United States: EPA's Replacement For The Clean Power Plan (The Proposed Affordable Clean Energy Rule): Potential Impacts To The Oil And Gas Industry

Last Updated: October 8 2018
Article by Troutman Sanders Pipeline Practice

EPA's proposed replacement for the Clean Power Plan, dubbed the "Affordable Clean Energy" rule, or "ACE," is now open for comment. In short, the rule requires states to develop efficiency standards for fossil fuel-fired power plants with the intent of reducing greenhouse gas emissions. Coal-fired power plants, and those involved in the production of coal, have a keen interest in the rule for obvious reasons—ACE targets them directly and could require capital projects costing millions.

Although gas-fired combustion turbines are expressly excluded from the rule, there are at least three reasons why the natural gas industry should monitor the ACE rulemaking process as well as consider proactive engagement with EPA. Further, there are similar reasons that oil pipeline and terminal facilities should pay attention to the proposed rule, with EPA's methodology for evaluating climate change impacts perhaps topping the list. Comments are currently due on October 31, 2018.

ACE Excludes Gas ... for Now

ACE expressly excludes existing "stationary combustion turbines," a term defined to include both simple-cycle and combined-cycle units. As a result, the vast majority of "existing" gas-fired power plants will not be covered by ACE, even though the prerequisite "new source" rule is already in place. That means states will skip over gas-fired turbines in crafting the unit-specific efficiency standards that ACE requires.

While EPA's decision to exclude gas turbines may be good news for the natural gas industry, the reason for that decision might be a bit less comforting. EPA's primary justification for excluding gas turbines is that it simply did not have enough information to propose a similar rule for them at this time, although EPA has expressly asked for that information in ACE. Implied in that reasoning is the risk that EPA may be pressured into developing a similar program for gas turbines in the future, if EPA receives new information on the efficiency improvements available for such units.

Although EPA's ACE proposal does not go into detail on why gas turbines are different from coal boilers from an efficiency perspective, perhaps it should have. The efficiency with which a gas turbine generates electricity is far more sensitive to ambient conditions (temperature, humidity, etc.) than that of a coal boiler. Thus, any not-to-exceed efficiency limit for a gas turbine, like those ACE will require for coal boilers, would have to account for the influence of ambient conditions. Otherwise, a mere change in weather could cause a violation.

Gas industry representatives should consider participating in the comment process to better explain why the approach EPA has proposed in ACE for coal will not work well for gas.

Proposed New Source Review Reform Applies to Gas

As proposed, the New Source Review (NSR) portion of ACE would apply directly to gas turbines even though they are excluded from ACE. EPA's stated concern is that the efficiency projects required by ACE could trigger NSR permitting—arguably the most controversial and heavily litigated program under the Clean Air Act.

In ACE, EPA has resurrected a proposal from 2007 for a new "preliminary" emissions test based on hourly emissions to precede the current annual test. An hourly test would avoid discouraging desirable efficiency projects that might otherwise trigger NSR under the annual test. It would also dovetail well with EPA's health-based ambient air quality standards, some of which are also based on a one-hour metric.

However, as with most NSR issues, the details are critical. Determining whether a unit's maximum hourly emission rate is expected to, or actually does, go up after a project can be extremely complicated. Recognizing the challenge, ACE includes three options (its 2007 proposal had twelve), but unfortunately none of them work. As proposed, EPA's rule would falsely predict emission increases in nearly every case. With a few key changes to one of those options, the reform could nevertheless be transformative and finally provide the level of clarity that EPA, states, and regulated sources have sought for decades.

Gas interests should respond by encouraging EPA to fix and then finalize the reforms to minimize the risk that NSR might in the future become the same quagmire for gas that it has long been for coal.

EPA's Method for Evaluating Climate Benefits

As with all major rules, EPA included in ACE an analysis of the projected costs and benefits. Notably, that analysis covers two types of benefits that have been hotly contested in the past—the climate benefits targeted by the rule, and the "co-benefits" resulting from ancillary reductions of other pollutants. At first glance, EPA's analysis of these benefits in ACE appears similar to its past evaluations, but there are two important differences worth noting.

First, in evaluating climate benefits targeted in ACE, EPA used the controversial social cost of carbon, but only a portion of it. Instead of the "global" value utilized by the Obama Administration, the Trump Administration has used only the "domestic" value, reflecting the potential benefits only within U.S. borders. The result cuts the value of a ton of carbon to about a fifth of what it was, depending on the specific metric. Second, in evaluating the "co-benefits" associated with reducing fine particulate matter (PM) emissions, EPA included a new step in its analysis. Even though EPA calculated the co-benefit of reduced premature mortality due to the expected reductions in PM the same way as it always has before, it also evaluated the percentage of the PM reductions likely to occur in areas that already meet EPA's health-based ambient standards. That extra step demonstrates that almost all of the PM benefits EPA has calculated will occur in areas with the level of PM that EPA has already deemed sufficient to "protect the public health" with "an adequate margin of safety."

Though quietly stated in ACE, these two key points are likely to reverberate into other contexts: (1) only domestic climate benefits should be compared to domestic costs, and (2) any analysis of "co-benefits" should consider the PM standards already set and met. Indeed, they may be even more important for the gas industry than for coal, since evaluating climate benefits often arises in the context of building new facilities, and the only new power plants expected in the foreseeable future will be fired with gas.

These new precedents could also be important for new oil and gas pipeline construction projects, which typically trigger a review of environmental impacts under the National Environmental Policy Act (NEPA). NEPA reviews take years and must include full consideration of potential climate and air quality impacts associated with new pipeline projects and the facilities they serve. This Administration's most high-profile evaluation of climate and air quality impacts is likely to serve as a model going forward for the similar evaluations required under NEPA.

* * *

All told, there are a number of ACE rule elements for oil and gas interests to consider, contrary to its coal-focused appearance. We encourage oil and gas interests to engage on these issues as they provide significant opportunity to provide their perspectives and potentially impact key precedents that may be established in a final rule.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Akin Gump Strauss Hauer & Feld LLP
Akin Gump Strauss Hauer & Feld LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Akin Gump Strauss Hauer & Feld LLP
Akin Gump Strauss Hauer & Feld LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions