Deliberative – Do Not Cite or QuoteOverview:Emission Guidelines and Standards ofPerformance for Existing Power PlantsUnder CAA Section 111(b) and (d)Deliberative – Do Not Cite or QuoteOverview►EPA’s Tasks Under the President’s Climate Action Plan►Background on Clean Air Act Section 111►Key Messages from Early Outreach to Stakeholders►Overview of Reduction Strategy for Existing Sources►Overview of Emissions Guidelines Under CAA Section 111(d)►Determination and Implementation Process►Building Blocks for the Best System of Emission Reductions►Building Block Technologies Translated to State Goals►Basis for Interim and Final State Goals►Historical CO2Emission Rates and State Goals►Regulatory Impacts►State Plans to Implement Emission Guidelines►Process►Components►Potential Pathways►Timing►Timing of Reductions►Summary of Proposed State Goals►Proposed Standards for Modified and Reconstructed Sources under CAA section 111(b)►Boilers►Turbines2Deliberative – Do Not Cite or QuoteEPA’s Tasks Under the President’s Climate Action Plan1. Issue carbon pollution standards for new power plants►Proposal issued on September 20, 2013•Informed by the more than 2.5 million comments received on theApril 2012 proposal•Reflects recent developments and trends in the power sector►Will follow the agency’s open and transparent review process,including public comment and a public hearing2. Issue carbon pollution standards for modified andreconstructed power plants►Proposal: June 2014►Final: June 2015►Will follow the agency’s open and transparent review process,including public comment and a public hearing3Deliberative – Do Not Cite or Quote3. Issue carbon pollution emission guidelines for existingpower plants►Issue federal guidelines for the states•Work in partnership with states•States will develop plans that set standards for existing sources•States use EPA guidelines as a reference►Federal guidelines should build on states’ leadership andexperience with programs that reduce GHGs►Will follow the agency’s open and transparent review process,including public comment and a public hearing4EPA’s Tasks Under the President’s Climate Action PlanDeliberative – Do Not Cite or QuoteBackground on Clean Air Act Section 111►Section 111 of the CAA establishes the process by which EPA isto develop standards of performance for stationary sources of airpollution►Section 111(b) addresses new, modified and reconstructed sources•Standards are to be based on the “best system of emissionreduction...adequately demonstrated” (BSER)►Section 111(d) addresses existing sources•Comes into play once EPA has adopted a 111(b) standard for a sourcecategory•EPA establishes, through guidelines, a procedure for states to submitplans that establish and implement standards for existing sources,based on BSER– BSER determinations are not the same for new and existingsources but are grounded in the same CAA definition and considerthe same criteria•EPA develops existing source BSER determinations for pollutants otherthan NAAQS pollutants and Section 112 air toxics (e.g., CO2)5Deliberative – Do Not Cite or QuoteSection 111 Regulations►EPA has promulgated 60+ NSPS for new sources►Rich litigation history with significant jurisprudence on whatconstitutes BSER►EPA has promulgated 111(d) regulations for 5 existing sourcecategories►Sulphuric acid plants (acid mist)►Phosphate fertilizer plants (fluorides)►Primary aluminum plants (fluorides)►Kraft pulp plants (total reduced sulphur)►Municipal solid waste plants (landfill gases)►There have been no court decisions on 111(d) regulations6Deliberative – Do Not Cite or Quote►EPA conducted an extensive outreach effort, starting in Fall2013►Several common themes emerged from stakeholder outreach►Broad agreement that opportunitiesexist to lower the carbonintensity of power generation through a wide range of measures►States need more than one year to develop and submit plans•More time necessary due to legislative/regulatory schedule in many states•Additional time would allow and promotemulti-state programs and cooperation►Multiple opinions about how broader measures taken throughout theelectric system could factor into programs►General support for giving states flexibility•Recognize existing programs and the progress achieved•Allow compliance options that permit the use of approaches that are outside thepower plant “fence line” (e.g., demand-side management)►Acknowledge leadership for prior GHG activities in states7Key Messages from Early Outreach to StakeholdersDeliberative – Do Not Cite or Quote►Potential hurdles or concerns identified by stakeholders:►Views vary regarding form of the goal•Rate-based: States must stay below a pounds-of-CO2-per-megawatt hourlimit•Mass-based: States must stay below a total tons-of-CO2-emitted-per-yearlimit►Many states have already achieved greenhouse