From: Hoffman, Howard [mailto:hoffman.howard@epa.gov] 

Sent: Sunday, June 01, 2014 04:26 PM Eastern Standard Time 

To: Higgins, Cortney 

Cc: Tsirigotis, Peter <Tsirigotis.Peter@epa.gov>; Wayland, Robertj 

<Wayland.Robertj@epa.gov>; Culligan, Kevin <Culligan.Kevin@epa.gov> 

Subject: One more thing -- RE: Legal Memo -- revised draft 

Cortney – in the last draft, we should have included a footnote, as follows: 

In the clean version, on p. 42, at the end of the second full paragraph, after the phrase “(in which 

case, the standard will reflect a relatively larger part of the emission performance level)”, add new 

fn. 79, and renumber the rest of the footnotes accordingly. 

In the red-line version, on p. 47, at the end of the carryover paragraph, add this as new fn. 82, and 

renumber the rest of the footnotes accordingly. 

Attached are a revised red-line version and clean version with this addition. 

Howard J. Hoffman US EPA-OGC-Air (202) 564-5582 (voice) (240) 401-9721 (cell) (202) 564-5603 

(fax) 

CONFIDENTIAL communication for internal deliberations only; may contain deliberative, attorneyclient, attorney work product, or otherwise privileged material; do not distribute outside EPA or 

DOJ. 

<< Leg-Mem_05-30-14_06-01-14_4-15pm_red-line.docx >> 

<< Leg-Mem_06-01-14_4-15pm_clean.docx >> 
1 

Legal Memorandum for Proposed Carbon Pollution Emission Guidelines for 

Existing Electric Utility Generating UnitsPower Plants

Introduction 

The purpose of this memorandum (Legal Memorandum) is to supplement the 

preamble by providing background for the legal issues raised discussed in the preamble 

for this proposed rule1 and further discussion of some, but not all, of those issues. This 

memorandum is not a comprehensive discussion of all of the legal issues raised by this 

proposal, and is intended to be read in conjunction with, and assumes familiarity with, the 

preamble. for this proposed rule.

I. Background 

A. Clean Air Act section 111 

Clean Air Act (CAA) section 111, which Congress enacted as part of the 1970 

CAA Amendments, establishes mechanisms for controlling emissions of air pollutants 

from stationary sources. This provision requires EPA to promulgate a list of categories of 

stationary sources that the Administrator, in his or her judgment, finds “causes, or 

contributes significantly to, air pollution which may reasonably be anticipated to 

endanger public health or welfare.” 2 EPA has listed more than 60 stationary source 

categories under this provision.3

 Once EPA lists a source category, EPA must, under 

CAA section 111(b)(1)(B), establish “standards of performance” for emissions of air 

pollutants from new sources in the source categoryies.

4

 These standards are known as 

new source standards of performance standards (NSPS), and they are national 

requirements that apply directly to the sources subject to them. 

When the EPA establishes NSPS for new sources in a particular source category, 

the EPA is also required, under CAA section 111(d)(1), to prescribe regulations for states 

to submit plans regulating existing sources in that source category for any air pollutant 

that, in general, is not regulated under the CAA section 109 requirements for the national 

ambient air quality standards (NAAQS) or regulated under the CAA section 112 

requirements for hazardous air pollutants (HAP). In contrast with CAA section 111(b), 

which provides for direct federal regulation of new sources, section 111(d)’s mechanism 

for regulating existing sources provides that states will submit plans that establish 

“standards of performance” for the affected sources and that contain other measures to 

implement and enforce those standards. 

The term “standard of performance” is defined under CAA section 111(a)(1) as a 

“standard for emissions of air pollutants” that “reflects the degree of emission limitation 

 

1

 The proposed rule is the “Carbon Pollution Guidelines for Existing Power Plants: Emission Guidelines for 

Greenhouse Gas Emissions from Existing Stationary Sources: Electric Utility Generating Units.” 2

 CAA §section 111(b)(1)(A). 3 See 40 CFR 60 subparts Cb – OOOO. 4

 CAA §section 111(b)(1)(B), 111(a)(1). 
2 

achievable” from the “best system of emission reduction,” considering costs and other 

factors, that “the Administrator determines has been adequately demonstrated.” CAA 

section 302(l) also defines “standard of performance” as “a requirement of continuous 

emission reduction, including any requirement relating to the operation or maintenance of 

a source to assure continuous emission reduction.” 

Under the EPA’s implementing regulations for CAA section 111(d)(1), the EPA 

must determine the best system of emission reduction for the sources, and then apply that 

best system to determine the required level of emissions or emission reduction, which the 

regulations refer to as the “emissions guideline.”5

 Under section 111(d)(1), the states 

must then adopt state plans that establish standards of performance and measures that 

implement and enforce those standards. In the case of an air pollutant that EPA has 

determined may cause or contribute to endangerment of public health, the states’ 

standards of performance must not be less stringent than the EPA’s emission guideline.6

 

CAA section 111(d)(1) grants states the authority, in applying a standard of performance 

to particular sources, to take into account the source’s remaining useful life or other 

factors. 

The state must submit its plan to the EPA for approval, and, under CAA section 

111(d)(2), the EPA must approve the state plan if it is “satisfactory.”7

 If a state does not 

submit a plan, the EPA must establish a federal plan for that state.8

 Once a state receives 

the EPA’s approval for its plan, the provisions in the plan become federally enforceable 

against the entity responsible for noncompliance, in the same manner as the provisions of 

an approved state implementation plan (SIP) under CAA section 110. As discussed in the 

preamble, in the case of a tribe that has one or more affected EGUs on its lands, the tribe 

would have the opportunity, but not the obligation, to establish a CO2 performance 

standard and a plan for its tribal lands.

B. Legislative history 

The legislative history of the 1970 Clean Air Act Amendments indicates that at 

that time, Congress grouped air pollutants from existing stationary sources into three 

categories: (i) Aair pollutants that affected the National Ambient Air Quality Standards 

(NAAQS), which would be regulated under CAA § section 110 state implementation 

plans (SIPs), (ii) hazardous air pollutants (HAPs), which would be regulated under EPApromulgated national emission standards pursuant to CAA §section 112, and (iii) all 

other air pollutants. The House bill did not address this third group of air pollutants, but 

the Senate bill did: it termed them “selected air pollution agents” and proposed to require 

the EPA to promulgate national emission standards pursuant to proposed CAA §section 

114. The 1970 House-Senate Conference Committee that was formed to resolve 

differences between the House and Senate versions of the CAA Amendments did not 

adopt the Senate bill’s proposed CAA section 114, but did adopt section 111(d), which 

 

5

 40 CFR 60.22(b)(5). 

6

 40 CFR 60.24(c). 

7

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

8 Id. 
3 

covers the same non-NAAQS, non-HAPs air pollutants. Under section 111(d)(1) as 

included in the 1970 CAA Amendments, the states were required to submit to the EPA 

state plans that “establish[] emission standards” for their existing sources. Although the 

legislative history of the 1970 CAA Amendments does not contain statements that 

directly discuss the specific provisions included in section 111(d), the legislative history 

of the Senate bill’s proposed section 114 is relevant to the meaning of section 111(d), and 

we refer to parts of that legislative history below. 

For new sources, section 111(b)(1)(B) required the EPA to promulgate “standards 

of performance,” and defined that term, under section 111(a)(1), as— 

a standard for emissions of air pollutants which reflects the degree of 

emission limitation achievable through the application of the best system 

of emission reduction which (taking into account the cost of achieving 

such reduction) the Administrator determines has been adequately 

demonstrated. 

The legislative history discusses, among other things, the meaning of the term “standard 

of performance,”9

 which we refer to below. 

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

including section 111(d). Congress substituted “standards of performance” for “emission 

standards,” which, as noted above, the states are required to establish in their state plans. 

In addition, Congress added to section 111(d)(1) the requirement that the EPA’s 

regulations “permit the State in applying a standard of performance to any particular 

source under a [section 111(d)] plan ... to take into consideration, among other factors, 

the remaining useful life of the existing source to which such standards applies.” 

Congress added to section 111(d)(2) a similar requirement applicable to federal plans. In 

addition, Congress revised the definition of “standard of performance” in section 

111(a)(1) to distinguish among different types of sources, and to require that for fossil 

fuel-fired sources, the standard (i) be based on, in lieu of the “best system of emission 

reduction ... adequately demonstrated,” the “best technological system of continuous 

emission reduction ... adequately demonstrated;” and (ii) require a percentage reduction 

in emissions. In addition, in the 1977 CAA Amendments, Congress expanded the 

parenthetical requirement that the Administrator consider the cost of achieving the 

reduction to also require the Administrator to consider “any nonair quality health and 

environment impact and energy requirements.” Congress also added the definition of 

“standard of performance” in section 302(l), which defines the term to require a 

“continuous emission reduction.” 

In the 1990 CAA Amendments, Congress made further amendments to section 

111, including section 111(d). Among other things, Congress again revised the definition 

of “standard of performance” under CAA section 111(a)(1), this time repealing the 

requirements that the standard of performance be based on the best technological system 

and achieve a percentage reduction in emissions, and replacing those provisions with the 

 

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

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

standard of performance be based on the “best system of emission reduction ... 

adequately demonstrated.” In addition, in section 111(d)(1)(A)(i), Congress revised the 

description of which air pollutants are subject to section 111(d) but, as discussed below, 

left the provision ambiguous with respect to its applicability to the air pollutant emitted 

from the sources at issue in this rulemaking: CO2 emissions from fossil fuel-fired EGUs . 

CAA section 111 has not been revised since the 1990 CAA Amendments. 

C. Regulatory history and case law 

The EPA issued regulations implementing CAA section 111(d) in 1975,10 and has 

revised them in the years since.11 (We refer to the regulations generally as the 

implementing regulations.) These regulations provide that, in promulgating requirements 

for sources under CAA section 111(d), the EPA first develops regulations known as 

“emission guidelines,” which establish binding requirements that states must address 

when they develop their plans.12 The implementing regulations also establish timetables 

for state and EPA action. The default rule is that states must submit state plans within 

nine months of the EPA’s issuance of the guidelines,13 but the regulations provide the 

EPA with authority to extend the deadlines for those submissions.14 The regulations also 

provide that the EPA must take final action on the state plans within four months of the 

due date for those plans.15 In the present rulemaking, the EPA is following the 

requirements of the implementing regulations, except that the EPA is extending certain 

timetables, as described in the preamble.16 

Over the last forty years, under CAA section 111(d), the agency has regulated 

four pollutants from five source categories (i.e., phosphate fertilizer plants (fluorides), 

sulfuric acid plants (acid mist), primary aluminum plants (fluorides), Kraft pulp plants 

(total reduced sulfur), and municipal solid waste landfills (landfill gases)).17 In addition, 

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

 

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

1975). 

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

12 40 CFR 60.22. In the 1975 rulemaking, the EPA explained that it used the term “emissions guidelines” – 

instead of emissions limitations – to make clear that guidelines would not be binding requirements 

applicable to the sources, but instead are “criteria for judging the adequacy of State plans.” 40 Fed. Reg. at 

53,343. 

13 40 CFR 60.23(a)(1). 

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

15 40 CFR 60.27(b). 

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

plan submittals. The EPA is proposing additional regulatory requirements, which are contained in proposed 

subpart UUUU. 

17 See “Phosphate Fertilizer Plants; Final Guideline Document Availability,” 42 Fed. Reg. 12,022 (Mar. 1, 

1977); “Standards of Performance for New Stationary Sources; Emission Guideline for Sulfuric Acid 

Mist,” 42 Fed. Reg. 55,796 (Oct. 18, 1977); “Kraft Pulp Mills, Notice of Availability of Final Guideline 

Document,” 44 Fed. Reg. 29,828 (May 22, 1979); “Primary Aluminum Plants; Availability of Final 

Guideline Document,” 45 Fed. Reg. 26,294 (Apr. 17, 1980); “Standards of Performance for New Stationary 

Sources and Guidelines for Control of Existing Sources: Municipal Solid Waste Landfills, Final Rule,” 61 

Fed. Reg. 9905 (Mar. 12, 1996). 
5 

with CAA section 129.18 The agency has not previously regulated CO2 or any other 

greenhouse gas under CAA section 111(d) (although because landfill gases include 

methane, the agency’s regulation of landfill gases reduced emissions of that greenhouse 

gas). 

The D.C. Circuit has never handed down a decision that interpreted, or reviewed 

EPA’s interpretation of, section 111(d). The D.C. Circuit has, however, reviewed 

rulemakings under CAA section 111 on numerous occasions during the past four 

decades, handing down decisions dated from 1973 to 2011.19 These decisions concerned 

various aspects of section 111, primarily the interpretation of the term “standard of 

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

D. Summary of section 111 proposals 

The EPA is in the process of conducting three rulemakings to regulate CO2 from 

fossil fuel-fired electricity generating units (EGUs), including both fossil fuel-fired 

electric utility steam generating units and natural gas-fired stationary combustion turbines 

(affected sources or affected EGUs). The first, published in January, 2014, proposes 

standards of performance under CAA section 111(b) for affected sources undertaking 

new construction. The second is the present rulemaking, under CAA section 111(d), 

which proposes emission guidelines for states to follow in adopting state plans that 

regulate existing affected EGUs. In the third rulemaking, which we expect to propose 

concurrently with the present one, the EPA is proposing standards of performance under 

section 111(b) for affected EGUs that undertake modifications or reconstructions. 

II. Summary of legal basis

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

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

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

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

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

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

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

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

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

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

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

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

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

rulemakings will provide the requisite predicate for this rulemaking. 

 

18 See, e.g., “Standards of Performance for New Stationary Sources and Emission Guidelines for Existing 

Sources: Sewage Sludge Incineration Units, Final Rule,” 76 Fed. Reg. 15,372 (Mar. 21, 2011). 19 Portland Cement Ass’n v. Ruckelshaus, 486 F.2d 375 (D.C. Cir. 1973), cert. denied, 417 U.S. 921 

(1974); Essex Chemical Corp. v. Ruckelshaus, 486 F.2d 427, (D.C. Cir. 1973), cert. denied, Appalachian 

Power Co. v. EPA, 416 U.S. 969 (1974); Portland Cement Ass’n v. EPA, 665 F.3d 177 (D.C. Cir. 2011). 
6 

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

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

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

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

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

BSER. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

basis for determining BSER, under which the BSER is the heat rate improvements in 

building block 1 plus reduced utilization of the fossil fuel-fired EGUs in an amount 

commensurate with the increased electricity generation that could result from the 

measures in building blocks 2 and 3, and from the decreased need for electricity as a 

result of energy efficiency measures in building block 4. In both cases, the EPA 

reasonably identifies the sets of measures as components of BSER based on the factors 

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

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

Documents, the measures in each of the building blocks individually and combined are 

both technically feasible and “adequately demonstrated.” Heat rate improvement 

measures (identified in building block 1) are well-recognized as feasible within the 

industry. Under the EPA’s approach to BSER, the measures that entail dispatch changes 

from fossil fuel-fired steam-generating EGUs to NGCC units, investments in renewable 

and nuclear energy, and demand-side energy efficiency (measures in building blocks 2, 3 

and 4) are each well-established in numerous states, and many of them have already been 

relied on to reduce CO2 and other air pollutants from fossil fuel-fired EGUs. Further, all 

of the measures achieve an important degree of emission reduction. In addition, they are 

not unreasonably costly, including when considered through a nation-wide lens. In 

addition, and importantly, the measures encourage the development and expansion of 

technology and practices to reduce CO2 and are consistent with current trends in the 

electricity sector. By the same token, under the alternative approach to BSER, generation 

 

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

reduction from the fossil-fired EGUs is technically feasible and adequately demonstrated 

because of the characteristics, just described, of the measures in building blocks 2, 3, and 

4. 

The implementing regulations provide that, in establishing an emission guideline 

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

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

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

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

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

form the EPA’s emission guidelines. 

 

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

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

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

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

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

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

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

standards of performance and include measures that implement and enforce those 

measures. 

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

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

established by entities other than EGU owners or operators, the EPA is proposing that 

states be authorized to submit state plans that do not necessarily impose legal 

responsibility on the affected EGUs for the entirety of the emissions performance level. 

Instead, the proposal would allow for compliance plans that impose or entail 

requirements on other parties (which we will refer to as affected entities) – such as 

renewable energy and demand-side energy efficiency measures - that would provide a 

means or basis for reducing utilization of, and therefore CO2 emissions from, the affected 

EGUs. As noted in the preamble for this rulemaking, a possible basis for this approach is 

that those requirements on other affected entities may be authorized as standards of 

performance or implementing measures. The EPA proposes that this is an appropriate 

flexibility and solicits comment, but also solicits comment on whether state plans must 

impose all of the legal responsibility for achieving the emissions performance level on 

the affected EGUs. 

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

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

requirements on other affected entities in order to facilitate the reduced utilization of, and 

CO2 emissions from, the affected EGUs – and the practical effect for the EGUs would be 

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

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

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

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

amount of reduction. 
8 

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

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

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

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

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

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

with their applicable standards of performance, to rely on any measures that will reduce 

their CO2 emissions, regardless of whether the EPA identifies those measures as part of 

BSER, as long as, again, the state plan achieves the requisite level of emissions reduction 

from the affected sources. 

 In this rulemaking, the EPA proposes reasonable deadlines for state plan 

submission and the EPA’s action. The proposed deadline for the EPA’s action varies 

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

implementing regulations accordingly. 

II. Summary of legal basis 

The following summarizes the main features of the EPA’s legal rationale for this 

proposed rulemaking. All of this rationale is discussed in the appropriate sections of the 

preamble for this rulemaking. This Legal Memorandum elaborates on some, although 

not, of these features. 

Today’s proposed action is consistent with the requirements of CAA section 

111(d) and the implementing regulations. As an initial matter, the EPA reasonably 

interprets the provisions identifying which air pollutants are covered under CAA section 

111(d) to authorize the EPA to regulate CO2 from fossil fuel-fired EGUs. Specifically, an 

ambiguity in the provisions of section 111(d)(1)(A)(i), arising from Congress’s 

simultaneous enactment of two separate versions of this provision, has led some 

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

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

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

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

In addition, the EPA recognizes that CAA section 111(d) applies to sources that, 

if they were new sources, would be covered under a CAA section 111(b) rule. The EPA 

intends to complete two CAA section 111(b) rulemakings regulating CO2 from new fossil 

fuel-fired EGUs and from modified and reconstructed fossil fuel-fired EGUs before it 

finalizes this rulemaking, and either of those section 111(b) rulemakings will provide the 

requisite predicate for this rulemaking. 

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

determining the “best system of emission reduction ... adequately demonstrated” (BSER). 

In promulgating the implementing regulations, the EPA explicitly stated that it is 

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Comment [HH1]: This section is a replacement 

for the previous “II. Summary of legal basis.” This 

replacement section combines previous version of 

“II..Summary of legal basis” and the summary of 

legal basis contained in the preamble (section IV.B., 

starting around p. 118). This replacement section 

shows the language from the preamble in black, and 

the revisions (mostly additions from the previous “II. 

Summary of legal basis” in the Legal Memo) in redline. 

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authorized to determine BSER;21 accordingly, in this rulemaking, the EPA is determining 

BSER. 

The EPA is proposing two alternative approaches for the “best system of emission 

reduction ... adequately demonstrated” BSER for fossil fuel-fired EGUs, each of which is 

based on methods that have employed for reducing emissions of air pollutants, including, 

in some cases, CO2, from these sources. The first identifies the combination of the four 

building blocks as the BSER. These include operational improvements and equipment 

upgrades that the coal-fired steam-generating EGUs in the state may undertake to 

improve their heat rate (building block 1) and increases in, or retention of, zero- or lowemitting generation, as well as measures to reduce demand for generation, all of which, 

taken together, displace, or avoid the need for, generation from the affected EGUs 

(building blocks 2, 3, and 4). All of these measures are components of a “system of 

emission reduction” for the affected EGUs because they either improve the carbon 

intensity of the affected EGUs in generating electricity or, because of the integrated 

nature of the electricity system grid and the fungibility of electricity and electricity 

services, they displace or avoid the need for generation from those sources and thereby 

reduce the emissions from those sources. Moreover, those measures may be undertaken 

by the affected EGUs themselves and, in the case of building blocks 2, 3, and 4, they may 

be required by the states. 

Further, these measures meet the criteria in CAA section 111(a)(1) and the 

caselaw as the “best” system of emission reduction because, among other things, they 

achieve the appropriate level of reductions;, they are of reasonable cost, including when 

viewed through a nation-wide lens; they are consistent with trends in the energy sector; 

and they encourage technological development and expansion that is important to 

achieving further emission reductions. Moreover, the measures in each of the building 

blocks are “adequately demonstrated” because they are each well-established in 

numerous states, and many of them have already been relied on to reduce air pollutants, 

including CO2, GHGs and other air pollutants from fossil fuel-fired EGUs and, as noted, 

they may be undertaken by the affected EGUs or, in general, required by the states. 

. It should be emphasized that these measures are consistent with current trends in 

the electricity sector. 

For the alternative approach for the BSER, the EPA is identifying the “system of 

emission reduction” as including, in addition to building block 1, the reduction of 

affected fossil fuel-fired EGUs’ mass emissions achievable through reductions in 

generation of specified amounts from those EGUs. Under this approach, the measures in 

building blocks 2, 3, and 4 would not be components of the system of emission reduction, 

but instead would serve as bases for quantifying the reduction in emissions resulting from 

the reduction in generation at affected EGUs. In light of the available sources of 

replacement generation through the measures in the building blocks, this approach would 

also meets the criteria for being the “best” system that is “adequately demonstrated” 

 

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

rulemaking. 

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because of, among other things, the emission reductions it would achieve, its reasonable 

cost, and its promotion of technological development, as well as the fact that under this 

approach, the reliability of the electricity system would be maintained. The approach of 

reduced generation is also “adequately demonstrated” because of the ability of affected 

EGUs to adjust their own generation, the authority of the state to impose requirements, 

and the fact that other entities that operate in the various types of markets in the states can 

be expected to respond to the reduction in generation from the fossil-fuel fired EGUs by 

undertaking the measures in the building blocks or other actions that would assure 

reliability.

After determining BSER, the EPA is authorized under the implementing 

regulations, as an integral component to setting emission guidelines, to apply the BSER 

and determine the resulting emission limitation. The EPA is proposing to apply the BSER 

to the affected EGUs on a statewide basis. In this rulemaking, the EPA terms the 

resulting emission limitation the state goal. The EPA is formulating each state goal as an 

average emissions rate. The state goals form the EPA’s emission guidelines. 

With the promulgation of the emission guidelines, each state must develop a plan 

to achieve an emission performance level that corresponds to the state goal. The state 

plans must establish standards of performance for the affected EGUs and include 

measures that implement and enforce those standards. Based on requests from states and 

other stakeholders, the EPA is proposing that states be authorized to submit state plans 

that do not impose legal responsibility on the affected EGUs for the entirety of the 

emission performance level, but instead, by adopting 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. (In the preamble and the regulatory text for this proposed 

rulemaking, we refer to the affected EGUs and other entities with obligations under the 

state plan as “affected entities.”) As noted in the preamble for this rulemaking, a possible 

basis for this approach is that those requirements on affected entities other than affected 

EGUs may be authorized as standards of performance or implementing measures. In the 

preamble, the EPA proposes that this is an appropriate flexibility and solicits comment, 

but also solicits comment on whether state plans must impose all of the legal 

responsibility for achieving the required emission performance level on the affected 

EGUs.

 

It should be noted that an important aspect of the BSER for affected EGUs is that 

the EPA is proposing to apply it on a statewide basis. The statewide approach also 

underlies the required emission performance level, which, as noted, is based on the 

application of the BSER to a state’s affected EGUs, and which the suite of measures in 

the state plan, including the emission standards for the affected EGUs, must achieve 

overall. The state has flexibility in assigning the emission performance obligations to its 

affected EGUs, in the form of standards of performance -- and, for the portfolio 

approach, in imposing requirements on other affected entities -- as long as, again, the 

required emission performance level is met. 
11 

This state-wide approach both harnesses the efficiencies of emission reduction 

opportunities in the interconnected electricity system and is fully consistent with the 

principles of federalism that underlie the Clean Air Act generally and CAA section 

111(d) particularly. That is, this provision achieves the emission performance 

requirements through the vehicle of a state plan, and provides each state significant 

flexibility to take local circumstances and state policy goals into account in determining 

how to reduce emissions from its affected sources, as long as the plan meets minimum 

federal requirements. 

This state-wide approach, and the standards of performance for the affected EGUs 

that the states will establish through the state-plan process, are consistent with the 

applicable CAA section 111 provisions.

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

obligations to achieve the required emission performance level on the affected EGUs, the 

state plan could nevertheless include requirements on other affected entities in order to 

facilitate the reduced utilization of, and CO2 emissions from, the affected EGUs – and the 

practical effect for the EGUs would be the same as under the proposed portfolio 

approach. The preamble solicits comment on other issues concerning state plans, 

including whether a state may include in its plan a mechanism to achieve a specified 

portion of the required emission performance level on behalf of the affected EGUs, and 

thereby limit the obligations of the affected EGUs. 

The EPA emphasizes that in developing the state plans, the states have substantial 

discretion in designing the standards of performance, as long as the plans reduce 

emissions from the affected sources to achieve the required emission performance level. 

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

does not identify as part of the BSER, and may include other approaches such as, for 

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

complying with their applicable standards of performance, to rely on any measures that 

will reduce their CO2 emissions, regardless of whether the EPA identifies those measures 

as part of BSER, as long as, again, the state plan achieves the requisite level of emissions 

reduction from the affected entities. 

A state has discretion in determining the measures in its plans. The state may 

adopt measures that assure the achievement of the required emission performance level, 

and is not limited to the measures that the EPA identifies as part of the BSER. By the 

same token, the affected EGUs, to comply with the applicable standards of performance 

in the state plan, may rely on any efficacious means of emission reduction, regardless of 

whether the EPA identifies those measures as part of BSER. 

 

In this rulemaking, the EPA proposes reasonable deadlines for state plan 

submission and the EPA’s action. The proposed deadline for the EPA’s action on state 

play submittals varies from that in the implementing regulations, and the EPA is 

proposing to revise that provision in the regulations accordingly. Under CAA section 

111(d)(2), the state plans must be “satisfactory” for the EPA to approve them, and in this 
12 

rulemaking, the EPA is proposing the criteria that the state plans must meet under that 

requirement.

III. Authority to regulate CO2 from EGUs 

CAA section 111 authorizes EPA to regulate CO2 emissions. The Supreme Court 

has held that greenhouse gases (including CO2) are an “air pollutant” under the CAA. 

Massachusetts. v. EPA.

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

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

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

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

on the Court’s understanding that §section 111, including §section 111(d), applies to 

carbon dioxide emissions from those sources.

The fact that EPA has regulated EGU emissions of mercury and other hazardous 

air pollutants under CAA section 112 does not deprive EPA of the authority to regulate 

CO2 emissions from EGUs under CAA section 111(d) under the Agency’s established 

construction of the ambiguous provisions in CAA section 111(d)(1)(A)(i) that identify 

the air pollutants subject to CAA section 111(d). The ambiguities stem from apparent 

drafting errors that occurred during enactment of the 1990 CAA Amendments, which 

revised section 111(d). The confusion arises because two different amendments to 

section 111(d) were enacted in the 1990 CAA Amendments – one in title I of the bill, the 

other in title III of the bill (both amendments were to be codified in section 111(d)). The 

confusion is exacerbated because the U.S. Code does not accurately reflect what was 

enacted – it presents only one of the two amendments. However, Tthe enacted law 

signed by the President (as recorded in the U.S. Statutes at Large), not the U.S. Code, is 

controlling. 

As presented in the U.S. Code, section 111(d)(1)(A) requires states to submit 

standards of performance for existing sources “for any air pollutant (i) [1] for which air 

quality criteria have not been issued or which is not included on a list published under 

[CAA section 108(a)] or [2] emitted from a source category which is regulated under 

[section 112].” (Emphasis added.) This provision has two components that exclude from 

section 111(d) two types of air pollutants. The first component, which we call the 

NAAQS Exclusion, excludes NAAQS pollutants. The second component, which we call 

the Section 112 Exclusion, presents the ambiguities. As presented in the U.S. Code, the 

Section 112 Exclusion appears by its terms to preclude from section 111(d) any pollutant 

if it is emitted from a source category that is regulated under section 112. 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 112.23 

 

22 549 U.S. 497 (2007). 

23 By the same token, GHGs are emitted by many other source categories, such as 

refineries, that are regulated under section 112. Indeed, the text as presented in the U.S. 

Code could be read to exclude virtually every pollutant from regulation under Section 

111(d), because it would be difficult to identify any pollutant that is not emitted from at 
13 

The text of section 111(d) as presented in the U.S. Code, however, does not 

accurately reproduce the Section 112 Exclusion as enacted in the 1990 CAA 

Amendments. The correct statement of the Section 112 Exclusion – the one that was 

enacted by Congress and signed by the President, and which therefore is controlling – is 

found in the U.S. Statutes at Large. This text incorporates two versions of the Section 112 

Exclusion, one passed by the U.S. House of Representatives and one passed by the U.S. 

Senate. The two versions were never reconciled, and both were enacted as part of the 

1990 CAA Amendments. The two versions conflict with each other and thus render the 

Section 112 Exclusion ambiguous. Under these circumstances, the EPA may reasonably 

construe the Section 112 Exclusion to authorize the regulation of GHGs under section 

111(d). 

To understand the different amendments by the House and Senate, one must start 

with section 111(d)(1) as it read before the 1990 CAA Amendments: 

The Administrator shall prescribe regulations which shall establish a procedure 

similar to that provided by section 7410 of this title under which each State shall 

submit to the Administrator a plan which (A) establishes standards of 

performance for any existing source for any air pollutant (i) for which air quality 

criteria have not been issued or which is not included on a list published under 

section 7408(a) or 7412(b)(1)(A) of this title, but (ii) to which a standard of 

performance under this section would apply if such existing source were a new 

source. * * * 

 

42 U.S.C.A. 7411(d)(1) (West 1977); Public Law 95–95 (emphasis added). In this 

version, the Section 112 Exclusion, by its terms, applied to section 112 pollutants, and 

not to categories of sources that emit those pollutants. It should also be noted that in the 

1990 CAA Amendments, Congress amended section 112 to include a statutory list of 

hazardous air pollutants for EPA to regulate, instead of relying on EPA to develop its 

own list. 

The 1990 Senate bill amended revised section 111(d)(1)(A)(i) by striking the term 

to ‘‘112(b)(1)(A)’’ and inserting in its place the term ‘‘112(b).’’ Under this amendment, 

the text would read as follows (with changes shown in strikeout): 

The Administrator shall prescribe regulations which shall establish a procedure 

similar to that Provided by section 7410 of this title under which each State shall 

submit to the Administrator a plan which (A) establishes standards of 

performance for any existing source for any air pollutant (i) for which air quality 

criteria have not been issued or which is not included on a list published under 

section 7408(a) or 7412(b) (1)(A) of this title, but (ii) to which a standard of 

 

least one source category that is regulated under 112. We do not need to address this 

ridiculous result, however, for the reasons discussed in the text above. 
14 

performance under this section would apply if such existing source were a new 

source. 

The 1990 House bill amended section 111(d)(1)(A)(i) of the 1977 CAA by 

striking the phrase ‘‘or 112(b)(1)(A)’’, and inserting in its place the phrase ‘‘or emitted 

from a source category which is regulated under section 112.’’ Under this amendment, 

the text would read as follows (with changes shown in underline and strikeout): 

The Administrator shall prescribe regulations which shall establish a procedure 

similar to that Provided by section 7410 of this title under which each State shall 

submit to the Administrator a plan which (A) establishes standards of 

performance for any existing source for any air pollutant (i) for which air quality 

criteria have not been issued or which is not included on a list published under 

section 7408(a) or 7412(b)(1)(A) emitted from a source category which is 

regulated under section 7412 of this title, but (ii) to which a standard of 

performance under this section would apply if such existing source were a new 

source. 

 

The House-Senate Conference Committee did not reconcile these two conflicting 

amendments, and both were included in the 1990 CAA Amendments as reported by the 

Conference Committee, approved by both the House and the Senate, and signed by the 

President. As presented in the Statutes at Large, the Section 112 Exclusion is therefore 

ambiguous. 

The EPA discussed these different amendments in the preamble to “Revision of 

December 2000 Regulatory Finding on the Emissions of Hazardous Air Pollutants From 

Electric Utility Steam Generating Units and the Removal of Coal- and Oil-Fired Electric 

Utility Steam Generating Units From the Section 112(c) List,” 70 FR 15994, 16029-32 

(March 29, 2005). There, the EPA concluded that the Section 112 Exclusion could be 

read as follows: Where a source category is regulated under section 112, a section 111(d) 

standard of performance cannot be established to address any HAP listed under section 

112(b) that may be emitted from that particular source category. The EPA explained that 

this approach reasonably interprets the Section 112 Exclusion to give some effect to both 

amendments. The EPA emphasized that it is not reasonable to give full effect to the 

House language because a literal reading of that language would mean that the EPA 

could not regulate any air pollutant from a source category regulated under section 112, a 

result that would be inconsistent with (i) Congress’ desire in the 1990 CAA Amendments 

to require the EPA to regulate more substances, and not to eliminate the EPA’s ability to 

regulate large categories of air pollutants, and (ii) the fact that the EPA has historically 

regulated non-hazardous air pollutants under section 111(d), even where those air 

pollutants were emitted from a source category actually regulated under section 112. See

70 FR 16031-32. The EPA continues to view this interpretation of the Section 112 

exclusion as reasonable, for the reasons just stated. 

Applying this interpretation of the Section 112 Exclusion to this rule, we conclude 

that section 111(d) authorizes the EPA to establish section 111(d) guidelines for GHG 
15 

emissions from EGUs. Although EGUs are a source category that is regulated under 

CAA section 112, GHGs are not a HAP regulated under section 112. Therefore, the 

Section 112 exclusion in section 111(d) does not apply to GHGs, and 111(d) does not 

preclude the EPA from establishing guidelines covering GHGs from EGUs. 

IV. Rational basis, endangerment finding 

 In response to the January 2014 Proposal for standards of performance for GHGs 

emissions from newly constructed fossil fuel-fired EGUs,24 some stakeholders raised 

concerns that the EPA could not promulgate those standards without first issuing a 

finding that GHGs from those sources cause or contribute significantly to air pollution 

which may reasonably be anticipated to endanger public health or welfare, under CAA § 

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

from fossil fuel-fired EGUs because the EPA has previously found that GHG emissions 

endanger public health and welfare, and because the electric generating industry emits a 

significant amount of GHGs. The EPA added that CAA section 111 does not require 

that EPA issue a formal endangerment finding, and that even if section 111 did require 

such a finding, the EPA’s rational basis would qualify as one.25 The EPA is taking the 

same position in the section 111(b) rulemaking proposal to establish standards of 

performance for GHG emissions from modified and reconstructed fossil fuel-fired EGUs. 

 The EPA will finalize either or both of the January 2014 Proposal and the 

rulemaking for modified and reconstructed EGUs by the time that it finalizes this 

proposed rulemaking. In that event, the EPA would not be required to further address the 

rational basis or endangerment finding in this rulemaking. In any event, these questions 

are properly addressed and resolved in the context of the parallel rulemakings under 

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

preamble to this proposal on any issues related to a rational basis or endangerment 

finding.

 

V. Authority for EPA to determine BSER and emission guidelines 

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

regulations under CAA section 111(d), for the EPA to determine the “best system of 

emission reduction ... adequately demonstrated” and the amount of required emission 

reduction that is based on the BSER. We also describe how, in this rulemaking, the EPA 

proposes to apply the BSER to each state, and on that basis, to determine the amount of 

emission limitation achievable by each state, which we refer to as the state goal. The 

state goal is the “emissions guideline” that the implementing regulations require the EPA 

to promulgate. 

CAA §section 111(d) directs the EPA to – 

 

24 79 Fed. Reg. 1,430 (Jan. 8, 2014). 

25 See 79 FR at 1,452/3 – 1,456/1. 
16 

prescribe regulations which shall establish a procedure similar to that 

provided by [CAA section 110] under which each State shall submit to 

the Administrator a plan which (A) establishes standards of performance 

for any existing source for [certain air pollutants] ... and (B) provides for 

the implementation and enforcement of such standards of performance. 

As noted above, the EPA promulgated the implementing regulations for section 111(d) in 

1975, and has revised parts of them since. The regulations set out a multi-step process for 

the development and approval of state plans, and assign responsibility for the various 

steps in the process to the EPA or the states. The EPA has followed these regulations in 

promulgating previous rulemakings under section 111(d).26 In the present rulemaking, 

EPA continues to follow them, except that EPA is establishing a different deadline for 

submission of state plans than what the regulations would otherwise require.27 

Under the implementing regulations, at the same time or after the EPA proposes 

and then finalizes standards of performance for sources in a source category under 

section 111(b), the EPA must propose and then finalize a “guideline document” with 

information pertinent to state plans under section 111(d): 

Concurrently upon or after proposal of standards of performance for the 

control of a designated pollutant from affected facilities, the Administrator 

will publish a draft guideline document containing information pertinent 

to control of the designated pollutant form [sic: from] designated facilities. 

Notice of the availability of the draft guideline document will be published 

in the Federal Register and public comments on its contents will be 

invited. After consideration of public comments and upon or after 

promulgation of standards of performance for control of a designated 

pollutant from affected facilities, a final guideline document will be 

published and notice of its availability will be published in the Federal 

Register.”28

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

among other things, an “emission guideline” that incorporates the “best system of 

emission reduction ... adequately demonstrated”: 

Guideline documents published under this section will provide 

information for the development of State plans, such as: * * * * 

(5) An emission guideline that reflects the application of the best system 

of emission reduction (considering the cost of such reduction) that has 

been adequately demonstrated for designated facilities, and the time within 

 

26 These rulemakings are cited above. 

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

plans. 

28 40 CFR 60.22(a). 
17 

which compliance with emission standards of equivalent stringency can be 

achieved.* * * * 

(6) Such other available information as the Administrator determines may 

contribute to the formulation of State plans.29

The implementing regulations define the “emission guideline” as – 

A guideline set forth in subpart C of this part, or in a final guideline 

document published under §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) the Administrator has determined has been adequately 

demonstrated for designated facilities.30

In addition, the implementing regulations mandate that for air pollutants that adversely 

affect public health, the “emission guidelines” must be proposed and finalized with the 

draft and final guideline document: 

[For air pollutants that have been demonstrated to adversely affect public 

health], the emission guidelines and compliance times referred to in 

paragraph (b)(5) of this section will be proposed for comment upon 

publication of the draft guideline document, and after consideration of 

comments will be promulgated in subpart C of this part with such 

modifications as may be appropriate.31

 With this proposed rulemaking, the EPA is complying with these regulatory 

provisions. This proposed rulemaking follows the proposal of standards of performance 

for newly constructed affected sources in the January 2014 Proposal, and is concurrent 

with the proposal of standards of performance for modified and reconstructed affected 

sources. This proposed rulemaking – including the preamble and the supporting 

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

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

information includes descriptions as well as technical and economic evaluations of the 

four building blocks. This information also includes the EPA’s application of the BSER 

to each state, and the EPA’s calculation of the resulting proposed state goals. These state 

goals comprise the proposed “emission guidelines.” In addition, the preamble and 

supporting documents propose the “time within which compliance with emission 

standards of equivalent stringency can be achieved,” which are the periods of 2020-2029 

for interim compliance, and the subsequent period for final compliance, and provide other 

information. 

 

29 Id. at 60.22(b). 30 40 CFR 60.21(e). 

31 Id. at 60.22(c). 
18 

VI. Best system of emission reduction adequately demonstrated and standards of 

performance

In this section we discuss our interpretation of the CAA §§section 111(d)(1) and 

(a)(1) provisions that require the state plans to establish, for “any existing source,” 

“standards of performance,” and that define the latter term to mean, in general, emission 

standards that “reflect the degree of emission limitation achievable through the 

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

(BSER). 

In subsection A of this section, we explain these section 111(d)(1) and 111(a)(1) 

provisions and summarize key parts of the applicable case law. 

In subsection B, we describe our proposed two alternative determinations for the 

BSER. We note that each alternative includes two main components. One component, 

for each alternative, is efficiency improvements that coal-fired power plants can make to 

their operations and equipment (which we call building block 1). For the first type of 

BSER, the remaining component is, in general, increased zero- or low-emitting 

generation in specified amounts (building blocks 2 and 3), and increased demand-side 

energy efficiency in specified amounts (building block 4), all of which have the effect of 

displacing generation from the higher-emitting affected sources. For the alternative type 

of BSER, the remaining component is reduced generation from higher-emitting affected 

sources in specified amounts, which is the amount that can be replaced by, in general,

increased zero- or low-emitting generation and eliminated by increased demand-side 

energy efficiency. After we explain these alternatives, we go on to discuss why each 

alternative is a “system of emission reduction,” and why we propose to determine that 

each system is the “best” that is “adequately demonstrated.” 

In subsection C, we discuss our interpretation of the requirement that each state 

must develop a plan that establishes for “any existing source” “standards of 

performance,” that is, emission standards that “reflect the degree of emission limitation 

achievable through the application of the [BSER].” We explain that once the EPA 

determines the BSER, it undertakes “the application of the [BSER]” to each state’s set of 

sources on a state-wide basis, and thereby determines the “emission limitation 

achievable,” which we term the state goal, and which in turn becomes the emissions 

performance levelrequired emission performance level that the state plan must achieve. 

The state must then develop its plan by identifying emission standards for its affected 

EGUssources -- and, in the case of a state that adopts the portfolio approach, by 

identifying other obligations on other affected entities -- that in total, achieve the required 

emissions performance levelemission performance level. Through this process, the state 

plan may meet the requirements of sections 111(d)(1) and (a)(1) to “establish[] standards 

of performance for any existing source” because it imposes, on each of its affected 

sources, emission standards that “reflect [that is, embody or represent] the degree of [that 

is, the part of] emission limitation achievable through the application of the best system 

of emission reduction ... adequately demonstrated” [that is, the state’s required emission 

performance level]. 
19 

A. CAA requirements for standards of performance and BSER 

In this subsection, we explain the relevant provisions of sections 111(d)(1) and 

111(a)(1) and summarize key parts of the applicable case law. 

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

provisions in CAA §§sections 111(d)(1) and 111(a)(1). Section 111(d)(1) requires that a 

state plan “(A) establish[] ... standards of performance for any existing source” and “(B) 

provide[] for the implementation and enforcement of such standards.” Section 111(a)(1) 

defines a “standard of performance” as-- 

a standard for emissions of air pollutants which reflects the degree of 

emission limitation achievable through the application of the best system 

of emission reduction which (taking into account the cost of achieving 

such reduction and any nonair quality health and environmental impact 

and energy requirements) the Administrator determines has been 

adequately demonstrated. 

Several points should be made about the BSER. By its terms, it is a “system of 

emission reduction” that is both the “best” and “adequately demonstrated.” The CAA 

does not define the term, “system,” and as a result, that term should be given its ordinary, 

everyday meaning: “a set of things working together as parts of a mechanism or 

interconnecting network; a complex whole.”32 In addition, the U.S. Court of Appeals for 

the D.C. Circuit (D.C. Circuit or Court) has handed down case law over a 40-year period 

that interprets the requirements that the “system of emission reduction be the “best” and 

be “adequately demonstrated.”33 Under this case law, the criteria for the EPA to use in 

determining whether the system is the “best” include the following key considerations, 

among others: 

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

 The EPA must consider the amount of emissions reductions that the system would 

generate. 

 The costs of the system must be reasonable. The EPA may consider the costs on 

 

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

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

33 Portland Cement Ass’n v. Ruckelshaus, 486 F.2d 375 (D.C. Cir. 1973), cert. denied, 417 U.S. 921 

(1974); Essex Chemical Corp. v. Ruckelshaus, 486 F.2d 427, (D.C. Cir. 1973), cert. denied, Appalachian 

Power Co. v. EPA, 416 U.S. 969 (1974); Sierra Club v. Costle, 657 F.2d 298 (D.C. Cir. 1981); Portland 

Cement Ass’n v. EPA, 665 F.3d 177 (D.C. Cir. 2011). 34 The case law may be read to treat technical feasibility as the measure for whether the standard of 

performance is “achievable,” Essex Chemical Corp. v. Ruckelshaus, 486 F.2d at 427,. not as a criterion for 

whether the system of emission reduction is the “best system of emission reduction ... adequately 

demonstrated.” However, for conveniencepresent purposes, we may refer to technical feasibility as another 

of the criteria for the BSER. 

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20 

the source level, the industry-wide level, and, at least in the case of the power 

sector, on the national level in terms of the overall costs of electricity and the 

impact on the national economy over time.35 

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

development and implementation of technology.36



 The EPA must also consider energy impacts, and, as with costs, may consider 

them both on the source level and on the nationwide structure of the power sector 

over time. 

Importantly, the EPA has discretion to weigh these various considerations, may 

determine that some merit greater weight than others, and may vary the weighting, 

depending on the source category. 

 In determining whether a system is “adequately demonstrated,” the EPA is to look 

forward toward what may fairly be projected for the regulatory future, rather than 

determining what is available now. In the D.C. Circuit’s first decision under section 111, 

Portland Cement Ass’n v. Ruckelshaus, 486 F.2d 375, 391 (D.C. Cir. 1973), the Court 

explained: 

Section 111 looks toward what may fairly be projected for the regulatory future, 

rather than the state of the art at the present . . . . The Senate Report made clear 

that it did not intend that the technology “must be in actual routine use 

somewhere.” . . . The Administrator may make a projection based on existing 

technology, that that projection is subject to the restraints of reasonableness and 

cannot be based on “crystal ball” inquiry. . . . [T]he question of availability is 

partially dependent on “lead time”, the time in which the technology will have to 

be available.37

The forward looking nature of determining whether a system is adequately 

demonstrated is particularly relevant for this proposal given the lengthy period for 

implementing state plans that the EPA is proposing. The EPA discussed the CAA 

requirements and Court interpretations of the BSER at length in the January 2014 

Proposal,38 and incorporates by reference that discussion in this rulemaking. 

 

35 See Sierra Club v. Costle, 657 F.2d 298, 330-31, 337-39 (D.C. Cir. 1981). As discussed in the January 

2014 Proposal, the D.C. Circuit’s case law formulates the cost consideration in various ways: the costs 

must not be “exorbitant[]”, Essex Chemical Corp. v. Ruckelshaus, 486 F.2d 427, 433 (D.C. Cir. 1973) cert. 

denied, Appalachian Power Co. v. EPA, 416 U.S. 969 (1974), see Lignite Energy Council v. EPA, 198 F.3d 

930, 933 (D.C. Cir. 1999); “greater than the industry could bear and survive,” Portland Cement Ass’n v. 

EPA, 513 F.2d 506, 508 (D.C. Cir. 1975); or “excessive” or “unreasonable.” Sierra Club v. Costle, 657 

F.2d 298, 343 (D.C. Cir. 1981). In the January 2014 Proposal, EPA stated that “these various formulations 

of the cost standard ... are synonymous,” and, for convenience, EPA used “reasonableness” as the 

formulation. EPA takes the same approach in this rulemaking.

36 See 79 Fed. Reg. at 1,465/1-2 (discussing case law and legislative history that includes technological 

development as a consideration in the determination of BSER, including Sierra Club v. Costle, 657 F.2d 

298 (D.C. Cir. 1981)). 37 Portland Cement Ass’n v. Ruckelshaus, 486 F.2d 375, 391-92 (D.C. Cir. 1973) (citations omitted). 38 See 79 Fed. Reg. at 1,462/1 – 1,467/3. 

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21 

 It should be noted that the EPA may identify as the best system of emission 

reduction adequately demonstrated as the BSER a system that would form the basis for 

emission standards that could be achieved by some, but not necessarily all, of the existing 

sources in the source category. This approach is consistent with the technology-forcing 

purposes of section 111, as well as the fact that under section 111(d)(1), the state retains 

authority, “in applying a standard of performance to any particular source ... to take into 

consideration, among other factors, the remaining useful life of the ... source....”39

B. Best system of emission reduction adequately demonstrated 

In this this subsection, we describe our two alternative proposed determinations 

for the BSER and explain why each is a “system of emission reduction,” and why each 

system is the “best” that is “adequately demonstrated.” 

1. Introduction and overview

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

the interconnected nature of the electrical generating system, which, among other things, 

means that generation at one EGU can substitute for generation at another. The 

importance of the interconnected nature of the grid in facilitating CO2 emissions 

reductions is evident in the long history of reliance on it to provide least-cost dispatch, 

the more recent history of implementing air pollutant emissions reductions, and the still 

more recent history of implementing CO2 emissions reductions at the company, state, and 

regional level. 

 

39 The EPA discussed this issue in connection with new sources in the recently proposed NSPS for CO2

emissions from fossil fuel-fired EGUs, 79 Fed. Reg. 1430, 1466/3 (Jan. 8, 2014). With respect to existing 

sources, a commentator has stated: 

There is no statutory provision or direct precedent under § 111(d) requiring EPA to 

demonstrate that emission limits are achievable by every source subject to an 

ESPS[standard of performance for existing sources]. Moreover, since the trigger for 

implementing § 111(d) is an NSPS under § 111(b), Congress arguably contemplated that, 

once EPA has identified BSER for new plants, it should raise the performance of the 

existing fleet with the goal of approaching new source levels at existing plants. In this 

reading, 111(d) would have a technology-forcing thrust, tempered by the performance 

and cost constraints at existing plants but nonetheless raising the bar significantly for the 

existing fleet. From this perspective, EPA could argue that “adequately demonstrated” 

means achievable at a reasonable cost by the more modern, better performing coal and 

gas units, not by all plants [citing Reinforcing this approach is the fact that cost is not 

determinative in defining a “standard of performance” under § 111(a) but only must be 

“taken into account” .... 

Sussman, R., “Power Plant Regulation Under the Clean Air Act: A Breakthrough Moment for U.S. Climate 

Policy?,” Virginia Environment Law Journal, 32:97 (2014), at 123 (citations omitted).
22 

In this rulemaking, the EPA proposes to determine the “best system of emission 

reduction ... adequately demonstrated” on a state-by-state basis. Moreover, the EPA 

proposes to determine the BSER based on four “building blocks,” some of which rely on 

the interconnected nature of the electricity generating grid: 

Building block 1: Reducing the carbon intensity of generation at individual 

affected EGUs through heat rate improvements. 

Building block 2: Reducing emissions from the most carbon-intensive affected 

EGUs in the amount that results from substituting generation at those EGUs with 

generation from less carbon-intensive affected EGUs (including NGCC units 

under construction). 

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

results from substituting generation at those EGUs with expanded low- or zerocarbon generation. 

Building block 4: Reducing emissions from affected EGUs in the amount that 

results from the use of demand-side energy efficiency that reduces the amount of 

generation required. 

As discussed in the preamble, with these building blocks in mind, we are 

proposing two alternatives for the BSER, each of which is based on methods for reducing 

fossil fuel-fired EGUs’ air pollutants that states and sources have already implemented. 

The first approach is that the BSER is the combination of building blocks 1 through 4. 

Building block 1 is a set of operational improvements and equipment upgrades that the 

affected sources may undertake to improve their efficiency and reduce their emissions 

rate. Building blocks 2, 3 and 4 are sets of measures that, in general, increase zero- or 

low-emitting generation in specified amounts and increased demand-side energy 

efficiency in specified amounts, all of which, due to the interconnected nature of the grid, 

result in drawing utilization away from higher-emitting fossil fuel-fired EGUs, thereby 

lowering those EGUs’ emissions. The second approach is that the BSER is building 

block 1 (heat rate improvements) combined with reduced generation from fossil fuelfired EGUs in the amount, calculated on a statewide basis, that can be replaced by, in 

general, increased zero- or low-emitting generation and avoided by increased demandside energy efficiency. The EPA proposes that each of these alternatives may be 

considered to be a “system of emission reduction,” and that each meets the criteria, set 

out in CAA section 111(a)(1) and the case law, to qualify as the “best” system that is 

“adequately demonstrated.” 

2. Background: Interconnected nature of the electricity system 

Central to our BSER determination is the fact that the nation’s electricity needs 

are being met, and have for many decades been met, through a grid formed by a network 

connecting groups of EGUs with each other and, ultimately, with the end-users of 
23 

electricity. We discuss this nature of the electricity system at length in the preamble and, 

for convenience, summarize that discussion here. 

Through the interconnected grid, fungible products – electricity and electricity 

services – are produced and delivered by a diverse group of EGUs operating in a 

coordinated fashion in response to end-users’ demand for electricity. Because the 

electricity grid operates through the interconnection of multiple EGUs and favors leastcost generation, owners and operators of generators have been able to assure the stability 

of electricity generation and the reliable delivery of electricity to users at least cost 

(subject to certain reliability, environmental and other constraints). The fact that 

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

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

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

electricity service. 

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

has also facilitated the achievement of environmental objectives, including the reduction 

of emissions of nitrogen oxides, sulfur dioxide, and particulate matter -- which, among 

them, worsen acid deposition and jeopardize the attainment and maintenance of national 

ambient air quality standards – as well as hazardous air pollutants. Regulation of those 

air pollutants tends to increase the relative cost of electricity from higher-emitting 

generation assets. Because EGU operators have the ability to use the grid as an 

interchange for shifting levels of generation among several facilities, the higher costs of 

higher-emitting assets must be considered, along with fuel costs and other marginal costs, 

in determining the extent to which those assets are utilized. The amount of their 

utilization affects the amount of their emissions. 

Most recently, states and companies seeking specifically to achieve CO2

emissions reduction objectives have also relied on the shifting of generation between and 

among EGUs to achieve those emissions reduction objectives. In fact, as the preamble 

notes, there are many cases in which companies have reduced emissions through shifting 

generation away from higher emitting units to lower- or zero-emitting units, or through 

reducing overall electric demand through demand-side energy efficiency measures. In 

some cases, this has occurred in response to goals set at the company level: some 

companies have established a single, company-wide emission target, and then have used 

combinations of strategies such as fuel switching, increased renewable or nuclear 

generation, and increased energy efficiency, to achieve those goals. In other cases, this 

has occurred in response to goals set at the state level: for example, California enacted its 

Global Warming Solutions Act in 2006 (AB 32), requiring the state to reduce its GHG 

emissions to 1990 levels by 2020 and 80 percent below 1990 levels by 2050,40 through a 

suite of mechanisms that include energy efficiency programs, renewable energy programs 

 

 

40 State of California Global Warming Solutions Act of 2006, Assembly Bill 32, Chapter 

http://www.leginfo.ca.gov/pub/05-06/bill/asm/ab_0001-0050/ab_32_bill_20060927_chaptered.pdf 
24 

and an economy-wide cap and trade program, along with other programs.41 Similarly, 

nine northeast and mid-Atlantic states participate in the Regional Greenhouse Gas 

Initiative (RGGI), a market-based emissions budget trading program that sets an 

aggregate limit on CO2 from fossil fuel fired power plants in the participating states. 

These examples demonstrate that it is appropriate to base the BSER at least in part on the 

combination of measures in building blocks 2, 3, and 1 through 4, and that this 

component of such a system is adequately demonstrated. 

In all of these instances, companies’ choices and policies implemented by states 

may impact decisions about dispatching of lower instead of higher emitting generating 

units both as part of the short term dispatch process and as part of longer term business 

planning processes. We believe that tThe proposed emission guidelines, including the 

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

variety of mechanisms that can reduce emissions both as part of those shorter term 

dispatch decisions and as part of longer term business planning processes. 

In this rulemaking, the EPA is building on these company, state, and regional 

approaches by continuing to rely on the interconnected nature of the grid to achieve, on a 

nationwide basis, the important objective of significant amounts of CO2 reductions from 

fossil fuel-fired EGUs. The EPA is doing so by proposing that the BSER should be based 

on a combination of the implementation of heat improvement measures for fossil fuelfired steam generating units (building block 1) to reduce their emissions, as well as the 

implementation of other measures that are associated with reduced emissions from those 

EGUs. The latter include substituting generation at higher emitting sources through with 

increasing generation at less carbon-intensive EGUs, using expanded amounts of low- or 

zero-carbon generating capacity connected to the electric grid, and using electricity more 

efficiently to reduce the total demand for electricity (building blocks 2, 3 and 4, 

respectively). 

In determining the BSER, it is significant that CO2 is a global pollutant, and 

therefore the location of the emissions (or emission reductions) does not affect the 

environmental consequences impact on climate change of an amount of emissions 

generated at any given source in any one location.42 The fact that global nature of CO2

becomes well-mixed in the atmosphere means that CO2 emissions may be reduced 

anywhere within the electricity grid and still achieve the intended environmental climate 

benefits. This allows the EPA to determine that a system is the “best” system based on 

 

41 See Cal. Air Res. Bd., Climate Change Scoping Plan 31-32, 41-46 (2008), available at: 

http://www.arb.ca.gov/cc/scopingplan/document/adopted_scoping_plan.pdf. 42 By analogy, because the problem of acid deposition is caused by EGU emissions of nitrogen oxide and 

sulfur dioxide over a wide geographic area, Title IV of the Clean Air Act established a national emissions 

trading program that addresses that problem by reducing the total amount of those emissions, but without 

regard to the particular location of those emissions (or emissions reductions). In contrast, other air 

pollutants have adverse health and welfare effects in the locality where they are emitted, and as a result, 

geographic constraints on emissions trading are necessary. See CAA §section 173(c)(1) (limiting offsets for 

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

nonattainment areas). 
25 

the total emission reductions the system would achieve, rather than basing the 

determination on the emission reductions achieved at each individual affected source. 

3. First Approach to the BSER: Building blocks 1, 2, 3, and 4 in 

combination 

Under the EPA’s first approach to determining the BSER, the EPA is proposing 

that the BSER is the combination of building blocks 1 through 4. As discussed in the 

preamble, under the EPA’s proposed approach to determining the BSER, the measures in 

building block 1, which entail improvements in the efficiency of the affected EGUs’ 

equipment or processes, meet the criteria to qualify as a part of the BSER. Further 

elaboration of this point here is not necessary. In addition, in the preamble, we explain 

why all four building blocks in combination meet the criteria to qualify as the BSER, and 

further elaboration of this latter point here is also not necessary. Instead, this discussion 

will focus on building blocks 2, 3, and 4. 

Under this first approach to the BSER, the “best system of emission reduction ... 

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

affected fossil fuel-fired steam generating boilers, and building blocks 3 and 4 for the 

fossil fuel-fired combustion turbines. In this section, we first explain why the measures 

in these building blocks are part of a “system of emission reduction,” and then why that 

system is the “best” system that is “adequately demonstrated.” 

