federally enforceable emission standards for affected EGUs (if
applicable); identification of backstop of federally enforceable
emission standards; and monitoring, recordkeeping and reporting
requirements.
     Identification of each state measure and demonstration
that each state measure will result in reductions that are
quantifiable, non-duplicative, permanent, verifiable, and
enforceable.

    In addition to these requirements, each state plan must follow the
EPA implementing regulations at 40 CFR 60.23.
    If a state with affected EGUs does not submit a plan or if the EPA
does not approve a state's plan, then under CAA section 111(d)(2)(A),
the EPA must establish a plan for that state. A state that has no
affected EGUs must document this in a formal negative declaration
submitted to the EPA by September 6, 2016. In the case of a tribe that
has one or more affected EGUs in its area of Indian country,\283\ the
tribe has the opportunity, but not the obligation, to establish a CAA
section 111(d) plan for its area of Indian country. If a tribe with one
or more affected EGUs located in its area of

Indian country does not submit a plan or does not receive EPA approval
of a submitted plan, the EPA has the responsibility to establish a CAA
section 111(d) plan for that area if it determines that such a plan is
necessary or appropriate.
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    \283\ The EPA is aware of at least four affected EGUs located in
Indian country: Two on Navajo lands, the Navajo Generating Station
and the Four Corners Power Plant; one on Ute lands, the Bonanza
Power Plant; and one on Fort Mojave lands, the South Point Energy
Center. The affected EGUs at the first three plants are coal-fired
EGUs. The fourth affected EGU is an NGCC facility.
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    During implementation of its approved state plan, each state must
demonstrate to the EPA that its affected EGUs are meeting the interim
and final performance requirements included in this final rule through
monitoring and reporting requirements. State plan requirements and
flexibilities are described more fully in Section VIII of this
preamble.

B. Brief Summary of Legal Basis

    This rule is consistent with the requirements of CAA section 111(d)
and the implementing regulations.\284\ As an initial matter, the EPA
reasonably interprets the provisions identifying which air pollutants
are covered under CAA section 111(d) to authorize the EPA to regulate
CO2 from fossil fuel-fired EGUs. In addition, the EPA
recognizes that CAA section 111(d) applies to sources that, if they
were new sources, would be covered under a CAA section 111(b) rule.
Concurrently with this rule, the EPA is finalizing a CAA section 111(b)
rulemaking establishing standards of performance for CO2
emissions from new fossil fuel-fired EGUs, from modified fossil fuel-
fired EGUs, and from reconstructed fossil fuel-fired EGUs, and any of
those sets of section 111(b) standards of performance provides the
requisite predicate for this rulemaking.
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    \284\ Under CAA section 111(d), there is no requirement that the
EPA make a finding that the emissions from existing sources that are
the subject of regulation cause or contribute significantly to air
pollution which may reasonably be anticipated to endanger public
health or welfare. As predicates to promulgating regulations under
CAA section 111(d) for existing sources, the EPA must make
endangerment and cause-or-contribute-significantly findings for
emissions from the source category, and the EPA must promulgate
regulations for new sources in the source category. In the CAA
section 111(b) rule for CO2 emissions for new affected
EGUs that the EPA is promulgating concurrently with this rule, the
EPA discusses the endangerment and cause-or-contribute-significantly
findings and explains why the EPA has already made them for the
affected EGU source categories so that the EPA is not required to
make them for CO2 emissions from affected EGUs, and, in
the alternative, why, if the EPA were required to make those
findings, it was making them in that rulemaking.
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    A key step in promulgating requirements under CAA section 111(d)(1)
is determining the ``best system of emission reduction which . . . the
Administrator determines has been adequately demonstrated'' (BSER)
under CAA section 111(a)(1). It is clear by the terms of section
111(a)(1) and the implementing regulations for section 111(d) that the
EPA is authorized to determine the BSER; \285\ accordingly, in this
rulemaking, the EPA is determining the BSER.
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    \285\ The EPA is not re-opening that interpretation in this
rulemaking.
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    The EPA is finalizing the BSER for fossil fuel-fired EGUs based on
building blocks 1, 2, and 3. Building block 1 includes operational
improvements and equipment upgrades that the coal-fired steam-
generating EGUs in the state may undertake to improve their heat rate.
It qualifies as part of the BSER because it improves the carbon
intensity of the affected EGUs in generating electricity through
actions the affected sources may undertake that are adequately
demonstrated and whose cost is ``reasonable.'' Building blocks 2 and 3
include increases in low- or zero-emitting generation which substitute
for generation from the affected EGUs and thereby reduce CO2
emissions from those sources. All of these measures are components of a
``system of emission reduction'' for the affected EGUs because they
entail actions that the affected EGUs may themselves undertake that
have the effect of reducing their emissions. Further, these measures
meet the criteria in CAA section 111(a)(1) and the case law for the
``best'' system of emission reduction that is ``adequately
demonstrated'' because they achieve the appropriate level of
reductions, their cost is ``reasonable,'' they do not have adverse non-
air quality health and environmental impacts or impose adverse energy
requirements, and they are each well-established among affected EGUs.
It should be emphasized that these measures are consistent with current
trends in the electricity sector.
    Building blocks 2 and 3 may be implemented through a set of
measures, including reduced generation from the fossil fuel-fired EGUs.
These measures do not, however, reduce the amount of electricity that
can be sold or that is available to end users. In addition, states
should be expected to allow their affected EGUs to trade rate-based
emission credits or mass-based emission allowances (trading) because
trading is well-established for this industry and has the effect of
focusing costs on the affected EGUs for which reducing emissions is
most cost-effective. Because trading facilitates implementation of the
building blocks and may help to optimize cost-effectiveness, trading is
a method of implementing the BSER as well.
    As a result, an affected EGU has a set of choices for achieving its
emission standards. For example, an affected coal-fired steam
generating unit can achieve a rate-based standard through a set of
actions that implement the building block 1 measures and that implement
the building block 2 and 3 measures through a set of actions that range
from purchasing full or partial interest in existing NGCC or new RE
assets to purchasing ERCs that represent the environmental attributes
of increased NGCC generation or new renewable generation. In addition,
the affected EGU may reduce its generation and thereby reduce the
extent that it needs to implement the building blocks. The affected EGU
may also purchase rate-based emission credits from other affected EGUs.
If the state chooses to impose a mass-based emission standard, the
coal-fired steam generating unit may implement building block 1
measures, purchase mass-based emission allowances from other affected
EGUs, or reduce its generation. In light of the available sources of
lower- and zero-emitting replacement generation, this approach would
achieve an appropriate level of emission reductions and maintain the
reliability of the electricity system.
    With the promulgation of the emission guidelines, each state must
develop and submit a plan to achieve the CO2 emission
performance rates established by the EPA or the equivalent statewide
rate-based or mass-based goal provided by the EPA in this rule. The EPA
interprets CAA section 111(d) to allow states to establish standards of
performance and provide for their implementation and enforcement
through either the ``emission standards'' or the ``state measures''
plan type. In the case of the ``emission standards'' plan type, the
emission standards establish standards of performance, and the other
components of the plan provide for their implementation and
enforcement. In the case of the ``state measures'' plan type, -the
state submits a plan that relies upon measures that are only
enforceable as a matter of state law that will, in conjunction with any
emission standards on affected EGUs, result in the achievement of the
applicable performance rates or state goals by the affected EGUs. Under
the state measures plan type, states must also submit a federally
enforceable backstop and a mechanism that would trigger implementation
of the backstop; therefore, in a state measures plan, the standards of
performance take the form of the backstop, the trigger mechanism
provides for the implementation of such backstop, and the other
required components of the plan provide for

implementation and enforcement of the standards of performance.
    These two types of state plans and their respective approaches,
which could be implemented on a single-state or multi-state basis,
allow states to meet the statutory requirements of section 111(d) while
accommodating the wide range of regulatory requirements and other
programs that states have deployed or will deploy in the electricity
sector that reduce CO2 emissions from affected EGUs. It
should be noted that both state plan types allow the state flexibility
in assigning the emission performance obligations to its affected EGUs
in the form of standards of performance as long as the required
emission performance level is met. Both plan types harness the
efficiencies of emission reduction opportunities in the interconnected
electricity system and are fully consistent with the principles of
cooperative federalism that underlie the Clean Air Act generally and
CAA section 111(d) particularly. That is, both plan types achieve the
emission performance requirements through the vehicle of a state plan,
and provide each state significant flexibility to take local
circumstances and state policy goals into account in determining how to
reduce emissions from its affected sources, as long as the plan meets
minimum federal requirements.
    Both state plan types, and the standards of performance for the
affected EGUs that the states will establish through the state plan
process, are consistent with the applicable CAA section 111 provisions.
A state has discretion in determining the appropriate measures to rely
upon for its plan. The state may adopt measures that assure the
achievement of the requisite CO2 emission performance rate
or state goal by the affected EGUs, and is not limited to the measures
that the EPA identifies as part of the BSER.
    In this rulemaking, the EPA establishes reasonable deadlines for
state plan submission. Under CAA section 111(d)(1), state plans must
``provide for implementation and enforcement'' of the standards of
performance, and under CAA section 111(d)(2), the state plans must be
``satisfactory'' for the EPA to approve them. In this rulemaking, the
EPA is finalizing the criteria that the state plans must meet under
these requirements.
    The EPA discusses its legal interpretation in more detail in other
parts of this preamble and provides additional information about
certain issues in the Legal Memorandum included in the docket for this
rulemaking.

IV. Authority for This Rulemaking, Definition of Affected Sources, and
Treatment of Source Categories

A. EPA's Authority Under CAA Section 111(d)

    EPA's authority for this rule is CAA section 111(d). CAA section
111(d) provides that the EPA will promulgate regulations under which
each state will establish standards of performance for existing sources
for any air pollutant that meets two criteria. First, CAA section
111(d) applies to air pollutants that are not regulated as a criteria
pollutant under section 108 or as a hazardous air pollutant (HAP) under
CAA section 112. 42 U.S.C. 7411(d)(1)(A)(i).\286\ Second, section
111(d) applies only to air pollutants for which the existing source
would be regulated under section 111 if it were a new source. 42 U.S.C.
7411(d)(1)(A)(ii). Here, carbon dioxide (CO2) meets both
criteria: (1) It is not a criteria pollutant regulated under section
108 nor a HAP regulated under CAA section 112, and (2) CO2
emissions from new power plants (including newly constructed, modified
and reconstructed power plants) are regulated under the CAA section
111(b) rule that is being finalized along with this rule.
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    \286\ Section 111(d) might be read to apply to HAP under certain
circumstances. However, because carbon dioxide is not a HAP, this
issue does not need to be resolved in the context of this rule.
---------------------------------------------------------------------------

B. CAA Section 112 Exclusion to CAA Section 111(d) Authority

    CAA section 111(d) contains an exclusion that limits the regulation
under CAA section 111(d) of air pollutants that are regulated under CAA
section 112. 42 U.S.C. 7411(d)(1)(A)(i). This ``Section 112 Exclusion''
in CAA section 111(d) was the subject of a significant number of
comments based on two differing amendments to this exclusion enacted in
the 1990 CAA Amendments. As discussed in more detail below, the House
and the Senate each initially passed different amendments to the
Section 112 Exclusion and both amendments were ultimately passed by
both houses and signed into law. In 2005, in connection with the Clean
Air Mercury Rule (CAMR), the EPA discussed the agency's interpretation
of the Section 112 Exclusion in light of these two differing amendments
and concluded that the two amendments were in conflict and that the
provision should be read as follows to give both amendments meaning:
where a source category has been regulated under CAA section 112, a CAA
section 111(d) standard of performance cannot be established to address
any HAP listed under CAA section 112(b) that may be emitted from that
particular source category. See 70 FR 15994, 16029-32 (March 29, 2005).
    In June 2014, the EPA presented this previous interpretation as
part of the proposal and requested comment on it. The EPA received
numerous comments on its previous interpretation, including comments on
the proper interpretation and effect of each of the two differing
amendments, and whether the Section 112 Exclusion should be read to
mean that the EPA's regulation of HAP from power plants under CAA
section 112 bars the EPA from establishing CAA section 111(d)
regulations covering CO2 emissions from power plants. In
particular, many comments focused on two specific issues. First, some
commenters--including some industry and state commenters that had
previously endorsed the EPA's interpretation of the Section 112
Exclusion in other contexts \287\--argued that the EPA's 2005
interpretation was in error because it allowed the regulation of
certain pollutants from source categories under CAA section 111(d) when
those source categories were also regulated for different pollutants
under CAA section 112. Second, some commenters argued that the EPA's
previous interpretation of the House amendment (as originally
represented in 2005 at 70 FR at 16029-30) was in error because it
improperly read that amendment as focusing on whether a source category
was regulated under CAA section 112 rather than on whether the air
pollutant was regulated under CAA section 112, and that improper
reading lead to an interpretation that was inconsistent with the
structure and purpose of the CAA.
---------------------------------------------------------------------------

