On April 25, 2024, the U.S. Environmental Protection Agency (EPA) finalized four new rules implementing pollution restrictions for power plants:

1. Greenhouse gas emissions reductions [GHG Rule].
2. Mercury emissions reductions [MATS Rule].
3. Wastewater limits [ELG Rule].
4. Coal ash storage management [Coal Ash Rule].

The simultaneous release of these new regulations will require the power sector to act quickly and strategically on a plan to juggle multiple new compliance measures. In the meantime, the rules will likely pass through several legal hurdles in the months ahead through litigation or other actions. Taft breaks down rule highlights below and analyzes the path ahead.

GHG Emissions Rule & Carbon Capture Sequestration

EPA made key changes to its rule for GHG emissions from existing coal-fired power plants. The new standard requires all existing coal-fired plants that plan to run in the long term, and all new baseload natural gas-fired plants, to control 90% of their carbon emissions. Specifically, coal-fired plants that expect to run past 2039 have until 2032 to meet the 90% efficiency carbon dioxide standard. Plants that won’t meet the standard must retire by 2039.

For new natural gas-fired plants, the new standards apply to baseload plants that operate at or above a 40% capacity factor (rather than a 50% capacity factor as had been originally proposed). Existing gas-fired facilities could be subject to other requirements in the future — EPA said it will address these in separate, broader regulations after the November election.

EPA grounds its authority for these changes in the Clean Air Act. Under section 111(b), EPA can set emission standards that apply directly to new plants constructed after the rule was proposed. Under section 111(d), EPA determines the emission standards that existing power plants must meet, although these are implemented by the states.

EPA bases these standards on what it evaluates as emission reductions achievable by the “best system of emission reduction,” often known as BSER. In this final rule, EPA set the standards based solely on implementing carbon capture and sequestration (CCS) as the BESR. While power plants are free to use whatever measures to achieve emissions reductions, the final rule contemplates that they will be implementing CCS to meet the emission reduction requirements.

CCS technology has undergone rapid development in recent years, in part due to federal incentives from the 2021 Infrastructure Investment and Jobs Act. EPA justifies its final rule based on expectations that this technology will rapidly mature at a commercial scale. As of September 2023, fifteen CCS facilities were operating in the United States, specifically in Texas, Oklahoma, Wyoming, North Dakota, Michigan, Kansas, Louisiana, and Illinois. Most of these facilities are located at plants that process natural gas or produce ethanol for fuel or ammonia for fertilizer. Thirteen of those facilities provide the captured CO₂ to oil companies, which use it for enhanced oil recovery. In that process, carbon dioxide is injected into partially depleted oil wells, and the pressure from the gas pushes the remaining oil to the surface.

EPA currently regulates CCS through the Safe Drinking Water Act’s Underground Injection Control Program, and there are two classes of CCS injection sites: Class II and Class VI wells. Class II wells are used for enhanced oil recovery, disposal of waste fluids, and storage of liquid hydrocarbons. Class VI wells are used to inject carbon dioxide into deep rock formations. As of March 2024, only four EPA-permitted Class VI wells are currently in operation, with two in Illinois and two in Indiana (there are also some Class VI wells in states that have primacy over the Underground Injection Control regulations).

The Illinois Basin is a primary reason these active Class VI wells are centralized in the Midwest. The Illinois Basin is a massive underground oval depression that stretches diagonally over Illinois, Indiana, and western Kentucky. A key feature of interest in the basin is the layer of Mount Simon Sandstone, a saline formation, which consists of a layer of rocks saturated with salty brine water. This structure provides an ideal location for underground storage of CO₂.

With EPA’s new rule announced, it is likely that CCS activity and permitting will increase not only in the Illinois Basin, but across the U.S., as power plants seek to navigate these new restrictions.

Mercury Emissions Rule

Under an update to the Mercury and Air Toxics Standards rule, often called MATS, EPA is requiring reductions of 70% for mercury from existing lignite coal-fired sources and 67% for filterable particulate matter. Together with the new standards, power plants will have to install continuous monitoring systems for emissions of mercury and other toxic pollutants like arsenic, chromium, cobalt, and nickel. This final rule includes the most significant updates to MATS since EPA first issued these standards in February 2012.

