with its mass-based standard of performance. The approach would have to
be authorized in the appropriate section 111(d) plan and would have to
conform to the minimum conditions for such approaches described in
section VIII below.
    Under a mass-based emissions trading approach, the total number of
allowances to be issued is defined in the state plan, and affected EGUs
may obtain an initial quantity of allowances through an allocation or
auction process. After that initial process, the owner/operator of an
affected EGU needing additional allowances can acquire allowances
through common ownership of another affected EGU or through a bilateral
transaction with the other affected EGU, or the owner/operator of the
affected EGU can acquire allowances in a transaction through an
intermediary, which could but need not involve an organized market. As
discussed earlier, based on observation of market behavior both inside
and outside the electricity industry, we expect that intermediaries
will seek opportunities to participate in such transactions and that
organized markets are likely to develop as well if section 111(d) plans
authorize the use of emissions trading. While the opportunity to
acquire allowances through common ownership might not extend to owner/
operators of single EGUs or small fleets, all owner/operators would
have the ability to engage in bilateral or intermediated purchase
transactions for allowances just as they can engage in transactions for
other kinds of goods and services.
    Further details regarding the possible use of mass-based emission
allowances in a state plan are provided in section VIII.J.
6. Use of Non-BSER Measures To Achieve Standards of Performance
    In addition to the BSER-related measures that affected EGUs can use
to achieve the standards of performance set in section 111(d) plans,
there are a variety of non-BSER measures that could also be employed
(to the extent permitted under a given plan). This final rule does not
limit the measures that affected EGUs may use for achieving standards
of performance to measures that are included in the BSER; thus, the
existence of these non-BSER measures provides flexibility allowing the
individual affected EGUs and the source category to achieve emission
reductions consistent with application of the BSER at the levels of
stringency reflected in this final rule even if one or more of the
building blocks is not implemented to the degree that the EPA has
determined to be reasonable for purposes of quantifying the BSER. In
this way, non-BSER measures provide additional flexibility to states in
establishing standards of performance for affected EGUs through section
111(d) plans and to individual affected EGUs for achieving those
standards.
    Any of the non-BSER measures described below would help the
affected source category as a whole achieve emission limits consistent
with the BSER. The non-BSER measures either reduce the amount of
CO2 emitted per MWh of generation from the set of affected
EGUs or reduce the amount of generation, and therefore associated
CO2 emissions, from the set of affected EGUs. However, the
manner in which the various non-BSER measures would help individual
affected EGUs meet their individual standards of performance varies
according to the type of measure and the type of standard of
performance--i.e., whether the standard is emission rate-based or mass-
based.
    In general, a non-BSER measure that reduces the amount of
CO2 emitted per MWh of generation at an affected EGU will
reduce the amount of CO2 emissions monitored at the EGU's
stack (assuming the quantity of generation is held constant). Measures
of this type can help the EGU meet either an emission rate-based or
mass-based standard of performance.
    Other non-BSER measures do not reduce an affected EGU's
CO2 emission rate but rather facilitate reductions in
CO2 emissions by reducing the amount of generation from
affected EGUs. Under a mass-based standard, the collective reduction in
emissions from the set of affected EGUs is reflected in the collective
monitored emissions from the set of affected EGUs. An individual EGU
that reduces its generation and emissions will be able to use the
measure to help achieve its mass-based limit. Individual EGUs that do
not reduce their generation and emissions will be able to use the
measure, if the relevant section 111(d) plans provide for allowance
trading, by purchasing emission allowances no longer needed by EGUs
that have reduced their emissions.
    Under an emission rate-based standard, non-BSER measures that
reduce generation from affected EGUs but do not reduce an affected
EGU's emission rate generally can facilitate compliance by serving as
the basis for ERCs that affected EGUs can average into their emission
rates for purposes of demonstrating compliance. Section VIII.K.
includes a discussion of the issuance of ERCs based on various non-BSER
measures. Affected EGUs could use such ERCs to the extent permitted by
the relevant section 111(d) plans.
    The remainder of this section discusses some specific types of non-
BSER measures. The first set discussed includes measures that can
reduce the amount of CO2 emitted per MWh of generation, and
the second set discussed includes measures that can reduce
CO2 emissions by reducing the amount of generation from
affected EGUs. In some cases, considerations related to use of these
measures for compliance are discussed below in section VIII on state
plans. The EPA notes that this is not an exhaustive list of non-BSER
measures that could be employed to reduce CO2 emissions from
affected EGUs, but merely a set of examples that illustrate the extent
of the additional flexibility such measures provide to states and
affected EGUs under the final rule.
    a. Non-BSER measures that reduce CO2 emissions per MWh
generated. In the June 2014 proposal, the EPA discussed several
potential measures that could reduce CO2 emissions per MWh
generated at affected EGUs but that were not proposed to be part of the
BSER. The measures discussed included heat rate improvements at
affected EGUs other than coal-fired steam EGUs; fuel switching from
coal to natural gas at affected EGUs, either completely (conversion) or
partially (co-firing); and carbon capture and storage by affected EGUs.
One reason for not proposing to consider these measures to be part of
the BSER was that they were more costly than the BSER measures. Another
reason was that the emission reduction potential was limited compared
to the potential available from the measures that were proposed to be
included in the BSER. However, we also noted that circumstances could
exist where these measures could be sufficiently attractive to deploy,
and that the measures could be used to help affected EGUs achieve
emission limits consistent with the BSER.
    In the final rule, the EPA has reached determinations consistent
with the proposal with respect to these measures: namely, that they do
not merit inclusion in the BSER, but that they are capable of helping
affected EGUs achieve compliance with standards of performance and are
likely to be used for that purpose by some units. To the extent that
they are selectively employed, they provide flexibility for the source
category as a whole and for individual affected EGUs to achieve
emission limits reflective of the BSER, as discussed above.

    (1) Heat rate improvement at affected EGUs other than coal-fired
steam EGUs.
    Building block 1 reflects the opportunity to improve heat rate at
coal-fired steam EGUs but not at other affected EGUs. As the EPA stated
at proposal, the potential CO2 reductions available from
heat rate improvements at coal-fired steam EGUs are much larger than
the potential CO2 reductions available from heat rate
improvements at other types of EGUs, and comments offered no persuasive
basis for reaching a different conclusion. Nevertheless, we recognize
that there may be instances where an owner/operator finds heat rate
improvement to be an attractive option at a particular non-coal-fired
affected EGU, and nothing in the rule prevents the owner/operator from
implementing such a measure and using it to help achieve a standard of
performance.
    (2) Carbon capture and storage at affected EGUs.
    Another approach for reducing CO2 emissions per MWh of
generation from affected EGUs is the application of carbon capture and
storage (CCS) technology. Consistent with the June 2014 proposal, we
are determining that use of full or partial CCS technology should not
be part of the BSER for existing EGUs because it would be more
expensive than the measures determined to be part of the BSER,
particularly if applied broadly to the overall source category. At the
same time, we note that retrofit of CCS technology may be a viable
option at some individual facilities, particularly where the captured
CO2 can be used for enhanced oil recovery (EOR). For
example, construction of one CCS retrofit application with EOR has
already been completed at a unit at the Boundary Dam plant in Canada,
and construction of another CCS retrofit application with EOR is
underway at the W.A. Parish plant in Texas. We expect the costs of CCS
to decline as implementation experience increases. CO2
emission rate reductions achieved through retrofit of CCS technology
would be available to help affected EGUs achieve emission limits
consistent with the BSER. State plan considerations related to CCS are
discussed in section VIII.I.2.a.
    (3) Fuel switching to natural gas at affected EGUs.
    In the proposal we discussed the opportunity to reduce
CO2 emissions at an individual affected EGU by switching
fuels at the EGU, particularly by switching from coal to natural gas.
Most coal-fired EGUs could be modified to burn natural gas instead, and
the potential CO2 emission reductions from this measure are
large--approximately 40 percent in the case of conversion from 100
percent coal to 100 percent natural gas, and proportionately smaller
for partial co-firing of coal with natural gas. The primary reason for
not considering this measure part of the BSER, both at proposal and in
this final rule, is that it is more expensive than the BSER measures.
In particular, combusting natural gas in a steam EGU is less efficient
and generally more costly than combusting natural gas in an NGCC unit.
For the category as a whole, CO2 emissions can be achieved
far more cheaply by combusting additional natural gas in currently
underutilized NGCC capacity and reducing generation from coal-fired
steam EGUs (building block 2) than by combusting natural gas instead of
coal in steam EGUs.
    Some owner/operators are already converting some affected EGUs from
coal to natural gas, and it is apparent that the measure can be
attractive compared to alternatives in certain circumstances, such as
when a unit must meet tighter unit-specific limits on emissions of non-
GHG pollutants, the options for meeting those emission limits are
costly, and retirement of the unit would necessitate transmission
upgrades that are costly or cannot be completed quickly. CO2
emission reductions achieved in these situations are available to help
achieve emission limits consistent with the BSER.
    (4) Fuel switching to biomass at affected EGUs.
    Some affected EGUs may seek to co-fire qualified biomass with
fossil fuels. The EPA recognizes that the use of some biomass-derived
fuels can play an important role in controlling increases of
CO2 levels in the atmosphere. As with the other non-BSER
measures discussed in this section, the EPA expects that use of biomass
may be economically attractive for certain individual sources even
though on a broader scale it would likely be more expensive or less
achievable than the measures determined to be part of the BSER. Section
VIII.I.2.c describes the process and considerations for states
proposing to use different kinds of biomass in state plans.
    (5) Waste heat-to-energy conversion at affected EGUs.
    Certain affected EGUs in urban areas or located near industrial or
commercial facilities with needs for thermal energy may be able add new
equipment to capture some of the waste heat from their electricity
generation processes and use it to create useful thermal output,
thereby engaging in combined heat and power (CHP) production. While the
set of affected EGUs in locations making this measure feasible may be
limited, where feasible the potential CO2 emission rate
improvements can be substantial: Depending on the process used, the
efficiency with which fuel is converted to useful energy can be
increased by 25 percent or more. The final rule allows an owner/
operator applying CHP technology to an affected EGU to account for the
increased efficiency by counting the useful thermal output as
additional MWh of generation, thereby lowering the unit's computed
emission rate and assisting with achievement of an emission rate-based
standard of performance. (The EPA notes that unless the unit also
reduced its fuel usage, the addition of the capability to capture waste
heat and produce useful thermal output would not reduce the unit's mass
emissions and therefore would not directly help the unit achieve a
mass-based standard of performance.\441\)
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    \441\ However, the EPA notes that a state could establish a
mechanism for encouraging affected EGUs to apply CHP technology
under a mass-based plan, for example, through awards of emission
allowances to CHP projects.
---------------------------------------------------------------------------

    b. Non-BSER measures that reduce CO2 emissions by
reducing fossil fuel-fired generation.
    A second group of non-BSER measures has the potential to reduce
CO2 emissions from affected EGUs by reducing the amount of
generation from those EGUs. As discussed above, under a section 111(d)
plan with mass-based standards of performance, no special action is
required to enable measures of this nature to help the source category
as a whole and individual affected EGUs achieve their emission limits,
because the CO2-reducing effects are captured in monitored
stack emissions. However, under a section 111(d) plan with rate-based
standards of performance, affected EGUs would need to acquire ERCs
based on the non-BSER activities that could be averaged into their
emission rate computations for purposes of determining compliance with
their standards of performance.
    (1) Demand-side EE.
    One of the major approaches available for achieving CO2
emission reductions from the utility power sector is demand-side EE. In
the June 2014 proposal, the EPA identified demand-side EE as one of the
four proposed building blocks for the BSER. We continue to believe that
significant emission reductions can be achieved by the source category
through use of such measures at reasonable costs. In fact, we believe
that the potential emission reductions from demand-side EE rival those
from building blocks 2 and 3 in magnitude, and that demand-side EE is
likely to

