Document ID: EPA-HQ-OAR-2013-0602-21200
Agency: epa
Document Type: Proposed Rule
Title: Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units
Posted Date: 2014-10-30T04:00Z

[Federal Register Volume 79, Number 210 (Thursday, October 30, 2014)]
[Proposed Rules]
[Pages 64543-64553]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-25845]

[[Page 64543]]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 60

[EPA-HQ-OAR-2013-0602; FRL-9918-53-OAR]
RIN 2060-AR33

Carbon Pollution Emission Guidelines for Existing Stationary 
Sources: Electric Utility Generating Units

AGENCY: Environmental Protection Agency.

ACTION: Notice of data availability.

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SUMMARY: The Environmental Protection Agency (EPA) is issuing this 
notice of data availability (NODA) in support of the proposed rule 
titled ``Carbon Pollution Emission Guidelines for Existing Stationary 
Sources: Electric Utility Generating Units,'' which was published on 
June 18, 2014. In this document, the EPA is providing additional 
information on several topics raised by stakeholders and is soliciting 
comment on the information presented. The three topic areas are the 
emission reduction compliance trajectories created by the interim goal 
for 2020 to 2029, certain aspects of the building block methodology, 
and the way state-specific carbon dioxide (CO2) goals are 
calculated.

DATES: Comments must be received on or before December 1, 2014.

ADDRESSES: Comments. Submit your comments, identified by Docket ID No. 
EPA-HQ-OAR-2013-0602, by one of the following methods:
    Federal eRulemaking portal: http://www.regulations.gov. Follow the 
online instructions for submitting comments.
    Email: A-and-R-Docket@epa.gov. Include Docket ID No. EPA-HQ-OAR-
2013-0602 in the subject line of the message.
    Facsimile: (202) 566-9744. Include Docket ID No. EPA-HQ-OAR-2013-
0602 on the cover page.
    Mail: Environmental Protection Agency, EPA Docket Center (EPA/DC), 
Mail code 28221T, Attn: Docket ID No. EPA-HQ-OAR-2013-0602, 1200 
Pennsylvania Ave. NW., Washington, DC 20460.
    Hand/Courier Delivery: EPA Docket Center, Room 3334, EPA WJC West 
Building, 1301 Constitution Ave. NW., Washington, DC 20004, Attn: 
Docket ID No. EPA-HQ-OAR-2013-0602. Such deliveries are accepted only 
during the Docket Center's normal hours of operation (8:30 a.m. to 4:30 
p.m., Monday through Friday, excluding federal holidays), and special 
arrangements should be made for deliveries of boxed information.
    Instructions: All submissions must include the agency name and 
Docket ID number (EPA-HQ-OAR-2013-0602). The EPA's policy is to include 
all comments received without change, including any personal 
information provided, in the public docket, available online at http://www.regulations.gov, unless the comment includes information claimed to 
be Confidential Business Information (CBI) or other information whose 
disclosure is restricted by statute. Do not submit information that you 
consider to be CBI or otherwise protected through http://www.regulations.gov or email. Send or deliver information identified as 
CBI only to the following address: Ms. Amy Vasu, c/o OAQPS Document 
Control Officer (C404-02), Office of Air Quality Planning and 
Standards, U.S. EPA, Research Triangle Park, North Carolina 27711, 
Attention Docket ID No. EPA-HQ-OAR-2013-0602. Clearly mark the part or 
all of the information that you claim to be CBI. For CBI information on 
a disk or CD-ROM that you mail to the EPA, mark the outside of the disk 
or CD-ROM as CBI and then identify electronically within the disk or 
CD-ROM the specific information you claim as CBI. In addition to one 
complete version of the comment that includes information claimed as 
CBI, you must submit a copy of the comment that does not contain the 
information claimed as CBI for inclusion in the public docket. 
Information so marked will not be disclosed except in accordance with 
procedures set forth in 40 CFR part 2.
    The EPA requests that you also submit a separate copy of your 
comments to the contact person identified below (see FOR FURTHER 
INFORMATION CONTACT). If the comment includes information you consider 
to be CBI or otherwise protected, you should send a copy of the comment 
that does not contain the information claimed as CBI or otherwise 
protected.
    The www.regulations.gov Web site is an ``anonymous access'' system, 
which means the EPA will not know your identity or contact information 
unless you provide it in the body of your comment. If you send an email 
comment directly to the EPA without going through http://www.regulations.gov, your email address will be automatically captured 
and included as part of the comment that is placed in the public docket 
and made available on the Internet. If you submit an electronic 
comment, the EPA recommends that you include your name and other 
contact information in the body of your comment and with any disk or 
CD-ROM you submit. If the EPA cannot read your comment due to technical 
difficulties and cannot contact you for clarification, the EPA may not 
be able to consider your comment. Electronic files should avoid the use 
of special characters, any form of encryption and be free of any 
defects or viruses.
    Docket: All documents in the docket are listed in the http://www.regulations.gov index. Although listed in the index, some 
information is not publicly available (e.g., CBI or other information 
whose disclosure is restricted by statute). Certain other material, 
such as copyrighted material, will be publicly available only in hard 
copy. Publicly available docket materials are available either 
electronically in http://www.regulations.gov or in hard copy at the EPA 
Docket Center, EPA WJC West Building, Room 3334, 1301 Constitution Ave. 
NW., Washington, DC. The Public Reading Room is open from 8:30 a.m. to 
4:30 p.m., Monday through Friday, excluding federal holidays. The 
telephone number for the Public Reading Room is (202) 566-1744, and the 
telephone number for the Air Docket is (202) 566-1742. Visit the EPA 
Docket Center homepage at http://www.epa.gov/epahome/dockets.htm for 
additional information about the EPA's public docket.
    In addition to being available in the docket, an electronic copy of 
the proposed rule is posted on the World Wide Web (WWW) at: http://www2.epa.gov/cleanpowerplan/.

FOR FURTHER INFORMATION CONTACT: Ms. Amy Vasu, Sector Policies and 
Programs Division (D205-01), U.S. EPA, Research Triangle Park, NC 
27711; telephone number (919) 541-0107, facsimile number (919) 541-
4991; email address: vasu.amy@epa.gov or Ms. Marguerite McLamb, Sector 
Policies and Programs Division (D205-01), U.S. EPA, Research Triangle 
Park, NC 27711; telephone number (919) 541-7858, facsimile number (919) 
541-4991; email address: mclamb.marguerite@epa.gov.

SUPPLEMENTARY INFORMATION: Organization of This Document. The 
information presented in this document is organized as follows:

I. Background
    A. Proposed Clean Power Plan
    B. Purpose of the NODA
    C. Overview of Topics Discussed in This NODA
II. Stakeholder Input on Select Topics in the Proposed Rule
    A. The 2020 to 2029 Glide Path
    B. Certain Aspects of the Building Block Methodology
    C. Implementation of the Goal-Setting Equation

[[Page 64544]]

III. Topics Upon Which the EPA Is Soliciting Additional Comment
    A. The 2020 to 2029 Glide Path
    B. Certain Aspects of the Building Block Methodology
    C. Implementation of the Goal-Setting Equation

I. Background

A. Proposed Clean Power Plan

    Under the authority of Clean Air Act (CAA) section 111(d), on June 
18, 2014, the EPA proposed emission guidelines for states to follow in 
developing plans to address greenhouse gas (GHG) emissions from 
existing fossil fuel-fired electric generating units (EGUs) (79 FR 
34830). The proposed rule, which we refer to as the Clean Power Plan, 
would continue progress already underway to lower the carbon intensity 
of power generation in the United States (U.S.). Lower carbon intensity 
means, for each megawatt-hour (MWh) of generation, fewer emissions of 
CO2, which is a potent greenhouse gas that contributes to 
climate change. The proposal incorporates critical elements that 
reflect the information and views shared during what stakeholders have 
called an unprecedented effort by the EPA, beginning in the summer of 
2013, to interact directly with, and solicit input from, a wide range 
of states and stakeholders. This effort encompassed several hundred 
meetings across the country with, among others, officials in state 
environmental and energy agencies, as well as public utility 
commissions; entities in the electricity sector, including utilities, 
generators, and system operators; and tribal governments, industry, 
citizens groups and members of the public. Many participants submitted 
written material and data to the EPA as well.

