From: Higgins, Cortney [mailto:Cortney_Higgins@omb.eop.gov] 

Sent: Thursday, May 22, 2014 11:50 AM 

To: Wayland, Robertj 

Cc: Elman, Barry; Culligan, Kevin 

Subject: Interagency Comments on RIN 2060-AR33 

Hi Bob, 

Here are high level comments on the last draft we received. I’ll be sending over more later today, 

and redlines today or tomorrow. 

Regards, 

Cortney 

<< Interagency Comments under EO 12886 on RIN 2060_AR33_05222014.docx >> 
Summary	of	Interagency	Working	Comments	on	Draft	Language	under	EO12866	

Interagency	Review.		Subject	to	Further	Policy	Review.	

1 of 7

The interagency reviewers recognize the tremendous effort that EPA has undertaken and appreciate the effort

as wells as the outreach program that they’ve undertaken.  Below are interagency comments, grouped by topic

area.  

Preamble

New Option. Take comment on a new option that applies Option 1 BSER assumptions over a 5-

year period rather than a 10-year period: EPA usefully requests comment on a nested approach to 

Option 1 that would require compliance within the 2020-2024 period (reflecting application of BSER for 

that period) as well as the overall 2020-2029 period (p. 398 in redline version). As a variant on this 

approach, EPA should propose a modification of Option 1 which uses the same assumptions as Option 1 

for each building block, but reaches and maintains its final fixed emissions rate by 2025 instead of 2030. 

Introduction of this option could be handled in the same way as the new “Building Blocks 1 and 2 Only” 

alternative BSER. Full technical details on this option could be provided later, but EPA should provide 

relevant state targets through 2025 to inform commenters. Moreover, relevant tables summarizing this 

new option should end in 2025 (note: we make a similar request to present projections for EPA’s 

existing option 2 only through 2025). 

Increased Stringency in Option Take comment on strengthening individual BSER building 

blocks within Option 1: EPA should at least take comment on the potential to strengthen each of the 

underlying BSER factors, including: 

Capacity utilization: EPA should remove the specific reference to taking comment on “75 

percent” to encourage comment on the full range of capacity utilization above 70 percent. EPA should 

also include a more balanced presentation regarding the viability of higher utilization rates for NGCCs. 

For example, EPA should highlight that individual NGCC units are designed to operate as baseload 

capacity and consider omitting the following text: “Combining the results of the modeling with the 

factors likely to be present in the real world reinforces the support we expressed above for the 70 percent 

utilization rate. We remain concerned, however, that higher NGCC utilization rates could be harder to 

sustain and could exert further upward pressure on prices.” 

New NGCC: EPA should request comment on including all cost-effective new NGCC potential, 

considering any state-specific constraints. Alternatively, EPA could take comment on a range of 

deployment rates consistent with historical experience (e.g. ranging from the minimum annual rate since 

2000 of 3.8 GW/year to the 15 GW/year average over the period from 2000-2013) with state-specific 

allocations based on weighted average share of national generation. An assessment of state-specific new 

NGCC potential could be released later as a supplementary document and any analysis should consider 

state-specific constraints (e.g. long-term natural gas availability). 

Renewables: EPA should follow through on its plan to request comment on more ambitious 

renewables assumptions. In particular, it should include state-specific estimates of cost-effective 
Summary	of	Interagency	Working	Comments	on	Draft	Language	under	EO12866	

Interagency	Review.		Subject	to	Further	Policy	Review.	

2 of 7

renewables potential, subject to any state-specific constraints. An assessment of state-specific 

renewables potential could be released later as a supplementary document. 

Efficiency: EPA should retain its current language that requests comment on efficiency 

improvement at rates of up to 2% per year versus the current rate of 1.5% per year. 

 

More Stringent Option out to 2030. Take comment on a new option that strengthens BSER 

assumptions through 2030: EPA should ask for comments on a stronger version of Option 1 that 

includes the capacity utilization, new NGCC and renewables strengthening options discussed above. 

Mass‐Based Compliance: In its current draft, EPA helpfully discusses the potential for states to use 

mass-based strategies for compliance purposes. Given the advantages of this approach, and for 

consistency, EPA should also take comment on using a mass-based trading system to define BSER. 

EPA should also take comment on strategies that could encourage adoption of efficient market-based 

approaches. For example, EPA could take comment on requiring that states pursue either mass-based or 

price-based regional strategies in order to be eligible for a 2-year extension for submission of their plans. 

At a minimum, EPA should take comment on the potential to require a mass-based demonstration of 

compliance for all state plans. 

 EPA should take comment on additional provisions to bolster the interim plans that are 

required by 2016. For example, EPA should take comment on potentially requiring that 

interim plans include commitment to reach required emissions rates and enumeration of 

all measures that do not require state legislation. Also, can EPA address or solicit 

comment on how the agency should judge what would be considered an adequate 

demonstration of "steps the state has already taken in furtherance of actions needed to 

finalize a complete plan" for an interim state plan to justify an extension for submittal of 

a final plan? 

