EPA Finalizes GHG Powerplant Rule, Setting Stage For "Major Questions" Showdown

Highlights

• The U.S. Environmental Protection Agency (EPA) on May 9, 2024, finalized its Standards and Guidelines for Fossil Fuel-Fired Power Plants.
• The rule, which would require aggressive reductions in greenhouse gas (GHG) emissions from conventional power plants, has already prompted 27 states and industry groups to file suit to block implementation. Challengers moved for an immediate stay of implementation on May 13, 2024.
• The rule is intended to address climate pollution from existing coal-fired power plants and ensure that new combustion turbines are constructed to minimize GHG emissions by requiring those plants to achieve emissions reductions equivalent to those possible through use of carbon capture and sequestration (CCS).
• The EPA's original proposal included reliance on "low-GHG" hydrogen, which was removed from the final rule.

The U.S. Environmental Protection Agency (EPA) on May 9, 2024, finalized its Standards and Guidelines for Fossil Fuel-Fired Power Plants – a rule that calls for aggressive action to reduce greenhouse gas (GHG) emissions from conventional power plants. The rule is aimed at lowering pollution from existing coal-fired power plants and ensuring that new combustion turbines are built to achieve GHG emissions reductions on par with those attained through carbon capture and sequestration (CCS). A call for reliance on "low-GHG" hydrogen was removed from the final rule. The EPA's proposal has already prompted 27 states and industry groups to raise "major questions" and file suit to block implementation.

Setting Performance Standards

Under Section 111 of the Clean Air Act, the EPA sets standards of performance for new, modified and reconstructed stationary sources. Section 111 defines the term "standard of performance" to "mean [] a standard for emissions of air pollutants which reflects the degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account the cost of achieving such reduction and any nonair quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated." Thus, pursuant to Section 111, the EPA must first identify the "best system of emissions reduction" (BSER) for a stationary emissions source, then set a standard of performance based on emissions achievable by sources employing that BSER.

The EPA's latest proposal is premised on the eventual use of CCS, which the EPA contends fits within the framework of West Virginia v. EPA as "add-on controls." The EPA asserts that its proposal relies on investments and advancements spurred by the Inflation Reduction Act (IRA), Infrastructure Investment and Jobs Act (IIJA), and Creating Helpful Incentives to Produce Semiconductors and Science (CHIPS) Act to underwrite the costs and development of both CCS and low-GHG hydrogen under the BSER criteria.

The final rule differs from the proposed rule published in 2023 in three key ways:

1. Coal-Fired Power Plants. The rule now divides coal-fired power plants into three categories. Those that will cease operation by 2032 are exempt from the rule. Those operating between 2032 and 2039 will be required to achieve emissions reductions equivalent to co-firing 40 percent by volume natural gas. Those intending to operate after 2039 will be required to achieve emissions reductions equivalent to 90 percent capture of CO2 through CCS.
2. New Gas Turbines. The rule now extends the applicability of the most stringent "base load" standard to units operating above 40 percent capacity factor. It also moves the compliance deadline for selecting the CCS pathway forward to 2032 from 2035. The pathway in the proposed rule for low-GHG hydrogen co-firing is no longer available for base load and intermediate units.
3. Notably, the EPA is not finalizing proposed requirements for existing fossil fuel-fired stationary combustion turbines. The EPA has opened a nonregulatory docket to gather input for future regulatory approaches to the entire fleet of existing power sector gas combustion turbines.

The final rule establishes the following standards:

New Natural Gas Power Plants

Coal-Fired Power Plants

The final rule also includes options for states to bake a modest amount of flexibility into the plans to implement the rule. The final rule provides guidance on how localized circumstances can be reflected in compliance requirements under Remaining Useful Life and Other Factors (RULOF) – provisions for allowing emissions trading and averaging that maintain the environmental integrity of the standards – and a pathway for sources to seek a one-year compliance extension for unanticipated delays with control technology implementation that are outside the owner's or operator's control. For the numerous stakeholders raising concerns regarding the impact of the rule on grid reliability, these modest flexibilities are far from a panacea.

Conclusion

The rule is already subject to challenge, with petitioners alleging that the rule is in excess of the EPA's authority and reliant on unproven and expensive technology. Like its predecessor, the Clean Power Plan, the new rule is likely to compel a fuel switch (from 100 percent coal-firing to co-firing natural gas) and require contracts with third parties for the sequestration of carbon. Whether this is truly the "add-on controls" the U.S. Supreme Court had in mind in West Virginia v. EPA remains to be seen. Litigation surrounding the rule's predecessors, the Clean Power Plan and Affordable Clean Energy Rule, prevented those rules from ever going into effect. This latest EPA rule will face many of the same hurdles to implementation, including motions to stay the rule's effect filed on May 13, 2024, by its challengers, who argue that "[a]lthough plants may not go offline tomorrow, the decisions leading there have begun and will not be unwindable."