B. Purpose of the NODA

    Since publication of the proposal on June 18, 2014, the EPA has 
held public hearings and has continued outreach to stakeholders. During 
the week of July 29, 2014, the EPA conducted eight days of public 
hearings in four cities. Over 1,300 people shared their thoughts and 
ideas about the proposal, and over 1,400 additional people attended 
those hearings. Agency officials have also continued to engage with 
states and stakeholders through meetings, webinars, and conference 
calls.
    The agency has heard a broad range of questions, concerns, and 
constructive suggestions from stakeholders on how the proposed rule 
could be improved. Many of these comments and suggestions relate to the 
array of alternatives presented in the proposed rule. This document is 
not intended to address all of the many issues that have been raised; 
we will summarize and respond to all comments in the final rule. 
Rather, the purpose of this document is to describe and seek comment on 
several ideas raised by multiple stakeholders that may go beyond those 
for which the agency sought comment in the June 18, 2014 proposal. By 
issuing this notice, we are ensuring that other stakeholders and the 
public have the opportunity to consider these ideas as they formulate 
their own comments on the proposal. In section II, we describe the 
specific issues and ideas raised by stakeholders and explain which of 
those ideas we consider to be within or possibly beyond the scope of 
comment already requested. In section III, we further discuss the 
approaches stakeholders have suggested which go beyond the June 18, 
2014 proposal and on which we are seeking comment through this 
document.
    The purpose of this document is to bring these ideas to the 
attention of other stakeholders and the public and provide commenters 
with a sense of the way in which the EPA believes these ideas relate to 
determining the best system of emission reduction (BSER) so that they 
have the opportunity to consider these ideas as they are formulating 
their comments on the proposal.
    It should be noted that the topics discussed in the NODA interact 
with each other and some of them could have the effect of increasing 
the stringency of the BSER as reflected in each state's target, while 
others could have the impact of decreasing it. The effect of the ideas 
presented here may have different impacts in different states, 
increasing the stringency of the BSER as expressed in the state goals 
in some states while decreasing it in others. The EPA welcomes comment 
specifically on the potential changes identified in this document in 
terms both of the rationale for these changes and of their effects on 
the stringency of the state goals, as well as the ways in which the 
potential changes interact with each other.

C. Overview of Topics Discussed in This NODA

    Since the June 18, 2014 proposed rule, the EPA has received 
feedback on a wide range of topics. This feedback includes comments 
from a significant number of stakeholders that may go beyond the scope 
of what the EPA originally took comment on in the proposal. The EPA 
would like to identify these ideas for other stakeholders and the 
public so that all stakeholders and the public are made aware of these 
ideas and have the opportunity to comment on them. The topics that the 
EPA is seeking additional comment on are: The compliance trajectory or 
glide path of emission reductions from 2020 to 2029, certain aspects of 
the building block methodology, and the way the state-specific 
CO2 goals are calculated. These issues are described briefly 
here and discussed in more detail in sections II and III of this 
document.
    Some stakeholders have expressed concern that, as proposed, the 
interim goals, which govern emission reductions over the 2020-2029 
period, do not provide enough flexibility for some states--
specifically, states in which building block 2 results in large amounts 
of the overall required CO2 reductions relative to other 
building blocks--to choose measures other than relying heavily on re-
dispatch from fossil steam generation (e.g., coal-, oil-, or gas-fired 
boilers) to natural gas combined cycle (NGCC) units to achieve the 
required reductions. Further, they have expressed concern that this 
effect of the interim goals severely limits the opportunity to fully 
take advantage of the remaining asset value of existing coal-fired 
generation. Some stakeholders have even suggested that the interim 
goals would force retirements of coal plants that could make unexpected 
events such as last winter's polar vortex more challenging to address. 
As reflected in the proposal, in a world impacted by climate change, 
such severe weather events are likely to become more frequent. The 
agency is seeking to ensure that, consistent with the BSER, the overall 
framework that we have proposed includes sufficient flexibility, 
particularly with respect to time and emission reduction strategies in 
meeting the required emission goals, to allow states and sources to 
readily respond to unexpected changes or demands on the system, such as 
severe weather. This flexibility also reflects consideration of cost 
(which could, in part, be reflected in concerns about stranded assets).
    In section II.A, the EPA discusses these concerns in more detail, 
as well as two alternate approaches that have been suggested by 
stakeholders. We also explain that the original proposal already 
requests comment on one of these alternative approaches--achieving some 
reductions earlier than 2020 to allow for a more gradual reduction of 
emissions between 2020 and 2030. In section III.A, we discuss and 
solicit comment on another approach offered by stakeholders--the 
concept of phasing in the reductions required under building block 2 
over time, just as

[[Page 64545]]

reductions required under building blocks 3 and 4 are phased in over 
time.
    Stakeholders, including states, have also noted concerns with the 
methodology used for the individual building blocks, particularly 
building blocks 2 and 3. With respect to building block 2, stakeholders 
have offered a range of views. Some have commented that this component 
should be less stringent (i.e., require shifting less utilization from 
existing coal-fired units to existing NGCC units), some have offered 
that it should be more stringent (i.e., require shifting more 
utilization from existing coal-fired units to existing NGCC units), and 
others have offered that it should be more stringent in some states and 
less stringent in other states. Some stakeholders have also noted that 
they believe the higher levels of utilization of existing NGCC units 
proposed for building block 2 are not feasible in the early years of 
the 2020-2029 compliance period due to infrastructure constraints and 
recent significant capital investments at some existing coal-fired 
units.
    Other stakeholders have suggested that focusing solely on 
increasing utilization of existing NGCC units ignores opportunities for 
emission reductions from the use of natural gas from states that are 
not already using natural gas for electricity generation.
    With respect to renewable energy (RE), stakeholders have expressed 
concern about the discrepancy between setting targets based on in-state 
renewable assets or resources while allowing other states that import 
renewable energy to count certain amounts of that generation toward 
their compliance. Some have also expressed concern that the approaches 
proposed with respect to renewable energy impose greater stringency on 
states that have already taken action to promote and deploy renewable 
energy. With respect to nuclear facilities and generation, stakeholders 
have raised concerns about a variety of aspects of including nuclear 
power in the goal-setting equation.
    In section II.B of this document, the EPA discusses these concerns 
in more detail, describes alternative approaches put forward by 
stakeholders and identifies which of these alternative approaches the 
EPA requested comment on in the original proposal. In section III.B, we 
discuss and solicit comment on additional concepts stakeholders have 
suggested for addressing concerns with the methodology used for 
building blocks 2 and 3. In particular, the EPA requests comment on 
ways that building block 2 could be expanded to include new NGCC units 
and natural gas co-firing in existing coal-fired boilers and ways that 
state-level RE targets could be set based on regional potential for 
renewable energy. Although a number of stakeholders have also commented 
that building block 1 is too stringent, we are not discussing it at 
length in this document because we have already requested comment on 
this in the June 18, 2014 proposal. Comments that stakeholders have 
offered on the treatment of nuclear power are also covered in the June 
18, 2014 proposal and, therefore, we do not believe that it is 
necessary to request additional comment on those ideas in this 
document.
    Stakeholders, including states, have also noted concerns with the 
way the state-specific CO2 goals are calculated. These 
include concerns that the numeric formula for calculating each state's 
goal is not consistent in its application of the best system of 
emission reduction (BSER) for building block 2, as compared with 
building blocks 3 and 4, and concerns with the use of data for the 
single year 2012. In section II.C, the EPA discusses these concerns in 
more detail, describes alternatives noted by stakeholders and explains 
that the original proposal requests comment on some of the potential 
alternatives suggested by stakeholders. In section III.C we discuss and 
solicit comment on two ideas suggested by stakeholders: Alternative 
approaches for the goal-setting equation and alternative uses of data 
in calculating the goals.
    This document is not intended to be a complete summary of the wide 
variety of ideas that have been raised. The agency has heard many other 
concepts that are not highlighted in this document because they are 
covered in the June 18, 2014 proposal.

II. Stakeholder Input on Select Topics in the Proposed Rule

    In this section, the EPA explains some of the concerns, and ideas 
to address those concerns, that have been raised by multiple 
stakeholders. We also explain how some of those ideas have already been 
addressed in the June 18, 2014 proposal and, in section III of this 
document, we identify the additional new ideas on which the agency is 
seeking comment.