In brief, building blocks 2, 3, and 4 are part of a “system of emission reduction” 

because that phrase, in the context in which it is used in section 111 and by its terms, is 

broad enough to apply to the measures in the building blocks, in light of the integrated 

nature of the electricity grid. Through the integrated grid, the measures reduce overall 

demand for, and therefore utilization of, higher emitting, fossil fuel-fired EGUs, which, 

in turn, reduces CO2 emissions from those EGUs. The measures in the building blocks 

are part of the “best” system that is “adequately demonstrated” because they meet the 

criteria in section 111(a)(1) and the case law for BSER and they are well-established. 

a. “[S]ystem of emission reduction”

The EPA’s proposal that in this rulemaking, the “system of emission reduction” 

includes the measures in building blocks 2, 3, and 4 is grounded in the EPA’s 

interpretation of the key CAA provisions: section 111(d)(1), which requires that each 

state plan “establish[] standards of performance for any existing source” for certain types 

of air pollutants; and section 111(a)(1), which defines a “standard of performance” as “a 

standard for emissions ... which reflects the degree of emission limitation achievable 

through the application of the best system of emission reduction ... adequately 

demonstrated.” As explained next, the EPA’s interpretation may be justified under either 

a Chevron step 1 or Chevron step 2 interpretation. 

i. Chevron step 1 interpretation 

Formatted: Indent: First line: 0.5"
26 

The starting point for our analysis is the phrase, “system of emission reduction,” 

which serves as the basis for the “standard for emissions.” As noted above, the CAA 

does not define the term, “system,” and as a result, that term should be given its ordinary, 

everyday meaning: “a set of things working together as parts of a mechanism or 

interconnecting network; a complex whole.”43 This definition is broad. It encompasses 

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

definition of “standard of performance” include any other constraints on the type of 

“things” that may serve as the basis for the standard for emissions. The only constraints 

are the qualifiers “best” and “adequately demonstrated,” but these do not constrain the 

type of “things” that could be a “system of emission reduction,” only whether a particular 

“thing” qualifies as the “best” “system of emission reduction” that is “adequately 

demonstrated” (it must be, among other things, technically feasible and of reasonable 

cost). Thus, the “system of emission reduction” may include anything that reduces 

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

control emissions, to measures that replace production or generation at the affected 

sources and thereby reduce emissions from those sources. 

Moreover, the context in which “standard of performance,” which includes 

“system of emission reduction,” is found does not add additional constraints. As noted 

above, section 111(d)(1) requires that state plans establish “standards of performance for 

any existing source,” and in the preamble, we solicit comment on the interpretation of 

that just quoted phrase. Among other things, we solicit comment on whether the 

standards of performance must apply directly to the affected sources and only to the 

affected sources, in which case the affected sources would bear the legal liability for the 

entire amount of emission reduction requirements; or whether, instead, the standards of 

performance may apply to other entities whose actions would reduce generation, and thus 

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

nothing in that phrase that limits the type of “system of emissions reductions” that, if it is 

the “best” that is “adequately demonstrated,” may furnish the basis for the standards for 

emissions. That is, even if that phrase -- “standards of performance for any existing 

source” -- is interpreted to mean that the standards of performance must apply directly to, 

and only to, the affected sources, that application of the standards of performance does 

not limit the scope of the type of “system of emission reduction” that may serve as the 

basis for the standards for emissions. Any “system of emission reduction” that reduces 

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

emissions, as long as, again, it is the “best” that is “adequately demonstrated.” For these 

reasons, the scope of the type of “system of emission reduction” that may be considered 

is broad. 

 Interpreting the “system of emission reduction” in this manner is also consistent 

with the scope of the state plans. Under section 111(d)(1), a state plan must “establish[] 

standards of performance” and “provide[] for the implementation and enforcement of 

such standards of performance.” At the state’s discretion, Mmeasures in building blocks 

 

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

http://www.oxfordreference.com.mutex.gmu.edu/view/10.1093/acref/9780199571123.001.0001/acref9780199571123 
27 

2, 3, and 4 may be included in state plans either through the portfolio approach or as 

measures that “provide[] for the implementation” of standards of performance that limit 

emissions from affected EGUs. 

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

we propose that the term “system of emission reduction” is sufficiently broad to include 

the measures in building blocks 2, 3, and 4 because they are part of the interconnected 

electricity sector and result in reduced utilization, and therefore reduced emissions, from 

the higher emitting fossil fuel-fired power plants. This proposed reading is clear as a 

matter of Chevron step 1 because of the breadth of the term, “system,” in the context in 

which it is found. 

ii. Chevron step 2 interpretation 

Moreover, even if the term, “system of emission reduction” is not considered to 

be clear as a matter of Chevron step 1 to include the measures in building blocks 2, 3, and 

4, then the EPA’s interpretation of the term to include those measures is valid as 

reasonable construction under Chevron step 2. There are several reasons for interpreting 

“system of emission reduction” in this way.44 

(I). Legislative history of “standard of 

performance” 

First, the legislative history of the definition of “standard of performance,” 

including the phrase “best system of emission reduction ... adequately demonstrated,” 

makes clear that the “system of emission reduction” is broader than a technological 

system. As enacted by Congress in the 1970 CAA Amendments, section 111(a)(1) 

defined the term “standard of performance” as, in relevant part -- 

a standard for emissions of air pollutants which reflects the degree of 

emission limitation achievable through the application of the best system 

of emission reduction ... adequately demonstrated. 

In the 1977 CAA Amendments, Congress changed this definition to require that for new 

sources, the standard must, in relevant part, “reflect the degree of emission limitation ... 

achievable through application of the best technological system of continuous emission 

reduction ... adequately demonstrated;” and for existing sources, the standard must, in 

relevant, “reflect[] the degree of emission reduction achievable through the application of 

the best system of continuous emission reduction ... adequately demonstrated....” 

 

44 See EME Homer City v. EPA, U.S. S. Ct. slip op. at 22 (2014) (after explaining why the text of the CAA 

"did not answer" the largely technical question of how EPA should allocate each state's responsibility for 

the tangle of potentially "significant" upwind-to-downwind air pollution contributions, stating: "we read 

Congress' silence as a delegation of authority to EPA to select from among reasonable options.") 
28 

(Emphasis added.)45 In the 1990 CAA Amendments, Congress again changed this 

definition, this time to reinstate the definition as found in the 1970 CAA Amendments 

(with some revisions not here relevant). That is, Congress repealed the requirements 

added in the 1977 CAA Amendments that the “system” be, in the case of new sources, 

“technological.” 

These amendments make clear that the “system[s] of emission reduction” upon 

which the section 111(d) standards of performance may be based are not limited to 

technological systems. Even when, in the 1977 CAA Amendments, Congress limited the 

systems that could provide the basis for the standards of performance for new sources to 

technological systems, Congress did not establish that limit on the systems for existing 

sources. Moreover, the 1977 House-Senate Conference Committee report stated that for 

existing sources, the standards of performance were to be based on the “best available 

means of emission control (not necessarily technological)....”46 

 (II). Pollution prevention

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

include the building blocks is consistent with a primary purpose of the CAA, which is 

encouraging pollution prevention, including assuring that states fulfill their role in 

developing pollution prevention measures. CAA §section 101(c) states that “[a] primary 

goal of [the Clean Air Act] is to encourage or otherwise promote reasonable Federal, 

State, and local governmental actions, consistent with the provisions of this chapter, for 

pollution prevention.” CAA §section 101(b)(4) adds that one of “the purposes of [title I 

of the CAA, which includes section 111] are ... (b) to encourage and assist the 

development and operation of regional air pollution prevention and control programs.” 

Indeed, in the U.S. Code, in which the CAA is codified as chapter 85, the CAA is 

entitled, “Air Pollution Prevention and Control.” CAA §section 101(a)(3) describes “air 

pollution prevention” as “the reduction or elimination, through any measures, of the 

amount of pollutants produced or created at the source,” and adds: “The Congress finds -- 

... (3) that air pollution prevention ... and air pollution control at its source is the primary 

responsibility of States and local governments.” 

The measures in building blocks 2, 3, and 4 all qualify as types of “pollution 

prevention” because they are “measures” that “reduc[] or eliminate[e] ... the amount of 

pollutants produced or created at the [fossil fuel-fired affected] source[s].” It is 

reasonable to interpret the section 111 provisions at issue in this rulemaking in light of 

these section 101 provisions, and this supports the reasonableness of interpreting the 

broad term found in section 111(a)(1), “system of emission reduction,” to include the 

pollution prevention measures in building blocks 2, 3, and 4. 

 

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

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

requirement). 

46 “Joint Explanatory Statement of the Committee of Conference,” reprinted in Congressional Research 

Service, A Legislative History of the Clean Air Act Amendments of 1977, vol. 3 at 502, 509 (1978) (1977 

Legislative History). The House Committee Report included the same statement. See H. Rep. 95-294 at 

195, reprinted in 1977 Legislative History, vol. 4 at 2465, 2662. 
29 

 (III). Title IV

The breadth of the term, “system of emission reduction” is further confirmed by 

reference to certain provisions of CAA Title IV. In Title IV, Congress established the 

program that regulates fossil fuel-fired power plants to reduce their emissions of the 

precursers to acid deposition, including reducing sulfur dioxide (SO2) emissions in two 

phases, and reducing nitrogen oxides (NOx) emissions. Congress enacted Title IV during 

as part of the 1990 CAA Amendments, at the same time that Congress revised the 

definition of “standard of performance” to generally return it to its 1970-vintage reading. 

In certain respects, section 111 and Title IV are related because both apply to fossil-fuel 

fired EGUs, and the Congress recognized the relationship in several Title IV provisions.47 

One contrasting provision in Title IV is section 407(b)(2), which requires the EPA 

to base the NOx emission limits for certain types of boilers “on the degree of reduction 

achievable through the retrofit application of the best system of continuous emission 

reduction...;” and further requires the EPA to revise previously promulgated emission 

limits for certain types of boilers “to be more stringent if the [EPA] determines that more 

effective low NOx burner technology is available.” (Emphasis added.) These narrower 

specifications for the basis of the Title IV emissions limits make clear that Congress 

knew how to constrain the basis for emission limits to the results of certain technology, 

and that its choice to base the section 111(d) standards of performance on a “system of 

emission reduction” indicates its intent to authorize a broader basis for those standards. 

Other provisions in Title IV and their legislative history provide further support 

for interpreting the term, “system of emission reduction” to include building blocks 2, 3, 

and 4. In designing Title IV, Congress recognized the integrated nature of the electricity 

sector and how that integration could be harnessed to reduce air pollutant emissions; and, 

in fact, Congress included provisions to encourage re-dispatch to lower emitting sources, 

renewable energy, and demand-side energy efficiency, all of which are measures in those 

building blocks. Specifically, Congress added into the “purposes” provision of Title IV, 

the statements that in addition to the reducing the adverse effects of acid deposition – 

It is also the purpose of [Title IV] to encourage energy conservation, use 

of renewable and clean alternative technologies, and pollution prevention 

as a long-range strategy, consistent with the provisions of [Title IV], for 

 

47 See, e.g., CAA section 402(8), 405(c)(2). In fact, in the 1990 CAA Amendments, Congress based its 

decision to repeal the percentage reduction requirements added in the 1977 CAA Amendments to the 

section 111(a)(1) definition of “standard of performance” for new fossil fuel-fired sources at least in part on 

the grounds that provisions of Title IV would cap SO2 emissions from fossil-fuel fired EGUs, and, further, 

Congress conditioned that repeal on the continued applicability of the SO2 cap, so that if the cap were 

eliminated, the repeal would, by operation of law, be eliminated. See Pub.L. 101-549 section 403(b), S. 

Rep. 101-228, at 338, reprinted in 1990 Legislative History 8338, 8678 (1990 Senate Committee Report). 
30 

reducing air pollution and other adverse impacts of energy production and 

use....”48

Congress recognized that the very structure of Title IV – which imposed a marketable 

trading system under which affected sources were required to have an allowance for each 

ton of SO2 emitted and could buy and sell allowances on the open market -- encouraged 

such measures as demand-side energy efficiency and re-dispatch by lower-emitting 

sources. The 1990 Senate Committee Report explained: 

[T]he incentives created by the allowance market should stimulate 

innovations and the technologies and strategies used to reduce 

emissions.... [T]he allowance market should encourage sources to exploit 

energy efficiency, enhanced emission reduction or control technologies....; 

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

emission reductions.”49

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

encourage electric utilities (defined as entities that sell electricity50) to reduce their 

emissions through demand-side energy efficiency and renewable energy: Section 404(f)-

(g) provided a special reserve of allowances to be allocated to electric utilities “for each 

ton of SO2 emissions avoided by an electric utility ... through the use of ... energy 

conservation measures or ... renewable energy.” In fact, in adopting these provisions, 

Congress explicitly recognized the integrated nature of the electricity sector: As one of 

the conditions for eligibility for this special reserve of allowances, the utility must 

“ha[ve] adopted and is implementing a least cost energy conservation and electric power 

plan which evaluates a range of resources, including new power supplies, energy 

conservation, and renewable energy resources, in order to meet expected future demand 

at the lowest system cost.”51 

 These CAA provisions and the accompanying statements in the legislative history 

make clear that in enacting the Title IV provisions to reduce SO2 and NOx emissions 

from fossil fuel-fired EGUs, Congress viewed the electricity sector as interconnected and 

considered re-dispatch to lower emitting sources, renewable energy, and demand-side 

energy efficiency as methods to reduce those emissions. All this supports the 

reasonableness of the EPA’s proposed interpretation that the “system of emission 

reduction” that serves as the basis for “standards of performance” for CO2 emissions from 

fossil fuel-fired EGUs may include those same measures, that is, building blocks 2, 3, and 

4 (re-dispatch; low- or zero-emitting generation, including renewables; and demand-side 

energy efficiency, respectively.) 

 

48 CAA §section 401(b). See H. Rep. 101-490 Part 1 at 369-70 (1990 House Comm. Rep.), reprinted in “A 

Legislative History of the Clean Air Act Amendments of 1990,” Congressional Research Service (1993) 

(1990 Legislative History), vol. II, at 3021, 3393-94. 

49 1990 Senate Committee Report at 316, reprinted in 1990 Legislative History, vol. V, at 8656 (emphasis 

added). 

50 CAA §section 404(f)(1)(C). 51 CAA §section 404(f)(2)(B)(iii)(I). 
31 

 (IV). EPA Precedent 

 In the past, the EPA has promulgated rules under CAA section 111(d), in 

conjunction with CAA section 129, that are were based on measures that are similar to 

some of the measures in the building blocks consistent with the broad interpretation of 

the term, “system of emission reduction” that EPA proposes as the basis for the 

regulatory requirements in this rulemaking. For example, the EPA has authorized states 

to allow large municipal waste combustors to average their emission rates and trade NOx 

emission credits,52 and have required the owners of certain waste incineration facilities to 

take steps to reduce the amount of waste that the facilities combust.53

 (V). Other considerations

It should also be noted that a number of commentators in the private sector and 

academia have indicated support for interpreting the term, “system of emission 

reduction” to incorporate measures such as re-dispatch, renewable energy, and demandside energy efficiency.54 Some stakeholders have as well.55

 

52 See “Standards of Performance for New Stationary Sources and Emission Guidelines for Existing 

Sources; Municipal Waste Combustors,” 60 Fed. Reg. 65,387 (Dec. 19, 1995) (trading rules codified in 40 

C.F.R. §§section 60.33b(d)(1)-(2)). EPA also authorized an emission trading program in the Clean Air 

Mercury Rule. See “Standards of Performance for New and Existing Stationary Sources: Electric Utility 

Steam Generating Units, Final Rule,” 70 Fed. Reg. 28,606 (May 18, 2005) vacated on other grounds by

New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008), cert denied sub nom. Util. Air Reg. Grp. v. New Jersey, 

555 U.S. 1169 (2009); “Standards of Performance for New Stationary Sources and Emission Guidelines for 

Existing Sources; Municipal Waste Combustors,” 60 Fed. Reg. 65,387 at 28616-24, (Dec. 19, 1995). 53 See, e.g., Standards of Performance for New Stationary Sources and Emission Guidelines for Existing 

Sources: Hospital/Medical/Infectious Waste Incinerators, 62 Fed. Reg. at48,348, 48359 (Sept. 15, 1997); 

Standards of Performance for New Stationary Sources and Emission Guidelines for Existing Sources: 

Commercial and Industrial Solid Waste Incineration Units, 65 Fed. Reg. at75338, 75341 (Dec. 1, 2000). 54 See Nordhaus R., Gutherz I., “Regulation of CO2 Emissions from Existing Power Plants Under §section 

111(d) of the Clean Air Act: Program Design and Statutory Authority,” Environmental Law Reporter, 44: 

10366, 10384 (May 2014) (“strong arguments for” interpreting “system” to include measures such as the 

addition of new zero-carbon generating capacity and increases in end-user energy efficiency); Sussman R., 

“Power Plant Regulation Under the Clean Air Act: A Breakthrough Moment for U.S. Climate Policy?” 

Virginia Environment Law Journal, 32:97, 119 (2014) (“EPA would seem to have discretion to define 

‘system’ to include any mix of strategies effective in reducing emissions.”); Konschnik K., Peskoe A., 

“Efficiency Rules: The Case for End-Use Energy Efficiency Programs in the Section 111(d) Rule for 

Existing Power Plants,” Harvard Law School Environmental Law Program – Policy Initiative 4 (March 3, 

2014) (EPA is authorized to “consider[] ... the entire [electricity grid] system when setting performance 

standards.”); Monast J., Profeta T., Pearson B., Doyle J., “Regulating Greenhouse Gas Emissions From 

Existing Sources: Section 111(d) and State Equivalency,” Environmental Law Reporter, 42: 10206, 10209 

(March 2012) (“Demand-side energy-efficiency programs and renewable energy generation may fit within 

the §section 111 framework, however, because both reduce the utilization of power plants .... According to 

this reasoning, emission reductions are occurring within the source category, because of changes in 

generation at the power plant.”).

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

Flexible & Cost-Effective Carbon Pollution Standards for Existing Power Plants,” Environmental Defense 

Fund, at 9 (Oct. 2013), available at http://www . edf .org/sites/default/files/111-clean_air_actstrong_flexible_cost-effective_ carbon_pollution_standards_for_existing_power_plants .pdf ; Doniger D., 

“Questions and Answers on the EPA’s Legal Authority to Set ‘System Based’ Carbon Pollution Standards 

for Existing Power Plants under Clean Air Act Section 111(d),” NRDC [Natural Resources Defense 
32 

In addition to the just-discussed reasons why interpreting the term, “system of 

emission reduction” to include those measures is a reasonable interpretation under the 

CAA, that interpretation also is reasonable as a matter of policy, as we discuss 

extensively in the preamble. To reiterate briefly, including those measures is consistent 

with the industry’s long-standing methods of operating to assure reliability at the least 

cost, how states have more recently reduced non-greenhouse gas air pollutants from the 

industry, and, how states and segments of the industry have, still more recently, reduced 

CO2 emissions. 

b. “Best system of emission reduction ... adequately 

demonstrated” 

For the reasons described next, the measures in each of building blocks 1, 2, 3, 

and 4 qualify as components of the “best system of emission reduction ... adequately 

demonstrated.” As noted elsewhere, the D.C. Circuit has interpreted the BSER as “[a]n 

adequately demonstrated system,” and explained that such a system is one that can “be[] 

shown to be reasonably reliable, reasonably efficient, and ... reasonably ... expected to 

serve the interests of pollution control without becoming exorbitantly costly in an 

economic or environmental way.”56 In fact, the measures in the building blocks do meet 

the criteria established by the Court in the section 111 case law. In addition, the measures 

are “adequately demonstrated” because they have already been implemented in many 

states, and because they may be undertaken by the affected EGUs in the regulated 

markets in which they operate, or may be implemented by the states in the state plans. 

i. Criteria for the BSER 

The measures in building blocks 12, 3, and through 4 together meet the criteria for 

inclusion as components of the BSER: because they are individually and together 

technically feasible, and together they achieve significant emission reductions, are not 

unreasonably costly, and will promote the development and implementation of 

technology improvements for continued emission reductions.57 The bases for these 

conclusions are discussed in detail in the preamble and briefly summarized below.

The technical support for the conclusion that building block 1 measures are 

feasible is explained at length in the preamble and accompanying technical support 

document. 

 Counsel] Issue Brief (Oct. 2013); “Comments of the Attorneys General of New York, California, 

Massachusetts, Connecticut, Delaware, Maine, Maryland, New Mexico, Oregon, Rhode Island, Vermont, 

Washington, and the District of Columbia on the Design of a Program to Reduce Carbon Pollution from 

Existing Power Plants” (Dec. 16, 2013). 56 Essex Chemical Corp. v. Ruckelshaus, 486 F.2d at 427. 57 As noted above, we are proposing to determine BSER as the combination of all four building blocks, and 

because we discuss in the preamble the reasons why building block 1 meets the criteria for inclusion in the 

BSER,and why the BSER is the combination of all four building blocks, we are not further discussing those 

points here. 
33 

Building block 2, which entails substituting generation at higher emitting units 

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

affected sources (existing NGCC units) is technically feasible because the NGCC units 

are already providing electricity to the grid and have sufficient capacity to generate the 

additional amount of electricity that would substitute for the generation at fossil fuel-fired 

steam generating units. Re-dispatch is already widely used (usually more in response to 

fuel price signals than as a GHG CO2 mitigation measure), including by companies that 

own both coal- and natural-gas-fired EGUs. It should be noted that there are several 

mechanisms through which states could cause re-dispatch to occur. First, a state could 

use its permitting authority to impose limits on the hours of operation (or emissions) of 

individual steam generating units over a given time period. Second, a state could change 

the relative costs of generation for more carbon-intensive and less carbon-intensive 

generating units by imposing a cost on carbon emissions. A state could do so through any 

of several market-based mechanisms. One would be to adopt an allowance-based system. 

An example is the Regional Greenhouse Gas Initiative, an allowance-based system in 

which sources purchase allowances in periodic auctions. Another way would be through 

a tradable emission rate system, under which the state would impose an emission rate on 

the steam generating unit that the unit could meet only by purchasing the right to average 

its emission rate with a unit with a lower rate, such as an NGCC unit. Most broadly, an 

allowance system would provide the greatest incentive for the most carbon-intensive 

affected sources to reduce emissions as much as possible so as to reduce their need to 

purchase allowances (or to allow them to sell un-needed allowances), and the same would 

be true for a tradable emission rate system. 

As discussed in the preamble, building block 3, which entails use of new low- and 

zero-emitting energygeneration, as well as preservation of nuclear capacity that might 

otherwise be retired, is also technically feasible. The technology for renewable energy is 

well-established and in use now, and the amount of renewable energy contemplated by 

the proposal would not impair the reliability of the grid. The nuclear capacity at issue 

either is already in operation or, in the case of new nuclear capacity under construction, 

has long been known to grid operators for planning purposes. The measures in building 

block 3 may be implemented in different ways, including market mechanisms. In 

particular, markets for renewable energy certificates, which facilitates investment in 

renewable energy, are already well-established. In addition, as noted above with redispatch, an allowance system or tradable emission rate system would provide incentives 

for sources to reduce their emissions as much as possible, including by substituting their 

generation with generation from renewable energy. 

As for building block 4, as discussed in the preamble, numerous state and utility 

programs have demonstrated that improvements in demand-side energy efficiency are 

technically feasible at the levels contemplated in the proposal. An allowance system or 

tradable emission rate system would provide incentives that promote the measures in 

building block 4 in the same manner as just discussed for other building blocks. 

For the reasons discussed in the preamble, the combination of building blocks 1,

2, 3, and 4, along with building block 1, also meet the remaining criteria to qualify as the 

Formatted: Subscript
34 

BSER. . The combination of building blocks 1 through 4 together would achieve 

significant emission reductions, something no one building block would do on its own. 

The level of CO2 emissions reduction they achieve is significant, which is appropriate 

because of the severity of the risk to public health and the environment of climate change, 

and the magnitude of both the amount of emissions reductions needed and the amount of 

CO2 emissions from fossil fuel-fired power plants. 

In addition, based on the measures in building blocks 1 through 2, 3, and 4 

combined, the proposed levels of reduced generation are not unreasonably costly for the 

affected source category or the nation-wide electricity system. These levels do not have 

adverse effects on the overall energy system. Electricity consumers would continue to 

have access to the electricity they need under these building blocks, although they would 

need less energy for the same amount of economic activity as a result of the measures in 

building block 4. Additionally, the measures in building blocks 2, 3, and 1 through 4 

would improve the electricity system by reducing its carbon intensity, as well as other 

pollutants, allowing consumers to get the same amount of electricity for less 

environmental harm. Together, these measures in building blocks 1 through 4 would also

promote the development and implementation of technology that is important for 

continued emissions reductions. 

ii. Basis for “adequately demonstrated” finding 

The combination of the measures in building blocks 1 through 2, 3, and 4 are 

“adequately demonstrated” because each of the individual measures is adequately 

demonstrated, and because it has been adequately demonstrated that the measures can be 

taken in combination with each other in a manner consistent with the criteria for 

determining the BSER. 

The measures in building block 1 are adequately demonstrated because they are 

based on the real-world experience of individual power plants in recent years, as more 

fully described in the preamble and a technical support document. 

The measures in building blocks 2, 3, and 4 are “adequately demonstrated” 

because, as discussed in the preamble, due to the integrated nature of the electricity 

system, they have long been relied on to reduce costs in general, assure reliability, and 

implement pre-existing pollution control requirements in the least cost manner. As also 

noted in the preamble, some utilities, states and regions are already relying on these 

measures for the specific purpose of reducing CO2 emissions from EGUs. 

At the same time, as discussed in the preamble, measures in building blocks 2, 3, 

and 4 may be undertaken, and in fact have been undertaken, by the affected EGUs 

themselves, which further indicates that these measures are “adequately demonstrated.” 

To achieve the re-dispatch described in building block 2, operators of the affected fossil 

fuel-fired steam-generating EGUs may reduce generation, while operators of the affected 

NGCC units may increase generation to replace that avoided at higher-emitting facilities. 

Operators of the affected EGUs may invest in, or otherwise acquire power from, the new 
35 

low- or zero-carbon intensive generation described in building block 3, as well as in 

many of the demand-side energy efficiency measures described in building block 4. 

 

More specifically, many states maintain a utility regulatory structure under which 

the utilities that serve end users in the state are vertically integrated, and not only own the 

EGUs, but often also own renewable energy resources and provide service directly to 

retail customers. Operators of EGUs, in those circumstances, are well-positioned to 

undertake the measures in building blocks 3 and 4. In fact, as noted in the preamble, 

numerous states have already imposed renewable portfolio standards and demand-side 

energy efficiency requirements on those utilities. As a result, as also noted in the 

preamble, many companies have already developed integrated resource plans that include 

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

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

and the implementation of demand-side energy efficiency measures.58

Other states have de-regulated their electricity markets59 and as a result, in some 

instances, the EGUs in those states are merchant generators that sell to the wholesale 

electricity market. The EPA believes that markets for acquiring renewable energy 

resources and for delivering demand-side energy efficiency services are sufficiently welldeveloped that operators of these EGUs could undertake or acquire those measures as 

well. For example, merchant generators can invest in NGCC capacity, invest in 

renewable capacity or purchase renewable energy or renewable energy certificates 

(representations that a certain amount of energy was produced from renewable sources), 

as well as purchase demand-side energy efficiency services from energy service 

companies. The fact that the affected sources may themselves implement or invest in the 

measures in building blocks 2, 3, and 4 -- which, again, reduce their emissions -- supports 

treating those measures as components of the BSER. 

Another reason that the measures in building blocks 1, 2, 3, and 4 should be 

considered “adequately demonstrated” – and wholly apart from the fact that the EGUs 

may undertake those measures themselves – is based on the fact that CAA section 

111(d)(1)(A) provides, by its terms, that the standards of performance that are based on 

the BSER must be established by the states in state plans. As a result, emissions reduction 

measures that the states themselves have the authority under state law to put in place may 

be considered to be part of the BSER. While EGU owners and operators may effectuate 

such measures directly or indirectly, the states also have authority to enact measures such 

as dispatch limitations, renewable portfolio standards that require investment in 

renewable energy resources, as well as demand-side energy efficiency measures.60 As 

noted in the preamble, many states have already done so.61 

 

58 Moreover, in many de-regulated states, forward capacity auctions are used to ensure the ability to meet 

future demand, and generators may bid into those auctions based on all of their resource portfolio, 

including renewable energy assets and demand-side energy efficiency projects. This has encouraged 

generators to undertake the measures in building blocks 3 and 4. 