represent an important component of some state plans, particularly in
instances where a state prefers to develop a plan reflecting the state
measures approach discussed in section VIII below. We also expect that
many sources would be interested in including demand-side EE in their
compliance strategies to the extent permitted, and we received comment
that it should be permitted.
    For the reasons discussed in section V.B.3.c.(8) below, the EPA has
determined not to include demand-side EE in the BSER in this final
rule. However, the final rule authorizes generation avoided through
investments in demand-side EE to serve as the basis for issuance of
ERCs when appropriate conditions are met. In section VIII.K below, the
EPA sets out the minimum criteria that must be satisfied for generation
and issuance of a valid ERC based upon implementation of new demand-
side EE programs. Those criteria generally concern ensuring that the
physical basis for the ERC--in this case, generation avoided through
implementation of demand-side EE measures--is adequately evaluated,
measured, and verified and that there is an adequate administrative
process for tracking credits.
    Through their authority over legal requirements such as building
codes, states have the ability to drive certain types of demand-side EE
measures that are beyond the reach of private-sector entities. The EPA
recognizes that, by definition, this type of measure is beyond the
ability of affected EGUs to invest in either directly or through
bilateral arrangements. However, the final rule also authorizes
generation avoided through such state policies to serve as the basis
for issuance of ERCs that in turn can be used by affected EGUs. The
section 111(d) plan would need to include appropriate provisions for
evaluating, measuring, and verifying the avoided MWh associated with
the state policies, consistent with the criteria discussed in section
VIII.K below.
    (2) New or uprated nuclear generating capacity.
    In the June 2014 proposal, the EPA included generation from the
five nuclear units currently under construction as part of the proposed
BSER. As discussed above in section V.A.3.c., upon consideration of
comments, we have determined that generation from these units should
not be part of the BSER. However, we continue to observe that the zero-
emitting generation from these units would be expected to replace
generation from affected EGUs and thereby reduce CO2
emissions, and the continued commitment of the owner/operators to
completion of the units is essential in order to realize that result.
Accordingly, a section 111(d) plan may rely on ERCs issued on the basis
of generation from these units and other new nuclear units. For the
same reason, a plan may rely on ERCs issued on the basis of generation
from uprates to the capacity of existing nuclear units. Requirements
for state plan provisions intended to serve this purpose are discussed
in section VIII.K.
    (3) Zero-emitting RE generating technologies not reflected in the
BSER.
    The range of available zero-emitting RE generating technologies is
broader than the range of RE technologies determined to be suitable for
use in quantification of building block 3 as an element of the BSER.
Examples of additional zero-emitting RE technologies not included in
the BSER that could be used to achieve emission limits consistent with
the BSER include offshore wind, distributed solar, and fuel cells.
These technologies were not included in the range of RE technologies
quantified for the BSER because they are generally more expensive than
the measures that were included and the other measures in the BSER.
However, these technologies are equally capable of replacing generation
from affected EGUs and thereby reducing CO2 emissions.
Further, as with any technology, there are likely to be certain
circumstances where the costs of these technologies are more attractive
relative to alternatives, making the technologies likely to be deployed
to some extent. Indeed, distributed solar is already being widely
deployed in much of the U.S. and offshore wind, while still unusual in
this country, has been extensively deployed in some other parts of the
world. We expect innovation in RE generating technologies to continue,
making such technologies even more attractive over time. A section
111(d) plan may rely on ERCs issued on the basis of generation from new
and uprated installations of these technologies. The necessary state
plan provisions are discussed in section VIII.K.
    (4) Non-zero-emitting RE generating technologies.
    Generation from new or expanded facilities that combust qualified
biomass or biogenic portions of municipal solid waste (MSW) to produce
electricity can also replace generation from affected EGUs and thereby
control CO2 levels in the atmosphere.\442\ While the EPA
believes it is reasonable to consider generation from these fuels and
technologies to be forms of RE generation, the fact that they can
produce stack emissions containing CO2 means that a section
111(d) plan seeking to permit use of such generation to serve as the
basis for issuance of ERCs must include appropriate consideration of
feedstock characteristics and climate benefits. Specifically, the use
of some kinds of biomass has the potential to offer a wide range of
environmental benefits, including carbon benefits. However these
benefits can only be realized if biomass feedstocks are sourced
responsibly and attributes of the carbon cycle related to the biomass
feedstock are taken into account. Section VIII.I.2.c describes the
process and considerations for states proposing to use biomass in state
plans. Section VIII.K describes additional provisions related to ERCs.
---------------------------------------------------------------------------

    \442\ The EPA and many states have recognized the importance of
integrated waste materials management strategies that emphasize a
hierarchy of waste prevention and all other productive uses of waste
materials to reduce the volume of disposed waste materials (see
section VIII for more discussion of waste-to-energy strategies).
---------------------------------------------------------------------------

    (5) Waste heat-to-electricity conversion at non-affected
facilities.
    Industrial facilities that install new equipment to capture waste
heat from an existing combustion process and then use the waste heat to
generate electricity--a form of combined heat and power (CHP)
production--can produce generation that replaces generation from
affected EGUs and thereby reduces CO2 emissions. A section
111(d) plan may rely on ERCs issued on the basis of generation of this
nature provided that the facility does not generate and sell sufficient
electricity to qualify as a new EGU for purposes of section 111(b) and
is not covered under section 111(d) for another source category. More
information is provided in section VIII.K.
    (6) Reduction in transmission and distribution line losses.
    Reductions of electricity line losses incurred from the
transmission and distribution system between the points of generation
and the points of consumption by end-users allow the same overall
demand for electricity services to be met with a smaller overall
quantity of electricity generation. Such reductions in generation
quantities would tend to reduce generation by affected EGUs, thereby
reducing CO2 emissions. The opportunity for improvement is
large because, on average, line losses account for approximately seven
percent of all electricity generation. The EPA recognizes that, in
general, only the

owner/operators of the transmission and distribution facilities have
the ability to undertake line loss reduction investments, and that
merchant generators may have little opportunity to engage a contractor
to pursue such opportunities on a bilateral basis. Nevertheless, for
entities that do have the opportunity to make such investments,
generation avoided through investment that reduces transmission and
distribution line losses may serve as the basis for issuance of ERCs
that in turn can be used by affected EGUs. Further information is
provided in section VIII.K.
7. Severability
    The EPA intends that the components of the BSER summarized above be
severable. It is reasonable to consider the building blocks severable
because the building blocks do not depend on one another. Building
blocks 2 and 3 are feasible and demonstrated means of reducing
CO2 emissions from the utility power sector that can be
implemented independently of the other building blocks. If implemented
in combination with at least one of the other building blocks, building
block 1 is also a feasible and demonstrated means of reducing
CO2 emission from the utility power sector.\443\ As
discussed in sections V.C. through V.E. below, we have determined that
each building block is independently of reasonable cost whether or not
the other building blocks are applied, and that alternative
combinations of the building blocks are likewise of reasonable cost,
and we have determined reasonable schedules and stringencies for
implementation of each building block independently, based on factors
that generally do not vary depending on the implementation of other
building blocks.
---------------------------------------------------------------------------

    \443\ The heat rate improvement measures included in building
block 1 are capable of being implemented independently of the
measures in the other building blocks but, as discussed earlier,
unless at least one other building block is also implemented, a
``rebound effect'' arising from improved competitiveness and
increased generation at the EGUs implementing heat rate improvements
could weaken or potentially even eliminate the ability of building
block 1 to achieve CO2 emission reductions.
---------------------------------------------------------------------------

    Further, building block 2, building block 3, and all combinations
of the building blocks (implemented on the schedules and at the
stringencies determined to be reasonable in this rule) would achieve
meaningful degrees of emission reductions,\444\ although less than the
combination of all three building blocks. No combination of the
building blocks would lead to adverse non-air environmental or energy
impacts or impose a risk to the reliability of electricity supplies.
---------------------------------------------------------------------------

    \444\ This conclusion would not extend to a BSER comprising
solely building block 1, in part because of the possibility of
rebound effects discussed earlier.
---------------------------------------------------------------------------

    In the event that a court should deem building block 2 or 3
defective, but not both, the standards and state goals can be
recomputed on the basis of the remaining building blocks. All of the
data and procedures necessary to determine recomputed state goals using
any combination of the building blocks are set forth in the
CO2 Emission Performance Rate and Goal Computation TSD for
the CPP Final Rule available in the docket.

B. Legal Discussion of Certain Aspects of the BSER

    This section includes a legal analysis of various aspects of EPA's
determination of the BSER, including responses to some of the major
adverse comments. These aspects include (1) the EPA's authority to
determine the BSER; (2) the approach to subcategorization; (3) the
EPA's basis for determining that building blocks 2 and 3 qualify as
part of the BSER under CAA sections 111(d)(1) and (a)(1),
notwithstanding commenters' arguments that these building blocks cannot
be considered part of the BSER because they are not based on measures
integrated into the design or operation of the affected source's own
production processes or methods or because they are dependent on
actions by entities other than the affected source; (4) the
relationship between an affected EGU's implementation of building
blocks 2 and 3 and CO2 emissions reductions; (5) how reduced
generation relates to the BSER; (6) reasons why, contrary to assertions
by commenters, this rule is within the EPA's statutory authority, is
not inconsistent with the Federal Power Act or state laws governing
public utility commissions, and does not result in what the U.S.
Supreme Court described as ``an enormous and transformative expansion
in [the] EPA's regulatory authority''; \445\ and (7) reasons that,
contrary to assertions by commenters, the stringency of the BSER for
this rule for CO2 emissions from existing affected EGUs is
not inconsistent with the stringency of the BSER for the rules the EPA
is promulgating at the same time for CO2 emissions from new
or modified affected EGUs.
---------------------------------------------------------------------------

    \445\ Util. Air Reg. Group v. EPA, 134 S. Ct. 2427, 2444 (2014).
---------------------------------------------------------------------------

1. The EPA's Authority To Determine the BSER
    In this section, we explain why the EPA, and not the states, has
the authority to determine the BSER and, therefore, the level of
emission limitation required from the existing sources in the source
category in section 111(d) rulemaking and the associated state plans.
    CAA section 111(d)(1) requires the EPA to establish a section 110-
like procedure under which each state submits a plan that ``establishes
standards of performance for any existing source of air pollutant'' and
``provides for the implementation and enforcement of such standards of
performance.'' As CAA section 111(d) was originally adopted in the 1970
CAA Amendments, however, state plans were required to establish
``emission standards''--an undefined term--rather than ``standards of
performance,'' a term that was limited to CAA section 111(b).\446\ The
1970 provision was in effect when the EPA issued the 1975 implementing
regulations for CAA section 111(d),\447\ which remain in effect to this
day.
---------------------------------------------------------------------------

    \446\ See 1970 CAA Amendments, Sec.  4, 84 Stat. at 1683-84.
Subsequently, in 1977, Congress replaced the term ``emission
standard'' with ``standards of performance.'' See 1977 CAA
Amendments, Sec.  109, 91 Stat. at 699.
    \447\ See ``State Plans for the Control of Certain Pollutants
From Existing Facilities,'' 40 FR 53340 (Nov. 17, 1975).
---------------------------------------------------------------------------

    These regulations establish a cooperative framework that is similar
to that under CAA section 110. First, the EPA develops ``emission
guidelines'' for source categories, which are defined as a final
guideline document reflecting ``the degree of emission reduction
achievable through the application of the best system of emission
reduction . . . which the Administrator has determined has been
adequately demonstrated.'' Then, the states submit implementation plans
to regulate any existing sources.\448\
---------------------------------------------------------------------------

    \448\ See ``State Plans for the Control of Certain Pollutants
From Existing Facilities,'' 40 FR 53340 (Nov. 17, 1975).
---------------------------------------------------------------------------

    The preamble to these regulations carefully considered the
allocation of responsibilities as between the EPA and the states for
purposes of CAA section 111(d), and concluded that the EPA is
responsible for determining the level of emission limitation from the
source category, while the states have the responsibility of assigning
emission requirements to their sources that assured their achievement
of that level of emission limitation.\449\ The EPA

explained ``that some substantive criterion was intended to govern not
only the Administrator's promulgation of standards but also [her]
review of state plans.'' \450\ The EPA added, ``it would make no sense
to interpret [CAA] section 111(d) as requiring the Administrator to
base approval or disapproval of state plans solely on procedural
criteria. Under that interpretation, states could set extremely lenient
standards--even standards permitting greatly increased emissions--so
long as [the] EPA's procedural requirements were met.'' \451\ The EPA
concluded that ``emission guidelines, each of which will be subjected
to public comment before final adoption, will serve [the] function'' of
providing substantive criteria ``in advance to the states, to industry,
and to the general public'' to aid states in ``developing and enforcing
control plans under [CAA] section 111(d).'' \452\ Thus, the
implementing regulations make clear that the EPA is responsible for
determining the level of emission limitation that the state plans must
achieve.
---------------------------------------------------------------------------

    \449\ As we made clear in the proposed rulemaking, we are not
re-opening these regulations (on the issue of the authority to
determine the BSER or any other issue, unless specifically indicated
otherwise) in this rulemaking, and our discussion of these
regulations in responding to comments does not constitute a re-
opening.
    \450\ ``State Plans for the Control of Certain Pollutants from
Existing Facilities,'' 40 FR 53340, 53342 (Nov. 17, 1975).
    \451\ ``State Plans for the Control of Certain Pollutants from
Existing Facilities,'' 40 FR 53340, 53343 (Nov. 17, 1975).
    \452\ ``State Plans for the Control of Certain Pollutants from
Existing Facilities,'' 40 FR 53340, 53343 (Nov. 17, 1975).
---------------------------------------------------------------------------