A. The 2020 to 2029 Glide Path

    Some stakeholders have expressed concern that the goal-setting 
methodology--in particular, calculating the interim goals on the basis 
of achieving the shift in generation assumed under building block 2 by 
2020--requires states to achieve such a significant portion of the 
required CO2 emission reductions early in the interim period 
that it defeats the intended purpose of providing states flexibility in 
how they may achieve the required emission reductions. In addition, we 
have heard that there may be technical challenges associated with 
achieving all of the reductions that states would be required to make 
as early as 2020, when the interim period commences. Stakeholders also 
have expressed concerns that such a lack of flexibility would prevent 
them from taking advantage of more cost effective reduction strategies 
and from ensuring that the energy system can respond to severe weather 
events such as occurred during the polar vortex in 2014. The EPA is 
interested in considering additional stakeholder ideas, such as those 
regarding the 2020-2029 glide path, to ensure that the overall 
framework includes sufficient flexibility, particularly with respect to 
timing of and strategies for reducing emissions from the affected units 
so that states can develop cost-effective strategies, and states, 
utilities, grid operators and others can readily respond to unexpected 
changes or demands on the energy system, such as severe weather.
    Stakeholders have suggested two ways of addressing these concerns. 
The first involves allowing credit for early CO2 emission 
reductions that could be used to allow flexibility to defer additional 
CO2 emission reductions until later in the 2020-2029 period. 
The second approach involves phasing in building block 2 over time, 
just as building blocks 3 and 4 are currently phased in.
1. Early Reductions
    With regard to the suggestion that early reductions could be used 
as a way to ease the 2020-2029 glide path, the agency believes that the 
existing proposal provides both stakeholders and the EPA the latitude 
to consider this concept. In the proposed rule, the EPA requests 
comment on a range of possible approaches to this type of credit for 
early action (79 FR 34918-34919). In the first approach, full 
accounting of emission reductions continues to begin in 2020 but credit 
could be received for certain pre-2020 reductions that could be used to 
reduce the amount of reductions needed during the 2020-2029 period. The 
EPA also requests comment in the proposed rule on a second approach in 
which states could choose early (e.g., pre-2020) implementation of 
state goal requirements, which could provide states with the ability to 
achieve the

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same amount of overall emission reductions but do so by making some 
reductions earlier (79 FR 34919). The EPA recognizes that some measures 
may take longer than 2020 to implement, while others can be, and are 
being, implemented more quickly. Implementation of any of these ideas 
would allow states or sources to include such reductions in their 
compliance strategies in lieu of achieving the full measure of 
reductions otherwise required in 2020 to meet the interim goal, and 
would thereby result in states and/or sources being able to phase in 
these reductions.\1\ It may be possible for at least some states to 
take advantage of these approaches by, for example, taking advantage of 
RE and demand-side energy efficiency (EE) projects already under 
development and scheduled to be implemented prior to 2020 or by 
expediting other projects currently scheduled to be implemented after 
2020. The EPA is interested in these and other ways to ensure that 
states continue the progress they are making to reduce CO2 
from the power sector prior to 2020 and that this rule does not create 
disincentives for those pre-2020 actions.
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    \1\ It should be noted that, in the June 2014 proposal, the EPA 
recognized that programs that are implemented between 2015 and 2020, 
to the extent that they continue to generate low- or zero-carbon in 
2020 and beyond, are beneficial, even in the absence of crediting 
such emission reductions toward compliance in 2020 because states 
possessing these programs will be better positioned to comply 
beginning in 2020 (79 FR 34918).
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2. Phasing in Building Block 2 and a More Gradual Glide Path
    Some stakeholders have stated that significant shifts of generation 
away from coal-fired generators to NGCC units (as calculated under 
building block 2 and illustrated in the Regulatory Impact Analysis 
(RIA) in support of the June 18, 2014 proposal) will be difficult for 
some states to achieve by 2020 as a result of technical, engineering, 
and infrastructure limitations or other considerations, and may limit 
cost-effective options for emission reductions. According to these 
stakeholders, these concerns exist even though the proposal does not 
require all emission reductions to be achieved in 2020, but rather 
provides that the interim goal can be met on an average basis for the 
2020-2029 period.
    In the proposal, the EPA determined that emission reductions are 
feasible and achievable at fossil fuel-fired steam EGUs by shifting 
from more carbon-intensive EGUs to less carbon-intensive EGUs, as part 
of the BSER.\2\ More specifically, the EPA concluded that, by shifting 
generation from fossil fuel-fired steam units (which are primarily 
coal-fired) to NGCC units, up to a utilization of 70% could be achieved 
by 2020, as part of building block 2 and for purposes of establishing 
state goals. In contrast, in the approach to building blocks 3 and 4, 
the EPA concluded that reductions in CO2 emissions from 
fossil fuel-fired units associated with increased utilization of RE and 
EE would be achievable on a phased-in basis between 2020-2029, 
reflecting the necessary time needed for deployment (79 FR 34866).
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    \2\ See 79 FR 34862 for a discussion of the BSER analysis of 
building block 2.
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    We note that the design of the guidelines makes clear that states 
are not required to reach their targets using precisely the building 
blocks that EPA used to determine each state's goal. Nevertheless, some 
stakeholders have expressed concern that it may not be feasible to 
ensure significantly higher levels of utilization for existing NGCC 
units that might be required in order to meet the interim state goals 
because of the time required to improve natural gas pipeline 
infrastructure in some states, as well as other factors. Stakeholders 
have also stated that, while some coal-fired units have recently been 
constructed and many have received significant capital investment 
(e.g., in the form of pollution control retrofits), some states' 
interim goals could not be achieved unless these units stop operating 
by 2020. According to stakeholders, this concern particularly applies 
for states that have both significant amounts of steam generation and 
significant amounts of existing NGCC capacity that is not currently 
being operated at high levels of utilization. While the EPA solicited 
comment in the proposal broadly on the proposed start date of 2020 (79 
FR 34902), the proposal does not discuss specific potential rationales 
for phasing in dispatch changes under building block 2. Therefore, in 
this document, the EPA is explicitly requesting comment on that topic. 
More detail on specific suggestions we have heard from stakeholders is 
provided in section III.B of this document.

B. Certain Aspects of the Building Block Methodology

    While the agency has already received significant feedback on all 
four building blocks, there are specific comments and concerns 
regarding particular aspects of the way in which building blocks 2 and 
3 were designed that may not have been fully evident in the original 
proposal and that commenters may want to consider as they prepare their 
comments.
1. Stringency of Building Block 2
    With regard to the ultimate stringency of building block 2 
(dispatch changes among affected EGUs), stakeholders have offered a 
wide range of views, with some suggesting that building block 2 should 
be less stringent, others suggesting that it should be more stringent 
and still others suggesting changes that could make it more stringent 
in some states and less stringent in others. Some stakeholders have 
expressed concerns that it might not be possible for all NGCC units to 
operate at capacity factors of 70%. Other stakeholders have raised 
concerns that, with respect to states with large amounts of steam 
generation, the proposed approach to building block 2 creates 
significant disparities in state goals between those states with little 
or no NGCC generating capacity and those with significant amounts of 
NGCC capacity not currently being used fully. Some stakeholders have 
also suggested that the EPA's BSER determination should recognize that 
there are additional opportunities to employ natural gas beyond what 
the EPA included in the proposed rule: The construction and/or 
increased utilization of new NGCC units and additional co-firing of 
natural gas at existing fossil steam units.
    In the proposed rule, the EPA invited comment on whether the BSER 
should include: (1) Increasing utilization of NGCC units that are under 
construction, from an expected capacity factor of 55% to 70% 
(reflecting a 15% increase), and displacing generation from fossil 
fired-steam units by an equivalent amount (79 FR 34876); and (2) co-
firing with natural gas (79 FR 34875). In the proposed rule, the EPA 
also discussed the opportunity to reduce CO2 emissions at 
affected EGUs by means of the addition, and greater operation, of new 
NGCC units (i.e., beyond what is currently under construction). The 
agency also solicited comment on whether new NGCC units should be 
included as part of the BSER, and how to define state-level goals based 
on consideration of new NGCC deployment (79 FR 34876-77).
    While the agency requested comment on the use of co-firing of 
natural gas and the inclusion of new NGCC units, a number of 
stakeholders have suggested that building block 2 should not focus 
purely on re-dispatch, but instead should focus more comprehensively or 
holistically on the use of natural gas as a means of reducing 
CO2 from the power sector. This concept may go beyond ideas 
raised in the original proposal; therefore, the EPA invites comment on