    \287\ For example, in the CAMR litigation (State of New Jersey
v. EPA, No. 05-1097 (D.C. Cir.), the joint brief filed by a group of
intervenors and an amicus (including six states and the West
Virginia Department of Environmental Protection, and Utility Air
Regulatory Group and nine other industry entities) stated that the
EPA had interpreted section 111(d) in light of the two different
amendments and that the EPA's interpretation was ``a reasoned way to
reconcile the conflicting language and the Court should defer to the
EPA's interpretation.'' Joint Brief of State Respondent-Intervenors,
Industry Respondent-Intervernors, and State Amicus, filed May 18,
2007, at 25.
---------------------------------------------------------------------------

    In light of the comments, the EPA has reconsidered its previous
interpretation of the Section 112 Exclusion and, in particular,
considered whether the exclusion precludes the regulation under CAA
section 111(d) of CO2 from power plants given that power
plants are regulated for certain HAP under CAA section 112. On this
issue, the EPA

has concluded that the two differing amendments are not properly read
as conflicting. Instead, the House amendment and the Senate Amendment
should each be read to mean the same in the context presented by this
rule: that the Section 112 Exclusion does not bar the regulation under
CAA section 111(d) of non-HAP from a source category, regardless of
whether that source category is subject to standards for HAP under CAA
section 112. In reaching this conclusion, the EPA has revised its
previous interpretation of the House amendment, as discussed below.
1. Structure of the CAA and Pre-1990 Section 112 Exclusion
    The Clean Air Act sets out a comprehensive scheme for air pollution
control, addressing three general categories of pollutants emitted from
stationary sources: (1) Criteria pollutants (which are addressed in
sections 108-110); (2) hazardous pollutants (which are addressed under
section 112); and (3) ``pollutants that are (or may be) harmful to
public health or welfare but are not or cannot be controlled under
sections 108-110 or 112.'' 40 FR 53340 (Nov. 17, 1975).
    Six ``criteria'' pollutants are regulated under sections 108-110.
These are pollutants that the Administrator has concluded ``cause or
contribute to air pollution which may reasonably be anticipated to
endanger public health or welfare;'' ``the presence of which in the
ambient air results from numerous and diverse mobile or stationary
sources;'' and for which the Administrator has issued, or plans to
issue, ``air quality criteria. 42 U.S.C. 7408(a)(1). Once the EPA
issues air quality criteria for such pollutants, the Administrator must
propose primary National Ambient Air Quality Standards (NAAQS) for
them, set at levels ``requisite to protect the public health'' with an
``adequate margin of safety.'' 42 U.S.C. 7409(a)-(b). States must then
adopt plans for implementing NAAQS. 42 U.S.C. 7410.
    HAP are regulated under CAA section 112 and include the pollutants
listed by Congress in section 112(b)(1) and other pollutants that the
EPA lists under sections 112(b)(2) and (b)(3). CAA section 112 further
provides that the EPA will publish and revise a list of ``major'' and
``area'' source categories of HAP, and then establish emissions
standards for HAP emitted by sources within each listed category. 42
U.S.C. 7412(c)(1) & (2).
    CAA section 111, 42 U.S.C. 7411, is the third part of the CAA's
structure for regulating stationary sources. Section 111 has two main
components. First, section 111(b) requires the EPA to promulgate
federal ``standards of performance'' addressing new stationary sources
that cause or contribute significantly to ``air pollution which may
reasonably be anticipated to endanger public health or welfare.'' 42
U.S.C. 7411(b)(1)(A). Once the EPA has set new source standards
addressing emissions of a particular pollutant under CAA section
111(b), CAA section 111(d) provides that the EPA will promulgate
regulations requiring states to establish standards of performance for
existing stationary sources of the same pollutant. 42 U.S.C.
7411(d)(1).
    Together, the criteria pollutant/NAAQS provisions in sections 108-
110, the hazardous air pollutant provisions in section 112, and
performance standard provisions in section 111 constitute a
comprehensive scheme to regulate air pollutants with ``no gaps in
control activities pertaining to stationary source emissions that pose
any significant danger to public health or welfare.'' S. Rep. No. 91-
1196, at 20 (1970).\288\
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    \288\ In subsequent CAA amendments, Congress has maintained this
three-part scheme, but supplemented it with the Preservation of
Significant Deterioration (PSD) program, the Acid Rain Program and
the Regional Haze program.
---------------------------------------------------------------------------

    The specific role of CAA section 111(d) in this structure can be
seen in CAA subsection 111(d)(1)(A)(i), which provides that regulation
under CAA section 111(d) is intended to cover pollutants that are not
regulated under either the criteria pollutant/NAAQS provisions or
section 112. Prior to 1990, this limitation was laid out in plain
language, which stated that CAA section 111(d) regulation applied to
``any air pollutant . . . for which air quality criteria have not been
issued or which is not included on a list published under section
[108(a)] or [112(b)(1)(A)].'' This plain language demonstrated that
section 111(d) is designed to regulate pollutants from existing sources
that fall in the gap not covered by the criteria pollutant provisions
or the hazardous air pollutant provisions.
    This gap-filling purpose can be seen in the early legislative
history of the CAA. As originally enacted in the 1970 CAA, the
precursor to CAA section 111 (which was originally section 114) was
described as covering pollutants that would not be controlled by the
criteria pollutant provisions or the hazardous air pollutant
provisions. See S. Committee Rep. to accompany S. 4358 (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 [which later became section 112]) could be
established under section 114 [later, 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.''); Statement by S. Muskie, S. Debate on S. 4358 (Sept. 21,
1970), 1970 CAA Legis. Hist. at 227 (``[T]he bill [in section 114]
provides the Secretary with the authority to set emission standards for
selected pollutants which cannot be controlled through the ambient air
quality standards and which are not hazardous substances.'').
2. The 1990 Amendments to the Section 112 Exclusion
    The Act was amended extensively in 1990. Among other things,
Congress sought to accelerate the EPA's regulation of hazardous
pollutants under section 112. To that end, Congress established a
lengthy list of HAP; set criteria for listing ``source categories'' of
such pollutants; and required the EPA to establish standards for each
listed source category's hazardous pollutant emissions. 42 U.S.C.
7412(b), (c) and (d). In the course of overhauling the regulation of
HAP under section 112, Congress needed to edit section 111(d)'s
reference to section 112(b)(1)(A), which was to be eliminated as part
of the revisions to section 112.
    To address the obsolete cross-reference to section 7412(b)(1)(A),
Congress passed two differing amendments--one from the Senate and one
from the House--that were never reconciled in conference. The Senate
amendment replaced the cross reference to old section 112(b)(1)(A) with
a cross-reference to new section 112. Pub. L. 101-549, Sec.  302(a),
104 Stat. 2399, 2574 (1990). The House amendment replaced the cross-
reference with the phrase ``emitted from a source category which is
regulated under section [112].'' Pub. L. 101-549, Sec.  108(g), 104
Stat. 2399, 2467 (1990).\289\ Both amendments were

enacted into law, and thus both are part of the current CAA. To
determine how this provision is properly applied in light of the two
differing amendments, we first look at the Senate amendment, then at
the House amendment, then discuss how the two amendments are properly
read together.

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    \289\ Originally, when the House bill to amend the CAA was
introduced in January 1989, it focused on amendments to control HAP.
Of particular note, the amendments to section 112 included a
provision that excluded regulation under section 112 of ``[a]ny air
pollutant which is included on the list under section 108(a), or
which is regulated for a source category under section 111(d).''
H.R. 4, Sec.  2 (Jan. 3, 1989), 1990 CAA Legist. Hist. at 4046. In
other words, the Section 112 Exclusion in section 111(d) that was
ultimately contained in the House amendment was originally crafted
as what might be called a ``Section 111(d) Exclusion'' in section
112. This is significant because the ``source category'' phrasing in
the original January 1989 text with respect to section 111(d) makes
sense, whereas the ``source category'' phrasing in the 1990 House
amendment does not. When referring to the scope of what is regulated
under section 111(d), it makes sense to frame that scope with
respect to source categories, because section 111 regulation begins
with the identification of source categories under section
111(b)(1)(A). By contrast, regulation under section 112 begins with
the identification of HAP under section 112(b); the listing of
source categories under section 112(c) is secondary to the listing
of HAP. From this history, and in light of this difference between
the scope of what is regulated in sections 111 and 112, it is
reasonable to conclude that the ``source category'' phrasing is a
legacy from the original 1989 bill--that is, when converting the
1989 text into the Section 112 Exclusion that we see in the 1990
House amendment, the legislative drafters continued to use phrasing
based on ``source category'' notwithstanding that this phrasing
created a mismatch with the way that the scope of section 112
regulation is determined.
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3. The Senate Amendment is Clear and Unambiguous
    Unlike the ambiguous amendment to CAA section 111(d) in the House
amendment (discussed below), the Senate amendment is straightforward
and unambiguous. It maintained the pre-1990 meaning of the Section 112
Exclusion by simply substituting ``section 112(b)'' for the prior
cross-reference to ``section 112(b)(1)(A).'' Pub. L. 101-549, Sec.
302(a), 104 Stat. 2399, 2574 (1990). So amended, CAA section 111(d)
mandates that the EPA require states to submit plans establishing
standards for ``any air pollutant . . . which is not included on a list
published under section [108(a)] or section [112(b)].'' Thus, the
Section 112 Exclusion resulting from the Senate amendment would
preclude CAA section 111(d) regulation of HAP emission but would not
preclude CAA section 111(d) regulation of CO2 emissions from
power plants notwithstanding that power plants are also regulated for
HAP under CAA section 112.
    Some commenters have argued that the Senate amendment should be
given no effect, because only the House amendment is shown in the U.S.
Code, and because the Senate amendment appeared under the heading
``conforming amendments,'' and for various other reasons. The EPA
disagrees. The Senate amendment, like the House amendment, was enacted
into law as part of the 1990 CAA amendments, and must be given effect.
    First, that the U.S. Code only reflects the House amendment does
not change the fact that both amendments were signed into law as part
of the 1990 Amendments, as shown in the Statutes at Large. Pub. L. 101-
549, Sec. Sec.  108(g) and 302(a), 104 Stat. 2399, 2467, 2574 (1990).
Where there is a conflict between the U.S. Code and the Statutes at
Large, the latter controls. See 1 U.S.C. 112 & 204(a); Stephan v.
United States, 319 U.S. 423, 426 (1943) (``the Code cannot prevail over
the Statutes at Large when the two are inconsistent''); Five Flags Pipe
Line Co. v. Dep't of Transp., 854 F.2d 1438, 1440 (D.C. Cir. 1988)
(``[W]here the language of the Statutes at Large conflicts with the
language in the United States Code that has not been enacted into
positive law, the language of the Statutes at Large controls.'').
    Second, the ``conforming'' label is irrelevant. A ``conforming''
amendment may be either substantive or non-substantive. Burgess v.
United States, 553 U.S. 124, 135 (2008). And while the House Amendment
contains more words, it also qualifies as a ``conforming amendment''
under the definition in the Senate Legislative Drafting Manual, Section
126(b)(2) (defining ``conforming amendments'' as those ``necessitated
by the substantive amendments of provisions of the bill''). Here, both
the House and Senate amendments were ``necessitated by'' Congress'
revisions to section 112 in the 1990 CAA Amendment, which included the
deletion of old section 112(b)(1)(A). Thus, the House's amendment is no
less ``conforming'' than the Senate's, and the heading under which it
was enacted (``Miscellaneous Guidance'') does not suggest any more
importance than ``Conforming Amendments.'' In any event, courts gives
full effect to conforming amendments, see Washington Hosp. Ctr. v.
Bowen, 795 F.2d 139, 149 (D.C. Cir. 1986), and so neither the Senate
Amendment nor the House amendment can be ignored.
    Third, the legislative history of the Senate amendment supports the
conclusion that the substitution of the updated cross-reference was not
a mindless, ministerial decision, but reflected a decision to choose an
update of the cross reference instead of the text that was inserted
into the Section 112 Exclusion by the House amendment. In mid-1989, the
House and Senate introduced identical bills (H.R. 3030 and S. 1490,
respectively) to provide for ``miscellaneous'' changes to the CAA. In
both the Senate and House bills as they were introduced in mid-1989,
the Section 112 Exclusion was to be amended by taking out ``or
112(b)(1)(A)'' and inserting ``or emitted from a source category which
is regulated under section 112.'' H.R. 3030, as introduced, 101st Cong.
Sec.  108 (Jul. 27, 1989); S. 1490, as introduced, 101st Cong. Sec.
108 (Aug. 3, 1989). See 1990 CAA Legis. Hist. at 3857 (noting that H.R.
3030 and S.1490, as introduced, were the same). Although S. 1490 was
identical to H.R. 3030 when they were introduced, the Senate reported a
vastly different bill (S.1630) at the end of 1989. See S. 1630, as
reported (Dec. 20, 1989), 1990 CAA Legis. Hist. at 7906. As reported
and eventually passed, S. 1630 did not contain the text in the House
amendment (``or emitted from a source category which is regulated under
section 112'') and instead contained the substitution of cross
references (changing ``section 112(b)(1)(A)'' to ``section 112(b)'').
See S. 1630, as reported, 101st Cong. Sec.  305, 1990 CAA Legis. Hist.
at 8153; S. 1630, as passed, Sec.  305 (Apr. 3, 1990), 1990 CAA Legis.
Hist. at 4534. Though the EPA is not aware of any statements in the
legislative history that expressly explain the Senate's intent in
making these changes to the Senate bill, the sequence itself supports
the conclusion that the Senate's substitution reflects a decision to
retain the pre-1990 approach of using a cross-reference to 112(b) to
define the scope of the Section 112 Exclusion. Whether the difference
in approach between the final Senate amendment in S.1630 and the House
amendment in H.R. 3030 creates a substantive difference or are simply
two different means of achieving the same end depends on what
interpretation one gives to the text in the House amendment, which we
turn to next.
4. The House Amendment
    a. The House amendment is ambiguous. Before looking at the specific
text of the House amendment, it is helpful to review some principles of
statutory interpretation. First, statutory interpretation begins with
the text, but does not end there. As the D.C. Circuit Court has
explained, ``[t]he literal language of a provision taken out of context
cannot provide conclusive proof of congressional intent.'' Bell
Atlantic Telephone Cos. v. F.C.C., 131 F.3d 1044, 1047 (D.C. Cir.
1977). See King v. Burwell, 2015 U.S. LEXIS 4248, *19(``[O]ftentimes
the `meaning--or ambiguity--of certain words or phrases may only become
evident when placed in context.' Brown & Williamson, 529 U. S., at 132,
120 S. Ct. 1291, 146 L. Ed. 2d 121. So when deciding whether the
language is plain, we must read the words `in their context and with a
view to their place in the overall statutory scheme.' Id., at 133, 120
S. Ct. 1291, 146 L. Ed. 2d 121 (internal quotation marks omitted). Our
duty, after all, is `to construe statutes, not isolated provisions.'
Graham County Soil and

