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Climate-NSPS-EGU/proposal-draft/OMB Nov 4 2011/transitional/revised draft-02-10-12+KC

Transitional Sources – Revised Draft

B. Requirements for Transitional Sources

1. Overview

In today’s proposed rulemaking, the EPA is not 

proposing a standard of performance for proposed coal-fired 

power plants that have received an approved PSD permit by,

and that commence construction within a year after, the 

date of this proposal. We call these sources “transitional 

sources” and, for convenience, we call all new sources that 

are subject to the standard of performance we propose in 

this rulemaking “non-transitional sources.” The EPA is 

aware of approximately 18 sources that could potentially 

qualify as transitional sources because they have obtained 

PSD permits but have not yet commenced construction, 

although many are not expected to commence construction 

within the one-year period. Seven of these have PSD 

permits that incorporate CCS. Without this different 

treatment, a transitional source would be subject to the 

new source standard of performance when it does commence 

construction, even though it has already incurred costs to 

receive a PSD permit, often times, purchased land and taken 

other steps preparatory to commence construction in the 

very near future, but in at least some cases has not 
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attempted to incorporate the controls that the EPA would 

now be requiring for new coal-fired EGUs under the new 

source standard of performance. In this event, the high 

costs of possibly relocating the project, revising its 

permit and other plans to meet the standard of performance 

could well oblige the proposed EGU to, in effect, start 

over, so that its prior expenditures would be lost.

As a result, we consider that the costs to the 

transitional sources of complying with the standard of 

performance to be significantly higher than for nontransitional sources, and therefore we do not consider that 

standard of performance to be appropriate for transitional 

sources. Rather, we consider that CO2 emissions from 

transitional sources should be limited only to the extent 

that they would be limited as the source complies with its 

PSD permit. This approach is consistent with the costs 

faced by transitional sources. It is also consistent with 

principles of equitable treatment of transitional sources. 

In addition, it helps to assure the reliability of the 

electrical system by allowing some of the plants that the 

industry had intended to go forward to go forward.

2. Requirements for Transitional Sources

In this action, we make clear that our proposed 

standard of performance for non-transitional sources is not 
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applicable to transitional sources, which we define as 

coal-fired power plants that have received approval for 

their complete PSD preconstruction permits by the date of 

this proposal, and that commence construction within a year 

of date of this proposal.1 Although transitional sources 

would not be subject to CO2 emissions controls under CAA 

section 111, they would be subject to CO2 emissions limits 

due to any CO2 limits in the source’s PSD permit. If the 

source received the permit prior to January 2, 2011, the 

permit may not include CO2 limits. In this case, as a 

practical matter, CO2 emissions would be limited by 

whatever design or operating constraints are imposed on the 

source under the PSD permit. For example, if the PSD 

permit requires that the source be constructed at a 

supercritical level of efficiency, then CO2 emissions can 

be expected to be limited to approximately 1800 lbs CO2/MWh

because, as noted, that is the level of CO2 emissions 

associated with that type of EGU. 

For purposes of this treatment of transitional 

sources, the date of this proposal is the date of 

 

1 We note that there may be some proposed natural gas-fired EGUs 

that are similarly situated to the coal-fired transitional 

sources because the natural-gas fired sources have received PSD 

permits but have not commenced construction by the date of this 

proposal. Because they are new gas-fired EGUs, we expect that 

they will be able to meet the requirements of the proposed new 

source standard of performance, so that there is no need to 

consider whether they merit special treatment.
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publication in the Federal Register of this proposed notice 

of rulemaking. The 12-month period would not be extended 

for any reason, including because of any challenges to the 

permit that may be brought in any court or agency. 

We also note that because transitional sources would 

not be subject to any proposed standard of performance, 

they would not be considered “new source[s],” under CAA 

section 111(a)(2). Instead, they would be considered to be 

“existing source[s],” under section 111(a)(6). As a 

result, they would be subject to any requirements 

promulgated for existing sources under section 111(d) and 

related state plans.