[[Page 64547]]

this idea, as discussed in section III.B.1 of this document.
    It is also worth noting that, although the EPA calculated the 
proposed state goals on the basis of applying building block 2 on a 
state-by-state basis (under which generation from fossil fuel-fired 
steam units within the state is shifted to NGCC units within the 
state), the EPA also invited comment on whether building block 2 should 
be applied on a regional basis, under which generation from fossil 
fuel-fired steam units within a region is shifted to NGCC units within 
the region (79 FR 34865, 34899). The EPA is noting this idea to alert 
commenters to the fact that it might be another possible mechanism for 
addressing stakeholders' concerns about the disparity of the impact of 
building block 2 between states that have already invested 
significantly in developing NGCC generation and those that have not.
2. Methodology for Building Block 3 and How Building Block 3 Targets 
Relate to Compliance Options
    Stakeholders have noted concerns both with the treatment of 
renewable generation and the treatment of nuclear generation in 
building block 3.
    a. Approaches for RE target setting. Stakeholders have raised 
concerns regarding the renewable energy target-setting component of 
building block 3, specifically what they describe as a potential 
misalignment between estimating each state's target based on in-state 
renewables while allowing use of out-of-state renewables for compliance 
with state goals.\3\ Stakeholders have expressed interest in a target-
setting methodology that takes into account interstate exchanges of RE 
in the calculation of state goals, on the premise that such an approach 
would better align with existing state RE policies and potential claims 
on a given state's RE generation by parties from other states (such as 
renewable energy certificates and power purchase agreements). This 
feedback has been received both from states that are net suppliers of 
RE generation to other states and from states that are net consumers of 
RE generation produced in other states. Some stakeholders have 
highlighted that the state physically hosting the RE generation in 
question approved its siting, issued its permits, and may make other 
claims as to having supported its development and operation and, thus, 
has a stake in such renewable resources. Other stakeholders have raised 
concerns that, due to dynamics of the target-setting calculations 
related to the in-state nature of targets, the RE target-setting 
approaches in the June 2014 proposal may require substantially more RE 
development from states that have already invested considerably in RE 
while requiring less from states that have not put significant effort 
into developing RE resources. Some stakeholders suggest that better 
aligning goal-setting to probable compliance approaches may mitigate 
some of these potential concerns.
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    \3\ While the June 2014 proposal included two different 
approaches for quantifying RE targets to inform state goals, both 
approaches premised RE targets on in-state generation potential.
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    The June 2014 proposed rule included two approaches for RE target-
setting. The approach that the EPA proposed established state RE 
targets premised upon an average of state RPS requirements across 
states in certain regions (see 79 FR 34866-34869 and Chapter 4 of the 
technical support document (TSD) titled ``GHG Abatement Methods,'' 
Docket ID No. EPA-HQ-OAR-2013-0602-17180). The EPA also requested 
comment on an alternative approach that used a state-by-state 
determination of RE targets, based on technical and market potential 
(see 79 FR 34869-34870 and ``Alternative RE Approach Technical Support 
Document,'' Docket ID No. EPA-HQ-OAR-2013-0602-0458).
    Both of these approaches focused on the ability to develop 
renewable generation within a state. At the same time, the EPA proposed 
that, for compliance, a state could take credit for any RE generation 
that was related to an enforceable measure in its state, whether that 
generation originated in its state or in another state. This approach 
was designed to reflect the nature of existing state policy that allows 
for compliance with out-of-state generation, such as renewable energy 
standards (RES).
    The proposed rule acknowledged the interstate nature of the 
electricity system (79 FR 34921-34922), while focusing requests for 
comment on alternative state plan options that could help states better 
align interstate RE measures and related emission reductions in their 
plan with the proposed in-state RE targets that informed their goal.\4\ 
These options included:
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    \4\ There is also an extensive discussion of interstate effects 
and related compliance strategies in section VII of the TSD titled 
``State Plan Considerations,'' Docket ID No. EPA-HQ-OAR-2013-0602-
0463.
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    (1) Allowing states to participate in multi-state plans to 
distribute the CO2 emission reductions among states in the 
multi-state area equivalent to the total CO2 emission 
reductions of each state's in-state emission reductions from RE 
measures, or to jointly demonstrate RE-related emission performance, 
which would make distribution of RE impacts unnecessary (note that 
these plans may be limited to, for example, RE or RE and EE, or they 
may encompass all of the building blocks);
    (2) allowing states to take into account only RE generation related 
to emission reductions occurring in-state; and
    (3) allowing a state to take credit for out-of-state emission 
reductions related to RE generation only if the state demonstrates that 
the generation will not also be credited by the other relevant 
state(s).
    Some stakeholders have suggested a different way to align state 
goal setting and state compliance through adjusting the state goal-
setting method. Consistent with the proposed idea that states could 
take credit for renewables developed in other states if they were 
attributable to state policies such as RES programs, these stakeholders 
have suggested that state targets could be developed by defining 
regional RE targets, then assigning shares of those regional targets to 
individual states within the region. We believe this idea lies beyond 
the scope of the June 18, 2014 proposal; thus, we are sharing this idea 
more broadly and requesting comment on this idea, which is discussed in 
more depth in section III.
    b. Inclusion of nuclear units in building block 3. Stakeholders 
have provided numerous suggestions about inclusion of nuclear power in 
the calculation of state goals and as a compliance option. The EPA 
believes that the topics that stakeholders, including states, have 
raised related to whether to, and if so, how to, include nuclear units 
that are currently under construction and at-risk existing nuclear 
capacity in the calculation of goals are covered in the original 
proposal (79 FR 34870-34871). We are carefully considering stakeholders 
comments on these topics and others for which we requested comment in 
the June 18, 2014 proposal.

C. Implementation of the Goal-Setting Equation

1. Goal-Setting Equation
    Some stakeholders have raised concerns that the numeric formula for 
calculating each state's goal is not consistent in its application of 
the BSER for building block 2, as compared with building blocks 3 and 
4. They state that the goal calculation for building block 2 not only 
reflects an increase in less carbon-intensive generation, but also

[[Page 64548]]

applies an equal downward adjustment to each state's total existing 
fossil steam generation level in 2012, reflecting a generation shift 
away from higher-emitting fossil steam generation and toward lower-
emitting NGCC generation. The result is that total generation is held 
constant, with only the mix of more and less carbon-intensive 
generation changing.\5\ In contrast, they state, the approach in the 
proposal for incorporating building blocks 3 and 4 in the goal 
calculations does not reflect shifting generation away from fossil 
units because the total amount of generation is increased (including 
``megawatts'' from EE as ``generation'') without any offsetting 
decrease in generation from 2012 fossil generation levels. Some 
stakeholders suggest that, by holding existing fossil generation at 
2012 levels for purposes of goal calculation and estimating building 
blocks 3 and 4 independent of the interaction with those existing 
fossil generation levels, the state goals do not reflect the potential 
for added generation from building block 3 and avoided generation from 
building block 4 to shift generation away from existing fossil steam 
generation below the 2012 level and, therefore, do not reduce 
generation, and thus emissions, from affected fossil fuel-fired 
generation in keeping with the EPA's proposed approach to the BSER.
---------------------------------------------------------------------------

    \5\ Note that, in states with under-construction NGCC units, the 
total fossil generation assumed in the proposed goal-setting 
equation exceeds the 2012 level due the 55% capacity factor assumed 
from these new sources.
---------------------------------------------------------------------------

    Since the EPA did not address this issue explicitly in the June 
2014 proposal, the EPA discusses alternative approaches that have been 
suggested by stakeholders and solicits comment on these in section 
III.C of this document so that all stakeholders will have an 
opportunity to consider these ideas as they prepare their comments.
2. Alternatives to the 2012 Data Year
    Since publication of the proposed rule, many states and other 
stakeholders have expressed concern over the use of 2012 as the single 
data year for calculating interim and final goals. Some states and 
stakeholders have identified anomalies with generation in their state 
or at their companies for 2012 that they believe make 2012 an 
inappropriate base year. At proposal, the EPA considered using average 
fossil generation and emission rate values over a longer period than a 
single year. As a result of the goal calculation methodology, the EPA 
determined that, on average, any potential changes to state goals using 
a multi-year base year would be minimal, and would result in increases 
for some states and decreases for others (see ``Goal Computation 
Technical Support Document'' at 4, Docket ID No. EPA-HQ-OAR-2013-0602-
0460). Numerous stakeholders have expressed interest in obtaining 
Emissions and Generation Resource Integrated Database (eGRID) data for 
years prior to 2012 to foster comparison with results from the 2012 
dataset. As is discussed further in section III.C.2 of this document, 
the EPA is making available the 2010 and 2011 eGRID data and requesting 
comment on the use of 2010 and 2011 data, in addition to 2012 data, in 
setting state-specific CO2 goals.

III. Topics Upon Which the EPA Is Soliciting Additional Comment

    As discussed above, stakeholders, including states, have raised 
questions or concerns, and provided suggestions, regarding several 
topics that relate either to the EPA's determination of the BSER or to 
states' and sources' options for compliance with the rule requirements 
and, if addressed in the final rule, could result in changes to the 
stringency of the proposed emission rate-based CO2 goals, at 
least for some states. The EPA is identifying these topics to ensure 
that all stakeholders have the opportunity to consider these topics as 
they comment on the proposal.
    This document is not a comprehensive presentation of the issues 
raised by stakeholders or under consideration by the EPA. The issues 
presented here arise from the agency having heard concerns and 
suggestions raised about the stringency of the CO2 goals; 
the timeframe required for complying with those goals and its potential 
impact on flexibility and cost; and unwanted effects that may arise 
from the differences between and among state goals. Potential changes 
to the rule based on any one of these issues could increase or decrease 
the stringency of the goals or shift stringency levels between and 
among states.

