EPA Finalizes ACE Rule, Replaces Clean Power Plan

The Environmental Protection Agency (EPA) has issued a final Affordable Clean Energy (ACE) rule to formally replace the Obama administration’s controversial Clean Power Plan (CPP). 

Like the CPP, the June 19–issued final ACE rule will regulate greenhouse gases (GHGs), and it will be founded firmly on the agency’s 2009 Endangerment Finding. However, the ACE rule focuses on the nation’s 600 coal-fired units (at 300 facilities) and gives states leeway on deciding how they will meet “emission guidelines” stipulated in the rule.

The ACE rule also defines the “best system of emission reduction” (BSER) for GHG emissions from existing power plants as on-site, heat-rate efficiency improvements, and it outlines six “candidate technologies” and operating and maintenance practices that generators can use to improve heat rate—which is a measure of the amount of energy required to generate a unit of electricity. In the CPP, by comparison, the EPA determined that BSER should be comprised of three building blocks: increasing operational efficiency of coal plants; shifting power generation from coal to natural gas; and increasing power generation from renewables.

The six heat rate improvement “candidate technologies” are: neural/network/intelligent soot blowers; boiler feed pumps; air heater and duct leakage control; variable frequency drives; blade path upgrades (for steam turbines); and economizer redesigns or replacements. In the ACE rule, the EPA provides a “degree of emission limitations” that can be achieved by applying each these technologies, along with ranges for how much improvement can be expected and costs associated with installing them.

Under the rule, states must now establish unit-specific “standards of performance” (in the form of an allowable emission rate, for example, lb CO2/MWh-gross) that reflect those achievable emission limitations. The EPA on Wednesday also stressed that the Clean Air Act allows states to consider “the remaining useful life of the source” and other source-specific factors in establishing standards of performance.

No NSR Reform—for Now

In a significant change compared to proposed rule, the final rule does not include any final action concerning the New Source Review (NSR)—a dedicated preconstruction permitting program that requires air pollution permits for “major modifications” at plants.

In its proposed rule, the EPA moved to revise the program to give states the option to adopt an hourly emissions increase test for projects that could improve plant efficiency. The revisions would have meant that only projects that increase a plant’s hourly rate of pollutant emissions would need to undergo a full NSR analysis. The EPA said at the time that the changes were designed to encourage carbon-emitting sources to implement heat-rate improvements without the prospect of triggering major NSR permitting and a protracted permitting process.

However in the final rule, the EPA said it intends to take final action on the proposed NSR reforms in a separate final action “at a later date.” The “consequences of that action are no longer considered in parallel with ACE,” the final rule notes. 

It reasons that for two candidate technologies—blade path upgrades and economizer redesigns or replacements—NSR “would not be a barrier for installation,” but, it adds, states can also consider costs associated with NSR as a source-specific factor in considering whether these two technologies are reasonable. Ultimately, it acknowledges it is “likely” states will determine the two technologies are “not as reasonable” without NSR reforms, but the agency still chose to include them as BSER because the technologies are “generally applicable across the fleet of existing [units], and because the costs of the technologies themselves are generally economical and reasonable.” 

[For an in-depth analysis of the “candidate technologies” to improve heat rate at coal units, see “What Coal Generators Should Know About the EPA’s Proposed ACE Rule.”]

EPA Wants Net Carbon Reductions—But ‘Legally’

Along with the final ACE rule, the EPA on Wednesday also issued two separate rule makings. One repeals the CPP and the other revises implementation regulations for ACE, ongoing emission guidelines, and future emission guidelines for existing sources issued under the Clean Air Act Section 111(d). 

According to EPA Administrator Andrew Wheeler, who signed the final rule in a streaming webcast event , the latter is essentially a set of guidelines that will inform states as they set unit-specific standards of performance. “For example, states can take a particular source’s remaining useful life and other factors into account when establishing a standard of performance for that source,” he said. “These changes to the implementing regulations in section 111(d) harmonize existing regulations with the statute by making it clear that states have broad discretion in establishing and applying emissions standards consistent with EPA’s determined BSER,” the agency said in a fact sheet. Wheeler elaborated:  “These provisions will give states and the private sector the regulatory certainty they need to invest in new technologies to increase efficiency and reduce emissions.” 

Wheeler noted that from 2005 to 2017, total energy-related CO2 emissions fell by 14%. “We owe much of this progress to the genius of the private sector and free markets—not the heavy hand of government,” he said. 