    In 1977, Congress revised CAA section 111(d) to require that the
states adopt ``standards of performance,'' as defined under CAA section
111(a)(1). As noted above, a standard of performance is defined as ``a
standard for emissions of air pollutants which reflects the degree of
emission limitation achievable through the application of the best
system of emission reduction which . . . the Administrator determines
has been adequately demonstrated.'' (Emphasis added.) By its terms,
this provision provides that the EPA has the responsibility of
determining whether the ``best system of emission reduction'' is
``adequately demonstrated.'' By giving the EPA this responsibility,
this provision is clear that Congress assigned the role of determining
the ``best system of emission reduction'' to the EPA. Even if the
provision may be considered to be silent or ambiguous on that question,
the EPA reasonably interprets the provision to assign the
responsibility of identifying the ``best system of emission reduction''
to the Administrator for the same reasons discussed in the preamble to
the 1975 implementing regulations.
    In addition, in the legislative history of the 1977 CAA Amendments,
when Congress replaced the term ``emission standards'' under CAA
section 111(d)(1) with the term ``standards of performance,'' Congress
endorsed the overall approach of the implementing regulations, which
lends further credence to the proposition that the EPA has the
responsibility for determining the ``best system of emission
reduction'' and the amount of emission limitation from the existing
sources. Specifically, in the House report that introduced the
substantive changes to CAA section 111, the Committee explained that
``[t]he Administrator would establish guidelines as to what the best
system for each category of existing sources is.'' \453\ States, on the
other hand, ``would be responsible for determining the applicability of
such guidelines to any particular source or sources.'' \454\ The use of
the term ``guidelines,'' which does not appear in CAA section 111(d),
indicates Congress was aware of and approved of the approach taken in
the EPA's implementing regulations for establishing guidelines, which
determine the BSER. At a minimum, if Congress disapproved of the EPA's
implementing regulations, we would not expect the House report to adopt
the EPA's terminology to clarify CAA section 111(d).
---------------------------------------------------------------------------

    \453\ H.R. Rep. No. 95-294, at 195 (May 12, 1977) (emphasis
added).
    \454\ H.R. Rep. No. 95-294, at 195 (May 12, 1977) (emphasis
added).
---------------------------------------------------------------------------

    In addition, Congress expressly referred to our ``guidelines'' in
CAA section 129, added as part of the 1990 CAA Amendments. Congress
added CAA section 129 to address solid waste combustion and
specifically directed the Administrator to establish ``guidelines
(under section 111(d) and this section) and other requirements
applicable to existing units.'' \455\ This reference also indicates
that Congress was aware of and approved the EPA's regulations under
section 111(d).
---------------------------------------------------------------------------

    \455\ CAA section 129(a)(1)(A) (emphasis added).
---------------------------------------------------------------------------

    The EPA has followed the same approach described in the
implementation regulations in all its rulemakings under section 111(d).
Thus, in all cases, the EPA has identified the type of emission
controls for the source category and the level of emission limitation
based on those controls.\456\ The EPA's longstanding and consistent
interpretation of CAA section 111(d) is also ``evidence showing that
the statute is in fact not ambiguous,'' and that the EPA's
interpretation should be adopted.\457\
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    \456\ See 40 CFR part 60, subpart Ca (large municipal waste
combustors), 56 FR 5514 (Feb. 11, 1991), 40 CFR 60.30a-.39a
(subsequently withdrawn and superseded by Subpart Cb, see 60 FR
65387 (Dec. 19, 1995)); Subpart Cb (large municipal waste combustors
constructed on or before September 20, 1994), 60 FR 65387 (Dec. 19,
1995), 40 CFR 60.30b-.39b (as amended in 1997, 2001, and 2006);
Subpart Cc (municipal solid waste landfills), 61 FR 9905 (Mar. 12,
1996), 40 CFR 60.30c-.36c (as amended in 1998, 1999, and 2000);
Subpart Cd (sulfuric acid production units), 60 FR 65387 (Dec. 19,
1995), 40 CFR 60.30d-.32d; Subpart Ce (hospital/medical/infectious
waste incinerators), 62 FR 48348 (Sept. 15, 1997), 40 CFR
60.30e-.39e (as amended in 2009 and 2011); Subpart BBBB (small
municipal waste combustion units constructed on or before August 30,
1999), 65 FR 76738 (Dec. 6, 2000), 40 CFR 60.1500-.1940; Subpart
DDDD (commercial and industrial solid waste incineration units that
commenced construction on or before November 30, 1999), 65 FR 75338
(Dec. 1, 2000), 40 CFR 60.2500-.2875 (as amended in 2005, 2011, and
2013); Subpart FFFF (other solid waste incineration units that
commenced construction on or before December 9, 2004), 70 FR 74870
(Dec. 16, 2005), 40 CFR 60.2980-.3078 (as amended in 2006); Subpart
HHHH (coal-electric utility steam generating units), 70 FR 28606
(May 18, 2005) (subsequently vacated by the D.C. Circuit in New
Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008)); Subpart MMMM
(existing sewage sludge incineration units), 76 FR 15372 (Mar. 21,
2011), 40 CFR 60.5000-.5250; ``Phosphate Fertilizer Plants, Final
Guideline Document Availability,'' 42 FR 12022 (Mar. 1, 1977) (not
codified); ``Kraft Pulp Mills; Final Guideline Document;
Availability,'' 44 FR 29828 (May 22, 1979) (not codified); and
``Primary Aluminum Plants; Availability of Final Guideline
Document,'' 45 FR 26294 (Apr. 17, 1980) (not codified).
    \457\ Scalia, Antonin, Judicial Deference to Administrative
Interpretations of Law, 1989 Duke L.J. 511, 518; see Riverkeeper v.
Entergy, 556 U.S. 208, 235 (2009).
---------------------------------------------------------------------------

    Lastly, this interpretation is consistent with the Supreme Court's
reading of CAA section 111(d) in American Electric Power Co. There, the
Court explained that ``EPA issues emissions guidelines, see 40 CFR
60.22, .23 (2009); in compliance with those guidelines and subject to
federal oversight, the States then issue performance standards for
stationary sources within their jurisdiction, Sec.  7411(d)(1).'' \458\
---------------------------------------------------------------------------

    \458\ Am. Elec. Power Co. v. Connecticut, 131 S. Ct. 2527, 2537-
38 (2011).
---------------------------------------------------------------------------

    As noted in the response to comment document, some commenters
agreed with our interpretation, just discussed, while others argued
that the states should be given the authority to determine the best
system of emission reduction and, therefore, the level of emission
limitation from their sources. For the reasons just discussed, this
latter interpretation is an incorrect interpretation of CAA section
111(d)(1) and (a)(1), and we are not compelled to abandon our
longstanding practice.
2. Approach to Subcategorization
    As noted above, in this rule, we are treating all fossil fuel-fired
EGUs as a single category, and, in the emission

guidelines that we are promulgating with this rule, we are treating
steam EGUs and combustion turbines as separate subcategories. We are
determining the BSER for steam EGUs and the BSER for combustion
turbines, and applying the BSER to each subcategory to determine a
performance rate for that subcategory. We are not further
subcategorizing among different types of steam EGUs or combustion
turbines.
    This approach is fully consistent with the provisions of section
111(d), which simply require the EPA to determine the BSER, do not
prescribe the method for doing so, and are silent as to
subcategorization. This approach is also fully consistent with other
provisions in CAA section 111, which require the EPA first to list
source categories that may reasonably be expected to endanger public
health or welfare \459\ and then to regulate new sources within each
such source category,\460\ and which grant the EPA discretion whether
to subcategorize new sources for purposes of determining the BSER.\461\
---------------------------------------------------------------------------

    \459\ CAA section 111(b)(1)(A).
    \460\ CAA section 111(b)(1)(B).
    \461\ CAA section 111(b)(2).
---------------------------------------------------------------------------

    For this rule, our approach of subcategorizing between steam EGUs
and combustion turbines is reasonable because building blocks 1 and 2
apply only to steam EGUs. No further subcategorization is appropriate
because each affected EGU can achieve the performance rate by
implementing the BSER. Specifically, as noted, each affected EGU may
take a range of actions including investment in the building blocks,
replacing or reducing generation, and emissions trading, as enabled or
facilitated by the implementation programs the states adopt. Further,
in the case of a rate-based state plan, several other compliance
options not included in the BSER for this rule are also available to
all affected sources, including investment in demand-side EE measures.
Such compliance options help affected sources achieve compliance under
a mass-based plan, even if indirectly. Our approach to
subcategorization in this rule is consistent with our approach to
subcategorization in previous section 111 rules for this industry, in
which we determined whether or not to subcategorize on the basis of the
ability of affected EGUs with different characteristics (e.g., size or
type of fuel used) to implement the BSER and achieve the emission
limits).\462\
---------------------------------------------------------------------------

    \462\ Compare ``Revision of Standards of Performance for
Nitrogen Oxide Emissions From New Fossil-Fuel Fired Steam Generating
Units; Revisions to Reporting Requirements for Standards of
Performance for New Fossil-Fuel Fired Steam Generating Units: Final
Rule,'' 63 FR 49442 (Sept. 16, 1998) and ``Proposed Revision of
Standards of Performance for Nitrogen Oxide Emissions From New
Fossil-Fuel Fired Steam Generating Units: Proposed Revisions,'' 62
FR 36948, 36943 (July 9, 1997) (establishing a single NOX
emission limit for new fossil-fuel fired steam generating units, and
not subcategorizing, because the affected units could implement the
BSER of SCR and achieve the promulgated emission limits) with
``National Emission Standards for Hazardous Air Pollutants From Coal
and Oil-Fired Electric Utility Steam Generating Units and Standards
of Performance for Fossil-Fuel-Fired Electric Utility, Industrial-
Commercial-Institutional, and Small Industrial-Commercial-
Institutional Steam Generating Units: Final Rule,'' 77 FR 9304 (Feb.
16, 2012) (MATS rule) and ``National Emission Standards for
Hazardous Air Pollutants From Coal and Oil-Fired Electric Utility
Steam Generating Units and Standards of performance for Fossil-Fuel-
Fired Electric Utility, Industrial-Commercial-Institutional, and
Small Industrial-Commercial-Institutional Steam Generating Units:
Proposed Rule,'' 76 FR 24976, 25036-37 (May 3, 2011)
(subcategorizing coal fired units designed to burn coal with greater
than or equal to 8,300 Btu/lb (for Hg emissions only), coal-fired
units designed to burn coal with less than 8,300 Btu/lb (for Hg
emissions only), IGCC units, liquid oil units, and solid oil-derived
units; evaluating ``subcategorization of lignite coal vs. other coal
ranks; subcategorization of Fort Union lignite coal vs. Gulf Coast
lignite coal vs. other coal ranks; subcategorization by EGU size
(i.e., MWe); subcategorization of base load vs. peaking units (e.g.,
low capacity utilization units); subcategorization of wall-fired vs.
tangentially-fired units; and subcategorization of small, non-
profit-owned units vs. other units;'' but deciding not to adopt
those latter subcategorizations).
---------------------------------------------------------------------------

    In addition, there are numerous possible criteria to use in
subcategorizing, including, among others, subcategorizing on the basis
of age; size; steam conditions (i.e., subcritical or supercritical);
type of fuel, including type of coal (i.e., lignite, bituminous, and
sub-bituminous), and coal refuse; and method of combustion (i.e.,
fluidized bed combustion, pulverized coal combustion, and
gasification). In addition, there are different possible combinations
of those categories. At least some of those criteria do not have
logical cut-points. Furthermore, we have not been presented with, nor
can we discern, a method of subcategorizing based on these or other
criteria that is appropriate in light of the BSER for the affected EGUs
and their ability to meet the emission limits. Moreover, our approach
of not further subcategorizing as between different types of steam EGUs
or combustion turbines reflects the reasonable policy that affected
EGUs with higher emission rates should reduce their emissions by a
greater percentage than affected EGUs with lower emission rates, and
can do so by implementing the BSER we are identifying.
    In addition, a section 111(d) rule presents less of a need to
subcategorize because the states retain great flexibility in assigning
standards of performance to their affected EGUs. Thus, a state can, if
it wishes, impose different emission reduction obligations on its
sources, as long as the overall level of emission limitation is at
least as stringent as the emission guidelines, as discussed below. This
means that if a state is concerned that its different sources have
different capabilities for compliance, it can adjust the standards of
performance in imposes on its sources accordingly.
3. Building Blocks 2 and 3 as a ``System of Emission Reduction''
    a. Overview.
    As we explain above, the emission performance rates that we include
in this rule's emission guidelines are achievable by the affected EGUs
through the application of the BSER, which includes the three building
blocks. Commenters object that building blocks 2 (generation shift) and
3 (RE) cannot, as a legal matter, be considered part of the BSER under
CAA section 111(d)(1) and (a)(1). These commenters explain that in
their view, under CAA section 111, the emission performance rates must
be based on, and therefore the BSER must be limited to, methods for
emission control that the owner/operator of the affected source can
integrate into the design or operation of the source itself, and cannot
be based on actions taken beyond the source or actions involving third-
party entities.\463\ For these reasons, these commenters argue that the
phrase ``system of emission reduction'' cannot be

interpreted to include building blocks 2 and 3.
---------------------------------------------------------------------------

