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2 - 1 **CHAPTER 2 CONTROL STRATEGIES**  **2 .1**  **Synopsis** This section defines the source categories affected by the proposal, outlines regulatory actions included in the analytical baseline, and describes the control strategies and regulatory alternatives for new, modified, reconstructed, and transitional sources. Existing EGU GHG sources are not addressed in this action , but will be the subject of a subsequent action by the EPA. **2 .2**  **Definition of Affected Sources 2** **.2.1 Electric Utility Generating Unit**  For the pu rposes of this rule, the EPA is proposing to define an EGU as any fossil fuel fired combustion unit that has the potential to produce more than 25 MW electrical output and serves a s a generator that produces electricity for sale, with the exception of simp le cycle turbines. For this rule, the term EGU includes steam generating units (“boilers”), NGCC combustion turbines and their associated heat recovery steam generator (HRSG) and duct burners, and Integrated Gasification Combined Cycle (IGCC, "coal gasific ation") units – including their combustion turbines and associated HRSGs. A unit that cogenerates steam and electricity or that cogenerates feedstocks (e.g., hydrogen or hydrocarbons from an IGCC) for chemical or fuel production and supplies more than one -third of its potential electric output capacity and more than 25 MW output to any utility power distribution system for sale is also considered to be an EGU for the purposes of this rule. This rule does not cover simple cycle turbines. **2 .2.2**  **New Sources** S ources affected by the new source provisions of the proposal are sources that are both considered “EGUs” and are considered “new” as defined by this rule. T he general NSPS provisions (40 CFR Part 60) define a new source a s one that begins construction (or reconstruction) after the date the provisions are proposed. CAA section 111(a)(2) defines a “new source” as “any stationary source, the construction or modification of which is commenced after publication of regulations (or, if early, proposed regulations ) prescribing a standard of performance under [CAA section 111] which will be applicable to such source.” In contrast, CAA section 111(a)(6) defines an “existing source” as “any stationary source other than a new source.” The definition of a “new source” a pplies for purposes of this rulemaking, except that special considerations come into play for***E.O. 12866 Review– Draft– Do Not Cite, Quote, Or Release During Review ***

2 - 2 sources undertaking physical or operational changes (modified sources) , transitional sources, and sources undertaking reconstruction. **2 .2.3**  **Modified Sources** T he E PA does not have a sufficient base of information to develop a proposal for the relatively few affected sources that may take actions that would constitute “modifications , ” as defined u nder the EPA’s NSPS regulations, and therefore be subject to requirements for new sources. A modification is any physical or operational change to a source that increases the amount of any air pollutant emitted by the source or results in the emission of any air pollutant not previously emitted. However, projects to install pollution controls required under other CAA provisions are specifically exempted from the definition of “modifications” under 40 CFR 60.14(e)(5) , even if they emit CO 2 as a byproduct . The significant majority of projects that the EPA believe s EGUs are most likely to undertake in the foreseeable future that could increase the maximum achievable hourly rate of CO 2 emissions would be pollution control projects that are exempt under this defini tion . More details on the approach for modified sources can be found in the preamble. EPA is not proposing a standard of performance for modifications at this time . As a result, sources that undertake modifications will be treated as existing sources and t hus not subject to the requirements proposed in this notice, although they would be subject to requirements that the EPA intends to propose separately for existing EGUs. The EPA is soliciting comment on the treatment of modified sources and, depending on t he information received, may issue proposed standards of performance in the future. **2 .2.4**  **Transitional Sources** This proposed rule sets no standard for transitional source s, although these sources may be subject to an existing source standard in a subsequent rulemaking. In th is proposal, EPA identifies transitional sources as those sources that have received permits to construct, but have not actually commenced construction . EPA believes that there are approximately 1 5 units that would be classified as transitional sources (see Appendix 2 A for a list of potential transitional units) . EPA is proposing that as long as these units commence construction within one year of the e ffective date of this proposal, these sources will be classified as transitional sources for the purposes of this rule and will not be subject to the NSPS . Historically, obtaining a permit does not guarantee that a unit will be constructed. In the last 1 0 years, 85 coal plants have been permitted. Of those, 40 (or less than half) have***E.O. 12866 Review– Draft– Do Not Cite, Quote, Or Release During Review ***