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

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

entities that undertake some of the measures in, for example, building block 4 may not be the affected 
36 

Finally, we note that during the public outreach sessions, stakeholders generally 

recommended that state plans be authorized to rely on, and that affected sources be 

authorized to implement, re-dispatch, renewable energy measures and demand-side 

energy efficiency measures, in order to meet the states’ and sources’ emissions reduction 

obligations. The EPA agrees that state plans may include these measures, at least under 

certain circumstances, discussed in the preamble, and that sources may rely on them to 

achieve required reductions. It is clear that these types of measures are well-accepted by 

the stakeholders as means to reduce emissions from affected sources. The fact that state 

plans and sources would be expected to use these types of measures to reduce emissions 

supports the view that these measures are part of a “system of emission reduction” for 

those sources that the EPA may evaluate against the appropriate criteria to determine 

whether they comprise the “best system of emission reduction ... adequately 

demonstrated.” 

c. Stakeholder concerns 

As noted above, some stakeholders have argued that section 111(a)(1) authorizes 

the EPA to identify re-dispatch, low- or zero-emitting generation, and demand-side 

energy efficiency measures (building blocks 2, 3, and 4) as components of the “best 

system of emission reduction ... adequately demonstrated.” However, other stakeholders 

have disagreed that this approach is consistent with CAA §section 111(d). According to 

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

undertaken at the affected units electric generating units (EGUs), including on-site 

controls, activities, or work practices(such as the measures in building block 1), and 

cannot include measures that are beyond the affected units. These stakeholders take the 

position that although efficiency improvements at the affected EGUs may be included in 

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

because they are implemented outside of the affected units EGUs and outside of their

control of their owners or operators.; and as a result, those measures cannot be considered 

components of the BSER.62 Some stakeholders have also argued that section 111(d)(1) 

 EGUs. Regardless of which entities undertake the measures in the building blocks, those measures have 

the effect of reducing CO2 emissions from fossil fuel-fired EGUs, and therefore each of the building blocks 

remains part of a “system” of emission reduction for those EGUs. 

61 More than half the states have established renewable portfolio standards (RPS) that require minimum 

proportions of electricity sales to be supplied with generation from renewable generating resources. More 

than 20 states have energy efficiency resource standards (EERS) that require utilities to effectuate a certain 

amount of savings in electricity demand each year or cumulatively. Database of State Incentives for 

Renewables & Efficiency (DSIRE), http://www.dsireusa.org/summarymaps/index.cfm?ee=0&RE=0.

62 “Response of the Utility Air Regulatory Group to EPA’s ‘Considerations in the Design of a Program to 

Reduce Carbon Pollution from Existing Power Plants” (Oct. 2013);, “Existing Source Performance 

Standards for Greenhouse Gas Emissions from Electrical Generating Units: Creating a Regulatory 

Framework Under Clean Air Act §section 111(d) – A whitepaper from the Coalition for Innovative Climate 

Solutions” (Feb. 26, 2014);. “Perspective of 18 States on Greenhouse Gas Emission Performance Standards 

for Existing Sources under §111(d) of the Clean Air Act,” included in “Testimony before the 

Subcommittee on Energy and Power of the House Committee on Energy and Commerce – ‘EPA’s 

Proposed GHG Standards for New Power Plants and H.R. __, Whitfield-Manchin Legislation’” (Nov. 14, 
37 

requires that the performance standards established by the states must reflect what is 

achievable at each existing unit.63

As the preamble notes, Wwe welcome comment on theseis issues. As discussed 

above, we propose that the provisions of section 111 allow the BSER to include those 

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

sources may themselves implement the measures included in building blocks 2, 3, and 4, 

so that those measures are within their control. Moreover, under our proposed alternative 

approach, the “system of emission reduction” includes reductions in utilization at the 

affected sources themselves.64 It should also be noted that, as discussed above, the redispatch measures in building block 2 are limited to affected sources. In addition, we 

discuss below that the performance standards that the states may establish under our 

approach meet the requirements of section 111(d)(1) and section 111(a)(1) because they 

would reflect the degree of the required emission performance level (which, in turn, is 

 2013) (statement of E. Scott Pruitt), 

http://democrats.energycommerce.house.gov/sites/default/files/documents/Testimony-Pruitt-EP-EPAGHG-Standards-Whitfield-Manchin-Legislation-2013-11-14.pdf. See National Climate Coalition, 

“Discussion Background Paper: Best System of Emission Reduction” (Oct. 16, 2013)(“BSER approach that 

mandates reductions based on actions outside the control of the regulated source would involve legal 

uncertainty. There is nothing in the CAA that authorizes EPA to issue guidelines that require a standard to 

be based on something that is outside the fence and outside the control of the source.”) 63 “Response of the Utility Air Regulatory Group to EPA’s ‘Considerations in the Design of a Program to 

Reduce Carbon Pollution from Existing Power Plants” (Oct. 2013). 64 Commenters have critiqued this “at-the-unit” and beyond-the-unit” distinction as follows: 

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

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

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

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

measures (e.g., fuel-switching or efficiency upgrades) or from beyond-theunit measures—are, in fact, emission reductions at or from electric 

generating units on the interconnected electric grid. For example, neither 

the addition of renewable generation nor the reduction of end-user demand 

directly reduces atmospheric emission of CO2; rather these measures permit 

fossil EGUs to reduce their own output and emissions. It can be argued that 

all of the systems of emission reduction here contemplated—whether they 

involve end-use energy efficiency, displacing high-emission generation with 

lower emission generation, fuel-switching, heat-rate improvements, etc.— 

are effectively at-the-unit measures that ultimately reduce emissions solely 

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

and redispatch from higher emitting facilities to lower emitting facilities 

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

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

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

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

means of complying with the rule. 

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

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

10383 n. 133 (May 2014).
38 

based on the BSER, as the EPA has applied it to the state’s sources) that the state assigns 

to the affected EGUs. Thus, the proposed approach and alternative described next 

respond to these stakeholder concerns. 

4. Second approach: Heat rate improvements measures in (building 

block 1) plus reduced utilization at levels commensurate with 

building blocks 2, 3 and 4 

The EPA is also proposing an alternative approach to the BSER: heat rate 

improvements (building block 1) combined with reduced utilization in specified amounts 

of the higher-emitting affected fossil fuel-fired EGUs, commensurate with the amount of 

low- and zero-emitting generation and avoided generation in building blocks 2, 3, and 4. 

The reasons why the measures in building block 1 qualify as a component of this 

approach to BSER, and the reasons why the combination of building block 1 with the 

reduced generation qualify as the BSER are the same as discussed above in connection 

with the first approach to BSER and in the preamble, and will not be discussed further in 

this subsection 4. Instead, this subsection will discuss the reduced generation component 

of this second approach to BSER. 

Under this approach, the measures in building blocks 2, 3, and 4 would not be 

components of the system of emission reduction but instead would serve as bases for 

quantifying the reduced generation (and therefore emissions) at affected EGUs, and 

assuring that the amount of reduced generation meets the criteria for the “best” system 

that is “adequately demonstrated” because, among other things, the reduced generation 

can be achieved while the demand for electricity services can continue to be met in a 

reliable and affordable manner. Specifically, the amount of generation from the increased 

utilization of NGCC units would determine a portion of the amount of the generation 

reduction component of the BSER for affected fossil fuel-fired steam EGUs; and the 

amount of generation from the use of expanded low- and zero-carbon generating capacity 

that could be provided, along with the amount of generation from fossil fuel-fired EGUs 

that could be avoided through the promotion of demand-side energy efficiency, would 

determine a portion of the amount of the generation reduction component of the BSER 

for all affected EGUs. 

The specified amount of reduced utilization is equal to the amount of increased 

generation from lower emitting sources in building blocks 2 and 3, and the decreased 

need for fossil fuel-fired generation from the efficiency measures in building block 4. 

For the reasons discussed below, heat rate improvements plus reduced generation 

in the specified amounts is a “system of emission reduction,” and meets the criteria to 

qualify as it is the “best” that is “adequately demonstrated.” because it meets the criteria 

for the BSER and relies on well-established methods of pollution control. 

a. “[S]ystem of emission reduction” 

Reduced generation is encompassed by the terms of the phrase “system of 

emission reduction” in CAA section 111(a)(1), as a matter of Chevron step 1, because, in 

Comment [HH2]: As revised, this section is a 

combination of the section in the previous version of 

the Legal Memo and the counterpart section in the 

preamble 

Comment [HH3]: This paragraph is from the 

preamble, p. 312-13 
39 

accordance with the above-discussed definition of “system,” reduced generation is a “set 

of things” – which include reduced use of generating equipment and therefore reduced 

fuel input – that the affected source may take to reduce its CO2 emissions.The phrase 

“system of emission reduction” may be interpreted to include reduced generation in the 

specified amounts, as well as heat rate improvements, as a matter of Chevron step 1. The 

phrase applies by its terms because reduced generation, as well as heat rate 

improvements, are actions or a set of actions – which include reduced use of generating 

equipment and reduced fuel input – that the affected source may take to reduce its CO2

emissions. 

If the phrase “system of emission reduction” is not considered clear by its terms, 

then it may reasonably be interpreted under Chevron step 2 to include reduced 

generation, for several reasons. because First, Congress has recognizeds reduced 

utilization in other several contexts as a method to reduce air pollution. The legislative 

history supports this interpretation. Beginning with the 1970 CAA Amendments, 

Congress has recognized that SIPs under CAA §section 110, in order to assure reductions 

in NAAQS pollutants to meet attainment requirements, may need to impose emission 

limits on industrial sources that those sources could meet only by retiring.65 Similarly, in 

adopting CAA §section 112, which directed the EPA to promulgate emission standards 

for sources of hazardous air pollutants (HAPs) to a level of stringency that provides an 

“ample margin of safety to protect the public health,”66 Congress was clear that the 

standards could be sufficiently stringent so that “effectively, ... a plant would be required 

to close because of the absence of control techniques.”67 Congress’s recognition that 

closing plants is a method of reducing pollution necessarily encompasses reduced 

utilization as a system of reducing pollution. As a result, it is reasonable to interpret the 

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

on §section 111(d) air pollutants, to include reduced production. 

Other examples of reduced utilization as a means of reducing emissions to comply 

with CAA requirements are found in settlement agreements between the EPA and fossil 

fuel-fired EGUs to resolve alleged violations of the CAA new source review (NSR) 

 

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

prevent the closing of a source of air pollution), enacted as CAA §section 110(f) in the 1970 CAA 

Amendments; _116 Cong. Rec. 42384 (Dec. 18, 1970), reprinted in 1970 Legislative History, vol. 1, at 

132-33 (statement of Sen. Muskie) (discussing criteria for sources to receive compliance date extensions). 

Similarly, Congress recognized that to achieve the NAAQS, it was necessary to reduce emissions from 

motor vehicles, and that an important method of doing so could be restricting the use of motor vehicles in 

urban areas that were already highly polluted. For this reason, Congress included in the 1970 CAA 

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

110(a)(2)(B), as approved in the 1970 CAA Amendments. Sen. Edmund S. Muskie (D-ME), who led the 

proponents for the Amendments in the Senate, explained that for some areas to attain the NAAQS, 

“[c]entral city use of motor vehicles may have to be restricted.” 116 Cong. Rec. 42384_(Dec. 18, 1970), 

reprinted in 1970 Legislative History, vol. 1, at 132 (statement of Sen. Muskie). 66 CAA §section 112(b)(1)(B), as approved enacted in the 1970 CAA Amendments. 67 116 Cong. Rec. 42385 (Dec. 18, 1970), reprinted in 1970 Legislative History, vol. 1, at 133 (statement 

of Sen. Muskie). Sen. Muskie added that the emission standards set by the EPA “could include emission 

standards which allowed for no measureable emissions,” id., which further suggests that, as a practical 

matter, the standards could result in reduced production. 

Formatted: Highlight
40 

requirements. These agreements typically allow the EGUs to choose one of several 

means to comply with their emission reduction obligations, including retiring units.68 

Reduction of, or limitation on, the amount of generation is already a wellestablished means of reducing emissions of pollutants in the electric sector, 

notwithstanding the fact that as a practical matter, some facilities may have to operate, or 

remain available, to ensure system reliability. For example, reduced generation by higheremitting sources is one of the compliance options available to, and used by, EGUs to 

comply with the Clean Air Act acid rain program in CAA title IV, as well as the transport 

rules that we refer to as the NOx SIP Call69 and the Clean Air Interstate Rule (CAIR).70

Reduction in generation is also a possible means by which an EGU can achieve 

compliance with its requirements under RGGI. 

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

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

requirements implementing the Clean Air Interstate Rule (CAIR),71 

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

demonstrated” 

Reduced generation in specified amounts meets the criteria to be the “best” 

system of emission reduction that is “adequately demonstrated.” Heat rate improvements 

and reduced generation from the higher-emitting EGUs in the indicated amounts combine 

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

Reduced generation is technically feasible due to the source’s ability to both improve its 

heat rate and limit its own operations. ; and Moreover, because the amount of reduced 

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

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

energy efficiency, that amount may be determined with precision ; and (ii) may be 

accomplished in a manner that assures the reliability of the electricity grid. 

Specifically, through this reduced generation approach, the amount of emission 

reduction achieved is appropriate, as discussed above. In addition, the cost of the 

proposed heat rate improvements and levels of reduced generation are reasonable for the 

affected source category and the nation-wide electricity system and do not jeopardize 

reliability. This is because the measures in building blocks 2, 3, and 4 are already in 

widespread use in the industry, and it is reasonable to expect that these measures will 

develop to achieve the levels proposed as part of this approach and thereby ensure an 

adequate and reliable supply of electricity. Moreover, reduced generation from fossil 

fuel-fired EGUs and its replacement through the measures in building blocks 2, 3, and 4 

 

68 See, e.g., Consent Decree, USA v. Wisconsin Power and Light Co., Civil Action No. 13-cv-266 

(WWi.DC), at 18, section IV, available at 

http://www2.epa.gov/sites/production/files/documents/wisconsinpower-cd.pdf 69 63 FR 57356 (Oct. 27, 1998). 

70 70 FR 25162 (May 12, 2005).

71 70 Fed. Reg. 25,162 (May 12, 2005). 

Comment [HH4]: From preamble, p. 315 

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41 

is consistent with trends in the energy sector and offer promise to reduce the carbon 

intensity of the system over the near- and long-term. Further, heat rate improvements and 

reduced generation from the higher-emitting EGUsThis approach also promotes the 

development and implementation of technologies that are important for continued 

emissions reductions by increasing the demand for those technologies. This is because of 

the interconnected nature of the electrical grid and the fungibility of electricity, which 

allows decreases in utilization at one facility to be seamlessly offset by increased 

utilization elsewhere (building blocks 2 and 3) or by decreased demand (building block 

4), and thereby makes reduced utilization a viable approach for emissions reductions by 

EGUs. Further, this fungibility increases over longer timeframes with the opportunity to 

invest in infrastructure improvements, and as noted elsewhere, this proposal provides an 

extended state plan and source compliance horizon. 

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

widespread use in the industry. At the levels in the proposal, they have the technical 

capability to substitute for the affected units’ reduced utilization at reasonable cost. 

Moreover, it is reasonable to expect that they will develop at the level requisite to ensure 

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

affected sources themselves could invest in new renewable energy resources and 

demand-side energy efficiency, as discussed above.72 Second, the states, as part of their 

plans, have mechanisms available to put these substitutes in place: They could establish 

requirements or incentives that would result in new renewable energy and demand-side 

energy efficiency programs, as also discussed above. 

 

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

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

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

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

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

authorizes the EPA to determine the BSER by “balanc[ing] long-term national and 

regional impacts,” and by “using a long-term lens with a broad focus on future costs, 

environmental and energy effects of different technological systems....”73

Reduced generation in those amounts is also “adequately demonstrated.” As noted 

above and discussed further in the preamble, the measures in building blocks 2, 3, and 4 

are already in widespread use in the industry. At the levels proposed, they have the 

technical capability to substitute for reduced generation at some or all affected EGUs at 

reasonable cost. The NGCC capacity necessary to accomplish the levels of generation 

reduction proposed for building block 2 is already in operation or under construction. 

Moreover, it is reasonable to expect that the incremental resources reflected in building 

 

72It should be noted that in light of the low current and projected near term prices for natural gas, market 

forces may lead investors to choose to build new NGCC units, rather than new renewable resources. This 

result would not call into question the technical feasibility of a BSER that included reductions in fossil fuelfired generation by the amount of a specified amount of new renewable resources. This is because under 

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

reliability or other problems in the electric power system. 73 Sierra Club v. Costle, 657 F.2d 298, 331 (D.C. Cir. 1981). 

Formatted: Indent: First line: 0.5", Tab

stops: Not at 3.87"

Comment [HH5]: The rest of this section is from 

the preamble 
42 

blocks 3 and 4 will develop at the levels requisite to ensure an adequate and reliable 

supply of electricity at the same time that affected EGUs may choose or be required to 

reduce their CO2 emissions by means of reducing their utilization. There are several 

reasons for this. First, the affected sources themselves could invest in new renewable 

energy resources and demand-side energy efficiency, as discussed in the preamble.74

Second, the states, as part of their plans, have mechanisms available to put these 

substitutes in place: they could establish requirements or incentives that would result in 

new renewable energy and demand-side energy efficiency programs, as also discussed in 

the preamble.75 Third, as also discussed in the preamble, regional entities in the electricity 

system can accommodate these substitutes. 

Most broadly, with respect to the measures in building blocks 2, 3, and 4, 

provided there is sufficient lead time for planning, mechanisms are in place in both 

regulated and deregulated electricity markets to assure that substitute generation will 

become available and/or steps to reduce demand will be taken to compensate for reduced 

generation by affected EGUs. These mechanisms are based on, among other things, the 

integrated nature of the electricity system coupled with the availability of capacity in 

existing NGCC units, the growing institutional capacity of entities that develop 

renewable energy and demand-side energy efficiency resources, and the ability of system 

operators and state regulators to incentivize further development of those resources.

7. Re-dispatch and sources in the regulated source categories.

As described in the preamble, building block 2 consists of reductions in 

generation from fossil fuel-fired steam generating boilersunits, and corresponding 

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

the steam generating boilers units may reduce, and that NGCC units may increase, up to 

an average of 70% capacity utilization of the NGCC units. 

Accordingly, this component of the BSER involves two sets of affected sources. 

The first (the steam generating boilersunits) decreases its their emissions. The second (the 

lower-emitting NGCC units) may increase its their emissions if increased operations are 

necessary to ensure the ongoing reliability of the integrated electricity system, of which 

both sets of source are a part, as emissions and generation reduction is occurring at steam 

generating boilers units and net reductions are being achieved. Both these sets of sources 

are affected sources because they are in source categories that are covered by this 

rulemaking. As noted in the preamble, the fossil fuel-fired steam generating boilers are in 

a source category that the EPA listed under CAA section 111(b) in 1971, and the NGCC 

units are in a source category that EPA listed in 1979. The NGCC units (as well as the 

 

74It should be noted that in light of the low current and projected near term prices for natural gas, market 

forces may lead investors to choose to build new NGCC units, rather than new renewable resources. This 

result would not call into question the technical feasibility of a BSER that included reductions in fossil fuelfired generation by the amount of a specified amount of new renewable resources. This is because under 

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

reliability or other problems in the electric power system. 75 The nuclear generating capacity reflected in building block 3 is already in operation or under 

construction.

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43 

steam-generating boilersunits) are subject to reduction requirements through other 

components of the BSER, specifically, building blocks 3 and 4 (low- and zero-emitting 

energy and demand-side energy efficiency, respectively). In addition, as noted in the 

preamble, the EPA is co-proposing to combine the two source categories into a single 

source category, covering fossil fuel-firedfossil fuel-fired EGUs. 

8. Building blocks 2, 3, and 4: intra-state and inter-state compliance 

In this section, we discuss the issue of whether CAA section 111(d) limits the 

EPA to applying the re-dispatch component (building block 2) of the BSER, based on the 

assumption that each state will comply with that component on a purely intra-state basis, 

or instead, whether the EPA could base building block 2 on an assumption that the states 

will comply with that component through the interstate region with which they share the 

grid. 

As the preamble describes, in evaluating building block 2, we have assumed that 

each state would implement it on a state-by-state basis, without relying on a multi-state 

regional grid. In particular, we have assumed that each state would increase generation 

of its own NGCC units to as close to the proposed average 70% capacity utilization as 

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

boilersunits, and we assumed the corresponding amount of reduction in generation from 

those steam generators. We have determined the costs of that re-dispatch, and propose to 

find that they are reasonable.76 Because we know that dispatch systems operate over 

multi-state regions, however, we have also determined the costs of the re-dispatch if each 

state that is part of a multi-state grid implements re-dispatch by taking into account the 

multi-state grid in which it operates. 

We found that based on the intra-state approach, some states could not increase 

their average NGCC unit utilization to 70% because they have limited fossil fuel-fired 

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

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

intra-state approach are demonstrably higher than the costs of the region-wide approach. 

In fact, we expect that because all of the lower-48 states, with the exception of Texas, are 

part of a multi-state, regional grid each state’s implementation of building block 2 would, 

as a practical matter, necessarily occur on an interstate, and not an intrastate, basis. 

CAA section 111(d)(1), by its terms, applies requirements on a state-by-state 

basis. It requires that “each State shall submit to the Administrator a plan” that includes 

standards of performance as well as implementing and enforcing measures. Further, it 

allows “the State in applying a standard of performance to any particular source under a 

[state] plan” to take into consideration factors such as the source’s remaining useful life. 

These provisions raise the issue of whether section 111(d) may be interpreted so 

that the re-dispatch component of the BSER may be applied on the assumption that each 

state would implement that component on a purely intra-state basis, or whether section 

 

76 It should be noted that we also evaluated region-wide re-dispatch, for which the costs are less. 
44 

111(d) may be interpreted so that the re-dispatch component may be applied on the 

assumption that each state would implement through the operation of the interstate grid in 

which it participates. This issue may also apply to building blocks 3 and 4. 

C. Application of the BSER; achievability of the emissions standards 

1. Introduction and Overview 

In this subsection C, we discuss our interpretation of the CAA §§sections 

111(d)(1) and 111(a)(1) requirements that each state must develop a plan that establishes 

for “any existing source”77 “standards of performance,” which are defined as emission 

standards that “reflect the degree of limitation achievable through the application of the 

best system of emission reduction ... adequately demonstrated.” We explain why our 

state-wide approach to applying the BSER and the emission standards that result from the 

state plan process we require are consistent with these section 111 provisions. 

These provisions make clear that an important aspect of the state’s establishment 

of the standards of performance is “the application of” the BSER. In this rulemaking, the 

EPA is proposing to apply the BSER for affected EGUs on a statewide basis. The 

statewide approach also underlies the required emission performance level, which is 

based on the application of the BSER to a state’s affected EGUs, and which the suite of 

measures in the state plan, including the emission standards for the affected EGUs, must 

achieve overall. The state has flexibility in assigning the emission performance 

obligations to its affected EGUs, in the form of standards of performance -- and, for the 

portfolio approach, in imposing requirements on other entities -- as long as, again, the 

required emission performance level is met. 

This state-wide approach both harnesses the efficiencies of emission reduction 

opportunities in the interconnected electricity system and is fully consistent with the 

principles of federalism that underlie the Clean Air Act generally and CAA section 

111(d) particularly. That is, section 111(d) achieves the emission performance 

requirements through the vehicle of a state plan, and provides each state significant 

flexibility to take local circumstances and state policy goals into account in determining 

how to reduce emissions from its affected sources, as long as the plan meets minimum 

federal requirements. 

For convenience, we set out the requirements of CAA sections 111(d)(1) and 

111(a)(1) here: under CAA section 111(d)(1), the state must adopt a plan that “establishes 

standards of performance for any existing source.” Under CAA section 111(a)(1), a 

“standard of performance” is a “standard for emissions ... which reflects the degree of 

emission limitation achievable through the application of the best system of emission 

 

77 It should be recalled that although in this subsection C. we refer to “any existing source” or “each 

existing source” in the state, or we use similar terms, CAA §section 111(d) applies to only those existing 

sources that would be covered by a section 111(b) standard if they were newly constructed or if they 

modified or reconstructed. 
45 

reduction ... adequately demonstrated.” The EPA proposes to interpret these provisions 

as set forth in this sub-section. 

The first step is for the EPA to determine the “best system of emission reduction 

... adequately demonstrated.” As discussed at length elsewhere, the EPA is proposing 

two alternative BSER. The first is the measures in building blocks 1 through 4 combined. 

This includes operational improvements and equipment upgrades that the coal-fired 

steam-generating EGUs in the state may undertake to improve their heat rate by, on 

average, six percent and increases in, or retention of, zero- or low-emitting generation, as 

well as measures to reduce demand for generation, all of which, taken together, displace, 

or avoid the need for, generation from the affected EGUs. This BSER is a set of measures 

that impacts affected EGUs as a group. The alternative approach to BSER is building 

block 1 combined with reduced utilization from the affected EGUs in the state as a group, 

in the amounts that can be replaced by an increase in, or retention of, zero- or lowemitting generation, as well as reduced demand for generation. 

After determining the BSER, the EPA then applies the BSER to each state’s 

affected EGUs, on a state-wide basis. Building block 1 is applied to the coal-fired steamgenerating EGUs on a statewide basis; building block 2 is applied to increase the 

generation of the NGCC units in the state up to certain amounts, and decrease the amount 

of generation from steam-generating units accordingly; and the measures in building 

blocks 3 and 4 are applied to reduce, or avoid, generation from affected EGUs on a statewide basis. Under the alternative formulation of the BSER, the total amount of reduced 

generation from the affected EGUs in the state, associated with the measures in building 

blocks 2, 3, and 4, is determined on the basis of each state’s affected EGUs as a group. 

This statewide approach to applying the BSER is consistent with the CAA section 

111(a)(1) definition of “standard of performance,” which, as quoted above, refers to “the 

application of the [BSER],” for the purpose of determining “the degree of emission 

limitation achievable,” but does not otherwise constrain how the BSER is to be applied. 

As a result, we, as the administering agency, have discretion under Chevron step 2 to 

fashion an interpretation that is a reasonable construction of the CAA provisions.78 

Similarly, the implementing regulations give the EPA broad discretion to identify the 

group of sources to which the BSER is applied. 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 costs of control, physical 

limitations, geographical location, or similar factors make subcategorization appropriate.” 

In this rulemaking, the EPA is applying the BSER to the affected EGUs in each 

state as a group. As we have noted, for this industry, a state-wide approach harnesses the 

efficiencies of emission reduction opportunities in the interconnected electricity system, 

including the opportunities to reduce emissions from all affected EGUs through 

reasonable cost, lower-emitting replacement generation. Accordingly, under the 

implementing regulations just quoted, it is “appropriate” to apply the BSER to the 

affected EGUs in each state as a group. 

 

78 Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-844 (1984). 
46 

As part of applying the BSER, the EPA, to return to provisions of CAA section 

111(a)(1), calculates the “emission limitation achievable through the application of the 

[BSER].” In this rulemaking, we refer to this amount as the state goal. As noted, the 

EPA expresses the state goal in the emission guidelines as an emission rate. 

The state must develop a state plan that achieves the state goal, either in the form 

of an emission rate, as specified for the state in the emission guidelines, or a translated 

mass-based version of the rate-based goal. We refer to the state goal, in the form used by 

the state as the foundation of its plan, as the required emission performance level. 

As part of its state plan, the state must establish “standards of performance” for its 

affected EGUs. To do so, the state may consider the measures the EPA identified as part 

of the BSER or other measures that reduce emissions from the affected EGUs. Moreover, 

the state has the flexibility to establish emission standards in the degree of stringency that 

the state considers appropriate.79 The primary limitation on the state’s flexibility is that 

the emissions standards applied to all of the state’s affected EGUs -- and, in the case of 

states that adopt the portfolio approach, the requirements imposed on other affected 

entities -- taken as a whole, must be demonstrated to achieve the required emission 

performance level. In addition, the state may make the emission standards for any of its 

affected EGUs sufficiently stringent, so that the standards and any requirements imposed 

on other affected entities (if relevant), taken as a whole, achieve a level of emission 

performance that is better than the required emission performance level. See CAA section 

116, 40 CFR 60.24(g).80

Under these circumstances – that the emission standards that the state establishes 

for its affected EGUs and any other requirements for the other affected entities, as 

relevant, taken together, are at least as stringent as necessary to achieve the required 

emission performance level for the state’s affected EGUs - each emissions standard that 

the state adopts for each of its affected EGUs will meet the definition of a “standard of 

performance” under CAA section 111(a)(1). Specifically, the “standard of performance” 

for each source will constitute, to return to the provisions of CAA section 111(a)(1), “a 

standard for emissions which reflects [that is, embodies, or represents]81 the degree [that 

is, the portion] of emission limitation achievable through the application of the [BSER]” 

[that is, as noted above, the required emission performance level for all affected sources 

in a state]. That “degree” or portion of the required emission performance level is, in 

 

79 Looked at another way, through our proposal, consistent with the EPA’s authority in determining the 

BSER to subcategorize sources on the basis of costs and other factors, see 40 CFR 60.22(b)(5), the state has 

the opportunity in effect to subcategorize its sources on the basis of their costs and other considerations 

associated with their position in the interconnected electricity grid, and to assign responsibilities for 

achieving the emission performance level accordingly.

80 By comparison to state implementation plans (SIPs) under CAA section 110, although section 111(d) 

state plans differ from SIPs in that the latter are designed to achieve a NAAQS, section 111(d) plans that 

are designed to achieve a required emission performance level incorporate many of the same flexibilities as 

SIPs.