 For clarity and to avoid misinterpretation of what state targets mean, can EPA provide a 

formula/equation in the preamble that should be used by states for demonstrating that 

state plans will achieve emissions rate targets (compliance equation, as opposed to a 

BSER target-setting equation)? 

Locking in Progress in Interim State Plans:

 EPA should take comment on additional provisions to bolster the interim plans that are required 

by 2016. For example, EPA should take comment on requiring that interim plans include 

commitments from each state to: 1) enumerate and implement by 2020 all measures available to 

them under existing state authorities; and, 2) seek new state legislation as required to meet their 

required emissions rates. 
Summary	of	Interagency	Working	Comments	on	Draft	Language	under	EO12866	

Interagency	Review.		Subject	to	Further	Policy	Review.	

3 of 7

 Can EPA address or solicit comment on how the agency should judge what would be considered 

an adequate demonstration of “steps the state has already taken in furtherance of actions needed 

to finalize a complete plan” for an interim state plan? 

 Similarly, can EPA address or solicit comment on how EPA would judge whether adequate 

progress has been made among states pursuing a regional approach (could an “executed 

agreement” be a requirement, for example)? 

Distributed Clean Energy Production. Provide explicit language on distributed clean energy 

production as an eligible measure under Building Block 3 (p.107 and p 186ff). 

The proposed rule is currently silent on the overall contribution of distributed clean energy in meeting 

the carbon emissions goals proposed in Tables 6 and 7, and whether it is specifically captured under 

Building Block 3. Building Block 4, as described on p.107 and elsewhere clearly refers to “demand-side 

energy efficiency” which would typically exclude renewable energy generation, whereas Building Block 

3 is described as “substituting generation at those EGUs with expanded low or zero carbon generation,” 

without any reference to distributed generation of renewable energy production. 

We acknowledge that, while there may be a tension between large-scale point sources that contribute to 

meeting carbon emissions goals and a large number of smaller sources located across the consumer, 

residential, and industrial sectors, intermediaries and state RPS programs offer models for aggregation 

among multiple community-scale and on-site renewable energy sources. Under this framework, EPA 

could avoid transactions with every distributed renewable energy generation provider, while still 

including distributed generation as a recognized method of delivering low- or zero carbon generation 

under this rule. 

Our recommendation is to add explicit references to on-site (rooftop, open land) and community-scale 

distributed generation under the Building Block 3 section. In addition, this section would benefit from 

examples of solar and other renewable energy sources that would contribute to the RPS targets, while 

providing direct benefits to states and local governments associated with lower-cost renewable energy 

deployment, job creation, and energy security. 

We recommend adding language that includes distributed generation under Building Block 3, including 

the following: 

 P.107, line 11, add the following text (underlined): 

3. Reducing emissions of affected EGUs in the amount that results from substituting generation 

at those EGUs with expanded low- or zero carbon generation, as well as from distributed 

renewable energy production, represented by community-scale and on-site generation serving the 

residential, commercial, and industrial building sectors. 

 p. 187, Building Block 3, add the following text, beginning on line 17 (underlined): 

using an expanded amount of lower-carbon generating capacity, from on-site, community-scale, 

and utility-scale sources, to produce replacement generation. 
Summary	of	Interagency	Working	Comments	on	Draft	Language	under	EO12866	

Interagency	Review.		Subject	to	Further	Policy	Review.	

4 of 7

 Beginning on p. 188, “a. Renewable generating capacity,” add a discussion of distributed 

generation from solar and other renewable energy sources. While large, centralized power plants 

still supply almost all of our energy, smaller scale systems for delivering clean energy much 

closer to consumers – including their own homes, schools and businesses – are rapidly gaining 

adoption. 

Distributed renewable energy has seen a significant increase in its contribution to clean energy 

production over the past decade. According to the most recent (May 2014) White House Solar 

Progress Report, “(l)ast year was a record-breaking year for new solar installations, and the 

amount of solar power installed in the United States has increased nearly eleven fold – from 1.2 

gigawatts in 2008 to an estimated 13 gigawatts today, which is enough to power more than 2.2 

million American homes.”1

 With the dramatic drop in the price of solar PV, some 90,000 

homeowners and businesses in the U.S. installed rooftop photovoltaic systems in 2012.2

 

Cities and states have developed a variety of initiatives and programs in support of distributed 

generation. These policies include state and local rebates and financial incentives for utility 

customers installing on-site solar or other renewable energy, property tax incentives for homes 

that include solar panels, net metering programs to allow the generators of distributed energy to 

sell power back to the utility via the electricity grid at retail rates, and explicit allowance of thirdparty lease or power-purchase agreements (PPAs) – a popular and growing tool to facilitate onsite renewable energy generation. Currently, 43 states and the District of Columbia have policies 

supporting net metering, 22 states have policies that allow PPAs, and 38 states have property tax 

incentive programs. 