2 - 3 actually commenced construction. Thirty projects have been cancelled and approximately 1 5 sources (the transitional sources) have active permits. EPA note s that many variables in addition to permitting appear to contribute to the likelihood of project completion . Based on this history and current economic conditions in particular, not all units are likely to proceed . EPA believes the transitional units that are most likely to commence construction are those that have received government incentives to install CCS. These units would be able to commence construction within the proposed rule time -frame. **2. 2** **.5 Reconstructed Sources**  The EPA’s CAA section 111 regulations provide that reconstructed sources are to be treated as new sources and, therefore, subject to new source standards of performance. The regulations define reconstructed sources, in general, as existing sources : (i) that replace components to such an extent that the capital costs of the new components exceed 50 percent of the capital costs of an entirely new facility and (ii) for which compliance with standards of performance for new sources is technologically and economically feasible ( 40 CFR 60.15 ) . Historically, very few power plants have undertaken reconstructions. We not aware that any power plants are presently planning any project that could meet the requirements for a reconstruction. In light of this limited experience concerning reconstructions, the Agency lacks adequate information that is needed to propose a standard of performance for reconstructions . EPA is soliciting comment o n the type of source that will unde rtake reconstruction ; the type of changes; the extent of emissions increases; and the type of control measures, including their cost and emissions reductions, . T he EPA is not proposing standards of performance for reconstructions at this time, but is instead soliciting comment on two different options. Under the first, given the lack of informa tion availabl e on potential reconstructions, we would not promulgate a standard of performance concerning reconstructions when we finalize this action, but, depending on the information we receive, we may propose and finalize such a standard at a later time. Under the second option, we would finalize a standard of performance. Under one sub - option, we would finalize a standard of 1,800 lb CO 2/MWh (gross). This would be consistent with the first phase requirement of the alternative compliance option using a 30 -year average and would mean upgrading the unit to an efficiency level consistent with some of the best performing existing units. A second sub - option would treat reconstructed sources the same as any other new source (e.g. subject to an emission limit of 1,000 lb CO 2/MWh). This sub - option cou ld be based on the view that if the owner of a source plans to invest enough capital into an existing unit to***E.O. 12866 Review– Draft– Do Not Cite, Quote, Or Release During Review ***

2 -4 reach the reconstructed threshold, it is likely with the intent of significantly increasing the life of the plant. The purpose of this option woul d be to avoid creating an incentive for an owner to forego building a new clean facility, in favor of merely reconstructing an existing facility that operated with higher emissions. **2.2.6 Existing Sources**  For the purposes of this rule an existing EGU is defined as any fossil fuel -fired combustion unit that has the potential to produce more than 25 MW output and serves a generator that produces electricity for sale and was in operation or commenced construction on or before publi cation of this proposed rul e. Existing sources are not covered in this proposed action , but will be addressed in a subsequent rulemaking by the EPA. **2 .**  **3 Control Strategies**  This proposal requires that all new fossil -fuel fired units with greater than 25 MW c apacity be able to meet a n emission rate standard of 1 , 000 lb CO 2/ MWh calculated over a rolling 12 - month period . It also proposes an alternative compliance option that would allow units to meet the 1 , 000 lb CO 2/MWh standard using a 30 -year averaging period. These standards could be met by NGCC generation with no additional GHG control or coal -fired generation using carbon capture and sequestration technology. **2. 4**  **Analytical Baseline**  EPA used IPM v.4.10 to assess the baseline conditions described for the proposed new source performance standards . IPM is a dynamic linear programming model that can be used to examine the economic impacts of air pollution control policies for CO 2 and other air pollutants throughout the contiguous U.S. for the entire power system. The modeling conducted for this proposal is discussed more extensively in Chapter 5 of this RIA. Documentation for IPM can be found in the docket for this rulemaking or at http://www.epa.gov/air markets/progsregs/epa - ipm/index.html . For more information on the analytical baseline see Chapter 5 of this report. **2 .5**  **Emission Reductions** As will be discussed in more detail in Chapter 5 of this RIA, the EPA anticipate s that the prop osed EGU GHG NSPS will result in negligible changes in GHG emission s over the analysis period ( through 2020 ) . Even in the absence of this rule, t he EPA expects that owners of new units will choose generation technologies that meet these standards due to expected economic***E.O. 12866 Review– Draft– Do Not Cite, Quote, Or Release During Review ***

2 - 5 conditions in the marketplace. Likewise, we anticipate that this rule will have negligible costs, quanti fied benefits, and impacts on the price of electricity, labor markets, or the economy.***E.O. 12866 Review– Draft– Do Not Cite, Quote, Or Release During Review ***

2A- 1 **APPENDIX 2A POTENTIAL**  **TRANSITIONAL UNITS Plant Name**  **Size CO**  **2 Mitigation Plan**  **Location** Trailblazer 600 MW CCS – EOR (supercritical PC) TX Taylorville 602 MW CCS – EOR/Geologic (IGCC) IL Texas Clean Energy Project 400 MW CCS – EOR (IGCC) TX Cash Creek Generation 761 MW CCS - IGCC KY Power County Advanced Energy Center 520 MW CCS – EOR (IGCC) ID Good Spring 270 MW CCS – IGCC PA Limestone 3 750 MW Agreement to capture or offset 50% of CO 2 (subcritical PC) – CCS ready TX Holcomb 2 895 MW None (supercritical PC) KS White Stallion 1320 MW None (subcritical CFB) TX James De Young 78 MW None (subcritical CFB) MI Wolverine 600 MW None (subcritical CFB) – CCS ready MI Coleto Creek 650 MW None (supercritical PC) – CCS ready TX Washington County 850 MW None (supercritical PC) GA Bonanza 110 MW None (subcritical CFB, waste coal) UT Two Elk 250 MW None (subcritical PC, waste coal) – CCS ready WY Note: This table does not reflect an official list of transitional sources, but instead reflects sources that could potentially be considered transitional under the proposed regulation. PC = pulverized coal CCS = carbon capture and storage CFB = circulating fluidized bed EOR = enhanced oil recovery IGCC = integrated gasification combined cycle