gas reductionsand have exceeded the President’s goal►Some suggest that EPA legally only can base the reduction goalon measures “within the fence line”•This would eliminate EPA’s ability to count reductions achieved away from thepower plant (e.g., demand-side energy efficiency programs)►Concerns that rulemaking will have a negative impact on jobsand ratepayers•Concern that ratepayers willhave to pay for stranded assets•Concerns regarding maintaining the reliability of the electric power systemKey Messages from Early Outreach to Stakeholders8Deliberative – Do Not Cite or QuoteOverview of Reduction Strategy for Existing Sources►Package consists of two separate but related rulemakings:►Existing source guidelines under Section 111(d)►Standards of performance for modified and reconstructed sources underSection 111(b)►Emissions Guidelines Package►Defines what represents BSER for existing sources►Translates BSER into state-specific goals►Primary proposal achieves approximately 25% to 30% reduction from 2005 levels►Takes comment on a less aggressive option►Provides additional guidance to States on their existing source plan►Components of a plan►Flexibility in compliance options►Timing for submittal►Timing of reductions►Modified and reconstructed package►Based largely on efficiency improvements at existing sources9Deliberative – Do Not Cite or QuoteSection 111(d) Emission Guidelines:Determination and Implementation Process►Under CAA Section 111(d), as applied in this context:►EPA determines the best system of emission reduction (BSER)►EPA applies BSER using state-specific data to derive the emissionsrate that represents the state goal for covered sources reflectingBSER►The state develops standards of performance that implement thatgoal and establishes those standards in its plan, along withimplementing and enforcing measures►The state applies that standard10Deliberative – Do Not Cite or QuoteBuilding Blocks and Determining BSER►EPA has identified four categories ofmeasures providing the basis fordetermining and quantifying BSER►They entail a combination of addressing emissions rates and levels ofutilization at the affected source in the power sector:1. Lowering carbon intensity of generationat individual existing EGUs through heatrate improvements2. Reducing emissions of most carbon-intensive existing EGUs by shiftinggeneration to less carbon-intensive existing fossil fuel-fired EGUs3. Reducing emissions of carbon-emittingEGUs by expanding the amount of new,lower (or no) carbon-intensity generation4. Reducing emissions of carbon-emittingEGUs by increasing demand-side energyefficiency►Together, the four building blocks constitute BSER, with each state’sgoal established through applying BSER to its fleet of affected sources►For each building block, EPA can identify a target level of performancethat reflects more or less aggressive performance►The assumptions are then applied to state-specific data (e.g., existinggeneration mix) to set state-specific goals11Deliberative – Do Not Cite or QuoteBuilding Block Technologies Translated to State GoalsTechnology/Building BlockOption 1 Option 21. Heat rate improvement (Avg.Reduction for Coal)6% 4%2. Dispatch to existing and underconstruction NGCCUtilization of NGCCup to 70% capacity factorUtilization of NGCCup to 65% capacity factor3. Dispatch to new clean electricgenerationIncludes new nuclear generation under construction,moderate deployment of new renewable generation,and continued use of existing nuclear generation4. Demand-side Energy Efficiency(% reduction in demand from BAU MWhsales)3.0% / 10.7%(2020 / 2030)2.4% / 5.2%(2020 / 2025)GoalOption 1 Option 2Average nationwide goal for coveredsources (lbs/MWh)25% to 30% below 2005levels20% to 25% below 2005levels12Deliberative – Do Not Cite or QuoteState Emission Rate Goal= (coal gen. x coal emission rate)+ (OG gen. x og emission rate) + (NGCC gen. x NGCC emission rate)Total Fossil Generation +EE MWh + BB 3 GenerationHow Are the Building Blocks Turned into State Goals?13Deliberative – Do Not Cite or QuoteBasis for Interim and Final State Goals14Deliberative – Do Not Cite or Quote‐5001,0001,5002,0002,500 North Dakota Montana Wyoming South Dakota Kansas

North Carolina Iowa Illinois Nebraska Kentucky West Virginia Maryland Missouri Wisconsin Indiana Minnesota Tennessee Colorado Michigan New Mexico Utah Ohio Arkansas South Carolina Pennsylvania Georgia Arizona Oklahoma Washington Texas Alabama Louisiana Virginia Delaware Mississippi Florida New Hampshire New Jersey New York Oregon Nevada Massachusetts Rhode Island California Maine Connecticut Idaho