Water Conservation Dist. v. United States ex rel. Wilson, 559 U. S.
280, 290, 130 S. Ct. 1396, 176 L. Ed. 2d 225 (2010) (internal quotation
marks omitted).''). In addition, statutes should not be given a
``hyperliteral'' reading that is contrary to established canons of
statutory construction and common sense. See RadLAX Gateway Hotel v.
Amalgamated Bank, 132 S.Ct. 2065, 2070-71 (2012).
    Further, a proper reading of statutory text ``must employ all the
tools of statutory interpretation, including text, structure, purpose,
and legislative history.'' Loving v. I.R.S., 742 F.3d 1013, 1016 (D.C.
Cir. 2014) (internal quotation omitted). See, also, Robinson v. Shell
Oil Co., 519 U.S. 337, 341 (1997) (statutory interpretation involves
consideration of ``the language itself, the specific context in which
that language is used, and the broader context of the statute as a
whole.''). Moreover, one principle of statutory construction that has
particular application here is that provisions in a statute should be
read to be consistent, rather than conflicting, if possible. This
principle was discussed in the recent case of Scialabba v. Cuellar De
Osorio, 134 S. Ct. 2191, 2214 (concurring opinion by Chief Justice
Roberts and Justice Scalia), 2219-2220 (dissent by Justices Sotomayor,
Breyer and Thomas)(2014). As Justice Sotomayor wrote (at 134 S. Ct. at
2220):

    ``We do not lightly presume that Congress has legislated in
self-contradicting terms. See A. Scalia & B. Garner, Reading Law:
The Interpretation of Legal Texts 180 (2012) (``The provisions of a
text should be interpreted in a way that renders them compatible,
not contradictory. . . . [T]here can be no justification for
needlessly rendering provisions in conflict if they can be
interpreted harmoniously''). . . . Thus, time and again we have
stressed our duty to ``fit, if possible, all parts [of a statute]
into [a] harmonious whole.'' FTC v. Mandel Brothers, Inc., 359 U.S.
385, 389, 79 S. Ct. 818, 3 L. Ed. 2d 893 (1959); see also Morton v.
Mancari, 417 U.S. 535, 551, 94 S. Ct. 2474, 41 L. Ed. 2d 290 (1974)
(when two provisions ``are capable of co-existence, it is the duty
of the courts . . . to regard each as effective''). In reviewing an
agency's construction of a statute, courts ``must,'' we have
emphasized, ``interpret the statute `as a . . . coherent regulatory
scheme' '' rather than an internally inconsistent muddle, at war
with itself and defective from the day it was written. Brown &
Williamson, 529 U.S., at 133, 120 S. Ct. 1291, 146 L. Ed. 2d 121.

    As amended by the House, CAA section 111(d)(1)(A)(i) limits CAA
section 111(d) to any air pollutant ``for which air quality criteria
have not been issued or which is not included on a list published under
section 7408(a) of this title or emitted from a source category which
is regulated under section 7412 of this title . . .'' This statutory
text is ambiguous and subject to numerous possible readings.
    First, the text of the House-amended version of CAA section 111(d)
could be read literally as authorizing the regulation of any pollutant
that is not a criteria pollutant. This reading arises if one focuses on
the use of ``or'' to join the three clauses:

    The Administrator shall prescribe regulations . . . under which
each State shall submit to the Administrator a plan which
establishes standards of performance for any existing source for any
air pollutant [1] for which air quality criteria have not been
issued or [2] which is not included on a list published under
section 7408(a) of this title or [3] emitted from a source category
which is regulated under section 7412 of this title. . . .

    42 U.S.C. 7411(d)(1) (emphasis and internal numbering added).
Because the text contains the conjunction ``or'' rather than ``and''
between the three clauses, a literal reading could read the three
clauses as alternatives, rather than requirements to be imposed
simultaneously. In other words, a literal reading of the language of
section 111(d) provides that the Administrator may require states to
establish standards for an air pollutant so long as either air quality
criteria have not been established for that pollutant, or one of the
remaining criteria is met. If this reading were applied to determine
whether the EPA may promulgate CAA section 111(d) regulations for
CO2 from power plants, the result would be that
CO2 from power plants could be regulated under CAA section
111(b) because air quality criteria have not been issued for
CO2 and therefore whether CO2 or power plants are
regulated under CAA section 112 would be irrelevant. This reading,
however, is not a reasonable reading of the statute because, among
other reasons, it gives little or no meaning to the limitation covering
HAP that are regulated under CAA section 112 and thus is contrary to
both the CAA's comprehensive scheme created by the three sets of
provisions (under which CAA section 111 is not intended to duplicate
the regulation of pollutants regulated under section 112) and the
principle of statutory construction that text should not be construed
such that a provision does not have effect.
    A second reading of CAA section 111(d) as revised by the House
amendment focuses on the lack of a negative before the third clause.
That is, unlike the first and second clauses that each contain negative
phrases (either ``has not been issued'' or ``which is not included''),
the third clause does not. One could presume that the negative from the
second clause was intended to carry over, implicitly inserting another
``which is not'' before ``emitted from a source category which is
regulated under section [112].'' But that is a presumption, and not the
plain language of the statute. The text as amended by the House says
that the EPA ``shall'' prescribe regulations for ``any air pollutant .
. . emitted from a source category which is regulated under section
[112].'' 42 U.S.C. 7411(d)(1). Thus, CAA section 111(d)(1)(A)(i) could
be read as providing for the regulation of emissions of pollutants if
they are emitted from a source category that is regulated under CAA
section 112. Like the first reading discussed above, this reading would
authorize the regulation of CO2 emissions from existing
power plants under CAA section 111(d). But, this second reading is not
reasonable because it would provide for the regulation of a source's
HAP emissions under CAA section 111(d) when those same emissions were
also subject to standards under CAA section 112. Thus, this reading
would be contrary to Congress's intent that CAA section 111(d)
regulation fill the gap between the other programs by covering
pollutants that the other programs do not, but not duplicate the
regulation of pollutants that the other programs cover.
    If one does presume that the ``which is not'' phrase is intended to
carry over to the third clause, then CAA section 111(d) regulation
under the House amendment would be limited to ``any air pollutant . . .
which is not . . . emitted from a source category which is regulated
under section [112].'' Even with this presumption, however, the House
amendment contains further ambiguities with respect to the phrases ``a
source category'' and ``regulated under section 112,'' and how those
phrases are used within the structure of the provision limiting what
air pollutants may be regulated under CAA section 111(d).
    The phrase ``regulated under section 112'' is ambiguous. As the
Supreme Court has explained in the context of other statutes using a
variation of the word ``regulate,'' an agency must consider what is
being regulated. See Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355,
366 (2002) (It is necessary to ``pars[e] . . . the `what' '' of the
term ``regulates.''); UNUM Life Ins. Co. of Am. v. Ward, 526 U.S. 358,
363 (1999) (the term `` `regulates insurance' . . . requires
interpretation, for [its] meaning is not plain.''). Here, one possible
reading is that the phase modifies the words ``a source category''
without

regard to what pollutants are regulated under section 112, which then
presents the issue of what meaning to give to the phrase ``a source
category.''
    Under this reading, and assuming the phrase ``a source category''
is read to mean the particular source category, the House amendment
would preclude the regulation under CAA section 111(d) of a specific
source category for any pollutant if that source category has been
regulated for any HAP under CAA section 112.\290\ The effect of this
reading would be to preclude the regulation of CO2 from
power plants under CAA section 111(d) because power plants have been
regulated for HAP under CAA section 112. This is the interpretation
that the EPA applied to the House amendment in connection with the CAMR
rule in 2005, when looking at the question of whether HAP can be
regulated under CAA section 111(d) for a source category that is not
regulated for HAP under section 112, and some commenters have advocated
for this interpretation here. But, after considering all of the
comments and reconsidering this interpretation, the EPA has concluded
that this interpretation of the House amendment is not a reasonable
reading because it would disrupt the comprehensive scheme for
regulating existing sources created by the three sets of provisions
covering criteria pollutants, HAP and the other pollutants that fall
outside of those two programs and frustrate the role that section 111
is intended to play.\291\ Specifically, under this interpretation, the
EPA could not regulate a source category's emissions of HAP under CAA
section 112, and then promulgate regulations for other pollutants from
that source category under CAA section 111(d).\292\ There is no reason
to conclude that the House amendment was intended to abandon the
existing structure and relationship between the three programs in this
way. Indeed, Congress expressly provided that regulation under CAA
section 112 was not to ``diminish or replace the requirements of'' the
EPA's regulation of non-hazardous pollutants under section 7411. See 42
U.S.C. 7412(d)(7). Further, consistent with CAA section 112's direction
that EPA list ``all categories and subcategories of major sources and
area [aka, non-major] sources'' of HAP and then establish CAA section
112 standards for those categories and subcategories, 42 U.S.C.
7412(c)(1) and (c)(2), the EPA has listed and regulated over 140
categories of sources under CAA section 112. Thus, this reading would
eviscerate the EPA's authority under section 111(d) and prevent it from
serving as the gap-filling provision within the comprehensive scheme of
the CAA as Congress intended.\293\ In short, it is not reasonable to
interpret the Section 112 Exclusion in section 111(d) to mean that the
existence of CAA section 112 standards covering hazardous pollutants
from a source category would entirely eliminate regulation of non-
hazardous emissions from that source category under section
111(d).\294\
---------------------------------------------------------------------------