A. The 2020 to 2029 Glide Path

    It was the EPA's intent in the proposal that, through the inclusion 
of a ten-year averaging period and other flexibility mechanisms, the 
interim goals would provide states with a reasonable glide path to 
compliance with their final goals by 2030. However, as noted in section 
II.A above, some stakeholders have expressed concerns with the approach 
that the EPA used to determine states' interim goals and have stated 
that, notwithstanding the flexibility provided in the proposal, 
significant shifts of generation away from coal-fired generators to 
NGCC units (as calculated under building block 2) will be necessary by 
2020 and will be difficult for at least some states to reasonably 
achieve in that timeframe. To facilitate further consideration of these 
and other stakeholder concerns about the potential challenges 
associated with achieving all of the reductions that states may need to 
obtain as early as 2020, the EPA is seeking comment on two additional 
specific adjustments to the interim goal calculations, discussed below, 
that would allow for a more gradual phase-in of building block 2 during 
the 2020-2029 period.
    With regard to the glide path, some stakeholders have also 
suggested that a phase-in of building block 1 would be appropriate. The 
EPA is also requesting comment on that idea.
    Stakeholders have suggested at least two additional ways that a 
trajectory for a gradual phase-in could be developed to respond to 
their concerns. First, a phase-in schedule could be developed for 
building block 2 on the basis of whether, and to what extent, any 
additional infrastructure improvements (e.g., natural gas pipeline 
expansion or transmission improvements) are needed to support more use 
of existing natural gas-fired generation. To the extent that more 
infrastructure is needed, the methodology for building block 2 could be 
modified on the basis of how much utilization shift toward existing 
NGCC generation would be possible by 2020, by factoring in how quickly 
additional infrastructure could be developed to support any additional 
use of natural gas-fired generation by that date. This would result in 
two parameters, parallel to the way that building blocks 3 and 4 are 
implemented in the proposal. The first parameter would define an amount 
of utilization shift to existing natural gas that is feasible by 2020, 
and the second parameter would define how quickly that amount could 
grow until the full amount of natural gas utilization could be achieved 
as part of the BSER.
    Second, building block 2 could be modified to respond to 
stakeholder concerns about the pace with which generation in some 
states may need to be shifted from higher-emitting to lower-emitting 
units. In particular, stakeholders have expressed a concern that 
shifting generation away from existing generating assets, particularly 
coal-fired EGUs, could, in some situations, result in limiting cost-
effective options. As discussed in the proposal (79 FR 34925), due to 
the flexibility provided by the EPA's approach to establishing state 
goals, and the flexibility provided to states in developing plans to 
achieve those goals, the EPA believes that the proposal

[[Page 64549]]

provides states the flexibility to specify appropriate requirements for 
individual EGUs, including coal-fired EGUs, taking into account the 
potential for stranded investments and other unit-specific factors. 
However, to the extent that stakeholders are concerned that the tools 
available to states under the proposal may, in some instances, be 
inadequate to address concerns regarding stranded investments, an 
additional way to address these concerns may be for the agency to take 
account of the book life of the original generation asset, as well as 
the book life of any major upgrades to the asset, such as major 
pollution control retrofits. For example, in its modeling, the EPA 
assumes a book life of 40 years for new coal-fired units.\6\ The EPA 
requests comment on whether, and how, book life might be either used as 
part of the basis for the development of an alternative emission glide 
path for building block 2 or used to evaluate whether other ways of 
developing an alternative glide path (such as the phase-in approaches 
discussed above) would address stakeholders' stranded investment 
concerns. The EPA is providing this additional information, arising 
from stakeholder concerns, to allow additional continued engagement of 
stakeholders in the comment process.
---------------------------------------------------------------------------

    \6\ IPM version 5.13 Documentation, Chapter 8, Financial 
Assumptions, available at: http://www.epa.gov/airmarkets/progsregs/epa-ipm/docs/v513/Chapter_8.pdf.
---------------------------------------------------------------------------

    It is also important to consider that changes to the structure of 
building blocks 2 and 3, as well as changes to the goal-setting 
equation discussed below in section III.D, would likely impact the 
glide path. The EPA continues to welcome other ideas on how to craft a 
glide path that offers states flexibility while still ensuring that 
they can achieve the final goals.

B. Certain Aspects of the Building Block Methodology

    This section describes alternative approaches, including approaches 
based on regional considerations or allocations. In offering these 
stakeholder ideas for comment, the agency's intent is not to require 
regional plans. Rather, it is to respond to stakeholder concerns that 
currently proposed approaches could limit some states' flexibility in 
meeting the goals. To address this concern, the agency is offering 
additional stakeholder ideas that could support states' flexibility in 
achieving the goals. Under any of the approaches, each state would 
still have the option of submitting an individual CAA section 111(d) 
plan or of participating in a multi-state CAA section 111(d) plan.
    The EPA acknowledges that determining the component of the BSER 
related to shifting generation from fossil fuel-fired units to 
renewable units based on regional considerations or allocations among 
states could result in changes to state's goals relative to a non-
regional approach. Furthermore, ultimate decisions about how a source 
may respond are dependent both on whether a state participates in a 
regional plan (which could effectively change the impact of the goals 
across the states involved) and on how a state assigns obligations to 
sources. The agency is also aware that how states decide to assign 
reduction obligations in their state plans, as well as a state's 
decision to develop an individual state plan or to participate in a 
regional plan, can play a significant role in how sources respond.
1. Stringency of Building Block 2
    In section II.B.1 above, we identified stakeholder comments on the 
treatment of natural gas in building block 2 and described stakeholder 
suggestions for approaches that are covered in the June 2014 proposal. 
In this section, we further describe stakeholder comments and also 
present new approaches for the treatment of natural gas for which the 
agency is seeking comment. The EPA is providing this additional 
information, arising from stakeholder concerns, to allow additional 
continued engagement of stakeholders in the comment process.
    Some stakeholders have raised concerns that, with respect to states 
with large amounts of steam generation, the proposed approach to 
building block 2 creates significant disparities in state goals between 
those states with little or no NGCC generating capacity, and those with 
significant amounts of NGCC capacity not currently being used fully. 
Stakeholders have also raised concerns that these disparities could 
result in distortions in regional electricity markets. Some 
stakeholders have suggested that these disparities could be reduced by 
increasing the obligation of those states with little or no NGCC 
generating capacity to employ natural gas beyond what the EPA included 
in the proposed rule, including the construction and/or increased 
utilization of new NGCC units and additional co-firing of natural gas 
at existing fossil steam units.
    Greater use of new NGCC units or additional co-firing of natural 
gas at existing steam boilers could result in changes in natural gas 
use. Some have argued that if there is increased demand for natural gas 
for new NGCC units and/or co-firing, it could add upward pressure on 
natural gas prices. However, commenters may want to consider whether 
there are ways to incorporate new NGCC units and co-firing into the 
BSER that might not result in an overall increase in the amount of 
natural gas usage, For example, if the EPA adopts the type of more 
gradual glide path for building block 2 described above in section 
III.A, increases in natural gas use from new NGCC units and increased 
co-firing might leave the amount of overall natural gas use similar to 
what would result from what the EPA proposed in building block 2 (at 
least in the early years of the glide path).
    Some stakeholders have suggested other reasons to consider new NGCC 
generation and natural gas co-firing as part of building block 2. They 
note that the incorporation of natural gas as part of the BSER should 
consider the cost and feasibility of the total amount of natural gas 
used, as opposed to the extent to which the gas is used for particular 
types of generation (i.e., existing NGCC generation, new NGCC 
generation, or co-firing). In the proposal, the EPA concluded that 
existing NGCC generation, which relies upon existing infrastructure, 
was the most cost-effective manner in which to base building block 2. 
However, there may be other important considerations that can shape the 
relationship of the BSER to natural gas consumption, such as the 
ability to build new infrastructure and the flexibility that co-firing 
could provide.
    These stakeholders note that this expanded approach would be more 
consistent with historic NGCC deployment, better reflect growing 
geographic availability of natural gas supply, contribute to expanded 
generation fuel diversity in states that currently have relatively 
little NGCC capacity, and offer more cost-effective emission 
reductions.
    The EPA has identified one potential approach to accommodate these 
stakeholder suggestions about utilization of new NGCC generation or co-
firing, especially in states with little or no existing NGCC capacity, 
to assist public engagement during the comment process and to solicit 
more specific comment. This approach would be to include an assumption 
about some minimum level of generation shift from higher-emitting to 
lower-emitting sources for all states containing some fossil steam 
generation in the state goals. In determining this minimum amount, it 
should be recalled that the proposal indicated a total amount of 
generation shift from fossil steam to NGCC generation assumed in 
building