    \463\ See, e.g., comments by UARG at 6-7 (``Standards
promulgated under section 111 must be source-based and reflect
measures that the source's owner can integrate into the design or
operation of the source itself. A standard cannot be based on
actions taken beyond the source itself that somehow reduce the
source's utilization.''); comments by UARG at 31 (the building
blocks other than building block 1 take a `` `beyond-the-source'
approach'' and ``impermissibly rely on measures that go beyond the
boundaries of individual affected EGUs and that are not within the
control of individual EGU owners and operators''); comments by UARG
at 33 (the ``system'' of emission reduction ``can refer only to
reductions resulting from measures that are incorporated into the
source itself;'' section 111 is ``designed to improve the emissions
performance of new and existing sources in specific categories based
on the application of achievable measures implemented in the design
or production process of the source at reasonable cost.''); comments
by American Chemistry Council et al. (``Associations'') at 60-61
(EPA's proposed BSER analysis is unlawful because it ``looks beyond
the fence line of the fossil fuel-fired EGUs that are the subject of
this rulemaking;'' ``the standard of performance must . . . be
limited to the types of actions that can be implemented directly by
an existing source within [the appropriate] class or category.'').
---------------------------------------------------------------------------

    We disagree with these comments, and note that other commenters
were supportive of our determination to include building blocks 2 and
3. Under CAA section 111(d)(1) and (a)(1), the EPA's emission
guidelines must establish achievable emission limits based on the
``best system of emission reduction . . . adequately demonstrated.''
While some commenters assert that emission guidelines must be limited
in the manner summarized above, the phrase ``system of emission
reduction,'' by its terms and when read in context, contains no such
limits. To the contrary, its plain meaning is deliberately broad and is
capacious enough to include actions taken by the owner/operator of a
stationary source designed to reduce emissions from that affected
source, including actions that may occur off-site and actions that a
third party takes pursuant to a commercial relationship with the owner/
operator, so long as those actions enable the affected source to
achieve its emission limitation. Such actions include the measures in
building blocks 2 and 3, which, when implemented by an affected source,
enable the source to achieve their emission limits because of the
unique characteristics of the utility power sector. For purposes of
this rule, we consider a ``system of emission reduction''--as defined
under CAA section 111(a)(1) and applied under CAA section 111(d)(1)--to
encompass a broad range of pollution-reduction actions, which includes
the measures in building blocks 2 and 3. Furthermore, the measures in
building blocks 2 and 3 fall squarely within EPA's historical
interpretation of section 111, pursuant to which the focus for the BSER
has been on how to most cleanly produce a good, not on how much of the
good should be produced.
    Our interpretation that a ``system of emission reduction'' is broad
enough to include the measures in building blocks 2 and 3 is supported
by the following: Our interpretation of the phrase ``system of emission
reduction'' is consistent with its plain meaning and statutory context;
our interpretation accommodates the very design of CAA section
111(d)(1), which covers a range of source categories and air
pollutants; \464\ our interpretation is supported by the legislative
history of CAA section 111(d)(1) and (a)(1), which indicates Congress's
intent to give the EPA broad discretion in determining the basis for
CAA section 111 control requirements, particularly for existing
sources, and Congress's intent to authorize the EPA to consider
measures that could be carried out by parties other than the affected
sources; and our interpretation is reasonable in light of comparisons
to CAA provisions that give the EPA similar authority to consider such
measures and to CAA provisions that would preclude the EPA from
considering such measures.
---------------------------------------------------------------------------

    \464\ Because it is designed to apply to a range of air
pollutants not regulated under other provisions, CAA section 111(d)
may be described as a ``catch-all'' or ``gap-filler.'' As such, a
``system of emission reduction'' as applied under CAA section 111(d)
should be interpreted flexibly to accommodate this role.
---------------------------------------------------------------------------

    In addition to the reasons stated above, the EPA's interpretation
is also reasonable for the following reasons: (i) Building blocks 2 and
3 fit well within the structure and economics of the utility power
sector. (ii) Fossil fuel-fired EGUs are already implementing the
measures in these building blocks for various reasons, including for
purposes of reducing CO2 emissions. (iii) Interpreting the
phrase ``system of emission reduction'' to incorporate building blocks
2 and 3 is consistent with (a) other provisions in the CAA, including
the acid rain provisions in Title IV and the SIP provisions in CAA
section 110, along with the EPA's regulations implementing the CAA SIP
requirements concerning interstate transport and regional haze, each of
which is based on at least some of the same measures included in
building blocks 2 and 3; (b) prior EPA action under CAA section 111(d),
including the 2005 Clean Air Mercury Rule,\465\ which is based on some
of the same measures in building blocks 2 and 3; (c) the various
provisions of the CAA that authorize emissions trading, because
emissions trading entails a source meeting its emission limitation
based on the actions of another entity; and (d) the pollution
prevention provisions of the CAA, which make clear that a primary goal
of the CAA is to encourage federal and state actions that reduce or
eliminate, through any measures, the amount of pollution produced at
the source.\466\ (iv) Lastly, interpreting the phrase ``system of
emission reduction'' to authorize the EPA, in formulating its BSER
determination, to weigh a broad range of emission-reducing measures
that includes building blocks 2 and 3 is consistent with Congress's
intent to address urgent environmental problems and to protect public
health and welfare against risks, as well as Congress's expectation
that American industry would be able to develop the innovative
solutions necessary to protect public health and welfare.
---------------------------------------------------------------------------

    \465\ This rule was vacated by the D.C. Circuit on other
grounds. New Jersey v. EPA, 517 F.3d 574, 583-84 (D.C. Cir. 2008),
cert. denied sub nom. Util. Air Reg. Group v. New Jersey, 555 U.S.
1169 (2009).
    \466\ As noted in the Legal Memorandum, in several of these
rulemakings and in the course of litigation, the fossil fuel-fired
electric power sector has taken positions that are consistent with
the EPA's interpretation that the BSER may include building blocks 2
and 3.
---------------------------------------------------------------------------

    Congress passed the CAA, including its several amendments, to
protect public health and welfare from ``mounting dangers,'' including
``injury to agricultural crops and livestock, damage to and the
deterioration of property, and hazards to air and ground
transportation.'' \467\ In doing so, Congress established numerous
programs to address air pollution problems and provided the EPA with
guidance and flexibility in carrying out many of those programs. Even
if we were to accept commenters' view that the system of emission
reduction identified as best here is not integrated into the design or
operation of the regulated sources, in the context of this industry and
this pollutant it is reasonable to reject the narrow interpretation
urged by some commenters that the ``system of emission reduction''
applicable to the affected EGUs must be limited to only those measures
that can be integrated into the design or operation of the source
itself. The plain language of the statute does not support such an
interpretation, and to adopt it would limit the ``system of emission
reduction'' to measures that are either substantially more expensive or
substantially less effective at reducing emissions than the measures in
building blocks 2 and 3, notwithstanding the absence of any statutory
language imposing such a limit. Such a result would be contrary to the
goals of the CAA and would ignore the facts that sources in the
electric generation industry routinely address planning and operating
objectives on a broad, multi-source basis using the measures in
building blocks 2 and 3 and would seek to use building blocks 2 and 3
(as well as non-BSER measures) to comply with whatever emission
standards are set as a result of this rule. Indeed, as already
observed, building blocks 2 and 3 are already being used to reduce
emissions, and to do so specifically by operation of the industry's
inherent multi-source functions.
---------------------------------------------------------------------------

    \467\ CAA section 101(a)(2).
---------------------------------------------------------------------------

    Although the BSER provisions are sufficiently broad to include, for
affected EGUs, the measures in building blocks 2 and 3, they also
incorporate significant constraints on the types of

measures that may be included in the BSER. We discuss those constraints
at the end of this section. They include the section 111(d)(1) and
(a)(1) requirements that emission reductions occur from the affected
sources; that the emission performance standards for which the BSER
forms the basis be achievable; that the system of emission reduction be
adequately demonstrated; and that the EPA account for cost, non-air
quality impacts, and energy requirements in determining the ``best''
system of emission reduction that is adequately demonstrated. The
constraints included in these statutory requirements do not preclude
building blocks 2 and 3 from the BSER. In interpreting these statutory
requirements for determining the BSER, the EPA is consistent with past
practice and current policy for both section 111 regulatory actions as
well as regulatory actions under other CAA provisions for the electric
power sector, under which the EPA has generally taken the approach of
basing regulatory requirements on controls and measures designed to
reduce air pollutants from the production process without limiting the
aggregate amount of production. This approach has been inherent in our
past interpretation and application of section 111 and we maintain this
interpretation in this rulemaking.\468\ While inclusion of building
blocks 2 and 3 is consistent with our interpretation of the statutory
requirements, inclusion of building block 4 is not, and for that
reason, we are declining to include building block in the BSER.
Finally, we briefly note additional constraints that focus the BSER
identified for new sources under section 111(b) on controls that assure
that sources are well-controlled at the time of construction.
---------------------------------------------------------------------------

    \468\ As we note in section V.A., this rulemaking presents a
unique set of circumstances, including the global nature of
CO2 and the emission control challenges that
CO2 presents (which limit the availability and
effectiveness of control measures), combined with the facts that the
electric power industry (including fossil fuel-fired steam
generators and combustion turbines) is highly integrated,
electricity is fungible, and generation is substitutable (which all
facilitate the generation shifting measures encompassed in building
blocks 2 and 3). Our interpretation of section 111 as focusing on
limiting emissions without limiting aggregate production must take
into account those unique circumstances.
---------------------------------------------------------------------------

    b. System of emission reduction as a broad range of measures.
    (1) Plain meaning and context of ``system of emission reduction.''
    The phrase ``system of emission reduction'' appears in the
definition of a ``standard of performance'' under CAA section
111(a)(1). That definition reads:

a standard for emissions of air pollutants which reflects the degree
of emission limitation achievable through the application of the
best system of emission reduction which (taking into account the
cost of achieving such reduction and any nonair quality health and
environmental impact and energy requirements) the Administrator
determines has been adequately demonstrated.

Pursuant to this definition, it is clear that a ``system of emission
reduction'' serves as the basis for emission limits embodied by CAA
section 111 standards. For this reason, emission limits must be
``achievable'' through the ``application'' of the ``best'' ``system of
emission reduction'' ``adequately demonstrated.'' Under CAA section
111(d)(1), such a limit is established for ``any existing source,''
which is defined as any existing ``building, structure, facility, or
installation which emits or may emit any air pollutant.'' \469\
---------------------------------------------------------------------------

    \469\ See CAA section 111(d)(1) (applying a standard of
performance to any existing source); (a)(6) (defining the term
``existing source'' as any stationary source other than a new
source); and (a)(3) (defining the term ``stationary source'' as
``any building, structure, facility, or installation which emits or
may emit any air pollutant,'' however, explaining that ``[n]othing
in subchapter II [i.e., Title II] of this chapter relating to
nonroad engines shall be construed to apply to stationary internal
combustion engines.'')
---------------------------------------------------------------------------

    Although a ``system of emission reduction'' lays the groundwork for
CAA section 111 standards, the term ``system'' is not defined in the
CAA. As a result, we look first to its ordinary meaning.
    Abstractly, the term ``system'' means a set of things or parts
forming a complex whole; a set of principles or procedures according to
which something is done; an organized scheme or method; and a group of
interacting, interrelated, or interdependent elements.\470\ As a
phrase, ``system of emission reduction'' takes a broad meaning to serve
a singular purpose: It is a set of measures that work together to
reduce emissions.
---------------------------------------------------------------------------

    \470\ Oxford Dictionary of English (3rd ed.) (2010), available
at http://www.oxforddictionaries.com/us/definition/american_english/system; see also American Heritage Dictionary (5th ed.) (2013),
available at http://www.yourdictionary.com/system#americanheritage;
and The American College Dictionary (C.L. Barnhart, ed. 1970) (``an
assemblage or combination of things or parts forming a complex or
unitary whole'').
---------------------------------------------------------------------------