81 See Oxford Dictionary of English (3rd ed. 2010 (online version 2013)) (defining “reflect” as, among 

other things, “embody or represent (something) in a faithful or appropriate way”). 
47 

effect, the portion of the state’s obligation to limit its affected sources’ emissions that the 

state has assigned to each particular affected source. An emissions standard meets this 

definition of the term “standard of performance” regardless of whether it is part of a plan 

that adopts the portfolio approach (in which case, the standard will reflect a relatively 

smaller part of the emission performance level) or one that imposes the plan’s emission 

limitation obligations entirely on the affected EGUs (in which case, the standard will 

reflect a relatively larger part of the emission performance level).82

These proposed interpretations of the provisions of CAA sections 111(d)(1) and 

(a)(1) are fully consistent with the EPA’s overall approach in this rulemaking to 

determining and applying the BSER and identifying the appropriate level of emission 

performance for the affected EGUs. As noted, this approach entails applying the BSER 

on a state-wide basis and, based on the BSER, identifying the emission performance level 

for each state’s affected EGUs that each state must achieve, so that each state may then 

assign the responsibilities for achieving that performance level emissions limitation 

obligations among its sources. As noted, this approach is fully consistent with the 

interconnected nature of the electricity system and with the principles of federalism that 

form part of the foundation of the Clean Air Act, and that find expression in section 

111(d) through its provisions implementing the required emission controls through the 

vehicle of state plans. underlie CAA section 111(d). We also note that, as part of our 

proposal for BSER, applying the “best system of emission reduction ... adequately 

demonstrated” on a statewide basis in this manner is consistent with interpreting the term 

“best” to include those principles of federalism. That is, one reason why each of our 

proposed two alternative approaches for BSER qualifies as the “best” system is that, in 

effect, each can be implemented in an efficient manner by a state – through its obligation 

to assure achievement of the emission performance level that is based on the BSER -- 

which may mean assigning greater responsibility for emission limitations to some 

affected EGUs than to others. 

It should be emphasized that each state has many options for assigning the 

emission limitation obligations among its affected sources.83 For example, the state could 

impose emission standards that are consistent with directly flow from the BSER. Under 

these circumstances, the state may assign to different affected sources emission standards 

with different levels of stringency because the state will have determined that those 

standards are consistent with the extent to which the low- or zero-emitting generation in 

 

82 The EPA’s approach may also be characterized as (i) determining the BSER for the affected EGUs, (ii) 

establishing as the emission guideline the standard for emissions that the affected EGUs in the state can 

achieve on average through the application of the BSER, and (iii) as part of the emission guideline, 

authorizing each state to establish as the applicable standard for each affected EGU, the standard that the 

state considers appropriate and that when totaled with the standards established for the other EGUs (and as 

may be adjusted to account for the portfolio approach, if that approach is adopted by the state) is at least as 

stringent as the average standard in the emission guideline. As noted in the accompanying text, a state has 

many ways to establish standards that meet these requirements, including, for example, following the 

BSER or authorizing emission rate averaging or trading. 83 One of the advantages of the flexibility states have under the EPA’s approach is that state officials may 

utilize their knowledge of the electricity sector in their state and of the entities involved in fashioning the 

standards of performance and other requirements.
48 

building blocks 2, 3, and 4 will displace the source’s generation and thereby lower the 

source’s emissions. The state may establish a relatively less stringent emission standard 

for a source that the state considers will not have much of its generation displaced than 

the state may for a source that the state considers will have more of its generation 

displaced.84 The state could base this approach on the recognition that the increased 

zero- and low-emitting generation displaces generation from affected sources in different 

amounts, depending on the affected sources’ costs and on other factors, such as 

transmission line capacity. 

In addition, the state could authorize emission trading as part of the emission 

standards for affected sources. Under these circumstances, if an affected source’s 

emissions level was higher than the standard the state established for it, the source could 

achieve the standard by purchasing additional emission rights through the trading 

program. 

It bears emphasis that each state has flexibility in establishing the standards of 

performance for its existing sources as long as, on a state-wide basis, those standards 

(and, in the case of the portfolio approach, any other permissible measures in the state 

plan) achieve the state’s required emissions performance levelemission performance 

level. This flexibility is in keeping with the nature of the BSER that we have determined 

and the state-wide manner in which we have applied it to each state’s existing sources. 

This flexibility is also consistent with the interconnected nature of the electricity system, 

through which the fossil fuel-fired EGUs are connected to, and affect, each other, and are 

all affected by other sources of generation. 

In addition, this flexibility is consistent with the federalism principles that form 

part of the foundation of the Clean Air Act, and which find expression in section 111(d) 

through its provisions implementing the required emission controls through the vehicle of 

state plans. 

Finally, it should be noted that states retain authority under CAA section 116 and 

40 CFR 60.24(g) to impose standards of performance that, cumulatively, are more 

stringent than the emission performance level. 

 

84 It should be noted that if the state wished to pattern the emissions standards after the way that the source 

was affected by the BSER, the state would also need to consider the extent to which the source can 

implement the heat rate improvements in building block 1, but for purposes of simplifying this example, we 

will set that consideration aside. It should also be noted that this example assumes that the state, in 

assigning emission rates to its sources, credits reductions in emissions due to reductions in generation 

against the emission rate. 
1 

Legal Memorandum for Proposed Carbon Pollution Emission Guidelines for 

Existing Electric Utility Generating Units 

Introduction 

The purpose of this memorandum (Legal Memorandum) is to supplement the 

preamble by providing background for the legal issues discussed in the preamble for this 

proposed rule1

 and further discussion of some, but not all, of those issues. This 

memorandum is intended to be read in conjunction with, and assumes familiarity with, 

the preamble. 

I. Background 

A. Clean Air Act section 111 

Clean Air Act (CAA) section 111, which Congress enacted as part of the 1970 

CAA Amendments, establishes mechanisms for controlling emissions of air pollutants 

from stationary sources. This provision requires EPA to promulgate a list of categories of 

stationary sources that the Administrator, in his or her judgment, finds “causes, or 

contributes significantly to, air pollution which may reasonably be anticipated to 

endanger public health or welfare.” 2 EPA has listed more than 60 stationary source 

categories under this provision.3

 Once EPA lists a source category, EPA must, under 

CAA section 111(b)(1)(B), establish “standards of performance” for emissions of air 

pollutants from new sources in the source category.4

 These standards are known as new 

source performance standards (NSPS), and they are national requirements that apply 

directly to the sources subject to them. 

When the EPA establishes NSPS for new sources in a particular source category, 

the EPA is also required, under CAA section 111(d)(1), to prescribe regulations for states 

to submit plans regulating existing sources in that source category for any air pollutant 

that, in general, is not regulated under the CAA section 109 requirements for the national 

ambient air quality standards (NAAQS) or regulated under the CAA section 112 

requirements for hazardous air pollutants (HAP). In contrast with CAA section 111(b), 

which provides for direct federal regulation of new sources, section 111(d)’s mechanism 

for regulating existing sources provides that states will submit plans that establish 

“standards of performance” for the affected sources and that contain other measures to 

implement and enforce those standards. 

The term “standard of performance” is defined under CAA section 111(a)(1) as a 

“standard for emissions of air pollutants” that “reflects the degree of emission limitation 

achievable” from the “best system of emission reduction,” considering costs and other 

 

1

 The proposed rule is the “Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric 

Utility Generating Units.” 

2

 CAA section 111(b)(1)(A). 

3 See 40 CFR 60 subparts Cb – OOOO. 4

 CAA section 111(b)(1)(B), 111(a)(1). 
2 

factors, that “the Administrator determines has been adequately demonstrated.” CAA 

section 302(l) also defines “standard of performance” as “a requirement of continuous 

emission reduction, including any requirement relating to the operation or maintenance of 

a source to assure continuous emission reduction.” 

Under the EPA’s implementing regulations for CAA section 111(d)(1), the EPA 

must determine the best system of emission reduction for the sources, and then apply that 

best system to determine the required level of emissions or emission reduction, which the 

regulations refer to as the “emissions guideline.”5

 Under section 111(d)(1), the states 

must then adopt state plans that establish standards of performance and measures that 

implement and enforce those standards. In the case of an air pollutant that EPA has 

determined may cause or contribute to endangerment of public health, the states’ 

standards of performance must not be less stringent than the EPA’s emission guideline.6

 

CAA section 111(d)(1) grants states the authority, in applying a standard of performance 

to particular sources, to take into account the source’s remaining useful life or other 

factors. 

The state must submit its plan to the EPA for approval, and, under CAA section 

111(d)(2), the EPA must approve the state plan if it is “satisfactory.”7

 If a state does not 

submit a plan, the EPA must establish a federal plan for that state.8

 Once a state receives 

the EPA’s approval for its plan, the provisions in the plan become federally enforceable 

against the entity responsible for noncompliance, in the same manner as the provisions of 

an approved state implementation plan (SIP) under CAA section 110. 

B. Legislative history 

The legislative history of the 1970 Clean Air Act Amendments indicates that at 

that time, Congress grouped air pollutants from existing stationary sources into three 

categories: (i) air pollutants that affected the National Ambient Air Quality Standards 

(NAAQS), which would be regulated under CAA section 110 state implementation plans 

(SIPs), (ii) hazardous air pollutants (HAPs), which would be regulated under EPApromulgated national emission standards pursuant to CAA section 112, and (iii) all other 

air pollutants. The House bill did not address this third group of air pollutants, but the 

Senate bill did: it termed them “selected air pollution agents” and proposed to require the 

EPA to promulgate national emission standards pursuant to proposed CAA section 114. 

The 1970 House-Senate Conference Committee that was formed to resolve differences 

between the House and Senate versions of the CAA Amendments did not adopt the 

Senate bill’s proposed CAA section 114, but did adopt section 111(d), which covers the 

same non-NAAQS, non-HAPs air pollutants. Under section 111(d)(1) as included in the 

1970 CAA Amendments, the states were required to submit to the EPA state plans that 

“establish[] emission standards” for their existing sources. Although the legislative 

history of the 1970 CAA Amendments does not contain statements that directly discuss 

 

5

 40 CFR 60.22(b)(5). 

6

 40 CFR 60.24(c). 

7

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

8 Id. 
3 

the specific provisions included in section 111(d), the legislative history of the Senate 

bill’s proposed section 114 is relevant to the meaning of section 111(d), and we refer to 

parts of that legislative history below. 

For new sources, section 111(b)(1)(B) required the EPA to promulgate “standards 

of performance,” and defined that term, under section 111(a)(1), as— 

a standard for emissions of air pollutants which reflects the degree of 

emission limitation achievable through the application of the best system 

of emission reduction which (taking into account the cost of achieving 

such reduction) the Administrator determines has been adequately 

demonstrated. 

The legislative history discusses, among other things, the meaning of the term “standard 

of performance,”9

 which we refer to below. 

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

including section 111(d). Congress substituted “standards of performance” for “emission 

standards,” which, as noted above, the states are required to establish in their state plans. 

In addition, Congress added to section 111(d)(1) the requirement that the EPA’s 

regulations “permit the State in applying a standard of performance to any particular 

source under a [section 111(d)] plan ... to take into consideration, among other factors, 

the remaining useful life of the existing source to which such standards applies.” 

Congress added to section 111(d)(2) a similar requirement applicable to federal plans. In 

addition, Congress revised the definition of “standard of performance” in section 

111(a)(1) to distinguish among different types of sources, and to require that for fossil 

fuel-fired sources, the standard (i) be based on, in lieu of the “best system of emission 

reduction ... adequately demonstrated,” the “best technological system of continuous 

emission reduction ... adequately demonstrated;” and (ii) require a percentage reduction 

in emissions. In addition, in the 1977 CAA Amendments, Congress expanded the 

parenthetical requirement that the Administrator consider the cost of achieving the 

reduction to also require the Administrator to consider “any nonair quality health and 

environment impact and energy requirements.” Congress also added the definition of 

“standard of performance” in section 302(l), which defines the term to require a 

“continuous emission reduction.” 

In the 1990 CAA Amendments, Congress made further amendments to section 

111, including section 111(d). Among other things, Congress again revised the definition 

of “standard of performance” under CAA section 111(a)(1), this time repealing the 

requirements that the standard of performance be based on the best technological system 

and achieve a percentage reduction in emissions, and replacing those provisions with the 

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

of performance be based on the “best system of emission reduction ... adequately 

demonstrated.” In addition, in section 111(d)(1)(A)(i), Congress revised the description 

of which air pollutants are subject to section 111(d) but, as discussed below, left the 

 

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

provision ambiguous with respect to its applicability to the air pollutant emitted from the 

sources at issue in this rulemaking: CO2 emissions from fossil fuel-fired EGUs . CAA 

section 111 has not been revised since the 1990 CAA Amendments. 

C. Regulatory history and case law 

The EPA issued regulations implementing CAA section 111(d) in 1975,10 and has 

revised them in the years since.11 (We refer to the regulations generally as the 

implementing regulations.) These regulations provide that, in promulgating requirements 

for sources under CAA section 111(d), the EPA first develops regulations known as 

“emission guidelines,” which establish binding requirements that states must address 

when they develop their plans.12 The implementing regulations also establish timetables 

for state and EPA action. The default rule is that states must submit state plans within 

nine months of the EPA’s issuance of the guidelines,13 but the regulations provide the 

EPA with authority to extend the deadlines for those submissions.14 The regulations also 

provide that the EPA must take final action on the state plans within four months of the 

due date for those plans.15 In the present rulemaking, the EPA is following the 

requirements of the implementing regulations, except that the EPA is extending certain 

timetables, as described in the preamble.16 

Over the last forty years, under CAA section 111(d), the agency has regulated 

four pollutants from five source categories (i.e., phosphate fertilizer plants (fluorides), 

sulfuric acid plants (acid mist), primary aluminum plants (fluorides), Kraft pulp plants 

(total reduced sulfur), and municipal solid waste landfills (landfill gases)).17 In addition, 

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

with CAA section 129.18 The agency has not previously regulated CO2 or any other 

greenhouse gas under CAA section 111(d) (although because landfill gases include 

 

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

1975). 

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

12 40 CFR 60.22. In the 1975 rulemaking, the EPA explained that it used the term “emissions guidelines” – 

instead of emissions limitations – to make clear that guidelines would not be binding requirements 

applicable to the sources, but instead are “criteria for judging the adequacy of State plans.” 40 Fed. Reg. at 

53,343. 

13 40 CFR 60.23(a)(1). 

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

15 40 CFR 60.27(b). 

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

plan submittals. The EPA is proposing additional regulatory requirements, which are contained in proposed 

subpart UUUU. 

17 See “Phosphate Fertilizer Plants; Final Guideline Document Availability,” 42 Fed. Reg. 12,022 (Mar. 1, 

1977); “Standards of Performance for New Stationary Sources; Emission Guideline for Sulfuric Acid 

Mist,” 42 Fed. Reg. 55,796 (Oct. 18, 1977); “Kraft Pulp Mills, Notice of Availability of Final Guideline 

Document,” 44 Fed. Reg. 29,828 (May 22, 1979); “Primary Aluminum Plants; Availability of Final 

Guideline Document,” 45 Fed. Reg. 26,294 (Apr. 17, 1980); “Standards of Performance for New Stationary 

Sources and Guidelines for Control of Existing Sources: Municipal Solid Waste Landfills, Final Rule,” 61 

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

18 See, e.g., “Standards of Performance for New Stationary Sources and Emission Guidelines for Existing 

Sources: Sewage Sludge Incineration Units, Final Rule,” 76 Fed. Reg. 15,372 (Mar. 21, 2011). 
5 

methane, the agency’s regulation of landfill gases reduced emissions of that greenhouse 

gas). 

The D.C. Circuit has never handed down a decision that interpreted, or reviewed 

EPA’s interpretation of, section 111(d). The D.C. Circuit has, however, reviewed 

rulemakings under CAA section 111 on numerous occasions during the past four 

decades, handing down decisions dated from 1973 to 2011.19 These decisions concerned 

various aspects of section 111, primarily the interpretation of the term “standard of 

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

D. Summary of section 111 proposals 

The EPA is in the process of conducting three rulemakings to regulate CO2 from 

fossil fuel-fired electricity generating units (EGUs), including both fossil fuel-fired 

electric utility steam generating units and natural gas-fired stationary combustion turbines 

(affected sources or affected EGUs). The first, published in January, 2014, proposes 

standards of performance under CAA section 111(b) for affected sources undertaking 

new construction. The second is the present rulemaking, under CAA section 111(d), 

which proposes emission guidelines for states to follow in adopting state plans that 

regulate existing affected EGUs. In the third rulemaking, which we expect to propose 

concurrently with the present one, the EPA is proposing standards of performance under 

section 111(b) for affected EGUs that undertake modifications or reconstructions. 

II. Summary of legal basis 

The following summarizes the main features of the EPA’s legal rationale for this 

proposed rulemaking. All of this rationale is discussed in the appropriate sections of the 

preamble for this rulemaking. This Legal Memorandum elaborates on some, although 

not, of these features. 

Today’s proposed action is consistent with the requirements of CAA section 

111(d) and the implementing regulations. As an initial matter, the EPA reasonably 

interprets the provisions identifying which air pollutants are covered under CAA section 

111(d) to authorize the EPA to regulate CO2 from fossil fuel-fired EGUs. Specifically, an 

ambiguity in the provisions of section 111(d)(1)(A)(i), arising from Congress’s 

simultaneous enactment of two separate versions of this provision, has led some 

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

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

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

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

In addition, the EPA recognizes that CAA section 111(d) applies to sources that, 

if they were new sources, would be covered under a CAA section 111(b) rule. The EPA 

 

19 Portland Cement Ass’n v. Ruckelshaus, 486 F.2d 375 (D.C. Cir. 1973), cert. denied, 417 U.S. 921 

(1974); Essex Chemical Corp. v. Ruckelshaus, 486 F.2d 427, (D.C. Cir. 1973), cert. denied, Appalachian 

Power Co. v. EPA, 416 U.S. 969 (1974); Portland Cement Ass’n v. EPA, 665 F.3d 177 (D.C. Cir. 2011). 
6 

intends to complete two CAA section 111(b) rulemakings regulating CO2 from new fossil 

fuel-fired EGUs and from modified and reconstructed fossil fuel-fired EGUs before it 

finalizes this rulemaking, and either of those section 111(b) rulemakings will provide the 

requisite predicate for this rulemaking. 

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

determining the “best system of emission reduction ... adequately demonstrated” (BSER). 

In promulgating the implementing regulations, the EPA explicitly stated that it is 

authorized to determine BSER;20 accordingly, in this rulemaking, the EPA is determining 

BSER. 

The EPA is proposing two alternative approaches for the “best system of emission 

reduction ... adequately demonstrated” for fossil fuel-fired EGUs, each of which is based 

on methods that have employed for reducing emissions of air pollutants, including, in 

some cases, CO2, from these sources. The first identifies the combination of the four 

building blocks as the BSER. These include operational improvements and equipment 

upgrades that the coal-fired steam-generating EGUs in the state may undertake to 

improve their heat rate (building block 1) and increases in, or retention of, zero- or lowemitting generation, as well as measures to reduce demand for generation, all of which, 

taken together, displace, or avoid the need for, generation from the affected EGUs 

(building blocks 2, 3, and 4). All of these measures are components of a “system of 

emission reduction” for the affected EGUs because they either improve the carbon 

intensity of the affected EGUs in generating electricity or, because of the integrated 

nature of the electricity grid and the fungibility of electricity and electricity services, they 

displace or avoid the need for generation from those sources and thereby reduce the 

emissions from those sources. Moreover, those measures may be undertaken by the 

affected EGUs themselves and, in the case of building blocks 2, 3, and 4, they may be 

required by the states. 

Further, these measures meet the criteria in CAA section 111(a)(1) and the case 

law as the “best” system of emission reduction because, among other things, they achieve 

the appropriate level of reductions; they are of reasonable cost, including when viewed 

through a nation-wide lens; they are consistent with trends in the energy sector; and they 

encourage technological development and expansion that is important to achieving 

further emission reductions. Moreover, the measures in each of the building blocks are 

“adequately demonstrated” because they are each well-established in numerous states, 

many of them have already been relied on to reduce air pollutants, including CO2, from 

fossil fuel-fired EGUs and, as noted, they may be undertaken by the affected EGUs or, in 

general, required by the states. 

For the alternative approach for the BSER, the EPA is identifying the “system of 

emission reduction” as including, in addition to building block 1, the reduction of 

affected fossil fuel-fired EGUs’ mass emissions achievable through reductions in 

 

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

rulemaking. 
7 

generation of specified amounts from those EGUs. Under this approach, the measures in 

building blocks 2, 3, and 4 would not be components of the system of emission reduction, 

but instead would serve as bases for quantifying the reduction in emissions resulting from 

the reduction in generation at affected EGUs. In light of the available sources of 

replacement generation through the measures in the building blocks, this approach also 

meets the criteria for being the “best” system because of, among other things, the 

emission reductions it would achieve, its reasonable cost, its promotion of technological 

development, as well as the fact that under this approach, the reliability of the electricity 

system would be maintained. The approach of reduced generation is also “adequately 

demonstrated” because of the ability of affected EGUs to adjust their own generation, the 

authority of the state to impose requirements, and the fact that other entities that operate 

in the various types of markets in the states can be expected to respond to the reduction in 

generation from the fossil-fuel fired EGUs by undertaking the measures in the building 

blocks or other actions that would assure reliability. 

After determining BSER, the EPA is authorized under the implementing 

regulations, as an integral component to setting emission guidelines, to apply the BSER 

and determine the resulting emission limitation. The EPA is proposing to apply the BSER 

to the affected EGUs on a statewide basis. In this rulemaking, the EPA terms the 

resulting emission limitation the state goal. The EPA is formulating each state goal as an 

average emissions rate. The state goals form the EPA’s emission guidelines. 

With the promulgation of the emission guidelines, each state must develop a plan 

to achieve an emission performance level that corresponds to the state goal. The state 

plans must establish standards of performance for the affected EGUs and include 

measures that implement and enforce those standards. Based on requests from states and 

other stakeholders, the EPA is proposing that states be authorized to submit state plans 

that do not impose legal responsibility on the affected EGUs for the entirety of the 

emission performance level, but instead, by adopting 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. (In the preamble and the regulatory text for this proposed 

rulemaking, we refer to the affected EGUs and other entities with obligations under the 

state plan as “affected entities.”) As noted in the preamble for this rulemaking, a possible 

basis for this approach is that those requirements on affected entities other than affected 

EGUs may be authorized as standards of performance or implementing measures. In the 

preamble, the EPA proposes that this is an appropriate flexibility and solicits comment, 

but also solicits comment on whether state plans must impose all of the legal 

responsibility for achieving the required emission performance level on the affected 

EGUs. 

 

It should be noted that an important aspect of the BSER for affected EGUs is that 

the EPA is proposing to apply it on a statewide basis. The statewide approach also 

underlies the required emission performance level, which, as noted, is based on the 

application of the BSER to a state’s affected EGUs, and which the suite of measures in 

the state plan, including the emission standards for the affected EGUs, must achieve 
8 

overall. The state has flexibility in assigning the emission performance obligations to its 

affected EGUs, in the form of standards of performance -- and, for the portfolio 

approach, in imposing requirements on other affected entities -- as long as, again, the 

required emission performance level is met. 

This state-wide approach both harnesses the efficiencies of emission reduction 

opportunities in the interconnected electricity system and is fully consistent with the 

principles of federalism that underlie the Clean Air Act generally and CAA section 

111(d) particularly. That is, this provision achieves the emission performance 

requirements through the vehicle of a state plan, and provides each state significant 

flexibility to take local circumstances and state policy goals into account in determining 

how to reduce emissions from its affected sources, as long as the plan meets minimum 

federal requirements. 

This state-wide approach, and the standards of performance for the affected EGUs 

that the states will establish through the state-plan process, are consistent with the 

applicable CAA section 111 provisions. 

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

obligations to achieve the required emission performance level on the affected EGUs, the 

state plan could nevertheless include requirements on other affected entities in order to 

facilitate the reduced utilization of, and CO2 emissions from, the affected EGUs – and the 

practical effect for the EGUs would be the same as under the proposed portfolio 

approach. The preamble solicits comment on other issues concerning state plans, 

including whether a state may include in its plan a mechanism to achieve a specified 

portion of the required emission performance level on behalf of the affected EGUs, and 

thereby limit the obligations of the affected EGUs. 

The EPA emphasizes that in developing the state plans, the states have substantial 

discretion in designing the standards of performance, as long as the plans reduce 

emissions from the affected sources to achieve the required emission performance level. 

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

does not identify as part of the BSER, and may include other approaches such as, for 

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

complying with their applicable standards of performance, to rely on any measures that 

will reduce their CO2 emissions, regardless of whether the EPA identifies those measures 

as part of BSER, as long as, again, the state plan achieves the requisite level of emissions 

reduction from the affected entities. 

 

In this rulemaking, the EPA proposes reasonable deadlines for state plan 

submission and the EPA’s action. The proposed deadline for the EPA’s action on state 

play submittals varies from that in the implementing regulations, and the EPA is 

proposing to revise that provision in the regulations accordingly. Under CAA section 

111(d)(2), the state plans must be “satisfactory” for the EPA to approve them, and in this 

rulemaking, the EPA is proposing the criteria that the state plans must meet under that 

requirement. 
9 

III. Authority to regulate CO2 from EGUs 

CAA section 111 authorizes EPA to regulate CO2 emissions. The Supreme Court 

has held that greenhouse gases (including CO2) are an “air pollutant” under the CAA. 

Massachusetts. v. EPA.

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

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

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

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

on the Court’s understanding that section 111, including section 111(d), applies to carbon 

dioxide emissions from those sources.

The fact that EPA has regulated EGU emissions of mercury and other hazardous 

air pollutants under CAA section 112 does not deprive EPA of the authority to regulate 

CO2 emissions from EGUs under CAA section 111(d) under the Agency’s established 

construction of the ambiguous provisions in CAA section 111(d)(1)(A)(i) that identify 

the air pollutants subject to CAA section 111(d). The ambiguities stem from apparent 

drafting errors that occurred during enactment of the 1990 CAA Amendments, which 

revised section 111(d). The confusion arises because two different amendments to 

section 111(d) were enacted in the 1990 CAA Amendments – one in title I of the bill, the 

other in title III of the bill (both amendments were to be codified in section 111(d)). The 

confusion is exacerbated because the U.S. Code does not accurately reflect what was 

enacted – it presents only one of the two amendments. However, the enacted law signed 

by the President (as recorded in the U.S. Statutes at Large), not the U.S. Code, is 

controlling. 

As presented in the U.S. Code, section 111(d)(1)(A) requires states to submit 

standards of performance for existing sources “for any air pollutant (i) [1] for which air 

quality criteria have not been issued or which is not included on a list published under 

[CAA section 108(a)] or [2] emitted from a source category which is regulated under 

[section 112].” (Emphasis added.) This provision has two components that exclude from 

section 111(d) two types of air pollutants. The first component, which we call the 

NAAQS Exclusion, excludes NAAQS pollutants. The second component, which we call 

the Section 112 Exclusion, presents the ambiguities. As presented in the U.S. Code, the 

Section 112 Exclusion appears by its terms to preclude from section 111(d) any pollutant 

if it is emitted from a source category that is regulated under section 112. The U.S. Code 

version of 111(d) can be read to provide that the provision would not cover GHGs 

because GHGs are emitted from EGUs and EGUs are a source category regulated under 

section 112.22 

 

21 549 U.S. 497 (2007). 

22 By the same token, GHGs are emitted by many other source categories, such as 

refineries, that are regulated under section 112. Indeed, the text as presented in the U.S. 

Code could be read to exclude virtually every pollutant from regulation under Section 

111(d), because it would be difficult to identify any pollutant that is not emitted from at 

least one source category that is regulated under 112. We do not need to address this 

ridiculous result, however, for the reasons discussed in the text above. 
10 

The text of section 111(d) as presented in the U.S. Code, however, does not 

accurately reproduce the Section 112 Exclusion as enacted in the 1990 CAA 

Amendments. The correct statement of the Section 112 Exclusion – the one that was 

enacted by Congress and signed by the President, and which therefore is controlling – is 

found in the U.S. Statutes at Large. This text incorporates two versions of the Section 112 

Exclusion, one passed by the U.S. House of Representatives and one passed by the U.S. 

Senate. The two versions were never reconciled, and both were enacted as part of the 

1990 CAA Amendments. The two versions conflict with each other and thus render the 

Section 112 Exclusion ambiguous. Under these circumstances, the EPA may reasonably 

construe the Section 112 Exclusion to authorize the regulation of GHGs under section 

111(d). 

To understand the different amendments by the House and Senate, one must start 

with section 111(d)(1) as it read before the 1990 CAA Amendments: 

The Administrator shall prescribe regulations which shall establish a procedure 

similar to that provided by section 7410 of this title under which each State shall 

submit to the Administrator a plan which (A) establishes standards of 

performance for any existing source for any air pollutant (i) for which air quality 

criteria have not been issued or which is not included on a list published under 

section 7408(a) or 7412(b)(1)(A) of this title, but (ii) to which a standard of 

performance under this section would apply if such existing source were a new 

source. * * * 

 

42 U.S.C.A. 7411(d)(1) (West 1977); Public Law 95–95 (emphasis added). In this 

version, the Section 112 Exclusion, by its terms, applied to section 112 pollutants, and 

not to categories of sources that emit those pollutants. It should also be noted that in the 

1990 CAA Amendments, Congress amended section 112 to include a statutory list of 

hazardous air pollutants for EPA to regulate, instead of relying on EPA to develop its 

own list. 