[[Page 64550]]

block 2 for each state.\7\ The 2012 eGRID data, used for purposes of 
setting state goals, reflects the total generation for each state. 
Dividing the former by the latter provides the percentage of each 
state's generation that is shifted from higher-emitting to lower-
emitting sources. For example, on average, the states that are able to 
shift fossil steam generation to lower-emitting generation sources 
shift 55% of their fossil steam generation, on average, under the 
proposed approach. The lower quartile of these states shift 
approximately 12% of their fossil steam generation.\8\
---------------------------------------------------------------------------

    \7\ See ``Regulatory Impact Analysis for the Proposed Carbon 
Pollution Guidelines for Existing Power Plants and Emission 
Standards for Modified and Reconstructed Power Plants'' (June 2014). 
Docket ID No. EPA-HQ-OAR-2013-0602-0391 at 3-24.
    \8\ This is based on the forty states that had: (1) NGCC 
capacity in 2012, and (2) some fossil steam generation from which 
shifting could occur. The 55% and 12% discussed here are non-
weighted averages of the percentage fossil steam generation shift 
observed in each state, the nationwide percentage of fossil steam 
generation shift assumed was 28%. See ``Goal Computation Technical 
Support Document,'' Docket ID No. EPA-HQ-OAR-2013-0602-0460, 
``Appendix 1--State Goal Data and Computation,'' Docket ID No. EPA-
HQ-OAR-2013-0602-0255, and ``2012 Unit-level Data Using the eGRID 
Methodology,'' Docket ID No. EPA-HQ-OAR-2013-0602-0254.
---------------------------------------------------------------------------

    The EPA solicits comment on whether to establish some minimum value 
as a floor for the amount of generation shift for purposes of building 
block 2, whether that shift takes the form of re-dispatch from steam 
generation to existing NGCC units, re-dispatch to new NGCC units, or 
co-firing natural gas in existing coal-fired boilers. The EPA also 
solicits comment on what that value should be, e.g., the lower quartile 
value of 12%, or any other value between 0 and the 55% average 
described above. To illustrate this minimum approach, if the lower 
quartile value were used, a state with 100 MWh of fossil generation and 
no existing NGCC generation in 2012 would have a state goal premised on 
12 MWh shifting from higher-emitting to lower-emitting NGCC generation.
    The EPA also solicits comment on how this approach to add a minimum 
requirement for states that currently have little or no NGCC capacity 
should relate to the proposed approach that requires states with 
significant amounts of unused NGCC capacity to utilize up to 70% of 
that capacity. Note at the outset that the total nationwide amount of 
NGCC generation assumed under building block 2 is approximately 1,450 
terrawatt-hours (TWh). Should the minimum generation shifts in states 
with little or no NGCC capacity be in addition to this total amount? 
Alternatively, should the total level of gas use for purposes of 
building block 2 be held the same? Under the latter approach, the 
amount of generation from states with higher amounts of NGCC capacity 
would be reduced in amounts equal to the additional NGCC generation 
applied to states with zero- or low-NGCC capacity states, for building 
block 2. This approach would further reduce the disparities between 
states with little or no NGCC capacity and those with significant 
amounts of NGCC capacity.
    Some stakeholders have made additional observations about natural 
gas co-firing, in response to the EPA's solicitation of comment in the 
proposed rulemaking (79 FR 34865). They have brought to the EPA's 
attention that there are some benefits associated with the co-firing of 
natural gas with coal that might make it a practical option for 
consideration in goal setting and compliance in lieu of, or in addition 
to, shifting from coal-fired steam generating units to NGCC units. For 
example, stakeholders point out that co-firing can reduce emissions of 
nitrogen oxides (NOX); sulfur dioxide (SO2); 
particulate matter; and hazardous air pollutants, including mercury. 
Co-firing could also reduce some portion of the costs related to 
control of these pollutants (depending on the extent of co-firing). Co-
firing might also provide additional operational flexibility, 
particularly for coal-fired units that are regularly used at less than 
full load or that cycle regularly. Co-firing may allow units to ramp up 
and down more quickly, which could give a company the opportunity to 
take advantage of low fuel prices, when they occur, to achieve cost 
savings. Co-firing could allow additional time for implementation of 
strategies in state plans that have a lengthier implementation 
timeframe, such as building up a robust energy efficiency program. 
Further, co-firing could provide an opportunity to achieve emission 
reductions at existing higher-emitting units with relatively low levels 
of capital investment, thereby addressing companies' concerns about 
stranded assets. It should also be noted that utilities continue to 
announce conversions or plans to convert coal-fired steam boilers to 
natural gas.\9\ We noted and requested comment on some, but not all, of 
these observations in the June 18, 2014 proposal (see 79 FR 34875-
34876).
---------------------------------------------------------------------------

    \9\ ``Coal unit retirements, conversions continue to sweep 
through power sector.'' M. Niven and N. Powell. SNL Financial, 
Charlottesville, VA. October 14, 2014. Accessed on 10/22/14 at: 
https://www.snl.com/InteractiveX/Article.aspx?cdid=A-9431641-13357.
---------------------------------------------------------------------------

    We are requesting comment on these aspects of the costs and 
potential benefits (or offsetting cost advantages) of co-firing natural 
gas at existing coal plants, to the extent they were not considered or 
presented for comment in the proposed rule, along with any other 
additional costs and potential benefits of such co-firing that could be 
considered in goal setting. In addition, we are requesting comment on 
other factors or variables that might affect the decision to use 
natural gas in co-firing at a particular unit (e.g., type, age, or size 
of a boiler), as well as factors that could limit the amount of co-
firing that could be done. For units currently co-firing with natural 
gas, we request comment on the benefits experienced and the extent to 
which co-firing is being done.
    It should be noted that in its June 2014 proposal, the EPA stated 
that replacing fossil steam generation with new NGCC units and natural 
gas co-firing at existing fossil steam units may be considered the BSER 
for various reasons. New NGCC units and natural gas co-firing at 
existing fossil steam units may be considered part of a ``system of 
emission reduction,'' in light of the broad definition of that phrase; 
for example, the affected sources can themselves undertake those 
actions (i.e., fossil steam generators may invest in new NGCC units and 
coal-fired steam generators may co-fire with natural gas); and steam 
generators may reduce their utilization, which, through the operation 
of the market, would lead to the construction of new NGCC capacity (see 
79 FR 34885-90). In addition, replacing fossil steam generation with 
new NGCC units and natural gas co-firing at existing fossil steam units 
are ``adequately demonstrated'' in light of the extent to which they 
have already occurred.
    As discussed above in section II.B, the June 2014 proposal already 
solicits comment on an alternative approach to addressing the concern 
that states with little existing natural gas infrastructure do not have 
the same opportunities to shift generation to lower-emitting NGCC 
units. We are highlighting this alternative approach from the June 2014 
proposal so that stakeholders can consider whether this approach could 
address their concerns. Under this approach, regional availability of 
NGCC generation would be considered rather than just in-state 
availability of NGCC generation in setting building block 2 targets. 
Determining the appropriate levels of generation shift under building 
block 2 in a similar, regional manner--

[[Page 64551]]

using either the same regional structure as that defined by the EPA for 
the RIA of the proposed rule (i.e., six regions whose borders are 
informed by North American Electric Reliability (NERC) regions and 
Regional Transmission Organizations (RTOs)) (79 FR 34865 n. 142),\10\ 
or some alternative regional structure--could be another way to 
mitigate the concerns expressed by stakeholders that building block 2 
has little or no effect on certain states with large amounts of coal-
fired generation and limited excess NGCC capacity. The EPA seeks 
comment on the appropriate regional structure to use in such a 
framework and the appropriate manner in which the goals could be 
derived and allocated among states.
---------------------------------------------------------------------------

