each type."[Id.] Commenters noted, the court co ncluded that the "plain implication of section 129(a)(1) is that the types of units listed are the relevant categories for determining emissions standards."[Id.] Commenters remarked that while Da vis involved the interpretation of Section 129 and a different standard, the court's holding i s instructive to EPA's current attempt to lump

fossil-fuel fired EGUs and NGCC units into one cate gory. Commenters added that in Davis, the court determined that EPA could not collapse source categories when Congress specifically defined those categories in Section 129(a)(1). Here , in similar fashion, Commenters noted that Congress has directed EPA to develop source categor ies under Section 111 and then issue standards for each one of those categories, and her e, as in Davis, EPA cannot collapse source categories for convenience sake when the CAA requir es existing source standards for each
source category.

Response 19: EPA disagrees with the commenter’s analysis of th is case law. Indeed, this commenter’s own discussion of the Davis opinion mak es clear that the court’s reasoning was based on the creation in section 129 of statutory c ategories and the text in section 129(a)(1) that specifies that EPA is to set standards and other re quirements “for each category of solid waste incineration units.” This text in section 129(a)(1 ) contains very different phrasing from the relevant text in section 111(b)(1)(B), which focuse s on sources rather than source categories.

1.5 AFFECTED SOURCES AND APPLICABILITY

Comment 1: Commenters stated the U.S. EPA asserts in the exi sting source rule that this oncein-always-in interpretation must apply to all sourc es in any source category regulated under Section 111(d), not just to this rulemaking. “It sh ould be noted that this proposal applies to any existing source subject to any CAA Section 111(d) p lan, and not only existing sources subject to the CAA Section 111(d) plans promulgated under this rulemaking.” [Id

. at 34903] Commenters stated not only is this not allowed under the plain language of Section 111, subjecting all sources that are covered by any Section 111(d) plan to fore ver be subject to that plan changes how all Section 111(d) programs are to be applied with real substantive consequences for the sources subject to the plans, and is illegal and a retroact ive application of a complete regulatory program. Commenters stated other source categories have no n otice that under the proposal for "Carbon

Pollution Standards for Modified and Reconstructed Stationary Sources: Electric Utility245

Generating Units: Proposed Rules" that U.S. EPA is proposing this retroactive application of Section 111(d) applicability. Commenters said this rulemaking approach violates the basic tenets of the Administrative Procedures Act (APA) and good government practices.

Response 1: In this final rule, EPA has not adopted the “once- in-always-in” interpretation.

Comment 2: Commenters stated that in determining BSER for mod ified and reconstructed sources, U.S. EPA evaluated several different contr ol technology configurations including reductions in generation associated with dispatch c hanges, renewable generation, and demandside EE; however, U.S. EPA ultimately decided not t o establish BSER as these components and opted for a less stringent BSER. Commenters found t his counterintuitive to how BSER typically is defined for new, modified and reconstructed, and existing sources, explaining that U.S. EPA is attempting to finalize a BSER for existing sources that is more stringent than the BSER for

modified and reconstructed sources. Commenters adde d that for modified sources, U.S. EPA proposes BSER as efficiency improvements achieved t hrough a combination of best operating practices and equipment upgrades. [79 FR 34982] Com menters noted, as part of one of the options, U.S. EPA is providing a low end cap to ens ure the final rate for these units will not be more stringent than the emission limit for reconstr ucted sources. [79 FR 34987] In their comments on the modified and reconstructed proposal , commenters raised concerns regarding a unit encroaching upon a rate that would be achievab le by reconstructed units applying BSER, and commenters also had significant concerns regard ing the potential for existing sources to ultimately have a more stringent emissions limit th an modified or reconstructed sources under this proposal.

Response 2: Comments related to new, modified and reconstructe d sources are beyond the scope of this rule. We disagree that the section 111(d) standards are m ore stringent than the section 111(b) standards. Further, we explain in th e Legal Memorandum why the section 111(b) and (d) standards are based on different determinat ions of the BSER. The use of the term “ordinarily” in the 1975 preamble reflects the agen cy’s long term understanding that standards under 111(d) may differ from those under 111(b). In any case, the statute does not dictate that 111(d) standards must be less stringent in all case s. Rather, Congress recognized that the agency would be faced with different sets of challenges in regulating existing rather than new sources. Congress addressed this in part by establishing a c ooperative-federalism planning regime under section 111(d) similar to section 110. Reflecting t his, the guidelines include significant flexibilities, including the ability to trade and r elatively long periods for compliance.

Comment 3: Commenters stated that widespread opposition to th is proposal is evident and it is nationwide, as they can see by action in the House of Representatives, the U.S. Senate, and state legislative actions. Commenters explained that in m id-July, the House Appropriations Committee passed a spending bill prohibiting EPA fr om using funds for carbon standards. Commenters also noted that, in March, the House pas sed legislation [H.R. 3826, or WhitfieldManchin] to repeal the proposed new source rule and stop 111(d) without congressional approval. Commenters stated that forty-one Republic an senators have asked EPA to withdraw the rule, and seven Democratic senators have writte n the President complaining about the new246

source performance standards for EGUs. Commenters c ontinued, stating that over 20 states passed legislation or resolutions stating greenhous e gas emissions can only be regulated on a plant by plant basis inside the fence so to speak, not the systemwide state approach that EPA

takes.

Response 3: The bills referenced by the commenters have not be come law and therefore are not binding on any person. The comment otherwise expres ses policy preferences. EPA has explained the policy advantages of this rule at length in the Preamble.

Comment 4: Commenters stated EPA proposes to regulate emissio ns from existing EGUs by recognizing that the "integrated grid" operates as a unit but this is far too simplistic. Commenters stated that EPA has assumed authority Congress did not grant. Commenters explained that the Supreme Court has clearly spoken to this point, sta ting that "it is axiomatic that an administrative agency's power to promulgate legislative regulation s is limited to the authority delegated by Congress." Bowen v. Georgetown Univ. Hosp., 488 U.S . 204, 208 (1988). Commenters asserted that Congress could not have foreseen the perceived need to define and regulate GHG emissions to combat climate change. Commenters noted, in eval uating the validity of the Federal Reserve's interpretation of the Bank Holding Company Act in D imension Financial, the Supreme Court observed that: Congress defined with specificity ce rtain transactions that constitute banking subject to regulation. Commenters stated that the s tatute may be imperfect, but the [Federal Reserve] Board has no power to correct flaws that i t perceives in the statute it is empowered to administer. Commenters asserted that its rulemaking power is limited to adopting regulations to carry into effect the will of Congress as expressed in the statute. Commenters stated, if the Bank Holding Company Act falls short of providing safegu ards desirable or necessary to protect the public interest, that is a problem for Congress, no t the Board or the courts, to address. Dimension Financial Corp., 474 U.S. at 362. Commenters added that similarly here, just because the CAA is an imperfect vehicle for the regulation of GHGs, EP A does not have the right to expand its authority to include wholesale energy market regula tion that is the sole domain of FERC, and by granting itself this authority, EPA is essentially attempting to "fix" the statute so that it may fit a regulatory policy into an act that Congress did notdesign for such a policy. Commenters closed, stating that similar to the Supreme Court's holding in Dimension Financial, if the CAA "falls short of providing safeguards desirable or necessar y to protect the public interest, that is a problem for Congress," not for EPA to address.

Commenters stated EPA's proposal is wrongfully dire cting states to regulate renewable energy resources, demand side energy efficiency programs, and even existing and under-construction nuclear units by means of "emission standards." Com menters stated that is not authorized under Section 111(d). Commenters explained that EPA's Leg al Memorandum discusses using renewable sources as a "reduction requirement" for NGCC units, but provides no citation of authority or other instance where EPA has looked to alternative non-regulated facilities for CAA compliance. OGC Legal Memorandum at 89. Commenters asserted that the Legal Memorandum acknowledges regulation of fossil-fuel fired steam generation boilers starting in 1971 and NGCC units in 1979, but notably identifies no statutory or regulatory authority for regulating renewable

energy sources.247

Response 4: We disagree with commenters’ assertion that this ru lemaking assumes authority Congress did not intend to grant. As explained by t he Court in AEP v. Connecticut , “[t]he Act itself ... provides a means to seek limits on emiss ions of carbon dioxide from domestic power plants” before holding that “[t]here is no room for a parallel track” to invoke federal common law to curtail greenhouse gas emissions from the po wer sector, including from existing sources. 131 S. Ct. at 2430. Accordingly, we disagree that C ongress intended to foreclose the regulation of greenhouse gases under section 111(d).

We also disagree that we are expanding our authorit y to include wholesale energy market regulation. Our emission guidelines simply reflect an achievable emissions limit through the application of the BSER and does not require states or sources to implement the BSER. Moreover, these emission guidelines provide states with the flexibility to establish, implement, and enforce standards of performance and do not intrude on the regulatory domain of FERC. It cannot be said that because environmental requireme nts may have an effect on the wholesale energy market that the EPA is therefore intruding i nto energy regulation. Certainly, in the legislative history of the 1970 CAA Amendments, Con gress expressly identified power plants as a priority source category for regulation under CAA section 111.

Contrary to commenters’ assertions, this rule does not regulate renewable energy sources. This rule simply identifies the BSER for affected source s which entails substitute generation to zeroemitting generators. It does not, however, impose e missions requirements on such sources.

Comment 5: Commenters stated that because the proposal as it stands would result in either the reduced utilization of EGUs beyond the ability of c ooperatives to repay investments in those facilities and/or the premature closure of those or other cooperative EGUs, the proposal's requirements amount to a regulatory taking requirin g compensation because of the premature closures and uneconomic curtailment it will require

.
Response 5: For EPA’s response to this issue, see the Legal Mem orandum.

1.5.1 EGU sources

1.5.2 Non-EGU sources

1.5.2.1. EPA has no legal authority to include othe r sources or source categories

1.5.2.1.1 Standards of performance, individual sources, and d efinitions

Multiple comments and multiple reasons address EPA’ s legal authority to go beyond standards of performance for individual sources and raise spe cific definitional concerns, including:

Comment 1: Commenters stated the Clean Air Act forbids Section 111(d) regulations based on

emission reductions that cannot be achieved at indi vidual facilities (sources) and stated further that EPA's goal calculation to be imposed on Alabam a cannot meet this requirement, but instead248

relies on reductions by an entire system, state, an d region to include facilities and state governments acting in tandem.

Commenters stated and concurred that EPA is pursuin g a regulatory standard on one industry source (fossil-fuel power plants) based on potentia l actions taken well beyond the source's physical location and controlling authority, and in many cases by entities that are not directly subject to regulation under section 111 of the Clea n Air Act, and this structure raises significant legal and practical questions regarding the viabili ty of the rule. Commenters stated EPA has to date failed to answer such questions, and provided little to no information regarding what authority it is relying upon to institute such an e xpansive regime, and how it intends to proceed if it does not approve of individual state implementat ion plans. Commenters concluded this is

critical information that EPA should disclose in th e interest of maximizing transparency and continued cooperation with states and stakeholders.

Commenters questioned that EPA may not have the le gal authority. Commenters stated that the EPA relies on interpretation of a rarely used secti on of the Clean Air Act, Section 111(d), as the basis to regulate carbon dioxide across a wide spec trum of the utility industry. Commenters stated, because the proposal is so outside historic EPA authority, undoubtedly there will be legal challenges to all or portions of the rule and will impact already tight guidelines. Finally, commenters stated they are concerned the proposal e xpands EPA's authority; rule is ambitious by any measure and regulates numerous activities that other federal and state agencies currently have authority for, and because the rule is not pas sed by Congress, a unilateral expansion by the EPA raises concerns how other federal and state age ncies will respond.

Commenters stated that even if EPA legally could ad opt the CPP, it has no authority to require actions by any entity other than the generating fac ility itself. Commenters stated that 42 U.S.C. section 7411 grants EPA authority to establish "sta ndards of performance" to "stationary sources." Commenters explained (verbatim) Section 7 411 defines "standards of performance" as "a standard for emissions of air pollutants which r eflects the degree of emission limitation achievable through the application of the best syst em of emission reduction." Commenters noted that "stationary source" means "any building, struc ture, facility, or installation which emits or may emit any air pollutant." Commenters stated thatstandards of performance can apply to an owner or operator of any stationary source that con tains an affected facility, which is "any apparatus to which a standard is applicable." Comme nters asserted, taken together, CPP standards may be applied to the source category as well as applicable equipment contained therein. Commenters stated, yet, the CPP goes beyon d that as it attempts to control sources other than coal-fired generating units by requiring that non-generating facilities also reduce their

emissions. Commenters stated that such a broad read ing of EPA's authority is improper and impermissible.

Commenters stated Section 111 of the CAA speaks wit h absolute clarity as to the subject and nature of standards of performance for new and exis ting sources. Commenters asserted that a standard of performance under section 111 must be a chievable for individual sources based on measures that the source's owner can integrate into the design or production process of the source

itself. Commenters remarked that the Section 111 ha s existed, with only minor changes, for over249

40 years, and in that time EPA has applied it with total consistency on this fundamental point. Commenters added that a standard of performance can not be based on actions taken beyond the

source itself that somehow reduce the source's util ization. Commenters noted that nor can it be based simply on requiring a source to reduce its op erations, and yet EPA is proposing a rule that departs so far from the Act's clear directions as t o be unrecognizable as a section 111 rulemaking. Commenters stated the Agency's proposed approach has inverted the lawful order of standard-setting under section 111, and instead of defining a category of regulated sources, identifying the BSER that any individual source can incorporate into its design, and then allowing states to determine what standards are ach ievable for sources based on that BSER and other factors, EPA has started at the end by defini ng an inflexible emissions goal for each state and then requiring states to impose whatever obliga tions are necessary to achieve that goal. To effectuate this unprecedented approach, commenters stated, EPA proposes to base its emission guidelines on actions that reach beyond individual regulated sources and impose obligations on entities with no emissions at all, or to simply man date that regulated sources curtail operations or cease operations altogether, and EPA's proposed app roach has no basis in the statute. Commenters posited the rule defies reason and is in consistent with the CAA, and EPA has exceeded its authority and must withdraw the Propos ed Guidelines.

Commenters stated and concurred that Section 111 pr ovides for the regulation of individual emission sources through performance standards thatare based on what design or process changes an individual source's owner can integrate into its facility. Commenters asserted, the nature of any standard of performance under section 111 is that, at a given level of operations, the regulated source emits less when subject to the standard than when not. Commenters continued that on its face, section 111 provides on ly for standards that regulate the emissions performance of individual stationary sources in a c ategory listed under section 111(b). Commenters noted the plain text of this section mak es it clear that standards of performance apply to sources within listed categories as indivi dual facilities and do not regulate categories or subcategories as a whole: NSPS apply only to "new s ources within [a listed] category," while state standards under section 111(d) apply to "any existing source . . . to which a [NSPS] . . . would apply if such existing source were a new sour ce." Id. section 111(b)(1)(B), (d)(1). Commenters noted, in addition, section 111(d) expli citly directs states (and EPA, in the case of a federal plan) to consider the "remaining useful lif e" of existing sources when applying any standard of performance, further demonstrating thatthis section focuses solely on what individual sources can do to improve their performa nce at reasonable cost rather than what the entire source category (or even other entities) can do collectively to reduce overall emissions. CAA section 111(d)(1), (d)(2). Commenters stated th at even the titles used in these provisions

indicate their narrow focus on individual sources. Commenters stated Section 111 is titled "[s]tandards of performance for new stationary sour ces," and section 111(d) is designated "[s]tandards of performance for existing sources; r emaining useful life of source." Id. section 111, 111(d). Commenters stressed section 111 also r equires that any standard of performance be "achievable" by the sources to which it applies bas ed on application of an "adequately demonstrated" system of emission reduction. Id. sec tion 111(a)(1). Commenters stated the achievability requirement clearly indicates that Co ngress intended standards of performance to be based on systems of emission reduction that are within the control of (and thus, incorporated250

into the design or production process of) an indivi dual source. Commenters asserted that a

standard cannot be "achievable" for a source if the source must rely on measures taken by some other entity that it does not control, or if the so urce must not operate, in order to achieve the standard. Commenters noted, moreover, a "standard o f performance" by its terms assumes that the source will continue to "perform." Commenters s tated that a "standard of performance" cannot mandate "non-performance." Commenters added that this focus on measures incorporated into individual sources pervades other parts of sec tion 111 as well and offers, for example, section 111(h) authorizes EPA to promulgate a desig n, equipment, work practice, or operational standard in cases where "it is not feasible to pres cribe or enforce a standard of performance," and defines exactly when Congress considered it "not fe asible to establish a standard of performance. Id. section 111(h)(1). Commenters said one such sit uation is where the regulated pollutant "cannot be emitted through a conveyance designed an d constructed to emit or capture such pollutant" - Id. section 111(h)(2)(A) - and this pr ovision equates a "standard of performance" with the use of a conveyance at the regulated sourc e to capture and to control a portion of the
source's emissions.

Commenters stated that EPA is a "creature of statut e" and has "only those authorities conferred upon it by Congress." Michigan v. EPA, 268 F.3d 107 5, 1081 (D.C. Cir. 2001). Commenters said EPA's decision to impose state-wide emission g oals instead of emission guidelines that address specific sources is not legally justified u nder Section 111(d). Commenters asserted that the statutory language, EPA's own implementing regu lations, and the structure for development and application of standards of performance under S ection 111 all focus on determining appropriate emission guidelines applicable to indiv idual emission sources. Commenters stated, by setting state goals that are not based on refere nce to particular sources of emissions regulated under Section 111(d) or the CAA, EPA has exceeded i ts statutory authority. Commenters said, first, the text of Section 111(d) and other provisi ons in Section 111 evince a clear focus on addressing individual sources, not an aggregation o f disparate sources on a state level. Commenters noted that Section 111(d) expressly prov ides for states to apply standards of performance to "any existing source." 42 U.S.C. sec tion 7411(d)(1)(A). Commenters noted that Congress has expressly limited the applicability of Section 111(d) to existing sources to which a standard of performance would apply if the existing source were a new source. 42 U.S.C. - 7411(d)(1)(A)(ii). Commenters stated, consistent wi th this requirement, Section 111(b) rulemakings regulating CO2 from new and modified fo ssil fuel-fired EGUs must be in effect before EPA has the authority to promulgate regulati ons for existing fossil fuel-fired EGUs under Section 111(d). Commenters stated, although EPA has proposed Section 111(b) rulemakings, see 79 Fed. Reg. 1430; 79 Fed. Reg. 34,960, the rules h ave not been finalized and will almost certainly be subject to legal challenge, creating u ncertainty on the status and applicability of any Section 111(d) rulemaking. Commenters asserted, if those Section 111(b) rules have not been finalized or remain subject to legal challenge at t he time EPA seeks to issue its final Section 111(d) rule for EGUs, the Section 111(d) rules mustbe held in abeyance pending completion of the jurisdictional prerequisite.) Commenters stated that EPA is required to permit states to take certain factors into account in applying a standard of performance "to any particular source." Id. section 7411(d)(1). Commenters said these factors i nclude the remaining useful life of "the existing source" to which such standard applies. Id . Commenters stated Section 111(a) defines251

"stationary source" as "any building, structure, fa cility, or installation which emits or may emit any pollutant." Id. section 7411(a)(3). Commenters said this plain statutory text (The sourcebased focus of Section 111(d)) is further supported in the legislative history. See, e.g., Report by the Committee on Interstate and Foreign Commerce to Accompany H.R. 6161 (CLEAN AIR ACT AMENDMENTS OF 1977), H.R. Rep No. 95-294, at 11 ("The section also makes clear that standards adopted for existing sources under s ection 111(d) of the act are to be based on available means of emission control (not necessaril y technological) and must, unless the State decides to be more stringent, take into account the remaining useful life of the existing sources.") (emphasis added)) Commenters noted that it placed d irect limits on EPA's ability to expand its regulatory reach beyond existing sources. See Elec. Power Supply Ass'n v. FERC, 753 F.3d 216, 222 (D.C. Cir. 2014) (rejecting FERC interpretation of authority that would render express statutory limitations on authority useless). Commen ters said, second, EPA's implementing regulations for Section 111(d) acknowledge the sour ce-based focus in the statute: "[E]mission guidelines will reflect the degree of control attai nable with the application of the best systems of emission reduction which (considering the cost of s uch reduction) have been adequately demonstrated for designated [existing] facilities." 40 Fed. Reg. 53,340, 53,340 (Nov. 17, 1975) (emphasis added). Commenters asserted that the emis sion guidelines, as EPA describes, must make "allowances for the costs of controlling existing sources." 40 Fed. Reg. at 53,343.

Commenters stated EPA further stated that it will c onsider subcategorization under Section 111(d) based on "sizes, types and classes of design ated facilities." See 40 C.F.R. section 60.22(b). Commenters stated that EPA provided no su ggestion in its 1975 regulations that it could or would attempt to expand its purported auth ority beyond the regulation of affected sources as it now proposes. Third, commenters state d that the overall structure of Section 111 demonstrates the focus on what controls may apply a nd what emission limits are achievable and adequately demonstrated at the individual sources. Commenters said Section 111 establishes a parallel structure in which standards of performanc e are derived for both new and, where appropriate, existing affected sources within the r elevant source category. Commenters noted EPA confirmed in its 1975 regulations that the same general principle (application of best adequately demonstrated control technology, conside ring costs) applies to determine standards of performance for both new sources under Section 111( b) and emission guidelines for existing sources under Section 111(d). See 40 Fed. Reg. at 5 3,341. Commenters stated, however, complications arise in regulating existing sources because of the need to account for the different sizes, types and classes of individual sources with in the larger source category. Commenters asserted EPA recognized that the way to ensure appr opriate treatment of the disparate sources was to drill down to smaller subcategories of indiv idual sources. Commenters noted that EPA specifically amended its regulations "to make clear that the Administrator will specify different emission guidelines for different sizes, types and classes of [existing sources] when costs of control, physical limitations, geographical locatio n, and similar factors make subcategorization appropriate." Id. ("Thus, while there may be only o ne standard of performance for new sources of designated pollutants, there may be several emis sion guidelines specified for [existing sources] based on plant configuration, size, and ot her factors peculiar to existing facilities."). Commenters said grouping of different emission sour ces into an amorphous and expanded "system" that includes both jurisdictional and non- jurisdictional units and unrelated activities,252

and then setting emission goals based solely on sta te boundaries as EPA has proposed, is not a valid means of subcategorizing because it fails to recognize the differences among units within particular states. Commenters stated, given the par allel process anticipated for the development of source-specific standards of performance for new and existing sources in the same source category, EPA logically anticipated that "the degre es of control represented by EPA's emission guidelines [for existing sources] will ordinarily b e less stringent than those required by standards of performance for new sources." 40 Fed. Reg. at 53 ,341. Commenters stated that the upsidedown nature of the Proposed Rule is demonstrated bycomparing the state emissions goals to the new source performance standards for EGUs in EPA's pending proposal under Section 111(b). Commenters said the final state emissions goals for more than half the states under the Proposed Rule are lower than the corresponding Section 111(b ) emission rates proposed for NGCC units.) Fourth, commenters stated that EPA's prior rulemaki ngs under Section 111(d) are fully

consistent with the source-based focus of Section 1 11(d). Commenters noted, despite the disparate nature of the affected source categories, none of the regulations promulgated by EPA under Sections 111(b) or 111(d) for specific source categories over the past forty years have strayed from the common principle that emission gui delines are intended to lead to standards of performance achievable at the source. Commenters as serted that EPA's Proposed Rule for existing EGUs does not focus on individual source p erformance; rather it sets emissions requirements at levels unachievable for individual sources, and requires emissions reductions from actions taken by third-party entities that are unrelated to the source. See 79 Fed. Reg. at 34,845 (proposing that emission guidelines be based on reduction of CO2 emissions from the entire "electric power sector"). Thus, commenters c oncluded that the Proposed Rule conflicts with the language, structure and historic implement ation of Section 111(d) and exceeds EPA's statutory authority.

Commenters added that elsewhere, section 111(d) spe aks to "the remaining useful life of existing source to which [a] standard applies CAA Section 11 1(d)(I)(B) and in addition, EPA's implementing regulations at 40 CPR 60.24(f) allow s tates to consider the "cost of control resulting from plant age, location, or basic proces s design," difficulties in "installing necessary control equipment," and "other factors specific to the facility" in determining the appropriateness of emissions standards and compliance schedules.

Response 1: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reaso nable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

As we explain in sections V.A. and V.B. of the prea mble, our emission guidelines simply reflect an achievable emissions limit through the applicati on of the BSER and do not in themselves require states or sources to implement the BSER. Th at is, EPA is responsible for determining the level of emission limitation from the source catego ry, while states have the responsibility of assigning emission requirements to their sources th at will ensure their achievement of that level of emission limitation. States may fulfil their res ponsibility by establishing emission standards or creating plans consistent with the guidelines. In d oing so, states will be able to choose from a wide range of emission reduction measures, includin g measures that are not part of the BSER.253

Commenter’s arguments on section 111’s remaining us eful life provision are addressed in section VIII.G.1 of the preamble and section IX of the Legal Memorandum.

Comment 2: Commenters stated and concurred that never before h as EPA adopted emissions guidelines based on such outside-the-fence consider ations. Commenters remarked that this is not surprising, since EPA's longstanding regulations fo cus on technological and operational measures that can be implemented at a specific unit . (See, e.g., 40 C.F.R. 60.21(h) (referring to emission control equipment and process changes, bot h of which are unit-specific measures). Commenters noted, since Section 111(d)'s enactment, EPA has promulgated regulations for specific source categories in 13 instances. (See Re gulation of CO2 Emissions from Existing Power Plants Under Section 111(d) of the Clean Air Act: Program Design and Statutory Authority, R. Nordhaus and I. Gutherz, 44 ELR 10366 , 10372 n. 57 (2014). According to the authors, the 13 are: Phosphate Fertilizer Plants; F inal Guideline Document Availability, 42 Fed. Reg. 12,022 (Mar. 1, 1977); Standards of Performanc e for New Stationary Sources; Emission Guideline for Sulfuric Acid Mist, 42 Fed. Reg. 55,7 96 (Oct. 18, 1977); Kraft Pulp Mills, Notice of Availability of Final Guideline Document, 44 Fed . Reg. 29,828 (May 22, 1979); Primary Aluminum Plants, Notice of Availability of Final Gu ideline Document, 45 Fed. Reg. 26,294 (Apr. 17, 1980); Emission Guidelines; Municipal Was te Combustors, Final Emission Guidelines, 56 Fed. Reg. 5,514 (Feb. 11, 1991), withdrawn & sup erseded by 60 Fed. Reg. 65387 (Dec. 19, 1995) (same source category); Standards of Performa nce for New Stationary Sources and Guidelines for Control of Existing Sources: Municip al Solid Waste Landfills, Final Rule, 61 Fed. Reg. 9,905 (Mar. 12, 1996); Standards of Performanc e for New Stationary Sources and Emission Guidelines for Existing Sources: Hospital/Medical/I nfectious Waste Incinerators, Final Rule, 62 Fed. Reg. 48,348 (Sept. 15, 1997); Standards of Per formance for New Stationary Sources and Emission Guidelines for Existing Sources: Commercia l and Industrial Solid Waste Incineration Units, Final Standards and Guidelines, 65 Fed. Reg. 75,338 (Dec. 1, 2000); Emission Guidelines for Existing Small Municipal Waste Combustion Units , Final Rule, 65 Fed. Reg. 76,378 (Dec. 6, 2000); Clean Air Mercury Rule, 70 Fed. Reg. 28,606; Standards of Performance for New Stationary Sources and Emission Guidelines for Exis ting Sources: Other Solid Waste Incineration Units, Final Rule, 70 Fed. Reg. 74,870 (Dec. 16, 2005); Standards of Performance for New Stationary Sources and Emission Guidelines for Existing Sources: Sewage Sludge Incineration Units, Final Rule, 76 Fed. Reg. 15,372 (Mar. 21, 2011), and in each instance, those standards have been technological or operational st andards that can be applied specifically to each designated facility. Commenters asserted such an approach harmonizes with Section 111's handling of stationary sources of air pollutants. C ommenters offered, or instance, in its final rule promulgating new source performance standards and e xisting source emission guidelines for municipal solid waste landfills, EPA determined tha t BSER for MSW landfills comprised a welldesigned and well-operated gas collection system an d [] a control device capable of reducing [the pollutant of concern] in the collected gas by 98 we ight-percent. (49 Fed. Reg. at 9907) Commenters noted that operational standards for eac h existing landfill were also promulgated to ensure that each landfill was operated according to best practices to minimize emissions. (Id. at 9907-08) Commenters stated no suggestion was made t hat BSER included shuttering some landfills in favor of others employing more modern or lower-emitting technologies, or that BSER

could or should include efforts to minimize consume rs' generation of municipal waste (even254

though that might have been one of the more effecti ve measures in reducing emissions from MSW landfills).

Commenters stated the required standard can only ex tend to the specific sources at issue (here, fossil fuel-fired EGUs), not an entire sector, and EPA's proposed BSER extends well beyond the source categories that EPA can require states to ad dress under Section 111(d) and is thus outside EPA's authority under the CAA.

Response 2: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reaso nable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

Comment 3: Commenters stated that the EPA's proposed building blocks are not a best system of emission reduction as required by Section 111(d) . Commenters explained (verbatim) EPA's proposed CO2 guidelines rely on Section 111(d) of t he CAA, although it has been rarely used by the EPA to establish procedures whereby states can implement and enforce performance standards for an existing source of an air pollutan t. Commenters asserted Section 111(d)(1)

mandates that "each state submit to the Administrat or a plan which (A) establishes standards of performance for any existing source ..." Commenters noted that "standard of performance" is defined as a "standard for emissions of air polluta nts which reflects the degree of emission limitation achievable through the application of th e best system of emission reduction which (taking into account the cost of achieving such red uction and any non-air quality health and environmental impact and energy requirements) the A dministrator determines has been adequately demonstrated." 42 U.S.C. section 7411(a) (1). Commenters noted EPA has proposed that the best system of emission reduction ("BSER") for CO2 should be a series of four "building blocks" or strategies: building block 1 - reducing the carbon intensity of generation at EGUs through heat rate improvements (target 6% heat rate reduction); building block 2 - reducing CO2 emissions by substituting generation from the most carbon intensive EGUs with generation from natural gas combined cycle units; building block 3 - reducing CO2 emissions from affected EGUs by expanding low and zero carbon generating capacity; and building block 4 - increasing demand-side energy efficiency. 79 Fed. Reg. at 3483 6. Commenters asserted that building blocks 2, 3 and 4 do not constitute a "best system of emis sion reduction" that can be established for and applied to a source which emits or may emit an air pollutant, such as an EGU. Commenters noted that Section 111(a)(3) of the CAA defines a s tationary source as any building, structure, facility or installation "which emits or may emit a ny air pollutant." Commenters suggested that entities which do not emit any pollutants, such as wind farms, or end users of electricity like the general public, cannot be treated as an "emitting s ource" under Section 111(a), as EPA proposes to do. Commenters stated that the limitation to req uiring a state plan to establish standards of performance only for existing sources is supported by the remaining language of Section 111(d), requiring that "regulations of the Administrator un der this paragraph shall permit the State in applying a standard of performance to any particular source under a plan submitted under this paragraph to take into consideration, among other f actors, the remaining useful life of the existing source to which such standard applies." 42 U.S.C. section 7411(d)(1)(B)(emphasis added). Commenters noted that Congress expressly in tended a standard of performance to be255

established and applied to a source. Commenters ass erted that Building blocks 2, 3 and 4 cannot in any meaningful sense be established or applied t o an existing EGU. Commenters said substituting low- or zero-carbon generation for gen eration produced by an EGU does not fit the statutory meaning of applying emission reductions t o that EGU, nor does requiring less energy use from consumers. Commenters said building blocks 2, 3, and 4, could be drafted into a state plan without even mentioning the word "source."

Response 3: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reaso nable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

Comment 4: Commenters noted that EPA's proposed CO2 guidelines ignore the clear requirements of Section 111(d), the authority upon which it relies for the proposed CO2 guidelines. Commenters said EPA's disregard for Sec tion 111(d) is further shown by its failure to give effect to the language "the remaining useful l ife of the existing source to which such standard applies" in setting standards for building blocks 2, 3 and 4. Commenters stated that the EPA proposed CO2 guideline fails to specify how the EPA took into account the remaining useful life of sources. Commenters noted, if anythi ng, these building blocks have the opposite effect by reducing the usefulness of existing coal- fired EGUs. Commenters said the reference to "existing useful life of a source" is further evide nce that Congress did not intend that EPA could impose upon a state a standard of performance which is "outside the fence" of an EGU. Commenters noted, in consequence, EPA proposed BSER building blocks 2, 3, and 4 violate Section 111(d) of the CAA and are in excess of the statutory jurisdiction and authority granted by Congress to EPA. Commenters noted that Section 1 11(h)(1) also provides evidence that the EPA cannot compel states to adopt standards of perf ormance which are outside of a source/facility and thus cannot be applied to a fac ility. Commenters said Section 111(h)(1) states that if it is not feasible to prescribe or enforce a standard of performance, the Administrator may instead promulgate a design, equipment, work practi ce or operational standard, or combination thereof, which reflects the "best technological sys tem of continuous emission reduction." 42 U.S.C. section 7411(h)(1). Commenters noted that th e term "technological system of continuous emission reduction" means "a technological process for production or operation by any source which is inherently low-polluting or nonpolluting," or "a technological system for continuous reduction of the pollution generated by a source be fore such pollution is emitted into the ambient air, including pre-combustion cleaning or treatmentof fuels." 42 U.S.C. section 7411(a)(7)(A) and (B)(emphasis added). Commenters asserted that b uilding blocks 2, 3 and 4 cannot be considered to reflect or be within the meaning of a "technological system of continuous emission

reduction."