Rate (lbs/MWhOption2‐1,334lbs/MWhHistorical Rates and State Goals(At Full Implementation)2012fossilrate=1,669lb/MWhOption1– 1,198lbs/MWhNote: The 2012 data and the calculated state goals are inclusive of all four building blocks, with EE and under construction renewableaveraged in at a 0 lb/MWh. These target rates are not the ratesthat covered fossil sources will have to achieve on their own.This slide is illustrativeand does not fullyreflect all measures.15Deliberative – Do Not Cite or Quote►CO2reductions►25% to 30% below 2005 levels►Monetized annual benefits►$20 to $35 billion (half associated with CO2reductions; the other halfassociated with criteria pollutant reductions)►Annual costs►$6-9 billion►National average retail electricity prices►Up to 7.5% increase►Coal►20% to 25% decrease in power sector coal use►5-8% decrease in coal price►About 200-215 remaining GW (about 30-45 GW of retirements)►Natural gas►About 10% increased useImpacts(Early estimates; do not fully reflect all measures)16Deliberative – Do Not Cite or QuoteSection 111(d) State Plan Process►Under CAA Section 111(d), as applied in this context:►The state develops standards of performance that implement its BSERderived goal and establishes those standards in its plan, along withimplementing and enforcing measures•EPA recognizes states’ requests for both flexibility and specificity– States can choose to meet rate- or mass-based goal– EPA would allow and encourage multi-state and regional plans– EPA would support building off existing reduction programs•EPA recognizes states’ concerns regarding timing for submission ofplans– Phased plan submittals considered►The state applies that standard to the appropriate entities•EPA recognizes the need for accountability and verifiability of attainingCO2emission reductions17Deliberative – Do Not Cite or QuoteState Plan Components►Emission guidelines would include a list of state plan components►Recommendation: Require state plans to include:►Identification of affected entities►Description of plan approach and geographic scope►Identification of state emission performance level►Demonstration that plan is projected to achieve emission performancelevel►Identification of milestones►Identification of backstop measures►Identification of standards of performance►Demonstration that each standard of performance is enforceable,quantifiable, surplus, permanent and verifiable (recognizing nontraditional nature of some potentially affected entities)►Identification of monitoring, reporting and recordkeeping requirements►Description of state reporting►Certification of hearing on state plan►Supporting material18Deliberative – Do Not Cite or QuotePotential Pathways for State Plans►Multiple pathways exist for states’ plans►These may include emissions reduction measures identified inbuilding blocks or others►Pathways that EPA anticipates include implementation of the followingactions, alone or in various combinations:►Direct emission limits on EGUs►Collaboration with RTOs and ISOs regarding re-dispatch prioritization►State policies to deploy new, lower- or non-carbon-emitting generationcapacity, such as natural gas combined cycle (NGCC) sources,renewable energy (RE) sources such as solar and wind, and/or nuclear►Energy efficiency (EE) deployment programs►Legislation or regulations establishing EE resource standards (EERS)and/or renewable portfolio standards (RPS)►Regional emissions reductions agreements►Integrated Resource Plan-type approaches for reducing utility fleet CO2emissions19Deliberative – Do Not Cite or QuoteTiming for State Plan Submittals►Individual and multi-state plans due June 30, 2016►Some states may reasonably need additional time to submit complete plans, dueto factors such as timing of legislativeapproval process, complexities associatedwith regional approaches►Proposing providing states with additional timeto submit complete plans if justifiedand if states providespecific information►Proposed timing of extensions to submit acomplete plan, if justified and supported:•Individual state plans: a one-year extension (June 30, 2017)•Multi-state plans: a two-year extension (June 30, 2018)•Would submit a progressreport on June 30, 2017►Proposed steps for initial plan submittal, if state seeks an extension:•Submit notice of intent by April 1, 2016 withjustification for extension, description ofactions taken to develop plan, and commitmentto meet submittal content requirements•Submit initial plan with following content by June 30, 2016– Description of plan approach and progress made to date in developing plan– Initial quantification of the level of emission performance thatwill be achieved through the plan– Commitment to maintain existingmeasures that limit or avoid CO2emissions (e.g., RESs, unitspecific limits on operation or fuel utilization), at least untilthe complete plan is approved– Comprehensive roadmap for completing the plan,including process, analytical methods, andschedule (including milestones) specifying whenall necessary plan components will be