EPA Releases Memorandum Outlining Changes to NAAQS Review Process

Last week, EPA Administrator Scott Pruitt released a Memorandum setting out changes to the process by which EPA reviews and sets National Ambient Air Quality Standards (NAAQS).  The procedural changes—dubbed a “Back to Basics” approach—are intended to “help EPA meet its statutory obligations consistent with [its] commitment to cooperative federalism.” Pruitt’s Memorandum also builds on a White House Memorandum released last month that directs EPA to ensure efficient and cost-effective implementation of the NAAQS program, especially with respect to permitting decisions for the construction of industrial and manufacturing facilities.

Pruitt’s Memorandum directs EPA and the Clean Air Scientific Advisory Committee (CASAC) to adhere to the following principles:

  1. Meet Statutory Deadlines. EPA and CASAC are directed to look for opportunities to streamline the NAAQS review process to ensure that new standards are timely set at five-year intervals.
  2. Address all Clean Air Act Provisions for NAAQS Reviews.  EPA will provide a standardized set of key questions to CASAC to frame the entirety of the NAAQS review process, including questions designed to elicit information about the health, welfare, social, economic, and energy effects of NAAQS standards.  The Memorandum acknowledges that under Whitman v. American Trucking Associations, Inc., 531 U.S. 457 (2001), EPA may not consider the cost of implementation when reviewing and revising NAAQS.  The Memorandum suggests that the Administrator may still take into account welfare, economic, and energy effects of NAAQS standards, because the Clean Air Act does not require EPA to establish NAAQS at a zero-risk level, but rather at a level that reduces risk to sufficiently protect public health with an adequate margin of safety: “The selection of any particular approach to providing an adequate margin of safety is a policy choice left specifically to the Administrator’s judgment.”
  3. Streamline and Standardize the Process for Development and Review of Key Policy-Relevant Information.  EPA’s Integrated Science Assessments, Risk and Exposure Assessments, and Policy Assessments should focus on policy-relevant science and on studies, causal determinations, or analyses that address key questions related to the adequacy of NAAQS.
  4. Differentiate Science and Policy Considerations in the NAAQS Review Process.  EPA should establish a clear distinction between the purely scientific findings of the Integrated Science Assessment and the wider range of policy concerns that the Administrator must consider when reviewing NAAQS.
  5. Timely Implementation of Regulations and Guidance.  When a NAAQS is revised, EPA should, where appropriate and consistent with law, also provide implementation regulations and guidance as well as technical information to assist state co-regulators in developing approvable plans to implement and maintain the NAAQS.
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EPA Transparency Proposal May Limit What Agency Can Consider in Rulemakings

UPDATED 05.25.2018 EPA has extended the deadline for comments to August 16.

On April 30, EPA issued a proposed rule, Strengthening Transparency in Regulatory Science, “to increase transparency in the preparation, identification, and use of science in policymaking.”  With this proposal, EPA is targeting dose response data and models that underlie “pivotal regulatory science”; that is, “the specific scientific studies or analyses that drive the requirements and/or quantitative analysis of EPA final significant regulatory decisions.”  EPA seeks to make more of this underlying data and models available to the public when it is used as a basis for rulemakings.  There has been some concern that the rule, if finalized, would effectively limit what EPA could consider in covered rulemakings, since some studies contain information restricted for personal privacy or confidential business reasons that may be difficult to effectively make public.

Several commenters, including the Public Library of Science and the National Association of Clean Air Agencies, have asked for an extension of the comment period and public hearings held around the country on the proposal.  The attorneys general of California, Delaware, the District of Columbia, Iowa, Maine, Minnesota, New York, and Pennsylvania sent a letter to EPA Administrator Pruitt on May 7 asking EPA to withdraw the proposed rule and consult with the National Academy of Sciences and other independent science organizations before proceeding further.  In lieu of withdrawal, the attorneys general ask for a comment period of at least 150 days, and they challenge the current, thirty-day comment period as “woefully insufficient.”  The attorneys general allege that the proposal is vague but could have a far-reaching impact on EPA’s mission.

Comments are currently due by May 30, 2018, and can be submitted in a number of ways, including online.

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EIA Anticipates Growth in New Natural-Gas-Fired Generation Capacity in 2018, While New Renewable Capacity Remains Flat

The U.S. Energy Information Administration (EIA) has released information on new generation capacity expected to come online in 2018.  This report is based on data from January and February and on estimates for the remainder of the year derived from EIA’s Preliminary Monthly Electric Generator Inventory.

The 2018 capacity additions tell two different stories, one for renewable generation capacity and one for natural-gas-fired generation capacity.  The total amount of new capacity expected in 2018 is 32 GW, which is greater than the capacity additions of any other year in the past decade and more than a 50 percent increase over 2017.  This increase, however, is driven exclusively by growth in new natural-gas-fired generation capacity.  New natural gas capacity is expected to more than double from about 9.5 GW in 2017 to about 20.5 GW in 2018.  This is just under the total amount of new capacity that came online in 2017.  About half of the new natural gas capacity in 2018 will come from combined-cycle units added in the PJM region, specifically 5.2 GW in Pennsylvania, 1.9 GW in Maryland, and 1.9 GW in Virginia.