Response 4: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reaso nable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

Comment 5: Commenters stated EPA interprets CAA Section 111 to mean "the affected sources must be subject to emissions standards, but the bas is for those standards - the 'system of emission reduction' - may be any method that reduces the aff ected sources' emissions, as long as that256

method is a 'system' that meets the criteria for be ing the 'best' that is 'adequately demonstrated.'" 79 Fed. Reg. at 34885/3. Commenters stated this int erpretation is said to pass muster under either Chevron step one or step two, id. at 34885-86, but it does neither. Commenters said EPA tries to justify its faulty interpretation of BSER by claimi ng "it is clear ... that anything that reduces the emissions of affected sources may be considered a ' system of emission reduction.'" 79 Fed. Reg.at 34886/1. Commenters noted, under this expans ive interpretation, literally anything and anybody - from preventing the issuance of housing p ermits to requiring households to turn down their thermostats in the winter - could be regulate d by the EPA. Commenters asserted that EPA's statutory analysis focuses on the term "'system,' w hich is not defined in the CAA," Id. at 34885/3, but system only refers to one part of the statutory plan, not to the plan as a whole. Commenters said such statutory dissection is imperm issible as a means to interpret statutory intent. American Petroleum Institute v. EPA, 52 F.3 d 1113, 1119-20 (D.C. Cir. 1995)("EPA cannot uncouple the first sentence of [the relevantsection] from the rest of the section in order to expand its authority beyond the aims and limits of the section as a whole."). Commenters stated

EPA asserts that the "context in which standard of performance is found" does not "add [any] constraints," but allows "anything that reduces the emissions of affected sources [to] be considered a 'system of emission reduction' for tho se sources." 79 Fed. Reg.at 34886/1. Commenters stated, in this regard, EPA reads the hi ghlighted portion of Section 111(d)(1)(A) - "standards of performance for any existing sourc e" - as having "a more capacious meaning" when applied to setting standards for those sources . 79 Fed. Reg.at 34903/1. Commenters noted, specifically, EPA's capacious meaning of "for" woul d include any standards that "would have an

effect on affected sources." Id. Commenters stated it is difficult to imagine what standards would not fit within this "capacious" definition. Comment ers said this interpretation contradicts EPA's prior view that "for" should be defined to link the system of emission reduction directly to what can be achieved by particular existing sources, not to what might "have an effect" upon those

sources. See State Plans for the Control of Certain Pollutants From Existing Facilities, 40 Fed. Reg.53340, 53341/2 (Nov. 17, 1975)("there may be se veral emission guidelines specified for designated facilities based on plant configuration, size, and other factors peculiar to existing facilities"); id. at 53343/3 ("EPA's emission guide lines will reflect its judgment of the degree of control that can be attained by various classes of existing sources without unreasonable costs" and "EPA's emission guidelines will in effect be ta ilored to what is reasonably achievable by particular classes of existing sources ... the resu lt is likely to be substantial variation in the deg ree of control required for particular sources, rather than identical standards for all sources"). Commenters noted, as the operative language of Sect ion 111(d)(1)(A), "standards of performance for any existing source," has not chang ed since EPA's contemporaneous interpretation of the originally-enacted provision, its initial narrow interpretation linking standards of performance to existing sources negate s EPA's current reading that Congress intended that standards of performance would encomp ass any system of emission reduction that "affects," but is not linked to (i.e., outside the fence or beyond the fence line of), existing sources. Commenters stated, likewise, EPA's reading that "for" in Section 111(d)(1) means that "affected sources must be subject to emissions stan dards," 79 Fed. Reg.at 34885/3, does not provide any clarity.257

Commenters offered as the alternative, that EPA mig ht treat "system" as including all units and facilities comprising a particular electrical gener ating utility. Commenters stated, though such a reading would be unreasonable in light of the plain language of Section 111 and judicial and agency interpretations of that language, EPA could, perhaps, argue that a utility is itself a sort of commercial system, as that term is sometimes used. Commenters stated, even so, the last three of EPA's proposed BSER Building Blocks cannot be part of the system, simply because the utility does not necessarily have control over them. Commen ters said, for example, order of dispatch and portfolio standards "both important components of EPA's proposed BSER determination" exceed what an individual utility can control. Comm enters stated that a single utility cannot control the order in which another utility dispatch es its electric generating units. Commenters said EPA's Building Block formula would therefore r equire utilities to coordinate their operations. Commenters noted, likewise, improvement s in end-use energy efficiency, another key Building Block, are entirely outside the univer se of actions over which utilities can exercise any enforceable degree of control. Commenters said the scope of EPA's proposed BSER, then, is too broad even for the most expansive definition of system.

Response 5: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reaso nable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

Comment 6: Commenters stated the proposed rule appears designe d to achieve 30% national
reduction in tons of carbon dioxide vs. 2005 for th e power sector as a whole but this is not what Section 111(d) requires. Commenters stated that Sec tion 111(d) only authorizes standards of performance on individual affected sources.

Commenters stated that the CPP treats each state's power sector as an existing source, and argued that is contrary to the text of section 111(d), EPA 's 1974-1975 implementing regulations, and historical practice, all of which leave no doubt th at an "existing source" is a "particular source," i.e., a "designated facility," not an entire econom ic sector or interconnected marketplace. Commenters stated that the CPP cites directly relev ant case law; however, n ASARCO Inc. v EPA 578 F.2d 319 (1978), the D.C. Circuit Court of Appeals struck down an NSPS rule in which EPA claimed flexibility to define a stationary sour ce as "either an individual facility or combination of facilities" comprising an "entire pl ant." Commenters explained that in agreeing with Sierra Club, the court ruled that a source is a "single building, structure, facility, or installation," and EPA "has no authority to rewrite the statute in this fashion." Commenters stated: "And so EPA may not even define the 'statio nary source' for section 111 purposes as an entire plant, much less as an entire state."

Commenters stated the proposed rule would extend re gulation well beyond any a single category of emitters to encompass every electricity generato r and consumer in the country, displacing the regulation of the Federal Energy Regulatory Commiss ion ("FERC") along the way, and the CAA does not authorize this extension of EPA authority, and EPA has never previously said that it does. Commenters continued (verbatim) stating that Section 111(d) authorizes EPA to "prescribe regulations which shall establish a procedure simil ar to that provided by section 7410 of this title." 42 U.S.C. section 7411(d). Commenters state d, specifically, the Section 110 model258

includes cooperation with the States, which submit plans specifying performance standards and methods for implementation and enforcement. Id. Com menters said, by its terms, this provision applies only to "existing sources," which it define s to include "any stationary source other than a new source." 42 U.S.C. section 7411(a). Commenters noted that "Stationary source" is also a defined term, meaning "any building, structure, fac ility, or installation which emits or may emit any air pollutant." Id. Commenters noted that this definition is crucial, and its meaning begins with ordinary dictionary definitions. Smith v. Unit ed States, 508 U.S. 223, 228-29(1993). Commenters said each noun defining the "stationary sources" subject to regulation under Section 111(d) refers to a single location. Webster's II Ne w College Dictionary, 149 (defining building as "[a] structure that is built"); 1120 (structure: "[ s]omething constructed, such as a building"); 409 (facility: "[s]omething created to serve a particul ar function 'a new mental health facility'"); 588 (installation: "[a]n apparatus, as a system of mach inery, set up for use."). Commenters said none of the definitions sweeps widely enough to allow re gulation of the national network of electricity-producing, transmitting, and consuming entities and locations. Commenters noted, instead, they refer to individual buildings, or oth er constructed equipment that emits pollution. Accordingly, in order to properly rely on Section 1 11(d), commenters stated that regulations must take a form that applies to an individual "bui lding, structure, facility, or installation." Commenters said, if anything, the dictionary defini tions underlying Section 111(a) represent the outer limit of how broad those terms might be. Comm enters stated canons of interpretation served to narrow further the meaning of "building, structure, facility, or installation," and achieving a reasonable reading of the statute underChevron requires the Agency to employ those canons. Bell Atlantic Telephone Co. v. FCC, 131 F.3 d 1044, 1047 (D.C. Cir. 1997). Commenters said the noscitur a sociis canon of statutory interpretation is particularly relevant. Commenters noted, in its simplest form, the canon mandates tha t "words grouped in a list should be given related meaning." Third Nat'l Bank in Nashville v. Impac Ltd., 432 U.S. 312, 322 (1977). Or, in a more faithful translation, "a word is known by th e company it keeps." Gustafson v. Alloyd Co., 513 U.S. 561, 575 (1995). Commenters stated, howeve r expressed, the canon's purpose is to narrow the universe of meanings that may permissibl y attach to statutory text. Id. (explaining that the canon serves to avoid "giving unintended b readth to the Acts of Congress"). Here, commenters said the canon's application is straight forward. Commenters said each of the nouns in the definition of "stationary source" reinforces the fact that the law applies only to individual locations. Commenters stated, if they appeared alon e, the Agency might have some claim to ambiguity based on an expansive reading of a dictio nary definition. But by enacting this particular four-word provision, commenters noted th at Congress conveyed additional information about the type of "sources" it intended to bring within Section 111(d). Commenters said comparison with neighboring provisions also pr ovides a contextual clue to the range of "stationary sources" covered by Section 111(d). Com menters noted, despite cross-referencing Section 112 for exclusionary purposes, Section 111( d) does not incorporate the definition of "major source" from this neighboring Clean Air Act provision. Commenters said that term, as used in Section 112, expressly allows the aggregati on of sources "within a contiguous area" and is thus broader than the disaggregated stationary s ources referred to in Section 111(d). See 42 U.S.C. section 7412(a)(1). Commenters said this con textual comparison bolsters the conclusion that Congress did not intend to authorize regulatio ns aimed at the entire network of energy-259

producing, transmitting, and consuming entities and locations as such. Commenters stated, instead, regulations must target a category of simi lar, individual sources and speak in terms of what they must do to reduce emissions. Furthermore, commenters asserted that Section 111(d)'s instruction that regulations "take into considerati on, among other factors, the remaining useful life of the existing source to which such standard applies," 42 U.S.C. section 7411(d) (emphasis added), shows that regulations must speak in terms of individual sources. Commenters said there is, after all, no single "useful life" of the power grid or nationwide set of power plants as a whole. Commenters stated, in this case, the proposed rulem aking sets aside the long-recognized meaning of Section 111(d) and seeks to regulate the entire network of energy production, transmission, and consumption. See, e.g., 79 Fed. R eg. at 34,925 ("Instead, the EPA is proposing to establish state emission performance goals for t he collective group of affected EGUs in a state ... ." (emphasis added)); Id. at 34,833 ("this prop osal lays out state-specific CO2 goals" (emphasis added)). Commenters noted that these prop osed regulations say nothing about the "performance standards" and methods for implementat ion and enforcement at individual stationary sources. Commenters said also illustrati ve of the mismatch between the statutory authorization and the proposed rule is the Notice's lack of any discussion of each source's "useful life." Commenters stated that the proposed rulemaki ng notes the "general" rule that "remaining useful life and other facility-specific factors are relevant for emission guidelines in which the EPA specifies a presumptive standard of performance that must be fully and directly implemented by each individual existing source with in a specified source category." Id. at 34,925. Commenters said despite acknowledging that standard approach for complying with the terms of Section 111(d), "[i]n these proposed guide lines ... the agency does not take that approach." Id. Commenters noted, instead, because E PA reinterprets the statute to allow regulation aimed at "the collective group" of power plants, the Agency would defer all consideration of remaining useful life to the State s as they implement EPA's mandate. Id. at 34,925-26. Commenters stated, in this fashion, when considered against the text and context of Section 111(d), the Agency's proposed rulemaking em erges as an unprecedented expansion of the statute, and one largely divorced from text and past practices. Commenters said recognizing that context can limit the scope of a statutory ter m to prevent an expansion of federal law has become routine at the Supreme Court. E.g., Bond v. United States, 134 S. Ct. 2077, 2091 (2014) ("We are reluctant to ignore the ordinary meaning o f 'chemical weapon' when doing so would transform a statute passed to implement the interna tional Convention on Chemical Weapons into one that also makes it a federal offense to poison goldfish."). Moreover, commenters said the Court recently emphasized that long-standing agencypractice weighs against reading a statute in a novel way to expand regulatory power: "When an ag ency claims to discover a long-extant and unheralded power to regulate 'a significant portion of the American economy' ... we typically greet its announcement with a measure of skepticism ." UARG, 134 S. Ct. at 2444 (quoting FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 159 (2000)). Commenters stated, if anything, the newly discovered powers on which the current proposed rulemaking relies are more sweeping than those at issue in UARG. Commente rs noted, by seeking to regulate the entire network of electrical production, transmissi on, and consumption as a single unit, the proposed regulations would use a limited provision of the CAA to reach every producer, transmitter, and consumer in 49 States over the com ing 16 years. Commenters stated that the260

instant proposed rulemaking threatens precisely the type of expansion beyond congressional
authorization that the Court has declined to allow.

Commenters stated that by attempting to expand BSER , and the associated Building Blocks, beyond the affected source category units, EPA ille gally seeks to regulate the electric power transmission system as a whole.

Response 6: We disagree that we are illegally seeking to regula te the electric power transmission system as a whole. Our emission guidelines simply r eflect an achievable emissions limit through the application of the BSER and does not require st ates or sources to implement the BSER. Moreover, these emission guidelines provide states with the flexibility to establish, implement, and enforce standards of performance and do not intrude on the regulatory domain of FERC. It cannot be said that because environmental requireme nts may have an effect on the wholesale energy market that the EPA is therefore intruding i nto energy regulation. Certainly, in the legislative history of the 1970 CAA Amendments, Con gress expressly identified power plants as a priority source category for regulation under CAA section 111.

Comment 7: Commenters stated that their review of EPA's propos ed Clean Power Plan and the accompanying Regulatory Impact Analysis and Technic al Support Documents leads them to conclude that the proposed rule is ill-founded and untimely. Commenters stated that the rule

should be limited to "inside the fence" emission re ductions similar to the 2011 energy efficiency guidance EPA has issued for Best Available Control Technology (BACT) reviews of major new

sources.

Commenters stated that Section 111(d) provides EPA with narrow authority to set emission standards based solely on emissions reductions thatcan be achieved inside the fence line. Commenters stated, as such, only the reductions res ulting from actions taken under EPA's proposed building block one may lawfully be recogni zed. Commenters stated that building blocks two through four, as proposed by the agency, are outside the fence line and the agency does not have the expansive statutory authority to recognize them as the best system of emission
reduction.

Commenters stated and concurred that the proposed rule mandates state "goals" that go far beyond setting standards on the affected sources, e mploying a "Best System of Emission Reduction" extending its reach beyond the "fencelin e" of affected sources.

Commenters stated that Section 111(d) only authoriz es standards of performance on individual, affected sources, and the proposed rule mandates st ate goals that go far beyond setting standards on the affected sources, employing a best system of emission reduction which extends its reach beyond the fence-line of its affected sources, and including renewable and energy efficiency in goal-setting infringes on state and local authority

.

Commenters stated that the Clean Air Act does not a llow EPA to regulate greenhouse gas emissions from existing coal-fired power plants und er Section 111(d) because coal-fired power plant are already regulated by EPA under Section 11 2 of the Clean Air Act. Commenters explained that even if EPA believes it has specific authority to regulate Section 111(d) allows261

EPA to set emission standards based solely on emiss ion reductions that can be achieved inside the fence line. Commenters noted, however, this pro posal requires substantial reductions outside
the fence.

Commenters stated the guidelines and the subsequentstate-developed standards for stationary

sources under Section 111 of the Clean Air Act shou ld begin and end with the regulated source

itself. Commenters asserted that an NSPS or existin g source guideline must apply to individual sources, must be based on reductions that an indivi dual source can achieve, and must be based on the use of a system that is incorporated into the d esign of the source. Commenters added that of the four building blocks that EPA proposes as part of its system of an emission reduction, under its option 1 approach, only the first building bloc k can be applied by individual sources.

Commenters remarked that the other three measures are out of the control of any particular regulated source and are predicated on actions by o thers. Commenters closed, stating that this is inconsistent with EPA's obligations under the Clean Air Act.

Response 7: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reaso nable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

Comment 8: Commenters stated the EPA has interpreted BSER too broadly; Section 111 applies

to sources within a discrete identified source cate gory; the EPA may not create different

standards for these sources based on their location , i.e., the EPA cannot set different state goals for the same types of sources; and the EPA's propos ed rule to establish CO2 emission guidelines for existing EGUs attempts to regulate the entire e nergy sector under Section 111(d). Commenters explained that Section 111 defin es a standard of performance as "standards for emissions of air pollutants which reflects the degree of emission limitation achievable through the application of the best system of emiss ion reduction [or BSER] which (taking into account the cost of achieving such reduction and an y non-air quality health and environmental impact and energy requirements) the Administrator d etermines has been adequately demonstrated." Commenters continued, stating that B SER is a source-based standard and is limited to systems of emission reduction that can b e implemented on-site by the affected facility, and thus, a standard of performance under FCAA Sect ion 111(d) must be based on a set of emission controls that can be implemented at the so urce that is subject to regulation. (See e.g. Portland Cement Association v. Ruckelshaus, 486 F2d 375 (D.C. Cir. 1973).) Commenters argued that BSER cannot be read as broadly as the E PA proposes for existing sources, explaining that FCAA Section 111(d) directs the EPA to prescri be regulations to "establish standards of performance for any existing source of any air poll utant." Commenters contended that the EPA is not setting standards of performance for existing s ources when it looks outside the fence line of the EGUs to establish 'building blocks' based on re newable energy and energy efficiency programs and uses them to establish a state goal orstandard. Commenters stated that a standard of performance that requires emission reductions fr om other sources and even other source categories is fundamentally inconsistent with the p lain language of the FCAA, and historically, the EPA has limited BSER to technology-based emissi on controls that could be installed and implemented at the facilities subject to regulation . Commenters asserted that EPA offers no262

reasonable explanation for abandoning that approach in this rulemaking. Commenters cited the TCEQ and PUCT statements to EPA that it did not hav e broad discretion under the FCAA in setting the standards in response to EPA questions for States on Section 111(d) plan requirements. (TCEQ Attachment 2, Comments on CO2 E missions for EGUs, Section 111(d) of the Clean Air Act, Letter from Richard A. Hyde, P.E ., Executive Director TCEQ, and Brian H. Lloyd, Executive Director, PUCT to Gina McCarthy, E PA Administrator, January 14, 2014), and the TCEQ and PUCT informed the EPA that the flexibi lity given to states in developing plans to meet the standards of performance should not, and l egally cannot, be used in setting BSER. Commenters cited "[Section] 111(d) limits EPA to es tablishing, 'standards of performance for any existing source for any pollutant ... if such e xisting source were a new source. Commenters said establishment of the performance standard mustbe based upon BSER on a source specific basis. Commenters said a 'system' standard may face additional practical and legal challenges; however, a 'system' approach should be allowed as a part of any state's plan on how it will apply the standard of performance to any particular sourc e under the plan." Commenters remarked that the EPA is considering coal and gas-fired EGUs coll ectively in setting the state goals under Section 111(d), and in the proposed NSPS (79 FR 143 0) under Section 111(b), the EPA

established that coal and NGCC units are fundamenta lly different and cannot be combined for purposes of establishing a standard of performance. Having done so, commenters explained, the EPA cannot take an inconsistent position by combini ng them in setting a standard under a 'system' approach for existing sources, and further , ceasing operation of coal-fired units cannot be a 'system of emission reduction' for coal-fired EGUs. Commenters believed requiring a 70% dispatch rate under Block 2 for all NGCC facilities will have the EPA's desired effect of shutting down coal-fired units, and it is not economical to operate a coal-fired EGU at partial capacity

and this would force shut-down of these units. Comm enters noted that the EPA acknowledges this fact in the proposal, estimating that 46 - 49 GW of coal-fired EGUs will retire by 2020 as a result of the rule under a state-by-state approach. Commenters said, however, the EPA has not shown how forcibly shutting down a source appropria tely considers the 'remaining useful lives' of these sources, as Section 111(d)(1) allows. Comm enters believed that by effectively regulating one source category out of existence through re-dis patch, increasing renewable energy production and demand side energy efficiency improv ements, the EPA exceeds its delegated authority by making energy policy rather than envir onmental policy. Commenters stated that the state goals established in this section 111(d) prop osed rule recognizes the diverse nature of the energy production and use section of the economy in attempting to look beyond the fence-line for reductions in CO2. However, beyond the identifi ed source categories of fossil fuel-fired EGUs, commenters asserted that the EPA has no juris diction over the other identified programs. Commenters said these are generally exclusively und er state control through state utility regulators. Commenters continued, stating that the proposed rule is arbitrary, capricious and unlawful because it will require states to regulate additional sources, including commercial buildings and residences, for mandatory reductions in order to achieve the emission reductions identified in Building Blocks 2, 3, and 4. Commente rs explained that the EPA unlawfully directs the states to impose standards of performance on af fected entities that are not fossil fuel-fired EGUs, and in proposed new 40 CFR Section 60.5820 (7 9 FR 34956), the EPA proposes to define "affected entities" broadly to include affected EGU s "or another entity with obligations under263

this subpart for the purpose of meeting the emissio n performance goal requirements in these emission guidelines." Specifically, commenters remarked, the EPA directs the states to identify "the state emission performance level for affected entities that will be achieved through implementation of the plan" and to demonstrate "tha t each emission standard is quantifiable, non-duplicative, permanent, verifiable, and enforce able with respect to any affected entity," and as a practical matter, by incorporating these block s into the BSER analysis, the EPA has proposed state emission reduction targets that cann ot be achieved by imposing emission reduction requirements on fossil fuel-fired EGUs al one. Commenters contended that this is not flexibility, but instead the EPA imposing on the st ates performance requirements that are outside the EPA's authority to do. Commenters believed the EPA's entire approach to identifying BSER based upon individual states is arbitrary, and the EPA's proposed rule is more akin to 50 different state plans than the establishment of national stan dards for existing units within source categories regulated under Section 111(b). Commenters argued t hat the EPA does not have the authority under Section 111(d) to establish a different stand ard of performance on a state-by-state basis; the section 111(d) statutory directive applies to ' existing sources'; commenters noted that state plans must establish a standard of performance, bas ed on BSER, "for any existing source;" commenters said the FCAA definition of "existing so urce" is any stationary source other than a new source;" and the term "stationary source" is al so clearly defined in statute as "any building, structure, facility, or installation which emits or may emit any air pollutant..." Commenters believed Section 111(b)(2) gives EPA the authority to distinguish among classes, types, and sizes within categories of new sources for the purpose of establishing standards; however, the authority to distinguish among states for the purpo se of establishing standards was clearly not granted to EPA for new sources, and that authority was also not granted to EPA for existing sources. In fact, commenters remarked, the limitati on on EPA to establish standards of performance for existing sources are linked to limi tations used to establish performance standards for new sources, specifying that section 111(d) limits the Administrator to "establishing standards of performance for any exis ting source for any air pollutant "... to which a standard of performance under this section would apply if such existing source were a new source..." Commenters posited that the EPA has igno red the clear source-specific intent of this section and proposes state-specific goals instead, based on what the EPA proposes as achievable by application of BSER to the energy generation mix of that state and commenters stated that Texas's goal of 791 lbs CO2/MWh is not based on wha t existing fossil fuel-fired EGUs can achieve, but rather a complicated EPA assumption of the state's future energy generation capabilities and energy efficiency efforts. Comment ers believed the EPA has not asserted clear statutory authority to establish state by state sta ndards of performance under section 111, and there is no ambiguity in the statute that would def er to the EPA the authority to make such a strained interpretation of the FCAA. Commenters quo ted the United States Supreme Court: "We are not willing to stand on the dock and wave goodb ye as EPA embarks on this multiyear voyage of discovery." (Utility Air Regulatory Group v. EPA , 134 S.Ct. 2427 (2014), p. 23.)

Commenters were concerned that EPA's Clean Power Pl an as proposed may not rest on the most secure legal foundation and may fall outside of the authority of Section 111(d) in the following areas as listed below, and therefore invite legal c hallenge that may delay implementation of the rule causing further uncertainty for regulated enti ties such as: the definition of "source";264

definition of "standard of performance" on the resu lting "best system of emissions reduction" (BSER); the definition of "adequately demonstrated" ; and whether EPA has fully taken "into account the cost of achieving such reduction and an y non-air quality health and environmental impacts and energy requirements." Commenters stated that if not based on a solid legal foundation, the proposed rule may result in the con sumption of significant resources and expenses while promoting regulatory uncertainty in an industry which must rely on long range planning to remain viable.

Commenters stated that EPA has exceeded its authori ty and intruded on the authority of other agencies and of the States by attempting to regulat e "beyond the fence line" of the real source category at issue coal-fired EGUs in a manner tanta mount to regulating electric power generally. Commenters cited Electric Power Supply Association v. FERC, in which the District of

Columbia Circuit held that "states retain exclusive authority to regulate the retail market" for the sale and delivery of electricity.(753 F.3d at 220, 221, 224 (holding that FERC's attempt to "regulat[e] consumption by electricity customers is a regulation of retail, not wholesale, activity," impinging on matters "exclusively within state control" thereby rendering FERC's attempt to regulate energy demand unlawful). Commenters noted, if FERC which does have important duties in regulating the power grid lacks authority to regulate consumer efficiency as held in Electric Power Supply Association, then EPA must su rely lack authority to regulate the same thing in building block four. Commenters held that EPA similarly must lack authority to impose building blocks two and three, and concluded, stati ng it is simply not plausible that Congress placed these immense and unexpected powers in the d efinition of BSER in section 111(d) of the CAA. (See Whitman v. Am. Trucking Associations, 531 U.S. 457, 468 (2001) ("Congress, we have held, does not alter the fundamental details o f a regulatory scheme in vague terms or ancillary provisions "it does not, one might say, h ide elephants in mouseholes."))

Response 8: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reaso nable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y. We disagree that we are expanding our authority to include regulating electric power generally. Our emission guidelines simply reflect an achievabl e emissions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. Moreover, these emission guidelines provide states with the f lexibility to establish, implement, and enforce standards of performance and do not intrude on the regulatory domain of FERC or the states. It cannot be said that because environmental requireme nts may have an effect on the wholesale energy market that the EPA is therefore intruding i nto energy regulation. Certainly, in the legislative history of the 1970 CAA Amendments, Con gress expressly identified power plants as a priority source category for regulation under CAA section 111. Finally, with respect to the building blocks, as we explain in sections V.A. and V.B. of the preamble, our emission guidelines simply reflect an achievable emissions l imit through the application of the BSER, and do not in themselves require states or sources to i mplement the BSER. That is, EPA is responsible for determining the level of emission l imitation from the source category, while states have the responsibility of assigning emissio n requirements to their sources that will ensure

their achievement of that level of emission limitat ion. States may fulfil their responsibility by265

establishing emission standards or creating plans c onsistent with the guidelines. In doing so, states will be able to choose from a wide range of emission reduction measures, including measures that are not part of the BSER. Finally, we note that the final rule does not include demand-side energy efficiency – building block 4 – as a component of BSER. Therefore, we are not responding to comments regarding its inclusion as a building block.

Comment 9: Commenters stated that the possibility of imposing the Proposed Rule through FIPs is a hollow one given commandeering doctrine and gi ven the limited regulatory reach that EPA has to act beyond the fence line in connection with building blocks two through four.

Commenters stated that EPA's approach to regulating "outside the fence" is contrary to the Supreme Court's recent decision in UARG, supra, 134 S. Ct. at 2444, stating the Court explained that, "[w]hen an agency claims to discover in a lon g-extant statute an unheralded power to regulate a significant portion of the American econ omy, we typically greet it with a measure of skepticism." Ibid. Commenters noted, further, the C ourt "expect[s] Congress to speak clearly if it wishes to assign to an agency decisions of vast eco nomic and political significance." Ibid. Commenters argued that performance standards do notand cannot apply to entities not within the source category of affected EGUs, yet EPA's proposa l would require application to other sources, or else it would be impossible for New Jer sey to meet the 2030 goal established by

EPA.

Commenters stated that even in cases where EPA has allowed existing sources to comply with emission guidelines by using beyond-the-fenceline m echanisms such as averaging and trading, the agency has based the stringency of these guidel ines exclusively on systems of emission

reduction that are well within the fenceline. Comme nters added that even assuming that section 111(d) could be read to allow EPA to exercise the e xpansive, newfound authority it now claims, the dictates of statutory construction require thatsuch significant authority be clearly established in the statutory language. Commenters said, in this case, neither the statute nor EPA's other interpretations of section 111 (including at least one that was made contemporaneously with the Proposed Rule) support such an expansive view of EP A's authority. Commenters noted, consequently, EPA's interpretation that it can base its mandatory emission guidelines on beyondthe-unit measures is unreasonable and should be wit hdrawn.

Response 9: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reaso nable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

Comment 10: Commenters stated the Supreme Court recently consid ered whether EPA permissibly interpreted the CAA to provide that a s ource may be required to obtain a PSD or Title V permit on the sole basis of its potential g reenhouse-gas emissions. Commenters stated in finding EPA's interpretation unreasonable under Che vron, the Court stated: EPA's interpretation is also unreasonable because it would bring about a n enormous and transformative expansion in EPA's regulatory authority without clear congressio nal authorization. When an agency claims to discover in a long-extant statute an unheralded pow er to regulate "a significant portion of the American economy," Brown & Williamson, 529 U.S., at159, 120 S. Ct. 1291, we typically greet266

its announcement with a measure of skepticism. We e xpect Congress to speak clearly if it wishes to assign to an agency decisions of vast "economic and political significance." Utility Air Regulatory Group, 573 U.S. at 2427. Commenters cont ended that the text of the CAA simply does not provide the authority to regulate entities outside of the affected source categories but that EPA nonetheless argues that the proposal is re asonable, and EPA claims that applying BSER on a statewide basis is fully consistent with the p rinciples of federalism because it provides each state with "significant flexibility" to take local circumstances and state policy goals into account in determining how to reduce emissions. [EPA Legal Memorandum, pg. 18] Commenters

remarked that the rule does not allow the flexibili ty it claims but rather, this agency-issued regulation would impose state-specific CO2 reductio n targets that preclude freezing, relaxing, or repealing cap and trade programs, renewable energy quota, and demand reduction policies, and moreover, each "SIP-like" state plan requires feder al approval and allows EPA to enforce a state

standard if the state does not. 42 U.S.C. section 7 411(d)(1)(B). However, commenters explained, because state plans must be submitted to EPA for ap proval and become federally enforceable, EPA is attempting to assert a newfound authority to regulate the activities of numerous entities that do not emit CO2 or any other regulated polluta nt under the Clean Air Act. Commenters believed that Congress did not intend such a result in promulgating the CAA. Commenters quoted, similar to the reasoning in UARG, allowing the regulation of beyond the fence line sources would render the CAA "unrecognizable to the Congress that designed" it. Utility Air Regulatory Group, 573 U.S. at 2444. Commenters stat ed, accordingly, EPA's reasoning in support of its authority to impose such a far-reach ing regulation is fundamentally flawed.

Commenters stated and concurred that EPA's interpre tation of BSER includes Building Block actions that take place outside the fence line of t he affected power plant and are outside of the control of the plant operator. Commenters argued th at this regulatory approach far exceeds EPA's authority under the CAA for several reasons, explaining first, the statute and previous

EPA rules make it clear that the emission control s ystems that EPA may consider to be BSER include only those that can be implemented at and b y the source, and consequently, EPA may not consider re-dispatch, RE, nuclear energy, or EE to be BSER because these measures are not part of an inside-the-fence system of emission reduction that is within the source's control. Second, commenters contended, EPA may not set the BSER base d on re-dispatch from coal units to natural gas combined cycle (NGCC) because the CAA c learly requires continuous emission reductions - which would not necessarily occur unde r a re-dispatch approach to reducing emissions from coal-fired EGUs, and third, EPA's al ternative interpretation of BSER-that

reduced utilization constitutes BSER-is unreasonabl e and would represent an unprecedented departure from the intent and spirit of the Act.

Commenters stated EPA's "outside the fence" proposa ls are inconsistent with the statutory plan and argues (verbatim) against three justifications EPA offers for why "outside/beyond the fence" measures can be included: (1) CAA Section 111 provi sions "do not by their terms preclude the BSER from including" them; (2) "affected sources ma y themselves implement the measures in building blocks 2, 3, and 4;" and (3) "re-dispatch measures in building block 2 are limited to267

affected sources." Id. at 34889/1. Commenters state d that the first justification resurrects a position that has been soundly rejected. Commenters noted, because a statute does not expressly preclude an agency from taking certain actions does not mean, as the CO2 guidelines appear to suggest, that the agency has been granted authorityto take those actions: "We refuse, once again, to presume a delegation of power merely because Con gress has not expressly withheld such power." Ethyl Corp. v. EPA, 51 F.3d 1053, 1060 (D.C . Cir. 1995). Commenters said nor does the absence of a specific preclusion create a gap that the agency may fill under Chevron step two analysis. "Were courts to presume a delegation of p ower absent an express withholding of such power, agencies would enjoy virtually limitless heg emony, a result plainly out of keeping with Chevron and quite likely with the Constitution as w ell." Id. (emphasis in original; citations omitted); see, e.g. Michigan v. EPA, 268 F.3d 1075, 1081 (D.C. Cir. 2001) ("EPA is a federal agency - a creature of statute. It has no constitut ional or common law existence or authority, but only those authorities conferred upon it by Congres s."); Atlantic City Elec. Co. v. FERC, 295 F.3d 1, 8 (D.C. Cir. 2001)("In the absence of statu tory authorization for its act, an agency's "action is plainly contrary to law and cannot stand .'"). Commenters noted the other reasons for adopting building blocks 2, 3, and 4, viz., "affect ed sources may themselves implement" those measures and "re-dispatch measures in Building bloc k 2 are limited to affected sources," 79 Fed. Reg. at 34889/1, are equally unpersuasive as justif ications for adopting outside the fence standards. Commenters said the legal question for t he instant matter is not, as EPA seems to think, whether compliance is sufficiently far in th e future to "relieve any pressure on grid reliability," 79 Fed. Reg. at 34899/3 (though obvio usly grid reliability is crucial), but, rather, whether the CAA gives EPA authority to promulgate o utside the boundary rules requiring implementation by third parties, not existing sourc es. See Barnhart v. Sigmon Coal Co., 534 U.S. 438, 462 (2002)("Congress, however, did not delegat e authority to the Commissioner to develop new guidelines or to assign liability in a manner i nconsistent with the statute."). Commenters noted, as previously discussed, building block 2 re sides on implementation by third parties not subject to EPA's authority, but whose tariffs, incl uding any changes to currently-approved dispatch protocols to accommodate the CO2 guideline s, fall within FERC's exclusive jurisdiction. Commenters said it follows that adopt ion of building block 2, which depends on action by ISO/RTOs, would exceed EPA's authority.