The White House Progress Report also recognized the employment impacts of solar: “according 

to industry analysis, solar now employs nearly 143,000 workers in the United States, a growth of 

more than 50% since 2010. Jobs in the solar industry increased by more than 20% last year 

alone.”3

 The American Solar Energy Society estimates that an “aggressive deployment” of 

renewable energy and energy efficiency together could net 4.5 million new jobs by 2030. These 

jobs would span a diverse range of skills and experience.4

 

Finally, on-site renewable energy is playing an increasingly important role in the affordable 

housing sector, helping low and moderate income residents take advantage of this technology. 

The Department of Housing and Urban Development (HUD) recently announced commitments 

from affordable housing providers and service providers across the nation to install more than 

150 megawatts of on-site renewable energy, more than doubling the amount of renewable energy 

on federally assisted multifamily buildings. This initiative is targeted at HUD’s multifamily 

assisted and public housing assets, as well as housing developed and supported by the 

                                                            

1

 White House, Solar Progress Report: Advancing Toward a Clean Energy Future, May 2014, p.1. 2 Bloomberg Business Week, November 14, 2013. 3 White House, op. cit., p.1. 4

 Bezdek, Roger, American Solar Energy Society’s Estimating the Jobs Impact of Tackling Climate Change, American Solar 

Energy Society, October 2009. 
Summary	of	Interagency	Working	Comments	on	Draft	Language	under	EO12866	

Interagency	Review.		Subject	to	Further	Policy	Review.	

5 of 7

Department of Agriculture’s Rural Development programs and the Department of Treasury’s 

Low Income Housing Tax Credit program. Meeting this target will make use of on-site 

generation potential of tens of thousands of roofs constructed with federal assistance. This 

initiative will help expand the renewable energy market for multifamily residential housing, 

while also promoting grid resilience and energy security.5

Indicate Collaboration with Other Federal Agencies. Include other agencies as appropriate 

in the review of state plans (pp. 448 ff) 

We recommend adding a provision that would engage subject matter experts from relevant federal 

agencies in the review of relevant portions of the state plans. We suggest including following sentence 

(underlined) after line 17, p.449, “under section 110 of the Act:” 

EPA will utilize subject matter expertise of other federal agencies in the review of relevant 

portions of state plans, including, but not limited to the Department of Energy, the Department of 

Housing and Urban Development, the Department of the Interior, the Department of Defense, 

and the Department of Agriculture. 

Offsets.		The treatment of offsets within the rule and the TSD is not clear. We believe that it is 

EPA’s intension is to exclude offsets when considering compliance with Section 111(d) EGU 

GHG requirements. However, in several places in the text, EPA states that offsets can be used 

for compliance. In these instances, we believe that EPA is referring to compliance with 

independent state programs, not programs used to for compliance under Section 111(d). For 

example, the following text appears in the Preamble. 

P. 416-417 

We are proposing that states may demonstrate such emission performance 

by affected EGUs either on an individual state basis or jointly on a multistate basis. All of the emission reduction measures included in the agency’s 

determination of BSER reduce CO2 emissions from affected EGUs. As a result, 

the EPA is not proposing that out-of-sector GHG offsets could be applied to 

demonstrated CO2 emission performance by affected EGUs in a state plan. 

However, states could still include in their plans emission limits for 

affected EGUs that include the ability to use GHG offsets for compliance, 

provided those emission limits would achieve the required level of emission 

performance in a state plan. All existing state emission budget trading 

programs addressing GHG emissions include out-of-sector project-based 

emission offsets, which may be used to cover a portion of the compliance 

obligation of affected sources. Other states may want to take a similar 

approach, for example, to incentivize GHG emission reductions from land use 

and agricultural waste management. How to address GHG offsets included in 

EGU emission limits when projecting emission performance under a state plan 

is addressed in the Projecting EGU CO2 Emission Performance in State Plans 

TSD. 

                                                            

5

 http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2014/HUDNo_14-046 
Summary	of	Interagency	Working	Comments	on	Draft	Language	under	EO12866	

Interagency	Review.		Subject	to	Further	Policy	Review.	

6 of 7

[One could conclude from this text that offsets could be used for compliance and that the EPA encourages states

to consider similar approaches.  However, the TSD makes it clear that the EPA’s intention is to exclude offsets

from BSER.]   

 
Summary	of	Interagency	Working	Comments	on	Draft	Language	under	EO12866	

Interagency	Review.		Subject	to	Further	Policy	Review.	

7 of 7