    \10\ See ``Regulatory Impact Analysis for the Proposed Carbon 
Pollution Guidelines for Existing Power Plants and Emission 
Standards for Modified and Reconstructed Power Plants'' (June 2014) 
Docket ID No. EPA-HQ-OAR-2013-0602-0391 at 3-11; TSD on ``GHG 
Abatement Measures'' (June 2014), Docket ID No. EPA-HQ-OAR-2013-
0602-0437 at 3-25.
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2. Methodology for Building Block 3 and How Building Block 3 Targets 
Relate to Compliance Options
    In section II.B.2 above, we identified stakeholder comments on the 
renewable energy target-setting component of building block 3 and 
described two methodological approaches for RE target-setting that are 
within the scope of the June 2014 proposal. In this section, we provide 
a conceptual discussion of a third methodological option for RE targets 
that some stakeholders have suggested and which we refer to here as a 
regionalized approach. This approach adjusts each state's RE target 
based on the RE potential available across a multi-state region in 
which the state is located. Under this approach, a state's goal would 
be informed by the opportunity to develop out-of-state RE resources as 
part of its state plan, and thus better align RE targets with the 
proposal to allow the use of certain out-of-state renewables for 
compliance, in accordance with stakeholder comments described in 
section II.B.2. This regionalized approach could group states into 
regions; aggregate RE generation potential across states within each 
region; and then reapportion the aggregate identified RE generation to 
individual states according to criteria that assume regional RE 
development in which parties in multiple states participate, regardless 
of the specific state where the generation occurs. One example of this 
type of regionalized approach would be grouping states into the 
regional structure shown in the June 2014 proposal \11\ (79 FR 34866-
34867); for each region, summing the RE target generation identified 
under the alternative approach in the June 2014 proposal for all states 
in that region; and then reallocating that summed generation 
proportionally to each state within that region by a chosen criterion, 
such as each state's share of total electricity sales within that 
region in 2012.\12\ The EPA requests comment on this regionalized 
approach for RE target setting, and specifically on the reallocation 
criterion.
---------------------------------------------------------------------------

    \11\ The regions were defined as follows, East Central: 
Delaware, District of Columbia, Maryland, New Jersey, Ohio, 
Pennsylvania, Virginia, West Virginia; North Central: Illinois, 
Indiana, Iowa, Michigan, Minnesota, Missouri, North Dakota, South 
Dakota, Wisconsin; Northeast: Connecticut, Maine, Massachusetts, New 
Hampshire, New York, Rhode Island, Vermont; South Central: Arkansas, 
Kansas, Louisiana, Nebraska, Oklahoma, Texas; Southeast: Alabama, 
Florida, Georgia, Kentucky, Mississippi, North Carolina, South 
Carolina, Tennessee; and West: Arizona, California, Colorado, Idaho, 
Montana, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming. 
Alaska and Hawaii were considered as two individual regions. Because 
Vermont and the District of Columbia lack affected sources, no goals 
are being proposed for these jurisdictions.
    \12\ This criterion could be informed by publicly available data 
in 2012 Retail Sales of Electricity by State by Sector by Provider, 
as reported from EIA Form 861, available at: http://www.eia.gov/electricity/data/state./
---------------------------------------------------------------------------

    The agency also requests comment on several key methodological 
assumptions involved in this regionalized approach. First, the EPA 
requests comment on what the regional structure would be, as well as a 
justification for that structure. One option would be grouping states 
together that are currently involved in interstate RE exchanges and are 
likely to do so in the future, and would include a balance of states 
that are net suppliers and states that are net consumers of RE 
generation. We invite comment on how a potential regional structure for 
this regionalized RE approach could address these concerns.
    Regional structures could be informed by NERC regions,\13\ FERC 
Planning Regions,\14\ RTOs,\15\ current regional renewable energy 
credit tracking systems,'' \16\ or some other approach. We recognize 
that some of these structures may need to be adjusted to conform to 
state boundaries for the purposes of informing state goals, and we 
invite comment on how to do so. In addition, some of these regional 
structures may yield isolated states, and we seek comment on whether 
these should be single-state regions or whether adjustments should be 
made to incorporate such states into multi-state regions. We also cite 
the regional structure used in the proposed target-setting approach and 
in compliance modeling as one example of a regional structure that 
could be used (79 FR 34866-34867). We noted above in section II.B.1, as 
well as in section III.B.1, that the June 2014 proposal sought comment 
on a regional approach to building block 2 and provided analysis using 
a structure informed by NERC regions and RTOs. It may be appropriate to 
use the same regional structure for building blocks 2 and 3, whether it 
is the one specified in the block 2 analysis or an alternative 
structure, particularly if transmission concerns are a primary driver 
of the structure. The EPA seeks comment on these regional structure 
considerations.
---------------------------------------------------------------------------

    \13\ Further information is available at: http://www.nerc.com/AboutNERC/keyplayers/Pages/Regional-Entities.aspx.
    \14\ An illustrative map is provided on p. 4 of the document at 
the following link: http://www.ferc.gov/media/news-releases/2011/2011-3/07-21-11-E-6-presentation.pdf.
    \15\ Further information and an illustrative map are available 
at http://www.ferc.gov/industries/electric/indus-act/rto.asp.
    \16\ There are several renewable energy tracking systems that 
serve to issue and retire renewable energy credits (RECs) across 
regions in the U.S. More information, including an illustrative map, 
is available from the U.S. Department of Energy at http://apps3.eere.energy.gov/greenpower/markets/certificates.shtml?page=3.
---------------------------------------------------------------------------

    Second, the EPA requests comment on the criteria that should be 
used for reapportioning state RE targets within given regions, as well 
as a justification for those criteria. The agency believes that a 
useful criterion would provide a simple state-specific quantitative 
characteristic that reflects interstate patterns to develop RE 
potential at reasonable cost across a region. Total electricity sales 
in each state in 2012 is an example of a possible criterion. Another 
possible criterion is total generation in each state in 2012. The EPA 
requests comment on other possible criteria.
    Third, the EPA requests comment on what components of the state RE 
targets should be regionalized under such an approach. For example, a 
regional approach may or may not apply to the entirety of each state's 
RE target from the alternative approach in the June 2014 proposal; the 
generation that would be reallocated across states in a given region 
may or may not include existing generation (as of 2012), incremental 
generation (beyond 2012 levels), or all types of RE generation (e.g., 
solar, wind) considered. In the June 2014 proposed rule, the EPA sought 
comment on the role of existing hydropower in target-setting (79 FR 
34869), and we also request comment on whether a regionalized approach 
should or should not reallocate existing hydropower generation across 
states (even if all other types of RE generation

[[Page 64552]]

are reallocated across states under a regionalized approach).\17\
---------------------------------------------------------------------------

    \17\ It should be noted that the EPA is not, in this document, 
addressing stakeholder comments concerning whether existing RE 
generation should be included in building block 3 or what types of 
generation (e.g., hydropower) to include in existing RE or 
incremental RE, the possibility of a floor based on 2012 generation 
or the possibility of a limitation based on 2012 fossil fuel-fired 
generation--those issues are already clearly covered in the June 
2014 proposal's request for comments and should be applied to this 
regionalized approach as well. Stakeholders are encouraged to 
provide input on these and other issues addressed in the proposal.
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    The EPA is requesting comment on the above approach, the extent to 
which the approach allows for states to address interstate RE concerns, 
and whether there are other ways to treat RE target-setting informing 
state goals that would take into account interstate effects. We are 
also still taking comment on the two approaches for RE target-setting 
specified in the June 2014 proposal. Finally, the EPA notes that there 
are a number of possible methodologies for using technical and economic 
renewable energy potential to quantify RE generation for purposes of 
state goals. The EPA invites comment on other possible techno-economic 
approaches.