Commenters stated that Section 111 (d) limits the t ypes of existing sources for which a standard of performance can be established to those already regulated under section 111 (b) (if the existing source was new); however, EPA does not currently regulate, nor has proposed to regulate, "beyond-the-unit" participants in the pow er market under section 111(b). Commenters said nor has EPA proposed to regulate CO2 emissions from non-fossil fuel-fired EGUs under section 111 (b), and in fact, at the present time, EPA does not regulate CO2 emissions from coal or natural gas-fired EGUs under section 111(b).

Commenters stated and concurred that EPA lacks the authority to set emission guidelines under CAA Section 111(d) based on beyond-the-unit measure s outside the EGU source category, and EPA may not set standards based on CO2 control meas ures that are undertaken outside the268

boundaries of a particular EGU, including re-dispat ching from coal to natural gas combined cycle (NGCC) generation, increased use of renewable , nuclear, and end-use energy efficiency.

Commenters stated that Building Blocks 3 and 4 clearly fall far outside the fence line and thus are invalid as a means for establishing North Carol ina's emission standard.

Commenters stated that Section 111(a) includes the definitions EPA must use when reading later portions of Section 111 of the CAA, including "stan dard of performance"42 U.S.C. section 7411(a)(1) (emphasis added). Commenters stated thatlogically, this definition requires BSER to control emissions from a particular source, and notto control all tangentially related industrial actors, or consumers of the affected source's end p roduct. Commenters added that the definition

discusses the emission limitations achievable throu gh "application of the best system of emission reduction." Commenters said this must mean applicat ion of the BSER to an affected source. Commenters observed that if the BSER could be appli ed beyond a particular source, then there is no logical reason to have specific systems of emiss ion reduction for different source categories.

Commenters stated that Section 111(d) Proposal Cons titutes an Unlawful Reorganization of State Energy Economies, and Section 111(d)'s text i s clear: it authorizes EPA to establish a procedure under which states will submit to it a pl an that "establishes standards of performance for any existing source. . . ." C.A.A. Section 111 (d)(1)(A), 42 U.S.C. 7411(d)(1)(A) (emphasis added). Commenters stated that only the first "buil ding block" from which EPA derives its proposed "state goals," heat-rate efficiency improv ements, resembles the "inside-the-fenceline" measures authorized by Section 111(d). And even in the case of efficiency improvements, commenters said there is a good case that EPA is ov erstepping its authority. Commenters continued (verbatim), the Section 111(d) proposal v iolates the core tenet of administrative law that "[t]he definition of words in isolation . . . is not necessarily controlling in statutory construction. A word in a statute may or may not ex tend to the outer limits of its definitional possibilities." e.g., Dolan v. U.S. Postal Serv., 5 46 U.S. 481, 486 (2006). Rather, commenters said statutory terms must be construed in light of the text of the provision as a whole, its context, its purpose, and relevant precedent and authority. Id. Furthermore, commenters said agencies cannot ground a claim to regulatory power on the ab sence of express prohibition. e.g., Ethyl Corp. v. EPA, 51 F.3d 1053, 1060 (D.C. Cir. 1995). Commenters asserted that the ostensibly open-ended "definitional possibilities" of the word "system" cannot support EPA's attempt to override states' policy choices and impose energy a nd natural-resource policy on them.

Commenters found that the proposed regulations fail to conform to the 111(d) requirement of reductions from the "SOURCE", that the proposed Bes t System of Emission Reduction (BSER) goes far beyond the means available to the "source" for reductions, and in fact proposes to turn the current economic dispatch model into an environ mental dispatch model.

Commenters stated that the [Clean Air] Act's use of term "system" in the context of emissions

controls is not isolated to Section 111. Commenters said, in fact, this terminology is used in an analogous manner elsewhere in Title I, that being t he definition of "best available control technology," or BACT, explaining that like a "stand ard of performance," BACT is an "emission limitation" which the Administrator (or permitting authority), "taking into account energy,269

environmental, and economic impacts and other costs , determines is achievable ... through application of production processes and available m ethods, systems, and techniques." [CAA Section 169(3) (emphasis added)] Commenters stated, indeed, BACT and "standard of performance" are intrinsically linked by the Act, a s the application of BACT cannot "result in emissions of any pollutants which will exceed the e missions allowed by any applicable standard established pursuant to section 7411" (i.e., Sectio n 111). [Id.] Commenters noted that until this point, EPA has consistently and correctly interpret ed "systems" in the definition of BACT to refer only to control techniques that can be applie d directly to "each individual new or modified affected emissions unit and pollutant emitting acti vity." ["New Source Review Workshop Manual" (draft), October 1990 (p. B.4). See also 40 CFR 52.210)].

Commenters stated that EPA's proposed emission redu ction targets are unlawful because they are not based on an adequately demonstrated best systemof emission reduction ("BSER") for fossil fuel-fired EGUs. Further, commenters remarked, to t he extent that there is/any ambiguity in Section 111(d), they did not believe that EPA can u se that ambiguity to regulate the entire energy

sector.

Commenters stated and concurred EPA's justification s for not stopping at the fenceline are specious and contrary to the statutory text. See Pr oposal, 70 Fed. Reg. at 34,856. Commenters said EPA argues that the word "system" in the statu tory phrase "best system of emission reduction" is broad enough to encompass these "outs ide-the-fenceline" measures. See Id. at 34,885-86 (relying on dictionary definition of "sys tem" as "[a] set of things working together as parts of a mechanism or interconnecting network"). But commenters said Section 111 does not actually grant EPA authority to regulate a "system. " Rather, commenters noted the statute provides that EPA and the states may set standards for emissions based on "the application of the best system of emission reduction." 42 U.S.C. secti on 7411(a)(1) (emphasis added). Commenters stated that this statutory phrase directs the agenc y (in the new-source, 111(b) context) or the state (in the existing-source, 111(d) context) to establi sh standards of performance by applying the "system of emission reduction" to the individual so urces with the source category being regulated. (In keeping with this, the 111(a) defini tion section defines "new source" and "stationary source" immediately after defining "sta ndard of performance." Id. section 7411(a)(2), (3).) Commenters continued, stating that the term " standard of performance" itself can only be understood in context of a source-specific limit, a s it is defined as "a requirement of continuous emission reduction, including any requirement relat ing to the operation or maintenance of a

source to assure continuous emission reduction." Se e CAA section 302(l), 42 U.S.C. section 7602(l) (emphasis added). Commenters stated, indeed , the meaning of the term "application" in

the context of a standard for emissions recurs thro ughout the Act and can only be understood in

the context of an individual source. Commenters sai d, considering again Section 169(3) of the Act, defining the "best available control technolog y" ("BACT") that must be applied to new or modified sources under the prevention of significan t deterioration program, the Act provides that "[i]n no event shall application of [BACT] result i n emissions of any pollutants which will exceed the emissions allowed by any applicable stan dard established pursuant to" Sections 111 or 112. 42 U.S.C. section 7479(3) (emphasis added). Commenters noted, similarly, the definition of lowest achievable emission rate ("LAER") for the nonattainment new source review program270

provides that "in no event shall the application of [LAER] permit a proposed new or modified source to emit any pollutant in excess of the amoun t allowable under applicable new source standards of performance." CAA section 171(3), 42 U .S.C. section 7501(3) (emphasis added). Commenters said, put another way, whatever the "bes t system" is, it must be a system that reduces emissions from a particular source "to whic h a standard of performance under this section would apply if such existing source were a new source." 42 U.S.C. section 7411(d)(1)(A)(ii). Commenters stated that even if E PA did have authority to regulate a "system," its proposed regulation here would fail. "The defin ition of words in isolation . . . is not necessarily controlling in statutory construction. A word in a statute may or may not extend to the outer limits of its definitional possibilities. Interpretation of a word or phrase depends upon reading the whole statutory text, considering the p urpose and context of the statute, and consulting any precedents or authorities that infor m the analysis." Dolan v. U.S. Postal Serv., 546 U.S. 481, 486 (2006). Commenters noted, in the context of emission control, the Clean Air Act displays a consistent and clear pattern of refe rring to "systems" as source-specific measures.32 Commenters said "Best system of emissio n reduction" as used in Section 111 falls within the statute's norm, rather than the exceptio n: "systems" limiting emissions are sourcespecific unless indicated otherwise. Commenters sai d the Section governs the issuance of performance standards, and "standard of performance " is defined at section 7602(l) to mean "a requirement of continuous emission reduction, inclu ding any requirement relating to the operation or maintenance of a source to assure cont inuous emission reduction." Commenters said the only example given in this definition is expres sly source-specific. Commenters mentioned, in

the few instances where the Clean Air Act intends t he term "system" to refer to a geographically dispersed "set of things," it does so expressly, as in Section 319(a) of the Act, directing the Administrator to "promulgate regulations establishi ng an air quality monitoring system throughout the United States." 42 U.S.C. section 76 19(a). Commenters continued that in this regard, EPA's attempt to take the term "system" outof context is akin to the situation that the Supreme Court faced in MCI Telecommunications Corp. v. American Telephone & Telegraph Co., 512 U.S. 218 (1994). Commenters noted, there, the Supreme Court rejected the agency's position that its decision to make tariff filing op tional for all nondominant long-distance carriers was within its statutory authority to "modify any r equirement" under 47 U.S.C. section 203. Id. at 225. Despite the seeming breadth of the term "mo dify," commenters stated the court determined that the word's plain meaning is to make a moderate change, whereas the challenged order made a "radical or fundamental change." Id. a t 228-29. Commenters asserted, instead, by "eliminat[ing a] crucial provision of the statute f or 40% of a major sector of the industry," the agency had engaged in "a fundamental revision of th e statute, changing it from a scheme of rate regulation in long-distance common-carrier communic ations to a scheme of rate regulation only where effective competition does not exist. That ma y be a good idea, but it was not the idea Congress enacted into law in 1934." Id. at 231-32. The order "is effectively the introduction of a whole new regime of regulation," Id. at 234. Commen ters posited that by going beyond sourcelevel, inside-the-fenceline measures, EPA's proposa l would expand 111(d), and specifically the underlying statutory term "best system of emission reduction," into "a whole new regime of regulation": one that regulates not only pollutant emission by sources, but a state's entire resource and energy sectors. And notably, commenters remarke d, courts have in the past rejected a similar271

attempt by EPA to re-define the fundamental level a t which Section 111's "best system of emission reduction" applies by disaggregating that concept from the concept of an individual source as defined by statute. In ASARCO Inc. v. EPA , 578 F.2d 319, 326-27 (D.C. Cir. 1978), the D.C. Circuit invalidated EPA regulations interp reting Section 111(a)(3)'s definition of "stationary source" to "allow a plant operator who alters an existing facility in a way that increases its emissions to avoid application of the NSPSs by decreasing emissions from other facilities within the plant." Id. at 325. EPA argue d that the broad statutory definition gave it discretion to define a stationary source as either a single facility or a combination of facilities." Id. at 326. (This type of aggregation is known as t he "bubble concept," e.g., Id. at 321.) Commenters stated that the court disagreed, holding that the "regulations plainly indicate that EPA has attempted to change the basic unit to which the NSPSs apply . . . ." Id. at 326-27 (emphasis added). (See also Id. at 322: "The basic controversy in the cases before us concerns

the determination of the units to which the NSPSs apply."). Commenters said, in the current Section 111(d) proposal, EPA takes the even more eg regious action of changing the field of regulation from sources to a state's entire power s ector. Commenters asserted, given that EPA lacks the authority to expand "performance standard s" to apply collectively to all regulated facilities at a single industrial site, it is not c redible to suggest that the "best system of emissio n reduction" underlying such standards can encompass measures adopted throughout the state's entire power sector.

Commenters remarked that States establish "standard s of performance for any existing source . . . ."(42 U.S.C. 7411(d)(1)(A) (emphasis added).); "Sta ndard of performance" is defined as "a standard for emissions of air pollutants which refl ects the degree of emission limitation achievable through the application of [BSER]."(42 U .S.C. 7411(a)(1) (emphasis added)); and thus, the terms of section 111 clearly require thatany eligible "system of emission reduction" be capable of "application" to the "existing source." Commenters argued that this language is a clear indication that EPA may only consider at-the-unit s ystems of emission reduction under section 111, and similarly, because a standard of performan ce must be established "for any existing source," each component in the definition of "stand ard of performance" must also, logically, be "for any existing source." Commenters stated that a s relevant here, the "best system of emission reduction which . . . has been adequately demonstra ted" must be a system that has been adequately demonstrated "for any existing source," and a system cannot be considered "adequately demonstrated" for a source if the imple mentation of that system depends on the actions of third parties that are not part of the s ource or under the source's control. Commenters remarked that Section 111(h), which authorizes EPA to establish design, equipment, work practice, and operational standards, clearly evince s congressional intent to limit EPA's BSER determination to at-the-unit systems of emission re duction and offers, for example, where EPA has determined that prescribing or enforcing a nume rical NSPS would not be feasible, EPA is authorized to issue a design, equipment, work pract ice, or operational standard "which reflects the best technological system of continuous emissio n reduction."(Id. 7411(h)(1) (emphasis added)) Commenters added that such a standard must "assure the proper operation and maintenance of any such element of design or equipm ent,"(Id.) and the phrase "technological system" and "element of design or equipment" clearl y evinces Congress' understanding that section 111 systems of emission reduction would be limited to at-the-unit systems. Commenters272

added that the statutory phrase "not feasible to pr escribe or enforce a standard of performance" is defined in section 111(h)(2) as "any situation in w hich [EPA] determines that," inter alia, "a pollutant or pollutants cannot be emitted through a conveyance designed and constructed to emit or capture such pollutant, or that any requirement for, or use of, such a conveyance would be inconsistent with any Federal, State, or local law" (42 U.S.C. 7411(h)(2) (emphasis added)), and Congress' use of the phrase "conveyance designe d and constructed to emit or capture [a] pollutant" strongly implies that Congress intended EPA to limit its BSER consideration to conveyances, devices, and other such at-the-unit fe atures of design or equipment that could be
used to reduce emissions.

Commenters stated that EPA's proposal is also unlaw ful because it would permit States to include in their implementation plans binding legal obligations on entities other than affected

fossil fuel-fired EGUs. Commenters stated that a ce ntral component of the flexibility touted by EPA is the so-called "portfolio approach" that woul d permit States to comply with the emission reduction targets by "impos[ing] requirements on ot her affected entities (e.g., renewable energy and demand-side energy efficiency measures) that wo uld reduce CO2 emissions from the affected EGUs." 79 Fed. Reg. at 34,853. In other wo rds, commenters noted, EPA would authorize States to implement Section 111(d) standards of performance by imposing binding legal obligations on an entity simply because it co uld either replace fossil fuel-fired electricity generation or reduce its own electricity consumptio n. Commenters contended that the proposed portfolio approach is unlawful because the Clean Ai r Act does not authorize EPA and the States to expand standards of performance under Section 11 1(d) beyond the source categories already subject to regulation under Section 111(b), and EPA cannot offer States the ability to regulate any generator or consumer of electricity (i.e. the entire economy) simply because doing so provides for greater emission reductions than limiting regulations to the affected fossil fuel-fired EGUs. Commenters contended that the plain language of Section 111(d) bars EPA's portfolio approach, explaining that in enacting Section 111(d ), Congress imposed a series of limitations on the authority of EPA and the States to regulate exi sting sources. Commenters pointed out that chief among them is that standards of performance m ay only be established for existing sources "to which a standard of performance would apply if such existing source were a new source." 42 U.S.C. Section 7411(d)(1). Further, commenters stat ed, EPA's assertion that its proposal to authorize a portfolio approach must be afforded def erence is incorrect. Commenters stated EPA asserts that "the terms of CAA section 111(d)(1) do not explicitly address whether, in addition to emissions limits on affected EGUs, State plans may include other measures for achieving the emission performance level, nor do they address whe ther entities other than affected EGUs may be subject to requirements that contribute to reduc ing EGU emissions." 79 Fed. Reg. at 34902. Commenters continued, explaining that given the broader context of Section 111, the lack of an explicit reference to a portfolio approach in Section 111(d) suggests that regulations should be limited to affected sources, not that EPA should expand regulations as it sees fit. UARG, 134 S. Ct. at 2442 ("[R]easonable statutory interpretat ion must account for both 'the specific context in which - language is used' and the broader contex t of the statute as a whole." Robinson v. Shell Oil Co., 519 U.S. 337, 341 (1997).). Commenters not ed that the central regulatory focus of Section 111 is on source categories, and Congress p rescribed a detailed process that EPA and the States must go through to impose regulations on a g iven source category: EPA must make a273

significant contribution endangerment determination for the pollutant and source category, EPA must establish standards of performance for new sou rces, and only then may EPA and the States establish standards of performance for existing sou rces. 42 U.S.C. Section 111(b), (d). Commenters stated, when viewed in this broader cont ext, the absence of a specific reference to the regulation of other source categories under Sec tion 111(d) does not suggest a statutory gap. Commenters said, instead, it is fully consistent wi th the implicit understanding that Section 111(d) would only be applied to existing sources in a source category for which EPA had made an endangerment determination and established stand ards of performance for new sources. Thus, commenters concluded, EPA and the States are forecl osed from basing implementation plans on a portfolio approach that imposes legal obligations on any entities other than the fossil fuel-fired EGUs in the source categories covered in EPA's Janu ary 2014 proposal under Section 111(b) because these are the only source categories for wh ich EPA has taken any action at all to regulate

GHG emissions under Section 111. Commenters asserte d, unless and until EPA conducts a significant contribution endangerment determination and establishes standards of performance for new sources under Section 111(b), it cannot aut horize States to use Section 111(d) to impose binding legal obligations to reduce GHG emissions o n nuclear electricity generators, renewable electricity generators, or electricity consumers. F urther, commenters said it is unlikely that EPA could ever regulate GHG emissions from these source s categories under Section 111 because, as the Agency has recognized, they produce either zero - or near-zero emissions of CO2 and, therefore cannot contribute significantly to the en dangerment of public health or the environment. Commenters concluded, thus, under Sect ion 111, neither EPA nor the States have the authority to unilaterally impose emission reduc tion obligations on any existing sources other than affected fossil fuel-fired EGUs, the only sour ce categories currently subject to regulation under Section 111(b).

Response 10: To the extent this comment objects to the portfolio approach, which the EPA is not finalizing, the comment is moot. Otherwise, for the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, o ur interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history

.

Comment 11: Commenters asked if EPA employs a portfolio approa ch, does Section 111(d) permit state plans that place enforceable requireme nts on entities other than EGUs. [79 Fed. Reg. 34830, at 34901-34903] Commenters stated that altho ugh EPA has not issued many rules under Section 111(d), [Id. at 34844] it has never interpr eted "standards of performance for any existing source..." to apply to third party entities beyond the fence and this appears to be a tortuous reading of the statute and one that Congress likelydid not intend.

Commenters stated that the language is clear on its face - the Section 111(d) standard must be "for existing facilities" in a regulated source cat egory (i.e., fossil fuel-fired EGUs), not the entir e "integrated electricity system" and not facilities outside the subject source categories.274

Commenters stated that the language and legislative history of the CAA show that Congress granted EPA the authority only to regulate individu al sources of pollution; not to rely on the phrase "system of emission reduction" to treat the grid as a "system" it can regulate. Commenters provided two explanations. First, commenters noted that Section 111 requires EPA to create a list of "categories of stationary sources" which "cause[ ], or significantly contribute to, air pollution which may reasonably be anticipated to endanger pub lic health or welfare."[42 U.S.C. section 7411(b)(1)(A)] "Stationary source" is defined as a "building, structure, facility, or installation."[40 C.F.R. section 60.2] Commenters s aid, second, and only after listing a source category, EPA is to establish standards of performa nce for new sources within such category."[42 U.S.C. section 7411(b)(1)(B) (emphasi s added)] Commenters asserted, unlike EPA posits, this does not mean that the entire utility system is a "source category" to be regulated. Commenters said that a "source category" would be a coal facility-and natural gas, nuclear facilities, renewable facilities, and energy effici ency measures are not components of a coal facility. Commenters observed that under this theor y, EPA could set performance standards for any source category that requires production cuts b ased on the fact that we should use less of that particular product or should substitute another pro duct, and commenters asked "What would prevent EPA from taking this one step further and d emanding that certain facilities are only able to run a set number of hours per day, or days per y ear?" Commenters believed not even EPA's strictest standards can require this, yet it is a l ogical next step here given EPA's interpretation of its power under section 111(d). [42 U.S.C. Section 7412(d)(3) (stating restrictive MACT standards require facilities to install control tec hnology to match "emission control that is achieved in practice" by best-controlled sources)].

Commenters stated EPA's novel "systems" approach to BSER in the proposed guidelines raises legal questions about EPA's authority to base stand ards for existing units on reductions that can be achieved only by units not regulated under the C AA or through changes in the end-use of a product. Commenters explained that because EGUs can not, on their own, achieve the level of reductions necessary to comply, the proposed guidel ines effectively require states, utilities owning EGUs and, in many cases, consumers and organ izations that are totally unrelated to an existing EGU to undertake new programs and measures to meet the emission rate goals. Commenters said that never before have the BSER pro visions of the CAA been applied to authorize EPA to regulate states and markets in thi s way, and these legal issues, which are discussed in more detail in section IV, below, even tually will be addressed by the inevitable litigation of the proposed 111(d) guidelines.

Commenters stated that standards promulgated under Section 111 must be source-based and reflect measures that the source's owner can integr ate into the design or operation of the source

itself. Commenters said a standard cannot be based on actions taken beyond the source itself that

somehow reduce the source's utilization. Commenters said nor can it be based simply on requiring a source to reduce its operations. Commen ters noted that a "standard of performance" cannot mandate "non-performance." Moreover, comment ers noted that requiring a source to operate at reduced capacity would effectively order a fundamental redesign of the facility, which EPA has no authority to do. Commenters continued, s tating that standards of performance apply to sources within listed categories and cannot regu late categories or subcategories in the275

aggregate or in combination with other entities out side the source category. Commenters asserted that the Act narrowly confines the stationary sourc es that may be regulated under Section 111 to any individual "building, structure, facility, or i nstallation which emits or may emit any air pollutant." Commenters said this definition of "sta tionary source" does not extend to combinations of these facilities or to non-emitting entities such as states or consumers of electricity. Commenters asserted that EPA's Propose d Guidelines would unlawfully impose federally enforceable obligations on a broad, undef ined class of "affected entities" beyond the regulated category of existing EGUs in order to eff ectuate the Agency's policy goal of reducing aggregate CO2 emissions. Commenters added that Sect ion 111 of the CAA also requires that any standard of performance be "achievable" by the sour ces to which it applies based on applying an "adequately demonstrated" system of emission reduct ion. Commenters said a standard cannot be "achievable" for a source if, in order to achieve t he standard, the source must rely on measures taken by some other entity that it does not control , or must simply cease to operate. Commenters stated that the Agency's past rulemakings pursuant to Section 111 reflect the provision's singular focus on individual sources. Commenters noted, in o ver 40 years of EPA's implementation of the CAA, every single standard of performance has been based on a "system of emission reduction" that is incorporated into the design or operation o f individual sources. Commenters added the Agency's radical redefinition of what measures may constitute a "system of emission reduction" is impermissible in light of the past four decades of contrary implementation and section 111's

exclusive focus on what individual sources can achi eve. Commenters remarked the broad program of energy resource management and economy-w ide demand reduction that EPA has proposed to create and administer in the Proposed G uidelines bears no resemblance to the source-focused regulatory program that Congress est ablished in section 111. Commenters stated that the Proposed Guidelines would violate the D.C. Circuit's holding in ASARCO Inc. v. EPA, 578 F.2d 319 (D.C. Cir. 1978). Commenters said ther e the court invalidated EPA's attempt to change the basic unit to which the section 111's ne w source performance standards ("NSPS") apply from a single building, structure, facility, or installation to a combination of such units.

Commenters stated the D.C. Circuit held that EPA "h as no authority to rewrite the statute in this
fashion."

Commenters stated that the CAA's other provisions c onfirm the narrow scope of what and how EPA may regulate under Section 111. Commenters asse rted that nothing in the remainder of the Act authorizes EPA to regulate emissions from stati onary sources by basing standards of performance on measures that are not implemented bythe regulated source itself. Commenters said, likewise, there is no provision of the CAA un der which the Agency may base a standard of performance on reduced operations. Commenters noted that standards of performance cannot be based on enforceable limitations on hours of operat ion or on electricity production. Commenters said the CAA's other programs establishing emission standards for new and existing sources focus solely on achieving emission reductions at in dividual sources. Commenters said these programs regulate emissions from sources based on w hat other individual sources can or already have achieved. Commenters mentioned, for example, e mission standards for hazardous air pollutants must be based on the maximum achievable control technology and reflect the application of "measures, processes, methods, syste ms or techniques" directly to individual sources. (5 These measures include those that: "(A) reduce the volume of, or eliminate emissions276

of, such pollutants through process changes, substi tution of materials or other modifications, (B) enclose systems or processes to eliminate emissions , (C) collect, capture or treat such pollutants when released from a process, stack, storage or fug itive emissions point, (D) are design, equipment, work practice, or operational standards (including requirements for operator training or certification) . . ., or (E) are a combination o f the above." CAA section 112(d)(2). Notably, all of these measures can be implemented at an individu al source.) Id. section 112(d)(2). Commenters noted that standards for visibility-impa iring pollutants must reflect the "best available retrofit technology . . . for controlling emissions from [each eligible] source," considering the costs, existing control technology, and remaining useful life for that source. Id. section 169A(b)(2)(A). Commenters stated, under the CAA's PSD program, new and modified sources must implement the "best available control technology" ("BACT"), which the permitting authority must identify on a case-by-case basis foreach source and which must reflect "application of production processes and available methods, systems, and techniques" at the source. Id. sections 165(a)(4), 169(3). Commenters said, although a source may accept operational limits in its preconstruction permit un der the PSD provisions in order to avoid qualifying as a "major emitting facility" and havin g to implement BACT, under no circumstances may the BACT standard itself be based on reduced utilization of the unit. See id. section 169(3), 40 C.F.R. section 52.21(b)(12). Com menters noted that the BACT program is particularly relevant as evidence of Section 111's scope because Congress explicitly tied the

BACT emission standards to Section 111. Commenters said standards of performance under Section 111 provide a regulatory floor for BACT sta ndards. CAA section 169(3). But, as commenters asserted, if a standard of performance r elies on a "system of emission reduction" that goes beyond the source itself, it cannot meani ngfully inform a BACT standard for sources in that category. Commenters stated, in contrast, in t he few regulatory programs where Congress did authorize emission control measures that go bey ond a specific source for the purpose of meeting aggregate emission reduction goals, it spok e clearly and precisely. Commenters said, for example, when Congress took action in the 1990 CAA Amendments to cap sulfur dioxide emissions and establish a program for emissions all owances and trading, it added an entirely new title to the Act (Title IV) spelling out the requir ements and implementation procedures for that program in great detail. See id. sections 401-416. Commenters stated, unlike Title I of the CAA, in which Section 111 is found, Congress's statementof purpose in Title IV specifically includes "encourag[ing] energy conservation, use of renewabl e and clean alternative technologies, and pollution prevention as a long-range strategy, cons istent with the provisions of this subchapter, for reducing air pollution." Id. section 401(b). Co mmenters said that Congress also gave EPA explicit instructions on how to credit sources for compliance with emission requirements based on avoided emissions from renewable energy and ener gy conservation. Id. section 404(f).

Commenters said Section 111 contains no such instru ctions. Commenters said, likewise, the CAA's provisions regarding implementation of the na tional ambient air quality standards ("NAAQS") authorize states to take broad measures t o attain and maintain compliance with those standards, and even contemplate that some existing stationary sources may need to reduce operations or retire in order for an area to achiev e those standards. See id. Section 110. But in establishing the NAAQS program, commenters stated t hat Congress explicitly authorized EPA to promulgate health-based standards for ambient conce ntrations of certain pollutants at a level277

"requisite to protect the public health" with "an a dequate margin of safety." Id. section 109(b). And commenters noted that Congress directed states to enact any "emission limitations and other control measures, means, or techniques (including e conomic incentives such as fees, marketable permits, and auctions of emissions rights) . . . as may be necessary or appropriate to meet" these standards, without singling out for regulation any specific sources of the regulated pollutants. Id. section 110(a)(2)(A). Commenters stated, in contras t, Section 111 regulates emissions from specific sources, not overall concentrations or amo unts of pollutants. Commenters closed, statin its technology-based standards of performance are d riven by what emission limitation those sources can achieve during their performance at rea sonable cost, using adequately demonstrated measures, rather than by requirements dictated by p ublic health or welfare.

Commenters stated EPA's long and consistent historyof implementing Section 111 confirms the plain language of the statute and has also given sh ape to this regulatory program. Commenters said the Agency's past rulemakings reflect the prog ram's singular focus on individual sources. Commenters noted, in fact, in the 44-year history o f the Act, EPA has limited the scope of Section 111 to the regulated source in every rulemaking it has undertaken. Commenters made multiple points. First, commenters said the Agency' s 1975 Subpart B regulations in which EPA established a procedural framework for states to ad opt standards of performance for existing

sources share the statute's exclusive focus on stan dards that are achievable by individual sources. Commenters stated that Subpart B directs EPA to pub lish a "guideline document containing information pertinent to control of the designated pollutant form [sic] designated facilities [i.e., existing sources subject to regulation under Sectio n 111(d)]." 40 C.F.R. section 60.22(a) (emphasis added). Commenters stated, echoing the st atutory text, emission guidelines under Subpart B must "reflect[] the application of the be st system of emission reduction (considering the cost of such reduction) that has been adequatel y demonstrated for designated facilities." Id. section 60.22(b)(5) (emphasis added). Commenters st ated, acknowledging Section 111's statutory command to consider the "remaining useful life" of regulated existing sources, Subpart B also notes that states may tailor standards of pe rformance for individual designated facilities to account for "[u]nreasonable cost of control resulti ng from plant age, location, or basic process design," "[p]hysical impossibility of installing ne cessary control equipment," or "[o]ther factors specific to the facility (or class of facilities) t hat make application of a less stringent standard o r final compliance time significantly more reasonable ." Id. section 60.24(f). Commenters stated, in adopting this provision, EPA noted that such flexib ility to depart from emission guidelines was necessary because "controls cannot be included in t he design of an existing facility and because physical limitations may make installation of parti cular control systems impossible or unreasonably expensive in some cases." 40 Fed. Reg. at 53,344. Commenters said this discretion reflects Subpart B's focus on identifying what emis sion reductions individual existing sources

can achieve themselves. Commenters continued that S ubpart B also specifies that compliance with any state standard of performance for existing sources will be shown through a series of "[i]ncrements of progress," which are "steps to ach ieve compliance which must be taken by an owner or operator of a designated facility." 40 C.F .R. section 60.21(h). Commenters said these increments of progress include awarding contracts, initiating on-site construction or installation, and completing on-site construction or installation of emission control equipment or process changes. Thus, commenters said Subpart B makes clear that compliance with standards of278

performance is achieved through on-site measures taken by regulated sources. Second, commenters noted, out of the nearly 100 NSPS and em ission guidelines EPA has promulgated and subsequently revised since 1970, every single s tandard of performance has been based on a "system of emission reduction" that is incorporated into the design or operation of individual sources. Commenters said, for example, when the Age ncy promulgated and later revised NSPS for kraft pulp mills, it never considered basing th e standard of performance on requiring increased use of recycled paper to reduce kraft pul p mill operations, even though such a measure arguably would have reduced emissions from kraft pu lp mills. See 43 Fed. Reg. 7568 (Feb. 23, 1978); 79 Fed. Reg. 18,952 (Apr. 4, 2014). Commente rs said, likewise, on each past occasion in which EPA has promulgated or revised NSPS for the c ategories of EGUs at issue in this proposed rulemaking a timeframe spanning from 1971 to 2012 the Agency's analysis has focused entirely on the use of emission control technology or low-sulfur fuels at individual sources.(See, e.g., 36 Fed. Reg. 24,876 (Dec. 23, 1971) (promulga ting Subpart D); 44 Fed. Reg. 33,580 (June 11, 1979) (promulgating Subpart Da); 44 Fed. Reg. 5 2,792 (Sept. 10, 1979) (promulgating Subpart GG); 63 Fed. Reg. 49,442 (Sept. 16, 1998) ( amending Subpart Da); 71 Fed. Reg. 38,482 (July 6, 2006) (promulgating Subpart KKKK); 77 Fed. Reg. 9304 (Feb. 16, 2012) (amending Subpart Da).) Commenters stated, despite pervasive ly regulating EGUs under Section 111 over the past forty years, EPA has never before even con sidered basing a standard of performance for

emissions from these sources on reduced utilization or shifting generation to lower-emitting

sources. Commenters said nor has EPA's focus on ind ividual sources changed in recent years. Commenters noted, in an NSPS rulemaking that took p lace just weeks after the Proposed Guidelines were published, EPA once again reaffirme d that standards of performance "apply to

sources" and must be "based on the BSER achievable at that source." 79 Fed. Reg. 36,880, 36,885 (June 30, 2014). Commenters stated, because of the nature of Section 111(d), EPA has conducted very few rulemakings under that provision . But on the few occasions that EPA has issued emission guidelines for existing sources, co mmenters said it has maintained the same focus on measures that the regulated source can inc orporate into its design or otherwise implement by itself. Commenters stated that adoptin g the same approach is not only appropriate but required, given that the CAA defines "standard of performance" identically for new and existing sources. Commenters said, since 1970, EPA has only published valid emission guidelines under section 111(d) for five source cat egories, and in all five of these rulemakings the emission guidelines were based on the applicati on of pollution control technology or other process controls at individual sources. (41 Fed. Re g. 19,585 (May 12, 1976) (guidelines for phosphate fertilizer plants based on "spray cross-f low packed scrubbers"); 41 Fed. Reg. 48,706 (Nov. 4, 1976) (guidelines for sulfuric acid produc tion units based on "fiber mist eliminators"); 43 Fed. Reg. 7597 (Feb. 23, 1978) (guidelines for kraft pulp mills based on process controls and two-stage black liquor oxidation system); 45 Fed. R eg. 26,294 (Apr. 17, 1980) (guidelines for primary aluminum plants based on "effective collect ion of emissions, followed by efficient fluoride removal by dry scrubbers or by wet scrubbe rs"); 61 Fed. Reg. 9905, 9907 (Mar. 12, 1996) (guidelines for municipal solid waste landfil ls based on "(1) [a] well-designed and welloperated gas collection system and (2) a control de vice capable of reducing [non-methane organic compounds] in the collected gas by 98 weigh t-percent").) Commenters noted that even EPA's short-lived CAMR under section 111(d) did notadopt a broader approach to establishing279

standards of performance. Commenters said, although CAMR did authorize an emissions trading program as a tool for compliance with standards of performance, the "system of emission reduction" that was used to set the emission guidel ines themselves was limited to pollution control technology that could be installed at indiv idual sources. 70 Fed. Reg. at 28,617-20, 28,621 (final guideline was "based on the level of Hg emissions reductions that will be achievable by the combined use of co-benefit (CAIR) and Hg-specific controls"). In sum, commenters stated that the plain text of Section 11 1 of the CAA establishes a program that is focused on reducing the rate of emissions from new and existing stationary sources through the application of systems that can be integrated into the design or operation of the source itself.

