How Quickly Can President Trump Unwind Environmental Regulations?

President Elect Trump has vowed to unwind regulations which he believes are dramatically constraining economic growth.  The Obama Administration's environmental regulations are specifically being targeted, including:  the Clean Power Plan, the Waters of the U.S. Rule and ozone regulations. His transition web-page even touts that for every one new regulation enacted his Administration will remove two old regulations.  

Billionaire investor Carl Ichan was given the position of Special Adviser on Regulatory Issues.  As reported on CNBC, Mr. Ichan said this about government regulation when his new position was announced:

"Under President Obama, America's business owners have been crippled by over $1 trillion in new regulations....It's time to break free of excessive regulation and let our entrepreneurs do what they do best: create jobs and support communities."

But just how quickly can the Trump Administration unwind environmental regulations?  What tools does the Administration have at its disposal to reduce or eliminate environmental regulation?

Federal Rulemaking Process

The rulemaking procedures for federal agencies, including U.S. EPA, are governed by the Administrative Procedures Act (APA).  While the APA imposes a formal process for adoption of new rules that naturally slows the pace of federal rulemaking, it also imposes restrictions on the ability to either remove existing regulations as well as stop regulations once they are in process.

The APA (5 U.S.C. Section 553) requires a four step rulemaking process:

  1. Issue a notice of proposed rulemaking;
  2. Receiving comments on the proposed rule;
  3. Issue a final rule; and
  4. Setting an effective date at least 30 days after publication of the final rule n the Federal Register.

Once a rule has completed this four step process, it becomes much more difficult to remove or prevent the rule from going into effect.  Below are some of the administrative, legislative and legal strategies the Trump Administration may employ to reduce and/or eliminate environmental regulation.

Executive Order to Stop Regulations in Process

On the first day of office, President Trump can have a memorandum issued directing all federal agencies, including the U.S. EPA, to freeze current rule making efforts.  Similar memorandums were issued on the first day by Bush and the Obama Administrations.  But the APA has limits on the authority to derail current rulemaking efforts.

A similar memorandum was issued on January 20, 2001, by Andrew Card, President Bush's Chief of Staff.  See, 66 Fed. Reg. 7702 (Jan. 24, 2001) The memo directed executive agencies to withdraw rules not yet published and to postpone the effective dates of public regulations. However, prior Court precedent forced agencies to go through proper APA procedures prior to withdrawing or delaying rules. 

In Natural Resources Defense Council, Inc. v. EPA, 683 F.3d 752 (3d Cir. 1982) the Court specifically addressed whether indefinite postponement of an EPA rule would violate the APA.  At issue was an EPA rule that had completed the four-step APA process with an effective date.  An Executive Order was issued to suspend the effective date of certain rules to reconsider the costs and benefits of the new rule.  The Court held that such a postponement was tantamount to rulemaking itself and the four step APA process would need to be completed to delay the effective date of the rule.

A GAO study showed that the Card memorandum resulted in the delay of the effective date of 90 rules and 15 rules still had not gone effective after one year from the date of issuance of the memorandum.  See, U.S. General Accounting Office, GAO-02-370R, Feb. 15, 2002.

While the Trump Administration can delay rules in process, past precedent shows that executive authority to stop a rule in process is does have constraints.

Slow the Pace of New EPA Regulations

The Trump Administration can also direct U.S. EPA to be cautious in adopting any new regulations. Certainly the new Administration can reduce the number of newly adopted regulations.  A similar action was taken by President Reagan through his Executive Order 12291.  The Order enacted on February 17, 1981, required all agencies perform a "Regulatory Impact Analysis" to determine if the "potential benefits to society for the regulation outweigh the potential costs to society" and the rule with the "least net cost to society" shall be enacted.

President Reagan order did reduce the number of new regulations adopted during his Presidency. However, such an Executive Order cannot prevent all new rulemaking, in particular with regard to U.S. EPA that is statutorily required to adopt certain regulations.