    \290\ ``A source category'' could also be interpreted to mean
``any source category.'' Under this interpretation, CAA 111(d)
regulation would be limited to air pollutants that are not emitted
by any source category for which the EPA has issued standards for
HAP under CAA section 112. This interpretation is not reasonable
because it would effectively read CAA 111(d) out of the statute.
Given the extensive list of source categories regulated under CAA
112 and the breadth of pollutants emitted by those categories
collectively, literally all air pollutants would be barred from CAA
111(d) regulation under this interpretation.
    \291\ In assessing any interpretation of section 111(d), EPA
must consider how the three main programs set forth in the CAA work
together. See UARG, 134 S. Ct. at 2442 (a ``reasonable statutory
interpretation must account for . . . the broader context of the
statute as a whole'') (quotation omitted).
    \292\ Supporters of this interpretation have noted that the EPA
could regulate power plants under both CAA section 111(d) and CAA
section 112 if it regulated under section 111(d) first, before the
Section 112 Exclusion is triggered. But that argument actually
further demonstrates another reason why this interpretation is
unreasonable. There is no basis for concluding that Congress
intended to mandate that section 111(d) regulation occur first, nor
is there any logical reason why the need to regulate under section
111(d) should be dependent on the timing of such regulation in
relation to CAA 112 regulation of that source category.
    \293\ Some commenters have stated that EPA could choose to
regulate both HAP and non-HAP under section 111(d), and thus could
regulate HAP without creating a gap. But this presumes that Congress
intended EPA to have the choice of declining to regulate a section
112-listed source category for HAP under section 112, which is
inconsistent with the mandatory language in section 112. See, e.g.,
section 112(d)(1)(``The Administrator shall promulgate regulations
establishing emissions standards for each category or subcategory of
major sources and area sources of hazardous air pollutants listed
for regulation pursuant to subsection (c) of this section in
accordance with the schedules provided in subsections (c) and (e) of
this section.''). Moreover, given the prescriptive language that
Congress added into section 112 concerning how to set standards for
HAP, see section 112(d)(2) and (d)(3), it is unreasonable to
conclude that Congress intended that the EPA could simply choose to
ignore the provisions in section 112 and instead regulate HAP for a
section 112 listed source category under section 111(d).
    Further, some supporters of this interpretation have suggested
that EPA could regulate CO2 under section 112. But this
suggestion fails to consider that sources emitting HAP are major
sources if they emit 10 tons of any HAP. See CAA section 112(a)(1).
Thus, if CO2 were regulated as a HAP, and because
emissions of CO2 tend to be many times greater than
emissions of other pollutants, a huge number of smaller sources
would become regulated for the first time under the CAA.
    \294\ Even if one were to determine that this interpretation
were the proper reading of the House amendment that would not be the
end of the analysis. Instead, that reading would create a conflict
between the Senate amendment and the House amendment that would need
to be resolved. In that event, the proper resolution of a conflict
between the two amendments would be the analysis and conclusion
discussed in the Proposed Rule's legal memorandum (discussing EPA's
analysis in the CAMR rule at 70 FR 15994, 16029-32): The two
amendments must be read together so as to give some effect to each
amendment and they are properly read together to provide that, where
a source category is regulated under section 112, the EPA may not
establish regulations covering the HAP emissions from that source
category under section 111(d).
---------------------------------------------------------------------------

    b. The EPA's Interpretation of the House Amendment. Having
concluded that the interpretations discussed above are not reasonable,
the EPA now turns to what it has concluded is the best, and sole
reasonable, interpretation of the House amendment as it applies to the
issue here.
    The EPA's interpretation of the House amendment as applied to the
issue presented in this rule is that the Section 112 Exclusion excludes
the regulation of HAP under CAA section 112 if the source category at
issue is regulated under CAA section 112, but does not exclude the
regulation of other pollutants, regardless of whether that source
category is subject to CAA section 112 standards. This interpretation
reads the phrase ``regulated under section 112'' as modifying the words
``source category'' (as does the interpretation discussed above) but
also recognizes that the phrase ``regulated under section 112'' refers
only to the regulation of HAP emissions. In other words, the EPA's
interpretation recognizes that source categories ``regulated under
section 112'' are not regulated by CAA section 112 with respect to all
pollutants, but only with respect to HAP. Thus, it is reasonable to
interpret the House amendment of the Section 112 Exclusion as only
excluding the regulation of HAP emissions under CAA section 111(d) and
only when that source category is regulated under CAA section 112. We
note that this interpretation of the House amendment alone is the same
as the 2005 CAMR interpretation of the two amendments combined: Where a
source category has been regulated under CAA section 112, a CAA section
111(d) standard of performance cannot be established to address any HAP
listed under CAA section 112(b) that may be emitted from that
particular source category. See 70 FR 15994, 16029-30 (March 29, 2005).

    There are a number of reasons why the EPA's interpretation is
reasonable and avoids the issues discussed above.
    First, the EPA's interpretation reads the House amendment to the
Section 112 Exclusion as determining the scope of what air pollutants
are to be regulated under CAA section 111(d), as opposed to creating a
wholesale exclusion for source categories. The other text in
subsections 111(d)(1)(A)(i) and (ii) modify the phrase ``any air
pollutant.'' Thus, reading the Section 112 Exclusion to also address
the question of what air pollutants may be regulated under CAA section
111(d) is consistent with the overall structure and focus of CAA
section 111(d)(1)(A).
    Second, the EPA's interpretation furthers--rather than undermines--
the purpose of CAA section 111(d) within the long-standing structure of
the CAA. That is, this interpretation supports the comprehensive
structure for regulating various pollutants from existing sources under
the criteria pollutant/NAAQS program under sections 108-110, the HAP
program under section 112, and other pollutants under section 111(d),
and avoids creating a gap in that structure. See King v. Burwell, 2015
U.S. LEXIS 4248, *28 (2015)(``A provision that may seem ambiguous in
isolation is often clarified by the remainder of the statutory scheme .
. . because only one of the permissible meanings produces a substantive
effect that is compatible with the rest of the law.'') (quoting United
Sav. Assn. of Tex. v. Timbers of Inwood Forest Associates, Ltd., 484 U.
S. 365, 371, 108 S. Ct. 626, 98 L. Ed. 2d 740 (1988)'')
    Third, by avoiding the creation of gaps in the statutory structure,
the EPA's interpretation is consistent with the legislative history
demonstrating that Congress's intent in the 1990 CAA Amendments was to
expand the EPA's regulatory authority across the board, compelling the
agency to regulate more pollutants, under more programs, more
quickly.\295\ Conversely, the EPA is aware of no statement in the
legislative history indicating that Congress simultaneously sought to
restrict the EPA's authority under CAA section 111(d) or to create gaps
in the comprehensive structure of the statute. If Congress had intended
this amendment to make such a change, one would expect to see some
indication of that in the legislative history.
---------------------------------------------------------------------------

    \295\ See S. Rep. No. 101-228 at 133 (``There is now a broad
consensus that the program to regulate hazardous air pollutants . .
. should be restructured to provide the EPA with authority to
regulate industrial and area sources of air pollution . . . in the
near term''), reprinted in 5 A Legislative History of the Clean Air
Act Amendments of 1990 (``Legis. Hist.'') 8338, 8473 (Comm. Print
1993); S. Rep. No. 101-228 at 14 (``The bill gives significant
authority to the Administrator in order to overcome the deficiencies
in [the NAAQS program]'') & 123 (``Experience with the mobile source
provisions in Title II of the Act has shown that the enforcement
authorities . . . need to be strengthened and broadened . . .''),
reprinted in 5 Legis. Hist. at 8354, 8463; H.R. Rep. No. 101-952 at
336-36, 340, 345 & 347 (discussing enhancements to Act's motor
vehicle provisions, the EPA's new authority to promulgate chemical
accident prevention regulations, the enactment of the Title V permit
program, and enhancements to the EPA's enforcement authority),
reprinted in 5 Legis. Hist. at 1786, 1790, 1795, & 1997.
---------------------------------------------------------------------------

    Fourth, when applied in the context of this rule, the EPA's
interpretation of the House amendment is consistent with the Senate
amendment. Thus, this interpretation avoids creating a conflict within
the statute. See discussion above of Scialabba v. Cuellar De Osorio,
134 S. Ct. 2191 at 2220 (citing and quoting, among other authorities,
A. Scalia & B. Garner, Reading Law: The Interpretation of Legal Texts
180 (2012) (``The provisions of a text should be interpreted in a way
that renders them compatible, not contradictory. . . . [T]here can be
no justification for needlessly rendering provisions in conflict if
they can be interpreted harmoniously'')).
    In sum, when this interpretation of the House amendment is applied
in the context of this rule, the result is that the EPA may promulgate
CAA section 111(d) regulations covering carbon dioxide emissions from
existing power plants notwithstanding that power plants are regulated
for their HAP emissions under CAA section 112.
5. The Two Amendments Are Easily Reconciled and Can Be Given Full
Effect
    Given that both the House and Senate amendments should be read
individually as having the same meaning in the context presented in
this rule, giving each amendment full effect is straight-forward: The
Section 112 Exclusion in section 111(d) does not foreclose the
regulation of non-HAP from a source category regardless of whether that
source category is also regulated under CAA section 112. As applied
here, the EPA has the authority to promulgate CAA section 111(d)
regulations for CO2 from power plants notwithstanding that
power plants are regulated for HAP under CAA section 112.

C. Authority To Regulate EGUs

    In a separate, concurrent action, the EPA is also finalizing a CAA
section 111(b) rulemaking that regulates CO2 emissions from
new, modified, and reconstructed EGUs. The promulgation of these
standards provides the requisite predicate for applicability of CAA
section 111(d).
    CAA section 111(d)(1) requires the EPA to promulgate regulations
under which states must submit state plans regulating ``any existing
source'' of certain pollutants ``to which a standard of performance
would apply if such existing source were a new source.'' A ``new
source'' is ``any stationary source, the construction or modification
of which is commenced after the publication of regulations (or, if
earlier, proposed regulations) prescribing a standard of performance
under [CAA section 111] which will be applicable to such source.'' It
should be noted that these provisions make clear that a ``new source''
includes one that undertakes either new construction or a modification.
It should also be noted that the EPA's implementing regulations define
``construction'' to include ``reconstruction,'' which the implementing
regulations go on to define as the replacement of components of an
existing facility to an extent that (i) the fixed capital cost of the
new components exceeds 50 percent of the fixed capital cost that would
be required to construct a comparable entirely new facility, and (ii)
it is technologically and economically feasible to meet the applicable
standards.
    Under CAA section 111(d)(1), in order for existing sources to
become subject to that provision, the EPA must promulgate standards of
performance under CAA section 111(b) to which, if the existing sources
were new sources, they would be subject. Those standards of performance
may include standards for sources that undertake new construction,
modifications, or reconstructions.
    The EPA is finalizing a rulemaking under CAA section 111(b) for
CO2 emissions from affected EGUs concurrently with this CAA
section 111(d) rulemaking, which will provide the requisite predicate
for applicability of CAA section 111(d).\296\
---------------------------------------------------------------------------

    \296\ In the past, the EPA has issued standards of performance
under section 111(b) and emission guidelines under section 111(d)
simultaneously. See ``Standards of Performance for new Stationary
Sources and Guidelines for Control of Existing Sources: Municipal
Solid Waste Landfills--Final Rule,'' 61 FR 9905 (March 12, 1996).
---------------------------------------------------------------------------

D. Definition of Affected Sources

    For the emission guidelines, an affected EGU is any fossil fuel-
fired electric utility steam generating unit (i.e., utility boiler or
integrated gasification combined cycle (IGCC) unit) or stationary
combustion turbine that was in operation or had commenced

construction as of January 8, 2014,\297\ and that meets the following
criteria, which differ depending on the type of unit. To be an affected
EGU, such a unit, if it is a fossil fuel-fired electric utility steam
generating unit (i.e., a utility boiler or IGCC unit), must serve a
generator capable of selling greater than 25 MW to a utility power
distribution system and have a base load rating greater than 260 GJ/h
(250 MMBtu/h) heat input of fossil fuel (either alone or in combination
with any other fuel). If such a unit is a stationary combustion
turbine, the unit must meet the definition of a combined cycle or
combined heat and power combustion turbine, serve a generator capable
of selling greater than 25 MW to a utility power distribution system,
and have a base load rating of greater than 260 GJ/h (250 MMBtu/h).
---------------------------------------------------------------------------

    \297\ Under Section 111(a) of the CAA, determination of affected
sources is based on the date that the EPA proposes action on such
sources. January 8, 2014 is the date the proposed GHG standards of
performance for new fossil fuel-fired EGUs were published in the
Federal Register (79 FR 1430).
---------------------------------------------------------------------------