Commenters noted that the overall context of the CA A and EPA's unwavering commitment to this approach outside of the present rulemaking con firm this focus. Commenters closed, stating the notion that a source must be able to comply wit h a standard of performance through measures

under its own control is so fundamental to Section 111 that it pervades every aspect of that provision's language and history of implementation.

Commenters stated the broad program of energy resou rce management and economy-wide demand reduction that EPA proposes to create and ad minister in this rule bears no resemblance to the source-focused regulatory program that Congr ess established in Section 111 and that EPA has consistently implemented over the past four dec ades. Commenters noted, in the Proposed Guidelines, the Agency has defied precedent and log ic by rewriting some parts of the Act and completely ignoring others in order to embark on a multiyear voyage of discovery that far exceeds EPA's lawful authority. See UARG v. EPA, 13 4 S. Ct. at 2446. Indeed, commenters remarked, as noted in the introduction to this sect ion of UARG's comments, EPA's proposal would invert the Act's regulatory process under Sec tion 111 for controlling emissions from existing sources. Commenters stated, in the lawful course of regulation, reducing emissions from existing sources under Section 111(d) would proceed such that: (1) EPA specifies a source category and identifies achievable source-based per formance measures that can reduce sources emissions through design or process changes; (2) th e state determines which measures are appropriate for particular sources based on cost, r emaining useful life, and other factors; (3) individual regulated sources implement those measur es based on standards of performance promulgated by states; and (4) emission reductions result from individual sources operating at a reduced emission rate. Commenters said yet EPA's Pr oposed Guidelines would begin at the end, by mandating a specific level of CO2 emissions fromeach state at the outset, and only deviate

farther from the Act from there. Commenters stated EPA's approach is that: (1) the Agency specifies a permissible CO2 emissions rate for each state expressed in lb/MWh; (2) the state

determines what entities whether EGUs or other comm ercial, institutional, corporate, or governmental entities it will subject to enforceabl e obligations; and (3) the state requires a broad and undefined range of emission-reducing or operati onal measures at those entities as necessary

to achieve the desired emissions level. Commenters asserted that this backwards approach plainly exceeds the Agency's authority under the CA A. Commenters stated that nearly every aspect of the Proposed Guidelines is inconsistent w ith the Act and with EPA's binding legislative rules. Commenters stated, in particular, the Agency 's radical redefinition of what measures may constitute a system of emission reduction is plainl y impermissible in light of Section 111's

exclusive focus on what individual sources can achi eve and the past four decades of contrary280

implementation. Likewise, commenters added, EPA's c laim that it may apply BSER to a state as

a whole rather than to individual sources in a sour ce category lacks any legal merit. And, commenters stated, finally, the fact that the Propo sed Guidelines required emission reductions cannot be enforced without dramatically expanding t he universe of entities subject to obligations

under Section 111 underscores the extent to which E PA has strayed from the scope of regulation permitted under the CAA. Commenters stated, togethe r, these defects reflect the Agency's disregard for the statutory and administrative boun ds of its own authority. Commenters closed, stating the Proposed Guidelines would bring about a n enormous and transformative expansion in EPA's regulatory authority without clear congressio nal authorization, and therefore it must be
withdrawn. Id. at 2444.

Commenters stated and concurred that perhaps the mo st fundamental departure from the law in EPA's Proposed Guidelines is the Agency's assertion that the "best system of emission reduction" for the sources in a designated source category und er Section 111 may include measures that would (either directly or indirectly) reduce a sour ce's utilization and that are not within the control of individual sources. Commenters stated, o f the four "building blocks" that make up EPA's proposed statewide BSER for existing EGUs, on ly Building Block 1 (heat rate improvements at coal-fired EGUs) falls within the s cope of measures contemplated in the Act and could therefore provide the foundation for a le gally defensible emission guideline. Commenters asserted that the others mandating redis patch of generation from coal-fired units to NGCC units, displacing generation from affected EGU s with generation from renewable energy sources, and reducing electricity demand through en ergy efficiency measures all impermissibly rely on measures that go beyond the boundaries of i ndividual affected EGUs and that are not within the control of individual EGU owners and ope rators. Commenters said the measures in Building Blocks 2, 3, and 4 are all based on implem entation of statewide energy policies that would confiscate the available generating capacity of existing EGUs. Commenters stated, indeed, the Proposed Guidelines impose undefined regulatoryobligations on a broad swath of unspecified "affected entities" in addition to the fossil fuel-fired EGUs that are the source category for this rule. Commenters said many of the se "affected entities" do not emit CO2 in any appreciable amount. Commenters asserted that this " beyond-the-source" approach would allow EPA to restructure every aspect of the states electric power markets and regulate any electricity user - effectively, to administer the entire nation al economy - for the purposes of reducing demand for and generation by sources in the listed source category (i.e., existing fossil fuel-fired EGUs). Commenters stated that this is impermissible and would transform Section 111 into something untethered to its statutory language and unrecognizable to the Congress that created it. Commenters said the genesis of this novel claim to regulatory power lies in the Agency's attempt to rewrite what constitutes a "system of emission r eduction" for the purposes of Section 111. Commenters stated, as noted above, under that secti on, a standard of performance must "reflect[] the degree of emission limitation achievable throug h the application of the best system of emission reduction" that has been adequately demons trated for sources in the regulated category. CAA Section 111(a)(1) (emphasis added). Commenters asserted, in this rulemaking, however, EPA "claims to [have] discover[ed] in [this] long-e xtant statute an unheralded power to regulate a significant portion of the American economy," a p ractice that courts have looked upon skeptically in the past. UARG v. EPA, 134 S. Ct. at2444. Commenters stated EPA asserts here281

that because the word "system" is not explicitly de fined in the CAA, the Agency may freely apply that word's abstract dictionary definition: " a set of things working together as parts of a mechanism or interconnecting network; a complex who le. ("Legal Memorandum for Proposed Carbon Pollution Emission Guidelines for Existing E lectric Utility Generating Units at 51 (undated) (emphasis added), Docket ID No. EPA-HQ-OA R-2013-0602-0419 ("EPA Legal Memorandum"). Commenters noted EPA applies this def inition in the abstract to conclude that a "system of emission reduction" can be "virtually an y set of things that reduce emissions," including anything from "add-on controls . . . to m easures that replace production or generation at the affected sources." Id. at 51-52 (emphasis ad ded). Commenters noted the Agency even claims that it may require "reduced utilization" of a source as part of a "system of emission reduction," presumably including a prohibition on u tilizing a specific regulated source. Id. at 79; 79 Fed. Reg. at 34,889. Commenters stated that the breadth of EPA's unprecedented assertion of authority is staggering, particularly in light of S ection 111's singular focus on regulating individual sources of emissions. Commenters stated, under EPA's asserted definition of a "system of emission reduction," standards of perfor mance for sources in a regulated source category would become a mere pretext for imposing a wide range of demand-reducing obligations on countless entities across the entire nation. Commenters noted, under EPA's interpretation, EPA would be able to require any "a ffected entity" to implement any "set of things" that the Agency believes would reduce the o peration of sources in the listed source category and hence emissions from that category no matter how far removed the required actions

are from the source itself. Commenters noted that i n the context of EGUs, these measures could include anything from capping annual generation fro m certain EGUs, to ordering the shutdown of some EGUs or other affected entities altogether, to regulating how individuals use electricity or consume other goods and services that require el ectricity. Commenters asserted that applying this "beyond-the-source" approach to other source c ategories as this rulemaking suggests EPA is likely to attempt leads to similarly expansive outc omes. Commenters said, for example, this approach could lead EPA to adopt standards of perfo rmance for kraft pulp mills that are based on efforts to reduce demand for new paper, such as req uiring office buildings to implement paper recycling programs or encouraging credit card compa nies to provide paperless billing to

customers. Commenters said or it could allow EPA to adopt standards of performance for oil and gas production facilities that are based on reducin g demand for gasoline, such as mandating carpooling programs or requiring additional state i nvestments in public transportation infrastructure. Commenters stated that these beyond -the-source measures are inconsistent with the regulatory program Congress provided for in Sec tion 111 of the CAA. Commenters stated, although the dictionary definition of "system," if considered in the abstract and devoid of any statutory or historical context, might theoreticall y embrace statewide, regional, or even national reduction programs, the word as used in Section 111 can refer only to reductions resulting from measures that are incorporated into the source itse lf. EPA's claim that nothing in the language or context of Section 111 limits the Agency's expansiv e redefinition of "system of emission reduction" is patently false, and it suggests that EPA has ignored the statute and its own past rulemakings. See EPA Legal Memorandum at 51-52. Com menters stated, indeed, Section 111's clear focus on measures that are achievable by the regulated source itself pervades every aspect of that provision's language, its statutory context , and EPA's legislative rulemakings282

implementing that provision. Commenters said, as de scribed above in Section III.A, Section 111 is a narrow program designed to improve the emissio ns 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 c ost. Commenters asserted that EPA completely ignored these factors when addressing th e meaning of the word "system" as it is used in Section 111, and in developing its proposed BSER . Commenters noted that Building Blocks 2, 3, and 4 of the proposed BSER are based on beyond-t he-source measures that cannot be achieved by individual sources, and accordingly, they cannotbe used to support a rulemaking under Section 111 of the CAA. Commenters stated, as noted above, Section 111 requires that emission guidelines and standards of performance be "achievable" by "any existing source" in the regulated category not by only some sources, by a s tate, or by the category in the aggregate or in

combination with other "entities." Commenters said an emission guideline that requires regulated

sources to obtain emission reductions offsite in or der to comply with an otherwise unachievable standard would unambiguously contravene the plain t ext of the CAA. Commenters said yet EPA failed to acknowledge how the achievability require ment limits the systems of emission reduction that may provide the basis for Section 11 1 regulation. Commenters noted Building Blocks 2, 3, and 4 of the proposed BSER require mea sures that go beyond individual existing

EGUs. Commenters said the owner of an individual co al-fired utility boiler cannot control the dispatch of NGCC units relative to other fossil fue l-fired EGUs. Commenters said nor can it make changes in the design or production process of its boiler to generate renewable energy or to lead consumers to use less electricity. Therefore, commenters noted that Building Blocks 2, 3, and 4 cannot support an achievable emission guideli ne. Commenters said, indeed, when EPA has attempted in the past to group individual sources t ogether for the purposes of applying standards of performance, these attempts have been soundly re jected by the courts. See ASARCO, 578 F.2d at 327. Commenters noted, in ASARCO, the D.C. Circuit invalidated EPA's attempt to "change the basic unit to which the NSPSs apply fro m a single building, structure, facility, or installation - the unit prescribed in the statute - to a combination of such units," holding that EPA "has no authority to rewrite the statute in this fa shion." Id. (emphasis in original). Commenters noted that the Agency must be "guided by a reasoned application of the terms of the statute it is charged to enforce, not by an abstract dictionary d efinition." Id. at 324 n.17. Commenters said if the Agency is concerned about the need for flexibil ity in order for sources to comply with a standard, the solution is to alter the stringency o f the standard rather than the scope of the source to which that standard applies. Id. at 328-29. More over, commenters asserted that EPA failed to acknowledge the other ways in which the language an d overall statutory context of Section 111 render its beyond-the-source approach unreasonable. Commenters said it is a "fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory sche me." UARG v. EPA, 134 S. Ct. at 2441 (internal quotation marks omitted). Commenters said yet EPA m yopically limits its discussion of the "context in which . . . system of emission reductio n is found" to Section 111(d)(1) of the CAA in isolation, and states that nothing in that subsecti on constrains the Agency from applying a beyond-the-source regulatory approach. EPA Legal Me morandum at 52. Commenters stated, as an initial matter, this conclusion is simply inaccu rate. Commenters said Section 111(d)(1) specifies that its standards of performance must ap ply to "any existing source" and directs states283

to account for the remaining useful life of each re gulated source when applying these standards to the source, demonstrating that Section 111(d) is concerned with achievable measures that

individual sources can take to reduce their rate of emissions. But more importantly, commenters

asserted that it is unreasonable for EPA to limit t he context of this statutory provision to a single paragraph in Section 111, or even to a single secti on of the CAA, particularly when that term is used repeatedly throughout the Act. As discussed ab ove, commenters stated that Section 111 unambiguously limits standards of performance, and thus the systems of emission reduction on which they are based, to individual sources. Commen ters said, likewise, the CAA's other similar programs for regulating emissions from stationary s ources - including programs for hazardous air pollutants, visibility-impairing pollutants, and pr evention of significant deterioration of air quality - are limited to measures incorporated into the design or production processes of

individual sources. Commenters said nowhere in the Proposed Guidelines does EPA acknowledge that its claimed authority to base stan dards on beyond-the-source measures fundamentally conflicts with its entire 44-year his tory of rulemaking under Section 111. Commenters noted that EPA's Subpart B regulations s peak exclusively in terms of requirements that apply to, and are implemented by, individual d esignated facilities. Commenters asserted that emission guidelines must be based on "the applicati on of the best system of emission reduction . . . that has been adequately demonstrated for desig nated facilities," and EPA committed itself to address "different sizes, types, and classes" of ex isting sources by "specify[ing] different emission guidelines or compliance times" when "cost s of control, physical limitations, geographical location, or similar factors" warrant the application of different guidelines. 40 C.F.R. section 60.22(b)(5) (emphasis added). In add ition, commenters stated that every single NSPS or emission guideline that EPA has ever issued - spanning over four decades, multiple comprehensive amendments to the CAA, and nearly 100 subparts within EPA's regulations has

been based on measures that individual sources can implement through design or process

measures at the source itself. Commenters stated th at the Agency's only reference to precedent is to note that some of its emission guidelines for mu nicipal waste combustors, which were promulgated jointly under Sections 111 and 129 of t he CAA, have included provisions concerning emission rate averaging, tradable emissi on credits, and waste management plans. EPA Legal Memorandum at 63. Commenters noted that t hese rules do not support the position EPA has adopted in the Proposed Guidelines. Comment ers said, contrary to the Agency's implication, none of the emission guidelines for mu nicipal waste combustors were based on measures similar to Building Blocks 2, 3, and 4. Co mmenters said, rather, the emission guidelines for existing hospital/medical/infectious waste incinerators were based on "good combustion" and wet scrubbers of varying efficiencylevels, 62 Fed. Reg. 48,348, 48,371 (Sept. 15, 1997), while the emission guideline for existin g commercial and industrial solid waste

incinerators was based on "the use of a wet scrubbi ng system, or other equivalent emission control technology," 65 Fed. Reg. 75,338, 75,344 (D ec. 1, 2000). Critically, commenters asserted that the emission rate averaging and tradable emiss ion credits that EPA included in its emission guidelines for municipal waste combustors were mere ly flexible compliance tools and were not used to determine the stringency of the standard it self, as EPA seeks to do here. Thus, commenters stated that these rulemakings only serve to reinforce - not to contradict - Section

111's narrow focus on measures that individual sour ces can implement (and have implemented in284

the past). Commenters said this focus is unsurprisi ng in joint rulemaking under Sections 111 and 129, given that standards of performance under both provisions are required to reflect the "degree of reduction in emissions of air pollutants " that the Administrator determines is "achievable" for individual sources. Compare CAA se ction 111(a)(1) with CAA section 129(a)(2). Commenters noted that EPA also points to the now-defunct emission guidelines under CAMR as an example of regulations under Section 111 that EPA claims are based on a beyondthe-source emission trading program. EPA Legal Memo randum at 63 n.51. But, commenters stated, like the emission guidelines for municipal waste combustors described above, CAMR's trading program was merely a tool for compliance: t he actual standards were set based on the application of pollution control technology at indi vidual EGUs. Commenters noted that the systems of emission reduction that were used to setCAMR's emission guidelines were (1) the co-benefit mercury reductions of installing scrubbe rs and selective catalytic reduction ("SCR") at

individual units under the Clean Air Interstate Rul e ("CAIR") (for the first phase of CAMR) and (2) the installation of mercury-specific pollution control technologies such as activated carbon injection (for the second phase). 70 Fed. Reg. at 2 8,617-20, 28,621. Thus, commenters asserted that EPA's reasoning in CAMR does not support a bey ond-the-source approach to standardsetting under Section 111. Commenters said it confi rms the source-focused nature of Section 111, and further demonstrates that, after setting a chievable emission standards for individual sources, EPA may allow states to adopt flexible pro grams (such as emissions trading) to comply

with standards that those individual sources are ot herwise capable of achieving without resorting to those flexible programs. Commenters stated Secti on 111 could not be clearer that its standards of performance for new and existing sources must be achievable by individual sources using measures that are implemented into the sources them selves. Commenters stated, when compared to the narrow regulatory program that Congress crea ted in Section 111 and to which EPA has given shape through its consistent administrative i mplementation, the authority that the Agency now claims under its novel redefinition of "system of emission reduction" is plainly unlawful. Commenters closed, stating that EPA's beyond-the-so urce approach "would bring about an enormous and transformative expansion in EPA's regu latory authority without clear congressional authorization "indeed, despite clear congressional language and regulatory history contradicting that claim of authority. See UARG v. EPA, 134 S. Ct. at 2444. Therefore, EPA must withdraw the Proposed Guidelines.

Commenters stated that EPA's proposal for modified and reconstructed sources under S. 111(b) is not sufficient to justify the S. 111(d) proposal . Commenters stated, although the CAA defines the term "new source" to include a modified source, CAA Section 111(a)(2), the proposed guidelines seek to regulate systems, states, and so urces other than individual EGUs. Commenters noted that the proposed guidelines define an "affec ted entity" as any entity with an enforceable obligation under a state plan. Commenters said this could include nearly any type of entity, "e.g., an entity that is regulated by the state, such as a n electric distribution utility, or a private or public third-party entity." By contrast, commenters noted that the Section 111(b) proposal for

modified and reconstructed facilities define the de signated facility as a fossil fuel-fired EGU. Commenters believed this is an unlawful mismatch, e xplaining that EPA cannot regulate or285

require the regulation of a different type of sourc e under Section 111(d) than the type of source that is regulated as a new (or modified or reconstr ucted) source under Section 111(b). Commenters posited that because EPA has not met the se legal prerequisites for proposing and finalizing Section 111(d) emission guidelines for C O2 emissions, the proposal is unlawful and
must be withdrawn.

Commenters stated that the Clean Air Act and its re gulations define "stationary source," as "any building, structure, facility, or installation whic h emits or may emit any air pollutant." (69 40 C.F.R. 60.2), and emissions controls under Section 111(d) must apply directly to "a single building, structure, facility, or installation" the unit prescribed in the statute, rather than to a combination or agglomeration of such units.(70 Asar co Inc. v. EPA, 578 F.2d 319, 322 (D.C. Cir. 1978)) Commenters believed that EPA's implemen ting regulations make it clear that these standards and reductions apply to individual units and offers the example, when EPA's regulations speak of "increments of progress" towar d compliance with a standard of performance, they refer expressly to the steps "whi ch must be taken by an owner or operator of a designated facility" in order to achieve that compl iance. (71 40 C.F.R. 60.21) Commenters stated that the regulations call for each state plan to "a dopt emission standards and compliance schedules applicable to designated facilities," to obtain information about compliance at designated facilities, and to require testing and r ecordkeeping at designated facilities (72 40 C.F.R. 60.26).

Commenters stated that arguing that the definition of source and system is unique between 111(b) and 169(3) applications versus what EPA choo ses to apply under 111(d) in this instance only leads to the City's uncertainty in this rule's outcome, especially in light of the Supreme Court's recent decision reversing in large part the Tailoring Rule.

Commenters stated that through its four building bl ocks contained in the proposed rule, EPA defines the Best System of Emission Reduction ("BSE R") for coal-fired EGUs as a combination of emission reductions from efficiency upgrades at coal-fired units, increased utilization of natural gas units, extending the life of nuclear pl ants, installing more renewable power and significant gains in demand-side energy efficiency, and this so-called "integrated electricity system" approach for defining BSER stretches so far beyond the fence-line of a regulated facility that literally every consumer of electricity in the U.S. could be implicated as a potential compliance option for EPA's rule. Commenters remark ed that certainly heavy manufacturers such as steel and forging would be forced into a St ate's compliance plan. Commenters closed stating that this approach is not only unprecedente d, it is unlawful, and commenters requested that EPA reevaluate its proposed method for establi shing BSER and limit any guidance in setting performance standards to actions that can reasonabl y take place within the fence-line of a regulated facility.

Commenters stated that EPA's "system-based" approac h in the proposed ESPS that looks to CO2 reductions from entities in building blocks 2-4 bey ond the "affected facility" is inconsistent with past precedent, incompatible with the statutory pro visions, and ultimately results in the regulation of a wide range of entities that are not"existing sources" to meet the proposed ESPS.286

Commenters stated that even the broadest interpreta tion of the term "system" does not support this precedential expansion of EPA's Section 111 au thority and requires EPA to side-step its statutory obligation to consider costs at the sourc e, and as a result, EPA has proposed an unreasonable and excessively stringent standard of performance that will result in the closure of coal-fired EGUs. Commenters added that EPA gleans m uch of its authority to reduce generation at coal-fired EGUS from a broad reading of the bestsystem of emission reduction. Commenters said, however, even if one accepts EPA's premise th at EGUs are part of an electrical "system" (a point that Newmont does not concede), it does not f ollow that EPA has the authority to use that "system" to require the listed source category to r educe production or close its doors. Commenters noted, similarly, using the entire "syst em" as a means of spreading costs across a state's electrical grid does not properly account f or the costs that the "affected EGU" must shoulder to comply with the standard of performance . Commenters continued, stating that prior to this rulemaking, EPA has consistently used its authority under Section 111 to require control technologies (historically referred to as "best dem onstrated technology") at the source and has never applied a standard of performance to intentio nally reduce production. Commenters stated, as EPA developed this rulemaking, however, it began moving away from technology-based

standards under Section 111 to focus on BSER: The l evel of control prescribed by Section 111 of the [Clean Air Act] historically has been referred to as "Best Demonstrated Technology" or BDT. Commenters noted, to better reflect that Secti on 111 was amended in 1990 to clarify that 'best systems' may or may not be 'technology,' the EPA is now using the term 'best systems of

emission reduction' or BSER. Commenters contended t hat EPA's new reliance on the phrase "system" does not provide the requisite authority t o treat the entire grid - or even each state grid - as a "system" (including the entire population of e lectrical consumers) over which EPA can spread the costs of BSER. Commenters stated that no ne of the example source categories EPA cites provide a precedent for vastly expanding the scope of Section 111(d). (For example, EPA cites to Clean Air Act Section 129 regulations for hospital/medical/infectious waste incinerators, 62 Fed. Reg. 48,348, 48,359 (Sept. 15, 1997), and f or commercial and industrial solid waste incinerators, 65 Fed. Reg. 75,338, 75,341 (Dec. 1, 2000), which require the incinerators would adopt waste management "plans." See e.g. 65 Fed. Re g. at 48,359 (noting that "recycling and pollution prevention measures could yield greater r eductions in emissions than add-on controls alone.").) Commenters asserted that these plans are limited to the sources in question, and not the entire industrial system within which they operate, and they do not require regulated sources to cut back operations in order to further reduce emis sions. Commenters concluded that EPA's previous rulemakings do not provide precedent for E PA's expansive reading of its Section 111(d) authority.

Commenters stated that EPA notes that it wants to g ive states broad discretion to implement the Section 111(d) program, including through the portf olio approach EPA has developed to reflect the Building Blocks it used to identify BSER. Id. a t 34,917. Commenters stated EPA goes on to admit, however, that the program it has envisioned may prove challenging to implement. Id. Commenters added that EPA suggests that it is a keystate consideration, therefore, to figure if the program as imagined by the Agency could be work able. Commenters said EPA has it backwards. In developing the Proposed Guidelines, c ommenters stated that EPA should have done the work necessary to determine if the programit has devised is practical. Commenters287

noted, under Section 111(d), EPA cannot seek to imp ose stringent emission control requirements on states without knowing if the plans needed to im plement those requirements can be developed. Commenters closed, stating that this is the antithesis of Section 111's requirement that performance standards reflect levels of emissi on control that are achievable and
demonstrated.

Commenters stated that EPA lacks statutory authorit y (and is limited by its own regulations) to issue emission guidelines seeking reductions of CO2 emissions from coal-based EGUs in a manner based on something other than an adequately demonstrated reduction system for such

EGUs.

Commenters stated the proposed guidelines would req uire the regulation of sources that extend far beyond the coal- and gas-fired EGUs addressed i n the Agency's January 2014 Section 111(b) proposal, and that it is clear that EPA intends for the Section 111(d) performance standards to apply to "affected entities," not only to "affected EGUs."(5050 See, e.g., Proposed 40 C.F.R. 60.5780(a) ("Your state plan shall include emission standard(s) that are quantifiable, verifiable, non-duplicative, permanent, and enforceable with re spect to each affected entity."); Id. 60.5780(f) ("An emission standard is enforceab le against an affected entity if: (1) A technically accurate limitation or requirement and the time period for the limitation or requirement is specified; (2) Compliance requiremen ts are clearly defined; (3) The affected entities responsible for compliance and liable for violations can be identified; (4) Each compliance activity or measure is enforceable as a practical matter; and (5) The Administrator and the state maintain the ability to enforce viola tions and secure appropriate corrective actions . . . .") (emphasis added).) Commenters posited that EPA has no authority, under either Section 111(d) or the Subpart B regulations, to adopt a non negotiable, binding "emission limitation" for states as it proposes to do. Commenters noted that Subpart B does not even mention the term "emission limitation." Commenters said both SubpartB and Section 111(d) speak in terms of "standards of performance." Commenters stated, unde r Section 111(a)(1), the standard of performance must reflect the degree of "emission li mitation" that is achievable. Commenters stated, under Section 111(d), states are to establi sh standards of performance applicable to sources. Commenters closed, stating that EPA's appr oach disregards both the statute and its own implementing regulations and would apply to states a binding emission limitation, and states must then apply standards of performance to any "af fected entity" it wishes, without fealty to the restriction that the regulated entity must be ident ical in the Section 111(b) and Section 111(d) regulations.

Commenters stated that EPA has established a BSER m ethodology that sets state-specific emission rates, and EPA is, in effect, claiming tha t while the rate was set based on the particular state's circumstances, it need not evaluate whether those circumstances actually are consistent

with the mix of BSER blocks the EPA has determined are achievable. Commenters contended that the proposed guidelines do not establish that the four BSER Building Blocks can be implemented together as an achievable, adequately d emonstrated, cost-effective "system" for
each state.288

Commenters believed the CPP is illegal because it d epends on "outside the fence line"

mechanisms - not controls at the sources of the emi ssions - to achieve the vast majority of emission reductions. See generally 79 Fed. Reg. 34, 856-34,858. Commenters stated, in its proposal, EPA mandates CO2 reductions for individua l states. Id. at 34,833 (the proposed rule "lays out state-specific CO2 goals that each state is required to meet?") Commenters asserted that EPA repeatedly refers to these as "goals" even though they are actually "binding," not optional as the word "goal" implies, based on four building blocks, only one of which involves reduction of emissions at the source. Id. at 34,892 . "EPA's Proposed Clean Power Plan: Implications for States and the Electric Ind ustry," The Brattle Group, June 2014, page 3, Table 1 (building block 1 accounts for only 12% of the total BSER CO2 reductions in the Clean Power Plan). Commenters argued that the majority of the reductions are achieved from building blocks that are beyond the source of the CO2 emissi ons, and further, EPA also employs these same building blocks as the compliance mechanisms u pon which states are to rely for developing compliance plans.

Commenters stated that EPA has not described the me chanisms states can use to develop and implement a plan that will reliably demonstrate com pliance. Commenters believed that Building blocks 3 and 4 are not enforceable against designat ed facilities, explaining that EPA's proposal takes the form of a "portfolio approach" under whic h states would apply traditional "emission standards" to affected EGUs, and other requirements to other "affected entities" that, taken as a whole, will achieve the required level of emission performance. (79 Fed. Reg. at 34,891) Commenters stated, alternatively, EPA suggests thata "standard of performance" could be adopted by the states that places the entire burden of achieving the level of performance reflected in the state goals on affected sources. Commenters said EPA proposes that states can create other "compliance entities" to assume those responsibilit ies, (79 Fed. Reg. at 34,901) but does not explain how these entities (which emit nothing thatis subject to regulation under the CAA) became subject to the jurisdiction of the environme ntal regulators, or how states could rely on activities by unrelated third parties to reduce emi ssions at independently operated facilities.

Commenters remarked that this framework raises a nu mber of unanswered questions, including who is the entity being regulated, and who has enfo rcement responsibility.

Commenters stated EPA proposes to redefine the term"emission standard" beyond its historic meaning to include "any requirement applicable to a n affected entity other than an affected source that has the effect of reducing utilization of one or more affected sources, thereby avoiding emissions from such sources, including, fo r example, renewable energy and demandside energy efficiency measures requirements." 40 C FR 60.5820 (proposed), 79 Fed. Reg. at 34,956. Commenters stated, coupled with this is EPA 's proposed definition of a whole new category of "affected entities," other than "affect ed sources," that would become subject to CAA Section 111(d) regulation even though these "affect ed entities" (1) do not comprise any part of the CO2 emitting affected sources subject to CAA Se ction 111(d) regulation and (2) may not

even emit CO2 at all. Commenters did not believe th ere is evidence of support in Section 111 of
the CAA for the "overreach" of these new definition s.289

Commenters also stated that CAA Section 111 address es "new" (Section 111(b)) and "existing" (Section 111(d)) "stationary sources." Commenters q uoted the term "stationary source" means "any building, structure, facility, or installation which emits or may emit any air pollutant." CAA Section 111(a). Commenters added that Section 111 authorizes EPA to establish "standards of performance" for "categories of stationary sources. " In other words, commenters said the standards of performance apply to defined "stationary sources," i.e., facilities that emit air pollutants ("affected sources"), not facilities tha t merely consume electricity ("affected entities" under EPA's proposed new definition). Commenters ar gued that EPA's proposed definitions of "emission standard" and "affected entities": go farbeyond any historic interpretation of the reach of CAA Section 111 and are simply not supported by any reasonable interpretation of that

statute.

Commenters stated EPA proposes to regulate sources that are not affected sources, and some of these sources are gas-fired units that operate belo w a 33% capacity factor, RE sources that will be required to operate in lieu of fossil-fueled sou rces, and demand side improvements (i.e., Building Blocks 2, 3 and 4) to accomplish the targe ts set by EPA. Commenters believed it is clear that Congress intended a standard of performa nce to be something that would be established and applied to a source, and substituti ng other generation from less carbon intensive

sources does not establish a standard for an EGU. C ommenters explained that substituting low or zero carbon generation for generation produced by a n EGU does not apply anything to the EGU. Commenters stated that reducing generation from an affected EGU by requiring less energy use from consumers does not apply anything to the EGU. Commenters argued that EPA's proposed CO2 guidelines ignore the clear requirements of Sec tion 111(d) upon which it relies for its authority to propose the CO2 guidelines, and EPA do es not have legal authority to regulate nonaffected sources and should not do so in the final rule either as proposed or in an expanded
fashion.

Commenters stated that each component of the defini tion of "standard of performance" must also be "for any existing source", and consequently, und er the statute, the "best system of emission reduction which ... has been adequately demonstrate d" must have been adequately demonstrated "for any existing source." Commenters stated that they fail to see how the beyondthe-unit systems that EPA identifies in building bl ocks two, three, and four can be considered "adequately demonstrated" for EGUs if the implement ation of those systems depends on the actions of third parties (e.g., RE generators or en d-users) that are neither part of the source nor
under the source's control.

Commenters stated that while regulated utilities ca n and often do encourage demand-side efficiency measures, they generally have no license or capability to restrict any given end-user's demand. Commenters stated, consequently, building b locks 2, 3, and 4 are plainly not "within [the] control" of affected sources.