C. Implementation of the Goal-Setting Equation

1. Goal-Setting Equation
    As noted above in section II.C.1, stakeholders have raised concerns 
that the proposed numeric formula for calculating each state's goal is 
not consistent in its application of the BSER for incremental 
generation from existing NGCC units under building block 2, as compared 
with incremental RE generation and EE generation avoidance under 
building blocks 3 and 4. (For ease of reference, unless otherwise 
indicated, we refer to both incremental RE generation and incremental 
EE generation avoidance \18\ as ``incremental RE and EE.'') \19\ They 
state that, for building block 2, the formula subtracts 1 MWh of fossil 
steam generation and corresponding emissions from the 2012 baseline 
levels for every 1 MWh of incremental NGCC generation (subtracting 
emissions from the numerator and subtracting generation from the 
denominator of the goal calculation formula) (see 79 FR 34896 and 
``Goal Computation Technical Support Document,'' Docket ID No. EPA-HQ-
OAR-2013-0602-0460, at 10-12). In the stakeholders' view, this approach 
reflects the assumption that incremental NGCC generation will supplant 
historical fossil steam generation levels.
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    \18\ EE avoidance is incorporated into the goal-setting formula 
as zero-emitting generation.
    \19\ This section discusses approaches for state goal 
calculations that focus specifically on the treatment of incremental 
RE generation and EE generation avoidance. The June 2014 proposal 
set out a methodology for state goal calculations that includes 
existing RE, and comments on that inclusion are within the scope of 
the proposal. The state goal calculation methods outlined in this 
section are independent of the treatment of existing RE.
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    In contrast, as the stakeholders also point out, the formula adds 
incremental RE and EE to 2012 baseline generation levels (in the 
denominator of that formula) but does not reduce the 2012 baseline 
levels of fossil generation (in the denominator of the formula) by that 
incremental RE and EE, or remove the corresponding emissions (in the 
numerator of that formula) (see 79 FR 34896 and ``Goal Computation 
Technical Support Document,'' Docket ID No. EPA-HQ-OAR-2013-0602-0460, 
at 15-18). In the stakeholders' view, by holding existing fossil 
generation and the corresponding emissions at 2012 levels, and not 
reducing them based on the amounts of incremental RE and EE, the state 
goals fail to reflect the full potential, under the BSER, for 
incremental RE and EE to replace fossil steam generation. Instead, 
simply adding incremental RE and EE to the denominator, while making no 
equivalent subtraction from the 2012 levels of fossil generation and 
corresponding emissions, does not clearly indicate whether, and to what 
extent, that generation will replace existing fossil generation as 
opposed to future generation increases from existing sources.
    Some stakeholders have suggested an alternative approach of 
applying generation from building blocks 3 and 4 to reduce fossil 
generation below 2012 levels in the goal calculation. They have stated 
that this alternative approach is more consistent with the treatment of 
generation under building block 2, while also achieving greater 
CO2 reductions. They suggest that the alternative approach, 
in which incremental RE and EE explicitly replaces generation from 
fossil fuel-fired sources in the goal calculation, better represents 
the BSER by better reflecting the likely reductions in fossil 
generation (and corresponding reduction in emissions) that can be 
achieved by affected sources.\20\
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    \20\ This alternative approach would be consistent with 
identifying, as part of the BSER, fossil generating sources 
replacing their historical generation levels with incremental RE and 
EE.
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    The following subsections describe two different approaches for 
revising the state goal-setting formula to address this concern. These 
approaches are being shared more broadly to allow continued stakeholder 
engagement and to enhance the ability of stakeholders to submit 
substantive comments.
    a. Replace all historical fossil generation on a pro rata basis. 
The proposed state goal-setting formula assumes a constant level of 
generation for total existing fossil generation greater than or equal 
to 2012 historical levels (i.e., the amount of fossil generation in the 
denominator of the state goal equation is greater than or equal to 2012 
levels).\21\ In the proposal, incremental RE and EE was simply added to 
the denominator of the state goal formula. An alternative treatment of 
this incremental RE and EE would be to assume that it directly replaces 
2012 fossil generation levels and the corresponding emissions on a pro 
rata basis across generation types (i.e., fossil steam and gas 
turbine). Although the incremental generation levels assumed for 
building blocks 3 and 4 would not change under this approach, this 
adjustment to the goal-setting formula would yield more stringent state 
goals. Note that, under this alternative approach, the incremental RE 
would replace fossil steam and NGCC generation in proportion (i.e., pro 
rata) to their historical generation.
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    \21\ Fossil generation in the formula is greater than 2012 
historical levels in states where ``existing'' NGCC units were under 
construction during 2012 and, therefore, did not report generation 
in that year.
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    The incremental RE and EE is assumed to replace generation from 
existing fossil sources in both the goal-setting calculation approach 
in the June 2014 proposal and this alternative approach. However, these 
two approaches reflect two different interpretations of how this 
replacement occurs. Under the approach in the June 2014 proposal, 
incremental RE and EE could replace a generation increase from existing 
fossil sources that would otherwise occur after 2012, while under this 
alternative approach, incremental RE and EE could replace historical 
fossil generation below 2012 levels. The assumption is that the former 
of these two scenarios results in a smaller reduction in carbon 
intensity and, hence, a less stringent state goal than under the latter 
scenario. The former scenario also implicitly assumes significant 
increases in existing fossil generation beyond 2012 levels absent 
building block three or four.
    This alternative approach would recognize a greater reduction 
potential in carbon intensity from incremental RE and EE, and it would 
be more closely analogous to the treatment of

[[Page 64553]]

incremental NGCC generation identified under building block 2 (given 
that under the proposal, generation from building block 2 was assumed 
to reduce carbon intensity by replacing generation from 2012 levels). 
The rationale for this approach would be that the BSER for all fossil 
generation includes replacing that generation with incremental RE and 
EE. Moreover, this approach acknowledges that, taken by itself, such 
incremental generation would not necessarily replace the highest-
emitting generation, but would likely replace a mix of existing fossil 
generating technologies.
    b. Prioritize replacement of historical fossil steam generation. A 
second alternative approach would be similar to the one described 
above, but the adjustment would reflect incremental RE and EE first 
replacing fossil steam generation below 2012 levels rather than 
replacing all fossil generation on a pro rata basis. Subsequent to 
replacing fossil steam generation, if there were any remaining 
incremental RE or EE, it would replace gas turbine generation levels 
and the corresponding emissions. Therefore, the reduction in carbon 
intensity observed from this type of adjustment would be more than that 
estimated in the proposal's goal-setting formula and more than the 
alternative approach above, in section III.C.1.a, because incremental 
and avoided generation would replace generation from higher-emitting 
fossil steam sources first. The rationale for this alternative approach 
would be based on the view that, as part of the BSER, because fossil 
steam generation has higher carbon intensity, it should be replaced 
before NGCC generation.
    By identifying the two alternative approaches above and providing 
more detailed data by which to assess them, the EPA is seeking 
additional engagement during the public comment process and supporting 
the ability of stakeholders to provide comment. The EPA is requesting 
comment on whether a formula change of this nature would better reflect 
the emission reduction potential from incremental RE and EE. In 
particular, the EPA is seeking comment on how the amount of incremental 
RE and EE in the June 2014 proposal relate to potential future 
generation increases from existing fossil sources. The EPA is also 
soliciting comment on approaches where some portion of such incremental 
generation is calculated to replace future increases in existing fossil 
generation with the remainder assumed to replace historical existing 
fossil generation. The EPA is also requesting comment on how to treat a 
state in which the incremental RE and EE exceeds historical fossil 
steam generation levels. Together, the approach in the proposal and the 
alternative approach in this document reflect a range of possible 
emission rate impacts that could be expected through the application of 
the incremental RE and EE in the state goal calculation. The EPA is 
seeking comment on which approach better reflects the BSER. At the same 
time, we note that the alternative state goal formula approaches listed 
here may raise a number of additional considerations. These approaches, 
for example, would increase the collective stringency of the state 
goals, which would likely increase both the costs and benefits of the 
proposed rule.
    As noted above, at least some of these alternative applications of 
the target-setting equation would result in many states having tighter 
rate-based goals. Therefore, in considering any of these changes, the 
EPA would also consider how they relate to other issues discussed in 
this document, as well as in the original proposal, particularly 
inclusion of new NGCC units in the state goal calculation and 
alternatives to the 2020-2029 glide path. While the goal-setting 
formula adjustments described here would tighten the state goals, the 
glide path adjustments discussed previously would have the offsetting 
effect of reducing the stringency of the goals. The EPA welcomes 
comment specifically on the potential changes identified in this 
document in terms both of the rationale for these changes and of their 
effects on the stringency of the state goals.
2. Alternatives to the 2012 Data Year
    A number of stakeholders have raised concerns over the use of 2012 
as the single data year for calculating interim and final goals. The 
EPA has identified several approaches that stakeholders may want to 
consider and upon which we are requesting comment. The EPA is seeking 
comment on whether we should use a different single data year or the 
average of a combination of years (such as 2010, 2011, and 2012) to 
calculate the state fossil fuel emission rates used in state goal 
calculations. The agency is also seeking comment on whether state-
specific circumstances exist that could justify using different data 
years for individual states, as opposed to using the same data year, or 
combination of years, consistently across states.
    Stakeholders have also expressed interest in obtaining eGRID data 
for years prior to 2012 in order to foster comparison with results from 
the 2012 dataset. The EPA is adding, to the docket for this action, 
data for the years 2010 and 2011 that are based on the same information 
sources and presented in the same format as the 2012 dataset used for 
the June 2014 proposed rule. We are also making these data available 
at: http://www2.epa.gov/cleanpowerplan/.

    Dated: October 27, 2014.
Janet G. McCabe,
Acting Assistant Administrator, Office of Air and Radiation.
[FR Doc. 2014-25845 Filed 10-29-14; 8:45 am]
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