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Case number 24-1120 et al.

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State of West Virginia et al.

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Petitioners versus Environmental Protection Agency and Michael S. Reagan, Administrator, United States Environmental Protection Agency.

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Good morning, Council.

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Mr. Keller, please proceed when you're ready.

[00:00:22] Speaker 06:
Good morning.

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Thank you, Chief Judge Srinivasan.

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May it please the court, Scott Keller for petitioners challenging EPA's 90% carbon capture transportation storage system, reserving five minutes.

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EPA cannot name a single facility that has ever accomplished this rule's mandate of a system of facility-wide annual 90% carbon capture.

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To be clear, petitioners want carbon capture to work, and we're at the forefront of trying to demonstrate it at large scale.

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For example, Minn Kota's planned Project Tundra would be the world's largest CCS project, but even Tundra would not comply with this rule.

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In fact, the only facility to ever attempt what this rule mandates is boundary dam.

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And it got 89.7% capture for just three days nearly a decade ago before technical difficulties forced it to scale back to capturing only 65 to 70% of emissions and from that just a partial emission stream.

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So EPA selected facility wide annual 90% CCS system has not been adequately demonstrated to quote the text of the Clean Air Act is both a matter of statutory text as well as the record of CCS performance.

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And this rules emissions limits too are not achievable again to quote the Clean Air Act.

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The 90% CCS system requires more than just carbon capture.

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It also requires carbon transportation and storage.

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So EPA is mandating a massive infrastructure build out of new CO2 pipelines and storage sites, all controlled by third parties, not the power plants.

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This will entail extraordinary permitting and siting issues in the country.

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We'll need over 10 times more CO2 pipelines and storage capacity.

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So ultimately here, EPA is asserting a transformative power over the nation's energy grid by mandating a 90% CCS system that no power plant has done before that violates the Clean Air Act.

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So I take it there's some percentage at which you'd be okay if it was south of the 90%?

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We would not concede that there is at this point some facility-wide full stream demonstration of CCS.

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I think Project HUNDRA is case in point.

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I mean, Project HUNDRA is receiving federal funds right now on the basis that this is not demonstrated technology.

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This is emerging technology.

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And so in thinking about what does it mean for something to have been adequately demonstrated, we would submit that it's what the West Virginia versus EPA dissenting opinion said, or what EPA told this court in 2016 in the Clean Power Plan argument.

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There needs to be a proven track record.

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It needs to be something that's already in place and successful within an industry.

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Here, EPA has cited a few examples

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none of which are there's no percentage then for ccs at this point we can see that carbon capture technology exists but that's very different than is there a system of emission reduction that can create an emissions limit that's achievable

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So for purposes of the Clean Air Act text, we of course can see carbon capture technology does exist.

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But that's a different inquiry.

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And I think this is one of the key points that we have a fundamental disagreement with how to interpret the statute with EPA.

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And that's a legal question.

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So on the legal question, it seems today you're saying that to be adequately demonstrated, there would have to be a plant

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out there in the world that has already voluntarily done in every respect what EPA is going to mandate.

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Is that fair or am I over reading what you're claiming?

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No, Judge Garcia, I do agree.

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There has to be someone that has done this before.

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And when we talk about volume.

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So I suppose the question is, how do you reconcile that with language from our cases like Essex, which seems to say that that's not required.

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You don't need a plant that's performed in all capacities in exactly the way EPA is going to require.

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And instead, EPA is allowed to extrapolate from it certainly can't make things up or count on new technology.

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But it can extrapolate from demonstrations, perhaps on a smaller scale.

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Well, two points, Judge Garcia.

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I think the first one is, even under Essex, that upheld a system for new sources.

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When the system was demonstrated at existing sources, there, this is at 486F2 at 436 to 37, the existing source had met the standard multiple times.

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It had nearly met it 19 times.

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So this wasn't a situation where the system had just never been done before anywhere.

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And then also, this court's case is subsequent to Essex said that the idea that, well, something doesn't have to be in routine use.

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Sure.

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But what National Lime said and what Sierra Club said is you have to look at, is this achievable under most adverse conditions?

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And there's a wide gulf between something being in routine use.

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That's not our argument today.

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That's never been our argument.

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But what we're saying is, at minimum, there has to be someone that has done this before.

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And we could talk about whatever gray areas in between, but I would submit that with this rule and on this record, we're nowhere close to whatever that gray area would be.

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I think the question would be, I don't want to cut you off.

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Well, I was just going to ask a record sort of specific question.

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So it's about the Petronova plant.

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So I think it's on JA53 EPA.

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This is a very large slipstream on which they have performed 90% carbon capture.

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And the distinction, at least in the briefs that the petitioners posit is, well, that's a slipstream, not the full exhaust stream.

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And there's a finding from EPA that the properties, the composition, et cetera, of that very large slipstream are comparable to those to what a full exhaust stream would be.

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at a comparably sized plant.

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And so as a matter of the record, it seems to me the key question is, do you have affirmative evidence that that slipstream demonstration is not representative of what would work on a full exhaust stream?

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And I want to know what your best evidence is for that.

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Sure.

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A few responses.

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First of all, Petronova was offline for more than a third of the time when

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was operating.

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That's a JA2716.

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Additionally, I believe more recently it's been down to 10 percent of the time that plant has not been operating.

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Yeah and look some of this is also we're dealing with emerging technology and so in talking about you know what is the state of play today versus the record the record as of when this rule was promulgated was that but even beyond that I mean Boundary Dam is their best example.

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Boundary Dam was trying to be a full stream

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ccs system i'm sorry could I just be I think I might have asked a convoluted question to the if I think certainly one of the important questions is are the properties of a full exhaust stream materially different from a slipstream dpa says no we say yes and what is the basis for that the basis is a slipstream has dynamic amounts of pressure and

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Sorry, a full stream has dynamic amounts of pressure.

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A slipstream, it's fixed.

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It's constant.

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And that matters because it's much harder to do CCS when you are talking about dynamic pressures instead of just knowing a constant of what's being done.

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I think Boundary Dam is case in point.

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Boundary Dam was trying to be full stream.

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It could never do that.

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It didn't achieve that.

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And for record sites on dynamic versus static and full stream versus slipstream, I would cite the court

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to JA2796 and JA2848.

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And also, too, if it really- Can I just before you go on on that, when you say dynamic versus fixed, is that true no matter the breadth of the slipstream?

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There's just a categorical difference between slipstream and non-slipstream?

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Yes, because when you're talking about dealing with the full set of emissions and you're talking about trying to prove

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get the demand needed to the electricity grid, you're never going to know completely exactly what demand is needed.

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And so when you're talking about all of the emissions, that's different than controlling for a partial set of the emissions.

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But also too, I would submit that if EPA were right, that it's just so easy to scale up from a slipstream to a full stream, then why has nobody done it?

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And I think Boundary Dam really is case in point here.

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Well, your answer to that is that no one is going to employ this very expensive technology unless it's required by regulation.

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And I don't think that's right.

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Part of the thing about the congressional subsidies and federal funding and state grants for these programs are so that we can demonstrate this.

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In Project Tundra that is planned to be the world's largest CCS project, that's been in planning stages for 10 years and this rule is threatening its viability.

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That's an example where this project was being planned and it was being planned without governmental mandates.

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And again, if the record in the state of technology in the world were different, that someone had done this, maybe EPA would have a much stronger basis to come into court to say that this has been adequately demonstrated.

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Again, we want CCS to work.

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Mr. Hiller, if you could speak to, so I agree that this is a really important question, right?

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take the evidence from slipstreams and extrapolate them to a full stream.

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And one of the things that EPA says is that the fluctuations in variability in the full stream are not meaningfully different from the slipstream.

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And then they cite to variability about turndown rates.

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But turndown rates don't seem to me to be quite the same thing.

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as the type of fluctuations that petitioners are talking about so I'm wondering if you can speak to that question right does the variability and and how you know how it deals with turned down rates, how do we think about that.

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I think all this goes to it's similar but it's not identical and it's similar in that.

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When a power plant thinks about just generating power, that is one question.

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But how it transmits power onto the electricity grid so that everyone can get the power they need.

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And this goes to our point about EPA didn't even study operational reliability.

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They only studied resource adequacy.

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That's a very similar point.

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And the real word of trying to

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generate enough power and get that power out to where it needs to go is going to have to take into account all sorts of factors.

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Is there a winter storm?

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How do we get it from one part of the country to another?

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If you can't, then you have to take account of regional considerations.

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And that wasn't done here either.

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So I think in some ways, though, to back up to the statutory text, it's not our job to come in here and to say that here is the definitive explanation about slipstreams and full streams.

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EPA has to be able to demonstrate

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that its facility-wide annual 90% CCS system has been done somewhere, that they want to run away from that rule.

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But that's the rule they selected.

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And so to say that we're coming into court purportedly adding statutory terms is just not correct.

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That's the rule they selected.

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In fact, I would cite this court to JA90 and JA146.

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This is the rule that EPA promulgated.

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They said that partial capture

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partial capture slipstream for CCS was not determined to be BSE are the best system.

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They were presented with alternatives saying you need to account for the fact that your examples were only partial slipstreams and they said that's not the system we're selecting we're selecting a facility wide system and no one has been able to do that no power plant has been able to do that.

[00:12:10] Speaker 08:
Can I ask a specific question about boundary dam?

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And I know you have other complaints about it.

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But in terms of what caused the problem with the carbon capture system, EPA at least says that they have an explanation.

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They specifically believe it was the fly ash was fouling the particular type of sulfur dioxide control system at that plant.

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A different, better sulfur dioxide control system is mandated in the US.

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So that problem won't occur in the United States.

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And I wasn't sure I saw just a specific response to that point from you.

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And I would point to Sask Powers comments.

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This is JA 1787, which is the owner and operator of that facility saying that, look, we tried to do this.

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We can only get 65 to 70% capture.

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But the other response, Judge Garcia, would be.

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And the reason they say they were economic and regulatory and technical, and the technical issue was the sulfur dioxide system is being fouled by fly ash.

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The EPA says that will not happen for the type of scrubbers we require in the United States.

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And they're projecting that and if they're right about that and someone could do it and then someone would have demonstrated this may be a very different record.

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But even then, you of course would still have to look at the massive pipeline build out the massive storage capacity build out.

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And so, if I were in EPA's position trying to think about what does it mean for something to have been adequately demonstrated.

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I would want to know, how is Project Tundra actually going to turn out?

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I mean, Project Tundra is trying to demonstrate CCS at a large scale at 70%, and that's still only a partial admission stream.

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You know, another plan, Project Dry Fork, said even trying to demonstrate this at 70% is going to be prohibitively expensive at $1.5 billion, which is more than the cost of the station itself.

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And so I think every time EPA comes up with some sort of projection, and they are still projecting on the annual 90% facility rate, the projecting on pipelines and storage facilities on operational reliability, I would ask, well, why not just determine whether someone has been able to do this before, rather than saying, well, there are all these differences.

[00:14:20] Speaker 06:
If there are all these differences, then under their view, this should be technology that can be, in fact, put into place.

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We're sitting here today with a record where no one has been able to come close to hitting that facility-wide 90% rate.

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Your formulation is it's got to be shown that somebody has done this before, and then that raises the question of what's the this?

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And when you say this, you mean 90% facility-wide.

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that it or there's something else in that too.

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What I mean by this, the best system of emission reduction that EPA selected in the rule and what the best system of emission reduction that EPA selected in this rule is facility-wide annual 90 percent and this is not a matter of EPA saying like well you know carbon capture technology exists in the

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everyone admits that.

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But that's not what the statute says.

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The statute is focusing on the system that EPA selected and is that adequately demonstrated.

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The question before the court is not simply, does this technology exist?

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But even then, you would still need to ask, then is the emissions limit that EPA set based on that 90% facility-wide system, is that achievable?

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And that has to be available for the industry

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And you said annual, too.

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So it has to be 90% facility-wide and has to be shown to have been done on an annual basis?

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Yeah, JA99, JA161 to 63.

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What EPA said is this is, quote, annual calendar year basis, unquote.

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But in terms of what you think has to be shown for EPA to be justified in imposing what they've imposed, the criteria are 90% facility-wide and annual.

[00:16:01] Speaker 08:
Yes, because that's the system that they have selected in this rule.

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Isn't that just odd, right?

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Imagine there was a.

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large plant that had done this for 90 percent for a month and EPA also says in our expert judgment we've studied this industry has studied this there's no reason to think it's going to be any different to do it for a year is that impermissible speculation or is that a finding EPA is allowed to make I think that would be impermissible but I think as a practical matter too you know just because of

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taking proposed rulemaking and then the length of time it takes for comments and promulgating a rule.

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I think EPA would know in pretty short order whether that month could be a year and waiting a few more months at that point.

[00:16:44] Speaker 08:
You could ask the same question.

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So if it's demonstrated for a full year but it's at a relatively small test plant because nobody wants to do this voluntarily,

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it seems to me you would make the same argument well you've demonstrated that a 30 gigawatt plant but some of these plants are 240 so you've got it demonstrated at exactly how it's going to be mandated before and that seems to be getting pretty pretty limiting i i don't think so judge rc because for instance take sierra club i mean here in sierra club the court refused to credit epa's evidence appointing to two instances

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That almost met the standard.

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One was a commercial scale plant.

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The other was small pilot unit.

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This is 657 F second 363 and so there it's.

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Even when something is almost meeting a standard, that's not good enough because the statutory text is backward looking.

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It has something been adequately demonstrated.

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And we know from Carr from the Supreme Court using the present perfect tense, what that means is the act has to have been completed.

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And if EPA were to try to come up with some different system, it's entitled to choose that.

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But here, the examples that were given were slipstreams.

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And it said, we're going to mandate much more than partial capture.

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There's a complete mismatch.

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what your argument doesn't turn on the fact that that the evidence would have to be for an entire year does it mean to say that the evidence EPA presented here doesn't show it's been adequately demonstrated doesn't mean that they would have to show continuous carbon capture for an entire year does it I think in my judge route because

[00:18:23] Speaker 06:
The rule they've selected, not only is it measuring on an annual basis, but they've also selected the emissions have to be captured.

[00:18:30] Speaker 03:
I mean, three days is not enough off of a slipstream, but are you really suggesting that if they want to show this level, they would have to do it for an entire year?

[00:18:42] Speaker 03:
That seems perhaps overreaching.

[00:18:45] Speaker 06:
Let me come at it in a different direction.

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Their rule says that emissions have to be captured on a continuous basis.

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So let's assume that they were able to show that on a continuous basis,

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had the pipelines and he had the storage capacity.

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And now we're building in a lot of hypotheticals to get to where they need to go.

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But I do think that record could look different.