Commenters stated EPA does not have authority to su bject entities that are not "affected EGUs" to regulation and enforcement under Section 111(d). Commenters contended that EPA is attempting to regulate the retail electricity secto r, over which the states have exclusive jurisdiction.290

Response 11: To the extent this comment objects to the portfolio approach, which the EPA is not finalizing, the comment is moot. Otherwise, for the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, o ur interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history

.

Comment 12: Commenters stated that while the industry supports flexible mechanisms for power plants to meet their compliance obligations u nder the Existing Source proposal, such as counting of renewable energy produced from landfill or biogas towards the renewable energy component of individual compliance plans, they do n ot support any regulatory compliance obligations on other entities that are not affected EGUs (i.e., fossil fuel-fired EGUs). Commenters’ concerns with this approach were enumer ated. First, commenters found EPA's description of the role of "other entities" to be v ague and open-ended. For the most part, EPA emphasizes situations that would leverage actions a lready being taken in states by an array of "other entities." Commenters said these include pot entially requiring utility distribution companies to comply with a state's Renewable Portfo lio Standards (RPS) or Energy Efficiency Resource Standards (EERS); requiring an established private non-profit entity to administer enduse energy efficiency (EE) and/or renewable energy (RE) deployment programs, or requiring a state agency or authority to implement an EE or RE program to reduce emissions. [State Plan Considerations TSD, p. 15-16] Commenters stated, ho wever, there is nothing in the draft rule that limits EPA or the states from being more expan sive in their approach toward "other entities." Commenters stated, in fact, EPA itself appears to b e soliciting additional information on what types of entities might be relevant. Commenters sai d, for example, EPA seeks comment "whether the Agency should provide guidance on enfo rceability considerations related to requirements in state plans for entities other than affected EGUs (and, if so, which types of entities). Commenters noted this statement is troub ling for many reasons, not least of which are (1) EPA's failure to reveal their own view of "othe r entities," and (2) the EPA's open-ended request for stakeholders to broaden the types of ot her entities. Second, commenters did not agree that EPA has the authority to designate ill-defined "other entities" to reduce emissions that are properly the responsibility of the affected EGUs.

Commenters stated and concurred that their legal co ncerns are magnified by EPA's vague and open-ended description of "entities other than affe cted EGUs." Commenters stated, in the preamble and supporting materials, EPA focuses disc ussion of other entities on those that are already implementing EE and RE policies at the stat e level. (For example, pp. 15-16 of the State Plan Considerations TSD includes discussion of pote ntially requiring utility distribution companies to comply with a state RPS or EERS; requi ring an established private non-profit entity to administer end-use EE and/or RE deploymen t programs on behalf of a state, or requiring a state agency or authority to implement an EE or RE program to reduce emissions.) Commenters stated that there is nothing in EPA's la nguage, however, that limits EPA or the states from being more expansive in their approach towards "other entities." In fact, commenters remarked, EPA itself appears to be soliciting addit ional information on what types of entities might be targeted for regulation. Commenters said, for example, EPA seeks comment "whether the Agency should provide guidance on enforceabilit y considerations related to requirements in291

state plans for entities other than affected EGUs ( and, if so, which types of entities).(79 FR 34911) (Emphasis added.) Commenters asserted that t his statement is troubling for many reasons, not least of which are (1) EPA's failure t o reveal their own view of "other entities," and (2) the Agency's open-ended request for stakeholder s to expand the scope of other entities that could be affected by the rule.

Response 12: As explained in Section VIII.C. of the preamble, t he EPA is not finalizing the portfolio approach that was included in the propose d rulemaking, 79 FR 34830, 34902 (June 18, 2014). In the proposal, the EPA noted that the port folio approach raised legal questions. 79 FR 34830, 34902-03. After reviewing comments, the EPA agrees with commenters that legal questions remain.

Comment 13: Commenters stated that EPA should not expand green house gas regulations to other source categories. Commenters said not only d oes the CPP extend the EPA's reach unnecessarily and without authority in one sector, they believed there is no legal obligation for EPA to address other source categories. Commenters stated that other source-specific regulations would and should require a much broader, more compl ex consideration by the EPA and potential stakeholders. Commenters noted that rolling other s ource categories into the existing power plant rule does not to consider the complexity these mult iple source categories present. Commenters closed suggesting that should the EPA insist on mov ing forward with this provision, and suggested a state compliance plan should allow for exemption under any potential future Section 111 regulations.

Commenters stated that EPA is seeking not only to r egulate existing electric generating units, but is greatly expanding the scope to extend to other n on-regulated and non-emitting entities. Commenters observed that EPA's building block l see ks to regulate existing electric generating units (EGUs) in the traditional manner; however, in blocks 2, 3, and 4 EPA is seeking to determine how EGUs are to be dispatched, what resou rces are to be installed and how consumers use electricity, and this approach is so counter to the Congressional intent of the Section 111
standards and structure that EPA must withdraw this proposal.

Commenters stated (verbatim) EPA argues that its un precedented interpretation of Section 111(d) is supported by the addition and subsequent removal of the word "technological" from Section 111's definition of "standard of performanc e." (See Legal Memorandum at 56) Commenters stated, as a principal matter, it is ill ogical for EPA to draw a conclusion about the standard that applies to existing sources by referr ing to a change in the standard for new sources. Commenters said, however, even assuming that this l egislative history could be read to support the idea that BSER can include non-technological sy stems of emission reduction, it clearly does not support EPA's conclusion that the CAA authorize s beyond-the-unit measures. Commenters stated, rather, the removal of the term "technologi cal" during the 1990 Amendments from the definition that applied to new sources (66 As EPA c orrectly points out, the definition of standard of performance applicable to existing sources has n ever included the term "technological." See Legal Memorandum at 55-56. Consequently, Congress' decision to remove the term from the definition that previously applied to new sources h as no bearing on the interpretation of the term as it applies to existing sources) was simply meantto clarify that other available at-the-unit292

methods of reducing emissions' other than "technolo gical" end-of-stack improvements (such as fuel switching to lower-sulfur coals) could be comp onents of BSER. Commenters stated the legislative history of Section 111 demonstrates con clusively that this narrower interpretation represents the true intent of Congress. Commenters noted that Congress first used the phrase "best system of emission reduction" in the 1970 Ame ndments to the CAA. (Clean Air Amendments of 1970, Pub. L. No. 91-604, S. 111, 84 Stat. 1676, 1683 (codified as amended at 42 U.S.C. 1857, et seq. (currently codified at 42 U.S.C. 7401, et seq.))) Commenters noted, according to the official "Summary of the Provision s of Conference Agreement on the 1970 CAA Amendments," Section 111 authorized EPA to requ ire sources to achieve performance

standards "based on the latest available control te chnology, processes, operating methods, and other alternatives."(CAA Amendments of 1970, Confer ence Report, 116 Cong. Rec. 42,381, 42,384 (1970) (emphasis added)) Commenters said the 1970 Senate Committee on Public Works' description of the Senate provisions that would lat er be combined into Section 111 (These provisions were included in Sections 113 and 114 of the Senate bill) also indicates that the absence of the word "technological" from the origin al definition of "standard of performance"

was meant to allow consideration of additional at-t he-unit process and operational changes that would not have been considered "technological." Com menters said, according to the Committee, "'[s]tandards of performance' . . . refers to the d egree of emission control which can be achieved through process changes, operation changes, direct emission control, or other methods." (S. Rep. No. 91-1196 at 17 (emphasis added). See also id. (" The Secretary would be directed to review and promulgate new or modified standards whenever n ew technology processes or operating methods become available.") (emphasis added); H.R. 17255, 91st Cong. Section 113(b)(2) (as amended and passed by Senate Sept. 22, 1970) (requi ring the establishment of performance standards reflecting "the greatest degree of emissi on control which the Secretary determines to be achievable through application of the latest ava ilable control technology, processes, operating methods, or other alternatives") (emphasis added)) Commenters said the same Committee Report emphasizes that both technological and non-technolo gical at-the-unit systems of emission reduction were to be applied at existing sources: " Emission standards developed under this section would be applied to existing stationary sou rces. Commenters noted, however, the Committee recognizes that certain old facilities ma y use equipment and processes which are not suited to the application of control technology." ( S. Rep. No. 91-1196, at 19 (emphasis added)) Commenters stated, because the definition of "stand ard of performance" in the 1970 Amendments and current law are nearly identical, an d because this aspect of the definition for existing sources (unlike the definition for new sou rces) has not changed since 1970, it is clear that the absence of the word "technological" from t he definition of "standard of performance" in the current statute does not imply that beyond-the- unit measures can be designated as BSER. Rather, commenters said the decision not to use the word "technological" in the definition of standard of performance only serves to clarify thatnon-"technological" systems of emission reduction could also be considered BSER so long as they could be "applied" at and by the regulated source. Commenters stated that the additi on and subsequent removal of the word "technological" to the requirements for new sources does not alter this analysis. Commenters said Congress added this word to Section 111 out of concern that power plants would lack incentives to install "technological" methods of po llution control (such as scrubbers) because293

they could meet the then-applicable emission limits by substituting from high-sulfur coal to lowsulfur coal (See, e.g., H.R. Rep. No. 95-294, at 18 8 (May 12, 1977) ("In order to effectuate the purposes stated above in the promulgation (and revi sion) of new source standards of performance, the committee has specified that stand ards under section 111(b) must require use of the best technological system which has been adequa tely demonstrated. This means that a major new stationary source may no longer meet NSPS requi rements merely by use of untreated oil or coal. Instead, employment of a technological systemwould become a mandatory aspect of the NSPS requirements for such a source.").) not out of concern that sources EPA would base future NSPS on beyond-the-unit measures (a concept that cl early never occurred to the authors of section 111). Commenters stated, as the Congression al Record clearly demonstrates, Congress added the word "technological" as a signal that fut ure NSPS could not be based solely on use of non-technological, at-the-unit compliance options s uch as fuel switching from high-sulfur fuel to low-sulfur fuel. Importantly, commenters noted thatthe addition and subsequent removal of this term to the requirement for new sources did not cha nge the fundamental intent of the statute, which was and is to limit required control techniqu es under Section 111 to those that can be implemented at the unit and under the control of th e owner or operator of the regulated source. Commenters noted that the legislative history of th e 1990 Amendments further confirms this interpretation. Commenters stated, for example, Sec tion 501 of the 1990 Amendments clearly uses the term "technological" as a contrast to othe r methods of at-the-unit emission reduction approaches, such as "work practices" (See 1990 Amen dments, Pub. L. No. 101-549, S. 507, 104 Stat. 2399, 2645-46 (codified as amended at 42 U.S. C. 7401, et seq.) (requiring EPA to approve state "small business stationary source technical a nd environmental compliance assistance" programs if the state includes, among other things, "[p]rocedures for consideration of requests from a small business stationary source for modific ation of . . . (A) any work practice or technological method of compliance . . . .") (empha sis added)) not as a contrast to "beyond-theunit" measures. In addition, commenters noted that language in several pre-1990 Committee Reports demonstrates that Congress used the term "t echnological" as a way of differentiating scrubbers, precipitators, and other end-of-stack tr eatments (i.e., "technological" systems) from other types of at-the-unit processes and systems th at a regulated source could employ to reduce emissions. (See, e.g., S. Rep. No. 100-231, at 232 (Nov. 20, 1987) ("The technologies, practices or strategies which are to be considered in setting emission standards under [section 112] go beyond the traditional end-of-the-stack treatment o r abatement system. The Administrator is to give priority to technologies or strategies which r educe the amount of pollution generated through process changes or the substitution of less hazardous substances. A second class of control requirements focusing on the enclosure of e missions points or other secondary containment systems is also to be considered before systems to collect, capture or treat the emissions are reviewed. Considering municipal waste combustion as a potential category of major sources to illustrate these concepts (even th ough standards for [Municipal Waste Combustors] are set independently by another provis ion of this legislation): source separation and good combustion are examples of process modific ations; covered facilities for ash handling and negative air flow are examples of enclosure and secondary containment; and scrubbers, precipitators and selective catalytic reduction are examples of end-of-the-stack treatment systems."); S. Rep. No. 101-228, at 168 (Dec. 20, 1 989) (substantially the same language))294

Commenters noted, finally, EPA itself also clearly contemplated that emission guidelines would be based on at-the-unit systems of emission reducti on. EPA's implementing regulations, which were issued five years after the 1970 Amendments be came law, require EPA's emission guideline to reflect "the application of the best s ystem of emission reduction . . . that has been adequately demonstrated for designated facilities." In addition, commenters noted that the regulations require EPA to provide information on t he costs and effects of "applying each system [of emission reduction] to designated facilities" a s well as the time needed "for the design, installation, and startup of identified control sys tems."Commenters said this language from EPA's own regulations conforms with EPA's and Congr ess' past, consistent position that BSER can include only those technologies and practices t hat can be implemented at the regulated

source and under the control of the source's owner or operator. Commenters said examples of

such at-the-unit methods in the EGU context include operating or work practices that could improve heat rate or lower the parasitic consumptio n of electricity used for pollution control equipment and other ancillary facilities. Commenter s stated that these kinds of methods involve the application of some control measure or practice at the EGU, and would be within the full control of the EGU operator. Commenters noted that redispatch, renewable energy additions, nuclear generation, and end-use energy efficiency, by contrast, are neither at-the-unit improvements nor are they within the typical source 's power to control. Commenters said, consequently, these "systems of emission reduction" are outside the scope of the term BSER, and may not be considered in establishing emission guid elines under section 111(d).

Commenters stated that they have concerns about EPA expanding the traditional boundaries for BSER beyond not only the electric generating unit b ut also going to generating sources and segments of the economy, not specifically regulated by the Clean Air Act.

Commenters posited that EPA's proposal exceeds lega l authority under the Clean Air Act. Commenters stated, by this proposal, EPA attempts t o require actions by entities which are not directly subject to the regulation on the Clean Air Act.

Commenters posited that the final rule should indic ate, explicitly, that EPA and states do not have the legal authority to require emissions reduc tions outside the EGU sector.

Commenters stated that even under a permissive read ing of Section 111's BSER requirement, EPA is limited to regulating within a distinct sour ce category but EPA's Proposed Rule goes beyond the limits of the specified source category to define BSER based on its highly inexpert assumptions as to how States could or should regula te renewable energy sources, nuclear power plants, and end-user energy efficiency improvements . Commenters argued it is difficult to discern how a regulation intended to limit CO2 emis sions from fossil-fuel-fired power plants arrives at such far-reaching regulation of EGUs, no n-emitting power generators, energy markets, electric transmission and gas infrastructure, and e ven energy consumers, that are not within the identified source category, contending that the eff ect of EPA's definition is to lump nearly every conceivable producer and user of electric energy to gether as a single "source category" for BSER purposes, and that the definition is ultimately unw orkable, since it renders the term source category a nullity and results in EPA regulating th e generation, dispatch, and consumption of295

energy, rather than just "systems of emission reduc tion" designed to reduce specific sources
emissions.

Response 13: EPA’s source category for this rule is limited to t he affected EGUs. For the reasons discussed in section V.A. and V.B. of the p reamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the
statutory text, statutory context, statutory purpos e, and legislative history.

Comment 14: Commenters stated that in the Proposed Rule, EPA a sserts that both at-the- unit and beyond-the-unit measures that reduce CO2 emissi ons from EGUs can be considered "systems of emission reduction." (Proposed Rule, 79 Fed. Reg. at 34,886) Commenters stated EPA is proposing that the combination of four "buil ding blocks" - three of which involve actions that are beyond the control of the affected EGU- co nstitute BSER. (Proposed Rule, 79 Fed. Reg. at 34,836) Commenters stated that this interpretati on appears to be precluded by the terms of Section 111 and is also contrary to EPA's past inte rpretations of the term - including the agency's interpretation of BSER in the New and Modified UnitProposals that EPA issued in tandem with this Proposed Rule. (Standards of Performance for G reenhouse Gas Emissions From New Stationary Sources: Electric Utility Generating Uni ts, Proposed Rule, 79 Fed. Reg. 1430 Gan. 8, 2014) [hereinafter "New Unit Proposal"]; Carbon Pol lution Standards for Modified and Reconstructed Stationary Sources: Electric Utility Generating Units, Proposed Rule, 79 Fed. Reg. 34,960 Gune 18, 2014) [hereinafter "Modified U nit Proposal"]) Commenters concluded that EPA should revise its approach to BSER by setting e mission guidelines based only on actions that can be applied at and by the regulated source.

Commenters stated that Building Blocks 2 and 3 lie far afield of any lawful authority EPA may exercise under Section 111(d). Commenters stated th at as the Supreme Court recently held in striking down EPA's PSD/Title V Tailoring Rule, whi ch, like the present proposed regulation, would radically expand EPA's authority compared to what Congress intended, "EPA's interpretation is "unreasonable because it would br ing about an enormous and transformative expansion in EPA's regulatory authority without cle ar congressional authorization. Commenters said when an agency claims to discover in a long-ex tant statute an unheralded power to regulate 'a significant portion of the American economy,' th ey typically greet its announcement with a measure of skepticism. Commenters expected Congress to speak clearly if it wishes to assign to an agency decisions of vast 'economic and political significance.' Commenters remarked that the holdings of UARG and American Trucking Associations apply with force here. Commenters stated that in the proposed rule, EPA transforms a provision allowing the States considerable flexibility in establishing standards of performanc e for specific existing sources into a vast program giving EPA unprecedented and almost limitle ss power, and it would effectively allow EPA to take control of the nation's electric grid f or the sole purpose of achieving reductions in the emissions of a single pollutant, without regard to reliability or other generation or dispatch considerations. To that end, commenters closed stat ing, EPA specifies not only the level of emission reductions that it expects at each designa ted facility through heat-rate improvements, but also how electricity generation dispatch decisi ons are to be made which is unlawful.296

Commenters stated that Building Block 4, which requ ires increases in end-user energy efficiency and other efforts to reduce demand for electricity, sits egregiously outside of EPA's lawful authority and looks to derive emission reduction fr om something over which utilities have no enforceable control: efficiencies that might be gai ned by consumer efforts, and when the Agency

calls for demand reduction as a means of controllin g emissions from the production of a good, it is calling for the regulation of millions of small actions, by entities that are not even sources under the Clean Air Act, before they hit the grid. Commenters contended this is the type of gross expansion of regulatory authority rejected by the U ARG Court.

Response 14: The EPA is not finalizing a building block 4. Furt her, as we explain in sections V.A. and V.B. of the preamble, our emission guideli nes simply reflect an achievable emissions limit through the application of the BSER and do no t in themselves require states or sources to implement the BSER. That is, EPA is responsible for determining the level of emission limitation from the source category, while states h ave the responsibility of assigning emission requirements to their sources that will ensure thei r achievement of that level of emission limitation. States may fulfil their responsibility by establishing emission standards or creating plans consistent with the guidelines. In doing so, states will be able to choose from a wide range of emission reduction measures, including measures that are not part of the BSER. For the reasons discussed in section V.A. and V.B. of the p reamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the
statutory text, statutory context, statutory purpos e, and legislative history.

Comment 15: Commenters stated that Section 111's language, whic h specifically focuses on individual sources, does not allow EPA to regulate any of these entities directly. Commenters added that if a state does not act in a timely mann er to provide an approvable plan that includes enforceable measures, then EPA is mandated by the A ct to create a federal plan. However, commenters said EPA would not have the authority to implement any measure in Building Block 2, 3, or 4 as it cannot regulate, for instance, a s tate's energy consumers.

Commenters stated that EPA coverage of Building Blo cks 3 and 4 is inappropriate, citing Section 111(d)(2) of the statute, which requires EP A to establish a federal Section 111(d) plan for any state that fails to submit a "satisfactory" plan of its own. [42 U.S.C. section 7411(b)(1)(A)]. Commenters explained that EPA has n o authority or ability to require increased renewable or nuclear generation or to implement dem and-side energy efficiency programs, and that these are traditional areas of state legislati on and regulation and areas over which EPA and the regulated Section 111 source categories have no control. As a result, commenters concluded, if a federal plan were to apply, affected EGUs subj ect to a BSER standard based on such federally unenforceable programs or activities woul d bear the full stringency of the resulting limits, and therefore would be forced to limit gene ration in order to achieve compliance, and this in turn threatens the reliability of the electricit y grid, a result incompatible with BSER's express consideration of "energy requirements" and the foun dational prerequisite that standards be "adequately demonstrated." [42 U.S.C. section 7411( a)(1)] Commenters contended that EPA may not stretch its authority to extend to regulati on of resources and activities over which it has no jurisdiction, [See Elec. Power Supply Ass'n v. F ERC, 753 F.3d 216, 221 (D.C. Cir. 2014)297

(concluding that agency could not read its authorit y to "lure' non-jurisdictional resources" into its regulatory sweep)] and because any "system" of emis sion reduction that reaches beyond EPA's regulated source categories cannot be implemented b y EPA, neither can it satisfy BSER when establishing emission guidelines for state complian ce.

Response 15: The EPA is not finalizing building block 4. Furthe r, as we explain in sections V.A. and V.B. of the preamble, our emission guidelines s imply reflect an achievable emissions limit through the application of the BSER and do not in t hemselves require states or sources to implement the BSER. That is, EPA is responsible for determining the level of emission limitation from the source category, while states h ave the responsibility of assigning emission requirements to their sources that will ensure thei r achievement of that level of emission limitation. States may fulfil their responsibility by establishing emission standards or creating plans consistent with the guidelines. In doing so, states will be able to choose from a wide range of emission reduction measures, including measures that are not part of the BSER. For the reasons discussed in section V.A. and V.B. of the p reamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the
statutory text, statutory context, statutory purpos e, and legislative history.

Comment 16: Commenters stated that 88 Section 103(g) of the CA A confers on EPA limited authority to address energy conservation with respe ct to research and other non-regulatory activities. 42 U.S.C. section 7403(g)(1). Commenter s said EPA has relied upon this authority in carrying out its Energy Star Program, EPA's flagshi p effort to reduce consumer electricity demand, and has generally acted through voluntary p ublic/private partnerships to promote energy efficiency. Commenters noted, in 2005, Congress exp ressly authorized the Energy Star Program, specifically conferring on EPA specific energy cons ervation authority. See Energy Policy Act of 2005, Pub. L. No. 109-58, section 131, 119 Stat. 59 4, 620-21 (2005). Commenters stated, where Congress has delegated such specific and limited au thority, EPA cannot presume that it has any broader authority to direct energy conservation. Cf . Am. Petroleum Inst. v. EPA, 52 F.3d 1113, 1119 (D.C. Cir. 1995) ("EPA cannot rely on its gene ral authority to make rules necessary to carry out its functions when a specific statutory d irective defines the relevant functions of EPA in a particular area."); Am. Petroleum Inst. v. EPA , 706 F.3d 474, 479 (D.C. Cir. 2013) ("[A] broad programmatic objective cannot trump specific instructions."). Commenters asserted, as such, EPA has no authority to require energy effici ency measures through 111(d) or other regulatory provisions.

Response 16: EPA is not mandating particular forms of energy co nservation. As we explain in sections V.A. and V.B. of the preamble, our emissio n guidelines simply reflect an achievable emissions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. That is, EPA is resp onsible for determining the level of emission limitation from the source category, while states have the responsibility of assigning emission requirements to their sources that will en sure their achievement of that level of emission limitation. States may fulfil their respon sibility by establishing emission standards or creating plans consistent with the guidelines. In d oing so, states will be able to choose from a wide range of emission reduction measures.298

Comment 17: Commenters stated that some of their specific issu es include that the proposed rule appears designed to achieve a 30 percent natio nal reduction in tons of CO2, first in 2005 for the power sector as a whole, and this is not what S ection 111(d) requires. Commenters believed Section 111(d) only authorizes standards of perform ance on individual, affected sources and adds that the proposed rule mandates state goals th at go far beyond setting standards on the affected sources, employing a best system of emissi on reduction which extends its reach beyond

the fence-line of its affected sources.

Response 17: The commenters misinterpret EPA’s statements aboutexpected overall reductions from the program. These are projections about how m uch emissions reduction will occur under the rule, not a binding or mandatory target in and of itself.

Comment 18: Commenters stated that EPA bases the proposed state -wide emission reductions on beyond-the-fence measures that EPA itself has no authority to mandate, including reductions in consumer use of electricity, changes in the stat es' generation resource mix and the dispatch of generation resources. Commenters added that through its four building blocks EPA defines the BSER for fossil-fuel-fired power plants as a combin ation of emission reductions from efficiency upgrades at coal-fired power plants, increased util ization of natural gas plants, extending the life of nuclear plants and completing construction of ne w nuclear units, installing more renewable power and significantly increasing demand side ener gy efficiency, and this so-called "integrated electricity system" approach for defining BSER stre tches so far beyond the fence-line of a regulated facility that literally every consumer of electricity in the United States could become part of state compliance plans mandated by EPA's ru le. Commenters remarked that it is one thing to give States the flexibility to use alternative m ethods, such as increased nuclear or renewable energy, to help demonstrate compliance with an emis sion reduction obligation; it is quite another for EPA to base reduction requirements on alternati ve methods that the Agency itself - if it were authorized to establish the final performance stand ards - could not mandate (or enforce) under

the Act. Commenters believed EPA must reevaluate it s proposed method for establishing BSER and limit any guidance in setting performance stand ards to actions that can reasonably take place within the power plant's fence-line, explaining tha t the unprecedented nature and expansive scope of the Proposal demonstrate how far from EPA' s delegated authority the Agency has attempted to travel. Commenters asserted that Secti on 111(d) does not authorize EPA to regulate entire sectors of the economy. Commenters cited the U.S. Supreme Court which recently noted: "[w]hen an agency claims to discover in a long-exta nt statute an unheralded power to regulate 'a significant portion of the American economy,' ... w e typically greet its announcement with a measure of skepticism. We expect Congress to speak clearly if it wishes to assign to an agency decisions of vast 'economic and political significa nce.'"

Response 18: The EPA is not finalizing a building block 4. Furt her, as we explain in sections V.A. and V.B. of the preamble, our emission guideli nes simply reflect an achievable emissions limit through the application of the BSER and do no t in themselves require states or sources to implement the BSER. That is, EPA is responsible for determining the level of emission limitation from the source category, while states h ave the responsibility of assigning emission requirements to their sources that will ensure thei r achievement of that level of emission299

limitation. States may fulfil their responsibility by establishing emission standards or creating plans consistent with the guidelines. In doing so, states will be able to choose from a wide range of emission reduction measures, including measures that are not part of the BSER. For the reasons discussed in section V.A. and V.B. of the p reamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the
statutory text, statutory context, statutory purpos e, and legislative history.

Comment 19: Commenters stated Section 111(d) does not require a 30% or "meaningful" national reduction in power sector carbon dioxide e missions; nor does Section 111(d) call for a regulatory program based on "opportunities" for lar ge emissions reductions. Commenters stated that Section 111(d) is very specific on what it aut horizes and requires. Commenters said Section 111(d) calls for state plans that establish standar ds of performance for certain existing sources. Commenters noted, in this rulemaking, the only pote ntially eligible existing source categories are electric utility steam generating units and station ary combustion turbines - because these are the only two source categories for which EPA has propos ed (but has not yet finalized) Section 111(b) federal standards of performance for new sou rces. Thus, commenters asserted that EPA is only authorized to apply 111(d) to electric utilitysteam generating units and stationary combustion turbines. Commenters said, yet, the prop osal's preamble and other docket materials make it clear that the regulation is designed to ac hieve a "meaningful" emission reduction, or about a 30% emission reduction in tons, by 2030, co mpared with 2005 (or a "greater" emission reduction than alternatives as discussed below), an d that the best ways to reduce emissions are to "look at the power system as a whole" - rather than reducing emissions by means of standards of performance for the two potentially eligible existi ng source categories as required by Section 111(d).

Commenters stated not only does U.S. EPA expect sta tes to impose emission limits on a wide range of affected entities to meet the state's perf ormance goal under the proposed emission guideline, but U.S. EPA arrived at the BSER, compri sed of the four building blocks, that also incorporates obligations imposed on those affected entities. Commenters stated that Building Blocks 2 (dispatch changes) and 3 (increased RE), f or example, require regulating entities across the entire power system, and not just the EGUs alon e. Commenters remarked that in no other Section 111(d) rule have sources other than those t hat, if new, would be regulated under a Section 111(b) standard of performance been subjectto an emission limit. Commenters posited that by essentially requiring states to impose emis sion limits on affected entities, as well as using obligations on affected entities to arrive at the B SER, the proposed emission guideline exceeds U.S. EPA's statutory authority by regulating source s to which the NSPS would not apply if those

sources were new.

Commenters stated that while it has long been commo n industry practice for system operators to choose from among multiple EGUs when deciding which EGU to "dispatch" to generate the next increment of electricity needed - the well-establis hed practices of the industry that support EPA's evaluation of "re-dispatch" of generation from coal -fired steam EGUs to NGCC units as a potential component of the basis for the BSER to re duce CO2 emissions from existing EGUs - is what got us all here, in this predicament in the fi rst place. Commenters stated that wind and solar300

generation cannot be categorized under this ruling, yet the Clean Power Plan leaves open the consideration of the expansion of Zero-emission EGU s beyond the phase-in period and a reduction in the need for expensive and environment ally burdensome nuclear EGUs, and even Natural Gas Combined Cycle (NGCC).

Commenters stated that Section 111 of the CAA defin es "existing source" as "any stationary

source other than a new source." 42 U.S.C. Section 7411(a)(6), and a "new source" is defined as "any stationary source, the construction or modific ation of which commenced after the publication of regulations (or, if earlier, propose d regulations) prescribing a standard of performance under this section which will be applic able to such source." 42 U.S.C. Section 7411 (a)(2). Moreover, commenters added, the CAA defines "stationary source" as "any building, structure, facility or installation which emits or may emit any air pollutant." 42 U.S.C. Section 7411(a)(3), and therefore, by definition under Sect ion 111(d), nuclear energy, renewable energy and energy efficiency (the measures grouped in Buil ding Blocks 3 and 4) cannot be existing stationary sources pursuant to a CO2 rule because n one of them "emit or may emit" CO2.

Response 19: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

The final rule limits federal enforceability to emi ssion standards for affected EGUs, whether in the context of an emission standard type plan, a st ate measure type plan, the federal backstop, or a federal plan

1.5.2.1.2 Section 111(d) process

Comment 1: Multiple comments question EPA’s use of 111(d) proc ess:

Commenters stated the regulations provide that stat es may apply "less stringent emission standards or longer compliance schedules" to indivi dual facilities or classes of facilities if adopting the standards reflecting the emission guid elines would be unreasonably costly, physically impossible, or for other reasons.(40 C.F .R. 60.24(f)(1)-(3).) Commenters noted that EPA must permit states to take into considerat ion the "remaining useful life of the existing source," (42 U.S.C. 7411(d)(1)(B)) and in doing so, permit states to grant individual sources or classes of sources longer periods of time to comply , or to apply less stringent standards than set forth in EPA's emission guidelines. Commenters stat ed EPA's regulations also require that its emission guidelines address subcategories of "diffe rent sizes, types, and classes" of existing sources where factors like "costs of control, physi cal limitations, [or] geographical location" warrant the application of different guidelines. (4 0 C.F.R. 60.22(b)(5).) The Proposed Rule does not do any of these things.

Commenters stated that EPA claims that the four BBs are mere guidelines for the states and that states are afforded maximum flexibility in choosing how to meet the standards; however, the301

guidelines proposed by EPA are mandatory and extrao rdinarily stringent. Commenters explained that the four BBs are the basis of the proposed man datory emission limiting goals, and rather than affording flexibility as EPA claims, they cons titute a regulatory straightjacket, and further, EPA intends to deny the states statutory flexibilities contained in CAA Section 111(d) that allow the states to take into account specific state fact ors that would allow the states to require less stringent emission limiting standards for certain p lants based on the life of the unit and other factors. Commenters remarked that EPA regulations o utline other flexibilities to be afforded the states, including costs, physical limitations or "o ther" factors. Commenters said, however, the

flexibilities that EPA insists the states have unde r the proposed rule are illusory given the stringency of the mandatory emission limiting goals

. Commenters stated EPA has no authority to propose s tandards for the states or state goals, which EPA maintains are mandatory requirements, based on actions that are outside of the CO2 emitting EGU sources. Commenters believed EPA is ex pected to provide guidelines to the states so that the states can develop a state plan to meetstate-established source specific standards, with the states provided great flexibility in terms of d eveloping the means of meeting those source specific standards. Commenters believed that EPA is imposing mandatory goals on the states to meet instead of providing procedural guidance to st ates for standards that the EGUs will be required to meet, contrary to the statutory design of Section 111, and EPA, rather than offering guidance towards development of state plans, has in stead dictated the stringency and content of state plans through its bizarre determination of BS ER. Commenters contended that the four BBs that are the basis of EPA-designed standards become instead the actual state plan with very little room to alter the mandatory goals. Commenters noted that Section 111 requires source-specific regulation of CO2 emitting EGUs, and the statute re quires states to "establish standards of performance for any existing sources for any air po llutant." Commenters concluded that EPA is not authorized under the statute to regulate "outsi de the fence" or to include non-emitting sources, reduced utilization or end use energy effi ciency improvements or demand reductions as components of the BSER.

Commenters stated because the Clean Air Act does no t authorize EPA or states to impose emission reduction requirements onto sources outsid e the fence line, EPA cannot require states to incorporate such obligations into state plans. Comm enters continued, stating that BSER and emissions rate reduction targets cannot be set usin g emissions reductions EPA would be unable to achieve in a federal implementation plan. Commen ters added that because EPA has no authority to establish or enforce these measures, w hich are solely within the province of the states, EPA lacks authority to include these measur es in its BSER analysis or in setting emission rate reduction targets.

Commenters stated that the statute dictates that Se ction 111(d) emissions standards be designed to be cost-effective, be adequately demonstrated, a nd be achievable at each specific source or electric generating unit (EGU), and such a standard requires source-specific analysis.