3. EPA Policy

As noted, EPA proposes that non-transitional source 

fossil-fired power plants that commence construction after 

the date of proposal are subject to the standard of 1,000 

lbs CO2/MWh, and EPA proposes to base this standard on 

EPA’s identification of natural gas combined cycle (NGCC) 

as the “best system of emission reduction . . . adequately 

demonstrated.” CAA section 111(a)(1) (BSER).

Commenters have pointed out that there is a group of 

proposed coal-fired power plants that, by the date of this 

proposal, will have already received PSD permits and that 

may have taken other action preparatory to constructing
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(including purchasing land) such that they are poised to 

commence construction in the very near future. The EPA is 

aware that owners or operators of approximately 18 proposed 

new coal-fired EGUs have obtained permits under the CAA PSD 

program for the EGUs, but have not “commenced 

construction”, as that term is defined under 40 CFR 60.2

(discussed below). Seven of these newly proposed EGUs are 

permitted for CCS, and the remaining ones are not. 

Available information indicates that a small number of 

these sources have taken additional preconstruction steps

and therefore may be in a position to commence construction 

in the very near future. For instance, several sources have 

signed contracts for electricity, CO2, or other products. 

For instance, the Texas Clean Energy Project has contracts 

for its sulfur dioxide, CO2, and electricity.2

It is the policy of the EPA that this small group of 

transitional sources should be treated as separate and 

distinct from the other proposed or future power plants, 

that is, the non-transitional sources, which are much 

greater in number, and for which we propose the 1,000 lb 

CO2/MWh standard. As we explain elsewhere, in justifying 

this proposed standard, owners or operators contemplating 

construction of non-transitional base-load power plants 

 

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http://www.texascleanenergyproject.com/news-room/
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have choices: they can choose the type of facility and 

therefore may construct either a NGCC plant or a coal-fired 

plant, and if they choose the latter, they have choices as 

to siting and other considerations so as to be able to 

install CCS. As a result, for these sources, NGCC 

constitutes the BSER, and the 1,000 lbs CO2/MWh emission 

limit reflects that BSER and therefore is the appropriate 

standard of performance under section 111. Moreover, as a 

policy matter, for those that choose to construct a coalfired unit, they may choose to construct the plant in a 

place and a manner that allows installation of CCS, either 

at the time of construction or, in accordance with the 30-

year averaging proposal, some years down the road.

In contrast, transitional sources are differently

situated. They have already incurred substantial costs in 

permitting and taking other steps preparatory to commencing 

construction as coal-fired power plants, often including 

purchasing land for the new facility, in most cases without 

CCS. Counting these sunk costs, converting their plant to 

NGCC would be more expensive than for non-transitional 

sources, and as a result, NGCC does not constitute the BSER 

for them. As for CCS, for the transitional sources that 

are not designed for CCS, as a practical matter, it would 

be extremely difficult if not impossible for such a source 
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to proceed with construction without substantial re-design 

of the project in order to install CCS and thereby be in 

compliance with the 1,000 lbs CO2/MwH standard. There are 

several reasons for this. First, captured CO2 must be 

sequestered or used. If this was not considered as part of 

the original site selection, it provides additional 

challenges to the sources’ ability to adopt CCS. Second, if 

CCS was not considered in the original project design, 

space considerations may make it difficult to accommodate 

in the facility’s design. Third, the requirement to use CCS 

could necessitate a change in the very generation 

technology that a source may choose to use. For instance, 

instead of building a pulverized coal boiler, IGCC 

technology may be more appropriate. This is not to say that 

CCS could not be added to a project at this stage. Projects 

like the AEP Mountaineer project have shown that CCS can be 

successfully retrofitted on an existing plant. However, 

unlike in an existing facility where retrofit decisions 

must take into account previously made design decisions, in 

a facility in the pre-design phase, there is more 

opportunity for cost savings from re-designing the whole 

project, rather than just designing it as a retrofit. 

It bears emphasis that the requirements created by the 

new source standard in today’s action are fundamentally 
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different from post-combustion controls required to meet 

new source standards for conventional pollutants. Those 

controls could be much more easily redesigned into a 

planned plant without changing the plant’s basic underlying 

characteristics (such as type of unit or even location).

