Title IV Does Not Preclude Consideration of the Building Blocks as the BSER
XVII. Shifts in Generation Dispatch
This section provides additional information to support the explanation in section V.A., B., and V.D. for why building block 2, which entails shifting generation – sometimes called load shifting -- from (higher emitting) fossil steam generators to (lower emitting) NGCC units, is part of the BSER.
Load shifting has been recognized is an “easy and fairly inexpensive strategy” that “may be used in conjunction with other control measures” for “emission reduction.”336 Moreover, it has been recognized as a pollution control technique as early as 1968, when it was included in the “Chicago Air Pollution System Model” for controlling incidents of extremely high
333 In the final interpretation, the EPA interpreted the word “necessary” to mean that an EGU’s continued operation is “required [to ensure] reliability” while the replacement power is being generated. See 77 Fed. Reg. 9,304, 9,410 (Feb. 16, 2012).
334 77 Fed. Reg. 9,304, 9,410 (Feb. 16, 2012). In each of these cases, the EPA included reliability concerns as a component of when the extension would be justified. The requirement to
demonstrate reliability concerns flowed from EPA’s interpretation of the word “necessary” in the phrase “necessary for the installation of controls.” See id. at 9,410–11. Under each of the three options, “installation of controls” was interpreted to mean retirement, construction of new off- site generation, or transmission upgrades. Id.
335See MATS RTC at 313 (responding to comment 42).
336 Donald S. Shepard, “A Load Shifting Model for Air Pollution Control in the Electric Power Industry,” Journal of the Air Pollution Control Association, Vol. 20, No. 11, p. 760 (Nov. 1970).
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pollution.337 The report recognized, as an initial matter, that the Commonwealth Edison
Company (CECO) was “constrained to meet the total load demand” but that “load reduction at one plant or even a number of plants is usually feasible by shifting the power demand to other plants in the system.”338 As a result, the report noted, “load shifting within the physical limits of the CECO system ... may be a highly desirable control mechanism.”339 The report also predicted that “[i]n the future, it may be possible to form reciprocal agreements to obtain ‘pollution
abatement’ power from neighbor companies during a pollution incident and return this borrowed power at some later date.”340
XVIII. Limiting Principles and Commenters’ Hypothetical Examples
Several commenters assert that the EPA’s interpretation of the BSER lacks a limiting principle and would therefore allow the EPA to impose intrusive controls on other sectors. These commenters offer hypothetical examples of the types of rules that EPA could promulgate. For example, one commenter claims that the EPA’s interpretation at proposal “would provide little check on the level of output [the] EPA could mandate” through reduced utilization.341 Another claims that building blocks 2 and 3 are akin to “requiring car owners to take the bus more” and to “requiring the [purchase] of more electric vehicles”.342 Still others argue that “the agency could require states to mandate that consumers dim their lights on alternate days, limit home builders to constructing only two-story buildings, or shutter public schools during periods of peak energy usage”343 or in setting other standards the EPA “could require Americans to use scythes ... force businesses to ship their products by rail ... [and] force business to convert to ‘paperless’
workplaces and outlaw printing emails and other documents.”344 And as a last example, one set of comments explains that “if the EPA were to apply a ‘beyond the source’ approach to GHG standards of performance and emission guidelines for the gasoline refining industry, it might require refiners to ‘redispatch’ fuel production from their facilities to less-utilized existing biofuel facilities, or it might require states to invest in constructing new biofuel facilities.”345
337 E.J. Croke, et al., “Chicago Air Pollution System Model, Third Quarterly Progress Report,” Chicago Department of Air Pollution Control, p. 186 (1968) (discussing the feasibility of
“Control by Load Reduction” in combination with load shifting as applied to the Commonwealth Edison Company), available at http://www.osti.gov/scitech/servlets/purl/4827809. The report also considered “combining fuel switching and load reduction” as a possible air pollution abatement technique. See id. at 188.
338Id. 339Id.
340Id. at 187.