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We're nowhere close to that here.

[00:19:07] Speaker 03:
I think that's your point.

[00:19:08] Speaker 05:
Well, I wonder about that.

[00:19:10] Speaker 05:
That's why I asked about this.

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Because it seems to me that the logic of your position is you can't extrapolate.

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The thing that they're trying to do has to have already demonstrated to have been something that can be done.

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And if that's true,

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I mean, I understand the practical point that, well, if you're at six months, of course you can get to a year.

[00:19:30] Speaker 05:
But the logic of the position that you've articulated, it seems to me that what you're saying is you don't extrapolate.

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You don't project.

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You've got to show that you can do the thing you're requiring be done.

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And that would cover all of it.

[00:19:43] Speaker 05:
How do we know where to stop?

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Because then if we're talking about extrapolation of some magnitude,

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then we have an expert agency that is looked into this and kind of do the projections and try to figure out, OK, even though we've only demonstrated that this has been done, whichever of the variables you stop short of the actual mandate can say, well, but we have no reason to think, especially because this is forward-looking and the effective days doesn't kick in for a number of years, and we're looking at net general trends, and there's no dispute.

[00:20:13] Speaker 05:
on the part of anyone that this is going to improve to a point where this can be done.

[00:20:17] Speaker 05:
I take that your logic of your position though is that no, because the thing that's required to be done has to have already been demonstrated to be something that can be done.

[00:20:27] Speaker 06:
This court's precedence on projections

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have really focused in on fairly minor projections.

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And I think what we're talking about in this dialogue is much more than those types of incremental objectives.

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We're not talking about going from an 86% to a 90% pollutant removal rate, like Sierra Club.

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In Lignite, for instance, they said, well, data was unavailable.

[00:20:49] Speaker 06:
Well, here data is available.

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Boundary dam has failed.

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In achieving a facility-wide 90% CCS rate, of course,

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hit certain rates, but that's their best example.

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So I think on a record like that, the projections we're talking about here are not like anything this court's seen in its prior cases.

[00:21:06] Speaker 05:
So projections can be done then.

[00:21:08] Speaker 05:
It's just that it has to be a projection that's within a zone of reasonableness or something, and then you just think this one falls outside it.

[00:21:15] Speaker 05:
That's different than saying that, actually, I think where you were, which is, no, the thing that you mandate has to have been already demonstrated too.

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something that has been done.

[00:21:24] Speaker 06:
So just to be very clear, we have preserved the argument that no projections were allowed under the statutory tax, but we concede that under this court's precedence, certain amounts of projections.

[00:21:34] Speaker 06:
So my arguments today are based on this court's precedence.

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And so some minor level of projection could potentially be allowed.

[00:21:42] Speaker 06:
But I think this comes back to then what does it mean to have a proven track record

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What does it mean for something to already be in place and successful in the industry?

[00:21:49] Speaker 06:
And I think a hypothetical of, well, it's been done for one month at one time.

[00:21:53] Speaker 06:
I'm not sure that's a proven track record.

[00:21:56] Speaker 03:
Mr. Keller, does that in part turn on what the word adequately means?

[00:22:00] Speaker 06:
I do think it does.

[00:22:01] Speaker 06:
And I think adequately means that the demonstration or the giving of clear examples has to be done for a specific purpose.

[00:22:08] Speaker 06:
statutory tax.

[00:22:09] Speaker 06:
What is that purpose?

[00:22:10] Speaker 06:
Well, the purpose is setting the best system of emission reductions that can get emissions limits that are achievable.

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And we know to have achievable emissions limits under this court's precedence, it has to be a system that's available for installation at the time of it has to be representative for the industry as a whole, not cherry picked examples.

[00:22:27] Speaker 06:
And it has to be looking at or it has to be achievable under most adverse conditions to quote National Lime and Sierra Club.

[00:22:37] Speaker 03:
I'm wondering, so the EPA and its rule took a very forward-looking interpretation of has been adequately demonstrated, or at least in a number of places in the rule, it interpreted its authority under has been adequately demonstrated quite broadly and in a forward-looking way.

[00:22:54] Speaker 03:
But here, for this court, they have disavowed that broader interpretation.

[00:23:00] Speaker 03:
So what does that do to petitioners contrary to law challenge?

[00:23:04] Speaker 03:
Are we just left with the arbitrary and capricious challenge?

[00:23:08] Speaker 03:
Is there still a contrary to law challenge that we can reach?

[00:23:12] Speaker 06:
Yes, there is.

[00:23:14] Speaker 06:
Also, I think this kind of gives away the game.

[00:23:16] Speaker 06:
The rule that EPA promulgated engaged in projections over and over again.

[00:23:21] Speaker 06:
Our brief at page 40 collects seven examples.

[00:23:23] Speaker 06:
And if EPA now before this court is going to say, well, we didn't mean to do that, or we didn't do that, or we shouldn't have done that.

[00:23:32] Speaker 06:
I mean, under Chenery, you have to look at what the rule promulgated by the agency in fact did.

[00:23:37] Speaker 06:
But even beyond that, I would submit that while now they've conceded that you have to look at what has been demonstrated now, we clearly still have a legal dispute, a question of statutory interpretation.

[00:23:47] Speaker 06:
We say,

[00:23:48] Speaker 06:
Some power plant out there has to have done facility-wide 90% CCS for this to be adequately demonstrated.

[00:23:54] Speaker 06:
They say no.

[00:23:55] Speaker 06:
That's a matter of statutory interpretation.

[00:23:57] Speaker 06:
That's a contrary to law issue.

[00:23:59] Speaker 06:
That's not just record-based.

[00:24:00] Speaker 06:
We think we went on the record, but I think we also went on the statute.

[00:24:05] Speaker 08:
One last question on the slipstream issue.

[00:24:07] Speaker 08:
One of the other things that I think EPA says is that

[00:24:10] Speaker 08:
sort of contrary to your view that it's fundamentally different from a full exhaust stream, that slipstreams are just commonly used to test new emission control technologies because they allow you to do it on a smaller scale.

[00:24:23] Speaker 08:
Do you have a general dispute with that proposition, or is it just that you don't think that holds in the specific?

[00:24:30] Speaker 06:
I do think it's true as a factual proposition that the CCS examples, the handful of CCS examples that have been attempted to date are definitely slipstreams.

[00:24:40] Speaker 06:
But that's not looking at the most adverse conditions.

[00:24:43] Speaker 08:
I mean, you think about what is a... I think EPA's point is that for CCS, for sulfur dioxide, for all sorts of things,

[00:24:52] Speaker 08:
Plants commonly test technologies on slipstreams to find out if they work.

[00:24:58] Speaker 08:
And then once they work on the slipstream, they can be confident it will work on the full exhaust stream.

[00:25:04] Speaker 06:
Well, but I think it's very different than talking about, say, scrubber, like one physical item that you put on a stack to control emissions compared to something like this, where you are going to have not only

[00:25:19] Speaker 06:
the CCS carbon capture train on a unit.

[00:25:23] Speaker 06:
You're also going to have pipelines and storage facilities.

[00:25:26] Speaker 06:
I know we haven't talked much about that, but this is a key point of the argument that EPA is going way beyond any of the bounds of the other cases on projections and essentially mandating an infrastructure buildup by third parties.

[00:25:38] Speaker 06:
So even if other technologies have been tested on slipstreams and we

[00:25:42] Speaker 06:
agree that carbon capture to date has been on slipstreams.

[00:25:46] Speaker 06:
That's still not looking at the most adverse conditions that would be representative to an industry that's trying to comply with this rule.

[00:25:52] Speaker 06:
I mean, talking to a plan project Tundra or another power plant out there, it's cold comfort to say some version of, well, to date it's been done on slipstreams, but what we're going to mandate you to do on your facility-wide full stream annual basis, do 90% CCS.

[00:26:07] Speaker 06:
That violates the clean air.

[00:26:09] Speaker 05:
Can I just make sure I've got the answer on going from slipstream to full stream?

[00:26:14] Speaker 05:
And the points you made were first, there's a difference between dynamic and fixed.

[00:26:18] Speaker 05:
And I get that one.

[00:26:19] Speaker 05:
And then the second point was that if it were doable in that way, then why hasn't anyone done it?

[00:26:25] Speaker 05:
I've got that one.

[00:26:26] Speaker 05:
And are those the two?

[00:26:27] Speaker 05:
It's an important point.

[00:26:29] Speaker 05:
I just want to make sure we have the full sum of the.

[00:26:31] Speaker 06:
And to be very clear, the last part about

[00:26:34] Speaker 06:
looking at what is representative of the industry and what are the most adverse conditions that EPA would still need to be looking at that analysis, even beyond any type of projection and even beyond the practical point that no one's been able to do this before.

[00:26:50] Speaker 03:
Well, but achievable in Section 7411 is a forward-looking standard, right?

[00:26:55] Speaker 03:
And this rule doesn't take effect today, so EPA has to show that something is achievable in the future.

[00:27:02] Speaker 03:
I mean, there are two different questions about whether something has been adequately demonstrated today.

[00:27:09] Speaker 03:
you know, that technology exists in the world versus whether something is achievable.

[00:27:15] Speaker 03:
And it seems to me that the achievable part of 7411 is tied to when the rule would go into effect.

[00:27:23] Speaker 06:
Jojo, I think that achievable, though, still has to be looking at what is available for installation today, what would be representative of the industry as a whole.

[00:27:33] Speaker 03:
And if the technology were adequately demonstrated today, assuming that,

[00:27:38] Speaker 03:
And if it were adequately demonstrated today, then it seems a different question whether it would be achievable to have widespread industry-wide use under the most adverse conditions, the national line test.

[00:27:52] Speaker 03:
But that is a future inquiry.

[00:27:53] Speaker 03:
That is an inquiry that it does seem can be future looking.

[00:27:58] Speaker 03:
Do petitioners disagree with that?

[00:28:00] Speaker 06:
I think this comes back to in looking at this court's cases on what minor extrapolations and projections are allowed.

[00:28:06] Speaker 06:
The courts never had a case where we're talking about a projection of something eight years into the future.

[00:28:11] Speaker 06:
And I think this gets at the core of this case of why no one's been able to do it.

[00:28:16] Speaker 06:
But to be very clear, the industry has wanted CCS to work.

[00:28:19] Speaker 06:
They've spent two decades and billions of dollars trying to demonstrate this at large scale.

[00:28:23] Speaker 06:
And EPA comes in with a rule and says,

[00:28:26] Speaker 06:
Eight years from now is exactly when you'll all be able to do this.

[00:28:30] Speaker 05:
What is the answer to the question on if the statute says achievable and then it raises the question achievable by when and is your response that when the statute says achievable, it means achievable by now or is it that it means achievable by the effective date?

[00:28:46] Speaker 06:
Our position is achievable by now, but even if you disagree with that, I don't think this is even achievable in 2032 when they say it would come online.

[00:28:55] Speaker 03:
That is a separate question from the question.

[00:28:59] Speaker 04:
If there's no additional questions.

[00:29:02] Speaker 03:
Yeah.

[00:29:03] Speaker 03:
So, so here EPA relies heavily on what it says it's collective judgment, you know, they have different examples, you know, with respect to the arbitrary and capricious challenge and.

[00:29:15] Speaker 03:
Petitioners have a series of arguments about ways in which this rule is unreasonable or doesn't hold up.

[00:29:21] Speaker 03:
And if we agree with petitioners on some of those arguments, but not others, how do we think about the agency's collective judgment in enacting this rule?

[00:29:32] Speaker 03:
So do petitioners have to run the board on these questions in order for the rule to go down?

[00:29:39] Speaker 06:
No, I don't think so.

[00:29:41] Speaker 06:
To take the state farm test of arbitrary and capricious, if EPA has not considered an important part of the problem, that's a basis to vacate the rule.

[00:29:49] Speaker 06:
I mean, here, not studying operational reliability or not modeling operational reliability, I think is a great example of a classic state farm error.

[00:29:56] Speaker 06:
It's not enough to look at just resource generation.

[00:30:01] Speaker 06:
You have to look at, is the power going to be able to be transmitted properly?

[00:30:03] Speaker 06:
That's operational reliability.

[00:30:05] Speaker 06:
If I could point the court to J. A.

[00:30:08] Speaker 06:
3541 to 42.

[00:30:11] Speaker 06:
These are America's powers comments.

[00:30:13] Speaker 06:
They actually submitted a study a quantus study from quantus saying that this is how the type of operational reliability study could have been done and EPA concedes

[00:30:23] Speaker 06:
they just didn't do this.

[00:30:24] Speaker 06:
This is their response wave at 95.

[00:30:26] Speaker 06:
I think that Judge Rao is an example of that's just an error that would completely vacate the whole rule.

[00:30:32] Speaker 06:
We don't have to run the table on all of the other ways in which this rule is arbitrary or precious.

[00:30:40] Speaker 04:
Okay, thank you, Mr. Kelly.

[00:30:41] Speaker 04:
Give me some time for rebuttal.

[00:30:55] Speaker 04:
It's Coleman.

[00:30:56] Speaker 02:
Morning, your honor.

[00:31:00] Speaker 02:
May it please the court, my name is Chloe Coleman on behalf of the United States Environmental Protection Agency.

[00:31:06] Speaker 02:
With me at council's table are my co-counsel, Eric Hofstetler, Howard Hoffman from the EPA Office of General Counsel, and Counsel for Respondent State Interveners, Michael Myers.

[00:31:16] Speaker 02:
I will be addressing EPA's determinations that 90% CCS is adequately demonstrated and that the resulting standard for certain coal and gas plants is achievable.

[00:31:25] Speaker 02:
Mr. Hostetler will be addressing EPA's determinations concerning CCS cost and reliability.

[00:31:31] Speaker 02:
With respect to whether 90% CCS is an adequately demonstrated system of emission reduction, petitioner's challenge comes down to a dispute over the factual evidence and whether the record here is sufficient to support the agency's determination as to 90% CCS.

[00:31:47] Speaker 02:
A review of the record shows that EPA acted reasonably.

[00:31:50] Speaker 02:
It relied on extensive direct and corroborating evidence to draw a conclusion in its expert capacity that this system of emission reduction has been already demonstrated.

[00:32:00] Speaker 03:
Lynn, before you characterize this as just a factual question, what about the fact that EPA here in the rule adopted a very forward-looking understanding of what has been adequately demonstrated means?

[00:32:15] Speaker 03:
I understand that the agency is disavowing that interpretation of the statute now, but if this court were to think that that

[00:32:23] Speaker 03:
you know, atextual and perhaps ungrammatical understanding of has been adequately demonstrated is incorrect.

[00:32:30] Speaker 03:
Does that mean the rule fails?