In fact, environmental groups often sue U.S. EPA to force adoption of new regulations.  Such suits were common during the Bush Administration.  Environmental statutes, such as the Clean Air Act and Clean Water Act, contain citizen suit provisions that authorize third parties to compel an agency to perform a mandatory act under those statutes.  See, Clean Air Act, 42 U.S.C. Section 7604(a)(2) and Clean Water Act, 33 U.S.C. Section 1365(a)(2).

However, litigation takes time.  Even if Courts agree and order the U.S. EPA to adopt statutorily mandated regulations, the Trump Administration will have the power to slow pace of newly adopted EPA regulations.

Legislative Options

The Congressional Review Act (CRA- 5 U.S.C. Section 801-808) requires federal agencies to submit rules to Congress for review.  Under the CRA, Congress has the ability to revoke rules through a special joint resolution during the 60 day period following the rules submission to Congress.

While the CRA could be used to revoke rules enacted at the end of the Obama Administration, the process to adopt a special joint resolution is required for each rule to be rescinded.  Therefore, the process is time consuming.  

As discussed in Forbes, another option is to pass legislation such as the RED Tap Act (S. 1944), which would require elimination of one rule for every new rule enacted.  

Current Litigation Involving Obama Administration EPA Rules

Challenges to two of the Obama Administration's signature environmental rules- the Clean Power Plan and the Waters of U.S..- are still pending in the Courts.  The Trump Administration could simply not put on a strong defense to rules currently being challenged.  If the Court invalidates a rule, then the Trump Administration could simply choose not to enact the rule.

Authority to Repeal Existing EPA Regulations

While the ability to delay or revoke rules in process is important, what authority does the Administration have to revoke rules that are currently in place.  Previous Administrations have learned, typically through the courts, that Presidential powers to revoke existing rules is limited.  An existing regulation can only be amended or repealed if the four step APA rulemaking process is followed.  Furthermore, the APA requires the Administration to not act "arbitrary" or "capricious" in revoking or amending a rule.  In other words, the Agency must justify its change in position.  See, FCC V. Fox Television Stations, Inc., 556 U.S. 502 (2009).

A good example of the limits on the ability to revoke prior enacted rules is the Tongass National forest exemption to the U.S. Department of Agriculture's "Roadless Rule" which limited road construction and timber harvesting in national forests.  The Roadless Rule was promulgated under President Clinton.  President Bush created an exemption to the rule that was challenged in Court as arbitrary and capricious under the APA.  After years' of litigation, the Ninth Circuit Court of Appeal overturned the exemption stating the Agency provided insufficient justification for its change in policy.  See, Organized Village of Kake v. USDA, 795 F.3d 956 (9th Cir. 2015)

Conclusion

Clearly, the Trump Administration can slow down the regulatory rulemaking process.  It can also choose not to defend rules currently being challenged in the Courts.  However, under the APA, the Administration cannot simply revoke existing rules without sufficient technical and legal justification.  

First 100 Days- Repeal of the Clean Water Rule and Clean Power Plan

In a major upset, Donald Trump wins the Presidency last night.  In less than twenty-four hours after the official concession by Secretary Clinton, people are scrambling to figure out what a Trump Presidency really means.  Because he was purposefully silent on specifics during the General Election, many are left this morning "reading the tea leaves" to figure out what the future might hold. It is no different when it comes to the future of the EPA and environmental regulations.

Clearly, President-Elect Trump intends to reduce environmental regulation.  Just how far he plans on going has yet to be seen.  However, two of the most significant EPA regulatory actions under the Obama Administration are clearly on the chopping block-  the Clean Water Rule and Clean Power Plan.

What repeal of the Clean Water Rule will mean?

The Clean Water Rule was the Obama Administration's attempt to extend the reach of federal jurisdiction under the Clean Water Act to most waters and wetlands.  To understand the reason for the Clean Water Rule it is important to review the long history that led to is promulgation by EPA.

The CWA limits jurisdiction to "navigable waters" which is defined as "waters of the United States, including the territorial seas." 33 U.S.C. Section 1361(7)  Interpretation of the vague term- "waters of the United States"- has been left largely to guidance and the Courts. The most significant decisions were issued by the Supreme Court in Rapanos and SWANCC. Justice Kennedy, plurality decision in Rapanos held that CWA jurisdiction extended to both navigable waters and any non-navigable water that had a "significant nexus" to a navigable waterway.  