complete(e.g., projection of emissions performance; implementing legislation, regulations and agreements;necessary approvals)– Existing programs state intends to rely on to meet its target (if used)– Executed agreement(s) with otherstates (e.g., MOU), if regionalapproach is being pursued– Commitment to submit a complete plan by theapplicable required dateand actions the state willtake to show progress in addressing incomplete plan components20Deliberative – Do Not Cite or QuoteTiming of Reductions►Timing of reductions can vary, depending on a state's situation►Some states have existing programs that are achieving results►Some measures are more easily implementedand/or may obtain reductions promptly;others may require longer to implement and/or realize reductions►Early emphasis on effective implementationof EE programs could allow more EE tosubstitute for other, more expensive measures►New multi-state programs (or additions to existing multi-state programs) would need time toachieve goals►State plans must be designed to achieve and maintain affected EGU emissionsperformance consistent with final post-2029 goal, as well as an interim goal►Goals represent the collectiveCO2emission rate of affected EGUs in a state (adjusted toreflect the potential to achieve emissions reductions by avoiding fossil generation); a statemay translate its rate goal into a mass-based goal►Interim emissions performance goals apply during the years 2020-2029 on a 10-yearaverage or cumulative basis, as states ramp up programs to meet their final goals•This 10-year interim performanceperiod provides timing flexibility for states to recognizespecific implementation differences; milestone requirements and emissions reporting areproposed to track interim progress and enable corrective action if necessary►States must achieve and maintain final goals after 2029; a three-year averaging period(2030-2032) is proposed for demonstration thatfinal goal will be initially achieved►States must maintain the final-goal level of performance over time•Preamble takes comment on alternate mechanisms for maintaining performance21Deliberative – Do Not Cite or Quote10-year State Plan Performance22Basisforstategoal‐‐Emissionspathwayreflectingapplicationofbuildingblocks2020202120222023202420252026202720282029StateplanemissionstrajectoryDeliberative – Do Not Cite or QuoteProposed State Goals(Illustrative; do not fully reflect all measures)(Adjusted Output-Weighted-Average Lbs. of CO2per Net MWh from All Affected Fossil Fuel-Fired EGUs)23State InterimGoal FinalGoal State InterimGoal FinalGoalAlabama 1,2861,241Montana 2,0662,003Alaska 1,1361,048Nebraska 1,7561,676Arizona 759733Nevada 798765Arkansas 1,1121,066NewHampshire 773738California 710678NewJersey 823743Colorado 1,3921,343NewMexico 1,2791,230Connecticut 689652NewYork 797745Delaware 967937NorthCarolina 1,2561,189Florida 903866NorthDakota 2,0802,035Georgia 979931Ohio 1,5371,476Hawaii 1,6051,502Oklahoma 1,0701,035Idaho 400355Oregon 559521Illinois 1,6121,535Pennsylvania 1,3831,340Indiana 1,7041,642RhodeIsland 845818Iowa 1,6021,542SouthCarolina 964918Kansas 1,8571,763SouthDakota 1,058949Kentucky 1,8601,787Tennessee 1,3441,272Louisiana 1,1881,121Texas 1,1361,085Maine 675633Utah 1,5681,522Maryland 1,5811,489Virginia 950896Massachusetts 761723Washington 536449Michigan 1,4441,382WestVirginia 1,8851,850Minnesota 1,1411,075Wisconsin 1,4361,374Mississippi 802767Wyoming 2,1002,067Missouri 1,6691,597Deliberative – Do Not Cite or QuoteModified and Reconstructed Sources►Proposed Section 111(b) modified and reconstructed standards forelectric generating units is a separate package with a different docketfrom the Section 111(d) rulemaking►Under same schedule►Common technical analysis for modified standards and heat ratereduction building block►Proposed standards follow traditional analytical approach►Request comment on a range of alternative options to maintain flexibilityand for the final rule►Do not anticipate being triggered often►Modified requirements triggered by increase in hourly emissions(generally associated with increasing fuel throughput)•Increases due to pollution control devices would be exempt under the NSPSpollution control exemption►Reconstructed standard triggered whencost of a single project exceeds50% of replacement cost of unit•Only triggered once in the last 15 years (when a coal-fired boiler explodedand was rebuilt (Hawthorne, in Kansas))24Deliberative – Do Not Cite or QuoteProposed GHG Standardfor Modified Boilers and IGCC Units►Proposed different standards for modifications of boilers and IGCC unitsthat occur both before and after Section 111(d) rulemaking is in place:►Before 111(d) rulemaking is in place:•Unit-specific numerical standard determined from the best demonstrated annualhistorical operating performance for the modified facility using post-2002 dataand further reductions through implementation of heat rate improvementmeasures (additional 2%); OR•Take comment on a range of alternatives including nationwide numericalemission standard based on best performing existing sources (separatestandard for sub-critical and super-critical boilers)►After 111(d) rulemaking is in place (at this point source would be subject toboth 111(b) and 111(d)):•Unit-specific numerical standard determined from an assessment to identifyenergy efficiency improvement opportunities at the affected modified EGU.