CCS is more fundamental to both the design and siting of a 

unit, and therefore would likely involve fundamental 

changes to the underlying project. This is much more 

difficult in a project that has progressed through the 

permitting stage and is very close to commencing 

construction than it would be in other types of projects. 

Considerations in addition to costs also support our 

treatment of transitional sources. These include equitable 

considerations: Transitional sources have incurred 

significant expenses and undertaken a long planning period, 

as a result they have more invested in their current plans, 

and as a result of all that, they have an equitable claim 

to being allowed to proceed without requirements other than 

those in their PSD permits. These considerations also 

include promotion of the reliability of the electricity

system. Owners or operators of transitional sources have 

planned them and are on the verge of commencing 

construction of them because they perceive a demand for the 

electricity the sources would generate. The EPA’s modeling 
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of the electricity industry in the foreseeable future 

forecasts a potential reduction in supply as older coalfired EGUs are retired. Allowing these few transitional 

sources to proceed as planned – including generally on the 

time schedule planned -- would promote reliability.

As noted, we propose to define transitional sources to 

include sources that, besides having a complete PSD permit 

by the date of proposal, commence construction within 12 

months of the date of proposal. This one year period gives 

effect to the policy of limiting transitional source 

treatment to sources that, as of the date of proposal, have 

incurred the expenses necessary so that they are poised to 

commence construction in the very near future. In light of 

the complex of requirements, which range from siting to 

financing, needed to commence construction of the large and 

expensive type of project that a power plant is, any 

proposed source that does commence construction within the 

relatively short period of 12 months of the date of 

proposal qualifies as having been poised to commence 

construction as of the date of proposal. It is those 

sources that would be most disadvantaged by being subjected

to the standards of performance proposed in today’s 

rulemaking. On the other hand, 12 months is long enough to 

give transitional sources a reasonable period to commence 
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construction in accordance with the terms of their permit.

Any proposed source that does not commence construction 

within 12 months cannot be said to be similarly situated.

Finally, as a matter of policy, although transitional 

sources would not be subject to the 1,000 standard lbs 

CO2/MWh for new sources, it is EPA’s policy that 

transitional sources would become subject to the 

requirements EPA intends shortly to promulgate for existing 

sources.

4. Legal approach.

In this section, we describe our legal approach for 

implementing the transitional source policy. First, we note 

that we considered the approach of treating transitional 

sources as a separate subcategory and proposing a standard 

of performance for them at what we call a “no-furthercontrol level.” For practical reasons that we describe, we 

rejected this approach. Second, we discuss our basis for 

the approach we are taking, which is to not propose a 

standard of performance for these sources. We discuss the

relevant CAA section 111 requirements and our 

interpretation of them, and we then apply that 

interpretation to our approach.

a. Consideration of approach of separate standard of 

performance
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EPA considered treating transitional sources as a 

separate subcategory of new sources and proposing a

standard of performance for that subcategory. Under CAA 

section 111(b)(2), discussed further below, EPA is 

authorized to subcategorize sources within categories of 

new sources to establish standards of performance. In this 

case, EPA may well have proposed, in light of the 

transitional sources’ sunk costs, that the BSER for these 

sources would be the controls to which they would be 

subject under the terms of their PSD permits, and no 

further controls under section 111.3 EPA would then have 

determined the emission rate for each transitional source 

that reflected that source’s level of CO2 emissions in 

accord with the terms of its PSD permit. This emission rate 

would have constituted the “no-further-control” standard of 

performance. Note that under this approach, each 

transitional source would have received an emission limit 

distinct to that source.

However, this approach would give rise to practical 

problems: As noted, many of the 18 potential transitional 

sources have a PSD permit that does not regulate CO2 

 

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This type of standard of performance could take one of several 

different forms, such as a standard that would not limit the source’s 

CO2 emissions, or a standard that the transitional source itself would 

identify as equaling the emission limit it would achieve through 

compliance with the applicable terms of its permit.
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because GHGs were not subject to PSD until the January 2, 

2011 effective date of the first regulatory action 

controlling CO2 emissions under the CAA. Particularly for 

those sources, this approach could have created uncertainty 

as to what EPA would promulgate as the emission rate in the 

final standard of performance. This is because since these 

sources’ permits do not specify a CO2 limit, EPA would have 

to develop limits based on the design of the unit 

(including the project’s type of technology and fuels), EPA 

does not have all the information necessary to make such 

determinations at this time.

