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Testimony ofTexas Commission on Environmental Quality on the ProposedU .S.E.P.A. Carbon PollutionStandardfor NewPower Plants SusanaM. Hildebrand, P.E., ChiefEngineer May24, 2012

Good evening. My name is Susana Hildebrand and I am the ChiefEngineer for theTexas Commission on Environmental Quality. I appreciate the opportunityto provide
comments onthe EPA's Proposed Carbon Pollution Standard for New Power Plants. The TCEQ will be submitting extensive written comments on the proposal and inthe five minutes I have here, I will cover the TCEQ's major concerns with the rule.

There are two main points I will make. First, there is no apparent need for this rule. Second, ifEPA does proceed, there are multiple aspects that are inconsistent with Section 111 ofthe Clean Air Act and previous EPA policy.

NoNeed for the Rule

The EPA has not adequately demonstrated the need for the proposed rule. The EPA
states that the proposed rule will limit GHG emissions from the largest stationary source category and that it is necessaryto protect against projectedclimate change impacts and risks. However, the EPA then posits there will be no cost orbenefit associated with the rule andthat the rule will not result in any emissions reductions. The CAA says that the Administrator"

... shall include a category ofsources in suchlist ifin hisjudgmentit

causes or contributes significantly to, air pollution which may reasonably be anticipated
to endanger public health or welfare." Yet, ifone were to believe EPA's analysis that no

new coal-fired units would bebuilt through 2030 without carbon capture and storage (CCS), how can one reasonably anticipate that no new sources (and no new emissions from those sources) could reasonably endanger public health or welfare?

Inconsistent with FCAA

A number ofaspects ofthe proposal are inconsistent with the federal Clean Air Act. First, EPA must conduct a new endangerment and cause and contribute finding for this newly created source category, and may not rely onthe 2009 finding for mobile sources ofGHG. EPA proposes to create a new categoryby combining two existing and separate categories underthe NSPS rules, specifically for the purpose ofsetting standards for C02 only and no other pollutants. The EPA cannot rely on previous findings of endangerment and cause and contribute from coal-fired EGUs because these prior findings were based on non-GHG air pollutants that have very different characteristics than GHG. GHG are unique intheir scope and air quality impacts. Further, the proposed standard is to limit emissions ofC02 from a fraction ofthe sources ofGHG worldwide, whose specific contribution to climate change has notbeen determined.

Another major concern is that FCAA Section ui(b)(S) clearly stipulates that the U.S. EPA is not authorized to require any particulartechnological system ofcontinuous emission reduction to comply with any new source standardofpollution. The federal Clean Air Act definition of "technological system ofcontinuous emissionreduction" includes production or operational processes that are inherentlylow-polluting ornonpolluting, and natural gas-fired combined cycle units clearly meet this definition. The EPA is circumventingthe clear intent ofSection 111(b)(5) by setting a standard based on emissions from natural gas combined cycle units. In addition, the EPA's proposal to create a new source category based solely on equipment function, without
any consideration for unit design orfuel type, is contraryto NSPS precedent and previous case law.

The EPA has also created a new category of "transitional sources" for this rule that includes facilities that have received a complete PSD permit and commence constructionwithin 12 months ofthe proposal date ofthe rule. While the TCEQ appreciates the EPA's attemptto provide flexibility for these facilities, the EPA's creation ofa new category oftransitional sources clearly conflicts with the plain language ofdefinition ofnew source under Section 111(a)(2). A successful challenge or citizen suit tothis part ofthe rule wouldleave "transitional" facilities that commenced construction in the untenable position ofhaving to meet the performance standards for

a new source, exactly the situation thatthe EPAwas trying to prevent.

Economic and Technological Feasibility

The EPA is required to consider economic andtechnological feasibility when setting a standard ofperformance under Section 111. The EPA acknowledges that the 1000 pound
per megawatt-hour C0 2 standardis not technologically feasible for othertypes ofunits without CCS, yet there has not been a single full-scale commercial demonstration ofCCS

on a coal-fired power plant. Not only has the EPA failed to demonstrate the feasibility of CCS onnew coal-fired EGUs, they acknowledge that CCS is not economically feasible for

a new coal-fired EGU without government supportedfunding. The EPA should not and
cannotbase regulation onfuture subsidies provided by other federal agencies. EPA
cannot guarantee that such funding will be available or adequate in the future.

EPA claims they are complying with Executive Orders 12866 and 13563 by claiming that the rule will have no noticeable compliance costs because in essence, there will be no coal-fired EGUs built in the future based on a prediction oflow natural gas fuel prices. This flawed rationale based on EPA's predicted future economic scenario does not justifythe EPA's failure toperform a proper economic impact analysis. The EPA's analysis for Executive Order 13211 is also based on the same premise, essentially a simple statement that the rule has no notable impact to energy supply, distribution, or

use. Further, the EPA has not conducted an adequate analysis ofthe potential impact to reliability that results from a scenario where natural gas prices are much higher than projected and new coal-fired generation is no longer an option for the electric power industry. Fuel prices have historically fluctuated over time and even with new drilling techniques that make greater supplies ofnatural gas available, there are no guarantees that fuel prices will notfluctuate inthe future. Ifthe EPA predictions for natural gas prices prove to be wrong, as has been shown in the past, and the EPA takes away other fuel optionsby establishing rules to force the electric power generation sector to construct power plants that are the EPA's "facilities ofchoice," the EPA is not only setting energy policy for the countrybut is also endangering reliable and affordable electrical power for the public. 