Commenters believed that EPA did not undertake this level of analysis, instead relying on national modeling, averaging of data and assumption s of achievability that were not grounded in unit-specific assessments, that EPA has established mandatory goals for states based on302

assumption of authorities that are not granted to E PA under the law, and that these assumptions result in reductions that are far more stringent th an could be imposed if EPA followed the CAA statute, which has been interpreted by both the Age ncy and the courts to require source-specific
standards confined to fossil fuel sources.

Commenters stated and concurred that if a state fai ls to submit a "satisfactory plan" under 111(d), EPA is authorized to directly prescribe a p lan itself. C.A.A. Section 111(d)(2), 42 U.S.C. S. 7411(d)(2), but EPA lacks authority to directly regulate the substance of all but its first building block, e.g., to require the development ofnew renewable generation or to require enduse efficiency measures. Commenters explained that these measures are the traditional subject of state police powers, with federal regulation author ized only where Congress has expressly done so, and for this reason, EPA would likely be limite d to measures under the first block, i.e., inside-the-fenceline efficiency improvements at ind ividual sources, which would not be sufficient to achieve EPA's binding state-by-state emission goals. Commenters added that any attempt to do so would disproportionately burden th e regulated sources, create highly inequitable treatment of one state's sources compared to anothe r, and violate Congress' intent in affording EPA the authority to directly prescribe federal pla ns, and because EPA has that authority, the only reasonable reading of Section 111(d) is that t he measures embraced in EPA's proposed best system of emission reduction should be the type of measures which the agency could directly regulate itself under its 111(d)(2) authority, shou ld the need arise. Commenters concluded that the disconnect between the current proposal and EPA 's ability to directly regulate under (d)(2) confirms that the proposal exceeds the agency's aut hority under Section 111(d).

Commenters stated that the CPP deviates from EPA's 1975 implementing regulation: Whereas the implementing rule authorizes the division of ne w-source categories into existing-source subcategories in order to match designated faciliti es to appropriate pollution control standards, the CPP aggregates sources from different categorie s and mixes in non-sources outside of any category to maintain the fiction that a state power sector is an existing source. Commenters stated, while there may be only one standard of per formance for new sources of designated pollutants, there may be several emission guideline s for designated facilities based on plant configuration, size, and other factors peculiar to existing facilities. Commenters remarked that as discussed elsewhere in the preamble, EPA's emission guidelines will reflect sub-categorization within source categories where appropriate, taking into account differences in sizes and types of facilities and similar considerations, including di fferences in control costs that may be involved for sources located in different parts of the count ry. Thus, commenters stated that EPA's emission guidelines will in effect be tailored to w hat is reasonably achievable by particular classes of existing sources ... However, commenters said the CPP pursues an opposite approach. Commenters asserted that it aggregates coal power p lants, NGCC power plants, nuclear power plants, wind and solar power plants, grid managers, and even retail consumers into a vast, unnamed grab-bag category for the purpose of settin g a 'performance standard' (actually an emissions cap) for an entire state. Commenters stat ed "This won't fly", explaining that the courts will compare the CPP to EPA's implementing regulati on and wonder how the same agency could read section 111(d) so differently.303

Commenters stated that since EPA's proposed Section 111(b) new unit rule applies only to fossilfired units, there is no basis for EPA to establish existing unit standards for non-emitting sources such as wind, solar or nuclear generation, let alon e energy efficiency, under Section 111(d). Commenters added that EPA does not explain how it i s possible for their existing unit standard to be more stringent for many states than the propo sed national new unit standard, something Congress clearly did not intend. Commenters added t hat by going "outside the fence line" in setting standards, EPA developed standards for exis ting units that are more stringent than new unit new source performance standards (NSPS), which establishes a policy with no basis in the statute or no precedent under regulatory guidance. Commenters closed, stating EPA offers no justification for developing source specific standa rds under Section 111(b) and source specific
standards for the modification and reconstruction rule but not for Section 111(d).

Response 1: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reaso nable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

As we explain in sections V.A. and V.B. of the prea mble, our emission guidelines simply reflect an achievable emissions limit through the applicati on of the BSER and do not in themselves require states or sources to implement the BSER. Th at is, EPA is responsible for determining the level of emission limitation from the source catego ry, while states have the responsibility of assigning emission requirements to their sources th at will ensure their achievement of that level of emission limitation. States may fulfil their res ponsibility by establishing emission standards or creating plans consistent with the guidelines. In d oing so, states will be able to choose from a wide range of emission reduction measures, includin g measures that are not part of the BSER.

EPA is not finalizing the proposed “portfolio” appr oach, and will not accept state plans that attempt to impose emission standards or other CAA c ompliance obligations on entities other than affected EGUs. The state measures approach provides a path for a state to achieve the emission performance level as expressed as a state goal in a way that avoids placing enforceable emission standards on affected EGUs (unless and until the ba ckstop is triggered). States will have a wide range of flexibility in choosing how to demonstrate their affected EGUs are meeting a state goal.

EPA recognizes that each state has unique factual c ircumstances that will shape the development of a state’s plan. We look forward to working with the states to account for these factual circumstances in developing satisfactory state plan s.

1.5.2.1.3 Enforcement

Comment 1: Comments raise enforcement issues:

Commenters stated that EPA does not recognize that State agencies charged with enforcing the Proposed Rule have no authority to enforce outside the fence reductions, and by proposing to regulate outside the fence, the Proposed Rule excee ds the scope of EPA's authority under the

CAA.304

Commenters stated that past Clean Air Act (CAA) act ions impacting EGUs, as with other NSPS regulated industries, have been imposed inside-the- fence at the affected unit, and that these compliance strategies and tools are familiar to the state and regulated entities because once the Section 111(d) plans step outside that fence line, the landscape becomes more difficult, particularly when moving beyond traditional state e nvironmental and utility authorities. When factoring into the equation municipal electric syst ems and rural electric cooperatives that do not

fall under state RE and EE standards because of loc al governance, commenters believed U.S. EPA is essentially proposing a wholesale reworking of each state's individual enforcement

authorities. Commenters stated that at the forefron t are the problems associated with enforcing a standard that is directed at controlling emissions at an existing EGU against a non-affected facility, such as a manufacturing facility, commerc ial building, and the like, and if a demand-side regulation was not met, and that was a contributing factor in a state's failure to meet its assigned CO2 goal, who would the state, or U.S. EPA, seek to sanction? Commenters contended that it is difficult to imagine an enforcement action against a non-EGU based on an EGU NSPS from either a legal or practical standpoint, and difficu lt to imagine an enforcement action against an EGU for the actions of an entity accountable for im provements in EE. Commenters closed, stating that as with other sections of the proposal , the approach of enforcing an EGU NSPS against a non-EGU puts the U.S. EPA in the position of establishing energy and economic policy, an action outside the realm of environmenta l policy and well beyond existing legal
authorities.

Commenters stated that the CAA does not authorize E PA or citizen enforcement actions against non-stationary sources, that EPA lacks authority to make non-EGU entities subject to federal enforcement actions, and although Section 111(d) au thorizes EPA to enforce the provisions of state "plans" where the state fails to enforce them , (42 U.S.C. 7411(d)(2)(B)) this provision is clearly intended to authorize EPA to enforce only " standards of performance" that apply to the stationary sources identified in state plans. Comme nters continued (verbatim), nothing in Section 111 authorizes EPA to enforce other types of state or local regulations (for example, RPS requirements or energy efficient building codes) th at may be incorporated in state plans, if those regulations are not "standards of performance" for "stationary sources." Thus, commenters stated, although a state could enforce the non-"per formance standard" rules or regulations that may be necessary to achieve EPA's emission goal, EP A itself may not directly enforce these rules or regulations against the non-stationary sou rce entities that may be responsible for those specific actions under the state plan. Moreover, co mmenters noted that non-EGUs included in state plans clearly cannot be subject to federal ci tizen suits for failure to meet state plan requirements. Commenters said neither Section 111(d ) nor Section 304 (which relates to citizen suits) authorizes citizen suits against non- "stati onary source" entities for failure to comply with the requirements of state plans. Commenters stated, indeed, by its terms, Section 111(d) only authorizes EPA to enforce state plans. Commenters s aid, in addition, as applicable here, the CAA's citizen suit provisions only authorize citize n suits to be brought for a violation of an "emission standard or limitation,"(Id. 7604(a)(1)(A ). Commenters stated that citizens may also bring suit for alleged violations of EPA or state o rders, for failure of EPA to perform a nondiscretionary act or duty, and for construction of a source without a required federal air permit or for violation of such a permit. Id. 7604(a). Howeve r, commenters said none of these causes of305

action are directly relevant to the Section 111(d) context which the CAA defines as a "requirement established by the State or the Admini strator which limits the quantity, rate, or concentration of emissions of air pollutants on a c ontinuous basis, including any requirement relating to the operation or maintenance of a sourc e to assure continuous emission reduction." (135 Id. 7602(k)) Commenters said, since an RPS, EE RS, or other "portfolio" requirement on non-EGUs would not be a "requirement . . . which li mits the quantity, rate, or concentration of emissions of air pollutants," such a requirement ca nnot be considered an "emission standard or

limitation" and thus cannot form the basis of a cit izen suit against the entity. Commenters stated, consequently, any requirements in state plans other than an explicit emission limitation that is directly applicable to an affected EGU cannot be th e subject of a citizen suit. Commenters asserted, to the extent that EPA's proposal would a llow such suits against non-EGUs, the proposal exceeds EPA's statutory authority.

Response 1: The federal enforceability considerations raised in the comment arose primarily under the proposed portfolio approach for state pla ns. As explained in section VIII.C of the preamble, the EPA is not finalizing the portfolio a pproach, which would have allowed state plan submittals to include federally enforceable measure s that apply to entities that are not affected EGUs. However, as further explained in section VIII .D, if the state is adopting the state measures type plan, the state plan submittal will need to sp ecify, in the supporting materials, the state enforceable measures that the state is relying upon in conjunction with any federally enforceable

emission standards for affected EGUs to meet the em ission guidelines. The existing guidance documents pertaining to enforceability include: (1) September 23, 1987 memorandum and accompanying implementing guidance, “Review of Stat e Implementation Plans and Revisions for Enforceability and Legal Sufficiency;” (2) Augu st 5, 2004 “Guidance on SIP Credits for Emission Reductions from Electric-Sector Energy Eff iciency and Renewable Energy Measures;” and (3) July 2012 “Roadmap for Incorporating EnergyEfficiency/Renewable Energy Policies and Programs into State and Tribal Implementation P lans, Appendix F. The final rule provides considerable discretion to the states in setting em ission standards and related plan requirements
for its affected EGUs.

1.5.2.1.4 FIP Issues

Comment 1: Comments raise FIP issues:

Commenters stated that EPA has not provided a model rule or plan for implementation of the Clean Power Plan by each state, and part of the dif ficulty the commenters expected to face in developing any future state plan is related to this decision not to issue a model rule - on which any Federal Implementation Plan ("FIP") might be ba sed - that would allow states to assess how their own plans compare. [See Supplemental Proposal for the Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone (Cle an Air Interstate Rule), 69 Fed. Reg. 32,684, 32,709 (June 10, 2004) (discussing advantages of mo del rule for SO2 and NOx Clean Air Interstate Rule)] Commenters surmised that this lac k of a model rule stems in part from the fact that EPA lacks statutory authority to impose the bu ilding blocks (beyond building block one) on sources (and especially on non-sources), and that i t would therefore not be possible for EPA to implement a FIP based on all four building blocks. [See 42 U.S.C. Section 7411(a)(3) (defining306

"stationary source"); 40 C.F.R. Section 60.27(e) (r equiring regulations proposed and promulgated by the Administrator to prescribe emiss ion standards of the same stringency as the corresponding emission guideline(s) specified in th e final guidance document).] This leads the
commenters to the conclusion that EPA should not co nsider beyond the fence line, third-party measures in determining the stringency of state goa ls. [The Commission does not believe that the state goals set using all four building blocks as E PA had done are attainable through the implementation of only Building Block 1, even takin g all EPA assumptions related to Building Block 1 as feasible.]

Response 1: The EPA is proposing a federal plan and model rule that will demonstrate how the degree of emission limitation determined by the BSE R can be carried into effect through an emissions trading program in which enforceable emis sion standards are applied only to the
affected EGUs.

Comment 2: Commenters stated that EPA lacks authority to impo se a State-specific demandside energy efficiency program as part of a federal implementation plan. Commenters said, first, as EPA recognizes in the proposed rule, EERS progra ms, like RPS programs, are adopted and implemented at the State level and reflect the exer cise of authority that was reserved by the

States. Commenters said this is consistent with thegeneral federal approach to energy efficiency, which has focused on voluntary programs, such as ta x incentives and grants, rather than mandatory adoption of energy efficiency measures. ( See DSIRE Database for State Incentives for Renewables and Efficiency, Financial Incentives for Energy Efficiency, available at http://www.dsireusa.org/summarytables/finee.cfm .) In contrast, commenters stated that Congress has only authorized one federal energy efficiency p rogram, which is administered by the Department of Energy, not EPA. See 42 U.S.C. 6291 e t seq.; 10 C.F.R. pt. 431. Second, commenters noted that there is nothing in the Clean Air Act to suggest that EPA has authority to require States to implement mandatory energy effici ency obligations. Commenters said nor has EPA ever asserted that it possessed such authority in the past. In fact, EPA's website highlights State programs, such as energy efficiency portfolio standards, as means to improve energy efficiency. (EPA, Energy Efficiency, available at http://www.epa.gov/statelocalclimate/state /topics/energy-efficiency.html .)

In sum, commenters stated that the authority to imp ose energy efficiency requirements on retail consumers of electricity rests exclusively with the States and, to the extent that there is any federal role at all with respect to mandatory energ y efficiency standards, it is exercised by agencies other than EPA.

Response 2: The CAA section 111(d) phrase “system of emission r eduction” is deliberately broad in meaning. The provisions of CAA section 111 (d)(1) and (a)(1) do not explicitly include renewable energy use, but they do not include any s pecific emission reduction measures. The absence of specific provisions does not mean that C ongress did not intend the BSER to include any of those types of measures. Rather, this contra st supports viewing a “system of emission reduction” under CAA section 111 as sufficiently br oad to encompass a wide range of measures for the purpose of emission reduction of a wide ran ge of pollutants from a wide range of307

stationary sources. Renewable energy is one potenti al measure that may be employed, consistent with the state flexibility principle that is centra l to this program.

Comment 3: Commenters stated CAA neither Section 110 nor CAA S ection 111 addresses the contents of a FIP or describes the types of require ments EPA may establish through a FIP, and those sections identify the situations in which EPA may impose a FIP, but do not grant the power to adopt or enforce specific measures in a FIP. Com menters stated, for that, EPA must rely on other sections of the Act. Commenters continued, st ating EPA's FIP authority is limited by CAA Section 307, which provides that FIPs must not be " arbitrary, capricious, an abuse of discretion,

or otherwise not in accordance with law." 42 U.S.C. Section 7607(d)(9); North Dakota v. EPA, 730 F.3d 750, 758 (8th Cir. 2013); it would be arb itrary, capricious, an abuse of discretion and not in accordance with law for EPA to impose a FIP that regulates beyond the fence line because the Act does not grant EPA the power to do so. Comm enters believed EPA may exercise only the authority delegated by Congress. La. Pub. Serv. Com m'n., 476 U.S. at 374; Ctr. for Biological Diversity, 722 F.3d at 413 (Kavanaugh, J. concurrin g). Commenters added EPA may not exercise authority "in a manner that is inconsisten t with the administrative structure that Congress enacted into law." ETSI Pipeline Project v . Missouri, 484 U.S. 495, 517 (1988). Commenters concluded, stating that the administrati ve structure of the Clean Air Act allows for the regulation of individual stationary sources and their direct emissions. Indirect regulation of air emissions is authorized only rarely, and only w hen expressly called for by the Clean Air Act.

Commenters stated and concurred EPA proposes to mak e all requirements in state plans "federally enforceable," including those requiremen ts that would apply to entities other than affected EGUs under a "portfolio" approach. (See Pr oposed Rule, 79 Fed. Reg. at 34,901)

Commenters stated EPA does not define what it means by "federally enforceable"; however, this language could be interpreted to mean that non-EGU entities identified in state plans (which could include local distribution utilities, renewab le energy providers, energy efficiency providers, or state agencies) could be subject to f ederal enforcement actions by EPA (See 42 U.S.C. 7413) or by citizen groups under the CAA's c itizen suit provision. (See Id. 7604) Commenters noted that under section 111(d), EPA mayonly require states to issue performance standards for "sources" of air pollutants, and read in the context of the rest of the Act, Section 111(d)'s reference to "sources" is clearly intended to designate stationary sources," (See 42 U.S.C. 7411(a)(2)) (limiting the definition of "new source" to stationary sources); Id. 7411(a)(6) (limiting the definition of "existing source" to st ationary sources)) which Section 111 defines as "any building, structure, facility, or installation which emits or may emit any air pollutant."(Id. 7411(a)(3)) Thus, commenters concluded, EPA does no t have authority to regulate entities like local distribution utilities or nuclear generators that fall outside of the definition of a "stationar y source." Commenters noted that Section 111 also doe s not authorize states to regulate such entities, and although states may generally regulat e such entities under their own sovereign state powers, EPA may not require states to do so under S ection 111 of the CAA.

Commenters stated that the Proposed Rule encourages states to submit a plan that contains what EPA calls "portfolio" measures, and these measures would be used, for instance, to dramatically increase the use and deployment of renewable energyand EE throughout the state, targeting their308

state's citizens and businesses as necessary agents in the reduction of electric consumption. Commenters said, however, upon EPA approval of a st ate's CAA Section 111(d) Plan, these measures would become "federally-enforceable" again st those agents (citizens and businesses) required to implement them. Commenters stated that CAA Section 111(d) does not provide EPA the authority to create federally enforceable oblig ations on entities that do not own or operate facilities within the regulated source category butrather, CAA Section 111 authorizes standards

to be set for facilities within EPA-listed source c ategories. Commenters closed, stating that CAA Section 111 does not apply to, nor can it permi ssibly reach, any other facilities or entities that are not part of the listed source category.

Response 3: The federal enforceability considerations raised in the comment arose primarily under the proposed portfolio approach for state pla ns. As explained in section VIII.C of the preamble, the EPA is not finalizing the portfolio a pproach, which would have allowed state plan submittals to include federally enforceable measure s that apply to entities that are not affected EGUs. However, as further explained in section VIII .D, if the state is adopting the state measures type plan, the state plan submittal will need to sp ecify, in the supporting materials, the state enforceable measures that the state is relying upon in conjunction with any federally enforceable

emission standards for affected EGUs to meet the em ission guidelines. The final rule provides considerable discretion to the states in setting em ission standards and related plan requirements for its affected EGUs. Consistent with longstandin g practice under the Clean Air Act, if a regulated entity does not meet a requirement, the E PA will address the matter on a case-by-case basis, to determine the appropriate response and re solution.

1.5.2.1.5 Other Legal Authority Issues

Comment 1: Commenters believed EPA's proposed rules under Sect ion 111(d) to reduce greenhouse gases from both power plants and beyond power plants is legally and technically flawed, and that the EPA appears to recognize the l egal vulnerabilities by proposing to make each of the building blocks independently severable , as if realizing they will be vacated by the Court during judicial review.

Commenters stated that EPA determined each individu al state's emission reduction target using 2012 data for several building blocks, including: 6 percent heat rate improvements at existing coal plants; redispatching existing natural gas com bined cycle plants to 70 percent capacity; increasing the use of renewable energy; ensuring th e continued operation of nuclear plants; and enhancing energy efficiency programs. Commenters sa id EPA's plan emphasizes that states will have flexibility in the means chosen to meet the ca rbon dioxide target goals, through these and other measures. Commenters stated, however, with th e exception of the heat rate improvements, the other measures only serve to shift generation a way from existing coal-fired EGUs.

Commenters recognized EPA's limited authority to re gulate carbon dioxide emissions under the CAA and expresses concerns related to establishing CO2 reduction targets under Section 111(d) that force the development of a State Energy Plan r ather than the regulation of affected fossil

fuel-fired EGUs. Commenters continued that this is an unprecedented method of establishing control requirements for existing sources from a so urce category that is subject to New Source309

Performance Standards under Section 111(b) of the C AA. Commenters believed the Section 111(d) state plan should not be the State Energy Pl an; rather, the Section 111(d) plan should be part of a state's energy plan. Commenters stated th ey have developed a White Paper entitled Recommended Framework for the Section 111(d) Emissi ons Guidelines Addressing Carbon Dioxide Standards for Existing Fossil Fuel-Fired Po wer Plants. Commenters said it was sent to EPA Administrator Gina McCarthy on April 10, 2014, and has received a significant attention in the national press. In that paper, commenters recom mended and urged EPA establish emission guideline targets based upon actions that can be ta ken directly by operators at existing sources that would actually be subject to the Section 111(d ) emission guidelines, explaining that this approach is consistent with previous emissions guid elines promulgated under the CAA by EPA for other source categories.

Commenters stated EPA argues that it bases its prop osed "building blocks" on measures that states are already undertaking - Proposal, 79 Fed. Reg. at 34,856 - but a state's exercise of its own policy discretion cannot confer regulatory auth ority on a federal agency, and EPA expresses concern that, if it limited its proposal to heat-ra te improvements achieved inside the fence at individual coal-fired plants, a "rebound effect" wo uld increase operations at these plants and lead to smaller overall reductions. Id. at 34,856 & n.93 . Commenters said the "rebound effect" is nothing new in environmental law. See, e.g., 75 Fed . Reg. 74,152, 74,316-20 (Nov. 30, 2010) (providing detailed discussion of "rebound effect" in fuel-efficiency context). Commenters stated that it has never been used as a justification to s et state energy policy or otherwise enlarge EPA's authority, and it cannot bear that weight here. Com menters noted EPA also asserts that its additional, beyond-the-fenceline "building blocks" promise additional emission reductions "by significant amounts and at lower costs" than some s trategies within the first, inside-the-fenceline "building block." Proposal, 79 Fed. Reg. at 34,856. But commenters said even assuming this is true, it is only a reason to propose these measures if they are within the agency's power to

propose.

Commenters noted that in striking down EPA's Clean Air Interstate Rule, the D.C. Circuit noted that it is "entirely arbitrary" to base standards o n "irrelevant factors." North Carolina v. EPA, 531 F.3d 896, 930 (D.C. Cir. 2008). Commenters explaine d that in the CPP proposed rule, two of the four building blocks (Building Blocks 3 and 4) impa ct units or entities that do not emit CO2 and some do not emit anything at all. Commenters believ ed EPA has no authority to require actions from non-emitting units or entities under the CAA a nd continues (verbatim) EPA's contention that, under Section 111, these other units are some how relevant to the regulation of emissions from fossil-fuel-fired EGUs further supports the fi ction that it is establishing an existing source performance standard. EPA argues that these buildin g blocks "displace or avoid the need for generation from those sources and thereby reduce th e emissions from those sources." Legal Memorandum, supra note 21, at 14. Commenters stated , by this logic, EPA could include any number of things under this rule, including electri c vehicles, global climate patterns and geopolitics, all of which may "avoid the need for gene ration from those sources and thereby reduce emissions from those sources." Commenters said, as the court in North Carolina noted, "lest EPA forgot, it is 'a creature of statute' and has only those authorities conferred upon it by Congress." North Carolina, 531 F.3d at 922. Commenters stated that EPA may not take, even in the public310

interest, the power to regulate "a significant port ion of the American economy," much of which it currently does not and cannot regulate directly. Br own & Williamson, 529 U.S. at 159. Commenters stated, by including national projection s for non-emitting units and entities into state standards for fossil-fired EGUs, EPA is constructing a goal that is entirely theoretical and arbitrary.

Commenters stated that the assumption that all EGUs are fungible as part of an interconnected grid - such that increasing generation from natural gas and renewable power or reducing retail demand will reduce coal-fired generation - does no t apply to the Commenter's Power Plant. Commenters continued, stating that Building Blocks 2, 3, and 4 are entirely outside of

commenters’ control because it is not associated wi th a utility distribution system, and that it is neither technically feasible nor reasonable to impo se on an affected facility an emission standard generated through assumptions that are simply inapp licable to that facility. Commenters’ unique position further supports a finding that it is not an "affected" EGU and should not be included within the scope of this rulemaking.

Response 1: The commenters are incorrect. This rule is for the reduction of carbon dioxide from the affected power plants, not any other facility. Further, for the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memo randum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of legal precedent, the statutory text, statutory context, statutory purpose, and legislati ve history.

1.5.2.2. EPA has legal authority to include flexibl e beyond-the-fence compliance approaches

Comment 1: Commenters stated in earlier comments to EPA, the A labama Governor's office and Alabama Department of Environmental Management (collectively, "the Administration") questioned the legal basis for the proposal.(7 See, e.g., Alabama's Opposition to U.S. EPA's Clean Power Plan, Testimony by Blaine Galliher, Sen ior Advisor to Governor Robert Bentley,

available at http://governor.alabama.gov/newsroom/2014/07/govern or-bentley-sends-senioradvisor-testify-epas-public-hearing-clean-power-pla n-regulations/ ) Commenters noted, indeed, Alabama is one of 12 states that have brought suit against the proposal, notwithstanding the legal hurdles to challenging a non-final rule. (Neela Ban erjee, 12 States sue the EPA over proposed power plant regulations, L.A. Times (Aug. 4, 2014), available at http://www.latimes.com/business/la-fi-epa-lawsuit-2 0140805-story.html .) Commenters stated the Administration's purported legal critique involves two basic arguments: (1) EPA cannot regulate power plant carbon dioxide emissions under Clean Ai r Act section 111(d) because EPA has promulgated emission standards for power plant hazardous air emissions under section 112; and (2) section 111(d) requires controls on emission so urces only, and does not authorize "beyond the fence line" compliance flexibility. (Id.) Comme nters said each of the Administration's arguments is flawed. First, commenters stated EPA i nterprets section 111(d) to limit development of standards of performance for specifi c pollutants regulated under section 112, rather than for entire categories of sources regula ted under that section. Commenters said EPA's311

interpretation is a permissible construction that, in fact, is the most natural reading of the statute and best effectuates each of the statutory provisio ns. Second, commenters noted that EPA's broad interpretation of "best system of emission reductio n" to include beyond-the-fence-line compliance approaches is a logical and permissible reading of these generically defined statutory terms. Commenters said, to demonstrate the flaws in Administration's attempted legal critique, these comments will first briefly outline the appli cable statutory and regulatory framework for section 111 before addressing the state's specific criticisms. Commenters stated that Clean Air

Act section 111 directs EPA to establish "standards of performance" limiting emissions of harmful air pollutants in three phases. Commenters said, first, EPA must identify categories of stationary sources that cause or contribute signifi cantly to "air pollution which may reasonably be anticipated to endanger health or welfare."(42 U .S.C section 7411(b)) Second, commenters said EPA must establish national standards of perfo rmance for new sources in each such category. (Id.) Finally, commenters stated that onc e EPA has developed standards of performance for new sources in a category, it must then prescribe regulations under which states develop standards of performance for existing sourc es in the same source category. (Id. section 7411(d)) Commenters said Section 111(d) provides th at EPA "shall prescribe regulations which shall establish a procedure . . . under which each State shall submit [to EPA] a plan which . . . establishes standards of performance for any air po llutant . . . to which a standard of performance under this section would apply if such existing sou rce were a new source." (Id. (emphasis added) Commenters said Congress exempted two categories of air pollutants from this mandate: any air pollutant (1) for which air quality criteria have b een issued or which is listed under section 108(a); or (2) emitted from a source category cover ed under the hazardous air pollutant provisions of section 112.(Id.) Commenters said nei ther exemption applies here. Commenters noted that EPA regulations implementing section 111 (d) establish a broad framework under which EPA establishes emission guidelines for each covered pollutant.(40 C.F.R. section 60.22(a)) Commenters said the guidelines set minimu m required emissions limitations based on the best adequately demonstrated systems of emissio n reductions.(Id. section 60.22(b)) Commenters said states then have flexibility to tai lor their own plans to implement the standards of performance, so long as they meet or are equival ent to EPA's emission guideline.(Id.) Commenters stated that EPA's implementing regulatio ns also provide for case-by-case variances from an emission guideline to allow for "significan tly more reasonable" compliance options, (40 C.F.R. section 60.24(f)(3)) such as where necessaryto take into account the remaining useful life of an existing source that would be subject to the performance standard. (42 U.S.C. section 7411(d)(1)(B)) Commenters noted, although EPA promu lgated its guidelines for implementing section 111(d) in 1975, the agency has issued few p erformance standards for existing sources. Thus, commenters stated, while this is EPA's defaul t approach, it has not been extensively elaborated or refined through a long history of pri or rulemakings; and nothing in the Clean Air Act requires EPA to adhere rigidly to this approach for each air pollutant or each existing source category. Commenters stated, in fact, EPA may adoptany reasonable approach to develop, issue, and implement existing source standards, so long as they meet the minimum requirements of the Clean Air Act and the agency adequately explains it s approach and rationale through appropriate notice and comment rulemaking. (See, e.g., FCC v. F ox Television Stations, Inc. 566 U.S. 502, 515 (2009) (an agency may change its position so lo ng as it provides "good reasons" for doing312

so)) Commenters noted, in this instance, EPA's rati onale for using 111(d) as a legal basis to establish guidelines of performance for existing po wer plant sources of carbon dioxide is fully consistent with the Clean Air Act, EPA's implementi ng regulations, and past practice. In particular, commenters stated that "Congress amende d Section 111 [in 1990] to remove the word 'technology' from its definition of performance sta ndards, indicating that standards need not be technology-based."(Id.) Thus, commenters said not o nly there is no support in the statute for the Administration's overly restrictive reading of the statute, accepted principles of statutory interpretation refute the Administration's contenti on. Commenters noted, additionally, section 111(d) explicitly provides that the procedure for i mplementing standards of performance for existing sources "shall . . . be similar to that pr ovided by section 7410 [section 110] of this title. " (42 U.S.C. section 7411(d)(1)) Commenters stated th at the process prescribed under section 110 grants states great latitude to fashion state imple mentation plans so long as they will achieve air quality protections that are at least equivalent to minimum federal standards, and specifically authorizes flexible compliance approaches "includin g economic incentives such as fees, marketable permits, and auctions of emission rights ."(U.S.C. section 7410(a)(2)(A)) Commenters stated, based on well-established practi ce, states have, in fact, exercised this flexibility to implement pollutant reductions requi red under section 110 through a variety of nonsource-specific mechanisms, including renewable portfolio standards, demand-side management, utility planning, and other indirect emission reduc tion systems. (See EPA Roadmap for Incorporating Energy Efficiency/Renewable Energy Po licies and Programs into State Implementation Plans/Tribal Implementation Plans (2 011); EPA Guidance on SIP Credits for Emissions Reductions from Electric-Sector Energy Ef ficiency and Renewable Energy Measures (2004)). Commenters noted that these guidance docum ents have been successfully implemented in Texas, Shreveport, Louisiana, and the Washington , D.C. region, all of which modified their

SIPs to receive credit for reductions achieved thro ugh energy efficiency and renewable energy measures, and there is no question that EPA has sim ilar flexibility in suggesting and in some cases implementing through Federal Implementation P lans' flexible compliance approaches, as section 111(d)(2) accords EPA the same authority gr anted to the states in order to fashion a federal "backstop" program for existing sources. Th us, commenters stated that contrary to the Administration's unsupported criticisms, there is l ittle question that "EPA has the authority to outline flexible structures in its [section 111(d)] guidance to states on existing source regulation, either in the form of a specific preferred option o r by listing several alternative options."