[00:32:33] Speaker 02:
Well, Your Honor, to be clear, the agency isn't disavowing anything.

[00:32:36] Speaker 02:
What the agency was doing was summarizing.

[00:32:38] Speaker 02:
No, Your Honor, that's what this court's precedent says.

[00:32:41] Speaker 02:
The rule and the many places that my opposing counsel quote this rule are just representative of what this court found

[00:32:51] Speaker 02:
in Sierra Club, in Essex, in Portland Cement, in these other cases.

[00:32:54] Speaker 02:
And EPA accurately reflected- None of those cases.

[00:32:57] Speaker 03:
Where do those cases say that has been adequately demonstrated means it can be demonstrated in the future?

[00:33:03] Speaker 02:
Well, Your Honor, we think those courts left open the possibility that EPA might, in fact, be able to provide an adequate evidentiary demonstration to support a forward-looking projection.

[00:33:14] Speaker 02:
We are not suggesting that that's what happened here.

[00:33:16] Speaker 02:
And so we don't think this court needs to get into those issues.

[00:33:19] Speaker 02:
It's simply not presented.

[00:33:20] Speaker 03:
But if we disagree, I mean, that is the approach, that is the legal interpretation that the agency offered for its rule.

[00:33:27] Speaker 02:
Well, Your Honor, we fall so well within those boundaries that I think it's ultimately not a consideration here whether or not there is a circumstance in which the agency might theoretically be able to justify a more progressive rule.

[00:33:40] Speaker 02:
We just don't think you need to write an opinion that reflects anything about whether this court's previous precedent is in that respect.

[00:33:46] Speaker 03:
You're not answering my question.

[00:33:46] Speaker 03:
My question is, if the agency's legal theory in the rule

[00:33:50] Speaker 03:
is something that we find to be unlawful, then does that just jeopardize the rule altogether?

[00:33:56] Speaker 02:
No, Your Honor, it doesn't.

[00:33:57] Speaker 02:
I mean, we think we win this case.

[00:33:58] Speaker 02:
We think we win this case under petitioners' interpretation, even if something like has been adequately demonstrated.

[00:34:03] Speaker 02:
We don't actually disagree with petitioners about the dictionary definition of those terms.

[00:34:08] Speaker 03:
And the fact that that's not the reasoning that the agency relied on?

[00:34:12] Speaker 02:
We think that is the agency's reasoning here that, you know, the court or rather the agency at several points in the rule explicitly says it's not relying on the outer bounds of its authority.

[00:34:23] Speaker 02:
That's in the rule at 39, 830 and 39, 832, 39, 888, 39, 813.

[00:34:28] Speaker 02:
These are all places.

[00:34:30] Speaker 03:
Lots of places where the EPA and the rule takes a forward looking interpretation of has been adequately done.

[00:34:35] Speaker 02:
Well, Your Honor, as I suggested, I think that's the EPA attempting to encapsulate what it understood this court to have said in the previous cases.

[00:34:42] Speaker 02:
There will certainly be an opportunity, should another case come along where EPA tries to rely on that outer limits, for this court to assess its prior precedents and decide whether those were reasonably decided.

[00:34:51] Speaker 02:
But we don't think that's necessary here.

[00:34:53] Speaker 02:
It's simply the case that 90% CCS is a system that already exists.

[00:34:58] Speaker 02:
It's already doing the thing that we say it needs to do here.

[00:35:01] Speaker 02:
So the question of whether or not EPA could substantiate through sufficient evidence

[00:35:07] Speaker 02:
that some kinds of forward-looking projections can be considered adequately demonstrated, we just don't think it's an issue here.

[00:35:13] Speaker 03:
So you want the court to uphold the rule on a legal theory that the agency didn't rely on?

[00:35:18] Speaker 02:
Well, we want this court to uphold this on sort of being well within the bounds of any potential reading of the statute.

[00:35:25] Speaker 02:
We think any reading of the statute is sufficient to allow us to set this rule, because we have an evidentiary foundation here that is more substantial

[00:35:33] Speaker 02:
than what was decided in Essex or Sierra Club or any of these other cases.

[00:35:37] Speaker 02:
And so even if the interpretation in those particular cases is narrower than what the agency may have tried to paraphrase in its rule, we think we're well within the bounds of those cases.

[00:35:48] Speaker 02:
And that's because CCS here is a system that is already in operation

[00:35:52] Speaker 02:
on large exhaust streams at commercial scale facilities.

[00:35:56] Speaker 02:
We're not talking about the kinds of things that were in Essex and Sierra Club were sort of individual test data points.

[00:36:04] Speaker 02:
They weren't looking at continuous capture of

[00:36:06] Speaker 02:
a pollutant, they weren't looking certainly at annualized performance the way our opposing council has suggested.

[00:36:11] Speaker 02:
And so when we're talking about kind of what the agency did here, we're talking about looking at facilities like Boundary Dam, like Petronova, that operated for years and consistently achieved 90% capture.

[00:36:24] Speaker 02:
Petitioners really only objection here is on the slipstream issue and whether or not 90% capture on sort of a slipstream is the same thing as full exhaust.

[00:36:33] Speaker 02:
That's really, I think, as your honors have identified where this case turns.

[00:36:36] Speaker 02:
And I think it might be helpful to note sort of from the beginning what a slipstream is.

[00:36:39] Speaker 05:
I think they also have a time dimension.

[00:36:41] Speaker 05:
I definitely want to hear the slipstream part of it, obviously, because that's so much at the heart of this.

[00:36:45] Speaker 05:
But I think they also have a time dimension, which is so you can do something for three days and on a smaller stream, that's still not enough.

[00:36:54] Speaker 02:
Well, Your Honor, I don't think this court needs to decide based on the 90% three-day demonstration at Boundary Dam.

[00:37:00] Speaker 02:
We think the annualized performance that's been happening on these slipstreams is more than adequate.

[00:37:05] Speaker 02:
Rather or not, you think that three-day performance would be enough test data.

[00:37:09] Speaker 02:
And that's because a slipstream is fundamentally, you know, when you're thinking about exhaust coming out of a plant, talking about a big duct with air rushing through it.

[00:37:16] Speaker 02:
And some of that air is going to the right and some of that air is being routed to the left.

[00:37:20] Speaker 02:
And fundamentally, that's all a slipstream is.

[00:37:23] Speaker 02:
It's a portion of the exhaust that is being routed towards CCS instead of towards a stack.

[00:37:28] Speaker 02:
It does not have different properties.

[00:37:30] Speaker 02:
It's the same gas.

[00:37:31] Speaker 02:
There's no difference in pressure.

[00:37:32] Speaker 02:
There's no difference in temperature.

[00:37:34] Speaker 02:
It's subject to the same variable flow potentially that the whole stream is.

[00:37:37] Speaker 02:
And that's what EPA found in the record.

[00:37:39] Speaker 02:
It said, we looked at Petronova's slipstream, which is the size of a 240 megawatt equivalent facility that's larger than 41% of the regulated facilities in this rule.

[00:37:50] Speaker 03:
And it said, EPA has not

[00:37:51] Speaker 03:
answered the question.

[00:37:53] Speaker 03:
I mean, the petitioners have raised a number of ways in which a slipstream is fundamentally different.

[00:37:58] Speaker 03:
It operates in a different way and keeps things in a steady state, different from a full stream.

[00:38:03] Speaker 03:
And in response, EPA says, well, some of the slipstreams are very large.

[00:38:08] Speaker 03:
But that doesn't answer the question about whether a slipstream is fundamentally different from a full stream.

[00:38:14] Speaker 02:
Your Honor, I agree that size would not answer that question alone.

[00:38:17] Speaker 02:
However, I would encourage you to look at the citations petitioners actually cite for the suggestion that slipstreams are steady state.

[00:38:24] Speaker 02:
The actual things they cite do not support that proposition.

[00:38:28] Speaker 02:
They are evidence that concerns something called turndowns.

[00:38:31] Speaker 02:
They cite us with respect to turndowns, which is what happens when a coal plant isn't operating at its full capacity.

[00:38:38] Speaker 02:
It might be operating at a lower capacity.

[00:38:40] Speaker 02:
And in fact, EPA's analysis showed that even under turndown conditions, CCS operates just fine.

[00:38:46] Speaker 03:
We agree, Your Honor.

[00:38:51] Speaker 02:
We absolutely agree, which is why it's strange that that's a citation that petitioners were citing for the suggestion that that slipstreams are steady state.

[00:39:00] Speaker 02:
None of the two comments they cite, neither one from EERC or from Chicanowicz, say anything about steady state conditions.

[00:39:06] Speaker 02:
They don't say anything about pressure.

[00:39:08] Speaker 02:
They don't say anything about temperature.

[00:39:09] Speaker 02:
They don't say anything about variability.

[00:39:11] Speaker 02:
The first, EERC, is merely a restatement of a list of slipstream facilities.

[00:39:19] Speaker 02:
Well, Your Honor, we think that's very simple, which is that in the absence of a regulatory signal or an economic signal, there's no reason that these facilities would be investing in full-scale carbon capture.

[00:39:32] Speaker 03:
Even the projects under the Energy Policy Act or Boundary Dam, none of them have shown this.

[00:39:39] Speaker 03:
They can only show 90% rates of carbon capture on slipstreams.

[00:39:44] Speaker 02:
they have only done that that doesn't mean they couldn't do it on a full exhaust and we think okay then how is that at how has that been adequately demonstrated well your honor because i think in the first instance there are two questions and i think judge sort of awesome summarize these one is you know do we have information as to why a plant might not be operating

[00:40:03] Speaker 02:
this on full scale.

[00:40:04] Speaker 02:
We think that's very obvious.

[00:40:05] Speaker 02:
This is an expensive technology, and it's one that you wouldn't build at full scale if you didn't have a reason to do it.

[00:40:11] Speaker 02:
The facilities that are building these systems now and are doing so on slipstreams are doing that because they might have a contract to sell their carbon dioxide to an enhanced oil recovery operation, and they don't need to capture 100% of their CO2 to do that.

[00:40:25] Speaker 02:
Or they might be doing it for purposes of demonstration.

[00:40:27] Speaker 02:
And the reason.

[00:40:28] Speaker 08:
What's the answer about Boundary Dam then?

[00:40:30] Speaker 08:
Because they certainly very much wanted and tried to do this.

[00:40:34] Speaker 08:
And then they couldn't.

[00:40:36] Speaker 08:
But they could do it on a slipstream.

[00:40:38] Speaker 09:
Yes.

[00:40:39] Speaker 08:
So viewed from a practitioner's perspective, that is, maybe we don't know the reason.

[00:40:44] Speaker 08:
But it certainly seems to strongly suggest there is something different and easier about doing this on a slipstream where it worked than on the full exhaust stream where it didn't.

[00:40:53] Speaker 02:
Well, Your Honor, I'm glad you raised that, because I do think we have an answer as to Boundary Dam.

[00:40:58] Speaker 02:
This is a facility, again, that does not have a regulatory or a financial incentive at this point to optimize its facility to 100% capture.

[00:41:06] Speaker 02:
That doesn't mean it doesn't know how.

[00:41:07] Speaker 02:
And we know that it knows how, because these same operators put together the shanned feasibility

[00:41:11] Speaker 02:
for another one of their units that's three times as big, showing exactly what they would do in that facility to solve all of the problems at Boundary Dam.

[00:41:20] Speaker 02:
One of the major problems at Boundary Dam is it's using a kind of sulfur dioxide system, you know, that is upstream of the CO2.

[00:41:27] Speaker 02:
And what we mean by that is first this exhaust goes through PM controls, goes through NOx controls,

[00:41:32] Speaker 02:
It goes through sulfur dioxide controls, and then it gets to the carbon dioxide scrubber.

[00:41:36] Speaker 02:
And it needs those sort of earlier steps in the process to do their job, because otherwise you get gunk, essentially, in the carbon dioxide scrubber.

[00:41:45] Speaker 02:
So what happened at Boundary Dam is that they've run into significant issues with the upstream performance of their other technological systems.

[00:41:52] Speaker 02:
And we have evidence, and that evidence is Petra Nova, that those kinds of problems will not repeat

[00:41:57] Speaker 02:
in the kinds of configurations that are used in the United States.

[00:42:00] Speaker 08:
I appreciate that point.

[00:42:01] Speaker 08:
But if the properties of a slipstream are otherwise all the same, then why didn't Boundary Dam have the exact same problem when it tried to do this on it?

[00:42:09] Speaker 02:
That, Your Honor, is because one of the great values of a slipstream, if you're not in a circumstance where you're under an environmental obligation, is that you can continue to run your plant while you're doing maintenance on your carbon dioxide system.

[00:42:21] Speaker 02:
So in a case like Boundary Dam, there's not a lot of incentive for them to turn off their whole facility, to run at 100%, do all of the optimization, spend all of the money on the potential retrofits to get this up to 100%, and then have to sort of do all of that expense and do all of that maintenance work.

[00:42:39] Speaker 02:
if they don't need to, right?

[00:42:40] Speaker 02:
If you were building a facility with no environmental regulation, you would presumably build a bypass the way Boundary Dam is essentially operating.

[00:42:47] Speaker 02:
And you would do that because that way, if you want to keep operating your plant while you do maintenance on the carbon dioxide system, you can.

[00:42:53] Speaker 02:
Or for example, I think one of the things that's notable at Boundary Dam and worth keeping in mind is there are solutions you may know

[00:43:02] Speaker 02:
that will work, but that you may not spend the money on.

[00:43:04] Speaker 02:
So for example, if the solution to your problem is that you need to do more maintenance more often to resolve the problem of, you know, additional fouling pollutants getting into your carbon dioxide.

[00:43:16] Speaker 02:
carbon dioxide systems.

[00:43:17] Speaker 02:
One of the ways you can solve that is through a redundancy.

[00:43:20] Speaker 02:
So instead of just having one pipeline that connects point A to point B, you build two.

[00:43:25] Speaker 02:
And that way you can take the first example offline while you're running the second one and vice versa.

[00:43:30] Speaker 02:
And that allows you to be doing maintenance without taking the system down.

[00:43:34] Speaker 02:
But you wouldn't spend that money to do that kind of redundancy unless you needed to.

[00:43:39] Speaker 02:
And so in this case, Boundary Dam,

[00:43:41] Speaker 03:
Reasonable, but that's not what the statute says has been adequately demonstrated and all the verbs you use are this will happen this could happen this.

[00:43:51] Speaker 03:
You know they might do this in those are all forward looking understandings of what a plant might do, but that's not the EPA's obligation under the Clean Air Act.

[00:44:01] Speaker 02:
Well, your honor, EPA's obligation is to come up with an evidentiary defense here that asks these questions and has answers for them.