In contrast, new renewable capacity in 2018 is expected to be approximately 11.5 GW, the same amount of renewable capacity added in 2017.  As a result, for the first time in five years, new renewable capacity is expected to comprise less than half of the total annual new capacity.  EIA expects approximately 5 GW of new wind capacity in 2018, 2 GW of which will be located in Texas.  Approximately 4 GW of new solar capacity will be added, half of which will come from solar photovoltaic additions in California, North Carolina, and Texas.

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DOE to Fund Long-Duration Energy Storage

On Tuesday, DOE announced that it will be providing up to $30 million dollars through its Advanced Energy Research Projects Agency-Energy (ARPA-E) program to support the development of grid-connected long-duration energy storage.  The Duration Addition to electricitY Storage (DAYS) project will support the development of storage systems that will provide power to the grid for between 10 to 100 hours.  According to the project website, extended storage options will help to “prevent blackouts and smooth overall grid operation, improving resilience and enhancing grid security”; will “enable greater integration of intermittent renewable energy sources, greatly reducing emissions in the power sector”; and “could help improve grid efficiency and promote the growth of domestic energy sources.”

Notices of Intent to apply for funding under the program are due on June 15, 2018 with full applications due by July 2, 2018.

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PJM and NYISO take Steps to Address State Policy Objectives

PJM and the New York Independent System Operator (NYISO) both recently issued proposals to address the interplay of state policy objectives and wholesale electric market pricing.  PJM presented two alternative proposals to FERC, Docket No. ER18-1314, for authorization to amend PJM’s capacity market rules, and NY-ISO released a Carbon Pricing Straw Proposal.

PJM’s proposed tariff revisions target the capacity market price impact of resources receiving out-of-market state subsidies. The filing states that PJM is proposing these changes because “the PJM Region is seeing increased ‘participation of resources receiving out-of-market state revenues,’ which . . . threaten[] to ‘undermine[] [the first] principles [of capacity markets] in the PJM Region.”  The filing comes on the heels of the Commission’s recent contested order on ISO-New England’s (ISO-NE) Competitive Auction with Sponsored Policy Resources (CASPR) in which the Commission stated that the first principles of capacity markets are that:

[a] capacity market should facilitate robust competition for capacity supply obligations, provide price signals that guide the orderly entry and exit of capacity resources, result in the selection of the least-cost set of resources that possess the attributes sought by the markets, provide price transparency, shift risk as appropriate from customers to private capital, and mitigate market power.

PJM claims that its filing does not address “whether states have the right to act but instead how the wholesale market should respond to such actions.”  PJM presents FERC with two alternative options, neither of which received a large enough sector vote in PJM’s stakeholder process for endorsement:

  • Under Option A, the Capacity Pricing Approach, PJM would “accommodate” state subsidies by running the market twice.  The first run would be used to determine resource commitment. In this run, subsidized offers would bid at their subsidized level.  The second run would then determine the clearing price.  During this run, only those offers that cleared the first run would participate, but subsidized offers would be repriced at a competitive price.  This proposal is preferred by PJM and would replace PJM’s current Minimum Offer Price Rule (MOPR).
  • Under Option B, the MOPR-Ex proposal, PJM would “mitigate” the impacts of state subsidies by repricing subsidized offers before the market is run.  This proposal would apply a revised and expanded form of the current Minimum Offer Price Rule (MOPR-Ex) to both new and existing resources.  This approach is preferred by PJM’s Independent Market Monitor and received a higher portion of the sector-based vote in PJM’s stakeholder process.

Over 55 parties have intervened in this closely watched docket, including trade associations, environmental organizations, industrial customers, public utilities, rural electric cooperatives, independent power producers, and state attorney general, public service commission, and consumer advocate offices.  Responses to the filing are due by May 7, 2018.

NYISO’s Carbon Pricing Straw Proposal proposes to “harmonize” the State of New York’s decarbonization goals with NYISO’s wholesale electricity market prices by incorporating the price of carbon dioxide emissions into the market.  Under the proposal, each energy supplier participating in the market will be assessed a carbon charge for its carbon emissions.  For internal suppliers, the charge will be calculated based on the supplier’s point-of-production carbon emissions multiplied by a carbon price that will depend on whether the supplier is or is not covered by the Regional Greenhouse Gas Initiative.  The proposal states that it expects suppliers to incorporate these charges into their energy offers. Resources that clear the market will receive the full locational based marginal price (LBMP), but the carbon charge will be debited as part of the settlement process.  The proposal states it expects that the carbon charges should cause market prices to rise whenever high emitters are on the margin.  The straw proposal also addresses external transactions stating that to prevent production from shifting to resources outside of New York (which may be costlier and higher-emitting), external resources will be expected to “compete with internal resources on a status quo basis, as if there were no incremental carbon charge applied within the NYISO.”  As such, “NYISO would treat imports and exports similar to today (with imported energy being paid the full LBMP and exports buying energy at the full LBMP), but then apply a carbon charge to imports and a credit to exports.”  Under the proposal, load will be expected to continue to pay the full LBMP including the carbon effect on the market price, but will be credited the carbon charges collected from suppliers based on a cost levelizing allocation.

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