Commenters stated EPA also correctly takes a system -wide approach. Commenters supported the EPA's decision to look beyond the fence line of individual plants in identifying the best system of emission reduction, and because of the in tegrated nature of the electric grid, reductions in generation at a particular fossil fuel facility must be balance with either increased generation or with demand reduction elsewhere on the grid. Com menters added that because of this, the carbon intensity of generation cannot be considered in isolation, and setting goals and ultimately determining compliance should rightly consider the entire system.Commenters stated regarding regulating beyond the fence line, NCDENR erroneousl y claims that "[t]he plain language of the Act as well as legal precedent precludes EPA and St ates from designing a standard that relies on

reductions made outside of the emissions unit." Com menters continued (verbatim), tellingly, NCDENR does not identify the "plain language" or th e legal precedent that purportedly limits313

EPA to developing unit-specific guidelines and cons trains EPA from creating flexible compliance options. Commenters said the reason for this omission is simple - it does not exist. Commenters stated, in contrast to NCDENR's unsupported argument, "[t]here is widespread agreement in the academic community that Section 11 1 authorizes the use of many types of flexible approaches."(G. Wannier, J. Schwartz, N. R icardson, M. Livermore, & D. Burtaw, Prevailing Academic View on Compliance Flexibility under Section 111 of the Clean Air Act, Institute for Policy Integrity, New York University School of Law Discussion Paper No. 2011/2 at 1) Commenters stated, to the extent the Clean Ai r Act defines the terms used in section 111(d), it does so broadly, leaving EPA wide latitude to in terpret them in any reasonable manner that effectuates the pollution reduction goals of the Ac t. Commenters noted, in section 111(a), Congress defined "standard of performance" to mean "a standard for emissions of air pollutants which reflects the degree of emission limitation ac hievable through the application of the best system of emission reduction (taking into account t he cost of achieving such reduction and any non-air quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated." 42 U. S.C. section 7411(a)(1). Commenters noted that the general definitions in Clean Air Act secti on 302 define "standard of performance" to mean "a requirement of continuous emission reductio n, including any requirement relating to the operation or maintenance of a source to assure cont inuous emission reduction. 42 U.S.C. section 7602(l) (emphasis added). Commenters stated, on the face of the statute, EPA has broad discretion to identify the best system of emission reduction and is limited only to the extent the

standard is achievable and considers certain factor s such as cost and other non-air quality impacts. Commenters asserted that the applicable de finitions do not, as NCDENR argues, limit EPA to developing unit-specific guidelines. And com menters said courts should not infer such an unexpressed limitation on the agency's discretion t o reasonably interpret its statutory mandate. Chevron U.S.A. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 863 (1984); see Texas Rural Legal Aid Inc. v. Legal Serv. Corp., 940 F.2d 685, 694 (D.C. Cir. 1991) ("Under Chevron [courts] normally withhold deference from an agency 's interpretation of a statute only when Congress has 'directly spoken to the precise questi on at issue.'"). Commenters stated, to the extent Congress has spoken on the issue of EPA's di scretion to fashion flexible compliance approaches under section 111(d), "it has removed, r ather than added, barriers to flexible mechanisms in EPA regulations." G. Wannier, et al., Prevailing Academic View on Compliance Flexibility under Section 111 of the Clean Air Act, supra. at 4. Commenters noted, in particular, "Congress amended section 111 [in 1990] to remove t he word 'technology' from its definition of performance standards, indicating that standards ne ed not be technology-based." Id. Thus, commenters stated that not only is there no supportin the statute for NCDENR's overly restrictive reading of the statute, accepted princi ples of statutory interpretation refute NCDENR's contention. Additionally, commenters noted that Sec tion 111(d) explicitly provides that the procedure for implementing standards of performance for existing sources "shall . . . be similar to that provided by section 7410 [section 110] of this title." 42 U.S.C. section 7411(d)(1). Commenters said the process prescribed under sectio n 110 grants states great latitude to fashion state implementation plans so long as they will ach ieve air quality protections that are at least equivalent to minimum federal standards, and specif ically authorizes flexible compliance approaches "including economic incentives such as f ees, marketable permits, and auctions of314

emission rights." 42 U.S.C. section 7410(a)(2)(A). Commenters asserted, based on wellestablished practice, states have, in fact, exercis ed this flexibility to implement pollutant reductions required under section 110 through a var iety of non-source-specific mechanisms, including renewable portfolio standards, demand-sid e management, utility planning, and other indirect emission reduction systems. See EPA Roadmap for Incorporating Energy Efficiency/Renewable Energy Policies and Programs i nto State Implementation Plans/Tribal Implementation Plans (2011); EPA Guidance on SIP Cr edits for Emissions Reductions from Electric-Sector Energy Efficiency and Renewable Ene rgy Measures (2004) (These guidance documents have been successfully implemented in Tex as, Shreveport, Louisiana, and the Washington, D.C. region, all of which modified thei r SIPs to receive credit for reductions achieved through energy efficiency and renewable en ergy measures). Commenters stated that there is no question that EPA has similar flexibili ty in suggesting - and in some cases implementing through Federal Implementation Plans - flexible compliance approaches, as section 111(d)(2) accords EPA the same authority gr anted to the states in order to fashion a federal "backstop" program for existing sources. 42 U.S.C. section 7411(d)(2); see G. Wannier, et al., Prevailing Academic View on Compliance Flex ibility under Section 111 of the Clean Air Act, supra. at 4. Thus, commenters said, contrary t o NCDENR's unsupported criticisms, there is little question that "EPA has the authority to outl ine flexible structures in its [section 111(d)] guidance to states on existing source regulation, e ither in the form of a specific preferred option or by listing several alternative options." G. Wann ier, et al., Prevailing Academic View on Compliance Flexibility under Section 111 of the Cle an Air Act, supra at 4.

Commenters stated that Oklahoma DEQ does recognize that absent such an approach, most existing subject facilities located in Oklahoma wil l not be able to achieve the proposed CO2

emission limitations. Commenters believed that if o utside the fence-line reductions are determined to be impermissible, then the proposed g oals would need to be adjusted drastically in order for the state or the subject facilities to ha ve any reasonable chance to comply with EPA's requirements, and consequently, to the extent that such an approach is determined to be within the legal confines of the Clean Air Act, ODEQ suppo rts the ability to consider such reductions in developing and implementing a state Section 111(d) plan. However, commenters stated, if

outside the fence-line reductions are determined to be impermissible, then EPA's Proposed Rule

should be withdrawn. Commenters contended that stan dards for existing sources set under Section 111(d) are supposed to be similar to those for new, modified, or reconstructed sources set under Section 111(b). Commenters added that it appears that the corresponding emission rates for existing sources that would result from i mplementation of the Proposed Rule would actually be significantly more stringent than those contained in the related rule proposed for new sources. Commenters stated that the question is whe ther Section 111(d) allows for indirect or direct regulation of sources that are not regulated under the corresponding Section 111(b) standard, and if existing sources are not allowed t o include reductions obtained outside of the fence-line (i.e., EE, DSM, etc.), then it will be d ifficult (if not impossible) for many existing sources to comply.

Response 1: Some of these statements are supportive of the rul e and we appreciate them. We explain in section V. of the preamble our authorityunder section 111(d) and (a)(1) to include315

building blocks 2 and 3 as part of the BSER. We als o explain in the preamble that sources would be encouraged to take advantage of certain complian ce alternatives, including demand-side energy efficiency measures, in lieu of implementing the BSER. We disagree that the section 111(d) standards are more stringent than the sectio n 111(b) standards.

1.5.2.3. Including non-EGU sources will have negati ve economic impacts

Comment 1: Commenters stated that they are concerned that EPA has requested appropriations to develop emissions limits for other industries, i ncluding petroleum refining, pulp and paper, solid waste landfills, iron and steel production, C AFOs, and Portland cement manufacturing. Commenters stated that regulation of additional sou rce categories is not necessary, as emissions from these sectors are at least an order of magnitu de lower than those for fossil fuel-fired EGUs and EPA cannot make a source category-specific sign ificant contribution endangerment determination for these sectors based on the quanti ty of GHGs emitted. Commenters stated that many of the targeted sectors are energy intensive, trade exposed industrial and manufacturing sectors; in the face of stiff global competition, e ven small increases in operating costs due to compliance with additional environmental standards should shift the competitive structure of these industries and drive production overseas. Com menters stated that such an outcome could have the perverse effect of increasing rather than decreasing overall GHG emissions due to "carbon leakage" as production shifts to foreign co untries with fewer regulations designed to

reduce GHG emissions. Commenters stated that manufa cturing and industrial sectors are less homogenous than fossil fuel-fired EGUs, and rely on a much broader range of designs, processes, feedstocks, and products; as a result, i t is difficult to identify and apply broadly applicable "best systems of emissions reduction" fo r these sectors. Commenters stated that at a minimum, EPA must carefully coordinate among the various NSPS programs and ensure that manufacturing and industrial sectors are not punish ed in subsequent NSPS and ESPS rulemakings for any demand-side energy efficiency i mprovements that they undertake as a result of mandatory or voluntary actions taken to assist S tates in complying with the ESPS for fossil
fuel-fired EGUs.

Commenters stated that imposing uniform GHG standar ds of performance on other source categories could disadvantage these sectors by maki ng them less competitive on the global stage, and new regulations with high compliance costs thatdo not account for trade exposure will translate into significant job losses and reduction s in economic activity without actually reducing
GHG emissions.

Commenters stated that because the proposed rule re gulates greenhouse gas emissions outside the fence, it sets an impossible precedent for futu re regulation of greenhouse gases for the manufacturing sector. Commenters explained that the rule's precedent would require industrial sources to reduce greenhouse gases in amounts that are above what we could reduce through manufacturing technology, equipment, and practices, and be required to accept responsibility to achieve higher greenhouse gas reductions by reducin g emissions outside their fence line,316

and their customers are all over the world, and thi s regulation imposes costs that our global competitors would not have.

Response 1: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reaso nable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

Comment 2: Commenters stated they believe that taking the acti ons proposed through the 111(d) rulemaking process will lead to extensive re gulatory uncertainty, particularly for entities/industries that may be targeted for reduct ions through the outside the fence line portfolio approach, and this uncertainly will lead to a chill ing effect on capital investment and manufacturing growth opportunities throughout the U S economic base.

Commenters stated EPA should not expand GHG perform ance standards to other source categories, explaining that by usurping the role of States under 111(d) and requiring reductions at the source category (here, fossil fuel-fired genera ting units) achievable only with outside-thefence measures at unregulated entities, EPA's Propo sal sets dangerous precedent for other source categories. Commenters asserted that EPA should notproceed with additional GHG standards of performance for other source categories unless and until its legal authority and methodology for imposing such reductions on the utility sector are upheld. Commenters added that source categories in the manufacturing sector require cons ideration of impact by a broad range of

factors that EPA has not considered and in some cas es has not had to consider in its Proposal for power plants, such as industry economics, geography , federal and state incentives, transportation systems, ownership structures, foreign competition, profit margins, and customer bases, and regulating GHG emissions from the manufacturing sec tor is neither necessary nor sensible at this time, particularly given that so many industries ha ve already been reducing GHG emissions through voluntary and extensive energy efficiency i nitiatives. Commenters believed that imposing uniform GHG standards of performance on ot her source categories could disadvantage these sectors by making them less competitive on th e global stage, and new regulations with high compliance costs that do not account for trade expo sure will translate into significant job losses and reductions in economic activity without actuall y reducing GHG emissions. Commenters remarked that if EPA were to proceed with regulatio ns for other sectors, however, then the Agency, at a minimum, should first proceed with an Advanced Notice of Proposed Rulemaking (ANPR) for any particular source category. Commente rs said an ANPR would allow for notice and public comment from impacted stakeholders, as w ell as a source-category specific endangerment determination for GHG emissions.

Response 2: To the extent the comment objects to the portfolio approach, which the EPA is not finalizing, the comment is moot. With respect to ar guments about regulatory uncertainty and hypothetical future consequences, as we explain in section V. B. of the preamble and in the Legal Memorandum, we have refined our analysis of t he BSER, and we do not believe our interpretation will lead to unreasonable future act ions for any source category. In accordance with our interpretation, we undertake a pollutant-s pecific and source-category-specific evaluation. As a result, the BSER is unique to each industry and even may be different for new and existing sources.317

1.5.2.4. Including non-EGU sources is necessary

Comment 1: Commenters supported EPA's consideration of the po tential for shifts in dispatch, low or zero carbon generation, and energy efficienc y in the wider electricity system to assess emissions reduction potential, stating. Commenters said EPA's approach provides needed flexibility and will lead to more cost-effective re ductions than an approach that is limited to actions that can be taken at the electric generatin g units alone.

Commenters stated they believe the proposed rule is well within EPA's statutory authority and is in fact legally and scientifically required and dis agrees strongly with claims asserted by other industry groups that EPA has exceeded its authorityby looking to the full electric system for reductions, or by proposing the rule at all.

Commenters supported the approach of allowing entit ies, other than affected EGUs, to help achieve emission performance goals. Additionally, c ommenters supported recognition by U.S. EPA of renewable energy (Building Block 3) and ener gy efficiency (Building Block 4) measures, such as GHP systems, as implementation me asures that should be available for states to incorporate, at their option, into state impleme ntation plans. Commenters believed giving states flexibility to use a full-range of greenhous e gas emission reduction tools will aid in reaching goals while potentially reducing costs and allowing state-specific tailored approaches, and the proposed framework allows states to develop an implementation plan that fits their situation while nationally achieving the Clean Air Act objectives of protecting and enhancing the quality of the Nation's air resources so as to prom ote the public health and welfare and the productive capacity of its population.

Response 1: Some of these statements are supportive of the rule ; we appreciate them. As explained in the preamble, we are not finalizing bu ilding block 4. We explain in section V. of the preamble our authority under section 111(d) and (a) (1) to include building blocks 2 and 3 as part of the BSER. We also explain in the preamble that s ources would be encouraged to take advantage of certain compliance alternatives, inclu ding demand-side energy efficiency measures, in lieu of implementing the BSER.

1.5.2.5. State goals are improper and inequitable

Comment 1: Commenters stated that identifying BSER as a systemthat includes the regulation of non-emitting and non-affected entities is arbitr ary, capricious, and contrary to law.

Commenters believed that EPA must set BSER based on emission reductions achievable inside the fence line of the source category and then allo w states to achieve the reductions through

whatever means it chooses in its SIP. Commenters ar gued that the proposed rule illegally and unfairly reverses this process. Consequently, comme nters concluded, Ohio's target for reductions is unattainable and in implementation, inflexible. Commenters said further analysis of each building block illustrates this problem.318

Commenters stated that although the proposed rule d oes not explicitly require that states implement any or all of the building blocks propose d by U.S. EPA, the manner in which U.S. EPA applied BSER to each building block to establis h the goal for each state does require states to implement strategies beyond what can be achieved through a single building block, and as a result, the statewide average emission rates propos ed by U.S. EPA would be impossible to meet by implementing the only building block that can be legally implemented and enforced, that being Building Block 1. Clearly, commenters remarke d, the proposed rule is intended to regulate activities beyond the fence line and beyond the con trol of the affected sources, and Federal law
does not authorize this intent.

Commenters stated EPA proposed a unique approach fo r existing sources under Section 111(d) that calculates an emission rate target for each st ate, and this nontraditional, formulaic approach produces different targets for each state. Commente rs stated that the fact that an EGU is colocated in a state with an impressive record of cap turing energy efficiency or a robust renewable portfolio standard does not necessarily impact the environmental impact of that EGU's CO2 emissions; nor, given the interstate nature of the electric system, does it necessarily indicate that the given EGU's generation may more easily be displ aced by cleaner and carbon-free resources. Commenters believed EPA would be better served by applying CO2 standards on existing sources in Section 111(d) uniformly throughout the nation as it has proposed under Section 111(b).

Response 1: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reaso nable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y. To the extent this comment objects to the portfolio approach, which the EPA is not finalizing, the

comment is moot. While it is the case that the emi ssions reductions contemplated by this rule cannot be met by building block 1, as explained in Section VIII of the preamble, states have various options they can use in developing their st ate plans.

1.5.2.6. Guidance and clarification needed from EPA

Comment 1: Commenters stated that many of the operating practi ces and equipment upgrades that are the basis of the Agency's assertion that 4 to 6 percent heat rate improvements are achievable are not included in a Subpart Da affecte d facility, and for this reason, EPA lacks authority to regulate such equipment under Section 111(d). Commenters stated that Subpart Da is the codification of the NSPS for electric utility s team generating units, and these pieces of complicated equipment, logically enough, generate s team. Commenters noted that the "affected facility" is "each electric utility steam generatin g unit." [40 C.F.R. 60.40Da.] Commenters noted that equipment within the boiler island is the Subp art Da affected facility, while equipment beyond the boiler island is not. Commenters agreed with UARG's comments that the following equipment is specifically beyond the purview of thi s rule: steam turbines, water purification equipment, water-supply systems, air cleaning and c ooling apparatuses, condensers, main exhaust and main steam piping, water screens, motor s, and moisture separators for turbine steam.319

Commenters asserted that EPA's attempt to require i mprovements in these components' efficiency for building block 1 is contrary to law.

Commenters stated that Section 111(d) requires each state's plan to establish standards of performance for the existing stationary sources tha t are subject to Section 111(d) within its jurisdiction. Commenters explained that the only po tentially eligible existing stationary source categories for regulation under Section 111(d) are electric utility steam generating units and stationary combustion turbines - because these are the only two source categories for which EPA has proposed (but has not yet finalized) Section 11 1(b) standards of performance for new

sources.

Response 1: In this rulemaking, the EPA is combining the source s from the two existing source categories for the affected EGUs, as listed in 40 C FR subpart Da and 40 CFR subpart KKKK, into a single location, 40 CFR subpart UUUU, catego ry for purposes of addressing the CO2 emissions from existing affected EGUs. The EPA is a lso codifying all of the requirements for the affected EGUs in a new subpart UUUU of 40 CFR part 60 and including all GHG emission guidelines for the affected sources—fossil fuel–fir ed electric utility steam generating units, as well as natural gas-fired stationary combustion tur bines—in that newly created subpart.

For the EPA’s response to claims about “equipment b eyond the boiler island,” see section 1.9.4.

1.5.2.7. Other issues

Comment 1: Commenters stated that the precedent EPA's new inte rpretation would set is not limited to just the power sector, that it would app ly to setting existing-source performance standards throughout the economy, and every source category that EPA regulates could, in theory, be forced to reduce production if EPA, base d on an economy-wide "BSER" analysis,

determines that substitutes are available. Commente rs offered that EPA, for instance, could determine, under the guise of adopting performance standards, that petroleum refineries must reduce production because EPA thinks that the use o f more electric vehicles is "adequately
demonstrated" and cost-effective.

Commenters stated that because EGUs cannot, on thei r own, achieve the level of reductions necessary to comply, the proposed guidelines effect ively require states, utilities owning EGUs, and, in many cases, consumers and organizations tha t are totally unrelated to an existing EGU, to undertake new programs and measures to meet EPA's p roposed standards.

Commenters stated that EPA cannot hold affected EGU s solely responsible for meeting the entirety of a state's emission reduction goal. Comm enters explained that in setting the state goals, EPA relied upon emission reduction measures that co uld be achieved through mechanisms outside of affected EGUs, such as redispatch to NGC Cs and RE as well as avoided generation through EE programs, and as a result of EPA's use o f these mechanisms in its BSER analysis, EPA set state goals that the commenters cannot meetsolely through emission reduction measures achievable at affected EGUs, short of wholesale ret irement of existing fossil fuel-fired generation, given that several state goals are well below the CO2 emission rate achievable by fossil fuel-fired generation, even for new NGCCs. C ommenters believed that EPA does not have320

the authority to enforce the entire emission reduct ion commitments against affected units even though affected units are the only entities within EPA's jurisdiction. Commenters continued, stating that EPA proposes that each state plan mustinclude a "demonstration that each emission standard is quantifiable, nonduplicative, permanent , verifiable, and enforceable with respect to an affected entity" and commenters explained that 1 ) proposed section 60.5740(a)(iii)(6) (emphasis added). EPA further proposes that "[o]nce a state receives the EPA's approval for its plan, the provisions in the plan become federally e nforceable against the entity responsible for noncompliance, in the same manner as the provisions of an approved SIP under CAA Section 110." 79 Fed. Reg. at 34,844, and 2) due to the pro posed broad definition of "affected entity," EPA's proposal would transform emission reduction m easures in state plans that are the responsibility of non-affected EGU entities into fe derally enforceable requirements. Commenters opposed this approach. Commenters stated that an "a ffected entity" is "an affected EGU, or another entity with obligations under this subpart for the purpose of meeting the emissions performance goal requirements in these emission gui delines" (Proposed section 60.5820), and the category would include entities that EPA has no authority to regulate under Section 111(d), such as electric distribution utilities and indepen dent non-profit entities that administer RE and EE programs. (See State Plan Considerations TSD at 10.) While commenters agreed that states should be able to rely on emission reductions achie ved by affected entities to achieve compliance with their state goals, commenters believed that EP A does not have the authority to make these emission reduction commitments federally enforceabl e.

Response 1: The federal enforceability considerations raised in the comment arose primarily under the proposed portfolio approach for state pla ns. As explained in section VIII.C of the preamble, the EPA is not finalizing the portfolio a pproach, which would have allowed state plan submittals to include federally enforceable measure s that apply to entities that are not affected EGUs. However, as further explained in section VIII .D, if the state is adopting the state measures type plan, the state plan submittal will need to sp ecify, in the supporting materials, the state enforceable measures that the state is relying upon in conjunction with any federally enforceable

emission standards for affected EGUs to meet the em ission guidelines. The final rule provides considerable discretion to the states in setting em ission standards and related plan requirements for its affected EGUs. Consistent with longstandin g practice under the Clean Air Act, if a regulated entity does not meet a requirement, the E PA will address the matter on a case-by-case basis, to determine the appropriate response and re solution.

Further, for the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reaso nable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y. We do not believe our interpretation will lead to u nreasonable future actions for this or any other source category. In accordance with our interpretat ion, we undertake a pollutant specific and source category specific evaluation. As a result, t he BSER is unique to each industry and even may be different for new and existing sources.

Comment 2: Commenters stated that the first thing to be noted under this standard is that EPA has not considered the possibility that there will be widespread state refusal to issue SIPs321

implementing building blocks two through four. Comm enters noted that in 2010, Arizona passed a law precluding state regulation of GHGs without approval of the legislature (See A.R.S. S. 49- 191). Commenters stated the director of the Arizona Department of Environmental Quality has recently testified before Congress: "In the end, sh ould EPA choose not to make adjustments to the final rule based upon our real implementation c oncerns, litigation remains an option for Arizona." State Perspectives: Questions Concerning EPA's Proposed Clean Power Plan; Hearing Before the Subcomm. on Energy & Power of the H. Com m. on Energy & Commerce, 113th Cong. 33 (2014) [hereinafter State Perspectives: Qu estions Concerning EPA's Proposed Clean Power Plan] (testimony of Henry B. Darwin, Dir., Ar iz. Dept. of Envtl. Quality), available at http://democrats.energycommerce.house.gov/sites/default/files/documents/PreliminaryTranscript-EP-EPA-Clean-Power-Plan-2014-9-9.pdf ). Commenters explained that under existing law, Kansas, Kentucky, Louisiana, Missouri, and Wes t Virginia may not shift pollution control costs to other parts of the economy but must limit reductions to the specific source. Commenters noted, on June 6, 2014, the Attorney General of Wes t Virginia addressed a letter to the Administrator opining that the Proposed Rule is bey ond the authority of EPA (Letter from Patrick Morrissey, West Virginia Attorney General, to Gina McCarthy, Administrator, U.S. Envtl. Prot. Agency (June 6, 2014), available at http://www.ago.wv.gov/publicresources/Documents/Let ter%20to%20 EPA%20on%20section%20111%28d%29%20authority.pdf). C ommenters noted, on June 16, 2014, nine state governors wrote the President prot esting the rule (Letter from Governors of Alaska, Indiana, Louisiana, Mississippi, North Caro lina, North Dakota, Pennsylvania, Texas, and Wyoming to President Barack H. Obama II from Govern ors of the States of Alaska, Indiana, Louisiana, Mississippi, North Carolina, North Dakot a, Pennsylvania, Texas, and Wyoming (June 16, 2014), available at http://www.ncair.org/rules/EGUs/Gov_Energy_Letter6.16.14%20FINAL.pdf

). Commenters said thirteen Attorneys General wrote the Administrator on August 25, 2014, protesting the failure of EPA t o comply with 42 U.S.C. 7607(d) by including in the docket as of the date of publicati on of the Proposed Rule all data in the record on which the agency relies (Letter from Attorneys Gene ral of Alabama, Indiana, Kansas, Louisiana, Montana, Nebraska, North Dakota, Ohio, Oklahoma, So uth Carolina, South Dakota, West Virginia, and Wyoming to Gina McCarthy, Administrat or, U.S. Envtl. Prot. Agency (Aug. 25, 2014), available at http://www.ago.wv.gov/pressroom /Documents/ Section%20 307%20Letter%20(August%2025,%202014).pdf). Commente rs said on September 9, 2014 the Governors of fifteen states wrote the President pro testing the Proposed Rule and challenging EPA's authority to issue it (53 Letter from Governo rs of Alabama, Alaska, Arizona, Idaho, Indiana, Mississippi, New Mexico, North Carolina, N orth Dakota, Oklahoma, Pennsylvania, South Carolina, Utah, Wisconsin, and Wyoming to Pre sident Barack H. Obama (Sept. 9, 2014), available at http://governor.alabama.gov/assets/201 4/09/RGA-Letter-to-POTUS.pdf). Commenters noted that nine States have challenged t he settlement that provided the basis for the Proposed Rule in the United States Court of Appeals for the District of Columbia Circuit and have supported a complementary challenge in the sam e forum seeking an extraordinary writ against the Proposed Rule (See, e.g., West Virginia v. EPA, No. 14-1146 (D.C. Cir. 2014); In re Murray Energy Corp., No. 14-1112 (D.C. Cir. 2014)). Commenters noted that on October 29, 2014, the three commissioners of the Kansas Corpora tion Commission sent a letter to the322

Administrator stating "that Kansas ratepayers will face a future of exorbitantly high electricity costs and unreliable electric service" (Cover Lette r, Comments of the Staff of the Kansas Corporation Commission on the Proposed Clean Power Plan, EPA-HQ-OAR-2013-0602 (Oct. 29, 2014), available at http://www.eenews.net/assets/2014/10/31/document_ew _01.pdf ).
Commenters stated that the Commissioners attributed this threatened EPA regulatory harm to the fact that "the EPA has inserted itself into a regul atory field occupied by the states for decades in which the states have proven expertise." Commenters said the Commissioners also noted their "legal duty and obligation to look out for the ener gy future of Kansas and the Kansas economy." Commenters concluded listing by stating that Legisl ative proposals hostile to the approach now taken by EPA are pending in many States and EPA maynot simply ignore this important part of the problem.

Response 2: Consistent with the cooperative federalism structu re of section 111(d) the EPA can and will implement a federal plan imposing standard s of performance on affected EGUs in states that do not submit approvable state plans. See Texas v. EPA , 726 F.3d 180, 193 (D.C. Cir. 2013) (where a state has “no intention of revising its SI P because of its disagreement with EPA’s regulation of greenhouse gases under the [Clean Air ] Act],” “invoking ‘cooperative federalism’ ... rings hollow”).

Furthermore, we disagree that we are expanding our authority to include wholesale energy market regulation. Our emission guidelines simply r eflect an achievable emissions limit through the application of the BSER and do not in themselve s require states or sources to implement the BSER. Moreover, these emission guidelines provide s tates with the flexibility to establish, implement, and enforce standards of performance and do not intrude on the regulatory domain of

the states. It cannot be said that because environm ental requirements may have an effect on the wholesale energy market that the EPA is therefore i ntruding into energy regulation. Certainly, in the legislative history of the 1970 CAA Amendments, Congress expressly identified power plants as a priority source category for regulation under CAA section 111.

Finally, for the EPA’s response to comments regardi ng docketing requirements under CAA section 307(d), see section 1.13.

1.5.3 Affected entities under Building Block 2

1.5.3.1: Legal authority

Comment 1 : Commenters asked what state or federal legal aut hority (emphasis on legal authority) can EPA cite that can force the owner of a combined cycle natural gas plant to operate their unit at 70 percent of capacity if they decide not to. Commenters concluded that if EPA can't cite that law, then how can we have a best availabl e system of emission reductions that is both enforceable and measurable as EPA requires.

Response 1 : We disagree with commenters. As an initial matte r, we note that we are not requiring any NGCC unit to operate at 70 percent of capacity if they determine not to. As we explain in sections V.A. and V.B. of the preamble, our emission guidelines simply reflect an323

achievable emissions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. That is, E PA is responsible for determining the level of emission limitation from the source category, while states have the responsibility of assigning emission requirements to their sources that will en sure their achievement of that level of emission limitation. States may fulfil their respon sibility by establishing emission standards or creating plans consistent with the guidelines. In d oing so, states will be able to choose from a wide range of emission reduction measures, includin g measures that are not part of the BSER. Further, we note that the building blocks are not b ased on an individual unit basis. Instead, the calculation is an average with substantial addition al headroom available. Therefore, if a number of NGCC units decide not to, or are unable to, oper ate at 70 percent, this does not mean that the 70 percent is not achievable or unreasonable. For a comprehensive discussion of building block 2, please see the preamble section V.D.

Comment 2 : Commenters stated that EPA cannot include Buildi ng Block 2 in a federal implementation plan because it does not have the au thority to make electricity dispatching decisions, explaining that the authority is reserve d for the States in the FPA. 16 U.S.C. - 824(b)(1). Commenters cited Congress' recognition o f the States' "traditional responsibility in the field of regulating electrical utilities for determ ining questions of need, reliability, cost and othe r related state concerns" in Pac. Gas & Elec., 461 U. S. at 205. Commenters continued, stating that States have the fundamental authority to deter mine whether to operate a vertically integrated or competitive market system and to establish param eters under which those systems operate, and, in many cases, the States have partnered with ISOs or RTOs to manage aspects of electricity dispatching and transmission and to ensure the cons istent and reliable delivery of electricity to consumers. Commenters said, within this context, St ates retain the authority to determine the rules and priorities for dispatching various electr icity generating units, taking into account cost, reliability, and other priorities such as the gener ation of renewable energy. Thus, commenters concluded, EPA cannot rely on increasing utilizatio n at existing NGCC facilities as part of a federal implementation plan when dispatching decisi ons are made by the State and implemented by the States or ISOs and RTOs. Commenters added th at to the extent that there is any residual federal authority over dispatching decisions at the federal level, it does not belong to EPA. See, e.g., New York, 535 U.S. at 19-20 ([T]he text of th e FPA gives FERC jurisdiction over the transmission of electric energy in interstate comme rce and the sale of electric energy at wholesale in interstate commerce. (Quoting 16 U.S.C . - 824(b))). Commenters provided example, to the extent that States participate in R TOs with interstate transmission of electricity, changes to dispatching priorities would be subject to federal oversight through FERC, not EPA. See 16 U.S.C. -- 824d, 824e. Commenters posited tha t the division of authority between federal and State authorities under the FPA is clear, and l eaves no role for EPA to play. Commenters said, in light of this clear statement from Congres s in the FPA, there is no basis to suggest that Congress intended to give EPA broad authority to re gulate electricity dispatching as a means of controlling pollution under Section 111(d). See Whi tman v. Am. Trucking Association, Inc., 531324

U.S. 457, 468 (2001) (Congress does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions- it does not, one might say, hide elephants in mouseholes.).

Response 2 : The EPA disagrees that its approach to the BSER i n the Clean Power Plan conflicts with the FPA or otherwise places the CAA in tension with that law. As explained in Section VII of the Legal Memo, the BSER is a technical determin ation of what means are best to achieve emission reductions from a particular class of faci lities. At the point of implementation of the emission standard, either in a state or federal pla n under section 111(d), the source still retains the flexibility to determine how it will meet the s tandard. Neither the state air regulator, nor the agency, will need to or be required to regulate spe cific dispatch decisions in order to meet the requirements of the final rule. For example, in a s tate implementing a mass-based emission trading program, the agency’s determined emission p erformance levels may set the mass budget, but the primary compliance obligation on the source is simply to hold allowances sufficient to cover emissions. Failure to do so could subject a s ource to state or federal CAA enforcement. But that need not involve the air regulator in any of the other choices the owners and operators of the affected EGUs make regarding their operations o r level of generation. So, to complete the commenter’s analogy, there is no “elephant.” (And i n any case, section 111(d), is not a

“mousehole.” See AEP v. Connecticut , 131 S. Ct. 2527, 2539 (2011) (“It is altogether f itting that Congress designated an expert agency, here, EPA, as best suited to serve as primary regulator of greenhouse gas emissions.”) (citing section 111(d))

.

1.5.3.3: 111(b)/111(d) issues

Comment 1 : Commenters stated Indiana is assuming that when a new NGCC unit goes online after 2016-2017, that unit will be subject to 111(b ) and not subject to 111(d). Commenters explained that through conversations with U.S. EPA staff, it has been conveyed that states will have the option to include new NGCC units into the 111(d) planning process, thus making them subject to 111(d) standards. Commenters added that in order to prepare a compliant state plan, Indiana needs to see this matter explicitly address ed in the rule, including how states can avoid legal pitfalls associated with regulating affected entities under both elements of Section 111 (new and existing).

Response 1 : Section VIII of the preamble discusses how new E GUs covered under the CAA section 111(b) rule are not allowable measures in s ection 111(d) state plans because the EPA

believes it would result in increased emission leak age. However, to address emission leakage under mass based state plans, Section VIII.J. also discusses how states may regulate sources subject to 111(b) as a matter of state law in order to ensure obligations regarding affected EGUs regulated under a section 111(d) state plan are met

.

Comment 2 : Commenters stated that a unit cannot be both a n ew unit and an existing unit. Commenters noted, under Section 111(a)(6), "[t]he t erm 'existing source' means any stationary source other than a new source." (Emphasis added.) Commenters said, in contrast, Section 111(a)(2) defines a "new source" as "any stationarysource, the construction or modification of325

which is commenced after the publication or regulat ions (or, if earlier, proposed regulations) prescribing a standard of performance under this se ction which will be applicable to such source." Thus, commenters concluded, EPA has no aut hority to subject new units to regulation under both Sections 111(b) and 111(d).

Commenters stated that Section 111(a)(6) states tha t an "existing source" means any stationary

source "other than a new source." Commenters remark ed that the plain statutory meaning is that "new sources" and "existing sources" are entirely s eparate categories of sources that cannot be combined. Commenters explained that in the Preamble , EPA asks for comment on whether EPA should, at some point, fold new units governed by S ection 111(b) into the proposed Section 111(d) existing unit program. Commenters said EPA i ndicates that while they are not proposing that new NGCC capacity is "part of the basis supporting the BSER," they state that many new NGCC units are being built and will likely be used as a CO2 mitigation strategy. Commenters said EPA then states, "Therefore, we invite commenton whether we should consider construction and use of new NGCC capacity as part o f the basis supporting the BSER. Further we take comment on ways to define appropriate state -level goals based on consideration of new NGCC capacity." Commenters believed this would, in effect, create a statewide cap on the state CO2 emission rate. Commenters argued EPA does not h ave the authority to combine these statutorily separated programs, given that the stat ute states that an "existing source means any stationary source other than a new source" and comm enters explained that bringing new gas units into the existing unit program would radicall y change Section 111 and the entire existing unit program as to its nature, reach and stringency with huge policy, feasibility and cost implications, creating a nationwide cap on CO2 emis sions from fossil EGUs. Section 111(d) applies to existing units only.

Response 2 : We have not finalized new natural gas as part of the BSER nor are we finalizing an approach whereby modified sources would remain exis ting sources.