[00:44:07] Speaker 02:
And we think it does.

[00:44:08] Speaker 02:
So in the first instance, Boundary Dam has in fact solved many of these problems.

[00:44:12] Speaker 02:
It's operating with high levels of, you know, it's achieving this 90% consistently.

[00:44:18] Speaker 03:
In the third quarter of 2023, which is the last on record, it was online 98% consistently from the slipstream.

[00:44:24] Speaker 02:
They have chosen to operate on the slipstream.

[00:44:26] Speaker 02:
That's correct.

[00:44:26] Speaker 02:
But let me answer your question, which is, even if you assume that the kinds of solutions at Boundary Dam have not been fully applied, and that's why Boundary Dam is not sort of going ahead with 90% capture on the full stream, we have additional facilities that have done this successfully.

[00:44:41] Speaker 02:
Petra Nova is more than twice as big.

[00:44:43] Speaker 02:
It has a more successful wet FJD scrubber

[00:44:47] Speaker 02:
which is what you use in the United States generally for sulfur controls.

[00:44:50] Speaker 02:
It has not seen the kinds of technical issues.

[00:44:52] Speaker 03:
But Chernobyl is also a slipstream.

[00:44:54] Speaker 03:
It is a slipstream facility.

[00:44:55] Speaker 03:
So 90% of, I think, 37% of the flue gas

[00:45:01] Speaker 03:
That's running on a slipstream again.

[00:45:04] Speaker 02:
Well, your honor, I think these are two distinct questions.

[00:45:06] Speaker 02:
One is, are there technical issues that prevent performance adequate performance of the system?

[00:45:11] Speaker 02:
We think Boundary Dam has run into some of those issues, but we can see in a facility like Petra Nova that those issues don't recur.

[00:45:18] Speaker 02:
Petronova has been very successful at running this technology.

[00:45:21] Speaker 03:
On a slipstream.

[00:45:22] Speaker 02:
On a slipstream.

[00:45:22] Speaker 02:
But again, that's the technical issue.

[00:45:26] Speaker 02:
And then there's the question of, are slipstreams representative?

[00:45:28] Speaker 02:
And do we have a good explanation for why people are not building 100% full exhaust systems?

[00:45:34] Speaker 02:
And we think we have adequate answers to both of those questions.

[00:45:37] Speaker 02:
Because on the one hand, there isn't a regulatory or financial incentive to build a full exhaust stream capture system.

[00:45:44] Speaker 02:
A plant like Petra Nova simply didn't need to do that.

[00:45:46] Speaker 02:
It had no reason to do that.

[00:45:48] Speaker 02:
And we have answers to the questions of whether or not a slipstream is a representative waste stream of the exhaust.

[00:45:56] Speaker 02:
Again, petitioners do not substantiate their suggestion that slipstreams are steady state or that they have different properties.

[00:46:03] Speaker 02:
None of their citations actually use those words.

[00:46:06] Speaker 02:
They don't talk about pressure.

[00:46:08] Speaker 02:
They don't talk about steady state.

[00:46:09] Speaker 03:
burden to show that it has been adequately demonstrated.

[00:46:12] Speaker 03:
So EPA's assertions about that don't necessarily answer the questions that petitioners have raised, I think.

[00:46:19] Speaker 02:
Well, Your Honor, we have we made a finding in this record that Petra Nova's slipstream had the same properties.

[00:46:25] Speaker 02:
as its full exhaust stream.

[00:46:26] Speaker 02:
That's in the record.

[00:46:27] Speaker 02:
And so to the extent petitioners are going to say they disagree with that, they need to be able to present some evidence to the contrary.

[00:46:33] Speaker 02:
And they haven't done that.

[00:46:34] Speaker 02:
Part of the reason that the slipstream is not discussed in greater detail in this record is because it is a fundamentally logical and basic assumption within the industry.

[00:46:44] Speaker 02:
We do demonstration projects on slipstreams because they are representative of the exhaust conditions at a full stream facility.

[00:46:52] Speaker 02:
And so the suggestion that petitioners are making is a fairly counterintuitive one, that the gas that's sort of going to the right instead of going to the left is different in some way.

[00:47:00] Speaker 02:
If they're going to try and substantiate that that's true, we agree we have the burden on adequate demonstration, but we've made the requisite findings on the slipstream.

[00:47:09] Speaker 02:
And if they want to dispute those.

[00:47:10] Speaker 05:
It seems to me like so much turns on this, whether the slipstream is representative enough that you can do a full stream.

[00:47:16] Speaker 05:
It seems like it's sort of,

[00:47:18] Speaker 05:
It would be analogous to saying, all right, we've demonstrated that this happens on a Monday.

[00:47:22] Speaker 05:
And then the EPA says, well, then why wouldn't it happen on Tuesday?

[00:47:25] Speaker 05:
I mean, what's the difference?

[00:47:26] Speaker 05:
It's just a day of the week.

[00:47:27] Speaker 05:
That's a random thing.

[00:47:28] Speaker 05:
But then if somebody comes in and says, oh, well, actually, if you look at commute conditions, they're actually different between Mondays and Tuesdays.

[00:47:34] Speaker 05:
And then it starts to look like, well, actually, the day of the week can kind of matter.

[00:47:38] Speaker 05:
And that's where we are on this, isn't it?

[00:47:40] Speaker 02:
I suppose, Your Honor, but in this circumstance, they said, well, commute conditions are different on a Tuesday.

[00:47:45] Speaker 02:
And we said there's no evidence that that's true.

[00:47:47] Speaker 02:
And they marshaled no evidence to show that it was true.

[00:47:49] Speaker 02:
You know, when we're talking about whether or not this slipstream performance

[00:47:53] Speaker 02:
is the same as full exhaust performance, which again is petitioners only objection in many cases to the record evidence here.

[00:47:59] Speaker 02:
So I agree this is a central issue.

[00:48:01] Speaker 02:
If they're going to say that we are wrong about this, they have to have something to rely on to say we're wrong about this.

[00:48:07] Speaker 02:
And I would encourage you to look at those comments because none of them are making the assertions petitioners say they are.

[00:48:13] Speaker 05:
So from your perspective, EPA has already

[00:48:17] Speaker 05:
Regardless of whether it was anticipatory, you think there's enough in the record right now to show that EPA already thought about the question of whether there's a difference between dynamic and fixed and has made a finding based on its own assessment that there is no difference between those and that the physical conditions of the stream don't vary based on whether it's a slipstream or full stream?

[00:48:39] Speaker 02:
That's correct, Your Honor.

[00:48:40] Speaker 02:
At 39850, we state that the slipstream properties at Petra Nova were identical to its existing

[00:48:46] Speaker 02:
I would also encourage you to look at JA780, which is a diagram from the Shan study, just showing what these ducts look like.

[00:48:55] Speaker 02:
So you can really see they're just sort of branching out from each other, and they essentially have gates that open and close to let air through.

[00:49:01] Speaker 02:
And then EPA did separately consider things like, what happens when you have a variable amount of exhaust coming through the facility?

[00:49:09] Speaker 02:
That analysis is also in the record.

[00:49:11] Speaker 02:
It's at 39853 to 54 for coal plants.

[00:49:14] Speaker 02:
It's at 39,929 for gas plants.

[00:49:17] Speaker 03:
But that variability is not the variability that petitioners have cited to as the difference between full stream and slipstreams.

[00:49:24] Speaker 02:
No, but it is the variability.

[00:49:25] Speaker 02:
It is different.

[00:49:26] Speaker 03:
You can use the same words, but there is a different thing.

[00:49:29] Speaker 02:
No, Your Honor, I agree that it's different.

[00:49:31] Speaker 02:
But it is the kind of variability that their own citations are talking about.

[00:49:35] Speaker 02:
So to the extent that their citations are not supporting that slipstreams.

[00:49:39] Speaker 02:
What about the AEP comments?

[00:49:40] Speaker 03:
you know, that are at JA 3251 about how chemical plants work and how, you know, integrating these things into a plant has not been adequately demonstrated.

[00:49:50] Speaker 03:
What's the EPA's response to those?

[00:49:52] Speaker 02:
We disagree.

[00:49:53] Speaker 02:
We think there is substantial evidence in this record concerning power plants specifically and the kinds of systems are going to be applying here.

[00:49:59] Speaker 03:
And again... Well, you just said there were no comments or no evidence.

[00:50:03] Speaker 03:
I mean, I think that there are comments and evidence

[00:50:05] Speaker 02:
Well, I don't think those pertain to slipstreams specifically.

[00:50:08] Speaker 02:
And there are being differences in the properties, right?

[00:50:10] Speaker 02:
I mean, to the extent that there are allegations in this record that slipstream facilities are not sufficient.

[00:50:15] Speaker 02:
But they don't say why.

[00:50:16] Speaker 02:
And they don't say, we think slipstreams have different properties.

[00:50:19] Speaker 02:
Here's how we know.

[00:50:20] Speaker 02:
And so to the extent that the expert agency, which is due deference, has made determinations on the record with respect to these specific slipstreams at facilities like Petra Nova, at facilities like Boundary Dam,

[00:50:32] Speaker 02:
where in fact that slipstream is often up to 85% of the full exhaust.

[00:50:36] Speaker 02:
So it's really not sort of like a tiny little portion that would be different.

[00:50:39] Speaker 02:
It's the big kahuna.

[00:50:41] Speaker 03:
But it's not the amount.

[00:50:44] Speaker 03:
That's not what petitioners are saying.

[00:50:45] Speaker 03:
They're not saying you can't do it on a big slipstream.

[00:50:48] Speaker 03:
It's not the size of the slipstream.

[00:50:50] Speaker 03:
It's the fact that a slipstream operates in a different manner from the full stream.

[00:50:54] Speaker 02:
And if they had established that it does operate in a different manner, I would agree with you, Your Honor, but they have not.

[00:50:59] Speaker 05:
As I understand it, you're not just talking about the amount.

[00:51:02] Speaker 05:
You're not saying, look at the size of this slipstream.

[00:51:04] Speaker 05:
Even if it was a 10% slipstream, it could be a gargantuan one relative to other things.

[00:51:08] Speaker 05:
You're talking about the ratio.

[00:51:10] Speaker 02:
Yes, but I think to the extent that we're trying to address an important question here, I think it's reasonable to look at, do we have examples that are high percentages?

[00:51:19] Speaker 02:
Do we have examples that are high volumes?

[00:51:21] Speaker 02:
And we have both.

[00:51:22] Speaker 02:
In this case, Petronova is a high volume slipstream.

[00:51:25] Speaker 02:
It is taking an amount of exhaust.

[00:51:27] Speaker 02:
It is successfully running a 90% CCS system.

[00:51:30] Speaker 02:
In fact, it's consistently getting 92.4%.

[00:51:32] Speaker 02:
And it's doing that at a size that is comparable to 41% of the regulated units in this rule.

[00:51:39] Speaker 02:
So we have it in volume, and we have it in percentage, where Boundary Dam is doing up to 85%.

[00:51:44] Speaker 02:
of its exhaust stream, and in some cases has exceeded that.

[00:51:47] Speaker 02:
Once again, Your Honor, I acknowledge that.

[00:51:50] Speaker 02:
But I think if Your Honors are going to sort of look into this question of whether or not there is evidence that a slipstream is the same or different, EPA has determined that it's the same.

[00:51:59] Speaker 02:
Its evidence is in the record.

[00:52:00] Speaker 02:
Petitioners say it's different.

[00:52:02] Speaker 02:
They have no evidence for that proposition.

[00:52:03] Speaker 08:
They cite these two comments.

[00:52:06] Speaker 08:
And you were agreeing with Judge Rao that in some respect, these comments suggest there's more variability

[00:52:14] Speaker 08:
What is the variability?

[00:52:15] Speaker 02:
Sure.

[00:52:16] Speaker 08:
I'm happy to explain.

[00:52:18] Speaker 02:
So the first set of comments, the EERC comments, simply identify a list of facilities that are using slipstreams.

[00:52:25] Speaker 02:
And they sort of conclusorily say, those must not be adequate demonstration here.

[00:52:29] Speaker 02:
They give no explanation.

[00:52:30] Speaker 02:
They give no evidence that that's true.

[00:52:32] Speaker 02:
So we think you can discount that entirely.

[00:52:34] Speaker 02:
What the Chakanowitz comment says, the second one they cite, is essentially that because a slipstream is not, because there's a way to bypass the slipstream,

[00:52:43] Speaker 02:
slipstream systems in and of themselves don't answer the question about reliability.

[00:52:48] Speaker 02:
This is different than the properties of the slipstream.

[00:52:50] Speaker 02:
But the point in that comment is if you can continue to run your coal plant without turning off because you can still go around the CCS system when the CCS system has a problem,

[00:53:03] Speaker 02:
That doesn't necessarily tell you that a full exhaust stream will be able to operate all the time.

[00:53:08] Speaker 02:
That's a separate issue.

[00:53:09] Speaker 02:
It's an issue of availability.

[00:53:10] Speaker 02:
Are these CCS plants operating enough of the time that they can allow these underlying generation units to continue to be available to the grid?

[00:53:18] Speaker 02:
So that's what the Chicanowitz comment is talking about.

[00:53:21] Speaker 02:
It's not a slipstream issue.

[00:53:22] Speaker 08:
Right.

[00:53:23] Speaker 08:
practitioners are saying, in a slipstream, this comment shows that in a slipstream, the variability of the amount of flue gas going through is more controlled.

[00:53:33] Speaker 08:
Your response is, this doesn't say that.

[00:53:34] Speaker 02:
It doesn't say that.

[00:53:35] Speaker 02:
It asks a question which says, we don't know, based on slipstreams alone, whether there would be a reliability problem, because they aren't operating all the time.

[00:53:44] Speaker 02:
These facilities can bypass them.

[00:53:45] Speaker 02:
But EPA separately analyzed availability.

[00:53:48] Speaker 02:
And Petra Nova was available 90% of the time it operated.

[00:53:51] Speaker 02:
That's consistent with other industrial processes.

[00:53:54] Speaker 02:
And I think it's important to note that 10%, when there's an outage at your CCS facility, is not additive to the other kinds of outages.

[00:54:02] Speaker 02:
Essentially, you align your maintenance so that when your sulfur dioxide scrubber needs maintenance, when your underlying generating unit needs maintenance, you do that all at the same time.

[00:54:11] Speaker 02:
So that 10% of the time that CCS needs maintenance is entirely consistent.

[00:54:15] Speaker 02:
with other processes like that, with other scrubbers like the sulfur dioxide system.

[00:54:19] Speaker 03:
How does the math work out?