In addition, all transitional sources, even those 

whose PSD permits do establish a CO2 limit, would face 

uncertainty as to what final standard EPA would promulgate. 

This uncertainty would stem from (i) the possible wide 

range of design of transitional sources and the consequent 

complexity of EPA’s task, coupled with the relatively short 

(12-month) period of time for rulemaking, in establishing 

an individual standard of performance for each source; and 

(ii) the fact that the public could well comment on the 

proposed standard of performance and EPA, based on those 

comments, could finalize standards of performance different 

than proposed, which may be more difficult for the 

transitional sources to meet. 
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The uncertainties that the sources could experience as 

to what the final standards of performance would entail 

could well deter those sources from commencing construction 

until EPA promulgated the final standard of performance. 

Such delay would defeat the policy underlying EPA’s 

approach to transitional sources, which is to allow these 

sources favorable treatment only if they commence 

construction within 12 months of proposal. If they are 

deterred from commencing construction until after the final

rule, they may have lost that 12-month window. 

We have other concerns besides these practical 

problems over the approach of treating transitional sources 

as a subcategory of new sources and establishing a standard 

of performance for them. This approach would provide 

little, if any, environmental benefit because the standard 

of performance would not provide further control beyond the 

limits of the sources’ PSD permits. In fact, this approach 

could be detrimental from an environmental standpoint 

because by treating the transitional sources as new 

sources, EPA could not treat them as existing sources and 

as a result, could not subject them to possible regulation

under the existing source standard that EPA expects soon to 

promulgate.
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b. Adoption of approach of not proposing a standard of 

performance

In light of the practical difficulties just described, 

EPA is not proposing any standard of performance applicable 

to transitional sources. As a result, by the terms of CAA 

section 111, these sources cannot be treated as new sources 

and therefore cannot be subject to a new source standard of 

performance under CAA section 111(b). Instead, they would 

remain subject to the constraints imposed by their PSD 

permits. In addition, they would be considered to be 

existing sources, and therefore in the future, they would 

be subject to any requirements EPA may promulgate for 

existing sources under CAA section 111(d). This approach 

is consistent with the provisions of CAA section 111.

(i). Key provisions of CAA section 111

The key provisions of CAA section 111, for present 

purposes, are as follows: Under section 111(b)(1)(A), as 

the first step in the process of promulgating regulations 

under section 111, the Administrator must “publish ... a 

list of categories of stationary sources.” Then, the 

Administrator must “[propose] ... Federal standards of 

performance for new sources within [the source] category,” 

and then “promulgate ... such standards with such 

modifications as he deems appropriate.” Section 
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111(b)(1)(B). Section 111(b)(2) goes on to provide that 

“[t]he Administrator may distinguish among classes, types, 

and sizes within categories of new sources for the purpose 

of establishing such standards.” A “new source” is defined 

as “any stationary source, the construction or modification 

of which is commenced after [EPA proposes] a standard of 

performance ... which will be applicable to such source.” 

Section 111(a)(2).

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 Once the Administrator promulgates standards for new 

sources under CAA section 111(b), the Administrator must 

take action under CAA section 111(d) to establish 

requirements for “any existing source for any air pollutant 

(i) [that falls into specified categories] but (ii) to 

which a standard of performance under this section would 

 

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The CAA does not include a definition of the term 

“commenced” for these purposes, but the EPA framework 

regulations promulgated under section 111 define this term

as follows:

Commenced means, with respect to the definition 

of new source in section 111(a)(2) of the Act, 

that an owner or operator has undertaken a 

continuous program of construction or 

modification or that an owner or operator has 

entered into a contractual obligation to 

undertake and complete, within a reasonable time,

a continuous program of construction or 

modification.