Comment 3 : Commenters stated EPA's proposal is unlawful bec ause it would permit states to impose binding legal obligations on entities other than affected fossil fuel-fired EGUs. Commenters explained that a central component of th e flexibility touted by EPA is the so-called "portfolio approach" that would authorize states to impose binding legal obligations "on other affected entities (e.g., renewable energy and deman d-side energy efficiency measures) that

would reduce CO2 emissions from the affected EGUs." 79 Fed. Reg. at 34,853. Commenters believed this approach is unlawful because EPA and the states are prohibited from expanding standards of performance under Section 111(d) beyon d the source categories already subject to regulation under Section 111(b). Commenters stated that EPA proposes to define "affected entity" as "an affected EGU, or another entity with obligations under this subpart for the purpose of meeting the emissions performance goal requireme nts in these emission guidelines." Proposed 40 C.F.R. Section 60.5820, 79 Fed. Reg. at 34956 (e mphasis added). Commenters stated that the State Plan Considerations Technical Support Documen t (TSD) indicates that EPA intended to limit the scope of an affected entity to a "utilityentity that is not regulated by a state public utility commission, such as a municipal utility or a utility cooperative. Commenters said it could326

also be a private non-profit entity established to administer end-use energy efficiency and renewable energy deployment programs' non-profit en tities [that] are created by state legislation and overseen by state public utility commissions or state-regulated private utilities." [State Plan Considerations Technical Support Document, at 16-17 ] However, commenters said the proposed regulatory language defines an "affected entity" br oadly to any other entity identified by the state to help meet its emission goals. 79 Fed. Reg. at 34 956. Commenters noted that the regulatory text does not specifically limit it to the types of entities listed in the TSD, thus leaving the door open for a state to impose enforcement requirements on third parties such as industrial end users. [state must ensure that any compliance activity or measure must be enforceable for affected entities that are not affected EGUs. 79 Fed. Reg. a t 34953.] Commenters remarked that while the states and EPA are prohibited from imposing binding GHG emission reduction obligations on any entities other than affected EGUs, if EPA decid es to include other affected entities in the final Section 111(d) rule, commenters recommended t hat EPA revise its proposed regulatory definition of "affected entity" to align with EPA's intent as explained in the TSD and limit its scope to the utility entities that are not regulate d by a state public utility commission, such as a municipal utility or a utility cooperative, private non-profit entities established to administer enduse energy efficiency and renewable energy deployme nt programs, or entities that are created by state legislation and overseen by state public util ity commissions or state-regulated private

utilities. Commenters added that EPA and the states must make clear -both in these regulations and in state implementation plans- that third-partyparticipation in emission reduction programs is on a voluntary basis. Commenters said, by making participation voluntary EPA and the states can ensure that no third-party entity inadvertentlybecomes subject to regulatory obligations without its consent. Commenters agreed with EPA tha t electricity transmission and distribution efficiency improvements, the use of biomass-derived fuels, and new NGCC units should be available voluntary compliance options that are eli gible to participate voluntarily in a state implementation plan. See 79 Fed. Reg. at 34,923. Co mmenters observed that if EPA proceeds to finalize guidelines that permit states to allow for other entities such as electricity consumers to participate voluntary in emission reduction program , EPA and states needs to recognize the GHG emission reduction efforts in subsequent regulation s.

Commenters stated that EPA should allow states to a verage emissions from non-Section 111(d) generating units with emissions from "affected enti ties" for purposes of demonstrating compliance, and EPA should clarify in the final rul e that states have the option to average emissions from generating units that are not subjec t to regulation under Section 111(d) with emissions from affected EGUs for the purposes of ca lculating compliance. Commenters suggested this could include, for example, modified EGUs, reconstructed EGUs, and small units

that do not meet the definition of "affected EGU" u nder Section 111(d). Commenters said this would allow states to use these units in their comp liance calculations under Section 111(d), giving states employing a rate-based standard the f lexibility to determine how best to shift generation away from fossil-fuel fired EGUs to more efficient EGUs like new NGCCs. Commenters stated that allowing a state to include non-Section 111(d) generating units in their compliance calculations would not make these units subject to regulation under Section 111(d), nor would it require them to be factored into a sta te's goal calculation. Rather, commenters327

stated, allowing states to include non-Section 111( d) generating units in their compliance calculations furthers EPA's "portfolio approach," u nder which "[t]he state has flexibility...in imposing requirements on other [non-affected EGU] e ntities - as long as...the required emission performance level is met." 79 Fed. Reg. at 34,853, and indeed, EPA does not have the authority to subject non-Section 111(d) units, like new, modi fied, and reconstructed units, to regulation under both Sections 111(b) and 111(d). Commenters s tated, accordingly, the Class of '85 objects to EPA's proposal that "a modified or reconstructed source would be subject to both (1) the CAA Section 111(d) requirements that it had previously been subject to and (2) the modified source or reconstructed source standard being promulgated und er CAA Section 111(b)." 79 Fed. Reg. at 34,903. Further, commenters observed, the Group opp oses the proposed incorporation of redispatch to new NGCCs, which are regulated under Se ction 111(b), into Building Block Two. See NODA, 79 Fed. Reg. at 64,550. Commenters believ ed EPA's plan to subject modified and reconstructed units to requirements under both Sect ions 111(b) and 111(d) contravenes the clear statutory language in Section 111 and is beyond the scope of EPA's authority under the CAA, explaining that the CAA establishes two avenues for applying standards of performance to sources: (1) regulation of "new sources" under Sect ion 111(b), see 42 U.S.C. section 7411(b)(1)(B), or (2) regulation of "existing sourc e[s]" under Section 111(d), see S. 7411(d)(1)(A), and these two avenues are mutually e xclusive. Commenters stated that a unit cannot be both a new unit and an existing unit. Com menters said, under Section 111(a)(6),"[t]he term 'existing source' means any stationary source other than a new source." (emphasis added). Commenters noted, in contrast, Section 111(a)(2) de fines a "new source" as "any stationary source, the construction or modification of which i s commenced after the publication of regulations (or, if earlier, proposed regulations) prescribing a standard of performance under this section which will be applicable to such source." [ EPA's proposal to consider modified and

reconstructed units to be both "new" units and "exi sting" units at the same time is yet another example of how far EPA has strayed in this Proposed Rule from the authority granted to it by Congress under Section 111.] In light of the clear statutory language, commenters concluded, EPA cannot interpret Section 111(d) to apply to bot h new and existing units. [Chevron, 467 U.S. at 842-43 ("If the intent of Congress is clear, tha t is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously e xpressed intent of Congress.")] Commenters contended that EPA has provided no justification fo r its proposed approach of subjecting modified and reconstructed units to compliance obli gations under both Sections 111(b) and 111(d), and EPA's not providing any legal basis or policy justification for its determination that sources can simultaneously be subject to requiremen ts under both Sections 111(b) and 111(d) of the CAA clearly violates CAA Section 307. Commenter s noted Section 307(d)(3) requires that proposed rules "shall be accompanied by a statementof its basis and purpose." Further, commenters said the statement of basis and purpose must include a summary of "the major legal interpretations and policy considerations underlyin g the proposed rule." Commenters believed EPA does not do so here and commenters argued that prior to finalizing the Proposed Rule, EPA must make available its legal interpretation of how sources can be subject to both Sections 111(b) and 111(d) and provide the public with an op portunity for review and comment.328

Response 3 : To the extent the comment objects to the portfol io approach, which the EPA is not finalizing, the comment is moot.

Comment 4 : Commenters stated that any emissions standard pr omulgated pursuant to the authority of Section 111(d) of the Clean Air Act mu st utilize an "inside the fence" methodology to establish emission standards at each effected ge nerating unit ("EGU"), and while compliance plans can and should allow states to achieve compli ance through activities beyond the fence line, using facilities outside the plant site to establis h emission standard at such existing stationary sources exceeds EPA's authority under 111(d). Comme nters added that while Building Block 2 attempts to regulate behavior inside the fence by d irecting the dispatch of a state's generation resources, it exceeds EPA's authority under 111(d) by not establishing emission standards at the

EGU.

Response 4 : For the reasons discussed in section V.A. and V. B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y. We disagree that including building block 2 as partof the BSER does not lead to an emission standard applicable to affected EGUs. Pursuant to s ection 111, emission guidelines reflect the application of the BSER. These emission guidelines are provided to assist states in preparing satisfactory plans which establish standards of per formance for affected sources within their jurisdiction under section 111(d). In accordance wi th these plans, sources will need to comply with applicable emission standards, which could inc lude application of the BSER or other acceptable compliance measures.

1.5.4 Affected entities under Building Block 3

Comment 1: Commenters 23394 stated that regarding Block 3, ex cept possibly for renewable generation technologies such as biomass, EPA has no Section 111 authority over these generation technologies (nuclear, renewable) at all . Commenters said that first, they do not release any air pollution, preventing the EPA from making an endangerment finding involving

these units under Section 111. Commenters said thatfurther, the definition of stationary source requires that the source "emits or may emit any air pollutant." Commenters said since nuclear and non-biomass renewable generation emit no air po llutants of any type, it forecloses the ability of EPA to propose any rules regarding these generat ion technologies.

Commenters stated, renewable energy and nuclear pow er should not be included in the determination of BSER. Commenters said, EPA assumes in Building Block 3 that states can lower carbon emissions by deploying renewable energ y sources and zero-emitting sources such as nuclear power plants. Commenters did not believe that Building Block 3 - non-emitting

sources - should be included in the determination o f BSER because these "affected entities" would not be "affected electric generating unit(s)" as defined in the proposed rule. Commenters said, existing non-emitting sources, such as nuclea r, hydroelectric (hydro) and other RE generation sources have little effect on the emissi ons of existing affected EGUs. Commenters329

said, new nuclear, hydro, and RE generation may red uce the dispatch of existing affected

sources.

Response 1 : As explained in the final rule, we are not includin g nuclear energy within building block 3. In section V of the preamble we explain t he basis for our inclusion of renewable

energy.

Comment 2: Commenters stated Building Block 3 is outside the intent and precedence of Section 111 of the Act and should not be part of se tting the performance standard for this rule. Commenters said it would involve developing NEW gen eration facilities rather than measures to control emissions from existing units.

Commenters stated the CPP assumes as BSER the displ acement of coal by other generation, the addition of renewable energy and demand side manage ment programs (building blocks 2-3) which are not control technologies and should not b e considered to establish the BSER.

Commenters believed renewable energy programs are a matter of state policy and outside the scope of the EPA's regulatory authority under CAA 1 11(d). Commenters said, thus EPA should remove renewable energy from the Best System of Emi ssion Reduction (BSER) process used to set state goals, but allow renewable energy to be u sed for goal compliance.

Response 2: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reaso nable and within the scope of EPA’s authority in light of the statutory text, statutorycontext, statutory purpose, and legislative histor y.

Comment 3: Commenters stated the expansion of renewable energ y projects is beyond the authority of the EPA as required by the rule. Comme nters said EPA cannot set an RPS for Wyoming, as this goes beyond the jurisdiction of EP A.

Response 3: For the Reasons explained in Section V of the Prea mble and the legal memo, EPA

has concluded that its determination of BSER is wel l within the authority delegated to it under section 111 of the Clean Air Act. Contrary to the assertion in the comments EPA is not mandating that any state establish an RPS. Rather EPA has provided states with significant flexibility in designing their state plans. Renewab le energy is one potential measure that may be employed, consistent with the state flexibility pri nciple that is central to this program. This rule does not regulate renewable energy sources. It iden tifies the BSER for affected sources, which entails substitute generation to zero-emitting gene rators, but it does not impose emissions requirements on such sources.

Comment 4: Commenters stated including renewables and energy efficiency in goal-setting infringes on state and local authority.330

Commenters stated given Florida's existing statutor y framework, and EPA's failure to take this into account, its application of BSER in Florida is unlawful. Commenters said with regards to Building Block 3, no Florida agency has authority t o establish RPS. Commenters said unlike some state utility commissions, the FPSC does not d irectly oversee integrated utility resource planning, although it annually reviews Ten-Year Sit e Plans submitted by all electric utilities and it reviews resource planning decisions on an ad hoc basis when electric utilities petition for need determinations for new steam electric generating capacity. Commenters said although the FPSC briefly had authority to propose an RPS, the Legisl ature repealed that authority in 2012. See Ch. 2012-117, Laws of Fla. (repealing portions of Secti on 366.92, F.S., relating to RPS). Commenters said legislative action would be require d before this building block could be implemented under Florida law.

Response 4: We disagree with commenters. As an initial matter, we note that the final rule does not include demand-side energy efficiency – buildin g block 4 – as a component of BSER. For the Reasons explained in Section V of the Preamble and the legal memo, EPA has concluded that

its determination of BSER is well within the author ity delegated to it under section 111 of the Clean Air Act. Contrary to the assertion in the co mments EPA is not mandating that any state establish an RPS. Rather EPA has provided states w ith significant flexibility in designing their state plans. Renewable energy is one potential meas ure that may be employed, consistent with the state flexibility principle that is central to this program. This rule does not regulate renewable energy sources. It identifies the BSER for affected sources, which entails substitute generation to zero-emitting generators, but it does not impose em issions requirements on such sources.

Comment 5: Commenters stated the CPP violates the RE Act and over sixteen additional statutes establishing the federal mandate that rura l electric cooperatives reliably serve rural

America. Commenters said the CPP will force G&Ts li ke Hoosier Energy to violate the RE Act mandate, FERC requirements and state laws requiring reliable service. Commenters said the FERC, NERC, Regional Transmission Organizations (RT Os), Independent System Operators (ISOs) and state reliability analyses have all iden tified significant reliability concerns with the

CPP. Commenters said because of their location far from other sources of generation, and because of the unique cost constraints faced by man y rural electric cooperatives, gas-fired and

RE sources are often unavailable. Commenters said t his makes the emission reductions that EPA assumes can be obtained from Building Blocks 2 and 3 unrealistic. Commenters said if rural electric cooperatives retire coal units to achieve the CPP's goals, inaccessibility of NGCC and RE sources will make it difficult, if not impossibl e, to continue to provide reliable service to their

members.

Response 5: The EPA does not agree with commenters that the fi nal rule will cause reliability issues. The rule does not impede current dispatch p rotocols about how these units are operated, and provides many flexible options for compliance, such as emission rate credits, so that these entities can work with their respective states duri ng state plan development. So the commenter is incorrect to maintain that reliable operation of th eir units is restrict in conflict with their331

mandates. Moreover, the rule addresses reliability in both planning and potential unanticipated emergencies (See Section VII.G.2)

Comment 6: Nu clear: EPA lacks authority to include nuclear facil ities in Building Block 3

Commenters said the EPA unlawfully encroaches upon the regulatory domain of the NRC by implicitly assuming that about 30% of existing nucl ear capacity, which is due to expire before 2030, will be available. Commenters said the EPA ca n only rely on the continuation of this existing nuclear reactor capacity by assuming that the NRC will approve as safe the extension of those reactor licenses. Such an assumption undermin es the NRC's statutory responsibility to deny license renewal applications if the NRC concludes t hey would pose an unreasonable risks to public health and safety. Commenters said NRC has c onceded that renewal of a reactor license

should not be allowed unless the licensee can demon strate that it has taken measures to address "the detrimental effects of aging" during the react or's license renewal term. See Final Rule, Nuclear Power Plant License Renewal; Revisions, 60 Fed. Reg. 22,461, 22,464 (May 8, 1995). See also 10 C.F.R. Section 54.29(a)(1) (requiring a reasonable assurance finding regarding a licensee's program for "managing the effects of agi ng" on certain reactor components. Commenters said EPA should avoid trespassing on NRC 's unique regulatory domain by presuming a positive outcome for NRC license renewa l reviews. Commenters said even assuming for purposes of argument that such encroac hment is lawful, it would be extremely poor public policy for the EPA to build extended operati on of aging and increasingly dangerous reactors into its regulatory scheme as a fait accom pli.

Response 6: We disagree with commenters. Further, the final rul es does not include nuclear in building block 3. For a more comprehensive discussi on of this issue, please refer to preamble

section V.A.

Comment 7: Commenters stated that EPA cannot include Building Block 3's reliance on

avoided retirement of nuclear facilities in a feder al implementation plan because it does not have the authority over the operation of such facilities . Commenters noted, under the Atomic Energy Act, the NRC is given the authority to issue, renew , and, if necessary, revoke commercial licenses for nuclear energy facilities. 42 U.S.C. - 2133. Further, commenters stated that the savings clause in the Atomic Energy Act states that"this section shall not be deemed to confer upon any Federal, State, or local agency any author ity to regulate, control, or restrict any activities of the Commission." Id. S. 2018. Thus, c ommenters concluded that EPA lacks the authority to compel a nuclear energy facility to re main in operation and could not overrule a decision by the NRC not to renew an existing facili ty's license. Given EPA's lack of authority over nuclear energy generation, commenters asserted that it cannot rely on avoided nuclear generating capacity as part of a legally enforceabl e federal implementation plan.

Commenters contended that EPA's interpretation of i ts authority under Section 111(d) conflicts with the Federal Power Act, the Public Utility Regu latory Policies Act, and the Atomic Energy Act. Commenters added that pursuant to the Atomic E nergy Act, Congress granted the NRC exclusive authority to regulate radiation hazards a ssociated with the construction, operation, and332

decommissioning of nuclear facilities, (42 U.S.C. S ection 2011-2296b) and despite this explicit grant of authority over radiation safety, Congress made sure to preserve the existing division of responsibility between the federal government and s tates over resource planning and over the energy sector more generally, providing in Section 271 that nothing in the Atomic Energy Act "shall be construed to affect the authority or regu lations of any Federal, State, or local agency with respect to the generation, sale, or transmissi on of electric power produced through the use of nuclear facilities licensed by the [Nuclear Regu latory] Commission." (Id. at 2018) Commenters said this exclusion was explained by Sen ator Hickenlooper, the floor manager of the Senate bill, as follows: "Once [electricity] is produced it should be subject to the proper regulatory body, whether it be the Federal Power Co mmission [FERC] in the case of interstate transmission, or State regulatory bodies if such ex ist, or municipal regulatory bodies. We feel

that there is no difference and that it should be treated as all other electricity which is regulated by the public . . . [Section 271] is designed to ke ep the regulatory authority exactly as it is now, traditionally and under the law." (100 Cong. Rec. 1 1567 (1954) (statement of Sen. Bourke Hickenlooper)) Thus, commenters stated, when Congre ss has intended to authorize federal regulation of electric power, it has done so explic itly, and it has vested that authority in other agencies. More importantly, commenters added, Congr ess has just as clearly reserved to the states the authority to regulate the production of electric power, including the type of generating facilities, within their borders. Commenters stated , if Congress has to date been unwilling to give FERC or the NRC authority over generation resource planning, including demand-side programs, it cannot possibly have intended to vest that authority in EPA in 1970 under Section 111(d) of the CAA without having said.

Commenters also believed that EPA should not procee d with additional GHG standards of performance for other source categories, saying tha t in addition to the fact that it has no legal obligation to do so, the EPA should opt not to prop ose GHG standards of performance for other source categories for the reasons identified below.

Response 7: We disagree with commenters. Additionally, the fina l rules does not include nuclear in building block 3. For a more comprehensi ve discussion of this issue, please refer to preamble section V.A. We note that the additional steps the EPA may or sh ould take with respect to GHG standards of performance for other source ca tegories is outside the scope of this rulemaking. As the Agency has previously explained, however, itis taking a step by step common sense approach to regulating GHG emissions. These common sense steps are laid out

in the Climate Action Plan and the President’s Meth ane Strategy.

1.5.5 Affected entities under Building Block 4

Comment 1: Commenters said, the current laws of their states d o not facilitate the ability to meet building block 4 and mandate residential energ y efficiency measures. Commenters said, the proposed rule is based on actions the state cannot currently initiate and has created an333

unattainable goal that cannot be a valid standard o f performance. Commenters said, due to this fact they recommend either removing or modifying bu ilding block 4.

Commenters stated, building block #4, energy effici ency (EE), plays an important role in EPA's development of state-by-state CO2 reduction require ments. Commenters said, however, EPA has identified no authority for regulating customer end -uses of electricity. Commenters said, energy policies that include EE programs and goals are tra ditional areas of regulation reserved for states under the Tenth Amendment, and included in integrat ed planning processes in states with vertically integrated utilities. Commenters said, t hus, the use of building block #4 in setting the Section 111(d) proposed standards is not appropriat e.

Commenters stated that NERC notes that EPA has proj ected that energy efficiency will grow faster than electricity demand, which NERC characte rizes as an assumption with "complex" implications. Commenters said NERC states that if E PA's aggressive rate of efficiency growth cannot be met, it will be necessary to adopt additi onal CO2 emission reduction measures, presumably through further reductions in fossil fue l generation that may not themselves be

achievable.

Commenters believed energy efficiency programs are a matter of state policy and outside the scope of the EPA's regulatory authority under CAA 1 11(d). Commenters said, thus EPA should remove energy efficiency from the BSER process used to set state goals, but allow energy efficiency to be used for goal compliance.

Commenters stated, the Proposed Regulation is based on an unprecedented and unsupportable legal interpretation that the "best system of emiss ions reduction" for existing sources can include homeowners and retail customers that neither genera te any power nor produce emissions. Commenters said, the Proposed Regulation asserts th at statutory provisions for the regulation of existing generation facilities that are sources of emissions can apply more broadly to, and make subject to federal enforcement, other entities, cit izens, and activities. [79 Fed. Reg. 34,901.] Commenters said, for example, homeowners' installat ion of more efficient windows or light bulbs, which are common energy efficiency measures, would be subject to federal enforcement under EPA's proposal. Commenters said, this stretch es the Clean Air Act beyond recognition and forces the carbon emission rates proposed for Virgi nia so low that, as discussed above, the rate for existing sources is far more stringent than the rate for new sources using the best available control technology.

Commenters stated, including energy efficiency as p art of a "best system of emission reduction" also changes the "standard for emissions of air pol lutants" for existing sources of emissions from a measurable standard for which accountability can be ensured to a compliance requirement based on layer upon layer of assumptions and estima tes. Commenters said, the Proposed Regulation and supporting documents recognize that "many states with energy efficiency programs use different input values and assumptions " to estimate energy savings from such programs. [Technical Support Document, State Plan C onsiderations at 42.] Commenters said, this is because estimates of energy savings from th ese programs are just that - estimates.334

Commenters stated to use such estimates - which req uire many assumptions about, among other things, how retail customers would have acted but f or such energy efficiency programs - to calculate an emission standard for existing sources of pollutants moves an emission standard from science to, at best, a realm of art where ther e are many different schools of thought.

Commenters stated, in light of intervening guidance of the Supreme Court in its Utility Air Regulatory Group decision, the EPA need not, and sh ould not, wait until a subsequent court decision - as proposed in the Proposed Regulation [ 79 Fed. Reg. 34,892.] - to sever the energy efficiency building block. Commenters said, althoug h legitimate state and federal initiatives can be undertaken to encourage energy efficiency, the E PA's proposal to subject such consumer activity to regulation enforceable under the Clean Air Act is ultra vires and unworkable.

Response 1: As explained in Section V.B. of the preamble we are not including demand-side energy efficiency – building block 4 - as a compone nt of BSER. We disagree with the comment that the section 111(d) standards are more stringen t than the section 111(b) standards applicable to new sources. Further, we explain in the Legal Me morandum why the section 111(b) and (d)

standards are based on different determinations of the BSER.

Comment 2: Commenters stated regardless of the EE savings le vels proposed by EPA, no EE savings will be achieved unless current state- and administrator-run EE programs are both continued and expanded. Commenters explained that t he regulatory environment in each state determines the size of the budget for customer-fund ed EE programs; the budget determines the scope and breadth of the EE programs, and regulator y frameworks that support utility investments in EE programs (through cost recovery m echanisms or performance incentives), therefore, are the key to achieving actual EE savin gs. Commenters remarked that EPA's analysis does not make any mention of this relationship betw een supportive regulatory policies and EE savings, and refers to KDHE and KCC comments, which explain that KDHE does not have authority for the energy efficiency programs in Kan sas that authority resides with the KCC. In addition, commenters remarked, both the KDHE and KC C state that authority does not reside at

EPA.

Commenters stated that under Building Block 4, EPA established demand-side energy efficiency requirements for the states; and these are modeled on the current Energy Efficiency Portfolio
Standards in the 26 states that have them. Commente rs believed that EPA does not have the authority to require any actions outside those impo sed on existing sources; setting aside this legal argument, the methodology the EPA uses to set these state efficiency standards is arbitrary and highly flawed.

Commenters stated that while they strongly support voluntary demand-side energy efficiency improvements, the believe significant portions of t he proposed rule are unlawful because the EPA lacks the authority to fundamentally restructur e the energy sector under CAA Section 111(d). Commenters agreed the EPA is authorized to regulate existing sources within a specific source category (here fossil fuel-fired EGUs), and for this reason, commenters believed that the ESPS will not withstand judicial scrutiny. Commente rs cited Utility Air Regulatory Group v.335

EPA, 134 S. Ct. 2427, 2444 (2014) (Justice Scalia d elivering the opinion of the Court with respect to Parts I and II, warned "[w]hen an agencyclaims to discover in a long-extant statute an unheralded power to regulate 'a significant portion of the American economy,' Brown & Williamson, 529 U.S., at 159, 120 S. Ct. 1291, we t ypically greet its announcement with a measure of skepticism. We expect Congress to speak clearly if it wishes to assign to an agency decisions of vast 'economic and political significa nce.' Id., at 160, 120 S. Ct. 1291.... ").

Commenters believed that EPA lacks authority under the CAA to impose requirements beyond the boundaries of the "affected sources" subject to Section 111 regulation, in this case, the category of existing EGUs. Moreover, commenters bel ieved states lack any authority that could mandate energy efficiency requirements on consumers of electricity.

Response 2: As explained in Section V.B. of the preamble, we ar e not including demand-side energy efficiency – building block 4 -as a componen t of BSER.

Comment 3: Commenters stated that EPA's proposal to expand BS ER beyond the fence line is impermissible. Commenters asked, "by what metrics w ill EPA, a State, or a source evaluate demand reduction? How will they distinguish between demand growth and efficiency improvements?" Commenters asserted that nowhere has EPA attempted to answer these questions. Commenters believed such an all-encompas sing plan to reduce demand is not within the experience, competence, or jurisdiction of EPA. Commenters said there is neither the administrative record nor the programmatic structur e to support such an initiative. Commenters said, to call such ill-defined, untested efforts a "best system of emission reduction" is to deny any meaning or sense to the term. Commenters noted (ver batim) that vital to the Supreme Court's decision in UARG that EPA may regulate greenhouse g ases at least to some extent was the Court's observation that EPA was "not talking [in t he rules before the Court] about extending EPA jurisdiction over millions of previously unregu lated entities, but about moderately increasing the demand EPA . . . can make of entitie s already subject to its regulation." [134 S. Ct. at 2448-49] Commenters said the Court emphasized th at EPA should not interpret its narrow decision largely upholding EPA's rules to allow a v ast jurisdictional expansion. In particular, commenters said the Court rejected EPA"s assertion of "newfound authority to regulate millions of small sources' including retail stores, offices, apartment buildings, shopping centers, schools, and churches." [Id. at 2446] Yet, commenters observ ed, that is the jurisdictional expansion EPA contemplates in Building Block 4. Commenters stated that when the Agency calls or demand reduction as a means of controlling emissions from the production of a good, it is calling for the regulation of millions of small actions, by entitie s that are not even "sources" under the Clean Air Act, before they hit the grid, and this is the type of expansion of regulatory authority rejected by the UARG Court.

Commenters stated that including energy efficiency as part of a "best system of emission reduction" changes the "standard for emissions of a ir pollutants" for existing sources of

emissions from a measurable standard for which acco untability can be ensured to a compliance requirement based on layer upon layer of assumption s and estimates. Commenters explained that the Proposed Regulation and supporting documents re cognize that "many states with energy336

efficiency programs use different input values and assumptions" to estimate energy savings from such programs. [Technical Support Document, State P lan Considerations at 42], and this is because estimates of energy savings from these prog rams are just that - estimates. Commenters

said that to use such estimates to calculate an emi ssion standard for existing sources moves an emission standard from science to, at best, a "real m of art" where there are many different schools of thought. Commenters continued, stating t hat at the accountability stage, the inclusion of demand-side energy efficiency programs becomes e ven more problematic and unsupported by the Clean Air Act. Commenters asked, "What if the r etail customers and homeowners integral to these programs do not act the way they are assumed or expected to" [See, e.g., The Breakthrough Institute, Energy Emergence: Rebound & Backfire as Emergent Phenomena (Feb. 2011)] Under the Clean Air Act, how can either these homeowners (who are not within the scope of 111(d)) or the existing carbon emitters (who are within the sc ope of 111(d), but are not responsible for the actions of homeowners) be held accountable? Indeed, most aspects of a homeowner's everyday life that affect his or her electricity consumption are not matters of interstate commerce, much less the regulatory construct of the Clean Air Act. " Commenters asserted that the Proposed Regulation would place plainly excessive demands on state governmental resources for the foreseeable future, and it would transform EPA's re gulatory authority by expanding it beyond the fence line of existing power plants (and other actu al emitters) and into, among other things, the homes of citizens. Commenters closed, stating that in light of intervening guidance of the Supreme Court in its Utility Air Regulatory Group d ecision, the EPA need not, and should not, wait until a subsequent court decision - as propose d in the Proposed Regulation's - to sever the energy efficiency building block. Commenters stated that although legitimate state and federal initiatives can be undertaken to encourage energy e fficiency, the EPA's proposal to subject such consumer activity to regulation enforceable under t he Clean Air Act is ultra vires and
unworkable.

Response 3: As explained in Section V.B. of the preamble, we are not including demand-side energy efficiency – building block 4 -as a componen t of BSER. In the preamble and the legal memo we describe why the remaining building blocks constitute BSER.

Comment 4: Commenters stated EPA's reliance on demand respons e as part of the source of BB No. 4 reductions is especially untimely since the D .C. Court of Appeals has recently found that the Federal Power Act does not grant the FERC autho rity over demand response, and for EPA to establish an enforceable goal, based on the expecte d exercise of authority that Congress has reserved exclusively for states, raises significantlegal questions.

Response 4: As explained in Section V.B. of the preamble, we ar e not including demand-side energy efficiency – building block 4 -as a componen t of BSER. Building block 4 does however remain an important compliance options that states will be able to evaluate in developing their state plans. We note that the Supreme Court has gr anted cert. in the reference matter and oral argument is expected this fall.

Comment 5: Commenters stated that if EPA authorizes States to regulate additional sources beyond affected EGUs and make them responsible for mandatory reductions, electricity337

consumers - including those in the manufacturing an d industrial sectors - that implement energy efficiency measures with this rulemaking should be exempted from, or given credit towards, compliance with any subsequent GHG regulation for o ther sectors under CAA Section 111.

Response 5: While states may decide to regulate additional sou rces as part of a state measures approach, we have concluded that making such limits federally enforceable would be inappropriate. Questions regarding what EPA would d o in a subsequent Section 111 standard are beyond the scope of this rulemaking.

1.5.6 Other

Comment 1: Commenters stated that in formulating its state go als, EPA assumed building block 2 reductions (i.e., shifting to NGCC generation) wo uld be accomplished by 2020. Commenters believed there are significant impediments to this, and, as reflected in the NODA, EPA now recognizes two of them and concedes this is a signi ficant problem for states like Texas where "building block 2 results in large amounts of the o verall required CO2 reductions relative to other building blocks."[79 Fed. Reg. at 64,544] Com menters remarked that the NODA identifies two significant issues that prevent states from mee ting the 2020 interim deadline that EPA proposed - the need for additional infrastructure a nd stranded assets - and as a work-around to these obvious issues, EPA suggests a "glide path" i n lieu of the currently calculated reduction mandated in 2020. Commenters agreed that these are critical flaws in EPA's proposal, but the quick fix EPA is suggesting is not adequate nor can meaningful comment be developed until EPA issues an actual proposal to address these issu es. Commenters encouraged EPA to address them in a revised proposal that is published for pu blic comment. Commenters stated that EPA acknowledges that infrastructure improvements are n eeded before natural gas units could be ramped up to operate at a higher capacity factor bu t EPA's proposed glide path is not the answer to this issue. Commenters argued that EPA does not have the authority, nor is it appropriate, for EPA to direct a state's infrastructure development through Section 111(d). Commenters stated, whether EPA exceeds its authority by requiring the infrastructure in 2020 or in 2030, it is still coloring outside the lines of the authority that Co ngress provided in the CAA.

Response 1: We disagree with commenters. However, in the final rule, we address timing concerns, in part, by adjusting the compliance time frame from a 10-year interim period that begins in 2020 to an 8-year interim period that beg ins in 2022, and by refining the approach for meeting interim CO 2 emission performance rates to be a gradual glide p ath separated into three steps, 2022-2024, 2025-2027, and 2028-2029, that is also achievable “on average” over the 8- year interim period. In response to the concerns of commenters that the proposal’s 10-year interim target failed to afford sufficient flexibil ity, the final guidelines’ approach will provide states with realistic options for customizing their emission reduction trajectories.

Comment 2: Commenters asserted that the EPA is required to i dentify a “best system of emission reduction ... adequately demonstrated” (BSER ) for each affected EGU. Commenters stated that in light of the diversity of the electr ic power industry, the EPA might be obliged to338

make numerous subcategorizations, with a separate B SER for each one. Commenters stated that this process is necessary to avoid imposing unreaso nable costs on any individual affected EGU.

Response 2 : We disagree with this comment. We may identify a set of measures as the BSER as long as their costs meet the D.C. Circuit’s cost cr iteria across the industry, even if the costs are higher for individual sources. In this rule, howeve r, this issue is moot because the costs for a typical EGU are reasonable, and all sources have a wide range of methods available to achieve the emission performance standards, whether through implementation of the BSER or otherwise. In part because we reasonably expect st ates to authorize emission trading, few, if any, individual EGUs may be expected to find the costs of compliance with em ission standards that reflect the emission performance rates in the guide lines to be greatly in excess of the costs to a typical plant. The various mechanisms that individu al affected EGUs can use to access all of the building blocks are discussed in section V.A.5., V. C., V.D., and V.E. of the preamble and in the Legal Memorandum.