Public Comment Period Highlights Concerns About EPA's Clean Power Plan

EPA is roughly four months into the public comment period for its proposed Clean Power Plan ("Plan") to reduce greenhouse gas emissions from existing power plants.

Although the public comment period on the Plan will remain open until the first of December 2014, states and regulated entities have already raised numerous concerns about the legality, feasibility, and electric reliability impacts of the Plan during EPA public hearings and in litigation challenging the Plan.

As currently proposed, the Plan would establish statewide limits on carbon intensity in pounds of carbon dioxide emissions per megawatt-hour ("lb/MWh"). The statewide limits are based on EPA's determination of the potential for increasing renewable energy deployment, projected demand-side management savings, and utilization of natural gas-fired power plants. As authority for the Plan, EPA relies on Clean Air Act § 111(d), which calls for EPA to develop a procedure by which states establish standards of performance for existing sources of certain air pollutants. 

Our prior article outlined some legal concerns with EPA's reliance on CAA § 111(d), especially in light of the United States Supreme Court's recent analysis of CAA authority in UARG v. EPA. In addition to challenging EPA's basic legal authority for the Plan, electric utilities, state environmental agencies, and state electric regulatory agencies and system operators are raising concerns with the details of the Plan. 

A handful of those concerns are summarized below.

Inappropriate Baseline. EPA's selected baseline year (2012) is not an appropriate frame of reference for determining historical emission levels and setting state goals. In fact, no single year is appropriate as a baseline, and 2012 was especially unusual in terms of capacity factors for combined cycle and coal facilities in many areas. States and electric utilities are urging EPA to use an earlier, multiyear baseline.

Unrealistic Building Blocks. State budgets in the Plan are based on an unrealistic assumption of achieving a 6 percent efficiency improvement across coal units and an average capacity factor of 70 percent for natural gas combined cycle facilities. The Plan also assumes renewable energy expansion and customer energy efficiency increases that are well above achievable levels in many states.

Difficulty Translating State Limits. The Plan gives states the option of translating EPA's rate-based goals (lb/MWh) into mass-based caps (lbs), but there is no clear method of translation in the Plan. States may have difficulty ensuring consistent methods, assumptions, and outcomes among the different types of limits.

Conflicts with Existing Trading Programs. Many states will prefer multistate emission trading programs as a means of compliance, especially states that already have carbon trading programs like the Regional Greenhouse Gas Initiative. However, the details of the Plan may not be consistent with existing trading programs due to differences in baseline periods, planning horizons, and allowance budgets.

Infeasible Compliance Period. States and electric utilities are concerned that the Plan does not allow sufficient time for planning and implementation of measures to reduce emissions. The first state submissions to EPA would be due just one year after a final rule is expected. More detailed plans would be due one or two years later, depending on whether a state chooses to be part of a multistate plan. After submission of a state plan, EPA budgets just one year for its own review and approval process. Considering that the proposed interim compliance period begins in 2020, electric utilities will have very little time after EPA approval of final state plans to implement the required measures.

Electric Reliability Concerns. The short compliance period may compromise electric reliability because there will not be enough time to build the new generation and transmission capability needed to compensate for projected unit retirements. Changes in the long-term supply and pricing of natural gas could exacerbate these negative impacts on electric reliability.

State Authority. By influencing the operation of power plants and the electric system as a whole, the Plan treads on areas that are traditionally reserved for the authority of state electric utility agencies and system operators.

— Charles T. Wehland (+1.312.269.4388, ctwehland@jonesday.com), Casey Fernung Bradford (+1.404.581.8119, cbradford@jonesday.com), and Simon P. Hansen (+1.404. 581.8988, shansen@jonesday.com)

EPA Proposes Two Rules to Limit Hydrofluorocarbons with High Global Warming Potential

EPA recently proposed a pair of rules under the Significant New Alternatives Policy ("SNAP") program to substitute hydrofluorocarbon ("HFC") refrigerants that possess high global warming potential ("GWP") with low-GWP alternatives. These rules are pursuant to the Obama administration's efforts under the Climate Action Plan and the Montreal Protocol to phase out the production and use of chlorofluorocarbons and HFCs with high GWP. 

The Clean Air Act's SNAP program (Section 612) mandates that EPA continuously review alternatives to ozone-depleting substances to find substitutes that pose less overall risk to human health and the environment. EPA then has the authority to update the published lists of "acceptable" and "unacceptable" substitutes. 

On July 9, 2014, EPA proposed a rule under the SNAP program that would list certain hydrocarbons as acceptable substitutes for HFC refrigerants. Under this proposed rule, EPA would approve the use of low-GWP hydrocarbons (ethane, isobutane, and propane) and a hydrocarbon blend (R-441A) in stationary equipment such as household refrigerators and freezers, retail food refrigeration, vending machines, and air conditioners. In addition, the proposed rule would exempt these substitutes from the current venting prohibition for refrigerants under Section 608 of the Clean Air Act because EPA determined that the venting, release, or disposal of these hydrocarbons would not pose a threat to human health or the environment. According to EPA, these hydrocarbons are widely used as refrigerants in Europe and Asia and possess zero ozone depletion potential and very low GWP.

A few weeks later, on August 6, 2014, EPA proposed to modify the listing of certain common HFCs and HFC-containing blends to "unacceptable" for some uses under the SNAP program. Although the targeted HFCs initially were approved as acceptable substitutes to chlorofluorocarbons, EPA determined that other substitutes—including the hydrocarbon substitutes listed in the earlier proposed rule—are now available for the same uses that pose lower risk overall to human health and climate. Therefore, the change in status would make the targeted HFCs unacceptable for use in both new equipment and for retrofitting existing equipment. Under this proposal, the most abundant HFC (HFC-134a) could no longer be used in new light-duty vehicle air-conditioning systems beginning in model year 2021 or in new retail food refrigeration equipment and new vending machines beginning in 2016. Other products likely to be affected by the proposed rule include consumer aerosols and plastic foam products. 

Taken together, EPA Administrator Gina McCarthy stated that these proposed rules would significantly reduce greenhouse gas emissions—between 31 million and 42 million metric tons of carbon dioxide equivalent by 2020—and would encourage companies to pursue environmentally friendly alternatives. The public comment periods for the proposed rules ended on September 8, 2014 and October 20, 2014, respectively. 

— Greg S. Martin (+1.858.314.1136, gmartin@jonesday.com)