The 1990 Senate bill amended revised section 111(d)(1)(A)(i) by striking the term 

to ‘‘112(b)(1)(A)’’ and inserting in its place the term ‘‘112(b).’’ Under this amendment, 

the text would read as follows (with changes shown in strikeout): 

The Administrator shall prescribe regulations which shall establish a procedure 

similar to that Provided by section 7410 of this title under which each State shall 

submit to the Administrator a plan which (A) establishes standards of 

performance for any existing source for any air pollutant (i) for which air quality 

criteria have not been issued or which is not included on a list published under 

section 7408(a) or 7412(b) (1)(A) of this title, but (ii) to which a standard of 

performance under this section would apply if such existing source were a new 

source. 
11 

The 1990 House bill amended section 111(d)(1)(A)(i) of the 1977 CAA by 

striking the phrase ‘‘or 112(b)(1)(A)’’, and inserting in its place the phrase ‘‘or emitted 

from a source category which is regulated under section 112.’’ Under this amendment, 

the text would read as follows (with changes shown in underline and strikeout): 

The Administrator shall prescribe regulations which shall establish a procedure 

similar to that Provided by section 7410 of this title under which each State shall 

submit to the Administrator a plan which (A) establishes standards of 

performance for any existing source for any air pollutant (i) for which air quality 

criteria have not been issued or which is not included on a list published under 

section 7408(a) or 7412(b)(1)(A) emitted from a source category which is 

regulated under section 7412 of this title, but (ii) to which a standard of 

performance under this section would apply if such existing source were a new 

source. 

 

The House-Senate Conference Committee did not reconcile these two conflicting 

amendments, and both were included in the 1990 CAA Amendments as reported by the 

Conference Committee, approved by both the House and the Senate, and signed by the 

President. As presented in the Statutes at Large, the Section 112 Exclusion is therefore 

ambiguous. 

The EPA discussed these different amendments in the preamble to “Revision of 

December 2000 Regulatory Finding on the Emissions of Hazardous Air Pollutants From 

Electric Utility Steam Generating Units and the Removal of Coal- and Oil-Fired Electric 

Utility Steam Generating Units From the Section 112(c) List,” 70 FR 15994, 16029-32 

(March 29, 2005). There, the EPA concluded that the Section 112 Exclusion could be 

read as follows: Where a source category is regulated under section 112, a section 111(d) 

standard of performance cannot be established to address any HAP listed under section 

112(b) that may be emitted from that particular source category. The EPA explained that 

this approach reasonably interprets the Section 112 Exclusion to give some effect to both 

amendments. The EPA emphasized that it is not reasonable to give full effect to the 

House language because a literal reading of that language would mean that the EPA 

could not regulate any air pollutant from a source category regulated under section 112, a 

result that would be inconsistent with (i) Congress’ desire in the 1990 CAA Amendments 

to require the EPA to regulate more substances, and not to eliminate the EPA’s ability to 

regulate large categories of air pollutants, and (ii) the fact that the EPA has historically 

regulated non-hazardous air pollutants under section 111(d), even where those air 

pollutants were emitted from a source category actually regulated under section 112. See

70 FR 16031-32. The EPA continues to view this interpretation of the Section 112 

exclusion as reasonable, for the reasons just stated. 

Applying this interpretation of the Section 112 Exclusion to this rule, we conclude 

that section 111(d) authorizes the EPA to establish section 111(d) guidelines for GHG 

emissions from EGUs. Although EGUs are a source category that is regulated under 

CAA section 112, GHGs are not a HAP regulated under section 112. Therefore, the 
12 

Section 112 exclusion in section 111(d) does not apply to GHGs, and 111(d) does not 

preclude the EPA from establishing guidelines covering GHGs from EGUs. 

IV. Rational basis, endangerment finding 

 In response to the January 2014 Proposal for standards of performance for GHGs 

emissions from newly constructed fossil fuel-fired EGUs,23 some stakeholders raised 

concerns that the EPA could not promulgate those standards without first issuing a 

finding that GHGs from those sources cause or contribute significantly to air pollution 

which may reasonably be anticipated to endanger public health or welfare, under CAA 

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

from fossil fuel-fired EGUs because the EPA has previously found that GHG emissions 

endanger public health and welfare, and because the electric generating industry emits a 

significant amount of GHGs. The EPA added that CAA section 111 does not require 

that EPA issue a formal endangerment finding, and that even if section 111 did require 

such a finding, the EPA’s rational basis would qualify as one.24 The EPA is taking the 

same position in the section 111(b) rulemaking proposal to establish standards of 

performance for GHG emissions from modified and reconstructed fossil fuel-fired EGUs. 

 The EPA will finalize either or both of the January 2014 Proposal and the 

rulemaking for modified and reconstructed EGUs by the time that it finalizes this 

proposed rulemaking. In that event, the EPA would not be required to further address the 

rational basis or endangerment finding in this rulemaking. In any event, these questions 

are properly addressed and resolved in the context of the parallel rulemakings under 

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

preamble to this proposal on any issues related to a rational basis or endangerment 

finding.

 

V. Authority for EPA to determine BSER and emission guidelines 

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

regulations under CAA section 111(d), for the EPA to determine the “best system of 

emission reduction ... adequately demonstrated” and the amount of required emission 

reduction that is based on the BSER. We also describe how, in this rulemaking, the EPA 

proposes to apply the BSER to each state, and on that basis, to determine the amount of 

emission limitation achievable by each state, which we refer to as the state goal. The 

state goal is the “emissions guideline” that the implementing regulations require the EPA 

to promulgate. 

CAA section 111(d) directs the EPA to – 

prescribe regulations which shall establish a procedure similar to that 

provided by [CAA section 110] under which each State shall submit to 

the Administrator a plan which (A) establishes standards of performance 

 

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

24 See 79 FR at 1,452/3 – 1,456/1. 
13 

for any existing source for [certain air pollutants] ... and (B) provides for 

the implementation and enforcement of such standards of performance. 

As noted above, the EPA promulgated the implementing regulations for section 111(d) in 

1975, and has revised parts of them since. The regulations set out a multi-step process for 

the development and approval of state plans, and assign responsibility for the various 

steps in the process to the EPA or the states. The EPA has followed these regulations in 

promulgating previous rulemakings under section 111(d).25 In the present rulemaking, 

EPA continues to follow them, except that EPA is establishing a different deadline for 

submission of state plans than what the regulations would otherwise require.26 

Under the implementing regulations, at the same time or after the EPA proposes 

and then finalizes standards of performance for sources in a source category under 

section 111(b), the EPA must propose and then finalize a “guideline document” with 

information pertinent to state plans under section 111(d): 

Concurrently upon or after proposal of standards of performance for the 

control of a designated pollutant from affected facilities, the Administrator 

will publish a draft guideline document containing information pertinent 

to control of the designated pollutant form [sic: from] designated facilities. 

Notice of the availability of the draft guideline document will be published 

in the Federal Register and public comments on its contents will be 

invited. After consideration of public comments and upon or after 

promulgation of standards of performance for control of a designated 

pollutant from affected facilities, a final guideline document will be 

published and notice of its availability will be published in the Federal 

Register.”27

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

among other things, an “emission guideline” that incorporates the “best system of 

emission reduction ... adequately demonstrated”: 

Guideline documents published under this section will provide 

information for the development of State plans, such as: * * * * 

(5) An emission guideline that reflects the application of the best system 

of emission reduction (considering the cost of such reduction) that has 

been adequately demonstrated for designated facilities, and the time within 

which compliance with emission standards of equivalent stringency can be 

achieved.* * * * 

 

25 These rulemakings are cited above. 

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

plans. 

27 40 CFR 60.22(a). 
14 

(6) Such other available information as the Administrator determines may 

contribute to the formulation of State plans.28

The implementing regulations define the “emission guideline” as – 

A guideline set forth in subpart C of this part, or in a final guideline 

document published under 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) the Administrator has determined has been adequately 

demonstrated for designated facilities.29

In addition, the implementing regulations mandate that for air pollutants that adversely 

affect public health, the “emission guidelines” must be proposed and finalized with the 

draft and final guideline document: 

[For air pollutants that have been demonstrated to adversely affect public 

health], the emission guidelines and compliance times referred to in 

paragraph (b)(5) of this section will be proposed for comment upon 

publication of the draft guideline document, and after consideration of 

comments will be promulgated in subpart C of this part with such 

modifications as may be appropriate.30

 With this proposed rulemaking, the EPA is complying with these regulatory 

provisions. This proposed rulemaking follows the proposal of standards of performance 

for newly constructed affected sources in the January 2014 Proposal, and is concurrent 

with the proposal of standards of performance for modified and reconstructed affected 

sources. This proposed rulemaking – including the preamble and the supporting 

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

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

information includes descriptions as well as technical and economic evaluations of the 

four building blocks. This information also includes the EPA’s application of the BSER 

to each state, and the EPA’s calculation of the resulting proposed state goals. These state 

goals comprise the proposed “emission guidelines.” In addition, the preamble and 

supporting documents propose the “time within which compliance with emission 

standards of equivalent stringency can be achieved,” which are the periods of 2020-2029 

for interim compliance, and the subsequent period for final compliance, and provide other 

information. 

VI. Best system of emission reduction adequately demonstrated and standards of 

performance

 

28 Id. at 60.22(b). 29 40 CFR 60.21(e). 

30 Id. at 60.22(c). 
15 

In this section we discuss our interpretation of the CAA section 111(d)(1) and 

(a)(1) provisions that require the state plans to establish, for “any existing source,” 

“standards of performance,” and that define the latter term to mean, in general, emission 

standards that “reflect the degree of emission limitation achievable through the 

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

(BSER). 

In subsection A of this section, we explain these section 111(d)(1) and 111(a)(1) 

provisions and summarize key parts of the applicable case law. 

In subsection B, we describe our proposed two alternative determinations for the 

BSER. We note that each alternative includes two main components. One component, 

for each alternative, is efficiency improvements that coal-fired power plants can make to 

their operations and equipment (which we call building block 1). For the first type of 

BSER, the remaining component is, in general, increased zero- or low-emitting 

generation in specified amounts (building blocks 2 and 3), and increased demand-side 

energy efficiency in specified amounts (building block 4), all of which have the effect of 

displacing generation from the higher-emitting affected sources. For the alternative type 

of BSER, the remaining component is reduced generation from higher-emitting affected 

sources in specified amounts, which is the amount that can be replaced by, in general, 

increased zero- or low-emitting generation and eliminated by increased demand-side 

energy efficiency. After we explain these alternatives, we go on to discuss why each 

alternative is a “system of emission reduction,” and why we propose to determine that 

each system is the “best” that is “adequately demonstrated.” 

In subsection C, we discuss our interpretation of the requirement that each state 

must develop a plan that establishes for “any existing source” “standards of 

performance,” that is, emission standards that “reflect the degree of emission limitation 

achievable through the application of the [BSER].” We explain that once the EPA 

determines the BSER, it undertakes “the application of the [BSER]” to each state’s set of 

sources on a state-wide basis, and thereby determines the “emission limitation 

achievable,” which we term the state goal, and which in turn becomes the required 

emission performance level that the state plan must achieve. The state must then develop 

its plan by identifying emission standards for its affected EGUs -- and, in the case of a 

state that adopts the portfolio approach, by identifying other obligations on other affected 

entities -- that in total, achieve the required emission performance level. Through this 

process, the state plan may meet the requirements of sections 111(d)(1) and (a)(1) to 

“establish[] standards of performance for any existing source” because it imposes, on 

each of its affected sources, emission standards that “reflect [that is, embody or represent] 

the degree of [that is, the part of] emission limitation achievable through the application 

of the best system of emission reduction ... adequately demonstrated” [that is, the state’s 

required emission performance level]. 

A. CAA requirements for standards of performance and BSER 
16 

In this subsection, we explain the relevant provisions of sections 111(d)(1) and 

111(a)(1) and summarize key parts of the applicable case law. 

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

provisions in CAA sections 111(d)(1) and 111(a)(1). Section 111(d)(1) requires that a 

state plan “(A) establish[] ... standards of performance for any existing source” and “(B) 

provide[] for the implementation and enforcement of such standards.” Section 111(a)(1) 

defines a “standard of performance” as-- 

a standard for emissions of air pollutants which reflects the degree of 

emission limitation achievable through the application of the best system 

of emission reduction which (taking into account the cost of achieving 

such reduction and any nonair quality health and environmental impact 

and energy requirements) the Administrator determines has been 

adequately demonstrated. 

Several points should be made about the BSER. By its terms, it is a “system of 

emission reduction” that is both the “best” and “adequately demonstrated.” The CAA 

does not define the term, “system,” and as a result, that term should be given its ordinary, 

everyday meaning: “a set of things working together as parts of a mechanism or 

interconnecting network; a complex whole.”31 In addition, the U.S. Court of Appeals for 

the D.C. Circuit (D.C. Circuit or Court) has handed down case law over a 40-year period 

that interprets the requirements that the “system of emission reduction be the “best” and 

be “adequately demonstrated.”32 Under this case law, the criteria for the EPA to use in 

determining whether the system is the “best” include the following key considerations, 

among others: 

 The system of emission reduction must be technically feasible.33 

 The EPA must consider the amount of emissions reductions that the system would 

generate. 

 The costs of the system must be reasonable. The EPA may consider the costs on 

the source level, the industry-wide level, and, at least in the case of the power 

sector, on the national level in terms of the overall costs of electricity and the 

 

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

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

32 Portland Cement Ass’n v. Ruckelshaus, 486 F.2d 375 (D.C. Cir. 1973), cert. denied, 417 U.S. 921 

(1974); Essex Chemical Corp. v. Ruckelshaus, 486 F.2d 427, (D.C. Cir. 1973), cert. denied, Appalachian 

Power Co. v. EPA, 416 U.S. 969 (1974); Sierra Club v. Costle, 657 F.2d 298 (D.C. Cir. 1981); Portland 

Cement Ass’n v. EPA, 665 F.3d 177 (D.C. Cir. 2011). 33 The case law may be read to treat technical feasibility as the measure for whether the standard of 

performance is “achievable,” Essex Chemical Corp. v. Ruckelshaus, 486 F.2d at 427, not as a criterion for 

whether the system of emission reduction is the “best system of emission reduction ... adequately 

demonstrated.” However, for present purposes, we refer to technical feasibility as another of the criteria for 

the BSER. 
17 

impact on the national economy over time.34 

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

development and implementation of technology.35

 The EPA must also consider energy impacts, and, as with costs, may consider 

them both on the source level and on the nationwide structure of the power sector 

over time. 

Importantly, the EPA has discretion to weigh these various considerations, may 

determine that some merit greater weight than others, and may vary the weighting, 

depending on the source category. 

 In determining whether a system is “adequately demonstrated,” the EPA is to look 

forward toward what may fairly be projected for the regulatory future, rather than 

determining what is available now. In the D.C. Circuit’s first decision under section 111, 

Portland Cement Ass’n v. Ruckelshaus, 486 F.2d 375, 391 (D.C. Cir. 1973), the Court 

explained: 

Section 111 looks toward what may fairly be projected for the regulatory future, 

rather than the state of the art at the present . . . . The Senate Report made clear 

that it did not intend that the technology “must be in actual routine use 

somewhere.” . . . The Administrator may make a projection based on existing 

technology, that that projection is subject to the restraints of reasonableness and 

cannot be based on “crystal ball” inquiry. . . . [T]he question of availability is 

partially dependent on “lead time”, the time in which the technology will have to 

be available.36

The forward looking nature of determining whether a system is adequately 

demonstrated is particularly relevant for this proposal given the lengthy period for 

implementing state plans that the EPA is proposing. The EPA discussed the CAA 

requirements and Court interpretations of the BSER at length in the January 2014 

Proposal,37 and incorporates by reference that discussion in this rulemaking. 

 

34 See Sierra Club v. Costle, 657 F.2d 298, 330-31, 337-39 (D.C. Cir. 1981). As discussed in the January 

2014 Proposal, the D.C. Circuit’s case law formulates the cost consideration in various ways: the costs 

must not be “exorbitant[]”, Essex Chemical Corp. v. Ruckelshaus, 486 F.2d 427, 433 (D.C. Cir. 1973) cert. 

denied, Appalachian Power Co. v. EPA, 416 U.S. 969 (1974), see Lignite Energy Council v. EPA, 198 F.3d 

930, 933 (D.C. Cir. 1999); “greater than the industry could bear and survive,” Portland Cement Ass’n v. 

EPA, 513 F.2d 506, 508 (D.C. Cir. 1975); or “excessive” or “unreasonable.” Sierra Club v. Costle, 657 

F.2d 298, 343 (D.C. Cir. 1981). In the January 2014 Proposal, EPA stated that “these various formulations 

of the cost standard ... are synonymous,” and, for convenience, EPA used “reasonableness” as the 

formulation. EPA takes the same approach in this rulemaking.

35 See 79 Fed. Reg. at 1,465/1-2 (discussing case law and legislative history that includes technological 

development as a consideration in the determination of BSER, including Sierra Club v. Costle, 657 F.2d 

298 (D.C. Cir. 1981)). 

36 Portland Cement Ass’n v. Ruckelshaus, 486 F.2d 375, 391-92 (D.C. Cir. 1973) (citations omitted). 37 See 79 Fed. Reg. at 1,462/1 – 1,467/3. 

 
18 

 It should be noted that the EPA may identify as the best system of emission 

reduction adequately demonstrated as the BSER a system that would form the basis for 

emission standards that could be achieved by some, but not necessarily all, of the existing 

sources in the source category. This approach is consistent with the technology-forcing 

purposes of section 111, as well as the fact that under section 111(d)(1), the state retains 

authority, “in applying a standard of performance to any particular source ... to take into 

consideration, among other factors, the remaining useful life of the ... source....”38

B. Best system of emission reduction adequately demonstrated 

In this subsection, we describe our two alternative proposed determinations for 

the BSER and explain why each is a “system of emission reduction,” and why each 

system is the “best” that is “adequately demonstrated.” 

1. Introduction and overview

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

the interconnected nature of the electrical generating system, which, among other things, 

means that generation at one EGU can substitute for generation at another. The 

importance of the interconnected nature of the grid in facilitating CO2 emissions 

reductions is evident in the long history of reliance on it to provide least-cost dispatch, 

the more recent history of implementing air pollutant emissions reductions, and the still 

more recent history of implementing CO2 emissions reductions at the company, state, and 

regional level. 

In this rulemaking, the EPA proposes to determine the “best system of emission 

reduction ... adequately demonstrated” on a state-by-state basis. Moreover, the EPA 

 

38 The EPA discussed this issue in connection with new sources in the recently proposed NSPS for CO2

emissions from fossil fuel-fired EGUs, 79 Fed. Reg. 1430, 1466/3 (Jan. 8, 2014). With respect to existing 

sources, a commentator has stated: 

There is no statutory provision or direct precedent under § 111(d) requiring EPA to 

demonstrate that emission limits are achievable by every source subject to an [standard of 

performance for existing sources]. Moreover, since the trigger for implementing § 111(d) 

is an NSPS under § 111(b), Congress arguably contemplated that, once EPA has 

identified BSER for new plants, it should raise the performance of the existing fleet with 

the goal of approaching new source levels at existing plants. In this reading, 111(d) 

would have a technology-forcing thrust, tempered by the performance and cost 

constraints at existing plants but nonetheless raising the bar significantly for the existing 

fleet. From this perspective, EPA could argue that “adequately demonstrated” means 

achievable at a reasonable cost by the more modern, better performing coal and gas units, 

not by all plants [citing Reinforcing this approach is the fact that cost is not determinative 

in defining a “standard of performance” under § 111(a) but only must be “taken into 

account” .... 

Sussman, R., “Power Plant Regulation Under the Clean Air Act: A Breakthrough Moment for U.S. Climate 

Policy?,” Virginia Environment Law Journal, 32:97 (2014), at 123 (citations omitted).
19 

proposes to determine the BSER based on four “building blocks,” some of which rely on 

the interconnected nature of the electricity generating grid: 

Building block 1: Reducing the carbon intensity of generation at individual 

affected EGUs through heat rate improvements. 

Building block 2: Reducing emissions from the most carbon-intensive affected 

EGUs in the amount that results from substituting generation at those EGUs with 

generation from less carbon-intensive affected EGUs (including NGCC units 

under construction). 

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

results from substituting generation at those EGUs with expanded low- or zerocarbon generation. 

Building block 4: Reducing emissions from affected EGUs in the amount that 

results from the use of demand-side energy efficiency that reduces the amount of 

generation required. 

As discussed in the preamble, with these building blocks in mind, we are 

proposing two alternatives for the BSER, each of which is based on methods for reducing 

fossil fuel-fired EGUs’ air pollutants that states and sources have already implemented. 

The first approach is that the BSER is the combination of building blocks 1 through 4. 

Building block 1 is a set of operational improvements and equipment upgrades that the 

affected sources may undertake to improve their efficiency and reduce their emissions 

rate. Building blocks 2, 3 and 4 are sets of measures that, in general, increase zero- or 

low-emitting generation in specified amounts and increased demand-side energy 

efficiency in specified amounts, all of which, due to the interconnected nature of the grid, 

result in drawing utilization away from higher-emitting fossil fuel-fired EGUs, thereby 

lowering those EGUs’ emissions. The second approach is that the BSER is building 

block 1 (heat rate improvements) combined with reduced generation from fossil fuelfired EGUs in the amount, calculated on a statewide basis, that can be replaced by, in 

general, increased zero- or low-emitting generation and avoided by increased demandside energy efficiency. The EPA proposes that each of these alternatives may be 

considered to be a “system of emission reduction,” and that each meets the criteria, set 

out in CAA section 111(a)(1) and the case law, to qualify as the “best” system that is 

“adequately demonstrated.” 

2. Background: Interconnected nature of the electricity system 

Central to our BSER determination is the fact that the nation’s electricity needs 

are being met, and have for many decades been met, through a grid formed by a network 

connecting groups of EGUs with each other and, ultimately, with the end-users of 

electricity. We discuss this nature of the electricity system at length in the preamble and, 

for convenience, summarize that discussion here. 
20 

Through the interconnected grid, fungible products – electricity and electricity 

services – are produced and delivered by a diverse group of EGUs operating in a 

coordinated fashion in response to end-users’ demand for electricity. Because the 

electricity grid operates through the interconnection of multiple EGUs and favors leastcost generation, owners and operators of generators have been able to assure the stability 

of electricity generation and the reliable delivery of electricity to users at least cost 

(subject to certain reliability, environmental and other constraints). The fact that 

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

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

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

electricity service. 

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

has also facilitated the achievement of environmental objectives, including the reduction 

of emissions of nitrogen oxides, sulfur dioxide, and particulate matter -- which, among 

them, worsen acid deposition and jeopardize the attainment and maintenance of national 

ambient air quality standards – as well as hazardous air pollutants. Regulation of those 

air pollutants tends to increase the relative cost of electricity from higher-emitting 

generation assets. Because EGU operators have the ability to use the grid as an 

interchange for shifting levels of generation among several facilities, the higher costs of 

higher-emitting assets must be considered, along with fuel costs and other marginal costs, 

in determining the extent to which those assets are utilized. The amount of their 

utilization affects the amount of their emissions. 

Most recently, states and companies seeking specifically to achieve CO2

emissions reduction objectives have also relied on the shifting of generation between and 

among EGUs to achieve those emissions reduction objectives. In fact, as the preamble 

notes, there are many cases in which companies have reduced emissions through shifting 

generation away from higher emitting units to lower- or zero-emitting units, or through 

reducing overall electric demand through demand-side energy efficiency measures. In 

some cases, this has occurred in response to goals set at the company level: some 

companies have established a single, company-wide emission target, and then have used 

combinations of strategies such as fuel switching, increased renewable or nuclear 

generation, and increased energy efficiency, to achieve those goals. In other cases, this 

has occurred in response to goals set at the state level: for example, California enacted its 

Global Warming Solutions Act in 2006 (AB 32), requiring the state to reduce its GHG 

emissions to 1990 levels by 2020 and 80 percent below 1990 levels by 2050,39 through a 

suite of mechanisms that include energy efficiency programs, renewable energy programs 

and an economy-wide cap and trade program, along with other programs.40 Similarly, 

nine northeast and mid-Atlantic states participate in the Regional Greenhouse Gas 

Initiative (RGGI), a market-based emissions budget trading program that sets an 

 

 

39 State of California Global Warming Solutions Act of 2006, Assembly Bill 32, Chapter 

http://www.leginfo.ca.gov/pub/05-06/bill/asm/ab_0001-0050/ab_32_bill_20060927_chaptered.pdf 40 See Cal. Air Res. Bd., Climate Change Scoping Plan 31-32, 41-46 (2008), available at: 

http://www.arb.ca.gov/cc/scopingplan/document/adopted_scoping_plan.pdf. 
21 

aggregate limit on CO2 from fossil fuel fired power plants in the participating states. 

These examples demonstrate that it is appropriate to base the BSER at least in part on the 

combination of measures in building blocks 2, 3, and 4, and that this component of such a 

system is adequately demonstrated. 

In all of these instances, companies’ choices and policies implemented by states 

may impact decisions about dispatching of lower instead of higher emitting generating 

units both as part of the short term dispatch process and as part of longer term business 

planning processes. The proposed emission guidelines, including the temporal flexibility 

that the guidelines incorporate, allow states and EGUs to implement a variety of 

mechanisms that can reduce emissions both as part of those shorter term dispatch 

decisions and as part of longer term business planning processes. 

In this rulemaking, the EPA is building on these company, state, and regional 

approaches by continuing to rely on the interconnected nature of the grid to achieve, on a 

nationwide basis, the important objective of significant amounts of CO2 reductions from 

fossil fuel-fired EGUs. The EPA is doing so by proposing that the BSER should be based 

on a combination of the implementation of heat improvement measures for fossil fuelfired steam generating units (building block 1) to reduce their emissions, as well as the 

implementation of other measures that are associated with reduced emissions from those 

EGUs. The latter include substituting generation at higher emitting sources with 

increasing generation at less carbon-intensive EGUs, using expanded amounts of low- or 

zero-carbon generating capacity connected to the electric grid, and using electricity more 

efficiently to reduce the total demand for electricity (building blocks 2, 3 and 4, 

respectively). 

In determining the BSER, it is significant that CO2 is a global pollutant, and 

therefore the location of the emissions (or emission reductions) does not affect the 

impact on climate change of an amount of emissions generated at any given source in any 

one location.41 The fact that CO2 becomes well-mixed in the atmosphere means that CO2

emissions may be reduced anywhere within the electricity grid and still achieve the 

intended climate benefits. This allows the EPA to determine that a system is the “best” 

system based on the total emission reductions the system would achieve, rather than 

basing the determination on the emission reductions achieved at each individual affected 

source. 

3. First Approach to the BSER: Building blocks 1, 2, 3, and 4 in 

combination 

 

41 By analogy, because the problem of acid deposition is caused by EGU emissions of nitrogen oxide and 

sulfur dioxide over a wide geographic area, Title IV of the Clean Air Act established a national emissions 

trading program that addresses that problem by reducing the total amount of those emissions, but without 

regard to the particular location of those emissions (or emissions reductions). In contrast, other air 

pollutants have adverse health and welfare effects in the locality where they are emitted, and as a result, 

geographic constraints on emissions trading are necessary. See CAA section 173(c)(1) (limiting offsets for 

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

nonattainment areas). 
22 

Under the EPA’s first approach to determining the BSER, the EPA is proposing 

that the BSER is the combination of building blocks 1 through 4. As discussed in the 

preamble, under the EPA’s proposed approach to determining the BSER, the measures in 

building block 1, which entail improvements in the efficiency of the affected EGUs’ 

equipment or processes, meet the criteria to qualify as a part of the BSER. Further 

elaboration of this point here is not necessary. In addition, in the preamble, we explain 

why all four building blocks in combination meet the criteria to qualify as the BSER, and 

further elaboration of this latter point here is also not necessary. Instead, this discussion 

will focus on building blocks 2, 3, and 4. 

Under this first approach to the BSER, the “best system of emission reduction ... 

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

affected fossil fuel-fired steam generating boilers, and building blocks 3 and 4 for the 

fossil fuel-fired combustion turbines. In this section, we first explain why the measures 

in these building blocks are part of a “system of emission reduction,” and then why that 

system is the “best” system that is “adequately demonstrated.” 

In brief, building blocks 2, 3, and 4 are part of a “system of emission reduction” 

because that phrase, in the context in which it is used in section 111 and by its terms, is 

broad enough to apply to the measures in the building blocks, in light of the integrated 

nature of the electricity grid. Through the integrated grid, the measures reduce overall 

demand for, and therefore utilization of, higher emitting, fossil fuel-fired EGUs, which, 

in turn, reduces CO2 emissions from those EGUs. The measures in the building blocks 

are part of the “best” system that is “adequately demonstrated” because they meet the 

criteria in section 111(a)(1) and the case law for BSER and they are well-established. 

a. “[S]ystem of emission reduction”

The EPA’s proposal that in this rulemaking, the “system of emission reduction” 

includes the measures in building blocks 2, 3, and 4 is grounded in the EPA’s 

interpretation of the key CAA provisions: section 111(d)(1), which requires that each 

state plan “establish[] standards of performance for any existing source” for certain types 

of air pollutants; and section 111(a)(1), which defines a “standard of performance” as “a 

standard for emissions ... which reflects the degree of emission limitation achievable 

through the application of the best system of emission reduction ... adequately 

demonstrated.” As explained next, the EPA’s interpretation may be justified under either 

a Chevron step 1 or Chevron step 2 interpretation. 

i. Chevron step 1 interpretation 

The starting point for our analysis is the phrase, “system of emission reduction,” 

which serves as the basis for the “standard for emissions.” As noted above, the CAA 

does not define the term, “system,” and as a result, that term should be given its ordinary, 

everyday meaning: “a set of things working together as parts of a mechanism or 
23 

interconnecting network; a complex whole.”42 This definition is broad. It encompasses 

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

definition of “standard of performance” include any other constraints on the type of 

“things” that may serve as the basis for the standard for emissions. The only constraints 

are the qualifiers “best” and “adequately demonstrated,” but these do not constrain the 

type of “things” that could be a “system of emission reduction,” only whether a particular 

“thing” qualifies as the “best” “system of emission reduction” that is “adequately 

demonstrated” (it must be, among other things, technically feasible and of reasonable 

cost). Thus, the “system of emission reduction” may include anything that reduces 

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

control emissions, to measures that replace production or generation at the affected 

sources and thereby reduce emissions from those sources. 

