Clean Air Act
The primary purpose of the Clean Air Act is to protect and enhance air quality to promote the public health and welfare of the nation’s population. The Clean Air Act, as amended, has three major components that are most relevant here: the National Ambient Air Quality Standards (NAAQS) (Section 109; 42 U.S.C. § 7409); the National Emissions Standards for Hazardous Air Pollutants (Section 112; 42 U.S.C. § 7412); and New Source Performance Standards (Section 111; 42 U.S.C § 7411). Each provision is briefly highlighted below; for a more in-depth review, see Appendix I of the Seventh Power Plan.
Pursuant to Section 109 of the Clean Air Act, EPA is required to establish national ambient air quality standards (NAAQS) for pollutants that are reasonably anticipated to endanger human health and the environment, and the NAAQS prescribed must protect human health and the environment from any known or anticipated adverse effects associated with the pollutant.[1] EPA has set NAAQS for six criteria pollutants (particulate matter, ozone, sulfur dioxide, nitrogen dioxide, carbon monoxide, and lead). After setting NAAQS, EPA is responsible for designating areas as in “attainment,” meaning the air quality in that area complies with the NAAQS, or in “nonattainment,” meaning the air quality is worse than the NAAQS and actions must be undertaken to come into compliance or attain the NAAQS. Pursuant to Section 110, states or tribes are then responsible for developing state implementation plans (SIPs) or tribal implementation plans (TIPs) for the implementation, maintenance and enforcement of the NAAQS, with the plans reviewed and approved by EPA.[2] As an example, SIPs may require power generation facilities to install Best Available Retrofit Technology to control emissions of a specific criteria pollutant, which would impact the costs of that facility.
Emissions of hazardous air pollutants (HAPs) are addressed under Section 112 of the CAA.[3] Section 112 directs EPA to set emission control standards for hazardous air pollutants, including for the 189 HAPs listed in Section 112(b). Section 112(c) then requires that EPA publish and regularly update all categories and subcategories of major and area sources that emit HAPs, and per Section 112(d) EPA must issue technology-based emissions standards for major sources and certain area sources of HAPs. Pursuant to Section 112(d), the emissions standards promulgated must require the maximum degree of emission reduction achievable—commonly referred to as the “maximum achievable control technology” (MACT) standards. Eight years post-MACT promulgation, EPA must review and determine whether any residual health risks remain for the source categories, and, if it is determined that the residual risk for a source category does not provide an ample margin of safety to protect public health or to prevent an adverse environmental effect, EPA must revise the standard to further reduce HAP emissions.[4] This is known as the residual risk evaluation. Note, power facilities are included on the Section 112(c) list. However, Section 112(n)(1)(A) specifically addresses electric utility steam generating units, requiring EPA first perform a study of the hazards to public health reasonably anticipated to occur as a result of emissions from the facility of pollutants regulated under Section 112(b) (i.e. the list of hazardous air pollutants), and, facilities must be regulated pursuant to this section if EPA determines regulation is “appropriate and necessary.”
Lastly, Clean Air Act Section 111 establishes mechanisms for controlling air pollutant emissions from stationary sources. Specifically, Section 111 and the standards set thereunder apply to stationary ‘source categories’ that the EPA has determined cause or contribute significantly to air pollution and that may reasonably be anticipated to endanger public health or welfare. This is what is termed an ‘endangerment finding’ and it is a prerequisite for EPA to establish standards of performance for new sources within each source category (e.g. new source performance standards—NSPS). New and modified sources are addressed under Section 111(b) and section 111(d) addresses existing sources. For new or modified sources, EPA is to set emission limits based on the best system of emission reduction (BSER) adequately demonstrated, taking into consideration cost. Once EPA has set performance standards for a pollutant for new and modified sources in a source category, Section 111(d) requires regulation of existing sources in the source category, provided the pollutant is not regulated under another provision of the Act (i.e. Section 109 or Section 112) and the new source performance standard would apply if the source were a new source. However, Section 111(d) establishes a different regulatory mechanism than Section 111(b). As opposed to EPA establishing federal standards, which is the case with Section 111(b), Section 111(d) requires EPA to establish procedures for states to submit plans setting forth standards of performance for the existing sources from a source category and outlining the implementation and enforcement for such standards. Pursuant to EPA’s longstanding Section 111(d) implementing regulations, EPA first develops and issues an emissions guidelines document, providing a performance level that reflects the degree of emission reduction achievable through the application of the best system of emissions reduction. 40 CFR § 60.20-60.29. While the emissions guidelines are to reflect the best system of emissions reduction achievable, the statute as well as the implementing regulations permit consideration of the cost of control, useful life of facilities, and location of a particular facility. Thus, states are provided flexibility in meeting the emission guidelines and may utilize different systems of emissions reduction so long as the system identified achieves the emissions reduction that would be achieved by the best system (i.e. determined by the state to be equivalent to that prescribed). 40 CFR § 60.24. EPA must approve each state plan and if the state fails to submit a satisfactory plan, EPA may prescribe a plan.