As applied, the "significant nexus" test extends jurisdiction to small tributaries and wetlands separated from large rivers or water bodies.  Under the test, these smaller streams or wetlands fall under federal jurisdiction if impacts to the stream or wetland would affect the "chemical, physical, and the biological integrity of a navigable water."

EPA issued the Clean Water Rule in attempt to better define how the significant nexus test should be applied as well as establish which waterways were exempt from coverage.  The rule was harshly criticized as an overreach by EPA. Soon after its release, the rule was challenged by a number of states and business groups.  The Sixth Circuit Court issued a stay blocking implementation of the rule until the case could be heard.  

There is little doubt the a Trump Administration will repeal the Clean Water Rule as a significant overreach of federal jurisdiction under the Clean Water Act.  However, unless the rule is replaced with a new definition of "waters of the U.S." businesses and individuals will have no regulatory certainty.  Repeal of the rule will mean continuation of the status quo of vague guidance and litigation in the Courts over the extent of federal jurisdiction.  

What will be fascinating to see is whether a Trump Administration is simply satisfied with repeal of the Clean Water Rule or whether the Administration attempts to provide much needed regulatory certainty. One approach would be to limit federal jurisdiction under a new rule and rely on the states to determine which smaller streams or more isolated wetlands should be protected strictly under state law.  Ohio provides a good example of how this regulatory structure could work as it was one of the few states that passed a law protecting isolated wetlands after the Supreme Court decision in Rapanos.

Revoking the Clean Power Plan

It is also clear that the Obama Administration most significant regulatory action- promulgation of the Clean Power Plan- will be undone within the first 100 days of the Trump Presidency.  Years of technical and legal work by EPA went into development of the rule.  However, the rule was based on very tenuous legal grounds.  

After repeal, unlike the Clean Water Rule, there is virtually no chance the EPA under President Trump will replace the Clean Power Plan.  Furthermore, there is a very good chance additional climate change regulatory actions by EPA will be eliminated.  

However, despite those who forecast the end of all climate change related regulation, the Clean Air Act will still exist.  The Supreme Court has already decided that greenhouse gases are a "pollutant" under the Clean Air Act.  What this means is a likely a return the the Bush-era on climate change litigation- Blue States and environmental groups using the Courts to push for regulation or blocking attempts to repeal enacted regulations.  Litigation means less certainty for businesses, however, less regulation is a certainty as well.

Justice Scalia's Passing Has Major Implications for the Clean Power Plan

With the surprising and sad news over the weekend of Justice Scalia's passing, many critical decisions before the Supreme Court suddenly got more interesting. This is certainly the case with the Clean Power Plan. 

Last Week, in the first time in history the Court issued a stay of the effectiveness of the rule while the rule was still under challenge in the lower D.C. Circuit Court of Appeals.  This was a highly unusual move both because the D.C. Circuit denied to grant the stay and because the Court never had taken the step previously.  Many speculated that the Supreme Court's decision signaled the likelihood that the Clean Power Plan would not survive the legal challenge.

The stay was issued in a 5-4 decision along ideological lines.  It seemed likely that the Court's ultimate decision as to the legality of the rule would be issued along similar ideological lines.

With Justice Scalia's passing, the Supreme Court is now split down the middle, with four liberal justices and four conservative justices. 

What this ultimately means for the Clean Power Plan is somewhat uncertain, depending on the timing of the appeal.  First, it appears unlikely the Court will revisit the stay that was issued last week.  This comment appeared in the Atlantic Monthly:

"There is currently no reason to assume the Court will revisit the stay order," said Richard Lazarus an environmental-law professor at Harvard, "It is final as voted by the full Court at the time and is not subject to revisiting any more than any other rule by the Court before the Justice's passing."