[00:54:20] Speaker 03:
Even on a slipstream, if we assume that's analogous, is getting 90%, but there's 10% unavailability over the course of a year.

[00:54:29] Speaker 03:
That's only 80%.

[00:54:32] Speaker 02:
Well, no, Your Honor.

[00:54:32] Speaker 02:
So compliance in this circumstance is judged by when the plant is operating.

[00:54:37] Speaker 02:
So you're not dinged for not running your CCS if your plant's not making power.

[00:54:41] Speaker 03:
Ultimately, the- Don't these plants have to achieve 90% emissions reduction annually?

[00:54:47] Speaker 03:
Yes, Your Honor.

[00:54:48] Speaker 03:
How can they do that if 90% is the most that's of carbon capture is available and that's only available 90% of the time?

[00:54:57] Speaker 02:
Because the plant isn't running the other 10% of the time.

[00:54:59] Speaker 02:
Sulfur dioxide scrubbers, which are already on these facilities, also have the same thing.

[00:55:04] Speaker 02:
They are running a 90% capture system.

[00:55:06] Speaker 02:
They are also unavailable part of the year because of maintenance.

[00:55:09] Speaker 02:
But because you just, you know, the generating unit itself needs maintenance.

[00:55:13] Speaker 02:
So when you take the facility offline, which is something these facilities do,

[00:55:17] Speaker 02:
in the normal course, you do your maintenance on your sulfur dioxide scrubber, you do your maintenance on your carbon dioxide scrubber.

[00:55:24] Speaker 05:
And so that 10% of the year is already built into the- So if the plant's only running one out of 365 days, but it achieves 90% on that day, the criteria is satisfied?

[00:55:33] Speaker 02:
Yes.

[00:55:34] Speaker 02:
It would comply with this rule.

[00:55:36] Speaker 02:
That compliance is only measured when the facility is running.

[00:55:38] Speaker 02:
So there is no harm, no foul if your facility is offline for maintenance.

[00:55:46] Speaker 05:
Is it fair to say on the slipstream, full stream question, and what I particularly mean by that is on the question of whether there's a difference in the property, that there's the character of the stuff that's going through differs based on whether it's a slipstream or a full stream.

[00:56:03] Speaker 05:
Is it fair to say that EPA's position is there's nothing in the record that supports that proposition?

[00:56:09] Speaker 05:
That proposition has been asserted.

[00:56:11] Speaker 05:
But there's nothing in the record that actually supports that.

[00:56:14] Speaker 02:
That's correct, Your Honor.

[00:56:15] Speaker 02:
Not only is there nothing in the record to support any distinction between these kinds of streams, there is evidence in the record that these streams are the same and have the same properties.

[00:56:26] Speaker 02:
Your honor, I want to ensure my co-counsel can answer your questions on cost and reliability.

[00:56:31] Speaker 02:
Yes, please.

[00:56:31] Speaker 03:
I have a question about the transport of CO2 and whether these timelines are achievable.

[00:56:37] Speaker 03:
So am I correct that there is no federal scheme for CO2 pipeline permitting, right?

[00:56:43] Speaker 03:
There's no federal statute or federal, like those, the permitting for CO2 pipelines would be state by state.

[00:56:51] Speaker 02:
Your Honor, there is a pipeline and hazardous materials safety administration that deals with a lot of elements of this in particular on the sequestration side, but to the extent that you're asking whether there's sort of a specialized permitting process.

[00:57:04] Speaker 03:
Well, there's no federal, there's no national permitting process for CO2 pipelines.

[00:57:09] Speaker 02:
Your Honor, I admit I am not familiar with all of the details of the permitting system here.

[00:57:14] Speaker 03:
I don't believe that there is one, so I was hoping you could confirm that for me.

[00:57:17] Speaker 02:
No, I think that's correct.

[00:57:19] Speaker 02:
I mean, there are certainly circumstances in which, if you are doing interstate pipelines, there may be additional consideration.

[00:57:24] Speaker 03:
Well, like FERC has over natural gas pipelines, but I'm not aware that FERC has any authority, for instance, over CO2 pipelines, or than any other agency does.

[00:57:31] Speaker 03:
So I mean, these

[00:57:34] Speaker 03:
These timelines for dealing with CO2 pipelines seem very optimistic.

[00:57:43] Speaker 03:
I mean, there are a number of states that have said we're not going to have any CO2 pipelines.

[00:57:50] Speaker 03:
Invariably, some of these CO2 pipelines are going to have to cross state boundaries.

[00:57:54] Speaker 03:
And that's going to require permitting from multiple states.

[00:57:57] Speaker 03:
It's going to probably involve litigation.

[00:57:59] Speaker 03:
state courts and federal courts.

[00:58:01] Speaker 03:
And I'm not sure how EPA has demonstrated that these timelines are achievable for pipeline permitting.

[00:58:09] Speaker 02:
Well, first of all, Your Honor, EPA's analysis here, which used an expert engineering firm, was built on examples of actual pipelines.

[00:58:16] Speaker 02:
And so EPA was looking at carbon dioxide permitting that's already happened on pipelines and asking what was achievable in those circumstances.

[00:58:23] Speaker 02:
And it's also looking at comparable examples.

[00:58:25] Speaker 02:
So in the natural gas context,

[00:58:27] Speaker 02:
Between 2017 and 2021, an average of 1,000 to 2,500 miles of pipeline were built a year.

[00:58:34] Speaker 02:
Under this rule, EPA anticipates that 1,000 miles would be built a year.

[00:58:38] Speaker 02:
So that's well within what the natural gas industry is achieving, even with permitting difficulties or litigation.

[00:58:44] Speaker 02:
So that's the first thing I would say to your honor's question.

[00:58:47] Speaker 02:
The second is that in many respects, EPA's analysis was conservative.

[00:58:51] Speaker 02:
And so what EPA was doing with respect to these pipelines

[00:58:54] Speaker 02:
was asking, is it possible for every single one of these individual units to build their own pipeline directly from the unit to a sequestration source?

[00:59:03] Speaker 02:
And EPA said that was the case.

[00:59:04] Speaker 02:
And that was conservative in two ways.

[00:59:06] Speaker 02:
First, it assumed that every single facility that has not announced a retirement date would in fact be installing CCS.

[00:59:12] Speaker 02:
That ignores the medium-term co-firing category.

[00:59:15] Speaker 02:
Certainly not all facilities are going to end up building CCS.

[00:59:18] Speaker 02:
Some of them are going to be in the medium term category as well.

[00:59:21] Speaker 02:
So this was sort of overestimating in the first instance the number of facilities and therefore the number of pipelines.

[00:59:27] Speaker 02:
It was also conservative in a second respect, which is EPA declined to rely on the anticipated build out of what's called a trunk line network.

[00:59:35] Speaker 02:
So there are already 5,000 miles of CO2 pipeline in the United States.

[00:59:39] Speaker 02:
And some of those include large trunk lines.

[00:59:40] Speaker 02:
So there's a trunk line that goes from Colorado through New Mexico to Texas, for example.

[00:59:44] Speaker 02:
Those are the kinds of large infrastructure heavy projects that might take longer to permit.

[00:59:51] Speaker 02:
But once they exist, it would be very efficient and very easy for these facilities to hook up into them.

[00:59:56] Speaker 02:
Now EPA didn't want to assume that there would have to be a trunk line build out here.

[01:00:00] Speaker 02:
That's why it estimated the 5,000 miles of pipeline that it did.

[01:00:03] Speaker 02:
But other parts of the government are anticipating this kind of large trunk line build out.

[01:00:09] Speaker 02:
So the expectation here is that ultimately compliance.

[01:00:13] Speaker 02:
Which parts of the?

[01:00:14] Speaker 03:
federal government, since I don't think the federal government has any authority over CO2 pipelines.

[01:00:18] Speaker 02:
Well, these are other parts.

[01:00:20] Speaker 02:
So for example, the Pipeline Safety Administration.

[01:00:22] Speaker 03:
But I mean, the permitting and the eminent domain and the litigation all may take place at the state level or multiple state levels if there's no federal system to ensure uniformity or even in systems like natural gas pipeline permitting.

[01:00:40] Speaker 03:
I mean, this court here

[01:00:43] Speaker 03:
Every pipeline is challenged, you know, it takes years of litigation.

[01:00:46] Speaker 03:
And this is a system where there's not even a national solution for those pipelines.

[01:00:51] Speaker 02:
Well, Your Honor, I think, you know, even if we sort of take away the conservatism I was just discussing and assume that we're really going to have 5,000 miles that are built, the timelines here account for five and a half years from start to finish on the pipeline system.

[01:01:04] Speaker 03:
That's less.

[01:01:05] Speaker 03:
Is that really five and a half years though?

[01:01:07] Speaker 03:
Because the SIPs have to be first approved, right?

[01:01:10] Speaker 03:
So doesn't that reduce the amount of time that's left for permitting?

[01:01:14] Speaker 03:
I mean, are people going to be building CO2 pipelines before the SIPs are approved?

[01:01:18] Speaker 02:
They won't begin building.

[01:01:19] Speaker 02:
The expectation is that the first year of the work on the pipelines in terms of feasibility will be done concurrently with the state plan.

[01:01:26] Speaker 02:
The remaining four and a half years will start after the state plans are done in June 2026.

[01:01:30] Speaker 02:
But that still includes a little bit of leeway before we actually get to the compliance deadline.

[01:01:35] Speaker 02:
And in addition, the rule accounts for the kinds of sort of one-off circumstances that might be necessary here if an individual facility runs into a permitting issue.

[01:01:45] Speaker 02:
That's what the one-year compliance timeline extension, for example, can be used for.

[01:01:48] Speaker 02:
So if you have done everything you can to get through this permitting process and through no sort of fault of your own, it's still ongoing.

[01:01:56] Speaker 02:
That's the circumstance in which the states can grant

[01:01:59] Speaker 02:
those kinds of compliance exemptions as well as EPA.

[01:02:02] Speaker 08:
For new sources, can EPA do anything to go beyond one year?

[01:02:07] Speaker 02:
Not beyond one year, Your Honor, but new sources have the flexibility of where they're siting in the first place.

[01:02:12] Speaker 02:
So they can take into account upfront the kind of pipeline challenges they might encounter and where a pipeline is going to be best sited and where they're going to have the easiest access to sequestration.

[01:02:22] Speaker 02:
So in those circumstances, you're more likely to see these facilities

[01:02:25] Speaker 02:
citing close to their sequestration location, so they have potentially a short pipeline, and then just running their electricity back to the grid by transmission.

[01:02:32] Speaker 08:
So in response to Judge Rao's question about the SIPs, my understanding was that your position is construction will start once the SIPs are submitted, but before they're approved by EPA, right?

[01:02:45] Speaker 02:
That's correct, Your Honor.

[01:02:47] Speaker 08:
Why is that a reasonable approach?

[01:02:50] Speaker 08:
What if EPA comes in and requires some major change?

[01:02:55] Speaker 02:
Well, Your Honor, in a circumstance where a state plan reflects the requirements in the rule, there'd be no reason for EPA to deny that plan.

[01:03:03] Speaker 02:
And in a circumstance where, for example, the state has provided a longer time frame based on some exigency, this is a facility that needs more time to build a pipeline, the timeline pressure is the same.

[01:03:17] Speaker 02:
they still need to be working as quickly as possible towards getting towards compliance.

[01:03:21] Speaker 02:
Because even that extended timeline would be the sort of fastest possible timeline they could comply with.

[01:03:26] Speaker 02:
So I don't think there's really a circumstance where someone would be sitting on their hands because they thought they got a state plan extension.

[01:03:32] Speaker 02:
In any circumstance, they're going to be doing this same work moving forward.

[01:03:38] Speaker 02:
If I may, Your Honor, I'd like to conclude with two points before I turn over to my co-counsel here.

[01:03:44] Speaker 02:
First, EPA's technical record-based determinations that 90% CCS is technologically sound and can be installed by 2032 fall squarely within the administrator's discretion under the act and the agency's expertise.

[01:03:56] Speaker 02:
Those determinations were reasonable in their due substantial deference.

[01:04:00] Speaker 02:
Second, notwithstanding the arguments that you're hearing today and that this court has heard in similar cases, this industry actually has an excellent track record of adopting and running the emission controls that EPA has found demonstrated under this act.

[01:04:14] Speaker 02:
With those thoughts in mind and for the reasons in our brief and responding intervenors briefs, the petitions should be denied.

[01:04:20] Speaker 04:
Thank you, counsel.

[01:04:32] Speaker 07:
Good morning.

[01:04:33] Speaker 07:
May it please the court?

[01:04:34] Speaker 07:
Eric Hostetler, also for EPA.

[01:04:36] Speaker 07:
I'm covering two discrete issues pertaining to carbon capture.

[01:04:39] Speaker 07:
First, EPA's assessment of reliability impacts.

[01:04:42] Speaker 07:
Second, EPA's assessment of cost impacts.

[01:04:45] Speaker 07:
Since my friend mentioned reliability, I'll start there.

[01:04:48] Speaker 07:
EPA did properly assess impacts on grid reliability in this rule.

[01:04:57] Speaker 07:
just a couple of initial points.

[01:04:58] Speaker 07:
First, the agency does have considerable experience over decades assessing the effects of its pollution rules on the power sector.

[01:05:06] Speaker 07:
So assessing the impact of these particular standards on reliability

[01:05:10] Speaker 07:
was an exercise of predictive judgment that was well within the agency's expertise.

[01:05:15] Speaker 07:
Second, I did want to flag that petitioners' reliability arguments are in large part just a rehash of their demonstration and achievability arguments.

[01:05:24] Speaker 07:
That is, their arguments lean very heavily on the premise that 90% carbon capture is unachievable and can't be achieved by the deadline.

[01:05:32] Speaker 07:
And therefore, that's why plants will close, which is

[01:05:35] Speaker 07:
why there will be a reliability problem.

[01:05:37] Speaker 07:
So if you credit our demonstration and achievability arguments, their reliability concerns largely fall away.

[01:05:45] Speaker 07:
But to the extent they don't, EPA's judgments are well supported and meet the applicable arbitrary and capricious standard.

[01:05:53] Speaker 03:
Mr. Hasador, so EPA agrees that grid reliability includes both resource adequacy and reliable operation.

[01:06:04] Speaker 03:
Is that correct?

[01:06:05] Speaker 07:
That's correct.

[01:06:05] Speaker 03:
But the EPA didn't really consider reliable operation in this rule.

[01:06:11] Speaker 03:
So is that in itself arbitrary and capricious?

[01:06:14] Speaker 03:
I mean, the agency recognizes what's required for grid reliability, but then didn't study something they said was necessary for grid reliability.

