EPA’s Power Sector Carbon Rules: Are They Legal?

EPA’s final “Carbon Pollution Standards” rule, released today, requires new coal-fired power plants to meet a standard of 1,400 pounds of carbon dioxide per megawatt hour (1,400 lbs. CO2/MWh) – less stringent than the 1,100 lbs. CO2/MWh standard in the agency’s Jan. 2014 proposed rule.

Under §111(b) of the Clean Air Act, performance standards are to reflect the “best system of emission reduction” (BSER) that has been “adequately demonstrated,” taking “cost” into account.

EPA says the final standard “better represents the requirement that the BSER be implementable at reasonable cost.” That’s a face-saving way of saying the agency’s original proposal would not have survived judicial review.

Although not as blatantly unreasonable, the rule remains fatally flawed.

The standard is still based on the fiction that “partial” carbon capture and storage (CCS) is the “adequately demonstrated” BSER. The very example EPA cites to make its case – the Saskatchewan Boundary Dam Project – shows that nobody is building utility-scale CCS power plants without government subsidy.

More fundamentally, CCS in commercial practice is not really a system of emission reduction. Even with subsidy, CCS is uneconomical unless power plants can sell the captured CO2 to enhanced oil recovery (EOR) projects. When the recovered oil is combusted, it emits CO2. As explained previously on this site, EPA and Department of Energy data imply that the recovered oil emits about 1.4-1.6 metric tons of CO2 for every ton injected and stored underground.

EPA acknowledges that the “Carbon Pollution Standards” rule will have no monetized climate benefits, because the agency does not anticipate anyone building new coal-fired power plants anyway. So what’s the point?

The real prize for the Obama administration is control over each state’s electricity market. That’s the job of EPA’s final “Clean Power Plan“ (CPP) rule, also released today. Under §111 of the Clean Air Act, EPA may not promulgate emission performance standards for existing sources until it promulgates standards for new sources. The core function of the “Carbon Pollution Standards” rule is provide the regulatory prerequisite for the CPP.

Here’s the good news. EPA’s modification of the new source rule makes one of the CPP’s legal flaws more conspicuous.

Under the CPP as proposed in June 2014, half the states had performance standards for existing sources that were more stringent than EPA’s proposed standard of 1,100 lbs. CO2/MWh for new coal power plants. Under the final CPP, all states have performance standards for existing sources that are more stringent than the final standard of 1,400 lbs. CO2/MWh for new coal power plants.

Never before in the history of the Clean Air Act have §111 existing source performance standards been more stringent than the corresponding new source standards. That would, after all, defeat the logic and intent of the Act, which is to use the experience gained from regulating new sources to develop standards for existing sources that take into account the latter’s technological limitations and sunk costs.

Judges are bound to question the legal interpretation that has produced such a topsy-turvy pair of rules.