As can be gathered from this broad-brush summary, the Clean Air Act imposes emissions limitations and compliance obligations on the electric sector, including, for example, fossil-fueled electric generating facilities, nuclear and biomass-generating technologies as well as fuel extraction processes. See the Environmental Effects of Generating Resources for a high level description of some of the primary environmental effects of generating resources. (For an in-depth description of the lifecycle impacts associated with electricity generation, see Appendix I of the Seventh Power Plan.)
Greenhouse Gas Emissions from the Electricity Sector
Greenhouse gases emitted through human activities are a contributing factor to climate change, and one of the largest sources of greenhouse gas emissions in the United States is the electricity sector, specifically the burning of fossil fuels for electricity.[5] According to the EPA, in 2018 the electricity sector was the second largest source of greenhouse gas emissions in the U.S., responsible for 27% of greenhouse gas emissions in 2018.[6] Greenhouse gases emitted from the electricity sector include carbon dioxide (emitted through the burning of oil, natural gas and coal), methane (emitted during the production and transport of oil and natural gas as well as coal production) and nitrous oxide (emitted during the combustion of fossil fuels).[7] While EPA’s authority to directly regulate greenhouse gas emissions under the Clean Air Act has been confirmed by the Supreme Court, federal regulation has been challenging as reflected in the regulatory update below. Nonetheless, the Council considered greenhouse gas emissions and the effects of climate change in development of the 2021 Power Plan, including through application of the cost of carbon as a damage cost on emissions, which included upstream methane emissions that were quantified for the first time in this plan, through the incorporation of climate change data into the models and quantitative analysis, and through the incorporation of clean energy policies and goals enacted at the state and local level to reduce greenhouse gas emissions.
Recent Clean Air Act Regulatory Updates
Carbon Dioxide
New Source Performance Standards-New Plant Rule
In 2015, EPA issued the “Standards of Performance for Greenhouse Gas Emissions from New, Modified, and Reconstructed Stationary Sources” rule, regulating carbon dioxide emissions from new or modified power facilities, which in turn triggered EPA’s obligation to regulate carbon pollution from existing power plants under Section 111(d) of the Clean Air Act (see discussion below regarding Clean Power Plan and Affordable Clean Energy rule). Under the 2015 rule, EPA set carbon dioxide emission standards for new or modified facilities based on the best system of emissions reductions, which EPA determined for new or significantly modified coal facilities to be supercritical pulverized coal utility boiler implementing partial carbon capture and storage (CCS) and for new natural gas facilities to be the most, efficient well-performing generating technology. Litigation was immediately filed challenging the rule, with the rule taking effect in October 2015.
In March 2017, then-President Trump issued Executive Order 13783, “Promoting Energy Independence and Economic Growth,” which among other things, directed EPA to review the NSPS rule, and, if appropriate, suspend, revise, or rescind it. In response to its review, in 2018, EPA issued proposed revisions to the 2015 rule, proposing to amend its previous determination of the best system of emissions reductions for new coal facilities, finding that the best system of emission reduction for new coal facilities is the most efficient demonstrated steam cycle in combination with the best operating practices; thus, withdrawing the application of partial CCS technology. According to the 2018 proposed rule, the proposed revision was based on an updated analysis of reasonable costs and limited geographic availability of CCS, with the agency finding that CCS is not an adequately demonstrated technology. The proposed rule did not, however, propose to amend the standards of performance for newly constructed or reconstructed gas facilities. Comment closed on the proposed rule in March of 2019 and in January 2021, EPA issued a final rule, the Significant Contribution Rule. However, the January 2021 final rule did not address the best system of emissions reductions addressed predominately in the 2018 proposed rule, and, instead, finalized a pollutant-specific significant contribution finding (SCF) for greenhouse gas emission from EGUs. Specifically, EPA finalized a significant contribution finding for purposes of regulating source categories for GHG emissions under Section 111(b) of the Clean Air Act, finding that source categories are considered to contribute significantly to dangerous air pollution due to their GHG emissions if the amount of those emissions exceeds 3% of the total U.S. GHG emissions (i.e. a threshold of 3%). Litigation was immediately filed, and on March 17, 2021, EPA asked the D.C. Circuit to vacate and remand the Significant Contribution Rule because the rule was promulgated without public notice or opportunity to comment.[8] On April 5, 2021, the D.C. Circuit granted the motion, leaving the 2015 rule on the books and the significant contribution finding vacated and remanded back to the agency for further review.