[01:06:25] Speaker 07:
I don't think that's a fully accurate

[01:06:27] Speaker 07:
characterization of what's going on here.

[01:06:29] Speaker 07:
First of all, we agree that operational reliability is a component of grid reliability as is resource adequacy.

[01:06:37] Speaker 07:
But let me explain why EPA focused its modeling on resource adequacy and also explain why these two concepts overlap to a large degree.

[01:06:45] Speaker 07:
So the modeling that focused on resource adequacy was looking at operational reliability concerns to a large degree.

[01:06:53] Speaker 07:
In terms of the concepts we're talking about here,

[01:06:57] Speaker 07:
Resource adequacy is taking a more macro level view, looking at generally whether there are enough generation resources to meet demand.

[01:07:05] Speaker 07:
Operational reliability is looking at a more granular level at whether day-to-day operations of the grid can withstand sudden disturbances.

[01:07:14] Speaker 07:
And here, EPA focused its modeling on resource adequacy in as much as the additional regulation of coal and gas plants most directly affects

[01:07:23] Speaker 07:
the adequacy of resources to meet demand.

[01:07:27] Speaker 07:
The rules don't really affect things like whether transmission lines are being properly maintained.

[01:07:32] Speaker 07:
There are a lot of aspects of operational reliability that this rule has nothing to do with.

[01:07:36] Speaker 07:
That said, the modeling EPA did of resource adequacy does look at a lot of constraints that bear upon operational reliability, including projecting the need for adequate reserve margins,

[01:07:53] Speaker 07:
assessing the seasonal availability of particular types of resources, assessing transmission constraints, assessing the time it takes for sources to ramp up demand.

[01:08:03] Speaker 03:
So you're saying there's some overlap.

[01:08:05] Speaker 03:
But so even assuming that the modeling of the resource adequacy is reasonable, I mean, it doesn't seem that EPA has addressed operational reliability.

[01:08:18] Speaker 07:
We disagree.

[01:08:20] Speaker 07:
First, EPA didn't stop with the model.

[01:08:22] Speaker 07:
It looked at a lot of other evidence and information in the record, including studies that bear on issues of operational reliability.

[01:08:31] Speaker 07:
Those studies showed that even in a world where there were fewer fossil generation resources, fewer coal plants,

[01:08:38] Speaker 07:
operational reliability can be maintained through a number of strategies, what is referred to as a portfolio approach.

[01:08:49] Speaker 07:
So things like improving energy storage, increasing the resilience of the transmission lines or improving their capacity, looking at distributed energy resources.

[01:09:03] Speaker 03:
But has EPA demonstrated that that will be a reliable

[01:09:08] Speaker 03:
that will be a reliable part of grid operation?

[01:09:13] Speaker 07:
Yes, Your Honor.

[01:09:14] Speaker 07:
The only thing the integrated planning model didn't do, because it would be impossible to model with certainty, is to take a granular look specifically at which resources would be available to meet minute-by-minute demand everywhere in the country.

[01:09:30] Speaker 07:
because that kind of granularity would require a ton of guesswork and wouldn't be a particularly useful exercise for purposes of macro level decision-making.

[01:09:38] Speaker 08:
The petitioners say that quanta, some group was able to do something resembling that type of analysis.

[01:09:45] Speaker 08:
Can you just explain your response to that?

[01:09:48] Speaker 07:
Yeah, just to clarify on that quanta study, that study wasn't assessing this particular rule.

[01:09:52] Speaker 07:
It was looking at some earlier year and not this rule.

[01:09:56] Speaker 07:
And it was looking only at one region.

[01:09:58] Speaker 08:
They're saying it's proof of concept and that you could have done the same.

[01:10:01] Speaker 07:
Right.

[01:10:01] Speaker 07:
EPA didn't conduct its own operational study along the lines of the quantum study because it would have been ill-suited to the task at hand.

[01:10:08] Speaker 07:
The IPM model is very well suited to looking at resource adequacy and how the power sector will respond to future demand when the rule is implemented that might cause certain generation resources to go offline.

[01:10:20] Speaker 07:
That kind of macro level analysis is really the best analytical tool EPA could have had.

[01:10:26] Speaker 07:
It's much less useful for macro level decision making to try to model granular location specific operational reliability issues as those sorts of granular issues, as I said, require a lot of speculation about compliance decisions.

[01:10:41] Speaker 07:
And those kind of granular issues also are the kinds of issues that are resolved locally by reliability authorities.

[01:10:47] Speaker 07:
They aren't, you know,

[01:10:48] Speaker 07:
That's not something you solve at a macro level.

[01:10:52] Speaker 07:
So while EPA hypothetically could perhaps have tried to do something like that, the juice would not have been worth the squeeze in terms of the usefulness of the information that could have been obtained.

[01:11:03] Speaker 08:
And you were also making the point that EPA, even if it didn't conduct that kind of study, relied on more generic studies about how a resource mix change can be dealt with.

[01:11:12] Speaker 08:
Do you have record citation for the best places we could look for that?

[01:11:17] Speaker 07:
Yeah, I'm trying to find them here.

[01:11:25] Speaker 07:
I think J5536 to 5537.

[01:11:27] Speaker 07:
J5546, J6019 to 20 are some locations.

[01:11:39] Speaker 03:
There may be more.

[01:11:47] Speaker 03:
It's very strange.

[01:11:51] Speaker 07:
Going back to the IPM model and what that projected, it did include all these operational constraints that are built into the model.

[01:12:02] Speaker 07:
And ultimately, that model projected that there would be sufficient resources to meet capacity demands with this rule implemented.

[01:12:11] Speaker 07:
The model compared the baseline world without this rule to a world with this rule

[01:12:17] Speaker 07:
And the model does project some incremental co plant retirements, but it really those are really incremental and modest in context, this is a we're in a world where.

[01:12:30] Speaker 07:
The power sector is transitioning to cleaner generation.

[01:12:35] Speaker 07:
There are market trends going in that direction.

[01:12:38] Speaker 07:
So the retirements we're talking about here are small in number relative to the number of retirements that are predicted in the baseline.

[01:12:44] Speaker 07:
But importantly, the model projects that those retirements will be fully offset, offset by more gas, by more renewables, by more energy storage capacity.

[01:12:54] Speaker 07:
So bottom line, it does not project any resource efficiency.

[01:13:02] Speaker 08:
Can I ask a question about your cost argument briefly?

[01:13:05] Speaker 08:
Are you taking the position that EPA doesn't even have to consider a cost if it won't be ultimately borne by the sources?

[01:13:17] Speaker 08:
Or are you taking a different position?

[01:13:20] Speaker 07:
I think it's more nuanced than that.

[01:13:23] Speaker 07:
Section 7411 simply directs EPA to consider the cost of achieving such reduction.

[01:13:29] Speaker 07:
And we would say EPA did consider the cost of achieving such reduction.

[01:13:33] Speaker 07:
The issue here, that statutory phrasing doesn't dictate any particular kind of assessment.

[01:13:39] Speaker 07:
It rather leaves EPA with a range of discretion with respect to how it considers costs and how it balances them against benefits.

[01:13:46] Speaker 07:
So we would say the issue here is whether EPA reasonably exercised the discretion that it had in focusing in this rule on the cost to regulate its sources as opposed to

[01:13:58] Speaker 07:
indirect impacts on the public fisc.

[01:14:02] Speaker 07:
And, you know, our opponent's argument obviously centers on the point that EPA took into account the generous Section 45Q tax credits.

[01:14:11] Speaker 07:
So EPA considered those tax credits, and we think they considered them properly.

[01:14:16] Speaker 07:
We don't think EPA was required to prioritize foregone tax revenues over the emission reductions that Section 7411 is intended to achieve.

[01:14:26] Speaker 03:
Can I ask you about that?

[01:14:27] Speaker 03:
So of course the agency has some discretion about

[01:14:32] Speaker 03:
what costs and benefits to think about when assessing the costs of this rule.

[01:14:37] Speaker 03:
But I don't see how the agency has the authority to consider something that is a cost to the American people a benefit, right?

[01:14:47] Speaker 03:
So tax credits are always an expense.

[01:14:50] Speaker 03:
They are a cost.

[01:14:51] Speaker 03:
They are borne by taxpayers as a whole.

[01:14:55] Speaker 03:
So to include that effectively as a benefit of the rule,

[01:14:58] Speaker 03:
when they are a cost to the American people, I don't see where EPA has discretion to do that.

[01:15:04] Speaker 03:
I mean, there's no world of accounting in which a tax credit is not a cost.

[01:15:10] Speaker 07:
With all respect, I don't think it's a fair characterization of EPA's thought process.

[01:15:15] Speaker 07:
EPA, of course, recognizes that tax credits and subsidization of industries impose a burden on the public fisc.

[01:15:25] Speaker 07:
and require that governmental operations be funded elsewhere.

[01:15:28] Speaker 07:
The point is that by enacting tax credits into law, Congress, not EPA, has made a legislative judgment that the benefits of the tax credits in terms of stimulating cleaner practices are worth it in terms of the resulting burdens to taxpayers.

[01:15:44] Speaker 07:
So the EPA was deferring to Congress's legislative judgment here.

[01:15:48] Speaker 07:
It wasn't making its own judgment.

[01:15:50] Speaker 03:
No, it's not making, I mean, of course, Congress has made a judgment to subsidize this technology, but that is still a cost of the rule.

[01:15:58] Speaker 03:
When the rule imposes this technology on the industry, the tax credits, the fact that it is economically feasible is because of the tax credits.

[01:16:09] Speaker 03:
Without the tax credits, this is not economically justified.

[01:16:15] Speaker 07:
We agree that the tax credits were an important part of the puzzle here and that EPA did

[01:16:19] Speaker 07:
consider them.

[01:16:20] Speaker 07:
But we think the most logical understanding of what Congress intended here is that it expected EPA to focus on the costs to regulated sources who are the sources responsible for achieving the emission reduction as opposed to measuring indirect effects on third parties.

[01:16:38] Speaker 07:
And I mean, to help illustrate this, suppose that the taxpayer impacts went in the other direction.

[01:16:45] Speaker 07:
Suppose installing controls actually

[01:16:49] Speaker 07:
resulted in revenues for the treasury.

[01:16:54] Speaker 07:
That might be the case, for example, if a control technology had to be imported and there are tariffs on the import.

[01:17:00] Speaker 07:
So you actually would be raising revenues by requiring a particular control technology.

[01:17:06] Speaker 07:
I think no one would say in that hypothetical scenario that EPA should be thinking about the revenues to the treasury as opposed to focusing on the cost of sources.

[01:17:15] Speaker 07:
So we would say it's always gonna be a context specific

[01:17:19] Speaker 07:
situation, but here there's no reason to think EPA acted inconsistently with Congress's intent.

[01:17:25] Speaker 07:
EPA was mindful of the Inflation Reduction Act, which was, you know, before it, and so it would have been failing to grapple with a meaningful aspect of the situation before it had it not considered the tax credits and Congress's intent in the Inflation Reduction Act.

[01:17:43] Speaker 07:
That act reflects that Congress very much wanted to promote carbon capture

[01:17:48] Speaker 07:
And it would be a very odd understanding to think that Congress expected the EPA to regulate not mindful of those credits.

[01:18:00] Speaker 07:
Indeed, we have legislative histories rejecting petitioners' precise position.

[01:18:03] Speaker 03:
I mean, the act suggests that Congress is seeking to encourage this type of technological development or adoption of technology.

[01:18:15] Speaker 03:
But that doesn't go to the question of how EPA has to think about the costs of the war.

[01:18:22] Speaker 07:
Well, again, there's no reason to believe that Congress both thought it was very important to address climate change threats and yet not want EPA to take that judgment into account, where EPA simultaneously have been tasked by Congress with exercising regulatory authority.

[01:18:42] Speaker 07:
You know, if there's any doubt about this, we have again the plon statement, which is legislative histories.

[01:18:48] Speaker 03:
One member of Congress.

[01:18:50] Speaker 03:
It's not like 1980 or something with the legislative histories.

[01:18:54] Speaker 07:
In the context of an appropriations legislation where there are no committee reports, this is actually the only source of legislative history I'm aware of.

[01:19:02] Speaker 03:
So one member can determine how

[01:19:04] Speaker 03:
how an entire industry is regulated with respect to cost?

[01:19:08] Speaker 07:
I don't think it's binding on the agency.

[01:19:10] Speaker 07:
I just think it reflects that EPA was acting reasonably here.

[01:19:16] Speaker 07:
I'd also say that petitioners are kind of playing both sides of this issue.

[01:19:20] Speaker 07:
Under their view, if they take the initiative to install carbon capture systems and accrue the tax benefits, and that's perfectly fine use of taxpayer resources because they're entitled to the tax benefits,

[01:19:31] Speaker 07:
But they say if we're accruing those very same tax benefits and also complying with an EPA regulation, then taxpayers aren't being treated fairly or, you know, and that's just trying to have your cake and eat it too.

[01:19:45] Speaker 07:
These credits are legislate, Congress has made the legislative judgment that the burdens to taxpayers are worth it.

[01:19:52] Speaker 07:
And EPA wasn't required to second guess that.

[01:19:54] Speaker 03:
Congress didn't impose the technology.

[01:19:57] Speaker 03:
Right.

[01:19:57] Speaker 03:
So Congress create an incentive to use the technology, which is, of course, within Congress's authority to do.

[01:20:04] Speaker 03:
But when EPA imposes a mandate for regulation has to consider the costs of that mandate.

[01:20:11] Speaker 07:
Right.

[01:20:12] Speaker 07:
But this isn't a regulatory landscape where there's only the carrots.

[01:20:17] Speaker 07:
There's also the stick that Congress provided to EPA through the Clean Air Act.

[01:20:21] Speaker 07:
Congress directed EPA to regulate applying the best system of emission reduction.

[01:20:26] Speaker 07:
And we respectfully submit that in this context, it was quite reasonable for EPA to do its cost accounting mindful of those tax credits.

[01:20:40] Speaker 04:
My colleagues don't have additional questions for you.

[01:20:43] Speaker 04:
Thank you, Mr. Hostile.

[01:20:53] Speaker 04:
Taylor, we'll give you the five minutes you asked for for rebuttal.

[01:20:58] Speaker 06:
Very much appreciate that.

[01:20:59] Speaker 06:
Four points and I'll briefly wrap up.

[01:21:01] Speaker 06:
First, I think there's a very straightforward way to resolve this case at this point.

[01:21:07] Speaker 06:
You've heard my friends say, and they also told the Supreme Court during stay briefing that they were not relying on forward-looking projections.

[01:21:14] Speaker 06:
I would urge this court to look at what the rule says.