Second, it appears more than likely that the case will be heard by the Supreme Court before a justice can be appointed to replace Justice Scalia.  Based upon the political rhetoric that has ensued since news broke regarding Justice Scalia's passing, it appears highly unlikely that the Senate will confirm a new appointee by President Obama.  Also, based on current timing, with a decision expected this fall by the D.C. Circuit and a decision next spring by the Supreme Court, it also appears very unlikely the new President will have a replacement Justice confirmed before the Court issues its decision.

I had commented in my previous post on the Supreme Court's decision to issue the stay that the D.C. Circuit's decision on the merits regarding the legality of the rule was merely advisory. This comment was based on the assumption the Supreme Court would hear any challenge an render the ultimate decision on the legality.

Assuming no new justice is appointed before the Supreme Court hears the challenge to the Clean Power Plan, the D.C. Circuit Court's decision would likely decide the fate of the ambitious Clean Power Plan. Assuming no new Supreme Court Justice is appointed, and assuming the Court does vote on the legality of the plan along ideological lines, this could mean the Court would be deadlocked in a 4-4 tie.  If this were to occur, the D.C. Circuit Court decision on the merits would likely be the law of the land.  

The current panel at the D.C. Circuit seems to favor upholding the Clean Power Plan.  The case will be decided by a three judge panel.  Justices Judith Rogers (a Clinton appointee) and Karen Henderson (a George H.W. Bush appointee) have been inclined to vote in favor of EPA's efforts to regulate greenhouse gases in prior Court decisions.  The third Judge- Sri Srinivasan is an Obama Appointee.

With developments over the weekend, it appears the most significant piece of environmental regulation in decades may have new life.

Supreme Court Deals Major Blow to EPA's Ambitious Clean Power Plan

Yesterday, the Supreme Court issued a stay of the Obama Administration's Clean Power Plan (CPP) after the lower Court had denied to grant such relief.  Currently, the legal challenge to the validity of the rule is pending before the D.C. Circuit Court of Appeals.  The Supreme Court had never previously issued a stay of a rule in which the legal challenge was pending before the D.C. Circuit.

In a surprising move, the Supreme Court made the stay effective all the way until the Supreme Court weighs in on the legality of the rule. This makes the D.C. Circuit case little more than a preview of the arguments since the rule cannot be implemented until the Supreme Court renders its decision.

The stay was sought by 29 different states and state agencies, as well as various business groups. The decision to grant the stay was made in a 5-4 decision along ideological lines.  

Those seeking a stay must demonstrate that there would be irreparable harm if they were forced to comply while the legal challenges were pending.  The states seeking the stay argued that, despite the fact the most significant compliance deadlines were a couple years away, they were spending significant resources now trying to determine how to comply with the rule.

All deadlines imposed by the rule are on hold until the Supreme Court rules on the plan's legality. The first deadline was September 6, 2016, when States were required to either submit their implementation plans or request a two-year extension.  

The Clean Power Plan is an ambitious effort to change the fundamental aspects the energy sector in the United States.  It requires power plans to reduce carbon emissions by 32% from 2005 levels by 2030.  The States are called upon to enact individual plans for how they will achieve the required reductions.  Under the rule, State must submit their plans (referred to as State Implementation Plans or SIPs) by 2018 and start achieving reductions by 2022.  

Not only does the stay prevent implementation of the rule until two appeals are concluded (one before the D.C. Circuit and a second before the Supreme Court), it also signals that a majority of the justices question the legality of the rule. Those challenging the legality of the rule must demonstrate that they have a substantial likelihood of success in proving the rule is illegal.  

The crux of the CPP is based upon EPA's authority under Section 111 of the Clean Air Act.  At issue is whether that provision only provides EPA with authority to regulate technology at the powerplants themselves (i.e. within the "fence line") or whether EPA can set emissions standards across the entire energy sector thereby changing the mix of production to natural gas and renewables. Despite the fact the Court issued the stay order without an explanation as to its findings, its decision to issue the stay signals the Supreme Court may agree EPA has exceeded its authority.  
 

