Earlier this week, on August 21, President Trump’s Environmental Protection Agency (“EPA”) proposed a rule pursuant to Section 111(d) of the Clean Air Act (“CAA”) intended to replace the embattled Clean Power Plan (“CPP”) issued by President Obama’s administration. The CPP is a comprehensive regulation designed to significantly reduce carbon emissions from fossil fuel power plants. Just six months after the CPP became final, the Supreme Court took the unusual step of staying implementation of the rule pending the outcome of legal challenges from several states and industry groups. Many of these challenges remain in litigation. The Trump Administration has criticized the CPP as “overly prescriptive and burdensome” and has, at times, discussed an outright repeal of the rule.

Like the CPP, the new proposed regulation, entitled the Affordable Clean Energy (“ACE”) Rule, aims to eliminate about a third of the industry’s 2005 CO2 emissions by 2030. Unlike the CPP, however, the ACE Rule seeks to accomplish reductions primarily through efficiency improvements that directly impact coal-fired power plants rather transitioning power reliance to new natural gas and renewable energy sources.

In the contrast to the CPP, the ACE Rule establishes a limited role for the EPA in regulating power plant emissions, leaving states with most of the regulatory responsibility. EPA will define specified efficiency improvements as the “best system of emission reduction” for existing power plants and make changes to the New Source Review permitting program to spur additional efficiency changes. The ACE Rule will provide states with guidelines for how to limit greenhouse gas emissions by listing “candidate technologies” for use in setting performance standards. Such technologies include:

• Neural Network/Intelligent Sootblowers

• Boiler Feed Pumps

• Air Heater and Duct Leakage Control

• Variable Frequency Drives

• Blade Path Upgrade (Steam Turbine)

• Redesign/Replace Economizer

• Improved Operating and Maintenance Practices

States would identify standards of performance for the existing power plants and set specific allowable emission rates expressed on a pound CO2 per MWH-gross rate for affected emission units based on the application of these technologies. At present, EPA does not have sufficient information to make a “best system of emission reduction” determination with respect to heat rate improvements at natural gas-fired simple‑cycle turbines or combined cycle turbines, but has solicited comments on this issue. EPA’s underlying goal through its proposal is to “give states adequate time and flexibility to develop their state plans” and to provide each state with broad discretion in establishing specific performance standards for the affected utilities.

While the ACE proposed rule will not become final until it works its way through months or years of administrative rulemaking processes, including a 60-day public comment period, the existence of a proposed replacement is likely to take the steam out of the ongoing litigation over the CPP and shift the focus to new regulation, which could draw legal challenges of its own. While the ACE rule proposal is likely to be welcomed by coal energy producers, a large degree of uncertainty remains as key stakeholders, including environmental groups, industry leaders, and state regulators, continue to monitor and attempt to influence the final rule.