On March 27, the Environmental Protection Agency (EPA) proposed New Source Performance Standards (NSPS) under Section 111 of the Clean Air Act to limit carbon dioxide emissions from new fossil fuel-fired electric generating plants.  EPA's proposal follows the Supreme Court's 2007 decision that CO2 is a "pollutant" under the Clean Air Act in Massachusetts v. EPA and was almost certainly legally required after EPA's 2010 finding that CO2 and other greenhouse gas emissions from motor vehicles endanger human health and welfare.

Breaking with past precedent, EPA proposed one limit for both coal- and gas-fired units, 1,000 pounds of CO2 for each megawatt hour of power produced.  Modern combined-cycle natural gas plants easily meet this standard.  However, coal-fired power plants would not meet the standard unless they incorporated carbon capture and sequestration (CCS), an expensive, energy-intensive technology that has not yet been commercialized.

The rule applies only to fossil fuel-fired power plants larger than 25 megawatts.  It does not apply to any plant that had construction permits as of March 27, 2012 and that starts construction before March 27, 2013. This is a longer "grandfather" period than EPA usually provides for new NSPS, but EPA adopted it to avoid subjecting plants at an advanced stage of development to the new standard.

The rule does not apply to biomass fueled plants, the "reconstruction" of existing plants, or increased CO2emissions from existing power plants caused by new pollution control equipment.

This proposal is the fourth major EPA rule on greenhouse gas control.  However, its practical impact on the utility and coal industries will likely be limited because few new coal plants are being proposed.  EPA asserts that, regardless of the rule, abundant cheap natural gas and concerns about carbon emissions mean that few if any new coal-fired plants will be built in this country before 2030.

The prospect of so few new coal plants means EPA found no need to accommodate new coal generation by a special rule for their carbon emissions.

EPA's rule includes a novel approach that EPA contends will encourage CCS development.  New power plants can commit to meet the CO2 emissions limit on average during the first 30 years of operation.  EPA suggests that developers, anticipating future CCS technology that could significantly limit future carbon emissions, could construct and begin operating coal-fired plants without immediately providing CCS.  Carbon control technologies to be installed at a later date would control average carbon emission during the first 30 years to the NSPS standard.

Section 111(d) of the Clean Air Act requires states to come up with plans to control existing sources of a pollutant for which EPA has set an NSPS if there is no national ambient air quality standard for that pollutant.  There has been much academic speculation whether EPA might  use this provision to leverage a power plant NSPS into a broader program of greenhouse gas control.  However, EPA's proposal does not discuss that issue.

Comments on EPA's proposed new rule will be due 60 days after publication in the Federal Register. We expect significant discussion of the proposed rule from environmental organizations, coal-reliant electric utilities, the coal industry, regulators and regional interests that heavily rely on mining and coal transportation.  For further information on this rulemaking and the issues it raises, contact your regular Perkins Coie lawyer, or any of the following members of the Perkins Environment, Energy & Resources group:

Tom Lindley
LeAnn Johnson Koch

© 2012 Perkins Coie LLP