Clean Power Plan Rule and Affordable Clean Energy Rule
With the issuance of the 2015 new plant rule (noted above), it triggered EPA’s obligation to regulate carbon pollution from existing power plants per Section 111(d) of the Clean Air Act. And when the Seventh Power Plan was adopted, the Clean Power Plan had just been recently issued by the EPA regulating existing sources pursuant to Section 111(d). The Clean Power Plan established for the first-time carbon dioxide emission guidelines for existing power facilities. The goal of the rule was to reduce electricity sector carbon dioxide emissions by 32% from 2005 emission levels by 2030, and under the Clean Power Plan, the EPA set emissions targets for each state and issued guidelines for states to develop plans for achieving its goal. The Clean Power Plan was immediately challenged in the DC Circuit and in June 2019, EPA officially repealed the Clean Power Plan before it ever took effect and did so on the basis that the rule significantly exceeded the agency’s authority. Specifically, EPA determined that Section 111(d) of the Clean Air Act permits the agency to focus only on the individual source when determining the best system of emissions reductions, thus, the best system of emissions reductions must be determined and applied at the source. Consequently, EPA found the Agency inappropriately determined the best system of emission reductions by including reduction measures beyond the source or the fence line, i.e. by identifying and relying on system-wide operational practices and generation shifting.
Concurrent with EPA’s repeal of the Clean Power Plan, EPA issued a replacement rule, the Affordable Clean Energy rule to regulate carbon dioxide emissions from existing coal facilities under Section 111(d) of the Clean Air Act. The final ACE rule was adopted by the EPA in June of 2019. Consistent with EPA’s basis for repeal of the CPP, in determining the best system of emission reductions for the ACE rule, EPA focused solely on the individual source and emissions that could be reduced on-site. Thus, EPA determined that the best system of emissions reduction for greenhouse gases from existing coal facilities was a set of heat-rate or efficiency improvement measures that could be applied at an individual facility. EPA did not set particular emission targets nor mandate any specific heat rate improvement, but instead provided a handful of technology and operational change measures for states to consider and use in developing their own implementation plans that establish standards of performance. EPA limited the ACE rule to existing coal facilities due to insufficient information to determine a similar best system of emissions reduction for natural gas facilities.
Litigation that remained pending challenging the Clean Power Plan was dismissed as moot by the DC Circuit in September 2019. Litigation challenging the repeal and the ACE rule was immediately filed with the D.C. Circuit and in January 2021 the court vacated the Affordable Clean Energy rule, with the majority ruling that EPA’s interpretation of the Clean Air Act was legally flawed, remanding to the Environmental Protection Agency for further proceedings.[9] Specifically, the majority found that while the Clean Air Act is not explicit on whether the emission limits could only be predicated on what could be achieved within the plant boundaries of an emitting source, there is nothing in the definition of best system of emissions reductions that requires EPA to be plant-specific. And, because the ACE rule was premised on this flawed legal premise, the rule had no rational basis, was arbitrary and capricious and cannot stand. While vacating the ACE rule, the court did not expressly reinstate the Clean Power Plan. Consequently, with this ruling, there are no Section 111(d) regulations in place addressing greenhouse gas emission regulations for existing electric generating units. These two rules provided vastly different perspectives as to EPA’s authority under the Clean Air Act, highlighting the struggle of two successive administrations to fit such a regulation into the existing Clean Air Act framework. With this blank slate, the current Administration has an opportunity to propose regulations anew. However, on October 29, 2021, the Supreme Court granted certiorari for four separate petitions to review the D.C. Circuit's January 2021 decision.