    When considering and understanding applicability, the following
definitions may be helpful. Simple cycle combustion turbine means any
stationary combustion turbine which does not recover heat from the
combustion turbine engine exhaust gases for purposes other than
enhancing the performance of the stationary combustion turbine itself.
Combined cycle combustion turbine means any stationary combustion
turbine which recovers heat from the combustion turbine engine exhaust
gases to generate steam that is used to create additional electric
power output in a steam turbine. Combined heat and power (CHP)
combustion turbine means any stationary combustion turbine which
recovers heat from the combustion turbine engine exhaust gases to heat
water or another medium, generate steam for useful purposes other than
exclusively for additional electric generation, or directly uses the
heat in the exhaust gases for a useful purpose.
    We note that certain affected EGUs are exempt from inclusion in a
state plan. Affected EGUs that may be excluded from a state's plan are
(1) those units that are subject to subpart TTTT as a result of
commencing modification or reconstruction; (2) steam generating units
or IGCC units that are currently and always have been subject to a
federally enforceable permit limiting net-electric sales to one-third
or less of its potential electric output or 219,000 MWh or less on an
annual basis; (3) non-fossil units (i.e., units that are capable of
combusting 50 percent or more non-fossil fuel) that have historically
limited the use of fossil fuels to 10 percent or less of the annual
capacity factor or are subject to a federally enforceable permit
limiting fossil fuel use to 10 percent or less of the annual capacity
factor; (4) stationary combustion turbines that are not capable of
combusting natural gas (i.e., not connected to a natural gas pipeline);
(5) combined heat and power units that are subject to a federally
enforceable permit limiting, or have historically limited, annual net
electric sales to a utility power distribution system to the product of
the design efficiency and the potential electric output or 219,000 MWh
(whichever is greater) or less; (6) units that serve a generator along
with other steam generating unit(s), IGCC(s), or stationary combustion
turbine(s) where the effective generation capacity (determined based on
a prorated output of the base load rating of each steam generating
unit, IGCC, or stationary combustion turbine) is 25 MW or less; (7)
municipal waste combustor unit subject to subpart Eb of Part 60; or (8)
commercial or industrial solid waste incineration units that are
subject to subpart CCCC of Part 60.
    The rationale for applicability of this final rule is multi-fold.
We had proposed that affected EGUs were those existing fossil fuel-
fired EGUs that met the applicability criteria for coverage under the
final GHG standards for new fossil fuel-fired EGUs being promulgated
under section 111(b). However, we are finalizing that States need not
include certain units that would otherwise meet the CAA section 111(b)
applicability in this CAA section 111(d) emission guidelines. These
include simple cycle turbines, certain non-fossil units, and certain
combined heat and power units. The final 111(b) standards include
applicability criteria for simple cycle combustion turbines, for
reasons relating to implementation and minimizing emissions from all
future combustion turbines. However, for the following reasons none of
the building blocks would result in emission reductions from simple
cycle turbines so we are not requiring that States including them in
their CAA section 111(d) plans.
    First, even more than combined cycle units, simple cycle units have
limited opportunities, compared to steam generating units, to reduce
their heat rate. Most combustion turbines likely already follow the
manufacturer's recommended regular preventive/restorative maintenance
for both reliable and efficiency reasons. These regularly scheduled
maintenance practices are highly effective methods to maintain heat
rates, and additional fleet-wide reductions from simple cycle
combustion turbines are likely less than 2 percent. In addition, while
approximately one-fifth of overall fossil fuel-fired capacity (GW)
consists of simple cycle turbines, these units historically have
operated at capacity factors of less than 5 percent and only provide
about 1 percent of the fossil fuel-fired generation (GWh). Combustion
turbine capacity can therefore only contribute CO2 emissions
amounting to approximately 2 percent of total coal-steam CO2
emissions. Any single-digit percentage reduction in combustion turbine
heat rates would therefore provide less than 1 percent reduction in
total fossil-fired CO2 emissions.
    Further, we are not aware of an approach to estimate any limited
opportunities that existing simple cycle turbines may have to reduce
their heat rate. Similar to coal-steam EGUs, we do not have the unit-
specific detailed design information on existing individual simple
cycle combustion turbines that is necessary for a detailed assessment
of the heat rate improvement potential via best practices and upgrades
for each unit. While the EPA could conduct a ``variability analysis''
of simple cycle historical hourly heat rate data (as was done for coal-
steam EGUs), the various simple cycle models in use and the
historically lower capacity factors of the simple cycle fleet (less run
time per start, and more part load operation) would require a simple
cycle analysis that includes more complexity and likely more
uncertainty than in the coal-steam analysis. Therefore, we do not
consider it feasible to estimate potential reductions due to heat rate
improvements from simple cycle turbines, and even if it were, we have
concluded those reductions would be negligible compared to the
reductions from steam generating units. Hence, we do not consider
building block 1 as practically applicable to simple cycle units.
    Second, the vast majority of simple cycle turbines serve a specific
need--providing power during periods of peak electric demand (i.e.,
peaking units). The existing block of simple cycle turbines are the
only units that are able to start fast enough and ramp to full load
quickly enough to serve as peaking units. If these units were to be
used under building block 2 to displace higher emitting coal-fired
units, they would no longer be available to serve as peaking units.
Therefore, building block 2 could not be applied to simple cycle

combustion turbines without jeopardizing grid reliability.
    Third, many commenters on the CAA section 111(b) proposal stated
that simple cycle turbines will be used to provide backup power to
intermittent renewable sources of power such as wind and solar.
Consequently, adding additional generation from intermittent renewable
sources has the potential to actually increase emissions from simple
cycle turbines. Therefore, applying building block 3 based on the
capacity of simple cycle turbines would not result in emission
reductions from simple cycle combustion turbines. Finally, the EPA
expects existing simple cycle turbines to continue to operate as they
historically have operated, as peaking units. Including simple cycle
turbines in CAA section 111(d) applicability would impact the numerical
value of state goals, but it would not impact the stringency of the
plans. Such inclusion would increase burden but result in no
environmental benefit.
    Additionally, under CAA section 111(b) final applicability
criteria, new dedicated non-fossil and industrial CHP units are not
affected sources if they include permit restrictions on the amount of
fossil fuel they burn and the amount of electricity they sell. Such
units historically have had no regulatory mandate to include permit
requirements limiting the use of fossil fuel or electric sales. We are
exempting them from inclusion in CAA section 111(d) state plans in the
interest of consistency with CAA section 111(b) and based on their
historical fuel use and electric sales.
    We discuss changes in applicability of units in relation to state
plans in Section VIII of this preamble.

E. Combined Categories and Codification in the Code of Federal
Regulations

    In this rulemaking, the EPA is combining the listing of sources
from the two existing source categories for the affected EGUs, as
listed in 40 CFR subpart Da and 40 CFR subpart KKKK, into a single
location, 40 CFR subpart UUUU, for purposes of addressing the
CO2 emissions from existing affected EGUs. The EPA is also
codifying all of the requirements for the affected EGUs in a new
subpart UUUU of 40 CFR part 60 and including all GHG emission
guidelines for the affected sources--fossil fuel-fired electric utility
steam generating units, as well as stationary combustion turbines--in
that newly created subpart.\298\
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    \298\ The EPA is not codifying any of the requirements of this
rulemaking in subparts Da or KKKK.
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    We believe that combining the emission guidelines for affected
sources into a new subpart UUUU is appropriate because the emission
guidelines the EPA is establishing do not vary by type of source.
Combining the listing of sources into one location, subpart UUUU, will
facilitate implementation of CO2 mitigation measures, such
as shifting generation from higher to lower-carbon intensity generation
among existing sources (e.g., shifting from utility boilers to NGCC
units), and emission trading among sources in the source category.
    As discussed in the January 8, 2014 proposal for the CAA section
111(b) standards for GHG emissions from EGUs (79 FR 1430), in 1971 the
EPA listed fossil fuel-fired steam generating boilers as a new category
subject to section 111 rulemaking, and in 1979 the EPA listed fossil
fuel-fired combustion turbines as a new category subject to the CAA
section 111 rulemaking. In the ensuing years, the EPA has promulgated
standards of performance for the two categories and codified those
standards, at various times, in 40 CFR part 60 subparts D, Da, GG, and
KKKK.
    In the January 8, 2014 proposal, the EPA proposed separate
standards of performance for new sources in the two categories and
proposed codifying the standards in the same Da and KKKK subparts that
currently contain the standards of performance for conventional
pollutants from those sources. In addition, the EPA co-proposed
combining the two categories into a single category solely for purposes
of the CO2 emissions from new construction of affected EGUs,
and codifying the proposed requirements in a new 40 CFR part 60 subpart
TTTT. For the final standards of performance for new construction of
affected EGUs, the EPA is codifying the final requirements in a new 40
CFR part 60 subpart TTTT.
    In this rulemaking, the EPA is combining the two listed source
categories into a single source category for purposes of the emission
guidelines for the CO2 emissions from existing affected
EGUs. Because the two source categories are pre-existing and the EPA
would not be subjecting any additional sources to regulation, the
combined source category is not considered a new source category that
the EPA must list under CAA section 111(b)(1)(A). As a result, this
final rule does not list a new source category under section
111(a)(1)(A), nor does this final rule revise either of the two source
categories--fossil fuel--fired electric utility steam generating units
and stationary combustion turbines--that the EPA has already listed
under that provision. Thus, the EPA is not required to make a finding
that the combined source category causes or contributes significantly
to air pollution which may reasonably be anticipated to endanger public
health or welfare.

V. The Best System of Emission Reduction and Associated Building Blocks

    In the June 2014 proposal, the EPA proposed to determine that the
best system of emission reduction adequately demonstrated (BSER) for
reducing CO2 emissions from existing EGUs was a combination
of measures--(1) increasing the operational efficiency of existing
coal-fired steam EGUs, (2) substituting increased generation at
existing NGCC units for generation at existing steam EGUs, (3)
substituting generation from low- and zero-carbon generating capacity
for generation at existing fossil fuel-fired EGUs, and (4) increasing
demand-side EE to reduce the amount of fossil fuel-fired generation--
which we categorized as four ``building blocks.'' As an alternative to
the proposed building blocks 2, 3, and 4, the EPA also identified
reduced generation in the amount of those building blocks as part of
the BSER. These measures are not the only approaches EGUs can take to
reduce CO2, but are those that the EPA felt best met the
statutory criteria. We solicited comment on all aspects of our BSER
determination, including a broad array of other approaches. We have
considered thoroughly the extensive comments submitted on a variety of
topics related to the BSER and the individual building blocks, along
with our own continued analysis, and we are finalizing the BSER based
on the first three building blocks, with certain refinements.
    Consistent with the approach taken in the proposed rule, in
determining the BSER we have taken account of the unique
characteristics of CO2 pollution, particularly its global
nature, huge quantities, and the limited means for controlling it; and
the unique characteristics of the source category, particularly the
exceptional degree of interconnectedness among individual affected EGUs
and the longstanding practice of coordinating planning and operations
across multiple sources, reflecting the fact that each EGU's function
is interdependent with the function of other EGUs. Each building

block is a proven approach for reducing emissions from the affected
source category that is appropriate in this pollutant- and industry-
specific context. The BSER also encompasses a variety of measures or
actions that individual affected EGUs could take to implement the
building blocks, including (i) direct investment in efficiency
improvements and in lower- and zero-carbon generation, (ii) cross-
investment in these activities through mechanisms such as emissions
trading approaches, where the state-established standards of
performance to which sources are subject incorporate such approaches,
and (iii) reduction of higher-carbon generation.
    With attention to emission reduction costs, electricity rates, and
the importance of ensuring continued reliability of electricity
supplies, the individual building blocks and the overall BSER have been
defined not at the maximum possible degree of stringency but at a
reasonable degree of stringency designed to appropriately balance
consideration of the various BSER factors. Additional, non-building
block-specific aspects of the BSER quantification methodology discussed
below are similarly mindful of these considerations. This approach to
determination of the BSER provides compliance headroom that ensures
that the emission limitations reflecting the BSER are achievable by the
source category, but nevertheless, as required by the CAA, will result
in meaningful reductions in CO2 emissions from this sector.
The wide range of actions encompassed in the building blocks, and a
further wide range of possible emissions-reducing actions not included
in the BSER but nevertheless available to help with compliance, ensure
that those emission limitations are achievable by individual affected
EGUs as well.
    The final BSER incorporates certain changes from the proposed rule,
reflecting the EPA's consideration of comments responding to the
approaches outlined in the proposal and our own further analysis. The
principal changes are the exclusion from the BSER of emission
reductions achievable through demand-side EE and through nuclear
generation; a revised approach to determination of emission reductions
achievable through increased RE generation; a consistent approach to
determination of emission reductions achievable through all the
building blocks that better reflects the regional nature of the
electricity system and entails separate analyses for the Eastern,
Western, and Texas Interconnections; and a revised interim goal period
of 2022 to 2029 (instead of the proposed interim period of 2020 to
2029). These changes to the BSER and the building blocks are discussed
in more detail later in this section of the preamble.
    Also, to address concerns identified in the proposal and the
October 30, 2014 NODA and in response to associated comments, in the
final rule we have represented the emission limitations achievable
through the BSER in the form of uniform CO2 emission
performance rates for each of two affected source subcategories: Steam
generating units and stationary combustion turbines. However, like the
proposed rule, the final rule also provides weighted-average state-
specific goals that a state may choose as an alternative method for
complying with its obligation to set standards of performance for its
affected EGUs--an alternative, that is, to adopting the nationwide
subcategory-based CO2 emission performance rates as the
standard of performance for its affected EGUs. The reformulation of the
emission limitations as uniform CO2 emission performance
rates is discussed in this section and in section VI of the preamble,
and the relation of the performance rates to the state-specific goals
and states' section 111(d) plan options is discussed in sections VII
and VIII of the preamble.
    Section V.A. describes our determination of the final BSER,
including a discussion of the associated emissions performance level,
and provides the rationale for our determination. In section V.B. we
address certain legal issues in greater detail, including key issues
raised in comments. Sections V.C. through V.E. contain more detailed
discussions of the three individual building blocks included in the
final BSER. Further information can be found in the GHG Mitigation
Measures TSD for the CPP Final Rule, the CO2 Emission
Performance Rate and Goal Computation TSD for the CPP Final Rule, the
Response to Comments document, and, about certain topics, the Legal
Memorandum for the Clean Power Plan Final Rule, all of which are
available in the docket.

