U.S. EPA Proposes First NSPS For Greenhouse Gas Emissions

A major event in the Climate Change arena occurred on March 27, 2012 when, for the first time, U.S. EPA proposed New Source Performance Standards (NSPS) for emissions of carbon dioxide (CO2).  The recent proposal, which was published in the Federal Register on April 13, 2012, specifically applies to new affected fossil fuel-fired electric utility generating units (EGUs). However, it is a true regulatory milestone in that it marks the very first time an actual greenhouse (GHG) emission standard has been proposed by U.S. EPA for a stationary source.

The proposed standards are the direct result of two (2) settlement agreements proposed concurrently by U.S. EPA on December 30, 2010 [Federal Register Notice Volume 75, No. 250].  The settlement agreements were proposed in order to resolve threatened litigation filed by numerous states concerning the February 2006 amendments to 40 CFR Part 60, Subpart Da (Standards of Performance for Electric Utility Steam Generating Units, Industrial-Commercial-Institutional Steam Generating Units, and Small Industrial-Commercial-Institutional Steam Generating Units) and the June 2008 final rule entitled “Standards of Performance for Petroleum Refineries.”  In their originally filed petitions, the states made the claim that neither of the cited rules established standards of performance for GHG emissions, and further pointed out that U.S. EPA has a statutory obligation to issue NSPS for all pollutants it regulates.

Under the terms of the consent decree, U.S. EPA committed to proposing standards of performance for GHG for new and modified EGUs subject to Subpart Da by July 26, 2011, with final action no later than May 26, 2012, and also committed to proposing standards of performance for GHG for new and modified petroleum refineries subject to Subparts J and Ja (Petroleum Refineries, and Petroleum Refineries for Which Construction, Reconstruction, or Modification Commenced After May 14, 2007, respectively), Subpart Db (Industrial-Commercial-Institutional Steam Generating Units), Subpart Dc (Small Industrial-Commercial-Institutional Steam Generating Units), Subpart GGG (Equipment Leaks of VOC in Petroleum Refineries for Which Construction, Reconstruction, or Modification Commenced After November 7, 2006), and Subpart QQQ (VOC Emissions from Petroleum Refinery Wastewater Systems) by December 10, 2011, with final action no later than November 10, 2012.

At this point in time, U.S. EPA has only addressed the states’ requests for standards of performance for new EGUs; however, as committed to in the December 30, 2010 settlement agreements, U.S. EPA will likely demonstrate more activity in this area – first for existing EGUs, then for new and existing petroleum refineries – although U.S. EPA Administrator, Lisa Jackson, told reporters on a March 27 conference call that the proposal would “never apply” to existing plants “and we don’t have plans to address existing plants.”

As presented in U.S. EPA’s Regulatory Impact Analysis for the proposed rule, energy industry modeling forecasts uniformly predict that few, if any, new coal-fired power plants will be built in the near future, due to the increased availability of, and lower cost for, natural gas as compared to other types of fossil fuel.  Therefore, U.S. EPA proposed its new standard specifically based upon the demonstrated performance of natural gas combined cycle (NGCC) units.  Since NGCC units are already very prevalent throughout this country and anticipated to be the predominant fossil fuel-fired technology in the future, U.S. EPA anticipates that “the proposed EGU GHG NSPS will result in negligible CO₂ emission changes, energy impacts, quantified benefits, costs, and economic impacts by 2020…and does not anticipate this rule will have any impacts on the price of electricity, employment or labor markets, or the U.S. economy.”  In drafting the rule, U.S. EPA evaluated a wide range of electricity market conditions and performed multiple sensitivity analyses, which caused them to believe that industry will choose to construct new units that already meet these standards, regardless of the new proposal. 

Therefore, U.S. EPA further claims the proposed new rule is “practical, flexible, and achievable.”  Only time will tell as to whether future NSPS rulemakings for GHG will be so achievable – but they certainly appear to be so at the onset, with new fossil fuel-fired EGU sources greater than 25 megawatt electric (MWe) being required to meet an output-based standard of 1,000 pounds of CO2 per megawatt-hour (lb CO₂/MWh), but also being offered alternative compliance options like output-based standards to be averaged over a lengthy 30-year period.   For the time being, the proposed rule serves as a model from which to speculate what these future rules might look like, resolving some of the longstanding mystery that’s surrounded this category of emissions.  Comments on the proposed rule will be accepted through June 12, 2012.