40 CFR 60.2.
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apply if such existing source were a new source....” 

Section 111(d)(1). An “existing source” is defined as “any 

stationary source other than a new source.” Section 

111(a)(6).

(ii). Interpretation of key provisions of CAA section 111

EPA interprets these provisions as follows: Under 

section 111(b)(1)(B), once EPA lists a category of sources, 

EPA is required to propose and promulgate standards of 

performance for new sources in that category. EPA is not, 

however, required to promulgate standards of performance 

that cover all new sources. This is clear from the 

directive in section 111(b)(1)(B), which requires that EPA 

propose standards of performance “for new sources” within 

the category, but does not require that EPA propose such 

standards for all new sources or for any new source. EPA 

may fulfill that directive by proposing standards that 

cover some, but not all, sources that newly commence 

construction or modification. 

Similarly, the term “new source” in section 111(a)(2) 

is defined to incorporate the limitation that EPA must 

propose or promulgate a standard applicable to the source

for the source to be considered “new.” That is, section 

111(a)(2) defines a “new source” as any source for which 

construction or modification commences after EPA proposes 
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“a standard of performance ... which will be applicable to 

such source.” By its terms, this provision contemplates 

that EPA may not propose a standard of performance 

applicable to certain sources, and that if EPA does not, 

those sources would not be considered to be “new source[s]”

and therefore not subject to any new source standard of 

performance.

In fact, in a number of prior rulemakings under 

section 111, EPA has limited the applicability of its 

proposed and final standards of performance to certain 

groups of new sources, and has not attempted to cover all 

sources that newly commence construction or modification. 

For example, one of the first categories of sources that 

EPA regulated under section 111 was fossil-fired power 

plants, but from the beginning, EPA imposed an emissions 

threshold, so that sources that newly commence construction 

or modification but that emit below that threshold would 

not be subject to any standard of performance. Similarly, 

in other section 111 rulemakings, EPA has proposed and 

promulgated rulemakings that apply standards of performance 

to certain emission units in a category, but not to all of 

those emission units. In some cases, EPA has subsequently 

proposed or promulgated additional rulemakings that apply 
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standards of performance to more of the emission units in 

the category.

Section 111(b)(2) authorizes EPA to “distinguish 

among classes, types, and sizes within categories of new 

sources for the purpose of establishing such standards.” 

In other words, once EPA selects the set of sources for 

which to propose regulations, EPA may establish 

subcategories among those new sources and promulgate 

different standards for those subcategories. Strictly 

speaking, this authorization to subcategorize is limited to 

“new sources,” which, again, are sources newly commencing 

construction or modification and for which EPA proposes or 

promulgates a standard of performance; and this 

authorization to subcategorize does not apply in the case 

of sources that are not “new sources” because EPA does not 

propose or promulgate a standard of performance applicable 

to them.

Any source that is not a “new source” – either because 

of the time that it commences construction or modification 

or because EPA has not proposed or promulgated a standard 

of performance applicable to it – is considered an existing 

source, under section 111(a)(6). In general, existing 

sources of certain pollutants are subject to requirements 

that EPA promulgates under section 111(d).
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(iii). Application to transitional sources

In this action, EPA is not proposing a standard of 

performance for transitional sources and as a result, by 

the terms of CAA section 111, transitional sources would 

not be considered new sources and therefore would not be 

subject to any standard of performance for new sources. In 

contrast, EPA is proposing a standard of performance for 

non-transitional sources, one that is based EPA’s proposed 

determination that NGCC is the BSER for those sources, and, 

as a policy matter, that for coal-fired EGUs, CSS is a 

compliance option. As noted, the record that supports this 

proposal for non-transitional sources is based on the costs 

of those controls to those sources. 