A. The Best System of Emission Reduction

    This section sets forth our determination of the BSER for reducing
CO2 emissions from existing EGUs, including a discussion of
the associated emissions performance level, and the rationale for that
determination. In section V.A.1., we describe the legal framework for
determination of the BSER in general. Section V.A.2. summarizes the
determination of the BSER for this rule. In section V.A.3., we discuss
changes from the proposal. Section V.A.4. provides more detail on our
determination of the BSER, including our determinations regarding the
individual elements of the BSER, as applied to the two subcategories of
fossil steam units and combustion turbines. In section V.A.5., we
explain the specific actions that individual affected EGUs in the two
subcategories may take to implement the building blocks and thereby
achieve the EPA-identified source subcategory-specific emission
performance rates that, in turn, form the basis for the standards of
performance that states must set. Because these actions implement the
building blocks, they may be understood as part of the BSER. In this
discussion, we recognize that states can choose to set sources'
standards of performance in different forms and that the form of the
standard affects how various types of actions can be used to comply
with the standard. In section V.A.6., we discuss the substantial
compliance flexibility provided by additional measures, not included in
the BSER, that individual affected EGUs can use to achieve their
standards of performance. Finally, section V.A.7. addresses the
severability of the building blocks.
1. Legal Requirements for BSER in the Emission Guidelines
    a. Introduction. In the June 2014 proposal for this rule, we
described the principal legal requirements for standards of performance
under CAA section 111(d)(1) and (a)(1). We based our description in
part on our discussion of the legal requirements for standards of
performance under CAA section 111(b) and (a)(1), which we included in
the January 2014 proposal for standards of performance for
CO2 emissions from new fossil fuel-fired EGUs. In the latter
proposal, we noted that the D.C. Circuit has handed down numerous
decisions that interpret CAA section 111(a)(1), including its component
elements, and we reviewed that case law in detail.\299\
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    \299\ 79 FR 1430, 1462 (January 8, 2014).
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    We received comments on our proposed interpretation, and in light
of those comments, in this final rule, we are clarifying our
interpretation in certain respects. We discuss our interpretation
below.\300\
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    \300\ We also discuss our interpretation of the requirements for
standards of performance and the BSER under section 111(b), for new
sources, in the section 111(b) rulemaking that the EPA is finalizing
simultaneously with this rule and in the Legal Memorandum for this
rule. Our interpretations of these requirements in the two rules are
generally consistent except to the extent that they reflect
distinctions between new and existing sources. For example, as
discussed in the section 111(b) rule, the legislative history
indicates that Congress intended that the BSER for new industrial
facilities, which were expected to have lengthy useful lives, would
include the most advanced pollution controls available, but Congress
had a broader conception of the BSER for existing facilities.

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    b. CAA requirements and court interpretation.\301\ Section
111(d)(1) directs the EPA to promulgate regulations establishing a
section 110-like procedure under which states submit state plans that
establish ``standards of performance'' for emissions of certain air
pollutants from sources which, if they were new sources, would be
regulated under section 111(b), and that implement and enforce those
standards of performance.
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    \301\ Our interpretation of the CAA provisions at issue is
guided by Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-43 (1984).
In Chevron, the U.S. Supreme Court set out a two-step process for
agency interpretation of statutory requirements: the agency must, at
step 1, determine whether Congress's intent as to the specific
matter at issue is clear, and, if so, the agency must give effect to
that intent. If congressional intent is not clear, then, at step 2,
the agency has discretion to fashion an interpretation that is a
reasonable construction of the statute.\\
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    The term ``standard of performance'' is defined 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 and any nonair quality health and
environmental impact and energy requirements) the Administrator
determines has been adequately demonstrated.

Section 111(a)(1).
    These provisions authorize the EPA to determine the BSER for the
affected sources and, based on the BSER, to establish emission
guidelines that identify the minimum amount of emission limitation that
a state, in its state plan, must impose on its sources through
standards of performance. Consistent with these CAA requirements, the
EPA's regulations require that the EPA's guidelines reflect--

the degree of emission reduction achievable through the application
of the best system of emission reduction which (taking into account
the cost of such reduction) the Administrator has determined has
been adequately demonstrated.\302\
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    \302\ 40 CFR 60.21(e). This definition was promulgated as part
of the EPA's CAA 111(d) implementing regulations and was not updated
to reflect the textual changes adopted by Congress in 1977. That
said, Congress recognized that those changes ``merely make[]
explicit what was implicit in the previous language.'' H.R. Rep. No.
95-294, at 190 (May 12, 1977).

    The EPA's approach in this rulemaking is to determine the BSER on a
source subcategory-wide basis, to determine the emission limitation
that results from applying the BSER to the sources in the subcategory,
and then to establish emission guidelines for the states that
incorporate those emission limitations. The EPA expresses these
emission limitations in the form of emission performance rates, and
they must be achievable by the source subcategory through the
application of the BSER.
    Following the EPA's promulgation of emission guidelines, each state
must determine the standards of performance for its sources, which the
EPA's regulations call ``designated facilities.'' \303\ A state has
broad discretion in doing so. CAA section 111(d)(1) requires the EPA's
regulations to ``permit the State in applying a standard of performance
to any particular source . . . to take into consideration, among other
factors, the remaining useful life of the . . . source. . .'' \304\ In
addition, under CAA section 116, the state is authorized to set a
standard of performance for any particular source that is more
stringent than the emission limit contained in the EPA's emission
guidelines.\305\ Thus, for any particular source, a state may apply a
standard of performance that is either more stringent or less stringent
than the performance level in the emission guidelines, as long as, in
total, the state's sources achieve at least the same degree of emission
limitation as included in the EPA's emission guidelines. The states
must include the standards of performance in their state plans and
submit the plans to the EPA for review.\306\ Under CAA section
111(d)(2)(A), the EPA approves state plans as long as they are
``satisfactory.''
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    \303\ 40 CFR 60.24(b)(3).
    \304\ The EPA's regulations, promulgated prior to enactment of
the ``remaining useful life'' provision of section 111(d)(1),
provide: ``Unless otherwise specified in the applicable subpart on a
case-by-case basis for particular designated facilities, or classes
of facilities, States may provide for the application of less
stringent emission standards or longer compliance schedules than
those otherwise required'' by the corresponding emission guideline.
40 CFR 60.24(f). Some of the factors that a state may consider for
this case-by-case analysis include the ``cost of control resulting
from plant age, location, or basic process design'' and the
``physical impossibility of installing necessary control
equipment,'' among other factors ``that make application of a less
stringent standard or final compliance time significantly more
reasonable.'' Id.
    \305\ In addition, CAA section 116 authorizes the state to set
standards of performance for all of its sources that, together, are
more stringent than the EPA's emission guidelines.
    \306\ 40 CFR 60.23.
---------------------------------------------------------------------------

    As noted in the January 2014 proposal and discussed in more detail
above under section II.G, Congress first included the definition of
``standard of performance'' when enacting CAA section 111 in the 1970
Clean Air Act Amendments (CAAA), amended it in the 1977 CAAA, and then
amended it again in the 1990 CAAA to largely restore the definition as
it read in the 1970 CAAA. It is in the legislative history for the 1970
and 1977 CAAA that Congress primarily addressed the definition as it
read at those times and that legislative history provides guidance in
interpreting this provision.\307\ In addition, although the D.C.
Circuit has never reviewed a section 111(d) rulemaking, the Court has
reviewed section 111(b) rulemakings on numerous occasions during the
past 40 years, handing down decisions dated from 1973 to 2011,\308\
through which the Court has developed a body of case law that
interprets the term ``standard of performance.''
---------------------------------------------------------------------------

    \307\ In the 1970 CAAA, Congress defined ``standard of
performance,'' under Sec.  111(a)(1), 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 (taking into account the
cost of achieving such reduction) the Administrator determines has
been adequately demonstrated.
    In the 1977 CAAA, Congress revised the definition to distinguish
among different types of sources, and to require that for fossil
fuel-fired sources, the standard (i) be based on, in lieu of the
``best system of emission reduction . . . adequately demonstrated,''
the ``best technological system of continuous emission reduction . .
. adequately demonstrated;'' and (ii) require a percentage reduction
in emissions. In addition, in the 1977 CAAA, Congress expanded the
parenthetical requirement that the Administrator consider the cost
of achieving the reduction to also require the Administrator to
consider ``any nonair quality health and environmental impact and
energy requirements.''
    In the 1990 CAAA, Congress again revised the definition, this
time repealing the requirements that the standard of performance be
based on the best technological system and achieve a percentage
reduction in emissions, and replacing those provisions with the
terms used in the 1970 CAAA version of Sec.  111(a)(1) that the
standard of performance be based on the ``best system of emission
reduction . . . adequately demonstrated.'' This 1990 CAAA version is
the current definition, which is applicable at present. Even so,
because parts of the definition as it read under the 1977 CAAA were
retained in the 1990 CAAA, the explanation in the 1977 CAAA
legislative history, and the interpretation, in the case law, of
those parts of the definition remain relevant to the definition as
it reads today.
    \308\ Portland Cement Ass'n v. Ruckelshaus, 486 F.2d 375 (D.C.
Cir. 1973); Essex Chemical Corp. v. Ruckelshaus, 486 F.2d 427, (D.C.
Cir. 1973); Portland Cement Ass'n v. EPA, 665 F.3d 177 (D.C. Cir.
2011). See also Delaware v. EPA, No. 13-1093 (D.C. Cir. May 1,
2015).
---------------------------------------------------------------------------

    c. Key elements of interpretation. The emission guidelines
promulgated by the Administrator must include emission limitations that
are ``achievable'' by the source category by application of a ``system
of emission reduction'' that is ``adequately demonstrated'' and that
the EPA determines to be the ``best,''

``taking into account'' the factors of ``cost . . . nonair quality
health and environmental impact and energy requirements.'' The D.C.
Circuit has stated that in determining the ``best'' system, the EPA
must also take into account ``the amount of air pollution'' \309\
reduced and the role of ``technological innovation.'' \310\ The Court
has emphasized that the EPA has discretion in weighing those various
factors.311 312
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    \309\ See Sierra Club v. Costle, 657 F.2d 298, 326 (D.C. Cir.
1981).
    \310\ See Sierra Club v. Costle, 657 F.2d at 347.
    \311\ See Lignite Energy Council v. EPA, 198 F.3d 930, 933 (D.C.
Cir. 1999).
    \312\ Although CAA section 111(a)(1) may be read to state that
the factors enumerated in the parenthetical are part of the
``adequately demonstrated'' determination, the D.C. Circuit's case
law appears to treat them as part of the ``best'' determination. See
Sierra Club v. Costle, 657 F.2d at 330 (recognizing that CAA section
111 gives the EPA authority ``when determining the best
technological system to weigh cost, energy, and environmental
impacts''). Nevertheless, it does not appear that those two
approaches would lead to different outcomes. See, e.g., Lignite
Energy Council v. EPA, 198 F.3d at 933 (rejecting challenge to the
EPA's cost assessment of the ``best demonstrated system''). In this
rule, the EPA treats the factors as part of the ``best''
determination, but, as noted, even if the factors were part of the
``adequately demonstrated'' determination, our analysis and outcome
would be the same.
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    Our overall approach to determining the BSER and emission
guidelines, which incorporates the various elements, is as follows: In
developing an emission guideline, we generally engage in an analytical
approach that is similar to what we conduct under CAA section 111(b)
for new sources. First, we identify ``system[s] of emission reduction''
that have been ``adequately demonstrated'' for a particular source
category. Second, we determine the ``best'' of these systems after
evaluating the amount of reductions, costs, any nonair health and
environmental impacts, energy requirements, and, in the alternative,
the advancement of technology (that is, we apply a formulation of the
BSER with the above noted factors, and then, in the alternative, we
apply a formulation of the BSER with those same factors plus the
advancement of technology). And third, we select an achievable emission
limit--here, the emission performance rates--based on the BSER.\313\ In
contrast to subsection (b), however, subsection (d)(1) assigns to the
states, not the EPA, the obligation of setting standards of performance
for the affected sources. As discussed below in the following
subsection, in examining the range of reasonable options for states to
consider in setting standards of performance under these guidelines, we
identified a number of considerations, including the interconnected
operations of the affected sources and the characteristics of the
CO2 pollutant.
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    \313\ See, e.g., Oil and Natural Gas Sector: New Source
Performance Standards and National Emission Standards for Hazardous
Air pollutants Reviews, 77 FR 49490, 49494 (Aug. 16, 2012)
(describing the three-step analysis in setting a standard of
performance).
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    The remainder of this subsection discusses the various elements in
our general analytical approach.
(1) System of Emission Reduction
    As we discuss below, the CAA does not define the phrase ``system of
emission reduction.'' The ordinary, everyday meaning of ``system'' is 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.\314\ With this definition, the phrase ``system of emission
reduction'' takes a broad meaning: a set of measures that work together
to reduce emissions. The EPA interprets this phrase to carry an
important limitation: Because the emission guidelines for the existing
sources must reflect ``the degree of emission limitation achievable
through the application of the best system of emission reduction . . .
adequately demonstrated,'' the system must be limited to measures that
can be implemented--``appl[ied]''--by the sources themselves, that is,
as a practical matter, by actions taken by the owners or operators of
the sources. As we discuss below, this definition is sufficiently broad
to include the building blocks.
---------------------------------------------------------------------------

