On March 27, 2012, the Environmental Protection Agency (“EPA”) proposed a Carbon Pollution Standard for New Power Plants (“Carbon Standard”), setting national limits on the amount of carbon pollution power plants built in the future can emit.  The rules are a reaction to the United States Supreme Court’s decision in Massachusetts v. EPA, 549 U.S. 497 (2007), in which, among other things, the Supreme Court held that greenhouse gases, including carbon dioxide (“CO2”) are air pollutants under the Clean Air Act.  EPA was charged by the court with issuing an “endangerment finding,” i.e., a determination that greenhouse gases threaten public health and welfare which was issued on December 15, 2009. 

Immediately upon their initial promulgation, the Carbon Standard generated more contention than power plants generate greenhouse gases.  The Wall Street Journal charged, in an article entitled “Killing Coal,” that “because the putative ‘regulatory impact’ would be zero, there are also no benefits.”  It went on to say that, because the rule would apply not only to new plants but also to every plant upgrade or modification in existing facilities; and because the technology required to meet the standard is still speculative, the EPA’s real goal must be to put a stop to the use of coal in electricity generating. 

The EPA immediately fired back, characterizing the critique of the Carbon Standard in, among others, the Wall Street Journal, as examples of “fact free assault.”  Assistant Administrator Gina McCarthy pointed to the “example” that, in fact, “this standard only applies to new sources – that is power plants that will be constructed in the future.  This standard would never apply to existing power plants.”  Moreover, again pointing to the Wall Street Journal editorial, she stated “the proposed rule explicitly does not apply to facilities making such modifications.  In fact, EPA did not propose a standard for any modifications.”

The proposed Carbon Standard speaks for itself. 

The Carbon Standard proposes that new fossil fuel fired power plants meet an output based standard of 1,000 pounds of CO2 per megawatt hour (pound CO2/MWh gross).  It would apply only to new fossil fuel fired electric utility generating units (“EGUs”).  For purposes of the Carbon Standard, fossil fuel fired EGUs include fossil-fuel-fired boilers, integrated gasification combined cycle (“IGCC”) units, and stationary combined cycle turban units that generate electricity for sale and are larger than 25 megawatts.  EPA takes the position that new natural gas combined cycle (“NGCC”) power plant units should be able to meet the proposed standard without add-on controls.  In fact, basing its claim on available data, EPA believes that nearly all (95%) of the NGCC units built since 2005 would meet the standard.  Finally, new power plants that are designed to use coal or petroleum coke would be able to incorporate technology to reduce carbon dioxide emissions to meet the standard, such as carbon capture and storage (“CCS”).

What the Carbon Standard does not do is, perhaps, more notable, than what it does do.  EPA explains that the proposal would not apply to: (1) existing units including modifications such as changes needed to meet other air pollution standards; (2) new power plants that have permits and start construction within 12 months of the proposed rule, or units looking to renew permits that are part of a Department of Energy demonstration project (provided that these units start construction within 12 months of the proposal); (3) new units located in non-continental areas such as Hawaii and United States territories; and (4) new units that do not burn fossil fuels (e.g., that burn biomass only). 

Finally, EPA takes the position that the Carbon Standards provide flexibilities for new power plants to phase in technology to reduce carbon pollution.  For example, new power plants that use CCS would have the option to use a thirty year average of CO2 emissions to meet the proposed standard, rather than meeting the annual standard each year.  Moreover, plants that install and operate CCS right away would have the flexibility to emit more CO2 in the early years as they learn how to best optimize the controls.  In the final analysis, EPA’s, DOE’s and other industry projections indicate that the Carbon Standard is in line with current industry investment patterns.  That is, due to the economics of coal and natural gas, among other factors, new power plants that are built in over the next decade or more would be expected to meet this proposed standard even in the absence of the rule. 

EPA will accept comments for 60 days after publication in the Federal Register.  Comments on the proposed standard should be identified by Docket ID No. EPA-HQ-OAR-2011-0660.