    When read in context, the phrase ``system of emission reduction''
carries important limitations: because the ``degree of emission
limitation'' must be ``achievable through the application of the best
system of emission reduction,'' (emphasis added), the ``system of
emission reduction'' must be limited to a set of measures that work
together to reduce emissions and that are implementable by the sources
themselves.
    As a practical matter, the ``source'' includes the ``owner or
operator'' of any building, structure, facility, or installation for
which a standard of performance is applicable. For instance, under CAA
section 111(e), it is the ``owner or operator'' of a source who is
prohibited from operating ``in violation of any standard of performance
applicable to such source.'' \471\
---------------------------------------------------------------------------

    \471\ While this section provides for enforcement in the context
of new sources, a CAA section 111(d) plan must provide for the
enforcement of a standard of performance for existing sources.
---------------------------------------------------------------------------

    Thus, a ``system of emission reduction'' for purposes of CAA
section 111(d) means a set of measures that source owners or operators
can implement to achieve an emission limitation applicable to their
existing source.\472\
---------------------------------------------------------------------------

    \472\ Some commenters read the proposed rulemaking as taking the
position that the phrase ``system of emission reduction'' includes
anything whatsoever that reduces emissions, and criticized that
interpretation as too broad. See UARG comment, at 3-4. We are not
taking that interpretation here. In this final rule, we agree that
the phrase should be limited to exclude, inter alia, actions beyond
the ability of the owners/operators to control.
---------------------------------------------------------------------------

    In contrast, a ``system of emission reduction'' does not include
actions that only a state or other governmental entity could take that
would have the effect of reducing emissions from the source category,
and that are beyond the ability of the affected sources' owners/
operators to take or control. Additionally, actions that a source owner
or operator could take that would not have the effect of reducing
emissions from the source category, such as purchasing offsets, would
also not qualify as a ``system of emission reduction.''
    Building blocks 2 and 3 each fall within the meaning of a ``system
of emission reduction'' because they consist of measures that the
owners/operators of the affected EGUs can implement to achieve their
emission limits. In doing so, the affected EGUs will achieve the
overall emission reductions the EPA identifies in this rule. We
describe these building block 2 and 3 measures in detail elsewhere in
this rule, including the specific actions that owners/operators of
affected EGUs can take to implement the measures.
    It should be noted that defining the scope of a ``system of
emission reduction'' is not the end of our inquiry under CAA section
111(a)(1); rather, as noted above, a standard of performance must
reflect the application of the ``best system of emission reduction . .
. adequately demonstrated.'' (Emphasis

added.) Thus, in determining the BSER, the Administrator must first
determine whether the available systems of emission reduction are
``adequately demonstrated,'' based on the criteria, described above,
set out by Congress in the legislative history and the D.C. Circuit in
case law. After identifying the ``adequately demonstrated'' systems of
emission reduction, the Administrator then selects the ``best'' of
these, based on several factors, including amount of emission
reduction, cost, non-air quality health and environmental impact and
energy requirements. Only after the Administrator weighs all of these
considerations can she determine the BSER and, based on that, establish
a standard of performance under CAA section 111(b) or an emission
guideline under CAA section 111(d).
    For purposes of this final rule, it is not necessary to enumerate
all of the types of measures that do or do not constitute a ``system of
emission reduction.'' What is relevant is that building blocks 2 and 3
each qualify as part of the ``system of emission reduction.'' As noted,
they focus on supply-side activities and they each constitute measures
that the affected EGUs can implement that will allow those EGUs to
achieve the degree of emission limitation that the EPA has identified
based on those building blocks. Further, these building blocks also
satisfy the other statutory criteria enumerated in CAA section
111(a)(1).
    (2) Other indications that the BSER provisions encompass a broad
range of measures.
    The EPA's plain meaning interpretation that the BSER provisions in
CAA section 111(d)(1) and (a)(1) are designed to include a broad range
of measures, including building blocks 2 and 3, is supported by several
other indications in the CAA and the legislative history of section
111.
    (a) Scope of CAA section 111(d)(1).
    First, the broad scope of CAA section 111(d)(1) supports our
interpretation of the BSER because a wide range of control measures is
appropriate for the wide range of source categories and air pollutants
covered under CAA section 111(d).
    In the 1970 CAA Amendments, Congress established a regulatory
regime for existing stationary sources of air pollutants that may be
envisioned as a three-legged stool, designed to address ``three
categories of pollutants emitted from stationary sources'': (1)
Criteria pollutants (identified under CAA section 109 and regulated
under section 110); (2) hazardous air pollutants (identified and
regulated under section 112); and (3) ``pollutants that are (or may be)
harmful to public health or welfare but are not'' criteria or hazardous
air pollutants.\473\ Congress enacted CAA section 111(d) to cover this
third category of air pollutants and, in this sense, Congress designed
it to apply to any air pollutants that were not otherwise regulated as
toxics or NAAQS pollutants.\474\ This would include air pollutants that
the EPA might later, when more information became available, designate
as NAAQS or hazardous air pollutants, as well as air pollutants that
Congress may not have been aware of at the time.\475\ In addition, the
indications are that Congress expected CAA section 111(d) to be a
significant source of regulatory activity, by some measures, more
active than CAA section 112. This is evident because Congress expected
that CAA section 111(d) would cover more air pollutants than either CAA
section 109/110 (criteria pollutants) or CAA section 112 (hazardous air
pollutants).\476\ In addition, in the 1990 CAA Amendments, Congress
enacted CAA section 129 to achieve emission reductions from a major
source category, solid waste incinerators, and established CAA section
111(d) as the basic mechanism for that provision. The EPA subsequently
promulgated a number of CAA section 129/111(d) rulemakings.\477\
Finally, it should be noted that Congress designed CAA section 111(d)
to cover a wide range of source categories--including any source
category that the EPA identifies under subsection 111(b)(1)(A) as
meeting the criteria of, in general, causing or contributing
significantly to air pollution that may reasonably be anticipated to
endanger public health or welfare--along with the wide range of air
pollutants.
---------------------------------------------------------------------------

    \473\ 40 FR 53340, 53340 (Nov. 17, 1975) (EPA regulations
implementing CAA section 111(d)).
    \474\ See S. Rep. No. 91-1196, at 20 (Sept. 17, 1970), 1970 CAA
Legis. Hist. at 420 (``It should be noted that the emission
standards for pollutants which cannot be considered hazardous (as
defined in section 115 [i.e., the bill's version of CAA section 112]
could be established under section 114 [i.e., the bill's version CAA
section 111]. Thus, there should be no gaps in control activities
pertaining to stationary source emissions that pose any significant
danger to public health or welfare.'').
    \475\ See S. Rep. No. 91-1196, at 20 (Sept. 17, 1970), 1970 CAA
Legis. Hist. at 420.
    \476\ See S. Rep. No. 91-1196, at 9; 18-20, 1970 CAA Legis.
Hist. at 418-20. The Senate Committee Report identified 14
substances as subject to the provision that became section 111(d),
four substances as hazardous air pollutants that would be regulated
under the provision that became section 112, and 5 substances as
criteria pollutants that would be regulated under the provisions
that became sections 109-110 (and more ``as knowledge increases'').
In particular, the Report recognized that in particular, relatively
few air pollutants may qualify as hazardous air pollutants, but that
other air pollutants that did not qualify as hazardous air
pollutants would be regulated under what became section 111(d).
    \477\ See, e.g., Standards of Performance for New Stationary
Sources and Emission Guidelines for Existing Sources: Hospital/
Medical/Infectious Waste Incinerators, 62 FR 48348, 48359 (Sept. 15,
1997); Standards of Performance for New Stationary Sources and
Emission Guidelines for Existing Sources: Commercial and Industrial
Solid Waste Incineration Units, 65 FR 75338, 75341 (Dec. 1, 2000).
---------------------------------------------------------------------------

    Because Congress designed CAA section 111(d) to cover a wide range
of air pollutants--including ones that Congress may not have been aware
of at the time it enacted the provision--and a wide range of
industries, it is logical that Congress intended that the BSER
provision, as applied to CAA section 111(d), have a broad scope so as
to accommodate the range of air pollutants and source categories.
    (b) Legislative history of CAA section 111.
    (i) Breadth of ``system of emission reduction.''
    The phrase ``system of emission reduction,'' particularly as
applied under CAA section 111(d), should be broadly interpreted
consistent with its plain meaning but also in light of its legislative
history. The version of CAA section 111(d)(1) that Congress adopted as
part of the 1970 CAA Amendments read largely as CAA section 111(d)(1)
does at present, except that it required states to impose ``emission
standards'' on any existing source. (Congress replaced that term with
``standards of performance'' in the 1977 CAA Amendments.) The 1970 CAA
Amendments version of CAA section 111(d)(1) neither defined ``emission
standards'' nor imposed restrictions on the EPA in determining the
basis for the emission standards.\478\
---------------------------------------------------------------------------

    \478\ Although not defined under CAA section 111, the term was
used in other provisions and defined in some of them. The term was
defined under the CAA's citizen suit provision. See 1970 CAA
Amendments, Pub. L. 91-604, Sec.  12, 84 Stat. 1676, 1706 (Dec. 31,
1970) (defined as ``(1) a schedule or timetable of compliance,
emission limitation, standard of performance or emission standard,
or (2) a control or prohibition respecting a motor vehicle fuel or
fuel additive . . . . .''). Congress also used it in the CAA's NAAQS
provisions and in CAA section 112. Under the CAA's NAAQS provisions
(i.e., the ``Ambient Air Quality and Emission Standards''
provisions), Congress directed the EPA to issue information on ``air
pollution control techniques,'' and include data on ``available
technology and alternative methods of prevention and control of air
pollution'' as well as on ``alternative fuels, processes, and
operating methods which will result in elimination or significant
reduction of emissions.'' Id., Sec.  4, 84 Stat. at 1679. Similarly,
under CAA section 112, the Administrator was required to ``from time
to time, issue information on pollution control techniques for air
pollutants'' subject to emission standards. Id., 84 Stat. at 1685.
These statements provide additional context for the term's broad
intent.
---------------------------------------------------------------------------

    For new sources, CAA section 111(b)(1)(B), as enacted in the 1970
CAA Amendments (and as it largely still

reads), required the EPA to promulgate ``standards of performance,''
and defined that term, much like the present definition, as emission
standards based on the ``best system of emission reduction . . .
adequately demonstrated.'' This quoted phrase was not included in
either the House or Senate versions of the provision, and, instead, was
added during the joint conference between the House and Senate. The
conference report accompanying the text offers no clarifications.
    The House and Senate bills do, however, provide some insights. The
House bill, H.R. 17255, would have required new sources of non-
hazardous air pollutants to ``prevent and control such emissions to the
fullest extent compatible with the available technology and economic
feasibility, as determined by the Secretary.'' \479\ The Senate bill,
S. 4358, would have established ``Federal standards of performance for
new sources,'' which, in turn, were to ``reflect the greatest degree of
emission control which the Secretary determines to be achievable
through application of the latest available control technology,
processes, operating methods, or other alternatives.'' \480\ The Senate
Committee Report explains that ``performance standards should be met
through application of the latest available emission control technology
or through other means of preventing or controlling air pollution.''
\481\ This Report further elaborates that the term ``standards of
performance''

    \479\ H.R. 17255, Sec.  5, 1970 CAA Legis. Hist. at 921-22. The
reference to ``Secretary'' was to the Secretary of Health Education
and Welfare, which, at the time, was the agency with responsibility
for air pollution regulations.
    \480\ S. 4358, Sec.  6, 1970 Legis. Hist. at 554-55 (emphasis
added).
    \481\ S. Rep. No. 91-1196, at 15-16 (Sept. 17, 1970), 1970 CAA
Legis. Hist. at 415-16 (emphasis added).

refers to the degree of emission control which can be achieved
through process changes, operation changes, direct emission control,
or other methods. The Secretary should not make a technical judgment
as to how the standard should be implemented. He should determine
the achievable limits and let the owner or operator determine the
most economic, acceptable technique to apply.\482\
---------------------------------------------------------------------------

    \482\ S. Rep. No. 91-1196, at 15-16 (Sept. 17, 1970), 1970 CAA
Legis. Hist. at 415-16 (emphasis added).

Thus, the Senate bill clearly envisioned that standards of performance
would not be based on a particular technology or even a particular
method to prevent or control air pollution.\483\ This vision contrasted
with the House bill, which would have restricted performance standards
to economically feasible technical controls.
---------------------------------------------------------------------------

    \483\ Notably, the Senate report identifies pollution control
and pollution prevention as objectives of the Senate provision.
Pollution prevention is discussed more generally below as a
``primary purpose'' of the CAA, however, the report makes clear that
pollution prevention measures--which the EPA understands to include
such measures as building blocks 2 and 3--are appropriate under CAA
section 111.
---------------------------------------------------------------------------

    Following the House-Senate Conference, the enacted version of the
legislation defined a ``standard of performance'' to mean

a standard for emissions of air pollutants which reflects the degree
of emission limitation achievable through the application of the
best system of emission reduction which (taking into account the
cost of achieving such reduction) the Administrator determines has
been adequately demonstrated.\484\
---------------------------------------------------------------------------

    \484\ CAA section 111(a)(1) under the 1970 CAA Amendments
(emphasis added).

While the phrase ``system of emission reduction'' was not discussed in
the Conference Report, an exhibit titled ``Summary of the Provisions of
Conference Agreement on the Clean Air Amendments of 1970'' was added to
the record during the Senate's consideration of the Conference Report
and sheds some light on the phrase. According to the summary, ``[t]he
agreement authorizes regulations to require that new major industry
plants such as power plants, steel mills, and cement plants achieve a
standard of emission performance based on the latest available control
technology, processes, operating methods, and other alternatives.''
\485\ In light of this summary, the phrase ``system of emission
reduction'' appears to blend the broad spirit of S. 4358 (which
required the ``latest available control technology, processes,
operating methods, or other alternatives'') with the cost concerns
identified in H.R. 17255 (which required consideration of ``economic
feasibility'' when establishing federal emission standards for new
stationary sources). This history strongly suggests that Congress
intended to authorize the EPA to consider a wide range of measures in
calculating a standard of performance for stationary sources. At a
minimum, there is no indication that Congress intended to preclude
measures or actions such as the ones in building blocks 2 and 3 from
the EPA's assessment of the BSER.
---------------------------------------------------------------------------

    \485\ Sen. Muskie, S. Consideration of H.R. Conf. Rep. No. 91-
1783 (Dec. 17, 1970), 1970 CAA Legis. Hist. at 130.
---------------------------------------------------------------------------

    Notwithstanding this broad approach, as we discuss in the Legal
Memorandum, the legislative history of the 1970 CAA Amendments also
indicates that Congress intended that new sources be well-controlled at
the source, in light of their expected lengthy useful lives.
    In 1977, Congress amended CAA section 111(a)(1) to limit the types
of controls that could be the basis of standards of performance for new
sources to technological controls. Congress was clear, however, that
existing source standards, which were no longer developed as ``emission
standards,'' would not be limited to technological measures.
Specifically, the 1977 CAA Amendments revised CAA section 111(a)(1) to
require all new sources to meet emission standards based on the
reductions achievable through the use of the ``best technological
system of continuous emission reduction.'' \486\ According to the
legislative history, [t]his mean[t] that new sources may not comply
merely by burning untreated fuel, either oil or coal.'' \487\ The new
requirement stemmed in part from Congress's concern over the shocks
that the country experienced during the 1973-74 Arab Oil Embargo, which
led Congress to revise CAA section 111 to ``encourage and facilitate
the increased use of coal, and to reduce reliance (by new and old
sources alike), upon petroleum to meet emission requirements.'' \488\
Imposing a new technological requirement (along with a new percentage
reduction requirement) under CAA section 111 was designed to ``force
new sources to burn high-sulfur fuel thus freeing low-sulfur fuel for
use in existing sources where it is harder to control emissions and
where low-sulfur fuel is needed for compliance.'' \489\ Congress
nonetheless recognized that despite narrowing new source standards to
the best ``technological system of continuous emission reduction,''
many ``innovative approaches may in fact reduce the economic and energy
impact of emissions control,'' and the Administrator should still be
encouraged to consider other technologically based techniques for
emissions reduction, including ``precombustion cleaning or treatment of
fuels.'' \490\ This is discussed in more detail below.
---------------------------------------------------------------------------

    \486\ CAA section 111(a)(1) (1977).
    \487\ H.R. Rep. No. 95-294 (May 12, 1977), 1977 CAA Legis. Hist.
at 2659.
    \488\ H.R. Rep. No. 95-294 (May 12, 1977), 1977 CAA Legis. Hist.
at 2659.
    \489\ New Stationary Sources Performance Standards; Electric
Utility Steam Generating Units, 44 FR 33580, 33581-33582 (June 11,
1979).
    \490\ H.R. Rep. No. 95-294, at 189 (May 12, 1977), 1977 CAA
Legis. Hist. at 2656.
---------------------------------------------------------------------------

    Despite these changes with respect to new sources, the 1977 CAA
Amendments further reinforce the

notion that with respect to existing sources, the BSER was never
intended to be narrowly applied. In 1977, Congress changed CAA section
111(d)(1) to require that states adopt ``standards of performance'' and
made clear that such standards were to be based on the ``best system of
continuous emission reduction . . . adequately demonstrated,'' \491\
but generally maintained the breadth of that term. Although Congress
inserted the word ``continuous'' into the phrase, Congress explained
that ``standards in the Section 111(d) state plan would be based on the
best available means (not necessarily technological) for categories of
existing sources to reduce emissions.'' \492\ This was intended to
distinguish existing source standards from new source standards, for
which ``the requirement for [BSER] has been more narrowly redefined as
best technological system of continuous emission reduction.''
493 494
---------------------------------------------------------------------------

    \491\ CAA section 111(a)(1)(C) under the 1977 CAA Amendments.
    \492\ H.R. Rep. No. 95-294 (May 12, 1977), 1977 CAA Legis. Hist.
at 2662 (emphasis added). Congress also endorsed the EPA's practice
of establishing ``emission guidelines'' under CAA section 111(d).
See H.R. Rep. No. 95-294 (May 12, 1977), 1977 CAA Legis. Hist. at
2662 (``The Administrator would establish guidelines as to what the
best system for each such category of existing sources is. However,
the state would be responsible for determining the applicability of
such guidelines to any particular source or sources.'').
    \493\ Sen. Muskie, S. Consideration of the H.R. Conf. Rep. No.
95-564 (Aug. 4, 1977), 1977 CAA Legis. Hist. at 353.
    \494\ In 1977, Congress added a new substantive definition for
``emission standard'' generally applicable throughout the CAA. 1977
CAA Amendments, Public Law 95-95, Sec.  301, 91 Stat. 685, 770 (Aug.
7, 1977) (defining ``emission limitation'' and ``emission standard''
as ``a requirement established by the State or the Administrator
which limits the quantity, rate, or concentration of emissions of
air pollutants on a continuous basis, including any requirement
relating to the operation or maintenance of a source to assure
continuous emission reduction.''). Congress also added a generally
applicable definition of standard of performance, defined as ``a
requirement of continuous emission reduction, including any
requirement relating to the operation or maintenance of a source to
assure continuous emission reduction.'' Id.
---------------------------------------------------------------------------

    In the 1990 CAA Amendments, Congress restored the 1970s vintage
definition of a standard of performance as applied to both new and
existing sources. With respect to existing sources, this had the effect
of no longer requiring that the BSER be ``continuous.'' \495\ Further,
nothing in the 1990 CAA Amendments or their legislative history
indicates that Congress intended to impose new constraints on the types
of systems of emission reduction that could be considered under CAA
section 111(d)(1) and (a)(1). In contrast, Congress retained the
definition of the term ``technological system of continuous emission
reduction,'' which means ``a technological process for production or
operation by any source which is inherently low-polluting or
nonpolluting,'' CAA section 111(a)(7)(A), or ``a technological system
for continuous reduction of the pollution generated by a source before
such pollution is emitted into the ambient air, including precombustion
cleaning or treatment of fuels,'' CAA section 111(a)(7)(B).
---------------------------------------------------------------------------

    \495\ We note that the general definition of a standard of
performance at CAA section 302(l) still uses ``continuous.'' Even if
this provision applies to section 111, it does not affect our
analysis in this rule, including our interpretation that BSER
includes building blocks 2 and 3.
---------------------------------------------------------------------------

    That term continues to be used in reference to new sources in
certain circumstances, under CAA section 111(b), (h), and (j).\496\
However, it is not and never has been used to regulate existing
sources. In this manner, the 1990 CAA Amendments further reinforce the
breadth and flexibility of the phrase ``system of emission reduction,''
particularly as it applies to existing sources under CAA section
111(d).
---------------------------------------------------------------------------

    \496\ There are numerous reasons to find that particular CAA
section 111(b) standards of performance should be based on controls
installed at the source at the time of new construction. This is due
in part to the recognition that new sources have long operating
lives over which initial capital costs can be amortized, as
recognized in the legislative history for section 111. Thus, new
construction is the preferred time to drive capital investment in
emission controls. See, e.g., S. Rep. No. 91-1196, at 15-16, 1970
CAA Legis. Hist. at 416 (``[t]he overriding purpose of this section
[concerning new source performance standards] would be to prevent
new air pollution problems, and toward that end, maximum feasible
control of new sources at the time of their construction is seen by
the committee as the most effective and, in the long run, the least
expensive approach.''); see also 1977 CAA Amendments, Sec.  109, 91
Stat. at 700, (redefining, with respect to new sources, CAA section
111(a)(1) to reflect the best ``technological system of continuous
emission reduction'' and adding CAA section 111(a)(7) to define this
new term). However, as a result of the 1990 revisions to CAA section
111(a)(1), which replaced the phrase ``technological system of
continuous emission reduction'' with ``system of emission
reduction,'' new source standards would not be restricted to being
based on technological control measures.
---------------------------------------------------------------------------

    For these reasons, the 1970, 1977, and 1990 legislative histories
support the EPA's interpretation in this rule that the term is
sufficiently broad to encompass building blocks 2 and 3.
    (ii) Reliance on actions taken by other entities.
    The legislative history supports the EPA's interpretation of
``system of emission reduction'' in another way as well: The
legislative history makes clear that Congress intended that standards
of performance for electric power plants could be based on measures
implemented by other entities, for example, entities that ``wash,'' or
desulfurize, coal (or, for oil-fired EGUs, that desulfurize oil). This
legislative history is consistent with the EPA's view that the ``system
of emission reduction'' may include actions taken by an entity with
whom the owner/operator of the affected source enters into a
contractual relationship as long as those actions allow the affected
source to meet its emission limitation. By the same token, this
legislative history directly refutes commenters' assertions that the
phrase ``system of emission reduction'' must not include actions taken
by entities other than the affected sources.\497\
---------------------------------------------------------------------------

    \497\ See, e.g., comments by UARG at 31 (the building blocks
other than building block 1 take a `` `beyond-the-source' approach''
and ``impermissibly rely on measures that go beyond the boundaries
of individual affected EGUs and that are not within the control of
individual EGU owners and operators''); comments by American
Chemistry Council et al. (``Associations'') at 60-61 (EPA's proposed
BSER analysis is unlawful because it ``looks beyond the fence line
of the fossil fuel-fired EGUs that are the subject of this
rulemaking;'' ``the standard of performance must . . . be limited to
the types of actions that can be implemented directly by an existing
source within [the appropriate] class or category.'').
---------------------------------------------------------------------------

    As noted above, in the 1977 CAA Amendments, Congress revised the
basis for standards of performance for new fossil fuel-fired stationary
sources to be a ``technological system of continuous emission
reduction,'' including ``precombustion cleaning or treatment of
fuels.'' \498\ Precombustion cleaning or treatment reduces the amount
of sulfur in the fuel, which means that the fuel can be combusted with
fewer SO2 emissions, and that in turn means that the source
can achieve a lower emission limit. Congress understood that these fuel
cleaning techniques would not necessarily be accomplished at the
affected source and, in revising CAA section 111(a)(1), wanted to
ensure that such techniques would not be overlooked. For example, the
1977 House Committee report indicates that an assessment of the best
technological system of continuous emission reduction for fossil fuel-
fired power plants would include off-site or third-party pre-combustion
techniques for reducing emissions at the source (``e.g., various coal-
cleaning technologies such as solvent refining, oil desulfurization at
the refinery'').\499\

Thus, the standard of performance reflecting the best technological
system implementable by an affected source could be based, in part, on
technologies used at off-site facilities owned and operated by third-
parties.
---------------------------------------------------------------------------

    \498\ 1977 CAA Amendments, Sec.  109, 91 Stat. at 700; see also
CAA section 111(a)(7).
    \499\ H.R. Rep. No. 95-294 (May 12, 1977), 1977 CAA Legis. Hist.
at 2655 (emphasis added). Generally speaking, coal cleaning
activities also are conducted by third parties. For instance, EPA
recognized in a regulatory analysis of new source performance
standards for industrial-commercial-institutional steam generating
units that the technology ``requires too much space and is too
expensive to be employed at individual industrial-commercial-
institutional steam generating units.'' U.S. EPA, Summary of
Regulatory Analysis for New Source Performance Standards:
Industrial-Commercial-Institutional Steam Generating Units of
Greater than 100 Million Btu/hr Heat Input, EPA-450/3-86-005, p. 4-4
(June 1986).
---------------------------------------------------------------------------

    In the 1990 CAA Amendments, Congress eliminated many of the
restrictions and other provisions added in the 1977 CAA Amendments by
largely reinstating the 1970 CAA Amendments' definition of ``standard
of performance.'' Nevertheless, there is no indication that in doing
so, Congress intended to preclude the EPA from considering coal
cleaning by third parties (which had been considered within the scope
of the best system of emission reduction even under the 1970 CAA
Amendments),\500\ and in fact, the EPA's regulations promulgated after
the 1990 CAA Amendments continue to impose standards of performance
that are based on third-party coal cleaning.\501\
---------------------------------------------------------------------------

    \500\ See U.S. EPA, Background Information for Proposed New-
Source Performance Standards: Steam Generators, Incinerators,
Portland Cement Plants, Nitric Acid Plants, Sulfuric Acid Plants,
Office of Air Programs Tech. Rep. No. APTD-0711, p. 7 (Aug. 1971)
(indicating the ``desirability of setting sulfur dioxide standards
that would allow the use of low-sulfur fuels as well as fuel
cleaning, stack-gas cleaning, and equipment modifications''
(emphasis added)).
    \501\ 40 CFR 60.49b(n)(4); see also Amendments to New Source
Performance Standards (NSPS) for Electric Utility Steam Generating
Units and Industrial-Commercial-Institutional Steam Generating
Units; Final Rule, 72 FR 32742 (June 13, 2007).
---------------------------------------------------------------------------

    (c) Consistency of a broad interpretation of CAA section 111 with
the overall structure of the CAA.
    Interpreting CAA section 111(d)(1) and (a)(1) to authorize the
EPA's consideration of the building block 2 and 3 measures is
consistent with the overall structure of the CAA, particularly as it
was amended in 1970, when Congress added CAA section 111 in much the
same form that it reads today.
    In the 1970 CAA Amendments, for the most part, and particularly for
stationary source provisions, Congress painted with broad brush
strokes, giving broad authority to the EPA or the states. That is,
Congress established general requirements that were intended to produce
stringent results, but gave the EPA or the states great discretion in
fashioning the types of measures to achieve those results.
    For example, under CAA section 109, Congress authorized the EPA to
promulgate national ambient air quality standards (NAAQS) for air
pollutants, and Congress established general criteria and procedural
requirements, but left to the EPA discretion to identify the air
pollutants and select the standards. Under CAA section 110, Congress
required the states to submit to the EPA SIPs, required that the plans
attain the NAAQS by a date certain, and established procedural
requirements, but allowed the states broad discretion in determining
the substantive requirements of the SIPs.
    Under CAA section 111(b), Congress directed the EPA to list source
categories that endanger public health or welfare and established
procedural requirements, but did not include other substantive
requirements, and instead gave the EPA broad discretion to determine
the criteria for endangerment.
    Under CAA section 112, Congress required the EPA to regulate
certain air pollutants and to set ``emission standards'' that meet
general criteria, and established procedural requirements, but did not
include other substantive requirements and, instead, gave the EPA broad
discretion in identifying the types of pollutants and in determining
the standards.\502\ By and large, Congress left these provisions intact
in the 1977 CAA Amendments.503 504
---------------------------------------------------------------------------

    \502\ By comparison, under the 1990 CAA Amendments, Congress
substantially transformed CAA section 112 to be significantly more
prescriptive in directing EPA rulemaking, which reflected Congress's
increased knowledge of hazardous air pollutants and impatience with
the EPA's progress in regulating.
    \503\ In the 1977 CAA Amendments, Congress applied the same
broad drafting approach to the stratospheric ozone provisions it
adopted in CAA sections 150-159. There, Congress authorized the EPA
to determine whether, ``in the Administrator's judgment, any
substance, practice, process, or activity may reasonably be
anticipated to affect the stratosphere, especially ozone in the
stratosphere, and such effect may reasonably be anticipated to
endanger public health or welfare,'' and then directed the EPA, if
it made such a determination, to ``promulgate regulations respecting
the control of such process practice, process, or activity. . . .''
CAA section 157(a). This provision does not further specify
requirements for the regulations.
    \504\ On the other hand, in those instances in which Congress
had a clear idea as to the emission limitations that it thought
should be imposed, it mandated those emission limits, e.g., in Title
II concerning motor vehicles.
---------------------------------------------------------------------------

    Congress drafted the CAA section 111(d) requirements in the 1970
CAA Amendments, and revised them in the 1977 CAA Amendments, in a
manner that is similar to the other stationary source requirements,
just described, in CAA sections 109, 110, 111(b), and 112. The CAA
section 111(d) requirements are broadly phrased, include procedural
requirements but no more than very general substantive requirements,
and give broad discretion to the EPA to determine the basis for the
required emission limits and to the states to set the standards. It
should be noted that this drafting approach is not unique to the CAA;
on the contrary, Congress ``usually does not legislate by specifying
examples, but by identifying broad and general principles that must be
applied to particular factual instances.'' \505\
---------------------------------------------------------------------------

    \505\ Pub. Citizen v. U.S. Dept. of Justice, 491 U.S. 440, 475
(1989) (Kennedy, J., concurring).
---------------------------------------------------------------------------

    In light of this statutory framework, it is clear that Congress
delegated to the EPA the authority to administer CAA section 111,
including by authorizing the EPA to apply the ``broad and general
principles'' contained in CAA section 111(a)(1) to the particular
circumstances we face today.
    (3) Comments and responses.
    While some commenters support the EPA's interpretation of section
111 to authorize the inclusion of building blocks 2 and 3 in the BSER,
other commenters assert that the emission standards must be based on
measures that the sources subject to CAA section 111--in this rule, the
affected EGUs--apply to their own design or operations, and, as a
result, in this rule, cannot include measures implemented at entities
other than the affected EGUs that have the effect of reducing
generation, and therefore emissions, from the affected EGUs. The
commenters assert that various provisions in CAA section 111 make this
limitation clear. We do not find those arguments persuasive.
    First, some commenters state that under CAA section 111(d)(1) and
(a)(1), the existing sources subject to the standards of performance
must be able to achieve their emission limit, but that they are able to
do so only through measures integrated into the source's own design and
operation. As a result, according to these commenters, those are the
only types of measures that may qualify as a ``system of emission
reduction'' that may form the basis of the emissions standards. We
disagree. We see nothing in CAA section 111(d)(1) or (a)(1) which by
its terms limits CAA section 111 to measures that must be integrated
into the sources' own design or operation. Rather, we recognize that in
order for an emission limitation based on the BSER to be
``achievable,'' the BSER must consist of measures that can be
undertaken by an affected source--that is, its owner or operator. As
noted elsewhere in the

preamble, the affected sources subject to this rule are fully able to
meet their emission standards by undertaking the measures described in
all three building blocks. Moreover, as discussed, the measures in
building blocks 2 and 3 are highly effective in achieving
CO2 emission reductions from these affected EGUs, given the
unique characteristics of the industry. This reinforces the conclusion
that the term ``system of emission reduction'' is broad enough to
include these measures.
    The broad nature of CAA section 111(d)(1) and (a)(1) is also
confirmed by comparing it to CAA provisions that explicitly require
controls on the design or operations of an affected source. The most
notable comparison is at CAA section 111(a)(7). The term
``technological system of continuous emission reduction,'' which was
added in 1977 and remains as a separately defined term means, in part,
``a technological process for production or operation by any source
which is inherently low-emitting or nonpolluting.'' (Emphasis added.)
With respect to this portion of the definition (and ignoring the
additional text, which includes ``precombustion cleaning or treatment
of fuels'' and clearly encompasses off-site activities), it could be
argued that between 1977 and 1990 new source performance standards
should be restricted to measures that could be integrated into the
design or operation of a source. However, commenters' assertion that
the BSER must be limited in a similar fashion ignores the deliberate
change in 1990 to restore the broader definition of a standard of
performance (i.e., that it be based on the BSER and not the TSCER). In
any case, the narrower scope of CAA section 111(a)(7) was never
applicable to the regulation of existing sources under CAA section
111(d).
    Several other examples of standard setting in the CAA shed light on
ways in which Congress has constrained the EPA's review. CAA section
407(b)(2) provides that the EPA base NOX emission limits for
certain types of boilers ``on the degree of reduction achievable
through the retrofit application of the best system of continuous
emission reduction.'' (Emphasis added.) Likewise, in determining best
available retrofit technology under CAA section 169A, the state (or
Administrator) must ``take into consideration the costs of compliance,
the energy and nonair quality environmental impacts, any existing
pollution control technology in use at the source, the remaining useful
life of the source, and the degree of improvement in visibility which
may reasonably be anticipated to result from the use of such
technology.'' \506\ (Emphasis added.) These provisions make clear that
Congress knew how to constrain the basis for emission limits to
measures that are integrated into the design or operation of the
affected source, and that its choice to base CAA section 111(d)(1) and
(a)(1) standards of performance on a ``system of emission reduction''
indicates Congress' intent to authorize a broader basis for those
standards.
---------------------------------------------------------------------------

    \506\ Even under BART, the EPA is authorized to allow emissions
trading between sources. See, e.g., 40 CFR 51.308(e)(1) & (2); Util.
Air Reg. Group v. EPA, 471 F.3d 1333 (D.C. Cir. 2006); Ctr. for
Econ. Dev. v. EPA, 398 F.3d 653 (D.C. Cir. 2005); and Cent. Ariz.
Water Dist. v. EPA, 990 F.2d 1531 (9th Cir. 1993).
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    Some commenters also argue that other provisions in CAA section 111
indicate that Congress intended that CAA section 111(d)(1) and (a)(1)
be limited to measures that are integrated into the source's design or
operations. This argument is unpersuasive for several reasons. First,
it would be unreasonable to presume that Congress intended to limit the
BSER, indirectly through these other provisions, to measures that are
integrated into the affected source's design or operations, when
Congress could have done so expressly, as it did for the above-
discussed CAA section 407(b)(2) NOX requirements.
    Second, the interpretations that commenters offer for these various
provisions misapply the text. For example, commenters note that under
CAA section 111(d)(1), (a)(3), and (a)(6), the standards of performance
apply to ``any existing source,'' and an ``existing source'' is defined
to include ``any stationary source,'' which, in turn, is defined as
``any building, structure, facility, or installation which emits or may
emit any air pollutant.'' Commenters assert that these applicability
and definitional provisions indicate that the BSER provisions in CAA
section 111(d)(1) and (a)(1) must be interpreted to require that the
control measures must be integrated into the design or operations of
the source itself.
    We disagree. These applicability and definitional provisions are
jurisdictional in nature. Their purpose is simply to identify the types
of sources whose emissions are to be addressed under CAA section
111(d), i.e., stationary sources, as opposed to other types of sources,
e.g., mobile sources, whose emissions are addressed under other CAA
provisions (such as CAA Title II). This purpose is made apparent by the
terms of CAA section 111(a)(3), which contains two sentences (the
second of which commenters seem to ignore). The first sentence
provides: ``The term `stationary source' means any building, structure,
facility, or installation which emits or may emit any air pollutant.''
The second sentence provides: ``Nothing in subchapter II of this
chapter relating to nonroad engines shall be construed to apply to
stationary internal combustion engines.'' This second sentence explains
that stationary internal combustion engines are to be regulated under
CAA section 111, and not Title II (relating to mobile sources), which
confirms that the purpose of the definition of stationary source is
jurisdictional in nature--to identify the emissions that are to be
regulated under section 111, as opposed to other CAA provisions.
    These applicability and definitional provisions say nothing about
the system of emission reduction--whether it is limited to measures
integrated into the design or operation of the source itself or may be
broader--that may form the basis of the standards for those emissions
that are to be promulgated under CAA section 111.
    Third, this argument by commenters does not account for the
commonsense proposition that it is the owner/operator of the stationary
source, not the source itself, who is responsible for taking actions to
achieve the emission rate, so that actions that the owner/operator is
able to take should be considered in determining the appropriate
standards for the source's emissions. Again, it is common sense that
buildings, structures, facilities, and installations can take no
actions--only owners and operators can install and maintain pollution
control equipment; only owners and operators can solicit precombustion
cleaning or treatment of fuel services; and only owners and operators
can apply for a permit or trade allowances.\507\ Other provisions in
CAA section 111 make clear the role of the owner/operator. CAA section
111(e) provides that for new sources, the burden of compliance falls on
the ``owner or operator.'' \508\ The same is necessarily true for
existing sources. This supports the EPA's view that the basis for
whether a control measure qualifies as a ``system of emission
reduction'' under CAA section 111(d)(1)

and (a)(1) is whether it is something that the owner/operator can
implement in order to achieve the emissions standard assigned to the
source--if so, the control measure should qualify as a ``system of
emission reduction''--and not whether the control measure is integrated
into the source's own design or operation.
---------------------------------------------------------------------------

    \507\ Industry commenters also acknowledged that it is the owner
or operator that implements the control requirements. See UARG
comment at 19 (section 111(d) ``provides for the regulation of
individual emission sources through performance standards that are
based on what design or process changes an individual source's owner
can integrate into its facility'').
    \508\ CAA section 111(e) provides: (``[I]t shall be unlawful for
any owner or operator of any new source to operate such source in
violation of any [applicable] standard of performance.'')
---------------------------------------------------------------------------

    Commenters also argue that CAA section 111(h), which authorizes
``design, equipment, work practice or operational standard[s]''
(together, ``design standards'') only when a source's emissions are not
emitted through a conveyance or cannot be measured, makes clear that
CAA section 111 standards of performance must be based on measures
integrated into a source's own design or operations. We disagree. CAA
section 111(h) concerns the relatively rare situation in which an
emission standard, which entails a numerical limit on emissions, is not
appropriate because emissions cannot be measured, due either to the
nature of the pollutant (i.e., the pollutant is not emitted through a
conveyance) or the nature of the source category (i.e., the source
category is not able to conduct measurements). CAA section 111(h)
provides that in such cases, the EPA may instead impose design
standards rather than establish an emission standard (i.e., the EPA can
require sources to implement a particular design, equipment, work
practice, or operational standard). When an emissions standard is
appropriate, as in the present rule, CAA section 111(h) is silent as to
what types of measures--whether limited to a source's own design or
operations--may be considered as the system of emission reduction.\509\
In any event, CAA section 111(h) applies only to standards promulgated
by the Administrator, and therefore appears by its terms to be limited
to CAA section 111(b) rulemakings for new, modified, or reconstructed
sources, not CAA section 111(d) rulemakings for existing sources.
---------------------------------------------------------------------------

    \509\ For this same reason, the fact that CAA section 111(h)
authorizes the EPA to impose certain types of standards--such as,
among others, work practice or operational standards--only in
limited circumstances not present in this rulemaking, does not mean
that the EPA cannot consider those same measures as the BSER in
promulgating a standard of performance.
---------------------------------------------------------------------------

    Some commenters identify other provisions of CAA section 111 that,
in their view, prove that CAA section 111 is limited to control
measures that are integrated within the design or operations of the
source. We do not find those arguments persuasive, for the reasons
discussed in the supporting documents for this rule.
    Commenters also argue, more generally, that Congress knew how to
authorize control measures such as RE, as indicated by Congress's
inclusion of those measures in Title IV (relating to acid rain), so the
fact that Congress did not explicitly include these measures in the
BSER provisions of CAA section 111(d)(1) and (a)(1) indicates that
Congress did not intend that they be included as part of the BSER, and
instead intended that the BSER be limited to measures integrated into
the sources' design or operations. This argument misses the mark. The
provisions of CAA section 111(d)(1) and (a)(1) do not explicitly
include any specific emission reduction measures--neither RE measures
(like the ones Congress wanted to incentivize under Title IV), nor
measures that are integrated into the sources' design or operations
(like the retrofit control measures Congress required under CAA section
407(b)). But this contrast with other CAA provisions does not mean that
Congress did not intend the BSER to include any of those types of
measures. Rather, this contrast supports viewing a ``system of emission
reduction'' under CAA section 111 as sufficiently broad to encompass a
wide range of measures for the purpose of emission reduction of a wide
range of pollutants from a wide range of stationary sources.\510\
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    \510\ It should also be noted that Title IV is limited to
particular pollutants (i.e., SO2 and NOX) and
particular sources--fossil fuel-fired EGUs--and as a result, lends
itself to greater specificity about the types of control measures.
Section 111(d), in contrast, applies to a wide range of source
types, which, as discussed above, supports reading it to authorize a
broad range of control measures.
---------------------------------------------------------------------------

    c. Deference to interpret the BSER to include building blocks 2 and
3.
    To the extent that it is not clear whether the phrase ``system of
emission reduction'' may include the measures in building blocks 2 and
3, the EPA's interpretation of CAA section 111(d) and (a) is reasonable
\511\ in light of our discretion to determine ``whether and how to
regulate carbon-dioxide emissions from power plants . . . .'' \512\
---------------------------------------------------------------------------

    \511\ EPA v. EME Homer City Generation, L.P., 134 S. Ct. 1584,
1603 (2014) (``We routinely accord dispositive effect to an agency's
reasonable interpretation of ambiguous statutory language.'').
    \512\ American Electric Power Co. v. Connecticut, 131 S. Ct.
2527, 2538 (2011) (``AEP'') (emphasis added).
---------------------------------------------------------------------------

    Our interpretation that a ``system of emission reduction'' for the
affected EGUs may include building blocks 2 and 3 is a reasonable
construction of the statute for the reasons described above and in this
section below.
    (1) Consistency of building blocks 2 and 3 with the structure of
the utility power sector.
    (a) Integration of the utility power sector.
    Certain characteristics of the utility power sector are of central
importance for understanding why the measures of building blocks 2 and
3 qualify as part of the system of emission reduction. As discussed
above, electricity is highly substitutable and the utility power sector
is highly integrated, so much so that it has been likened to a
``complex machine.'' \513\ Specifically, the utility power sector is
characterized by physical, as well as operational, interconnections
between electricity generators themselves, and between those generators
and electricity users. Because of the physical properties of
electricity and the current low availability of large scale electricity
storage, generation and load (or use) must be instantaneously balanced
in real time. As a result, the utility power sector is uniquely
characterized by extensive planning and highly coordinated operation.
These features have been present for decades, and in fact, over time,
the sector has become more highly integrated. Another important
characteristics of the utility power sector is that although the states
have developed both regulated and de-regulated markets, the generation
of electricity reflects a least-cost dispatch approach, under which
electricity is generated first by the generators with the lowest
variable cost.
---------------------------------------------------------------------------

    \513\ S. Massoud Amin, ``Securing the Electricity Grid,'' The
Bridge, Spring 2010, at 13, 14; Phillip F. Schewe, The Grid: A
Journey Through the Heart of Our Electrified World 1 (2007).
---------------------------------------------------------------------------

    These characteristics of the sector have facilitated the overall
objective of providing reliable electric service at least cost subject
to a variety of constraints, including environmental constraints.
Moreover, in each type of market, the sector has developed mechanisms,
including the participation of institutional actors, to safeguard
reliability and to assure least cost service.
    Congress,\514\ the Courts,\515\ the EPA in its regulatory
actions,\516\ and states in

their regulatory actions \517\ have recognized the integrated nature of
the utility power sector.
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    \514\ See CAA section 404(f)(2)(B)(iii)(I) (conditioning a
utility's eligibility for certain allowances on implementing an
energy conservation and electric power plan that evaluates a range
of resources to meet expected future demand at least cost); see also
S. Rep. No. 101-228, at 319-20 (Dec. 20, 1989) (recognizing that
``utilities already engage in power-pooling arrangements to ensure
maximum flexibility and efficiency in supplying power'' to support
the establishment of an allowance system under Title IV).
    \515\ New York v. Federal Energy Regulatory Commission, 535 U.S.
1, at 7 (2002) (citing Brief for Respondent FERC 4-5).
    \516\ ``Stack Heights Emissions Balancing Policy,'' 53 FR 480,
482 (Jan. 7, 1988).
    \517\ See 79 FR 34830, 34880 (June 18, 2014) (discussing State
of California Global Warming Solutions Act of 2006, Assembly Bill
32, http://www.leginfo.ca.gov/pub/05-06/bill/asm/ab_0001-0050/ab_32_bill_20060927_chaptered.pdf, and quoting December 27, 2013
Letter from Mary D. Nichols, Chairman of California Air Resources
Board, to EPA Administrator Gina McCarthy).
---------------------------------------------------------------------------

    (b) Significance of integrated utility power sector for the BSER.
    The fungibility of electricity, coupled with the integration of the
utility power sector, means that, assuming that demand is held
constant, adding electricity to the grid from one generator will result
in the instantaneous reduction in generation from other generators.
Similarly, reductions in generation from one generator lead to the
instantaneous increase in generation from other generators. Thus, the
operation of individual EGUs is integrated and coordinated with the
operations of other EGUs and other sources of generation, as well as
with electricity users. This allows for locational flexibility across
the sector in meeting demand for electricity services. The institutions
that coordinate planning and operations routinely use this flexibility
to meet demand for electricity services economically while satisfying
constraints, including environmental constraints. Because of these
characteristics, EGU owner/operators have long conducted their
business, including entering into commercial arrangements with third
parties, based on the premise that the performance and operations of
any of their facilities is substantially dependent on the performance
and operation of other facilities, including ones they neither own nor
operate. For example, when an EGU goes off-line to perform maintenance,
its customer base is served by other EGUs that increase their
generation. Similarly, if an EGU needs to assure that it can meet its
obligations to supply a certain amount of generation, it may enter into
arrangements to purchase that generation, if it needs to, from other
EGUs.
    Because of this structure, fossil fuel-fired EGUs can reduce their
emissions by taking the actions in building blocks 2 and 3.
Specifically, fossil fuel-fired EGUs may generate or cause the
generation of increased amounts of lower- or zero-emitting
electricity--through contractual arrangements, investment, or
purchase--which will back out higher-emitting generation, and thereby
lower emissions. In addition, fossil fuel-fired EGUs may reduce their
generation, which, given the overall emission limits this rule
requires, will have the effect of stimulating lower- or zero-emitting
generation.
    It should also be noted that CO2 is particularly well-
suited for building blocks 2 and 3 because it is a global, not local,
air pollutant, so that the location where it is emitted does not affect
its environmental impact. The U.S. Supreme Court in the UARG case
highlighted the importance of taking account of the unique
characteristics of CO2.\518\
---------------------------------------------------------------------------

    \518\ See Util. Air. Reg. Group v. EPA, 134 S. Ct. 2427, 2441
(2014).
---------------------------------------------------------------------------

    In light of these characteristics of the utility power sector, as
well as the characteristics of CO2 pollution, it is
reasonable for the EPA to reject an interpretation of the term ``system
of emission reduction'' that would exclude building blocks 2 and 3 from
consideration in this rule and instead restrict consideration to
measures integrated into each individual affected source's design or
operation, especially since the record and other publicly available
information makes clear that the measures in the two building blocks
are effective in reducing emissions and are already widely used.
    As discussed above, no such restriction on the measures that can be
considered part of a ``system of emission reduction'' is required by
the statutory language, and the legislative history demonstrates that
Congress intended an interpretation of the phrase broad enough to
encompass building blocks 2 and 3. The narrow interpretation advocated
by some commenters would permit consideration only of potential
CO2 reduction measures that are either more expensive than
building blocks 2 and 3 (such as the use of natural gas co-firing at
affected EGUs or the application of CCS technology) or measures capable
of achieving far less reduction in CO2 emissions (such as
the heat rate improvement measures included in building block 1).
Imposing such a restrictive interpretation--one which is not called for
by the statute--would be inconsistent with CAA section 111's specific
requirement that standards be based on the ``best'' system of emission
reduction and, as discussed below, would be inconsistent with
Congressional design that the CAA be comprehensive and address the
major environmental issues.\519\
---------------------------------------------------------------------------

    \519\ See King v. Burwell, No. 14-114 (2015) (slip op., at 21)
(``But in every case we must respect the role of the Legislature,
and take care not to undo what it has done.'').
---------------------------------------------------------------------------

    The unique characteristics of the sector described above require
coordinated action in the fundamental, primary function of EGUs--and in
meeting current pollution control requirements to the extent that EGUs
operate in dispatch systems that apply variable costs in determining
dispatch--and affected EGUs necessarily already plan and operate on a
multi-unit basis. In doing so, they already make use of building blocks
2 and 3 to meet operational and environmental objectives in a cost-
effective manner, as further described below. CO2 is a
global pollutant that is exceptionally well-suited to emission
reduction efforts optimized on a broad geographic scale rather than on
a unit-by-unit basis. It is also clear from both comments and
communications received through the Agency's outreach efforts that
affected EGUs will seek to use building blocks 2 and 3 to achieve
compliance with the emission standards set in the section 111(d) plans
following promulgation of this rule. For these reasons--and the
additional reasons discussed below--interpreting ``system of emission
reduction'' so as to allow consideration in this rule of only the
individual pieces of the ``complex machine,'' and to forbid
consideration of the ways in which the pieces actually fit and work