    \314\ 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'').
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(2) ``Adequately Demonstrated''
    Under section 111(a)(1), in order for a ``system of emission
reduction'' to serve as the basis for an ``achievable'' emission
limitation, the Administrator must determine that the system is
``adequately demonstrated.'' This means, according to the D.C. Circuit,
that the system is ``one which has been shown to be reasonably
reliable, reasonably efficient, and which can reasonably be expected to
serve the interests of pollution control without becoming exorbitantly
costly in an economic or environmental way.'' \315\ It does not mean
that the system ``must be in actual routine use somewhere.'' \316\
Rather, the Court has said, ``[t]he Administrator may make a projection
based on existing technology, though that projection is subject to the
restraints of reasonableness and cannot be based on `crystal ball'
inquiry.'' \317\ Similarly, the EPA may ``hold the industry to a
standard of improved design and operational advances, so long as there
is substantial evidence that such improvements are feasible.'' \318\
Ultimately, the analysis ``is partially dependent on `lead time,'''
that is, ``the time in which the technology will have to be
available.'' \319\ Unlike for CAA section 111(b) standards that are
applicable immediately after the effective date of their promulgation,
under CAA section 111(e), compliance with CAA section 111(d) standards
may be set sometime in the future. This is due, in part, to the period
of time for states to submit state plans and for the EPA to act on
them.
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    \315\ Essex Chem. Corp. v. Ruckelshaus, 486 F.2d 427, 433 (D.C.
Cir. 1973), cert. denied, 416 U.S. 969 (1974).
    \316\ Portland Cement Ass'n v. Ruckelshaus, 486 F.2d 375, 391
(D.C. Cir. 1973) (citations omitted) (discussing the Senate and
House bills and reports from which the language in CAA section 111
grew).
    \317\ Ibid.
    \318\ Sierra Club v. Costle, 657 F.2d 298, 364 (1981).
    \319\ Portland Cement Ass'n v. Ruckelshaus, 486 F.2d 375, 391
(D.C. Cir. 1973) (citations omitted).
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(3) ``Best''
    In determining which adequately demonstrated system of emission
reduction is the ``best,'' the EPA considers the following factors:
(a) Costs
    Under CAA section 111(a)(1), the EPA is required to take into
account ``the cost of achieving'' the required emission reductions. As
described in the January 2014 proposal,\320\ in several cases the D.C.
Circuit has elaborated on this cost factor and formulated the cost
standard in various ways, stating that the EPA may not adopt a standard
the cost of which would be ``exorbitant,'' \321\ ``greater than the
industry could bear and survive,'' \322\ ``excessive,'' \323\ or
``unreasonable.'' \324\ These formulations appear to be synonymous, and
for convenience, in this rulemaking, we will use reasonableness as the
standard,

so that a control technology may be considered the ``best system of
emission reduction . . . adequately demonstrated'' if its costs are
reasonable, but cannot be considered the best system if its costs are
unreasonable.325 326
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    \320\ 79 FR 1430, 1464 (January 8, 2014).
    \321\ Lignite Energy Council v. EPA, 198 F.3d 930, 933 (D.C.
Cir. 1999).
    \322\ Portland Cement Ass'n v. EPA, 513 F.2d 506, 508 (D.C. Cir.
1975).
    \323\ Sierra Club v. Costle, 657 F.2d 298, 343 (D.C. Cir. 1981).
    \324\ Sierra Club v. Costle, 657 F.2d 298, 343 (D.C. Cir. 1981).
    \325\ These cost formulations are consistent with the
legislative history of section 111. The 1977 House Committee Report
noted:
    In the [1970] Congress [sic: Congress's] view, it was only right
that the costs of applying best practicable control technology be
considered by the owner of a large new source of pollution as a
normal and proper expense of doing business.
    1977 House Committee Report at 184. Similarly, the 1970 Senate
Committee Report stated:
    The implicit consideration of economic factors in determining
whether technology is ``available'' should not affect the usefulness
of this section. The overriding purpose of this section 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.
    S. Comm. Rep. No. 91-1196 at 16.
    \326\ We received comments that we do not have authority to
revise the cost standard as established in the case law, e.g.,
``exorbitant,'' ``excessive,'' etc., to a ``reasonableness''
standard that the commenters considered less protective of the
environment. We agree that we do not have authority to revise the
cost standard as established in the case law, and we are not
attempting to do so here. Rather, our description of the cost
standard as ``reasonableness'' is intended to be a convenient term
for referring to the cost standard as established in the case law.
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    The D.C. Circuit has repeatedly upheld the EPA's consideration of
cost in reviewing standards of performance. In several cases, the Court
upheld standards that entailed significant costs, consistent with
Congress's view that ``the costs of applying best practicable control
technology be considered by the owner of a large new source of
pollution as a normal and proper expense of doing business.'' \327\ See
Essex Chemical Corp. v. Ruckelshaus, 486 F.2d 427, 440 (D.C. Cir.
1973); \328\ Portland Cement Association v. Ruckelshaus, 486 F.2d 375,
387-88 (D.C. Cir. 1973); Sierra Club v. Costle, 657 F.2d 298, 313 (D.C.
Cir. 1981) (upholding standard imposing controls on SO2
emissions from coal-fired power plants when the ``cost of the new
controls . . . is substantial'').\329\
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    \327\ 1977 House Committee Report at 184.
    \328\ The costs for these standards were described in the
rulemakings. See 36 FR 24876 (December 23, 1971), 37 FR 5767, 5769
(March 21, 1972).
    \329\ Indeed, in upholding the EPA's consideration of costs
under other provisions requiring consideration of cost, courts have
also noted the substantial discretion delegated to the EPA to weigh
cost considerations with other factors. Chemical Mfr's Ass'n v. EPA,
870 F. 2d 177, 251 (5th Cir. 1989); Am. Iron & Steel Inst. v. EPA,
526 F. 2d 1027, 1054 (3d Cir. 1975); Ass'n of Pacific Fisheries v.
EPA, 615 F. 2d 794, 808 (9th Cir. 1980).
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    As discussed below, the EPA may consider costs on both a source-
specific basis and a sector-wide, regional, or nationwide basis.
(b) Non-Air Health and Environmental Impacts
    Under CAA section 111(a)(1), the EPA is required to take into
account ``any nonair quality health and environmental impact'' in
determining the BSER. As the D.C. Circuit has explained, this
requirement makes explicit that a system cannot be ``best'' if it does
more harm than good due to cross-media environmental impacts.\330\
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    \330\ Portland Cement v. EPA, 486 F. 2d at 384; Sierra Club v.
Costle, 657 F. 2d at 331; see also Essex Chemical Corp. v.
Ruckelshaus, 486 F. 2d at 439 (remanding standard to consider solid
waste disposal implications of the BSER determination).
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(c) Energy Considerations
    Under CAA section 111(a)(1), the EPA is required to take into
account ``energy requirements.'' As discussed below, the EPA may
consider energy requirements on both a source-specific basis and a
sector-wide, region-wide, or nationwide basis. Considered on a source-
specific basis, ``energy requirements'' entails, for example, the
impact, if any, of the system of emission reduction on the source's own
energy needs.
(d) Amount of Emissions Reductions
    In the proposed rulemakings for this rule and the associated
section 111(b) rule, we noted that although the definition of
``standard of performance'' does not by its terms identify the amount
of emissions from the category of sources or the amount of emission
reductions achieved as factors the EPA must consider in determining the
``best system of emission reduction,'' the D.C. Circuit has stated that
the EPA must do so. See Sierra Club v. Costle, 657 F.2d 298, 326 (D.C.
Cir. 1981) (``we can think of no sensible interpretation of the
statutory words ``best . . . system'' which would not incorporate the
amount of air pollution as a relevant factor to be weighed when
determining the optimal standard for controlling . . .
emissions'').\331\ The fact that the purpose of a ``system of emission
reduction'' is to reduce emissions, and that the term itself explicitly
incorporates the concept of reducing emissions, supports the Court's
view that in determining whether a ``system of emission reduction'' is
the ``best,'' the EPA must consider the amount of emission reductions
that the system would yield. Even if the EPA were not required to
consider the amount of emission reductions, the EPA has the discretion
to do so, on grounds that either the term ``system of emission
reduction'' or the term ``best'' may reasonably be read to allow that
discretion.
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    \331\ Sierra Club v. Costle, 657 F.2d 298 (D.C. Cir. 1981) was
governed by the 1977 CAAA version of the definition of ``standard of
performance,'' which revised the phrase ``best system of emission
reduction'' to read, ``best technological system of continuous
emission reduction.'' As noted above, the 1990 CAAA deleted
``technological'' and ``continuous'' and thereby returned the phrase
to how it read under the 1970 CAAA. The court's interpretation of
the 1977 CAAA phrase in Sierra Club v. Costle to require
consideration of the amount of air emissions remains valid for the
1990 CAAA phrase ``best system of emission reduction.''
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(e) Sector- or Nationwide Component of Factors in Determining the BSER
    As discussed in the January 2014 proposal for the section 111(b)
rulemaking and the proposal for this rulemaking, another component of
the D.C. Circuit's interpretations of CAA section 111 is that the EPA
may consider the various factors it is required to consider on a
national or regional level and over time, and not only on a plant-
specific level at the time of the rulemaking.\332\ The D.C. Circuit
based this interpretation--which it made in the 1981 Sierra Club v.
Costle case, which concerned the NSPS for new power plants--on a review
of the legislative history, stating,
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    \332\ 79 FR 1430, 1465 (January 8, 2014) (citing Sierra Club v.
Costle, 657 F.2d at 351).

    [T]he Reports from both Houses on the Senate and House bills
illustrate very clearly that Congress itself was using a long-term
lens with a broad focus on future costs, environmental and energy
effects of different technological systems when it discussed section
111.\333\
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    \333\ Sierra Club v. Costle, 657 F.2d at 331 (citations omitted)
(citing legislative history).

The Court has upheld EPA rules that the EPA ``justified . . . in terms
of the policies of the Act,'' including balancing long-term national
---------------------------------------------------------------------------
and regional impacts:

    The standard reflects a balance in environmental, economic, and
energy consideration by being sufficiently stringent to bring about
substantial reductions in SO2 emissions (3 million tons
in 1995) yet does so at reasonable costs without significant energy
penalties . . . . By achieving a balanced coal demand within the
utility sector and by promoting the development of less expensive
SO2 control technology, the final standard will expand
environmentally acceptable energy supplies to existing power plants
and industrial sources.
    By substantially reducing SO2 emissions, the standard
will enhance the potential for long term economic growth at both the
national and regional levels.\334\
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    \334\ Sierra Club v. Costle, 657 F.2d at 327-28 (quoting 44 FR
at 33583/3-33584/1). In the January 2014 proposal, we explained that
although the D.C. Circuit decided Sierra Club v. Costle before the
Chevron case was decided in 1984, the D.C. Circuit's decision could
be justified under either Chevron step 1 or 2. 79 FR 1430, 1466
(January 8, 2014).

