EPA Proposes CO2 Emission Standards for Modified & Reconstructed Power Plants

Environmental Update

Date: June 20, 2014

On June 2, 2014, the United States Environmental Protection Agency (EPA) issued a proposed rule (Modified Source Proposal) regulating carbon dioxide (CO2) emissions from modified and reconstructed coal- and natural gas-fired electric generating units (EGUs) under Section 111(b) of the Clean Air Act (CAA). The Modified Source Proposal would apply to existing EGUs that undertake a “modification” or “reconstruction” (as those terms are defined in the CAA) after the date on which the proposal was published in the Federal Register, which is June 18, 2014. The proposal sets forth separate emission standards for modified and reconstructed units, and within those categories, EPA has proposed separate standards based on whether the unit is powered by coal or natural gas. Unlike EPA’s proposed CO2 emission standards for new power plants, which are based on the implementation of carbon capture and sequestration technology at coal-fired plants, the emission standards for modified and reconstructed units are based on an array of efficiency improvement measures.

Also on June 2, EPA released proposed emission standards for existing EGUs under Section 111(d) (Existing Source Proposal). Those standards are addressed in a separate alert.

Modification v. Reconstruction

As mentioned above, the Modified Source Proposal would only apply to modified and reconstructed sources. With certain exceptions, EPA defines a “modification” as “a physical or operational change that increases the source’s maximum achievable hourly rate of emissions.” EPA defines “reconstruction” as “the replacement of components of an existing facility to such an extent that (1) the fixed capital cost of the new components exceeds 50 percent of the fixed capital cost that would be required to construct a comparable entirely new facility, and (2) it is technologically and economically feasible to meet the applicable [performance] standards.”

Emission Standards
Modified Utility Boilers & IGCC Units

For modified coal-fired utility boilers and integrated gasification combined cycle (IGCC) units, EPA is proposing two alternative standards of performance. Under the first, the emission limit for each covered unit would be a 2 percent reduction from the unit’s best annual emission rate since 2002, but no more stringent than 1,900 lbs. CO2/MWh for sources with a heat input rating greater than 2,000 MMBtu/h and 2,100 lbs. CO2/MWh for sources with a heat input rating of 2,000 MMBtu/h or less.

Under the second alternative, the emission limit depends on whether the unit was modified before or after becoming subject to a Section 111(d) implementation plan for existing EGUs. Units that modify before becoming subject to an implementation plan would be required to meet the same emission limit they would have to meet under the first alternative. Units that modify after becoming subject to an implementation plan, however, would be required to meet a unit-specific emission limit selected by the entity administering the plan. The unit-specific limit would be based on the results of an “energy efficiency improvement audit” of the facility.

These standards are based on a 12-month rolling average and a “best system of emission reduction” (BSER) described by EPA as each unit’s “best potential performance, achieved through a combination of best operating practices and equipment upgrades.”

Reconstructed Utility Boilers & IGCC Units

For reconstructed coal-fired utility boilers and IGCC units, the Modified Source Proposal sets forth emission limits of 1,900 lbs. CO2/MWh for sources with a heat input rating greater than 2,000 MMBtu/h and 2,100 lbs. CO2/MWh for sources with a heat input rating of 2,000 MMBtu/h or less. These standards are based on a 12-month rolling average and “the most efficient generating technology” at the covered unit (which EPA describes as “reconstructing the boiler to use higher steam, temperature, and pressure, even if the boiler was not originally designed to do so”) as the BSER.

Modified & Reconstructed Natural Gas-Fired Turbines

For both modified and reconstructed natural gas-fired turbines, EPA is proposing emission limits of 1,000 lbs. CO2/MWh for sources with a heat input rating greater than 850 MMBtu/h and 1,100 lbs. CO2/MWh for sources with a heat input rating of 850 MMBtu/h or less. The standards are based on a 12-month rolling average and efficient natural gas combined cycle technology as the BSER.

Interaction With Existing Source Proposal

In the Modified Source Proposal, EPA is proposing to require sources that undergo modification or reconstruction after the CO2 emission standards for existing sources become effective to continue complying with the existing source requirements in addition to the federal performance standards for modified or reconstructed EGUs. According to EPA, this is necessary to prevent existing EGUs from undertaking modification or reconstruction to escape the requirements for existing sources.

Next Steps

Comments on the Modified Source Proposal will be accepted through October 16, 2014. EPA plans to issue a final rule on June 1, 2015.

The full text of the proposed rule can be found on EPA’s website or in the June 18, 2014 Federal Register at 79 Fed. Reg. 34960.

FOR MORE INFORMATION

For more information, please contact:

Wray Blattner
937.443.6539
Wray.Blattner@ThompsonHine.com

Andrew L. Kolesar
513.352.6545
Andrew.Kolesar@ThompsonHine.com

Erin M. Minor
513.352.6556
Erin.Minor@ThompsonHine.com

or any member of Thompson Hine’s Environmental practice group.

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