341 EEI Comments, pp. 284-85. 342 UARG Comments, p. 3.
343 Comments of Attorney Generals of Oklahoma, West Virginia, et al., p. 8. 344 Natural Rural Electric Cooperative Association Comments, pp. 22-23. 345 Comments of Hon. Charles W. Pickering, Sr., and Hon. Thomas Scott, p. 25.
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Our final interpretation of the BSER is bounded by several principles, which take the form of significant constraints included in the provisions of CAA section 111(d)(1) and 111(a)(1).346
Constraints under CAA requirements for determining the BSER
We discuss our interpretation of section 111(a)(1) and (d)(1) in section V.A. and V.B. of the preamble, and focus particularly on the constraints in section V.B.3.(a) and (c)(8). As we note in the preamble, the first constraint is that the BSER must assure emission reductions from the affected sources. Under section 111(d)(1), the states must submit state plans that “establish[] standards of performance for any existing source,” and, under section 111(a)(1) and the EPA’s implementing regulations, those standards are informed by the EPA’s determination of the best system of emission reduction adequately demonstrated. Because the emission standards must apply to the affected sources, actions taken by affected sources that do not result in emission reductions from the affected sources—for example, offsets (e.g., the planting of forests to sequester CO2)—do not qualify for inclusion in the BSER.347
The second constraint is that because the affected EGUs must be able to achieve their emission performance rates through the application of the BSER, the BSER must be controls or measures that the EGUs themselves can implement. Moreover, as noted, the D.C. Circuit has established criteria for achievability in the section 111(b) case law; e.g., sources must be able to achieve their standards under a range of circumstances. If those criteria are applicable in a section 111(d) rule, the BSER must be of a type that allows sources to meet those achievability criteria.
The third constraint is that the system of emission reduction that the EPA determines to be the best must be “adequately demonstrated.” To qualify as the BSER, controls and measures must align with the nature of the regulated industry and the nature of the pollutant so that
implementation of those controls or measures will result in emission reductions from the industry and allow the sources to achieve their emission performance standards. The history of the
effectiveness of the controls or other measures, or other indications of their effectiveness, are important in determining whether they are adequately demonstrated.
The fourth constraint, or set of constraints, is that the system of emission reduction must be the “best,” “taking into account the cost of achieving such reduction and any nonair quality health and environmental impact and energy requirements.” As noted, in light of the D.C. Circuit case law, the EPA has considered cost and energy factors on both an individual source basis and on the basis of the nationwide electricity sector. In determining what is “best,” the EPA has
346See Lawson v. FMR LLC, 134 S. Ct. 1158, 1169 (2014) (noting that “limiting principles may serve as check against overbroad applications”).
347 As discussed in section VIII of the preamble, a mass-based state plan must address the potential for “leakage” and, as one of its options, may account for CO2 emissions from new and existing sources under a joint cap implemented under state law. This approach does not violate the constraint described in the accompanying text, in fact, it is intended to assure that existing sources do achieve emission reductions.
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broad discretion to balance the enumerated factors. In past actions under section 111 for the electricity sector and other sectors (and in past actions under other CAA provisions for the electricity sector), we have taken the approach of basing regulatory requirements on controls and measures designed to reduce air pollutants from the production process without limiting the aggregate amount of production. This approach has been inherent in our past interpretation and application of section 111 and we maintain this interpretation in this rulemaking.348 Thus, our approach for this rulemaking is that affected EGUs can implement a system of emission reduction that will reduce the amount of their emissions without reducing overall electricity generation. This approach takes into account costs by minimizing economic disruption, as well as maintaining the nation’s energy requirements, by avoiding the need for reductions in the aggregate amount of electricity available to the consumer, commercial, and industrial sectors. After taking into account costs and energy requirements in this manner, we have concluded that building blocks 2 and 3 are part of the best system of emission reduction adequately
demonstrated. Building block 4, however, is outside this paradigm as it targets consumer- oriented behavior and demand for electricity, which would reduce the aggregate amount of electricity to be produced.