    In this rule, the EPA is considering costs and energy implications
on the

basis of (i) their source-specific impacts and (ii) a sector-wide,
regional, or national basis, both separately and in combination with
each other.
(4) Achievability of the Emission Limitation in the Emission Guidelines
    Before discussing the requirement under section 111(d) that the
emission limitation in the emission guidelines must be ``achievable,''
it is useful to discuss the comparable requirement under section 111(b)
for new sources. For new sources, CAA section 111(b)(1)(B) and (a)(1)
provides that the EPA must establish ``standards of performance,''
which are standards for emissions that reflect the degree of emission
limitation that is ``achievable'' through the application of the BSER.
According to the D.C. Circuit, a standard of performance is
``achievable'' if a technology can reasonably be projected to be
available to an individual source at the time it is constructed that
will allow it to meet the standard.\335\ Moreover, according to the
Court, ``[a]n achievable standard is one which is within the realm of
the adequately demonstrated system's efficiency and which, while not at
a level that is purely theoretical or experimental, need not
necessarily be routinely achieved within the industry prior to its
adoption.'' \336\ To be achievable, a standard ``must be capable of
being met under most adverse conditions which can reasonably be
expected to recur and which are not or cannot be taken into account in
determining the `costs' of compliance.'' \337\ To show a standard is
achievable, the EPA must ``(1) identify variable conditions that might
contribute to the amount of expected emissions, and (2) establish that
the test data relied on by the agency are representative of potential
industry-wide performance, given the range of variables that affect the
achievability of the standard.'' \338\
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    \335\ Sierra Club v. Costle, 657 F.2d 298, 364, n. 276 (D.C.
Cir. 1981).
    \336\ Essex Chem. Corp. v. Ruckelshaus, 486 F.2d 427, 433-34
(D.C. Cir. 1973), cert. denied, 416 U.S. 969 (1974).
    \337\ Nat'l Lime Ass'n v. EPA, 627 F.2d 416, 433, n.46 (D.C.
Cir. 1980).
    \338\ Sierra Club v. Costle, 657 F.2d 298, 377 (D.C. Cir. 1981)
(citing Nat'l Lime Ass'n v. EPA, 627 F.2d 416 (D.C. Cir. 1980). In
considering the representativeness of the source tested, the EPA may
consider such variables as the ```feedstock, operation, size and
age' of the source.'' Nat'l Lime Ass'n v. EPA, 627 F.2d 416, 433
(D.C. Cir. 1980). Moreover, it may be sufficient to ``generalize
from a sample of one when one is the only available sample, or when
that one is shown to be representative of the regulated industry
along relevant parameters.'' Nat'l Lime Ass'n v. EPA, 627 F.2d 416,
434, n.52 (D.C. Cir. 1980).
---------------------------------------------------------------------------

    The D.C. Circuit established these standards for achievability in
cases concerning CAA section 111(b) new source standards of
performance. There is no case law under CAA section 111(d). Assuming
that those standards for achievability apply under section 111(d), in
this rulemaking, we are taking a similar approach for the emission
limitation that the EPA identifies in the emission guidelines. For
existing sources, section 111(d)(1) requires the EPA to establish
requirements for state plans that, in turn, must include ``standards of
performance.'' Through long-standing regulations \339\ and consistent
practice, the EPA has interpreted this provision to require the EPA to
promulgate emission guidelines that determine the BSER for a source
category and that identify the amount of emission limitation achievable
by application of the BSER.
---------------------------------------------------------------------------

    \339\ 40 CFR 60.21(e).
---------------------------------------------------------------------------

    The EPA has promulgated these emission guidelines on the basis that
the existing sources can achieve the limitation, even though the state
retains discretion to apply standards of performance to individual
sources that are more or less stringent.
    As indicated in the proposed rulemakings for this rule and the
associated section 111(b) rule, the requirement that the emission
limitation in the emission guidelines be ``achievable'' based on the
``best system of emission reduction . . . adequately demonstrated''
indicates that the technology or other measures that the EPA identifies
as the BSER must be technically feasible. See 79 FR 1430, 1463 (January
8, 2014). At least in some cases, in determining whether the emission
limitation is achievable, it is useful to analyze the technical
feasibility of the system of emission reduction, and we do so in this
rulemaking.
(5) Expanded Use and Development of Technology
    The D.C. Circuit has long held that Congress intended for CAA
section 111 to create incentives for new technology and therefore that
the EPA is required to consider technological innovation as one of the
factors in determining the ``best system of emission reduction.'' See
Sierra Club v. Costle, 657 F.2d at 346-47. The Court has grounded its
reading in the statutory text.\340\ In addition, the Court's
interpretation finds firm support in the legislative history.\341\ The
legislative history identifies three different ways that Congress
designed CAA section 111 to authorize standards of performance that
promote technological improvement: (i) The development of technology
that may be treated as the ``best system of emission reduction . . .
adequately demonstrated;'' under section 111(a)(1); \342\ (ii) the
expanded use of the best demonstrated technology; \343\ and (iii) the
development of emerging technology.\344\ Even if the EPA were not
required to consider technological innovation as part of its
determination of the BSER, it would be reasonable for the EPA to
consider it, either because technological innovation may be considered
an element of the term ``best,'' or because the term ``best system of
emission reduction'' is ambiguous as to whether technological
innovation may be considered, and it is reasonable for the EPA to
interpret it to authorize consideration of technological innovation in
light of Congress's emphasis on technological innovation.
---------------------------------------------------------------------------

    \340\ Sierra Club v. Costle, 657 F. 2d at 346 (``Our
interpretation of section 111(a) is that the mandated balancing of
cost, energy, and nonair quality health and environmental factors
embraces consideration of technological innovation as part of that
balance. The statutory factors which EPA must weigh are broadly
defined and include within their ambit subfactors such as
technological innovation.'').
    \341\ See S. Rep. No. 91-1196 at 16 (1970) (``Standards of
performance should provide an incentive for industries to work
toward constant improvement in techniques for preventing and
controlling emissions from stationary sources''); S. Rep. No. 95-127
at 17 (1977) (cited in Sierra Club v. Costle, 657 F.2d at 346 n.
174) (``The section 111 Standards of Performance . . . sought to
assure the use of available technology and to stimulate the
development of new technology'').
    \342\ See Portland Cement Ass'n v. Ruckelshaus, 486 F.2d 375,
391 (D.C. Cir. 1973) (the best system of emission reduction must
``look[ ] toward what may fairly be projected for the regulated
future, rather than the state of the art at present'').
    \343\ See 1970 Senate Committee Report No. 91-1196 at 15 (``The
maximum use of available means of preventing and controlling air
pollution is essential to the elimination of new pollution
problems'').
    \344\ See Sierra Club v. Costle, 657 F.2d at 351 (upholding a
standard of performance designed to promote the use of an emerging
technology).
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    In any event, as discussed below, the EPA may justify the control
measures identified in this rule as the BSER even without considering
the factor of incentivizing technological innovation or development.
(6) EPA Discretion
    The D.C. Circuit has made clear that the EPA has broad discretion
in determining the appropriate standard of performance under the
definition in CAA section 111(a)(1), quoted above. Specifically, in
Sierra Club v. Costle, 657 F.2d 298 (D.C. Cir. 1981), the Court
explained that ``section 111(a) explicitly instructs the EPA to balance
multiple concerns when promulgating a

NSPS,'' \345\ and emphasized that ``[t]he text gives the EPA broad
discretion to weigh different factors in setting the standard.'' \346\
In Lignite Energy Council v. EPA, 198 F.3d 930 (D.C. Cir. 1999), the
Court reiterated:
---------------------------------------------------------------------------

    \345\ Sierra Club v. Costle, 657 F.2d at 319.
    \346\ Sierra Club v. Costle, 657 F.2d at 321; see also New York
v. Reilly, 969 F. 2d at 1150 (because Congress did not assign the
specific weight the Administrator should assign to the statutory
elements, ``the Administrator is free to exercise [her] discretion''
in promulgating an NSPS).

    Because section 111 does not set forth the weight that should be
assigned to each of these factors, we have granted the agency a
great degree of discretion in balancing them. . . . EPA's choice [of
the `best system'] will be sustained unless the environmental or
economic costs of using the technology are exorbitant. . . . EPA
[has] considerable discretion under section 111.\347\
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    \347\ Lignite Energy Council v. EPA, 198 F.3d 930, 933 (D.C.
Cir. 1999) (paragraphing revised for convenience). See New York v.
Reilly, 969 F.2d 1147, 1150 (D.C. Cir. 1992) (``Because Congress did
not assign the specific weight the Administrator should accord each
of these factors, the Administrator is free to exercise his
discretion in this area.''); see also NRDC v. EPA, 25 F.3d 1063,
1071 (D.C. Cir. 1994) (EPA did not err in its final balancing
because ``neither RCRA nor EPA's regulations purports to assign any
particular weight to the factors listed in subsection (a)(3). That
being the case, the Administrator was free to emphasize or
deemphasize particular factors, constrained only by the requirements
of reasoned agency decisionmaking.'').

    d. Approach to the source category and subcategorizing. Section 111
requires the EPA first to list source categories that may reasonably be
expected to endanger public health or welfare and then to regulate new
sources within each such source category. Section 111(b)(2) grants the
EPA discretion whether to ``distinguish among classes, types, and sizes
within categories of new sources for the purpose of establishing [new
source] standards,'' which we refer to as ``subcategorizing.'' Section
111(d)(1), in conjunction with section 111(a)(1), simply requires the
EPA to determine the BSER, does not prescribe the method for doing so,
and is silent as to whether the EPA may subcategorize. The EPA
interprets this provision to authorize the EPA to exercise discretion
as to whether and, if so, how to subcategorize. In addition, the
regulations under CAA section 111(d) provide that the Administrator
will specify different emission guidelines or compliance times or both
``for different sizes, types, and classes of designated facilities when
costs of the control, physical limitations, geographical location, or
similar factors make subcategorization appropriate.'' \348\
---------------------------------------------------------------------------

    \348\ 40 CFR 60.22(b)(5).
---------------------------------------------------------------------------

    As with any of its own regulations, the EPA has authority to
interpret or revise these regulations.
    Of course, regardless of whether the EPA subcategorizes within a
source category for purposes of determining the BSER and the emissions
performance level for the emission guideline, as part of its CAA
section 111(d) plan, a state retains great flexibility in assigning
standards of performance to its affected EGUs. Thus, the state may, if
it wishes, impose different emission reduction obligations on different
sources, as long as the overall level of emission limitation is at
least as stringent as the emission guidelines.
2. The BSER for This Rule--Overview
    a. Summary. This section describes the EPA's overall approach to
establishing the BSER. This rule, promulgated under CAA section 111(d),
establishes emission guidelines for states to use in establishing
standards of performance for affected EGUs, and the BSER is the central
determination that the EPA must make in formulating the guidelines. In
order to establish the BSER we have considered the subcategory of the
steam affected EGUs as a whole, and the subcategory of the combustion
turbine affected EGUs as a whole, and have identified the BSER for each
subcategory as the measures that the sources, viewed together and
operating under the standards of performance established for them by
the states, can implement to reduce their emissions to an appropriate
amount, and that meet the other requirements for the BSER including,
for example, cost reasonableness.\349\ After identifying the BSER in
this manner, the EPA determines the performance levels--in this case,
the CO2 emission performance rates--for the steam generators
and for the combustion turbines.
---------------------------------------------------------------------------

    \349\ In this rulemaking, our determination that the costs are
reasonable means that the costs meet the cost standard in the case
law no matter how that standard is articulated, that is, whether the
cost standard is articulated through the terms that the case law
uses, e.g., ``exorbitant,'' ``excessive,'' etc., or through the term
we use for convenience, ``reasonableness''.
---------------------------------------------------------------------------

    In establishing the BSER the EPA also considered the set of actions
that an EGU, operating under a standard of performance established by
its state, may take to achieve the applicable performance rate, if the
state adopts that rate as the standard of performance and applies it to
the EGUs in its jurisdiction, or to achieve the equivalent mass-based
limit, and that meet the other requirements for the BSER. These actions
implement the BSER and may therefore be understood as part of the BSER.
    An example illustrating the relationship between the measures
determined to constitute the BSER for the source category and the
actions that may be undertaken by individual sources that are therefore
also part of the BSER is the substitution of zero-emitting generation
for CO2-emitting generation. This measure involves two
distinct actions: Increasing the amount of zero-emitting generation and
reducing the amount of CO2-emitting generation. From the
perspective of the source category, the two actions are halves of a
single balanced endeavor, but from the perspective of any individual
affected EGU, the two actions are separable, and a particular affected
EGU may decide to implement either or both of the actions. Further, an
individual source may choose to invest directly in actions at its own
facility or an affiliated facility or to cross-invest in actions at
other facilities on the interconnected electricity system.
    To reiterate the overall context for the BSER: In this rule, the
EPA determined the BSER, and applied it to the category of affected
EGUs to determine the performance levels--that is, the CO2
emission performance rates--for steam generators and for combustion
turbines. States must impose standards of performance on their sources
that implement the CO2 emission performance rates, or, as an
alternative method of compliance, in total, achieve the equivalent
emissions performance level that the CO2 emission
performance rates would achieve if applied directly to each source as