Wastewater Rule

Under the Clean Water Act, the EPA publishes Effluent Limitations Guidelines and Standards (ELGs), which are national industry-specific wastewater regulations. The Steam Electric Power Generating ELGs apply to power plants that generate electricity through the creation of steam. The new rule focuses on a subset of steam electric plants that burn coal to create steam and establishes zero discharge limitations for three wastewaters generated at coal-fired power plants: flue gas desulfurization (FGD) wastewater, bottom ash transport water (BATW), and combustion residual leachate (CRL). The new rule also establishes numeric discharge limitations for mercury and arsenic for CRL that is discharged through groundwater and for a fourth wastestream, called legacy wastewater, which is discharged from certain surface impoundments. EPA calculates that the final rule for wastewater discharges from power plants requires coal-fired power plants to reduce pollutants discharged through wastewater by more than 660 million pounds per year at an anticipated cost of $536 million to $1.1 billion dollars annually.

Coal Ash Storage Rule

The EPA’s new rule for coal combustion residuals (CCR) targets inactive surface impoundments at inactive electric utilities, known as “legacy CCR surface impoundments.” EPA’s new rules for these largely mirror those for inactive impoundments at active facilities, including requiring the proper closure of the impoundments and remediating groundwater that may be contaminated. This action comes in the wake of the Aug. 21, 2018, opinion by the U.S. Court of Appeals for the District of Columbia Circuit in Utility Solid Waste Activities Group, et al v. EPA that vacated and remanded the provision that exempted inactive impoundments at inactive facilities from the earlier 2015 version of the rule.

EPA also addressed “CCR management units,” which are CCR surface impoundments and landfills closed before the effective date of the 2015 CCR Rule, and inactive CCR landfills, which include inactive CCR piles. In this final rule, EPA establishes groundwater monitoring, corrective action, closure, and post-closure care requirements for these areas. CCR management units are subject to the regulations when located at active and inactive facilities with a legacy CCR surface impoundment.

Court & Political Battles Ahead

The legal basis for the new GHG emissions rule started with the Supreme Court’s landmark Massachusetts v. EPA decision in 2007, where the Court concluded that EPA must regulate carbon dioxide and other greenhouse gas emissions under the Clean Air Act. But in 2015, when the Obama administration sought to roll out the Clean Power Plan with provisions that regulated existing power plant emissions based on “outside the fence line” generation shifting away from fossil-fuel sources, challenges to the plan pushed the controversy up to the Supreme Court again. In its 2022 decision West Virginia v. EPA, the Court found that the Clean Power Plan represented a substantial restructuring of the American energy market that fell under the “major questions doctrine,” and Congress did not grant the EPA authority under Section 111(d) of the Clean Air Act to regulate emissions from existing plants based on changes “outside the fence line” of the plant, such as coal-to-gas generation shifting, emission trading schemes, and renewable energy development. In conclusion, though, the Court held that EPA may keep regulating emissions at existing plants through emissions reduction technologies “within the fence line” of the power plant.

In response to that Supreme Court decision, EPA has now created new emissions regulations governing individual power plants, which focus on emissions reduction at power plants themselves through CCS. The EPA administration noted that the agency was “really confident” it had “carefully crafted” the final rules within the confines of the law, and Administrator Michael Regan ensured that each of the four rules is “durable.”

However, West Virginia Attorney General Patrick Morrisey has already promised to appeal the EPA’s GHG limits for power plants, anchoring the challenge in the Supreme Court’s 2022 decision.

Other battles will likely take place outside the courts. West Virginia Senator Shelley Moore Capito announced plans to introduce a resolution to repeal the greenhouse gas standards.

Similarly, there will likely be litigation over the new MATS requirements, Steam Electric ELG revisions, and CCR Rule provisions.

Attorneys in Taft’s environmental and energy practice group are continuing to closely monitor developments surrounding EPA’s power plant rules and carbon capture and sequestration. For help navigating EPA’s new power plant rules and carbon capture and sequestration permitting and land use, contact Taft attorneys Elizabeth Brama, Will Gardner, and Tommy Sokolowski.