[01:21:16] Speaker 06:
Our brief at page 40 is collecting sites from J4, 33, 34, 35, 81, 92, and 129 that say the following, that this rule is engaging in the following, projections, predictions, extrapolations, anticipated improvements, and other forward-looking mechanisms.

[01:21:33] Speaker 06:
That's quoting the rule.

[01:21:35] Speaker 06:
At this point,

[01:21:36] Speaker 06:
The court has to review what the agency's rule in fact set in their chennery.

[01:21:41] Speaker 06:
They're saying they're not doing forward-looking projections, but they are.

[01:21:44] Speaker 06:
That alone is a basis to vacate.

[01:21:47] Speaker 06:
On costs, I do think that this is a fundamental error of administrative law and that the court hasn't seen a case quite like this where an agency was coming in saying because there are government subsidies, they could ignore costs.

[01:21:56] Speaker 06:
I mean, I think my friends on the other side supporting EPA here, I'm not sure that they want that rule if the government subsidies are about defense spending or agriculture subsidies or charter schools.

[01:22:06] Speaker 06:
whole host of other issues.

[01:22:08] Speaker 06:
So I would urge the court to take a close look at that issue.

[01:22:10] Speaker 06:
On reliability, commenters were repeatedly begging EPA to look at operational reliability and not just resource adequacy.

[01:22:18] Speaker 06:
You don't have to take our word for it.

[01:22:20] Speaker 06:
The independent system operators, this is JA 1627 to 28.

[01:22:24] Speaker 06:
We're saying there's a big difference between just generating power and the ability to transmit it.

[01:22:30] Speaker 06:
If I can address slipstreams just a little bit more.

[01:22:34] Speaker 06:
First of all,

[01:22:35] Speaker 06:
This is all projection at this point.

[01:22:38] Speaker 06:
And this is way more than the minor projections that this court's cases have allowed.

[01:22:42] Speaker 06:
And so what I'm about to say, we're trying to answer EPA's questions, but it's also not our burden.

[01:22:47] Speaker 06:
And this gets back to something has to have been adequately demonstrated.

[01:22:50] Speaker 06:
But I would also point the court to JA 1354.

[01:22:54] Speaker 06:
This is Mankota's comments.

[01:22:55] Speaker 06:
Mankota is the one that is trying to get the planned Project Tundra off the ground.

[01:23:00] Speaker 06:
And they said, quote, carbon capture efficiency will vary.

[01:23:04] Speaker 06:
when the flue gas stream is at a lower load.

[01:23:18] Speaker 06:
The problem with EPA's analysis is it's not linking reliability of the host process to the CO2 capture technology.

[01:23:24] Speaker 06:
There were comments in the record pointing this out, and not only that, but every single commenter that was saying there's gonna be grid reliability problems, we can't do this, I mean, Project Tundra, the world's largest CCS project, they were telling EPA, we can't comply with this rule.

[01:23:40] Speaker 06:
Slipstream, otherwise, no one has done it before, and there are a whole host of comments saying that it can't be done.

[01:23:47] Speaker 06:
And if I could just briefly now conclude, ultimately, at the end of the day, the industry, we want carbon capture to work.

[01:23:54] Speaker 06:
And Project Hunter is case in point.

[01:23:56] Speaker 06:
I think what EPA has done here is thumb its nose at an industry that is trying its best to get this technology to be able to demonstrate carbon capture levels at large scale.

[01:24:10] Speaker 06:
What happens?

[01:24:11] Speaker 06:
I would pose this question to the court.

[01:24:13] Speaker 06:
What happens in 2032 when EPA's projections

[01:24:17] Speaker 06:
It's way too late to reverse course.

[01:24:19] Speaker 06:
We all want CCS to work, but industry cannot be, this country cannot be stuck if it doesn't work and all of a sudden all coal plants are in violation of this rule.

[01:24:30] Speaker 06:
And the statute that Congress wrote here was written in a way to avoid that exact scenario.

[01:24:37] Speaker 06:
It tells EPA, you have to show that something has been adequately demonstrated.

[01:24:41] Speaker 06:
And when industry has spent two decades and billions of dollars trying to get this technology to demonstrate a large scale, and EPA comes in and says, well, in eight years, you're going to be able to do it.

[01:24:53] Speaker 06:
And they keep repeating this mantra that somehow no one would ever try to do this if there wasn't a government mandate.

[01:24:58] Speaker 06:
That is just completely blind by the record.

[01:25:00] Speaker 06:
the commenter after commenter and project under is case in point, but it's not the only case are saying we're trying to do this EPA.

[01:25:07] Speaker 06:
We do appreciate the tax credits.

[01:25:09] Speaker 06:
That's also very different than a mandate and an industry taking advantage of a tax credit to try to demonstrate this technology to then have EPA come back and say that we're trying to have it both ways.

[01:25:21] Speaker 06:
We're not trying to have it both ways.

[01:25:23] Speaker 06:
We are trying to get better at carbon capture.

[01:25:26] Speaker 06:
We're trying to address that problem, but we're also trying to provide

[01:25:31] Speaker 06:
reliable electricity for the nation.

[01:25:33] Speaker 06:
And if EPA is wrong, there's going to be huge energy deficits with high rates for consumers.

[01:25:38] Speaker 06:
And this is all when artificial intelligence and electric vehicles in this country, great technological developments that we all want are going to increase electricity demand.

[01:25:46] Speaker 06:
And if you don't want to take my word for any of this, I would urge this court to look at the independent sister operators amicus brief.

[01:25:53] Speaker 06:
They're the ones that maintain the grid and they said that this rule quote will drive premature retirements of generation sources that will threaten the reliability of the electric grid unquote EPA has violated the Clean Air Act.

[01:26:05] Speaker 06:
We'd ask that you vacate the rule.

[01:26:08] Speaker 05:
Thank you council.

[01:26:09] Speaker 05:
Thank you to all council on this issue.

[01:26:11] Speaker 05:
This set of issues.

[01:26:14] Speaker 05:
We'll move on to the next set of issues.

[01:26:27] Speaker 05:
Ms.

[01:26:27] Speaker 05:
Wood.

[01:26:28] Speaker 01:
Thank you, Judge Srinivasan.

[01:26:29] Speaker 01:
May it please the court?

[01:26:31] Speaker 01:
I'm Allison Wood on behalf of the petitioners who are challenging EPA's determination that for medium term existing coal plants, 40% co-firing of natural gas is the best system of emission reduction.

[01:26:46] Speaker 01:
I'd like to reserve two minutes of my time, please, for rebuttal.

[01:26:53] Speaker 01:
Like CCS, the 40% co-firing best system of emission reduction that EPA has identified in this role violates both section 7411 of the Clean Air Act and West Virginia versus EPA.

[01:27:11] Speaker 01:
But this BSCR is in a different position than we saw with CCS.

[01:27:17] Speaker 01:
Here, the issue is achievability.

[01:27:20] Speaker 01:
40% co-firing is not achievable as Section 7411 requires because most coal plants do not have access either to any amount of natural gas or to the amount of natural gas that is required to co-fire at this level.

[01:27:38] Speaker 03:
Mr. could you speak to the question of when achievability must be demonstrated?

[01:27:45] Speaker 03:
Because it seems petitioners are focused on the fact that it has to be achievable today, but the rule doesn't take into effect for some years into the future.

[01:27:55] Speaker 03:
Correct.

[01:27:56] Speaker 03:
So do you agree that EPA has to show that it is achievable by the effective date of the rule?

[01:28:04] Speaker 01:
Yes, it has to be achieved.

[01:28:07] Speaker 01:
That is the position of petitioners.

[01:28:10] Speaker 01:
But even if it has to be achievable today, it should be achievable at the time.

[01:28:15] Speaker 01:
And they should be able to show that it is achievable at the time that the rule is promulgated and goes into effect.

[01:28:22] Speaker 03:
Doesn't achievable suggest grammatically something in the, but the rule goes into effect in whatever, 2030.

[01:28:29] Speaker 01:
So the rule is in effect now, Your Honor, the timetable for compliance with it is.

[01:28:36] Speaker 03:
Right.

[01:28:36] Speaker 03:
So why is achievability, right?

[01:28:38] Speaker 03:
Whether the regulated entity can achieve these standards, not, you know, not keyed to when the rule, you know, I mean, yes, it's in effect, but when the requirements are imposed on the regulated entity.

[01:28:51] Speaker 01:
Because we need to be able to ensure that this standard will actually be able to be met by the regulated entity.

[01:29:02] Speaker 01:
Because if they cannot do it on the day that compliance begins, then they're in violation of the Clean Air Act, which is a serious issue.

[01:29:10] Speaker 03:
So each state then does have to show achievability by the time compliance begins, not the date, the rule.

[01:29:17] Speaker 03:
is promulgated.

[01:29:18] Speaker 01:
Right.

[01:29:19] Speaker 01:
And our position is that you have to be able to show that it can be achieved now.

[01:29:23] Speaker 01:
But let me explain further with regard to the 40% co-firing, even if it is supposed to be achievable,

[01:29:35] Speaker 01:
you know, on the date of compliance.

[01:29:38] Speaker 01:
Here, you still have an achievability issue.

[01:29:41] Speaker 01:
And let me give you an example.

[01:29:43] Speaker 05:
I do want to hear your argument about why there's an achievability problem, even if you look forward.

[01:29:49] Speaker 05:
But if you have a state of the world in which there's literally no dispute that it's going to be achievable by the compliance date,

[01:29:57] Speaker 05:
But there's also no dispute that it's not achievable right now.

[01:29:59] Speaker 05:
But even the industry, everybody agrees this is where this is going.

[01:30:03] Speaker 05:
It's as sure as it is that the night's going to follow the day, that by the compliance deadline, it's going to be achievable.

[01:30:10] Speaker 05:
You would still think the position that it's unlawful to impose that.

[01:30:13] Speaker 01:
Look, I think that that's a different situation than what we have here.

[01:30:16] Speaker 01:
The language of the statute is in the present tense.

[01:30:22] Speaker 01:
We talk about that in our briefs.

[01:30:26] Speaker 01:
But if everybody was convinced that it was going to be achievable on the date of compliance, nobody would be challenging that.

[01:30:33] Speaker 01:
And there would be no basis.

[01:30:36] Speaker 05:
That would be unlawful in your view.

[01:30:39] Speaker 01:
it would be ultra various without that.

[01:30:43] Speaker 01:
I, you know, that is a different factual circumstance than what we have here.

[01:30:48] Speaker 01:
And what we have here is a situation where more than half of the plants cannot achieve this standard.

[01:31:02] Speaker 01:
What EPA says in the rule is that the 40% co-firing BSCR, that what is required by that, they say, and this is a quote, it would require only minor changes to the unit's boilers.

[01:31:17] Speaker 01:
So they change the coal plant's boilers.

[01:31:23] Speaker 01:
Compliance date comes.

[01:31:25] Speaker 01:
If you don't have natural gas coming to the plant, you can't achieve it.

[01:31:30] Speaker 01:
And the build out of that type of infrastructure has never been required under section 7411 before.

[01:31:39] Speaker 01:
What we're talking about here is the construction of thousands of miles of natural gas pipeline at a cost of $11.5 billion that is actually the construction of an entirely separate source category that's regulated under a different provision of section 7411.

[01:32:01] Speaker 01:
The difference is that what EPA has always said and its position has always been is that a standard of performance has to be the least common denominator.

[01:32:15] Speaker 01:
This court has said it has to be achievable by the industry as a whole.

[01:32:19] Speaker 01:
And yet, when we look at the rule, what we see is that EPA's data show, taking their numbers here, that more than half

[01:32:30] Speaker 01:
of the existing coal plants don't use gas, either as a fuel or as a startup source.

[01:32:37] Speaker 01:
More than a third are located at a facility that doesn't have any connection to a natural gas pipeline.

[01:32:44] Speaker 01:
And nowhere in the Clean Air Act does it authorize EPH for wire or construction of an

[01:32:50] Speaker 01:
construction of an entirely different source category.

[01:32:54] Speaker 01:
Now what EPA does say here is you know they point to you know an example and they say well you know a lot of times you have to take other steps to be able to achieve the the standard of performance and the example that they give is they talk about

[01:33:12] Speaker 01:
flue gas desulphurization at a plant.

[01:33:16] Speaker 01:
And they talk about the fact that, look, we have required before where facilities may need to, there's going to be waste afterwards.

[01:33:27] Speaker 01:
So they're going to have to come up with methods offsite to treat it, to transport it.

[01:33:32] Speaker 01:
So how is this different?

[01:33:34] Speaker 01:
The difference, and it's a key distinction, is that the ability to meet the emission limit

[01:33:42] Speaker 01:
does not depend on those other items.

[01:33:46] Speaker 01:
So for example, if you took your scrubber waste and you did not dispose of it properly and you let it pile up, and I'm certainly not advocating for this, you would be violating other environmental laws, certainly.

[01:33:59] Speaker 01:
But when you put the scrubber on that plant, it's meeting its standard of performance under the Clean Air Act under 7411.

[01:34:08] Speaker 01:
And here,

[01:34:11] Speaker 01:
That doesn't occur.

[01:34:12] Speaker 01:
That does not occur unless you have constructed the thousands of miles of pipeline to the facility.

[01:34:21] Speaker 01:
And the next issue is that even if EPA could be authorized to construct those thousands of miles of pipeline, which we say they cannot,

[01:34:36] Speaker 01:
The timeline that is being provided here, which requires that construction, that build out to be done five years from today, is impossibly short, and it's based on unrealistic and flawed assumptions.

[01:34:52] Speaker 01:
First, petitioners

[01:34:54] Speaker 01:
argue that EPA has waived its argument with regard to the timeline because it failed to respond in its brief.

[01:35:01] Speaker 01:
There are supplemental briefs on this issue that are lodged with the court.

[01:35:04] Speaker 01:
But regardless, the record shows that EPA's assumption that a pipeline can be permitted and constructed in three years, and they say that will occur from June of 2026 to June of 2029, is arbitrary and capricious.

[01:35:22] Speaker 01:
EPA takes the most sunshine and roses view of at every turn of its consultants report.

[01:35:31] Speaker 01:
So ICF says, yes, that on average, you should be able to do this in three years.

[01:35:37] Speaker 01:
But EPA is ignoring ICF's language where it says that if a plant experiences difficulties, it could take up to five years.

[01:35:45] Speaker 01:
Well, if it does take up to the five years, then you miss your deadline.

[01:35:48] Speaker 01:
You can't, you've missed it by a year and a half.

[01:35:52] Speaker 01:
and you're too late.

[01:35:54] Speaker 01:
And the one-year extension that you may be able to get under this rule is not going to save the day.

[01:36:00] Speaker 01:
It's not enough and it's not guaranteed that a source can get it.

[01:36:04] Speaker 01:
EPA also assumes throughout everything to do with this BSCR that we're looking only at lateral pipelines, which are short ones that connect to an existing pipeline.

[01:36:21] Speaker 01:
These are easier to build.

[01:36:23] Speaker 01:
They're shorter.

[01:36:24] Speaker 01:
They're less controversial to permit.

[01:36:27] Speaker 01:
And EPA failed to assess what would happen if it was not a lateral pipeline.

[01:36:34] Speaker 01:
And even though these laterals do tend to be easier, it's not always the case, as this court is well aware in seeing, you know, cases where pipelines are controversial and are going on for years.

[01:36:47] Speaker 08:
that this requirement also violates West Virginia.

[01:36:52] Speaker 08:
Is that an issue that one of your co counselors going to take on or?

[01:36:57] Speaker 01:
Mr Williams is going to talk about that, but I will just briefly say that here the reason the 40% co firing violates West Virginia is because it explicitly is requiring generation shifting.

[01:37:12] Speaker 01:
It is requiring a coal fired power plant to turn into a hybrid

[01:37:17] Speaker 01:
coal gas plant that burns at least 40% natural gas.

[01:37:22] Speaker 01:
And the Supreme Court said that EPA does not have the authority to decide how much of a switch from coal to natural gas is practically feasible.

[01:37:32] Speaker 01:
That's at 597 US 729.

[01:37:36] Speaker 01:
And yet here, EPA is doing exactly that.

[01:37:39] Speaker 01:
It's saying that the amount that is practically feasible is 40%.

[01:37:42] Speaker 01:
And the Supreme Court also said in that case,

[01:37:47] Speaker 01:
that it doubted that EPA could order a coal plant to become a natural gas one.

[01:37:51] Speaker 01:
Yet again, that is what we're doing here.

[01:37:56] Speaker 04:
Colleagues don't have additional questions at this point.

[01:37:58] Speaker 04:
Thank you, Ms.

[01:37:59] Speaker 04:
Wood.

[01:38:00] Speaker 04:
Here from EPA Council.

[01:38:12] Speaker 04:
Bella.

[01:38:13] Speaker 07:
Your honors EPA appropriately identified 40% co firing is the best system for medium term plants.

[01:38:21] Speaker 07:
There are a number of objections asserted by my friend and I'll try to address each each of them in turn and I'll start with the statutory arguments.

[01:38:29] Speaker 03:
I could first just ask you a question.

[01:38:32] Speaker 03:
see anything in the rule about why EPA chose 40%, right?

[01:38:36] Speaker 03:
And there are places where it acknowledges that the states could impose a higher percentage, right?

[01:38:41] Speaker 03:
Because that would lead to greater emissions reduction.

[01:38:43] Speaker 03:
So, so why 40%?

[01:38:46] Speaker 07:
I think it was trying to come up with a balance that would be cost reasonable.

[01:38:50] Speaker 03:
There were cost constraints here, you know, because the main costs are the facility builds out in the infrastructure.

[01:38:56] Speaker 03:
It's not

[01:38:57] Speaker 03:
It's not the incremental emissions reductions, right?

[01:39:01] Speaker 03:
So why 40%?

[01:39:02] Speaker 03:
Is that just sort of what you think can kind of pass muster under West Virginia VEPA?

[01:39:07] Speaker 03:
I mean, I don't see any explanation for 40% where higher rates would produce more emissions reductions.

[01:39:15] Speaker 07:
I don't know that EPA specifically assessed higher percentages that I can check on that.

[01:39:22] Speaker 07:
The conclusion was reached that 40% was feasible and cost reasonable.

[01:39:28] Speaker 07:
And so that's where the agency landed.

[01:39:29] Speaker 07:
And the more modifications you're doing, the more costs are going to go up.

[01:39:35] Speaker 07:
And so I think there might've been a cost issue.

[01:39:37] Speaker 03:
Aren't the primary modifications, though, the infrastructure modification?

[01:39:41] Speaker 03:
I mean, you know, it's not about 40% or 50%.

[01:39:43] Speaker 03:
It's about the fact that some plants that have no natural gas hookup are now going to have to be partially fired with natural gas.

[01:39:51] Speaker 07:
Right, but the pipelines might need to be bigger in the context of... Does EPA say any of that in its rule?

[01:39:59] Speaker 07:
I'm not quite sure whether there's a specific analysis of higher percentages, a comparison, and I'll check on that.

[01:40:06] Speaker 03:
Just an arbitrary number?

[01:40:09] Speaker 07:
No, it's not arbitrary.

[01:40:10] Speaker 07:
It's a system intended to secure substantial emission reductions, and it will secure substantial emission reductions.

[01:40:17] Speaker 07:
When implemented, it will achieve a 16% reduction in carbon dioxide emissions from each facility, significantly improving their performance.

[01:40:24] Speaker 07:
That's a productive system of emission reduction.

[01:40:30] Speaker 03:
That doesn't say why not 50% or 60% or 70%.

[01:40:35] Speaker 07:
I grant that conceptually, you could go to a higher percentage if the cost metrics and the feasibility metrics worked out.

[01:40:42] Speaker 07:
And so it's not impossible to conceive of that as a system of emission reduction.

[01:40:49] Speaker 07:
With respect to the statutory interpretation issue that was teed up, this kind of fuel switching is a permissible system.

[01:40:58] Speaker 07:
My friend hasn't articulated any coherent construction of section 7411 that would preclude it.

[01:41:05] Speaker 07:
Our opponents have invoked the West Virginia opinion, but that decision only reinforces EPA's authority.

[01:41:12] Speaker 07:
As the Supreme Court noted in the West Virginia case, fuel switching is a traditional at the source measure that causes the regulated plant to operate more cleanly.

[01:41:21] Speaker 07:
And as such, it falls squarely within the heartland of Section 7411's coverage.

[01:41:26] Speaker 07:
And EPA has long considered and applied fuel switching in its Section 7411 rules.

[01:41:32] Speaker 07:
So there's no textual basis to reject it.

[01:41:34] Speaker 07:
Obviously, West Virginia ruled out a grid level system, which was a system intended to require certain plants to operate less.

[01:41:43] Speaker 03:
Mr. Hester, how is this fuel switching in the way that fuel switching has been discussed in the earlier cases, especially for a plant that has no natural gas at all?

[01:41:55] Speaker 03:
I mean, how is that fuel switching?

[01:41:57] Speaker 03:
in the way it's been understood, where it's really more like, you know, you go from leaded gasoline to unleaded gasoline.

[01:42:03] Speaker 03:
Here's a completely different, you know, source of fuel.

[01:42:08] Speaker 07:
Right.

[01:42:08] Speaker 07:
I think it's important to understand that these steam plants require very minor modifications to fuel switch.

[01:42:17] Speaker 07:
When we're talking about a steam plant, and I'll try to simplify this as much as possible, you know, you're basically boiling water to produce steam, to drive a turbine, to generate electricity.

[01:42:27] Speaker 07:
And you can boil the water using different fuels without any major transformation of the plant.

[01:42:33] Speaker 07:
So it's still a steam plant when you switch the fuel.

[01:42:37] Speaker 07:
It still retains all the same fundamental attributes.

[01:42:40] Speaker 07:
This is not like converting a steam plant to a gas-fired combustion turbine, which would be a different kind of plant.

[01:42:45] Speaker 07:
And those are the kinds of plants that are regulated as new sources in this rule.

[01:42:50] Speaker 07:
That would be a much greater degree of modification.

[01:42:54] Speaker 07:
So we're really talking about,

[01:42:55] Speaker 07:
taking a steam plant that's kind of a hybrid plant to begin with and converting it to a steam plant.

[01:43:00] Speaker 03:
Most of them are not hybrid plants though, isn't that right?

[01:43:04] Speaker 07:
Presently, almost half the fleet has the capability of firing some degree of natural gas.

[01:43:10] Speaker 03:
So half does not.

[01:43:12] Speaker 07:
Correct, but then it's an achievability issue.

[01:43:15] Speaker 07:
We submit that it is quite achievable and feasible to construct short lateral pipelines to connect to the mainline interstate gas network and secure the gas.

[01:43:28] Speaker 07:
So we're not asking them to do something that's impossible to do.

[01:43:31] Speaker 07:
It's very achievable and EPA did a thorough analysis of the costs and determined it wouldn't be cost excessive.

[01:43:44] Speaker 05:
I think the question in my mind is that, and this I think will continue in the next argument too, but is that tantamount to generation shifting?

[01:43:54] Speaker 07:
No, I think it's an app to characterize 40% co-firing as generation shifting.

[01:43:59] Speaker 07:
When that term is used, generation shifting, you're really talking about how it was used in the Clean Power Plan, where you're shifting generation from one plant to a different one.

[01:44:09] Speaker 07:
So you're subsidizing your competition.

[01:44:13] Speaker 07:
For example, in the clean power plant, a coal plant would have to be replaced by a gas plant or by a solar plant.

[01:44:19] Speaker 07:
40% co-firing doesn't entail any kind of shifting to another plant.

[01:44:23] Speaker 07:
It entails substituting a minority of fuel from coal to gas within the same plant under control of the same operator.

[01:44:34] Speaker 07:
So the steam plant with minor modifications is continuing to operate much the way it always has, continuing to generate power through spinning a steam turbine

[01:44:43] Speaker 07:
So it's much more appropriately characterized in our view as fuel switching, not generation.

[01:44:47] Speaker 05:
Can I just ask so I can understand the way this works physically?

[01:44:51] Speaker 05:
So suppose the percentage figure were 80% instead of 40%.

[01:44:56] Speaker 05:
Would everything you just said still be true, which is that it's still considered a steam plant rather than a gas plant, even though it's 80% by hypothesis gas at this point, because the way that the technology works is still

[01:45:11] Speaker 05:
the way that a steam plant works as opposed to the way that a gas plant works.

[01:45:16] Speaker 07:
Yeah, I mean, we in our brief characterized this fleet of plants as coal plants for simplicity, but it might have been more appropriate for us to characterize them as steam plants because that's what they are.

[01:45:27] Speaker 07:
And now if you went to a higher percentage, it might be a more difficult case for us on the record because maybe the degree of modifications would be more extensive

[01:45:38] Speaker 07:
But we don't think the outcome.

[01:45:39] Speaker 05:
In terms of whether you call it generation, I'm just thinking conceptually whether you would.

[01:45:42] Speaker 07:
It's not generation switching under any circumstance, but whether the amount of fuel switching is doable.

[01:45:51] Speaker 07:
Doable, right.

[01:45:53] Speaker 07:
And let me address.

[01:45:56] Speaker 03:
Question about that.

[01:45:57] Speaker 03:
So EPA is not able to redefine a facility.

[01:46:02] Speaker 03:
Right?

[01:46:03] Speaker 03:
So at what point does a facility become redefined in EPA's view?

[01:46:09] Speaker 03:
So in the brief, EPA asserts the authority to make changes to aspects of a facility that are either minor or significant.

[01:46:19] Speaker 03:
How is that consistent with the statute?

[01:46:22] Speaker 07:
Well, first of all, there's no prohibition on redefining the source in the statute.

[01:46:29] Speaker 07:
I think you're referring to a policy that EPA has applied in a different program, and petitioners have urged EPA to apply that same policy to this program.

[01:46:38] Speaker 03:
But that program, whatever the best available control technology, that provision of the statute refers back to

[01:46:46] Speaker 03:
7411, which EPA is relying on here.

[01:46:49] Speaker 03:
I mean, the provisions are connected and under the BACT provision, EPA can't redefine a source and that provision links back to 7411.

[01:46:59] Speaker 07:
More importantly, even if you applied that policy, which again is a policy, we're not talking about law here,

[01:47:05] Speaker 07:
That policy, as EPA understands it, wouldn't preclude this kind of co-firing.

[01:47:09] Speaker 07:
That policy doesn't preclude changing some minor aspects of the facility.

[01:47:13] Speaker 07:
It's a policy used by EPA only to rule out very major changes that fundamentally redefine the basic design and purpose of the source.

[01:47:23] Speaker 03:
So perhaps following up on Judge Srinivasan's question, what if it were 90% gas firing?

[01:47:28] Speaker 03:
Would that be redefining the facility?

[01:47:31] Speaker 07:
I think it would.

[01:47:32] Speaker 03:
Is there some limit on the ability of EPA to change one facility to another?

[01:47:38] Speaker 07:
Well, I think one way of looking at this is to focus on footnote three in the West Virginia opinion, which is DICTA.

[01:47:45] Speaker 07:
We do think the Supreme Court left this issue open for another day.

[01:47:48] Speaker 07:
But the concern the Supreme Court expressed in that footnote in DICTA is that if you went to a high percentage of fuel substitution, maybe you'd be causing the existing plant to cease to exist.

[01:48:01] Speaker 07:
And we would say it's a record specific inquiry whether a particular degree of fuel substitution is causing a plant to cease to exist.

[01:48:09] Speaker 07:
So the correct way for the court to approach that issue, when and if it's presented, would be to look at, you know, what degree of modification is this system doing?

[01:48:18] Speaker 07:
And are you effectively causing the existing plant to disappear?

[01:48:22] Speaker 07:
So, for example, to take one extreme,

[01:48:24] Speaker 07:
You know, suppose you were taking a coal plant and requiring it to become a nuclear plant.

[01:48:28] Speaker 07:
You'd have to tear the entire thing down and start from scratch.

[01:48:31] Speaker 07:
Now that probably would be impermissible because you are causing the existing steam plant to cease to exist.

[01:48:38] Speaker 07:
On the other end of the spectrum, suppose, you know, the plant's already configured to burn multiple types of fuel and you're just telling it, well, you know, they don't have to do anything.

[01:48:47] Speaker 07:
They don't have to spend a dime.

[01:48:48] Speaker 07:
They just switch out the, swap the fuel.

[01:48:51] Speaker 07:
In that circumstance, we say it's totally fine to go to 100% fuel substitution.

[01:48:55] Speaker 07:
You're just switching the fuel.

[01:48:57] Speaker 07:
So it's a record-specific inquiry in our view.

[01:48:59] Speaker 03:
And then what about the 40-some percent of plants that don't have a natural gas hookup currently?

[01:49:05] Speaker 07:
Right.

[01:49:06] Speaker 07:
And so we say this is a record issue as to whether it's feasible for them to get to 40% and do that hookup.

[01:49:14] Speaker 07:
And we think it is.

[01:49:15] Speaker 07:
We're talking about relatively short lateral pipelines to connect to the existing

[01:49:19] Speaker 07:
pipeline network cost reasonable.

[01:49:24] Speaker 07:
And I'm happy to get into these.