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The EPA's prediction ofno new coal-fired power plants without CCS is based on their Integrated Planning Model (IPM) results that include both the Mercury andAir Toxics Standards (MATS) rule andthe Cross-State Air Pollution Rule (CSAPR). Thus, the EPA is creating a self-fulfilling prophecy ofno new coal-fired EGUs by adopting rules that place extreme regulatory pressure on new coal-fired generation, and then using that prophecytojustifythe current proposed GHG NSPS rulemaking ratherthan attempt to justifythe proposed rule on its own technological merits andtrue economic evaluation. Furthermore, CSAPR has been stayedbythe D.C. Circuit Court and the MATS rule is also underlitigation. Ifthese rules are overturnedor even significantlymodified, IPM's predictions ofno new coal-fired power plants will be invalidby default.



### Withdrawal of Rule

TCEQ urges EPA to withdrawthis rule or at least delay promulgation ofthis NSPS until litigation over the several GHG regulatory actions being challenged, in particular the Tailoring Rule, is resolved. This proposal regulates C02 under section 111 for the first time, and underfederal PSD andTitle V regulations, regulation ofa pollutant under NSPS triggers applicability ofPSD to emissions ofthat pollutant. Regardless, EPA
states the proposal should not require SIP revisions in order for the Tailoring Rule thresholds to continue to apply to C02. EPA takes the position that the tailoring rule thresholds will continue to apply once the NSPS is promulgated, even though those thresholds were not incorporatedintothe portion ofthe PSD definition of'regulated NSR pollutant' that refers to §111 pollutants. The proposal attempts to incorporatethe interpretation into the NSPS rule. However, another reading ofthe effect ofa final GHG NSPS for C02 is a triggering ofPSD andTitle Vat statutorylevels for that pollutant, an opposite result from the Tailoring Rule andthejustproposed Step 3 rule that maintains those thresholdlevels. Discussion in the proposal indicates EPA has already received several comments voicing concern that this GHG NSPS will trigger PSD andthe statutorythresholds because ofthe way EPA incorporated the tailored thresholds in the PSD rules. Due to the interrelationship ofNSPS regulation to other FCAA requirements thathave not yet been fully consideredin this rulemaking, EPA shouldwithdrawthis proposal. If EPA is intent on moving forward with regulation ofGHG under 111, among the several infirmities already discussed that must be corrected, EPA must go back to notice with a revised rule that specifically applies the Tailoring Rule thresholds to NSPS pollutants.

IfEPA chooses notto withdraw and re-propose this C02 NSPS, it should at least delay promulgation, especially given the uncertain legal authorityfor EPA's approach to regulate GHG at all underthe FCAA. TCEQ does not interpret its rules to apply PSD to GHG sources (which includes C02 sources) resulting in EPA imposing a GHG PSD FIP in Texas. TCEQ andthe state ofTexas havejoined several other states in challenging EPA's GHG regulatory program (including the Tailoring Rule) as it applies nationally andin Texas specifically. These courtchallenges have notbeen resolved to date and it is uncertain what ifany ofEPA's rules will be upheld. Until the U.S. Court ofAppeals for the D.C. circuit renders opinions on the primary GHG cases, in particular EPA'sauthority to change statutorythresholds, itwouldbe prematureto place an additional regulatory burden on states to conduct rulemaking or issue PSD permits tothousands of

new sources. Delay is appropriate as well because a ruling against EPA onthe Tailoring Rule could render moot this issue as tothethresholds.

Impacton PSD Permits

EPA's adoption ofthe proposed NSPS would preclude applicants for PSD permits for coal-fired power plants without CCS from making an economically reasonableness argument, because the proposed NSPS establishes a floor for BACT. The CAA Section 169(3) defines "best available control technology" (BACT) which is a requirement ofa permit issued under CAA Section 165. The definition ofBACT also includes the following, "In no event shall application of "best available control technology" resultin emissions ofanypollutants which will exceed the emissions allowed by any applicable standard established pursuantto section 111 or 112 ofthis Act." To date, no new coalfired EGUs seeking PSD permits for GHGs have been requiredto install CCS, because thattechnology has been rejected as being economicallyunreasonable. The preamble to this rule even acknowledges that CCS is currently cost prohibitive without government subsidies. EPA suggests that CCS will become economically reasonable inthe future, because control cost usually decline over time, but it is unknown howfar out into the future that will be andinthe meantime a permit applicant for a PSD permit would be forced to meet a standardthat would require CCS which was currently cost prohibitive. The adoption ofthe proposed NSPS imposes an immediate unreasonable cost of controls on current PSD permit applicants for coal-fired EGUs, that effectively does what CAA Section 111(b)(5) says EPA shouldn't do, which is require a particular technological system ofcontinuous emission reduction, namely NGCC turbines. 

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