Moreover, the context in which “standard of performance,” which includes 

“system of emission reduction,” is found does not add additional constraints. As noted 

above, section 111(d)(1) requires that state plans establish “standards of performance for 

any existing source,” and in the preamble, we solicit comment on the interpretation of 

that phrase. Among other things, we solicit comment on whether the standards of 

performance must apply directly to the affected sources and only to the affected sources, 

in which case the affected sources would bear the legal liability for the entire amount of 

emission reduction requirements; or whether, instead, the standards of performance may 

apply to other entities whose actions would reduce generation, and thus emissions, from 

the affected sources. Under either of those interpretations, there is nothing in that phrase 

that limits the type of “system of emission reduction” that, if it is the “best” that is 

“adequately demonstrated,” may furnish the basis for the standards for emissions. That 

is, even if that phrase -- “standards of performance for any existing source” -- is 

interpreted to mean that the standards of performance must apply directly to, and only to, 

the affected sources, that application of the standards of performance does not limit the 

scope of the type of “system of emission reduction” that may serve as the basis for the 

standards for emissions. Any “system of emission reduction” that reduces the emissions 

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

again, it is the “best” that is “adequately demonstrated.” For these reasons, the scope of 

the type of “system of emission reduction” that may be considered is broad. 

 Interpreting the “system of emission reduction” in this manner is also consistent 

with the scope of the state plans. Under section 111(d)(1), a state plan must “establish[] 

standards of performance” and “provide[] for the implementation and enforcement of 

such standards of performance.” At the state’s discretion, measures in building blocks 2, 

3, and 4 may be included in state plans either through the portfolio approach or as 

measures that “provide[] for the implementation” of standards of performance that limit 

emissions from affected EGUs. 

 

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

http://www.oxfordreference.com.mutex.gmu.edu/view/10.1093/acref/9780199571123.001.0001/acref9780199571123 
24 

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

we propose that the term “system of emission reduction” is sufficiently broad to include 

the measures in building blocks 2, 3, and 4 because they are part of the interconnected 

electricity sector and result in reduced utilization, and therefore reduced emissions, from 

the higher emitting fossil fuel-fired power plants. This proposed reading is clear as a 

matter of Chevron step 1 because of the breadth of the term, “system,” in the context in 

which it is found. 

ii. Chevron step 2 interpretation 

Moreover, even if the term, “system of emission reduction” is not considered to 

be clear as a matter of Chevron step 1 to include the measures in building blocks 2, 3, and 

4, then the EPA’s interpretation of the term to include those measures is valid as 

reasonable construction under Chevron step 2. There are several reasons for interpreting 

“system of emission reduction” in this way.43 

(I). Legislative history of “standard of 

performance” 

First, the legislative history of the definition of “standard of performance,” 

including the phrase “best system of emission reduction ... adequately demonstrated,” 

makes clear that the “system of emission reduction” is broader than a technological 

system. As enacted by Congress in the 1970 CAA Amendments, section 111(a)(1) 

defined the term “standard of performance” as, in relevant part -- 

a standard for emissions of air pollutants which reflects the degree of 

emission limitation achievable through the application of the best system 

of emission reduction ... adequately demonstrated. 

In the 1977 CAA Amendments, Congress changed this definition to require that for new 

sources, the standard must, in relevant part, “reflect the degree of emission limitation ... 

achievable through application of the best technological system of continuous emission 

reduction ... adequately demonstrated;” and for existing sources, the standard must, in 

relevant, “reflect[] the degree of emission reduction achievable through the application of 

the best system of continuous emission reduction ... adequately demonstrated....” 

(Emphasis added.)44 In the 1990 CAA Amendments, Congress again changed this 

definition, this time to reinstate the definition as found in the 1970 CAA Amendments 

(with some revisions not here relevant). That is, Congress repealed the requirements 

 

43 See EME Homer City v. EPA, U.S. S. Ct. slip op. at 22 (2014) (after explaining why the text of the CAA 

"did not answer" the largely technical question of how EPA should allocate each state's responsibility for 

the tangle of potentially "significant" upwind-to-downwind air pollution contributions, stating: "we read 

Congress' silence as a delegation of authority to EPA to select from among reasonable options.") 

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

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

requirement). 
25 

added in the 1977 CAA Amendments that the “system” be, in the case of new sources, 

“technological.” 

These amendments make clear that the “system[s] of emission reduction” upon 

which the section 111(d) standards of performance may be based are not limited to 

technological systems. Even when, in the 1977 CAA Amendments, Congress limited the 

systems that could provide the basis for the standards of performance for new sources to 

technological systems, Congress did not establish that limit on the systems for existing 

sources. Moreover, the 1977 House-Senate Conference Committee report stated that for 

existing sources, the standards of performance were to be based on the “best available 

means of emission control (not necessarily technological)....”45 

 (II). Pollution prevention

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

include the building blocks is consistent with a primary purpose of the CAA, which is 

encouraging pollution prevention, including assuring that states fulfill their role in 

developing pollution prevention measures. CAA section 101(c) states that “[a] primary 

goal of [the Clean Air Act] is to encourage or otherwise promote reasonable Federal, 

State, and local governmental actions, consistent with the provisions of this chapter, for 

pollution prevention.” CAA section 101(b)(4) adds that one of “the purposes of [title I of 

the CAA, which includes section 111] are ... (b) to encourage and assist the development 

and operation of regional air pollution prevention and control programs.” Indeed, in the 

U.S. Code, in which the CAA is codified as chapter 85, the CAA is entitled, “Air 

Pollution Prevention and Control.” CAA section 101(a)(3) describes “air pollution 

prevention” as “the reduction or elimination, through any measures, of the amount of 

pollutants produced or created at the source,” and adds: “The Congress finds -- ... (3) that 

air pollution prevention ... and air pollution control at its source is the primary 

responsibility of States and local governments.” 

The measures in building blocks 2, 3, and 4 all qualify as types of “pollution 

prevention” because they are “measures” that “reduc[] or eliminate[e] ... the amount of 

pollutants produced or created at the [fossil fuel-fired affected] source[s].” It is 

reasonable to interpret the section 111 provisions at issue in this rulemaking in light of 

these section 101 provisions, and this supports the reasonableness of interpreting the 

broad term found in section 111(a)(1), “system of emission reduction,” to include the 

pollution prevention measures in building blocks 2, 3, and 4. 

 (III). Title IV

The breadth of the term, “system of emission reduction” is further confirmed by 

reference to certain provisions of CAA Title IV. In Title IV, Congress established the 

 

45 “Joint Explanatory Statement of the Committee of Conference,” reprinted in Congressional Research 

Service, A Legislative History of the Clean Air Act Amendments of 1977, vol. 3 at 502, 509 (1978) (1977 

Legislative History). The House Committee Report included the same statement. See H. Rep. 95-294 at 

195, reprinted in 1977 Legislative History, vol. 4 at 2465, 2662. 
26 

program that regulates fossil fuel-fired power plants to reduce their emissions of the 

precursers to acid deposition, including reducing sulfur dioxide (SO2) emissions in two 

phases, and reducing nitrogen oxides (NOx) emissions. Congress enacted Title IV as part 

of the 1990 CAA Amendments, at the same time that Congress revised the definition of 

“standard of performance” to generally return it to its 1970-vintage reading. In certain 

respects, section 111 and Title IV are related because both apply to fossil-fuel fired 

EGUs, and Congress recognized the relationship in several Title IV provisions.46 

One contrasting provision in Title IV is section 407(b)(2), which requires the EPA 

to base the NOx emission limits for certain types of boilers “on the degree of reduction 

achievable through the retrofit application of the best system of continuous emission 

reduction...;” and further requires the EPA to revise previously promulgated emission 

limits for certain types of boilers “to be more stringent if the [EPA] determines that more 

effective low NOx burner technology is available.” (Emphasis added.) These narrower 

specifications for the basis of the Title IV emissions limits make clear that Congress 

knew how to constrain the basis for emission limits to the results of certain technology, 

and that its choice to base the section 111(d) standards of performance on a “system of 

emission reduction” indicates its intent to authorize a broader basis for those standards. 

Other provisions in Title IV and their legislative history provide further support 

for interpreting the term, “system of emission reduction” to include building blocks 2, 3, 

and 4. In designing Title IV, Congress recognized the integrated nature of the electricity 

sector and how that integration could be harnessed to reduce air pollutant emissions; and, 

in fact, Congress included provisions to encourage re-dispatch to lower emitting sources, 

renewable energy, and demand-side energy efficiency, all of which are measures in those 

building blocks. Specifically, Congress added into the “purposes” provision of Title IV, 

the statements that in addition to the reducing the adverse effects of acid deposition – 

It is also the purpose of [Title IV] to encourage energy conservation, use 

of renewable and clean alternative technologies, and pollution prevention 

as a long-range strategy, consistent with the provisions of [Title IV], for 

reducing air pollution and other adverse impacts of energy production and 

use....”47

Congress recognized that the very structure of Title IV – which imposed a marketable 

trading system under which affected sources were required to have an allowance for each 

ton of SO2 emitted and could buy and sell allowances on the open market -- encouraged 

 

46 See, e.g., CAA section 402(8), 405(c)(2). In fact, in the 1990 CAA Amendments, Congress based its 

decision to repeal the percentage reduction requirements added in the 1977 CAA Amendments to the 

section 111(a)(1) definition of “standard of performance” for new fossil fuel-fired sources at least in part on 

the grounds that provisions of Title IV would cap SO2 emissions from fossil-fuel fired EGUs, and, further, 

Congress conditioned that repeal on the continued applicability of the SO2 cap, so that if the cap were 

eliminated, the repeal would, by operation of law, be eliminated. See Pub.L. 101-549 section 403(b), S. 

Rep. 101-228, at 338, reprinted in 1990 Legislative History 8338, 8678 (1990 Senate Committee Report). 47 CAA section 401(b). See H. Rep. 101-490 Part 1 at 369-70 (1990 House Comm. Rep.), reprinted in “A 

Legislative History of the Clean Air Act Amendments of 1990,” Congressional Research Service (1993) 

(1990 Legislative History), vol. II, at 3021, 3393-94. 
27 

such measures as demand-side energy efficiency and re-dispatch by lower-emitting 

sources. The 1990 Senate Committee Report explained: 

[T]he incentives created by the allowance market should stimulate 

innovations and the technologies and strategies used to reduce 

emissions.... [T]he allowance market should encourage sources to exploit 

energy efficiency, enhanced emission reduction or control technologies....; 

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

emission reductions.”48

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

encourage electric utilities (defined as entities that sell electricity49) to reduce their 

emissions through demand-side energy efficiency and renewable energy: Section 404(f)-

(g) provided a special reserve of allowances to be allocated to electric utilities “for each 

ton of SO2 emissions avoided by an electric utility ... through the use of ... energy 

conservation measures or ... renewable energy.” In fact, in adopting these provisions, 

Congress explicitly recognized the integrated nature of the electricity sector: As one of 

the conditions for eligibility for this special reserve of allowances, the utility must 

“ha[ve] adopted and is implementing a least cost energy conservation and electric power 

plan which evaluates a range of resources, including new power supplies, energy 

conservation, and renewable energy resources, in order to meet expected future demand 

at the lowest system cost.”50 

 These CAA provisions and the accompanying statements in the legislative history 

make clear that in enacting the Title IV provisions to reduce SO2 and NOx emissions 

from fossil fuel-fired EGUs, Congress viewed the electricity sector as interconnected and 

considered re-dispatch to lower emitting sources, renewable energy, and demand-side 

energy efficiency as methods to reduce those emissions. All this supports the 

reasonableness of the EPA’s proposed interpretation that the “system of emission 

reduction” that serves as the basis for “standards of performance” for CO2 emissions from 

fossil fuel-fired EGUs may include those same measures, that is, building blocks 2, 3, and 

4 (re-dispatch; low- or zero-emitting generation, including renewables; and demand-side 

energy efficiency, respectively.) 

 (IV). EPA Precedent 

 In the past, the EPA has promulgated rules under CAA section 111(d), in 

conjunction with CAA section 129, that were based on measures that are similar to some 

of the measures in the building blocks that EPA proposes as the basis for the regulatory 

requirements in this rulemaking. For example, the EPA has authorized states to allow 

large municipal waste combustors to average their emission rates and trade NOx emission 

 

48 1990 Senate Committee Report at 316, reprinted in 1990 Legislative History, vol. V, at 8656 (emphasis 

added). 

49 CAA section 404(f)(1)(C). 

50 CAA section 404(f)(2)(B)(iii)(I). 
28 

credits,51 and have required the owners of certain waste incineration facilities to take 

steps to reduce the amount of waste that the facilities combust.52

 (V). Other considerations

It should also be noted that a number of commentators in the private sector and 

academia have indicated support for interpreting the term, “system of emission 

reduction” to incorporate measures such as re-dispatch, renewable energy, and demandside energy efficiency.53 Some stakeholders have as well.54

In addition to the just-discussed reasons why interpreting the term, “system of 

emission reduction” to include those measures is a reasonable interpretation under the 

CAA, that interpretation also is reasonable as a matter of policy, as we discuss 

extensively in the preamble. To reiterate briefly, including those measures is consistent 

 

51 See “Standards of Performance for New Stationary Sources and Emission Guidelines for Existing 

Sources; Municipal Waste Combustors,” 60 Fed. Reg. 65,387 (Dec. 19, 1995) (trading rules codified in 40 

C.F.R. section 60.33b(d)(1)-(2)). EPA also authorized an emission trading program in the Clean Air 

Mercury Rule. See “Standards of Performance for New and Existing Stationary Sources: Electric Utility 

Steam Generating Units, Final Rule,” 70 Fed. Reg. 28,606 (May 18, 2005) vacated on other grounds by

New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008), cert denied sub nom. Util. Air Reg. Grp. v. New Jersey, 

555 U.S. 1169 (2009); “Standards of Performance for New Stationary Sources and Emission Guidelines for 

Existing Sources; Municipal Waste Combustors,” 60 Fed. Reg. 65,387 at 28616-24, (Dec. 19, 1995). 52 See, e.g., Standards of Performance for New Stationary Sources and Emission Guidelines for Existing 

Sources: Hospital/Medical/Infectious Waste Incinerators, 62 Fed. Reg. 48,348, 48359 (Sept. 15, 1997); 

Standards of Performance for New Stationary Sources and Emission Guidelines for Existing Sources: 

Commercial and Industrial Solid Waste Incineration Units, 65 Fed. Reg. 75338, 75341 (Dec. 1, 2000). 

53 See Nordhaus R., Gutherz I., “Regulation of CO2 Emissions from Existing Power Plants Under section 

111(d) of the Clean Air Act: Program Design and Statutory Authority,” Environmental Law Reporter, 44: 

10366, 10384 (May 2014) (“strong arguments for” interpreting “system” to include measures such as the 

addition of new zero-carbon generating capacity and increases in end-user energy efficiency); Sussman R., 

“Power Plant Regulation Under the Clean Air Act: A Breakthrough Moment for U.S. Climate Policy?” 

Virginia Environment Law Journal, 32:97, 119 (2014) (“EPA would seem to have discretion to define 

‘system’ to include any mix of strategies effective in reducing emissions.”); Konschnik K., Peskoe A., 

“Efficiency Rules: The Case for End-Use Energy Efficiency Programs in the Section 111(d) Rule for 

Existing Power Plants,” Harvard Law School Environmental Law Program – Policy Initiative 4 (March 3, 

2014) (EPA is authorized to “consider[] ... the entire [electricity grid] system when setting performance 

standards.”); Monast J., Profeta T., Pearson B., Doyle J., “Regulating Greenhouse Gas Emissions From 

Existing Sources: Section 111(d) and State Equivalency,” Environmental Law Reporter, 42: 10206, 10209 

(March 2012) (“Demand-side energy-efficiency programs and renewable energy generation may fit within 

the section 111 framework, however, because both reduce the utilization of power plants .... According to 

this reasoning, emission reductions are occurring within the source category, because of changes in 

generation at the power plant.”).

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

Flexible & Cost-Effective Carbon Pollution Standards for Existing Power Plants,” Environmental Defense 

Fund, at 9 (Oct. 2013), available at http://www . edf .org/sites/default/files/111-clean_air_actstrong_flexible_cost-effective_ carbon_pollution_standards_for_existing_power_plants .pdf ; Doniger D., 

“Questions and Answers on the EPA’s Legal Authority to Set ‘System Based’ Carbon Pollution Standards 

for Existing Power Plants under Clean Air Act Section 111(d),” NRDC [Natural Resources Defense 

Counsel] Issue Brief (Oct. 2013); “Comments of the Attorneys General of New York, California, 

Massachusetts, Connecticut, Delaware, Maine, Maryland, New Mexico, Oregon, Rhode Island, Vermont, 

Washington, and the District of Columbia on the Design of a Program to Reduce Carbon Pollution from 

Existing Power Plants” (Dec. 16, 2013). 
29 

with the industry’s long-standing methods of operating to assure reliability at the least 

cost, how states have more recently reduced non-greenhouse gas air pollutants from the 

industry, and, how states and segments of the industry have, still more recently, reduced 

CO2 emissions. 

b. “Best system of emission reduction ... adequately 

demonstrated” 

For the reasons described next, the measures in each of building blocks 2, 3, and 4 

qualify as components of the “best system of emission reduction ... adequately 

demonstrated.” As noted elsewhere, the D.C. Circuit has interpreted the BSER as “[a]n 

adequately demonstrated system,” and explained that such a system is one that can “be[] 

shown to be reasonably reliable, reasonably efficient, and ... reasonably ... expected to 

serve the interests of pollution control without becoming exorbitantly costly in an 

economic or environmental way.”55 In fact, the measures in the building blocks do meet 

the criteria established by the Court in the section 111 case law. In addition, the measures 

are “adequately demonstrated” because they have already been implemented in many 

states, and because they may be undertaken by the affected EGUs in the regulated 

markets in which they operate, or may be implemented by the states in the state plans. 

i. Criteria for the BSER 

The measures in building blocks 2, 3, and 4 meet the criteria for inclusion as 

components of the BSER because they are individually and together technically feasible, 

and together they achieve significant emission reductions, are not unreasonably costly, 

and will promote the development and implementation of technology improvements for 

continued emission reductions.56 The bases for these conclusions are discussed in detail 

in the preamble and briefly summarized below. 

Building block 2, which entails substituting generation at higher emitting units 

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

affected sources (existing NGCC units) is technically feasible because the NGCC units 

are already providing electricity to the grid and have sufficient capacity to generate the 

additional amount of electricity that would substitute for the generation at fossil fuel-fired 

steam generating units. Re-dispatch is already widely used (usually more in response to 

fuel price signals than as a CO2 mitigation measure), including by companies that own 

both coal- and natural-gas-fired EGUs. It should be noted that there are several 

mechanisms through which states could cause re-dispatch to occur. First, a state could 

use its permitting authority to impose limits on the hours of operation (or emissions) of 

individual steam generating units over a given time period. Second, a state could change 

the relative costs of generation for more carbon-intensive and less carbon-intensive 

generating units by imposing a cost on carbon emissions. A state could do so through any 

 

55 Essex Chemical Corp. v. Ruckelshaus, 486 F.2d at 427. 56 As noted above, we are proposing to determine BSER as the combination of all four building blocks, and 

because we discuss in the preamble the reasons why building block 1 meets the criteria for inclusion in the 

BSER,and why the BSER is the combination of all four building blocks, we are not further discussing those 

points here. 
30 

of several market-based mechanisms. One would be to adopt an allowance-based system. 

An example is the Regional Greenhouse Gas Initiative, an allowance-based system in 

which sources purchase allowances in periodic auctions. Another way would be through 

a tradable emission rate system, under which the state would impose an emission rate on 

the steam generating unit that the unit could meet only by purchasing the right to average 

its emission rate with a unit with a lower rate, such as an NGCC unit. Most broadly, an 

allowance system would provide the greatest incentive for the most carbon-intensive 

affected sources to reduce emissions as much as possible so as to reduce their need to 

purchase allowances (or to allow them to sell un-needed allowances), and the same would 

be true for a tradable emission rate system. 

As discussed in the preamble, building block 3, which entails use of new low- and 

zero-emitting generation, as well as preservation of nuclear capacity that might otherwise 

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

proposal would not impair the reliability of the grid. The nuclear capacity at issue either 

is already in operation or, in the case of new nuclear capacity under construction, has 

long been known to grid operators for planning purposes. The measures in building block 

3 may be implemented in different ways, including market mechanisms. In particular, 

markets for renewable energy certificates, which facilitates investment in renewable 

energy, are already well-established. In addition, as noted above with re-dispatch, an 

allowance system or tradable emission rate system would provide incentives for sources 

to reduce their emissions as much as possible, including by substituting their generation 

with generation from renewable energy. 

As for building block 4, as discussed in the preamble, numerous state and utility 

programs have demonstrated that improvements in demand-side energy efficiency are 

technically feasible at the levels contemplated in the proposal. An allowance system or 

tradable emission rate system would provide incentives that promote the measures in 

building block 4 in the same manner as just discussed for other building blocks. 

For the reasons discussed in the preamble, the combination of building blocks 2, 

3, and 4, along with building block 1, also meet the criteria to qualify as the BSER. The 

level of CO2 emissions reduction they achieve is significant, which is appropriate because 

of the severity of the risk to public health and the environment of climate change, and the 

magnitude of both the amount of emissions reductions needed and the amount of CO2

emissions from fossil fuel-fired power plants. 

In addition, based on the measures in building blocks 2, 3, and 4 combined, the 

proposed levels of reduced generation are not unreasonably costly for the affected source 

category or the nation-wide electricity system. These levels do not have adverse effects 

on the overall energy system. Electricity consumers would continue to have access to the 

electricity they need under these building blocks, although they would need less energy 

for the same amount of economic activity as a result of the measures in building block 4. 

Additionally, the measures in building blocks 2, 3, and 4 would improve the electricity 

system by reducing its carbon intensity, as well as other pollutants, allowing consumers 
31 

to get the same amount of electricity for less environmental harm. Together, these 

measures would also promote the development and implementation of technology that is 

important for continued emissions reductions. 

ii. Basis for “adequately demonstrated” finding 

The measures in building blocks 2, 3, and 4 are “adequately demonstrated” 

because each of the individual measures is adequately demonstrated, and because it has 

been adequately demonstrated that the measures can be taken in combination with each 

other in a manner consistent with the criteria for determining the BSER. 

The measures in building block 1 are adequately demonstrated because they are 

based on the real-world experience of individual power plants in recent years, as more 

fully described in the preamble and a technical support document. 

The measures in building blocks 2, 3, and 4 are “adequately demonstrated” 

because, as discussed in the preamble, due to the integrated nature of the electricity 

system, they have long been relied on to reduce costs in general, assure reliability, and 

implement pre-existing pollution control requirements in the least cost manner. As also 

noted in the preamble, some utilities, states and regions are already relying on these 

measures for the specific purpose of reducing CO2 emissions from EGUs. 

At the same time, as discussed in the preamble, measures in building blocks 2, 3, 

and 4 may be undertaken, and in fact have been undertaken, by the affected EGUs 

themselves, which further indicates that these measures are “adequately demonstrated.” 

To achieve the re-dispatch described in building block 2, operators of the affected fossil 

fuel-fired steam-generating EGUs may reduce generation, while operators of the affected 

NGCC units may increase generation to replace that avoided at higher-emitting facilities. 

Operators of the affected EGUs may invest in, or otherwise acquire power from, the new 

low- or zero-carbon intensive generation described in building block 3, as well as in 

many of the demand-side energy efficiency measures described in building block 4. 

 

More specifically, many states maintain a utility regulatory structure under which 

the utilities that serve end users in the state are vertically integrated, and not only own the 

EGUs, but often also own renewable energy resources and provide service directly to 

retail customers. Operators of EGUs, in those circumstances, are well-positioned to 

undertake the measures in building blocks 3 and 4. In fact, as noted in the preamble, 

numerous states have already imposed renewable portfolio standards and demand-side 

energy efficiency requirements on those utilities. As a result, as also noted in the 

preamble, many companies have already developed integrated resource plans that include 

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

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

and the implementation of demand-side energy efficiency measures.57

 

57 Moreover, in many de-regulated states, forward capacity auctions are used to ensure the ability to meet 

future demand, and generators may bid into those auctions based on all of their resource portfolio, 
32 

Other states have de-regulated their electricity markets58 and as a result, in some 

instances, the EGUs in those states are merchant generators that sell to the wholesale 

electricity market. The EPA believes that markets for acquiring renewable energy 

resources and for delivering demand-side energy efficiency services are sufficiently welldeveloped that operators of these EGUs could undertake or acquire those measures as 

well. For example, merchant generators can invest in NGCC capacity, invest in 

renewable capacity or purchase renewable energy or renewable energy certificates 

(representations that a certain amount of energy was produced from renewable sources), 

as well as purchase demand-side energy efficiency services from energy service 

companies. The fact that the affected sources may themselves implement or invest in the 

measures in building blocks 2, 3, and 4 -- which, again, reduce their emissions -- supports 

treating those measures as components of the BSER. 

Another reason that the measures in building blocks 2, 3, and 4 should be 

considered “adequately demonstrated” – and wholly apart from the fact that the EGUs 

may undertake those measures themselves – is based on the fact that CAA section 

111(d)(1)(A) provides, by its terms, that the standards of performance that are based on 

the BSER must be established by the states in state plans. As a result, emissions reduction 

measures that the states themselves have the authority under state law to put in place may 

be considered to be part of the BSER. While EGU owners and operators may effectuate 

such measures directly or indirectly, the states also have authority to enact measures such 

as dispatch limitations, renewable portfolio standards that require investment in 

renewable energy resources, as well as demand-side energy efficiency measures.59 As 

noted in the preamble, many states have already done so.60 

Finally, we note that during the public outreach sessions, stakeholders generally 

recommended that state plans be authorized to rely on, and that affected sources be 

authorized to implement, re-dispatch, renewable energy measures and demand-side 

energy efficiency measures, in order to meet the states’ and sources’ emissions reduction 

obligations. The EPA agrees that state plans may include these measures, at least under 

certain circumstances discussed in the preamble, and that sources may rely on them to 

achieve required reductions. It is clear that these types of measures are well-accepted by 

the stakeholders as means to reduce emissions from affected sources. The fact that state 

 including renewable energy assets and demand-side energy efficiency projects. This has encouraged 

generators to undertake the measures in building blocks 3 and 4. 

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

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

entities that undertake some of the measures in, for example, building block 4 may not be the affected 

EGUs. Regardless of which entities undertake the measures in the building blocks, those measures have 

the effect of reducing CO2 emissions from fossil fuel-fired EGUs, and therefore each of the building blocks 

remains part of a “system” of emission reduction for those EGUs. 