NSPS—Volatile Organic Compounds and Methane
In August 2020, EPA issued two rules, the Review Rule and the Reconsideration Rule, amending and rolling back previous new source of performance standards set in 2012 and 2016 that regulated methane and volatile organic compound (VOC) emissions from new oil and gas operations and facilities. Under the 2020 Review Rule, EPA removed the transmission and storage segment from the oil and gas source category, thus, rescinding the new source performance standards for VOCs and methane emissions applicable to sources in the transmission and storage segment, and rescinded methane standards for all remaining segments of the of the source category. The obvious effect of Review Rule rollback is the increased and continued emissions of methane and VOCs from this sector. More importantly, though, with the deregulation of methane for new sources, EPA also eliminated the legal grounds for regulating methane from existing sources from this category under Section 111(d), and existing sources are primary and significant contributors of methane emissions.
However, in June 2021, Congress used the Congressional Review Act to void the 2020 Review Rule, reinstating the 2016 methane regulations. Thus, the VOC and methane standards for the transmission storage segment, and methane standards for the production and processing segments were restored. Further, President Biden, through Executive Order 13990, specifically directed EPA to propose new regulations to establish standards of performance and emission guidelines for methane and volatile organic compound emissions from existing operations in the oil and gas source category, including the transmission and storage segments, by September 2021, and directed the EPA to review and consider revising or rescinding the Reconsideration Rule also by September 2021. In response, on November 2, 2021, EPA issued a proposed rule proposing revisions to and broadening of the new standards of performance for methane and VOC emissions for the oil and gas source category; proposing emission guidelines for states to follow in developing and implementing state plans to establish performance standards to limit greenhouse gases from existing sources in the oil and gas source category; and, proposing a program to reduce fugitive emissions from existing and new facilities. EPA intends to issue a supplemental rule in 2022, which will provide regulatory text for the proposed new source performance standard and emission guidelines. A final rule is expected before 2023.
Mercury and Air Toxics Standards Rule
In 2000, EPA found that regulation of hazardous air pollutants from coal-and- oil fired power facilities under Section 112 of the Clean Air Act “appropriate and necessary.” In 2012, EPA reaffirmed its initial 2000 “appropriate and necessary finding” and finalized the Mercury and Air Toxics Standards. This final rule set nationwide numerical emission limits for the release of mercury and other hazardous air pollutants from new and existing coal and oil-fired facilities. The standards created uniform emissions-control requirements based on proven in-use technologies and processes, reflecting levels achieved by the best-performing sources currently in operation.
The 2012 rule was challenged, and in 2015, the Supreme Court found the EPA adopted MATS without properly considering industry compliance and remanded the rule to the DC Circuit.[10] The DC Circuit ultimately remanded the rule back to the EPA to explain its cost considerations in determining whether the MATS are appropriate and necessary. In 2016, EPA issued its Supplemental Finding, in which the Agency concluded that a consideration of cost did not change its previous determination that it was appropriate and necessary to regulate MATS from coal fired facilities. The Supplemental Finding was challenged, and the DC Circuit eventually suspended the case to permit agency review under Executive Order 13783. While the case was suspended, the MATS rule remained in effect. However, in April 2020, EPA released a final rule reversing the 2016 Supplemental Finding underpinning the MATS rule; nonetheless, the 2020 rule did not rescind the rule, thus leaving MATs rule in effect.
Per the April 2020 final rule, EPA found that the 2016 Supplemental Finding did not appropriately consider costs, concluding that the cost of such regulation grossly outweighs the quantified HAP benefits. Specifically, EPA determined that the Agency erred by giving equal weight to the air quality co-benefits of reductions in emission of non-HAP pollutants projected to occur to support MATs. Based on the quantified benefits of reducing HAP emissions compared to the costs of compliance, EPA concluded it is not appropriate and necessary to regulate HAP emissions from coal and oil-fired power facilities, withdrawing the agencies previous “appropriate and necessary” finding. Litigation ensured.
Nonetheless, pursuant to President Biden’s Executive Order 13990, on February 1, 2022 EPA issued a proposed rule reversing course and reaffirming that it is appropriate and necessary to regulate emissions of hazardous air pollutants from coal-and oil-fired power plants.
[1] 42 U.S.C §7409
[2] EPA, NAAQS Implementation Process
[3] 42 U.S.C § 7412
[4]EPA, Summary of the Clean Air Act
[5]EPA, Sources of Greenhouse Gas Emissions
[6] EPA, Sources of Greenhouse Gas Emissions
[7] EPA, Climate Change Indicators: Greenhouse Gases
[8] See State of California et al. v. EPA, No. 21-1035 (D.C. Cir.)
[9] American Lung Association et al. v. U.S. Environmental Protection Agency et al., No. 19-1140 (D.C. Cir Jan. 19, 2021)
[10] Michigan v. EPA, 135 S.Ct. 2699 (2015)