Highlights from 2015 ABA SEER Spring Meeting

The Clean Power Plan and Waters of the U.S. Rule have dominated much of the discussion at the ABA's Spring Meeting of the Section of the Environment, Energy and Resources (SEER) in Chicago.  SEER is a gathering of nations prominent environmental and energy attorneys from both the private sector and government.

Waters of the U.S. Rule (WOTUS)

The WOTUS rule defines the jurisdiction of the Clean Water Act.  WOTUS was issued after the Supreme Court suggested in the Rapanos decision that the regulated community would benefit from a rule.  EPA released the rule earlier this summer.  As previously discussed in a prior post, the Sixth Circuit has issued a stay of the EPA's WOTUS rule after numerous lawsuits have been filed.  

Steven Neugeboren, Associate General Counsel, Water Law Office, U.S. EPA, discussed the Agency's development of the rule.  He emphasized that the Administrator's directive in developing WOTUS was to "follow the science."   He opined that part of the reason for all of the litigation and controversy surrounding the rule is based upon "speculation" and "fear" fostered by some in the regulated community regarding the scope of the rule.  

As an example, Mr. Neugeboren cited to public comments on the draft of the rule that argued EPA was trying to regulate puddles.  EPA responded by putting specifically in the final rule that puddles are exempt form regulation.  In response, he indicated some commented that the inclusion of the exemption was an indication EPA planned to regulate puddles all along.

Comments on the private bar during the conference have centered on the broad scope of the rule. EPA's approach in the rule was described as extending regulation to virtually every waterway and relying upon narrow exemptions to carve out instances EPA deems regulations unnecessary.  Due to the broad and vague language used in WOTUS there is tremendous uncertainty as exactly what is covered under the rule.

Are Wetland/Stream JD's Appeallable?  The Supreme Court Will Decide

As a first step in wetland/stream permitting, many developers and property owners will hire a consultant to perform a wetland and/or stream delineation on the property. The delineation is the consultant's opinion as to whether federally protected wetlands or streams exist on the property. The delineation will also determine the size and quality of the water resources on the property. However, the consultant's delineation is not a legal determination. Only the Army Corps of Engineers (ACOE) can determine if wetland or streams are federally protected. Therefore, although not required, many property owners/developers submit their wetland delineations to the ACOE for concurrence. This is called a "Jurisdictional Determination" or JD. See, 33 CFR 320.1(a)6)

The Eighth Circuit Court of Appeals determined that an approved jurisdictional determination (JD) is a final agency action that can be challenged. See, Hawkes Co., Inc. et al v. Corps, Case No. 13-3067 (April 10, 2015).  The Court determined that if a JD is not appeallable a property owner is left with the Hobson choice of risking enforcement or acquiescing to the ACOE permitting process.

At the conference, a panel discussed the likelihood the the Hawkes case would be heard by the U.S. Supreme Court.  Because there has been a split in the circuits, the panelists all believed the case would likely be heard.  

Panelist Ray Ludwiszewski, attorney at Gibson, Dunn & Crutcher, offered his opinion that while the case would be heard, he believed the Court would determine a JD is not appeallable because JDs are voluntary.  He distinguished JDs to the enforcement order that was issued by EPA in the Sackett case which compelled the property owner to comply.  

Professor Richard Lazarus, Harvard, agreed that the voluntary nature of JDs may be a key factor in how the Court would rule, but he said the Court may rule JDs are appeallable because the Court, in prior decisions like Sackett, showed its "anger" over the EPA's application of the 404 wetland/stream permitting and the "heavy handed nature of government regulation" in this area.

Clean Power Plan

Not surprisingly, EPA strongly defended the legality of the rule at the conference while attorneys from the private sector questioned its legal foundation.  The biggest open issue regarding the legality of the Clean Power Plan was the scope of Section 111(D) of the Clean Air Act.   Conference participants agreed the key issue is whether EPA's authority Section 111(D) is limited to the "fence line" at a power plant or provides much broader authority to regulate the mix of energy (coal, natural gas and renewables) across the country.