60 More than half the states have established renewable portfolio standards (RPS) that require minimum 

proportions of electricity sales to be supplied with generation from renewable generating resources. More 

than 20 states have energy efficiency resource standards (EERS) that require utilities to effectuate a certain 

amount of savings in electricity demand each year or cumulatively. Database of State Incentives for 

Renewables & Efficiency (DSIRE), http://www.dsireusa.org/summarymaps/index.cfm?ee=0&RE=0.
33 

plans and sources would be expected to use these types of measures to reduce emissions 

supports the view that these measures are part of a “system of emission reduction” for 

those sources that the EPA may evaluate against the appropriate criteria to determine 

whether they comprise the “best system of emission reduction ... adequately 

demonstrated.” 

c. Stakeholder concerns 

As noted above, some stakeholders have argued that section 111(a)(1) authorizes 

the EPA to identify re-dispatch, low- or zero-emitting generation, and demand-side 

energy efficiency measures (building blocks 2, 3, and 4) as components of the “best 

system of emission reduction ... adequately demonstrated.” However, other stakeholders 

have disagreed that this approach is consistent with CAA section 111(d). According to 

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

undertaken at the affected electric generating units (EGUs), including on-site controls, 

activities, or work practices, and cannot include measures that are beyond the affected 

units. These stakeholders take the position that although efficiency improvements at the 

affected EGUs may be included in the BSER,the measures in building blocks 2, 3, and 4 

are “beyond-the-unit” measures because they are implemented outside of the affected 

EGUs and outside of the control of their owners or operators.61 Some stakeholders have 

also argued that section 111(d)(1) requires that the performance standards established by 

the states must reflect what is achievable at each existing unit.62

As the preamble notes, we welcome comment on these issues. As discussed 

above, we propose that the provisions of section 111 allow the BSER to include those 

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

sources may themselves implement the measures included in building blocks 2, 3, and 4, 

so that those measures are within their control. Moreover, under our proposed alternative 

approach, the “system of emission reduction” includes reductions in utilization at the 

affected sources themselves.63 It should also be noted that, as discussed above, the re-

 

61 “Response of the Utility Air Regulatory Group to EPA’s ‘Considerations in the Design of a Program to 

Reduce Carbon Pollution from Existing Power Plants” (Oct. 2013); “Existing Source Performance 

Standards for Greenhouse Gas Emissions from Electrical Generating Units: Creating a Regulatory 

Framework Under Clean Air Act section 111(d) – A whitepaper from the Coalition for Innovative Climate 

Solutions” (Feb. 26, 2014); “Perspective of 18 States on Greenhouse Gas Emission Performance Standards 

for Existing Sources under §111(d) of the Clean Air Act,” included in “Testimony before the 

Subcommittee on Energy and Power of the House Committee on Energy and Commerce – ‘EPA’s 

Proposed GHG Standards for New Power Plants and H.R. __, Whitfield-Manchin Legislation’” (Nov. 14, 

2013) (statement of E. Scott Pruitt), 

http://democrats.energycommerce.house.gov/sites/default/files/documents/Testimony-Pruitt-EP-EPAGHG-Standards-Whitfield-Manchin-Legislation-2013-11-14.pdf. See National Climate Coalition, 

“Discussion Background Paper: Best System of Emission Reduction” (Oct. 16, 2013)(“BSER approach that 

mandates reductions based on actions outside the control of the regulated source would involve legal 

uncertainty. There is nothing in the CAA that authorizes EPA to issue guidelines that require a standard to 

be based on something that is outside the fence and outside the control of the source.”) 62 “Response of the Utility Air Regulatory Group to EPA’s ‘Considerations in the Design of a Program to 

Reduce Carbon Pollution from Existing Power Plants” (Oct. 2013). 63 Commenters have critiqued this “at-the-unit” and beyond-the-unit” distinction as follows: 
34 

dispatch measures in building block 2 are limited to affected sources. In addition, we 

discuss below that the performance standards that the states may establish under our 

approach meet the requirements of section 111(d)(1) and section 111(a)(1) because they 

would reflect the degree of the required emission performance level (which, in turn, is 

based on the BSER, as the EPA has applied it to the state’s sources) that the state assigns 

to the affected EGUs. Thus, the proposed approach and alternative described next 

respond to these stakeholder concerns. 

4. Second approach: Heat rate improvement measures inbuilding 

block 1 plus reduced utilization at levels commensurate with building 

blocks 2, 3 and 4 

The EPA is also proposing an alternative approach to the BSER: heat rate 

improvements (building block 1) combined with reduced utilization in specified amounts 

of the affected fossil fuel-fired EGUs, commensurate with the amount of low- and zeroemitting generation and avoided generation in building blocks 2, 3, and 4. The reasons 

why the measures in building block 1 qualify as a component of this approach to BSER, 

and the reasons why the combination of building block 1 with the reduced generation 

qualify as the BSER are the same as discussed above in connection with the first 

approach to BSER and in the preamble, and will not be discussed further in this 

subsection 4. Instead, this subsection will discuss the reduced generation component of 

this second approach to BSER. 

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

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

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

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

measures (e.g., fuel-switching or efficiency upgrades) or from beyond-theunit measures—are, in fact, emission reductions at or from electric 

generating units on the interconnected electric grid. For example, neither 

the addition of renewable generation nor the reduction of end-user demand 

directly reduces atmospheric emission of CO2; rather these measures permit 

fossil EGUs to reduce their own output and emissions. It can be argued that 

all of the systems of emission reduction here contemplated—whether they 

involve end-use energy efficiency, displacing high-emission generation with 

lower emission generation, fuel-switching, heat-rate improvements, etc.— 

are effectively at-the-unit measures that ultimately reduce emissions solely 

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

and redispatch from higher emitting facilities to lower emitting facilities 

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

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

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

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

means of complying with the rule. 

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

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

10383 n. 133 (May 2014).

Comment [HH1]: As revised, this section is a 

combination of the section in the previous version of 

the Legal Memo and the counterpart section in the 

preamble 
35 

Under this approach, the measures in building blocks 2, 3, and 4 would not be 

components of the system of emission reduction but instead would serve as bases for 

quantifying the reduced generation (and therefore emissions) at affected EGUs, and 

assuring that the amount of reduced generation meets the criteria for the “best” system 

that is “adequately demonstrated” because, among other things, the reduced generation 

can be achieved while the demand for electricity services can continue to be met in a 

reliable and affordable manner. Specifically, the amount of generation from the increased 

utilization of NGCC units would determine a portion of the amount of the generation 

reduction component of the BSER for affected fossil fuel-fired steam EGUs; and the 

amount of generation from the use of expanded low- and zero-carbon generating capacity 

that could be provided, along with the amount of generation from fossil fuel-fired EGUs 

that could be avoided through the promotion of demand-side energy efficiency, would 

determine a portion of the amount of the generation reduction component of the BSER 

for all affected EGUs. 

For the reasons discussed below, reduced generation in the specified amounts is a 

“system of emission reduction,” and meets the criteria to qualify as the “best” that is 

“adequately demonstrated.” 

a. “System of emission reduction” 

Reduced generation is encompassed by the terms of the phrase “system of 

emission reduction” in CAA section 111(a)(1), as a matter of Chevron step 1, because, in 

accordance with the above-discussed definition of “system,” reduced generation is a “set 

of things” – which include reduced use of generating equipment and therefore reduced 

fuel input – that the affected source may take to reduce its CO2 emissions. 

If the phrase “system of emission reduction” is not considered clear by its terms, 

then it may reasonably be interpreted under Chevron step 2 to include reduced 

generation, for several reasons. First, Congress has recognized reduced utilization in 

several contexts as a method to reduce air pollution. Beginning with the 1970 CAA 

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

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

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

retiring.64 Similarly, in adopting CAA section 112, which directed the EPA to 

 

64 See CAA section 110(g) (authorizing temporary emergency suspensions of SIP revisions if needed to 

prevent the closing of a source of air pollution), enacted as CAA section 110(f) in the 1970 CAA 

Amendments; 116 Cong. Rec. 42384 (Dec. 18, 1970), reprinted in 1970 Legislative History, vol. 1, at 132-

33 (statement of Sen. Muskie) (discussing criteria for sources to receive compliance date extensions). 

Similarly, Congress recognized that to achieve the NAAQS, it was necessary to reduce emissions from 

motor vehicles, and that an important method of doing so could be restricting the use of motor vehicles in 

urban areas that were already highly polluted. For this reason, Congress included in the 1970 CAA 

Amendments authorization for SIPs under section 110 to include “transportation controls.” CAA section 

110(a)(2)(B), as approved in the 1970 CAA Amendments. Sen. Edmund S. Muskie (D-ME), who led the 

proponents for the Amendments in the Senate, explained that for some areas to attain the NAAQS, 

“[c]entral city use of motor vehicles may have to be restricted.” 116 Cong. Rec. 42384 (Dec. 18, 1970), 

reprinted in 1970 Legislative History, vol. 1, at 132 (statement of Sen. Muskie). 

Comment [HH2]: This paragraph is from the 

preamble, p. 312-13 
36 

promulgate emission standards for sources of hazardous air pollutants to a level of 

stringency that provides an “ample margin of safety to protect the public health,”65

Congress was clear that the standards could be sufficiently stringent so that “effectively, 

... a plant would be required to close because of the absence of control techniques.”66

Congress’s recognition that closing plants is a method of reducing pollution necessarily 

encompasses reduced utilization as a system of reducing pollution. As a result, it is 

reasonable to interpret the term “system of emission reduction,” which Congress 

mandated as the basis for controls on section 111(d) air pollutants, to include reduced 

production. 

Other examples of reduced utilization as a means of reducing emissions to comply 

with CAA requirements are found in settlement agreements between the EPA and fossil 

fuel-fired EGUs to resolve alleged violations of the CAA new source review (NSR) 

requirements. These agreements typically allow the EGUs to choose one of several 

means to comply with their emission reduction obligations, including retiring units.67 

Reduction of, or limitation on, the amount of generation is already a wellestablished means of reducing emissions of pollutants in the electric sector, 

notwithstanding the fact that as a practical matter, some facilities may have to operate, or 

remain available, to ensure system reliability. For example, reduced generation by higheremitting sources is one of the compliance options available to, and used by, EGUs to 

comply with the Clean Air Act acid rain program in CAA title IV, as well as the transport 

rules that we refer to as the NOx SIP Call68 and the Clean Air Interstate Rule (CAIR).69

Reduction in generation is also a possible means by which an EGU can achieve 

compliance with its requirements under RGGI. 

b. “Best system of emission reduction ... adequately 

demonstrated” 

Reduced generation in specified amounts meets the criteria to be the “best” 

system of emission reduction that is “adequately demonstrated.” Reduced generation is 

technically feasible due to the source’s ability to limit its own operations. Moreover, 

because the amount of reduced generation may be substituted with the building block 2, 

3, and 4 measures for increased generation from low- or zero-emitting sources and 

increased demand-side energy efficiency, that amount may be determined with precision 

and may be accomplished in a manner that assures the reliability of the electricity grid. 

 

65 CAA section 112(b)(1)(B), as enacted in the 1970 CAA Amendments. 

66 116 Cong. Rec. 42385 (Dec. 18, 1970), reprinted in 1970 Legislative History, vol. 1, at 133 (statement 

of Sen. Muskie). Sen. Muskie added that the emission standards set by the EPA “could include emission 

standards which allowed for no measureable emissions,” id., which further suggests that, as a practical 

matter, the standards could result in reduced production. 

67 See, e.g., Consent Decree, USA v. Wisconsin Power and Light Co., Civil Action No. 13-cv-266 

(WWi.DC), at 18, section IV, available at 

http://www2.epa.gov/sites/production/files/documents/wisconsinpower-cd.pdf 68 63 FR 57356 (Oct. 27, 1998). 

69 70 FR 25162 (May 12, 2005).
37 

Specifically, through this reduced generation approach, the amount of emission 

reduction achieved is appropriate, as discussed above. In addition, the cost of the levels 

of reduced generation are reasonable for the affected source category and the nation-wide 

electricity system and do not jeopardize reliability. This is because the measures in 

building blocks 2, 3, and 4 are already in widespread use in the industry, and it is 

reasonable to expect that these measures will develop to achieve the levels proposed as 

part of this approach and thereby ensure an adequate and reliable supply of electricity. 

Moreover, reduced generation from fossil fuel-fired EGUs and its replacement through 

the measures in building blocks 2, 3, and 4 is consistent with trends in the energy sector 

and offer promise to reduce the carbon intensity of the system over the near- and longterm. This approach also promotes the development and implementation of technologies 

that are important for continued emissions reductions by increasing the demand for those 

technologies. This is because of the interconnected nature of the electrical grid and the 

fungibility of electricity, which allows decreases in utilization at one facility to be 

seamlessly offset by increased utilization elsewhere (building blocks 2 and 3) or by 

decreased demand (building block 4), and thereby makes reduced utilization a viable 

approach for emissions reductions by EGUs. Further, this fungibility increases over 

longer timeframes with the opportunity to invest in infrastructure improvements, and as 

noted elsewhere, this proposal provides an extended state plan and source compliance 

horizon. Thus, this approach is consistent with the case law, which authorizes the EPA to 

determine the BSER by “balanc[ing] long-term national and regional impacts,” and by 

“using a long-term lens with a broad focus on future costs, environmental and energy 

effects of different technological systems....”70

Reduced generation in those amounts is also “adequately demonstrated.” As noted 

above and discussed further in the preamble, the measures in building blocks 2, 3, and 4 

are already in widespread use in the industry. At the levels proposed, they have the 

technical capability to substitute for reduced generation at some or all affected EGUs at 

reasonable cost. The NGCC capacity necessary to accomplish the levels of generation 

reduction proposed for building block 2 is already in operation or under construction. 

Moreover, it is reasonable to expect that the incremental resources reflected in building 

blocks 3 and 4 will develop at the levels requisite to ensure an adequate and reliable 

supply of electricity at the same time that affected EGUs may choose or be required to 

reduce their CO2 emissions by means of reducing their utilization. There are several 

reasons for this. First, the affected sources themselves could invest in new renewable 

energy resources and demand-side energy efficiency, as discussed in the preamble.71

Second, the states, as part of their plans, have mechanisms available to put these 

substitutes in place: they could establish requirements or incentives that would result in 

new renewable energy and demand-side energy efficiency programs, as also discussed in 

 

70 Sierra Club v. Costle, 657 F.2d 298, 331 (D.C. Cir. 1981). 71It should be noted that in light of the low current and projected near term prices for natural gas, market 

forces may lead investors to choose to build new NGCC units, rather than new renewable resources. This 

result would not call into question the technical feasibility of a BSER that included reductions in fossil fuelfired generation by the amount of a specified amount of new renewable resources. This is because under 

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

reliability or other problems in the electric power system. 
38 

the preamble.72 Third, as also discussed in the preamble, regional entities in the electricity 

system can accommodate these substitutes. 

Most broadly, with respect to the measures in building blocks 2, 3, and 4, 

provided there is sufficient lead time for planning, mechanisms are in place in both 

regulated and deregulated electricity markets to assure that substitute generation will 

become available and/or steps to reduce demand will be taken to compensate for reduced 

generation by affected EGUs. These mechanisms are based on, among other things, the 

integrated nature of the electricity system coupled with the availability of capacity in 

existing NGCC units, the growing institutional capacity of entities that develop 

renewable energy and demand-side energy efficiency resources, and the ability of system 

operators and state regulators to incentivize further development of those resources. 

7. Re-dispatch and sources in the regulated source categories. 

As described in the preamble, building block 2 consists of reductions in 

generation from fossil fuel-fired steam generating units, and corresponding increases in 

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

generating units may reduce, and that NGCC units may increase, up to an average of 70% 

capacity utilization of the NGCC units. 

Accordingly, this component of the BSER involves two sets of affected sources. 

The first (the steam generating units) decreases their emissions. The second (the loweremitting NGCC units) may increase their emissions if increased operations are necessary 

to ensure the ongoing reliability of the integrated electricity system, of which both sets of 

source are a part, as emissions and generation reduction is occurring at steam generating 

units and net reductions are being achieved. Both these sets of sources are affected 

sources because they are in source categories that are covered by this rulemaking. As 

noted in the preamble, the fossil fuel-fired steam generating boilers are in a source 

category that the EPA listed under CAA section 111(b) in 1971, and the NGCC units are 

in a source category that EPA listed in 1979. The NGCC units (as well as the steamgenerating units) are subject to reduction requirements through other components of the 

BSER, specifically, building blocks 3 and 4 (low- and zero-emitting energy and demandside energy efficiency, respectively). In addition, as noted in the preamble, the EPA is 

co-proposing to combine the two source categories into a single source category, 

covering fossil fuel-fired EGUs. 

8. Building blocks 2, 3, and 4: intra-state and inter-state compliance 

In this section, we discuss the issue of whether CAA section 111(d) limits the 

EPA to applying the re-dispatch component (building block 2) of the BSER, based on the 

assumption that each state will comply with that component on a purely intra-state basis, 

or instead, whether the EPA could base building block 2 on an assumption that the states 

 

72 The nuclear generating capacity reflected in building block 3 is already in operation or under 

construction.
39 

will comply with that component through the interstate region with which they share the 

grid. 

As the preamble describes, in evaluating building block 2, we have assumed that 

each state would implement it on a state-by-state basis, without relying on a multi-state 

regional grid. In particular, we have assumed that each state would increase generation 

of its own NGCC units to as close to the proposed average 70% capacity utilization as 

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

units, and we assumed the corresponding amount of reduction in generation from those 

steam generators. We have determined the costs of that re-dispatch, and propose to find 

that they are reasonable.73 Because we know that dispatch systems operate over multistate regions, however, we have also determined the costs of the re-dispatch if each state 

that is part of a multi-state grid implements re-dispatch by taking into account the multistate grid in which it operates. 

We found that based on the intra-state approach, some states could not increase 

their average NGCC unit utilization to 70% because they have limited fossil fuel-fired 

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

could increase their average NGCC utilization to 70%. In addition, the costs of the intrastate approach are demonstrably higher than the costs of the region-wide approach. In 

fact, we expect that because all of the lower-48 states, with the exception of Texas, are 

part of a multi-state, regional grid each state’s implementation of building block 2 would, 

as a practical matter, necessarily occur on an interstate, and not an intrastate, basis. 

CAA section 111(d)(1), by its terms, applies requirements on a state-by-state 

basis. It requires that “each State shall submit to the Administrator a plan” that includes 

standards of performance as well as implementing and enforcing measures. Further, it 

allows “the State in applying a standard of performance to any particular source under a 

[state] plan” to take into consideration factors such as the source’s remaining useful life. 

These provisions raise the issue of whether section 111(d) may be interpreted so 

that the re-dispatch component of the BSER may be applied on the assumption that each 

state would implement that component on a purely intra-state basis, or whether section 

111(d) may be interpreted so that the re-dispatch component may be applied on the 

assumption that each state would implement through the operation of the interstate grid in 

which it participates. This issue may also apply to building blocks 3 and 4. 

C. Application of the BSER; achievability of the emissions standards 

1. Introduction and Overview 

In this subsection C, we discuss our interpretation of the CAA sections 111(d)(1) 

and 111(a)(1) requirements that each state must develop a plan that establishes for “any 

 

73 It should be noted that we also evaluated region-wide re-dispatch, for which the costs are less. 
40 

existing source”74 “standards of performance,” which are defined as emission standards 

that “reflect the degree of limitation achievable through the application of the best system 

of emission reduction ... adequately demonstrated.” We explain why our state-wide 

approach to applying the BSER and the emission standards that result from the state plan 

process we require are consistent with these section 111 provisions. 

These provisions make clear that an important aspect of the state’s establishment 

of the standards of performance is “the application of” the BSER. In this rulemaking, the 

EPA is proposing to apply the BSER for affected EGUs on a statewide basis. The 

statewide approach also underlies the required emission performance level, which is 

based on the application of the BSER to a state’s affected EGUs, and which the suite of 

measures in the state plan, including the emission standards for the affected EGUs, must 

achieve overall. The state has flexibility in assigning the emission performance 

obligations to its affected EGUs, in the form of standards of performance -- and, for the 

portfolio approach, in imposing requirements on other entities -- as long as, again, the 

required emission performance level is met. 

This state-wide approach both harnesses the efficiencies of emission reduction 

opportunities in the interconnected electricity system and is fully consistent with the 

principles of federalism that underlie the Clean Air Act generally and CAA section 

111(d) particularly. That is, section 111(d) achieves the emission performance 

requirements through the vehicle of a state plan, and provides each state significant 

flexibility to take local circumstances and state policy goals into account in determining 

how to reduce emissions from its affected sources, as long as the plan meets minimum 

federal requirements. 

For convenience, we set out the requirements of CAA sections 111(d)(1) and 

111(a)(1) here: under CAA section 111(d)(1), the state must adopt a plan that “establishes 

standards of performance for any existing source.” Under CAA section 111(a)(1), a 

“standard of performance” is a “standard for emissions ... which reflects the degree of 

emission limitation achievable through the application of the best system of emission 

reduction ... adequately demonstrated.” The EPA proposes to interpret these provisions 

as set forth in this sub-section. 

The first step is for the EPA to determine the “best system of emission reduction 

... adequately demonstrated.” As discussed at length elsewhere, the EPA is proposing 

two alternative BSER. The first is the measures in building blocks 1 through 4 combined. 

This includes operational improvements and equipment upgrades that the coal-fired 

steam-generating EGUs in the state may undertake to improve their heat rate by, on 

average, six percent and increases in, or retention of, zero- or low-emitting generation, as 

well as measures to reduce demand for generation, all of which, taken together, displace, 

or avoid the need for, generation from the affected EGUs. This BSER is a set of measures 

 

74 It should be recalled that although in this subsection C. we refer to “any existing source” or “each 

existing source” in the state, or we use similar terms, CAA section 111(d) applies to only those existing 

sources that would be covered by a section 111(b) standard if they were newly constructed or if they 

modified or reconstructed. 
41 

that impacts affected EGUs as a group. The alternative approach to BSER is building 

block 1 combined with reduced utilization from the affected EGUs in the state as a group, 

in the amounts that can be replaced by an increase in, or retention of, zero- or lowemitting generation, as well as reduced demand for generation. 

After determining the BSER, the EPA then applies the BSER to each state’s 

affected EGUs, on a state-wide basis. Building block 1 is applied to the coal-fired steamgenerating EGUs on a statewide basis; building block 2 is applied to increase the 

generation of the NGCC units in the state up to certain amounts, and decrease the amount 

of generation from steam-generating units accordingly; and the measures in building 

blocks 3 and 4 are applied to reduce, or avoid, generation from affected EGUs on a statewide basis. Under the alternative formulation of the BSER, the total amount of reduced 

generation from the affected EGUs in the state, associated with the measures in building 

blocks 2, 3, and 4, is determined on the basis of each state’s affected EGUs as a group. 

This statewide approach to applying the BSER is consistent with the CAA section 

111(a)(1) definition of “standard of performance,” which, as quoted above, refers to “the 

application of the [BSER],” for the purpose of determining “the degree of emission 

limitation achievable,” but does not otherwise constrain how the BSER is to be applied. 

As a result, we, as the administering agency, have discretion under Chevron step 2 to 

fashion an interpretation that is a reasonable construction of the CAA provisions.75 

Similarly, the implementing regulations give the EPA broad discretion to identify the 

group of sources to which the BSER is applied. 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 costs of control, physical 

limitations, geographical location, or similar factors make subcategorization appropriate.” 

In this rulemaking, the EPA is applying the BSER to the affected EGUs in each 

state as a group. As we have noted, for this industry, a state-wide approach harnesses the 

efficiencies of emission reduction opportunities in the interconnected electricity system, 

including the opportunities to reduce emissions from all affected EGUs through 

reasonable cost, lower-emitting replacement generation. Accordingly, under the 

implementing regulations just quoted, it is “appropriate” to apply the BSER to the 

affected EGUs in each state as a group. 

As part of applying the BSER, the EPA, to return to provisions of CAA section 

111(a)(1), calculates the “emission limitation achievable through the application of the 

[BSER].” In this rulemaking, we refer to this amount as the state goal. As noted, the 

EPA expresses the state goal in the emission guidelines as an emission rate. 

The state must develop a state plan that achieves the state goal, either in the form 

of an emission rate, as specified for the state in the emission guidelines, or a translated 

mass-based version of the rate-based goal. We refer to the state goal, in the form used by 

the state as the foundation of its plan, as the required emission performance level. 

 

75 Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-844 (1984). 
42 

As part of its state plan, the state must establish “standards of performance” for its 

affected EGUs. To do so, the state may consider the measures the EPA identified as part 

of the BSER or other measures that reduce emissions from the affected EGUs. Moreover, 

the state has the flexibility to establish emission standards in the degree of stringency that 

the state considers appropriate.76 The primary limitation on the state’s flexibility is that 

the emissions standards applied to all of the state’s affected EGUs -- and, in the case of 

states that adopt the portfolio approach, the requirements imposed on other affected 

entities -- taken as a whole, must be demonstrated to achieve the required emission 

performance level. In addition, the state may make the emission standards for any of its 

affected EGUs sufficiently stringent, so that the standards and any requirements imposed 

on other affected entities (if relevant), taken as a whole, achieve a level of emission 

performance that is better than the required emission performance level. See CAA section 

116, 40 CFR 60.24(g).77

Under these circumstances – that the emission standards that the state establishes 

for its affected EGUs and any other requirements for the other affected entities, as 

relevant, taken together, are at least as stringent as necessary to achieve the required 

emission performance level for the state’s affected EGUs - each emissions standard that 

the state adopts for each of its affected EGUs will meet the definition of a “standard of 

performance” under CAA section 111(a)(1). Specifically, the “standard of performance” 

for each source will constitute, to return to the provisions of CAA section 111(a)(1), “a 

standard for emissions which reflects [that is, embodies, or represents]78 the degree [that 

is, the portion] of emission limitation achievable through the application of the [BSER]” 

[that is, as noted above, the required emission performance level for all affected sources 

in a state]. That “degree” or portion of the required emission performance level is, in 

effect, the portion of the state’s obligation to limit its affected sources’ emissions that the 

state has assigned to each particular affected source. An emissions standard meets this 

definition of the term “standard of performance” regardless of whether it is part of a plan 

that adopts the portfolio approach (in which case, the standard will reflect a relatively 

smaller part of the emission performance level) or one that imposes the plan’s emission 

limitation obligations entirely on the affected EGUs (in which case, the standard will 

reflect a relatively larger part of the emission performance level).79

 

76 Looked at another way, through our proposal, consistent with the EPA’s authority in determining the 

BSER to subcategorize sources on the basis of costs and other factors, see 40 CFR 60.22(b)(5), the state has 

the opportunity in effect to subcategorize its sources on the basis of their costs and other considerations 

associated with their position in the interconnected electricity grid, and to assign responsibilities for 

achieving the emission performance level accordingly. 

77 By comparison to state implementation plans (SIPs) under CAA section 110, although section 111(d) 

state plans differ from SIPs in that the latter are designed to achieve a NAAQS, section 111(d) plans that 

are designed to achieve a required emission performance level incorporate many of the same flexibilities as 

SIPs. 

78 See Oxford Dictionary of English (3rd ed. 2010 (online version 2013)) (defining “reflect” as, among 

other things, “embody or represent (something) in a faithful or appropriate way”). 

79 The EPA’s approach may also be characterized as (i) determining the BSER for the affected EGUs, (ii) 

establishing as the emission guideline the standard for emissions that the affected EGUs in the state can 

achieve on average through the application of the BSER, and (iii) as part of the emission guideline, 

authorizing each state to establish as the applicable standard for each affected EGU, the standard that the 

state considers appropriate and that when totaled with the standards established for the other EGUs (and as 
43 

These proposed interpretations of the provisions of CAA sections 111(d)(1) and 

(a)(1) are fully consistent with the EPA’s overall approach in this rulemaking to 

determining and applying the BSER and identifying the appropriate level of emission 

performance for the affected EGUs. As noted, this approach entails applying the BSER 

on a state-wide basis and, based on the BSER, identifying the emission performance level 

that each state must achieve, so that each state may then assign responsibilities for 

achieving that performance level among its sources. As noted, this approach is fully 

consistent with the interconnected nature of the electricity system and with the principles 

of federalism that form part of the foundation of the Clean Air Act, and that find 

expression in section 111(d) through its provisions implementing the required emission 

controls through the vehicle of state plans. We also note that, as part of our proposal for 

BSER, applying the “best system of emission reduction ... adequately demonstrated” on 

a statewide basis in this manner is consistent with interpreting the term “best” to include 

those principles of federalism. That is, one reason why each of our proposed two 

alternative approaches for BSER qualifies as the “best” system is that, in effect, each can 

be implemented in an efficient manner by a state – through its obligation to assure 

achievement of the emission performance level that is based on the BSER -- which may 

mean assigning greater responsibility for emission limitations to some affected EGUs 

than to others. 

It should be emphasized that each state has many options for assigning the 

emission limitation obligations among its affected sources.80 For example, the state could 

impose emission standards that directly flow from the BSER. Under these circumstances, 

the state may assign to different affected sources emission standards with different levels 

of stringency because the state will have determined that those standards are consistent 

with the extent to which the low- or zero-emitting generation in building blocks 2, 3, and 

4 will displace the source’s generation and thereby lower the source’s emissions. The 

state may establish a relatively less stringent emission standard for a source that the state 

considers will not have much of its generation displaced than the state may for a source 

that the state considers will have more of its generation displaced.81 The state could base 

this approach on the recognition that the increased zero- and low-emitting generation 

displaces generation from affected sources in different amounts, depending on the 

affected sources’ costs and on other factors, such as transmission line capacity. 

 may be adjusted to account for the portfolio approach, if that approach is adopted by the state) is at least as 

stringent as the average standard in the emission guideline. As noted in the accompanying text, a state has 

many ways to establish standards that meet these requirements, including, for example, following the 

BSER or authorizing emission rate averaging or trading. 80 One of the advantages of the flexibility states have under the EPA’s approach is that state officials may 

utilize their knowledge of the electricity sector in their state and of the entities involved in fashioning the 

standards of performance and other requirements. 81 It should be noted that if the state wished to pattern the emissions standards after the way that the source 

was affected by the BSER, the state would also need to consider the extent to which the source can 

implement the heat rate improvements in building block 1, but for purposes of simplifying this example, we 

will set that consideration aside. It should also be noted that this example assumes that the state, in 

assigning emission rates to its sources, credits reductions in emissions due to reductions in generation 

against the emission rate. 
44 

In addition, the state could authorize emission trading as part of the emission 

standards for affected sources. Under these circumstances, if an affected source’s 

emissions level was higher than the standard the state established for it, the source could 

achieve the standard by purchasing additional emission rights through the trading 

program. 

It bears emphasis that each state has flexibility in establishing the standards of 

performance for its existing sources as long as, on a state-wide basis, those standards 

(and, in the case of the portfolio approach, any other permissible measures in the state 

plan) achieve the state’s required emission performance level. This flexibility is in 

keeping with the nature of the BSER that we have determined and the state-wide manner 

in which we have applied it to each state’s existing sources. This flexibility is also 

consistent with the interconnected nature of the electricity system, through which the 

fossil fuel-fired EGUs are connected to, and affect, each other, and are all affected by 

other sources of generation. 

Finally, it should be noted that states retain authority under CAA section 116 and 

40 CFR 60.24(g) to impose standards of performance that, cumulatively, are more 

stringent than the emission performance level.