However, when ACE is “fully implemented,” the EPA expects that power sector carbon emissions could fall to as much as 35% below 2005 levels. ACE will also reduce SO2, NOX, and particulate matter emissions, he said. “EPA projects that ACE will result in annual net benefits of anywhere between $120 million to $730 million,” said Wheeler. “And here’s the bottom line: ACE will continue our nation’s environmental progress, and it will do so legally, and with proper respect for the states.” 

The Planned Rollout

The final ACE rule is just the first of several power plant rule rollbacks that the agency plans to issue over the next few months.This month, the EPA is also expected to issue revisions to the Effluent Limitations Guidelines (ELG) and Standards, and next month, it will issue four new coal ash rules. (For a full schedule, see, “EPA Sets Schedules for Long List of Power Plant Regulatory Actions.”)

According to Wheeler, the ACE rule will be implemented in three steps. Step one will see the agency set the BSER for existing power plants. “To be clear, the EPA is not setting a presumptive standard of performance. States will be given the flexibility to design a plan that best suits their local environmental and energy needs,” he said. 

In step 2, each state will have three years to submit a plan that establishes a standard of performance with EPA’s guidelines. In step 3, the EPA will have 12 months once a state plan is submitted to approve it. “This timeline is in line with other planning deadlines under the Clean Air Act,” Wheeler noted.

Litigation Continues

It is unclear how finalization of the rule will affect a set of consolidated legal challenges to the CPP, West Virginia, et. al. v. EPA (No. 15-1363), which remain in abeyance at the D.C. Circuit. At least 17 states have claimed the EPA has taken “undue advantage” of the now two-year-long abeyance granted to the agency by the federal court to allow it to review the rule. The states have urged the court to decide merits of the case, which it heard in the fall of 2016.

West Virginia v. Environmental Protection Agency, which was docketed in October 2015, just after the EPA promulgated the Clean Power Plan, involves numerous petitions for review of the final rule. It originally pitted a coalition of 27 states and several energy producers, utilities, and trade organizations against the Obama-era EPA, 18 states, and a host of environmental groups.The Supreme Court granted an unprecedented stay of the rule pending judicial review in February 2016, and the D.C. Circuit heard oral arguments en banc in September 2016. 

In March 2017, however, President Trump issued an executive order for executive departments and agencies to review, revise, or rescind rules that “burden domestically produced energy resources,” prompting former EPA Administrator Scott Pruitt to announce that the EPA would review the CPP. 

Early Reactions 

America’s Power, the national coal power industry group, on Wednesday lauded the rule. “The rule takes a sensible and legally sound approach to regulating carbon dioxide emissions from the nation’s coal fleet.” said the group’s president and CEO Michelle Bloodworth. Of particular significance is the rule’s flexibility “to set reasonable carbon dioxide standards that do not force the premature retirement of more coal-fired generating units,” she said. The group also commended the EPA “for not attempting to use environmental regulations to drive energy policy.” 

International nonprofit organization Natural Resources Defense Council’s (NRDC’s) reaction echoed those from other environmental groups. “President Trump’s dirty power scheme would do nothing to address the rising economic costs and the increasing dangers wrought by climate change. Instead, it would give polluters free rein and doom future generations to a dangerously hostile world,” said President Rhea Suh. Strengthening the CPP would have been a better option to  reduce power plant carbon emissions, she said. 

Suh also said the group will go to court to stop it.

The National Rural Electric Cooperative Association (NRECA), a trade association representing 900 electric cooperatives, also lauded the final rule’s flexibility. “Electric cooperatives have invested billions of dollars in diverse energy sources and emission-reduction technology to meet the electricity needs of their local communities while protecting the environment. The final ACE rule gives electric cooperatives the ability to adopt evolving technology and respond to market and consumer demands while continuing to serve as engines of economic development for one in eight Americans,” said NRECA CEO Jim Matheson. 

However, NRECA also noted that nearly 60% of the power produced by electric co-ops today comes from low- or no-emission energy sources. “Electric cooperatives have reduced emissions from their electric generation sources significantly since 2009 and are investing in research to develop proven carbon capture, storage and reuse technology that can extend the operation of fossil fuel power plants,” it said. However, regulatory flexibility was important to co-ops, NRECA said. In comments on the rule that the group submitted to the the EPA, the group urged regulations “within the fence” of a facility by allowing states to make assessments based on federal guidelines at each power plant.

—Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine).