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EPA Moves to Replace Obama-Era CPP With Affordable Clean Energy Rule

The U.S. Environmental Protection Agency (EPA) proposed a rule Tuesday that would shift to states much of the responsibility for regulating carbon dioxide (CO2) emissions from power plants, potentially opening a door to increased burning of coal, in the Trump administration’s latest maneuver to kill the Obama-era Clean Power Plan (CPP).

Like CPP, the Affordable Clean Energy (ACE) Rule, EPA said, would continue lowering CO2 emission levels. But unlike the "overly prescriptive and burdensome" CPP, ACE "empowers states, promotes energy independence, and facilitates economic growth and job creation."

ACE would put in place a "reasonable program focused on potential upgrades to coal plants...[and] leaves the market alone and doesn’t pick winners and losers," EPA said. As proposed, the regulation:

  • Defines the "best system of emission reduction" for greenhouse gas (GHG) emissions from existing plants as on-site, heat-rate efficiency improvements;
  • Provides states with a list of "candidate technologies" that can be used to establish standards of performance and incorporated into their state plans;
  • Updates EPA’s New Source Review Permitting program to incentivize efficiency improvements at existing power plants; and
  • Aligns Clean Air Act section 111(d) general implementing regulations to give states adequate time and flexibility to develop their state plans.

An EPA analysis found that coal-fired power plants can reduce CO2 emissions by making on-site efficiency upgrades, or "heat rate improvements."

About 600 coal-fired electric generating units would be covered by the proposed rule, EPA said. The agency estimated that replacing CPP with ACE could result in $3.4 billion in net benefits. "Under some scenarios, avoided compliance costs total $6.4 billion compared to the CPP," EPA said.

"The ACE Rule would restore the rule of law and empower states to reduce greenhouse gas emissions and provide modern, reliable, and affordable energy for all Americans," said EPA acting administrator Andrew Wheeler. "Today's proposal provides the states and regulated community the certainty they need to continue environmental progress while fulfilling President Trump's goal of energy dominance."

EPA's ACE proposal and the attendant repeal of the CPP found a quick ally in the National Mining Association (NMA).

"The policy put forward by the previous administration was an illegal attempt to impose a political agenda on the country's power system, to create what it called 'a new energy economy,’” said NMA CEO Hal Quinn. “That 'new energy economy' would have had dire consequences for everyday Americans who depend on affordable, reliable coal-powered electricity, forcing the premature retirement of many existing coal plants, and increasing the vulnerability of our grid to supply outages and price spikes -- an unacceptable proposal given the negligible environmental benefits.

"The replacement rule respects the infrastructure and economic realities that are unique to each state, allowing for state-driven solutions, as intended by the Clean Air Act, rather than top down mandates. It also embraces American innovation, by encouraging plant upgrades."

ACE also found a potential ally in the U.S. Chamber of Commerce.

"Today's announcement is an important step toward a more collaborative process that fits within EPA's statutory authority and will result in achievable progress through more practical, state-driven programs," said Karen Harbert, CEO of the U.S. Chamber’s Global Energy Institute. "This revised approach will help continue the trend of lower electric power sector emissions while preserving America's energy edge and respecting environmental law."

Some Democratic lawmakers on Capitol Hill, still smarting over the elevation of Wheeler, a former coal industry lobbyist, to EPA's highest office, were just as quick to criticize EPA's announcement.

“This Dirty Power Plan is King Coal corporate welfare, propping open the doors to aging, polluting coal plants," said Sen. Edward Markey (D-MA). "Coal cannot compete against wind, solar and renewables in the free market. It’s not a conspiracy, it’s competition. In 2016, more jobs were created in solar than existed in the entire coal industry…

“Unless we reduce carbon and other dangerous air pollution, the public’s health will suffer from more asthma attacks and respiratory illness. A clean energy revolution is happening across the globe, but President Trump wants to hand over countless American clean energy jobs and the development of new technologies to China, Germany, India, and other nations."

"Economics -- not regulation -- will continue to be the primary driver of coal plant shutdowns," said Toby Shea, a vice president at Moody's Investors Service. "While the administration's proposal is credit positive for owners of coal plants in the short-term, it only moderates the industry's move away from coal in the long-term, and the lack of regulatory certainty will present challenges for utility generation planners."

Replacing CPP with ACE appears to be step toward disassembling the 2013 Climate Action Plan, ClearView Energy Partners LLC wrote in a note to clients Tuesday.

"We expect a less aggressive regulatory outlook to discourage older, higher emitting fossil fuel assets from exiting the nation's power portfolio, and do not anticipate the regulatory reprieve to ameliorate the difficult economics these units face. We continue to expect that the Department of Energy could move forward with its potential plan to offer financial support to ‘fuel secure’ coal and nuclear units."

EPA made it clear last year that it planned to completely repeal the CPP in 2018, a move it said could save power generators up to $33 billion in avoided compliance costs in the year 2030. The agency issued a notice of proposed rulemaking announcing the repeal last October.

The Obama administration unveiled the final version of the CPP in August 2015. The plan, which embraces renewables, solar and wind power, but not so much natural gas, calls for states to reduce emissions by 32% below 2005 levels by 2030.

Under the CPP, states must develop and implement plans that ensure power plants in their state -- either as single plants or as a collective group -- achieve goals for reducing CO2 emissions between 2022 and 2029, and final CO2 emission performance rates by 2030. The CPP gives states the option of choosing between either an emissions standards plan or a state measures plan to reduce emissions. They would also have the option of trading emissions rate credits with other states.

The CPP has been on hold pending legal challenges working their way through the courts. Twenty-seven states have sued over the CPP, arguing that it is an overreach by EPA. In February 2016, the U.S. Supreme Court temporarily blocked implementation of the rule until all legal challenges are resolved.

Earlier this year a coalition of 236 mayors of U.S. cities urged EPA to halt its plans for a complete repeal of the CPP, and a trio of former commissioners at FERC said EPA erred when it suggested that the CPP interferes with the authority of the Federal Energy Regulatory Commission and threatens the affordability and reliability of the nation’s electricity supply.

EPA will take public comment on the ACE proposal for 60 days after publication in the Federal Register.

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