These criteria ensure that the selected system of emission reduction is a reasonable exercise of the Administrator’s discretion.349 Section 111(a)(1) grants broad discretion to the Administrator but nonetheless spells out “‘what the [EPA] should do and how it should do it, and sets out specific directives to govern particular situations.’”350 Nonetheless, the mere fact that “a system of emission reduction” embodies a broad set of measures does not mean that EPA’s discretion is unbounded. In fact, the Supreme Court suggested in AT&T v. Iowa Utilities Board
that a rule can apply a broadly defined statutory term even where other terms limited an agency’s
348 As we note in section V.A., in rulemaking under section 111, the EPA must necessarily take into account the nature of the industry, the nature of the air pollutant, and the types of controls or measures available for that industry to reduce that air pollutant. In previous section 111
rulemakings, on-site controls or measures that applied to the design or operations of the affected sources were generally available. In some cases, as noted in section V.B. of the preamble and section XV of this Legal Memorandum, off-site fuel cleaning measures were also available and, in the case of section 129/111(d) rules, waste reduction measures were also available, in
accordance with CAA section 129(a)(3). Accordingly, the EPA interpreted section 111 in those contexts. This rulemaking presents a unique set of circumstances, including the global nature of CO2 and the emission control challenges that CO2 presents (which limit the availability and effectiveness of control measures), combined with the facts that the electric power industry (including fossil fuel steam generators and combustion turbines) is highly integrated, electricity is fungible, and generation is substitutable (which all facilitate the generation shifting measures encompassed in building blocks 2 and 3). Our interpretation of section 111 as focusing on limiting emissions without limiting aggregate production must take into account those unique circumstances.
349See, e.g., Gas Appliance Mfrs. Ass’n v. DOE, 998 F.2d 1041, 1045 (D.C. Cir. 1993) (identifying a “limiting principle inherent in ‘economic cost and benefit’”).
350Mistretta v. U.S., 488 U.S. 361, 378-79 (1989) (upholding Congressional delegation to the U.S. Sentencing Commission to set guidelines under Sentencing Reform Act of 1984 because “[t]he Act sets forth more than merely an ‘intelligible principle’ or minimal standards.”).
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access to the full breadth of that definition in carrying out the statutory directive.351 Here, Congress established several constraints (identified above) that the Administrator must consider before she may carry out her duties under section 111. Thus, it is not necessary to deduce an additional limitation on the Administrator’s discretion under section 111(a)(1) to avoid the hypothetical intrusive regulatory examples that some commenters describe.
As we discuss in section V. of the preamble, we undertake a three-step analysis under section 111. First, we survey a range of adequately demonstrated systems of emission reduction; second, we determine the best of those systems, taking into account cost and other factors; and third, we select an achievable emission limit based on application of the BSER. Thus, in accordance with our interpretation, we undertake a pollutant-specific and source-category- specific evaluation. As a result, the BSER is unique to each industry and even may be different for new and existing sources.
With these principles in mind, we now turn to address commenters’ hypotheticals.
Commenters’ Hypotheticals
1. Consumer Products: Pulp and Paper
Commenters assert that when EPA promulgated and later revised NSPS for kraft pulp mills, it never considered basing the standard of performance on requiring increased use of recycled paper to reduce kraft pulp mill operations, even though such a measure arguably would have reduced emissions from kraft pulp mills. Commenters argue that applying EPA’s proposed interpretation of the BSER could lead EPA to adopt standards of performance for kraft pulp mills that are based on efforts to reduce demand for new paper, such as requiring office buildings to implement paper recycling programs, convert to paperless workplaces, outlaw printing, or encouraging credit card companies to provide paperless billing to customers.
351AT&T Corp. v. Iowa Utilities Board, 525 U.S. 366, 370-71 (1999). In AT&T Corp., the Court addressed the argument “that the FCC included within the features and services that must be provided to competitors under Rule 319 items that do not (as they must) meet the statutory definition of ‘network element’”. Id. at 386. After reciting the definition of a “network element,” the Court recognized that the term is broadly defined and rejected arguments that it “must be part of the physical facilities and equipment used to provide local phone service.” Id. at 387.