Transitional sources have different cost 

considerations because of the costs they have already 

incurred to obtain their PSD permits and to take whatever 

other steps necessary for them to commence construction in 

the very near future.5 These cost considerations support 

EPA’s policy that transitional sources should remain 

subject to whatever CO2 emission limits are included in, or 

result from compliance with, their PSD permits, but that no 

 

5 EPA intends that its treatment of transitional and non-transitional sources is severable from each other and 

considers that severability is logical because of the record-based differences between the two types of 

sources and because there is no interdependency in EPA’s treatment of the two types of sources. This 

statement concerning severability for these components in this rulemaking should not be construed to have 

implications for whether other components in this rulemaking are severable. 
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further control of CO2 under the new source provisions of 

CAA section 111(b) is merited. EPA is not actually 

subcategorizing transitional sources under 111(b)(2) 

because by its terms that provision authorizes 

subcategorizing only for new sources (that is, sources for 

which EPA proposes a standard of performance). Nor is EPA 

proposing a no-further-control standard of performance 

because, as noted, of the practical concerns that such a 

standard would deter transitional sources from commencing 

construction and thereby defeat the policy that 

transitional source treatment should apply to sources that 

commence construction within 12 months of the proposal.

Even so, the approach that EPA is taking for transitional 

sources of not proposing a standard of performance has much 

the same effect as proposing a no-further-control standard 

of performance and is supported by the same cost 

considerations. As noted, other supporting considerations 

include equitable and reliability.

Our approach of not proposing regulations for 

transitional sources is consistent with the terms of the 

provisions of section 111 and is consistent with the 

purposes of CAA section 111. As noted, under the terms of 

section 111, EPA is not required to propose or promulgate 

standards of performance for all sources in a source 
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category that newly commence construction, and therefore 

EPA is not required to propose a standard of performance 

for transitional sources. Transitional sources are a small 

group of sources with a distinct profile of costs, CO2

emissions, and equitable concerns. In any event, EPA’s 

approach for these sources is, in key ways, consistent with 

proposing a standard of performance for them. As noted, 

under EPA’s approach, transitional source would, as a 

matter of practice, face limits on their CO2 emissions that 

stem from either any explicit CO2 limits in their PSD 

permit or, if none, the operational limits associated with 

compliance with the terms of their PSD permit. Any more 

stringent limits for CO2 emissions could not be justified 

for these particular sources because such limits would 

require them to substantially redesign the source to meet 

the new limits. As noted, this would be true if we required 

the source to meet a 1,000 lb/MWh standard requiring CCS. 

It would also be true if we required limits even slightly 

tighter than those that the unit was currently designed to 

meet, because efficiency (and thus CO2 emissions) are an 

integral part of unit design.

We recognize that this approach of not proposing a 

standard of performance for transitional sources could 

raise the question of whether this approach is consistent 
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with the requirement implicit in the definition of “new

source” under CAA section 111(a)(2) that a source be 

subject to a standard of performance when it commences 

construction after the date of proposal for that standard. 

We believe the approach is consistent with, and does not 

circumvent, that requirement. As noted, CAA section 111 

does not require that all sources that newly commence 

construction be treated as new sources, and in past section 

111 rulemakings, EPA has not applied the standards of 

performance that it proposes and promulgates to all sources 

that newly commence construction in a source category. 

Moreover, as noted, transitional sources are a small 

group of sources and they have a distinct profile. 

In addition, we note that section 111 allows other 

approaches under which EPA may encourage sources to 

commence construction as soon as possible and avoid the 

applicability of a standard of performance. For example, 

in this case, EPA could have issued an advance notice of 

proposed rulemaking (ANPR) stating that EPA intends to 

propose a standard of performance for all fossil-fired 

power plants within 12 months, and further stating that EPA

did not expect to provide any special treatment for coalfired power plants that as of the date of proposal (again, 

12 months hence), had received a PSD permit and taken other 
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action to preparatory for commencing construction, but had 

not yet commenced construction. This ANPR approach would 

have had a similar effect, so far as transitional sources 

are concerned, as the treatment of transitional sources in 

today’s rulemaking. However, it would also have had the 

effect of delaying by 12 months EPA’s establishment of 

standards of performance for non-transitional sources. 

Accordingly, this ANPR approach would not achieve EPA’s 

policy objectives, and EPA does not take this approach. 

But the fact that this ANPR approach is consistent with 

section 111 suggests that the approach that EPA is taking 

in this rulemaking is also consistent with section 111.