►If convinced by commenters that 111(d) requirements do not remain ineffect, take comment on:•Pre-111(d) requirements outlined above; or•Allowing a source to choose the optionto remain in the 111(d) program andmeet unit-specific numerical standard determined from an assessmentidentifying energy efficiency improvement opportunities at the affected modifiedEGU25Deliberative – Do Not Cite or QuoteProposed GHG Standard for Reconstructed Boilers►Fossil fuel-fired boilers►Efficiency standard based on combustion technology•Large subcategory (>~200 MW); standard of 1,900 lbCO2/MWhnet•Small subcategory (<~200 MW); standard of 2,100 lbCO2/MWhnet–Supercriticalsteamturbinesarenotavailablebelow~200MW►Request comment on equal treatment by fuel type•Petroleum coke and coal-refuse are more carbon intensive thanother coals; natural gas and oilare less carbon intensive fuels26Deliberative – Do Not Cite or QuoteProposed Standards for Combustion Turbines►Modified combustion turbines would have two alternatives,depending on timing of the modification:►Alternative 1: Nationwide numeric emission standard (same asstandards for new)•Large subcategory (>~100 MW); standard of 1,000 lb CO2/MWhgross•Small subcategory (<~100 MW); standard of 1,100 lb CO2/MWhgross►If the modification occurs after the source is subject to aqualifying/approved 111(d) GHG plan, the source would remain subjectto 111(d) plan requirements, and the source could choose to meet eitherthe emission limit shown above OR could choose to meet Alternative 2shown below►Alternative 2: Unit-specific numeric standard determined from anassessment to identify energy efficiency improvement opportunities atthe affected modified EGU►Reconstructed combustion turbines►Large subcategory (>~100 MW); standard of 1,000 lb CO2/MWhgross►Small subcategory (<~100 MW); standard of 1,100 lb CO2/MWhgross27Deliberative – Do Not Cite or QuoteAPPENDIX28Deliberative – Do Not Cite or QuoteClean Air Act Section 111 – Excerpts►Section 111(a)(1) (Definitions):►“The term ‘standard of performance’ means a standard for emissions of airpollutants which reflects the degree ofemission limitation achievable through theapplication of the best system of emission reduction which (taking into accountthe cost of achieving such reduction and any non-air quality health andenvironmental impact and energy requirements) the Administrator determineshas been adequately demonstrated.”►Section 111(d)(1) (Standards of performance for existing sources; remaininguseful life of source):►“The Administrator shall prescribe regulations which shall establish a proceduresimilar to that provided by section 7410 ofthis title under which each state shallsubmit 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 listpublished under section 7408 (a) of this title or emitted from a source category which isregulated under section 7412 of this title but(ii) to which a standard of performanceunder this section would apply if such existing source were a new source, and•(B) provides for the implementationand enforcement of such standards ofperformance. Regulations of the Administrator under this paragraph shall permit thestate in applying a standard of performance to any particular source under a plansubmitted under this paragraph to take intoconsideration, among other factors, theremaining useful life of the existing source to which such standard applies.”29Deliberative – Do Not Cite or QuoteClean Air Act Section 111 – Excerpts (cont.)►Section 111(d)(2) (Standards of performance for existing sources;remaining useful life of source):►“The Administrator shall have the same authority•(A) to prescribe a plan for a state incases where the state fails to submita satisfactory plan as he would have under section 7410 (c) of this title inthe case of failure to submit an implementation plan, and•(B) to enforce the provisions of suchplan in cases where the state failsto enforce them as he would have under sections 7413 and 7414 of thistitle with respect to an implementation plan.►In promulgating a standard of performance under a plan prescribedunder this paragraph, the Administratorshall take into consideration,among other factors, remaining useful lives of the sources in thecategory of sources to which such standard applies.”30