Accordingly, the Court deemed the FCC’s application of the term “eminently reasonable.” Id., citing Chevron, 467 U.S. at 866. The Court went on to conclude, however, “that the FCC did not adequately consider the ‘necessary and impair’ standards when it gave blanket access to these network elements, and others, in Rule 319.” AT&T at 387. The Court reasoned that the FCC needed “to apply some limiting standard, rationally related to the goals of the Act” when
determining what network elements should be made available, which the Act explained required the FCC to consider whether “(A) access to such networks elements … is necessary; and (B) the failure to provide access to such network elements would impair the ability of the
telecommunications carrier seeking access to provide the services that it seeks to offer.” Id. at 388. Thus, because the FCC neglected to consider the necessary and impair standards, the Court vacated Rule 319 for failing to suffice as a reasonable interpretation of the statute.
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Basing the BSER for kraft pulp mills on demand-side activities would not qualify as a system of emission reduction in accordance with our interpretation of section 111, including the constraints noted above. First, we do not interpret section 111(a)(1) to authorize measures that target consumer-oriented behavior as the BSER.
Moreover, even if such activities could be considered under section 111, commenters have not shown that such measures would satisfy other of the criteria of section 111(a)(1) for this industry.
Several of commenters’ hypotheticals are not systems of emission reduction that owners or operators of kraft pulp mills could undertake to achieve emission limits. While governments could, in theory, require that office buildings implement paper recycling programs, require conversion to paperless workplaces, or outlaw printing, the owners or operators of kraft pulp mills could not.
In addition, commenters’ hypotheticals concerning recycling do not take into account limits on the substitutability of recycled paper in the marketplace. Paper is significantly less fungible than electricity, which raises issues as to whether commenters’ hypotheticals could qualify as adequately demonstrated systems of emission reduction. Recycled paper is not
uniformly substitutable in the marketplace because of the physical properties of the final product. First, paper can only be recycled a finite number of times. Every time paper is recycled, the cellulosic fibers that make up the sheet become shorter. After being recycled five to seven times, the fibers are too short to bond to form a new sheet of paper, therefore, new fibers must be added to produce the sheet. Second, some paper products require strength properties that are not
achievable with recycled fibers because recycled fibers weaken each time they go through the recycling process. For example, grocery bags need very high tensile and tear properties so that the bags don’t break when people use them to carry their groceries, and therefore, are made with new, long softwood fibers instead of short recycled fibers. Some paper products require very clean fibers such as book papers and personal hygiene products. The recycling process does not remove 100 percent of the contaminants, so recycled fiber cannot be used for these products.
By the same token, commenters’ hypotheticals concerning paperless documents and communications do not take into account the fact that, although fossil fuel-fired generated electricity and renewable generated electricity are fungible, paperless communications and printed documents are not fungible. This lack of fungibility places limits on the extent to which the commenters’ hypotheticals would constitute adequately demonstrated systems of emission reduction.
Further, commenters have not shown that such measures are adequately demonstrated for the kraft pulp mill industry. Commenters have not explained what actions owners or operators of kraft pulp mills could undertake to implement such measures to reduce emissions from their sources, and we are not aware of any history of any of those entities doing so. Moreover, due to the trade-sensitive nature of the industry, the extent to which demand-side measures would actually reduce emissions from kraft pulp mill sources is not clear because (i) a large percentage (in 2013, approximately 40 percent) of the domestically recovered paper and paperboard were exported to China and other nations for recycling and producing paper in their own countries;
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and (ii) it may be possible for pulp and paper mills to produce more paper products and sell them overseas or produce other types of products.
In addition, commenters have not shown that their hypotheticals meet the other criteria for the BSER, including the amount of emission reduction and the costs. For instance,
commenters have not identified any business practices in the kraft pulp mill industry that could help lessen the costs of implementing such measures. In addition, it is not clear whether owners or operators of kraft pulp mills could recover the costs of the hypothesized measures, in light of foreign competition.
Lastly, commenters have not shown how we could quantify an achievable limit based on application of such measures, that is, how sources could be credited for such measures. As discussed in section V of the preamble and supporting documents, for renewable energy, the REC market is well-established and generation tracking systems are well-established; as a result, systems can be developed for crediting the affected EGUs subject to this rulemaking for
generation shifts and the development or incremental renewable energy. Those types of