Another issue discussed was the uncertainty caused by litigation  The States must file their plans to comply (referred to as a "State Implementation Plan" or "SIP") by September 2016.  The rule allows incentives to State's to file SIPs.  For example, states can get more time to develop their plans and cannot participate in a emission trading plan if they don't submit a compliance plan. Despite the incentives, states that strongly oppose the rule may elect to not file a compliance plan.  

Art Harrington, attorney from Godfrey & Kahn, discussed the uncertainty the rule is causing in his State of Wisconsin.  The implementation time lines and requirements, especially with the cloud of litigation, is causing tremendous uncertainty in the regulated community.  

Monica Trauzzi, reporter for E&ETV/E&E Publishing, commented that in her discussions with Governors and State agency air directors, the states are having conversations around development of compliance plans.   Conversations are occurring even in states strongly opposed to the plan because the utility industry has been putting pressure on states due to the uncertainty associated with failing to comply with the plan.

 

WKSU Radio Interview Regarding Clean Power Plan

I was fortunate enough to be asked to participate in a radio interview with Jeff St. Clair, WKSU Radio, regarding the Clean Power Plan.  It was an interesting discussion of the legal questions surrounding the plan as well as a broader discussion of the state of environmental regulation in the United States.

Here is an excerpt from the story:

Energy policy through the courts, instead of Congress
“The courts are not the ideal place to be sorting out your environmental policy or your energy policies,” says Koncelik.

Koncelik has the admittedly utopian view that Congress should decide these environmental issues. But he acknowledges that in today’s dysfunctional political system a reasonable compromise from happening.

“So,” he says, “the EPA is forced to act and when they act they do things that are questionable and vague because you’re dealing with laws that are outdated and technology that is radically different than the 80’s.”

“That’s what we’re left with as a country,” says Koncelik, “and until we have real compromise and real discussion, what we’re going to end-up with is regulatory uncertainty which is not good for the economy.”

Congress Fails to Pass Significant Environmental Legislation in Twenty Five Years

One of the points we discussed in the interview is that Congress has not passed new environmental legislation nor significantly amended an existing statute since the 1990 amendments to the Clean Air Act.   Despite Congressional failure to act, EPA has moved forward with thousands of pages of new regulations.  

EPA's new regulations are based upon authority granted to it by Congress.  However, those regulations often rely on vague terminology or ambiguity in underlying environmental statutes. What results is constant litigation regarding the extent of EPA's authority or legality of the new regulations.

For example, I am certain that in 1990, Congress never envisioned that the Clean Air Act would be used as the basis to address climate change.  The Clean Air Act principally deals with local or regional air pollution issues, not a complex international issue like climate change.  Remember, even EPA said that the Clean Air Act was "ill suited" to address the issue of climate change prior to embarking on its massive new regulations.

Most recently, the Obama Administration decided to move forward with its Clean Power Plan to address climate change relying upon questionable EPA legal authority under the Clean Air Act. As a result, the are multiple legal challenges pending to this very significant new rule.

Due to the inability of Congress to enact significant changes to existing environmental laws or pass new ones, EPA fills the void.  EPA constantly develops new regulations which are almost always challenged in the Courts.  This results in uncertainty for businesses and, at best, inconsistent environmental policy in the U.S. 

Clean Power Plan- An Ambitious Plan with Serious Legal Issues

On August 3rd, the Obama Administration and U.S. EPA released the much-anticipated final Clean Power Plan designed to curtail greenhouse gas emissions to combat climate change.  The regulations promise to be the most comprehensive, complex and costly regulatory program ever launched without specific authorization from Congress.   

How the Plan Works

The final plan calls for a 32% reduction in the amount of 2005-level carbon emissions that existing power plants must eliminate by 2030.  How does EPA achieve the reductions?

Performance Rates

EPA establishes both interim and final CO2 emission performance rates for two subcategories of fossil fuel-fire electric generating units (EGUs):

  • Fossil fuel-fired electric steam generating units (coal and oil-fired power plants); and
  • Natural gas-fired combined cycle generating units

Interim performance rates must be met between 2022 and 2029.  The final emission rate by 2030.

The EPA reviewed prior determinations made under Section 111(d) regarding "best system of emissions reduction" (BSER) that has been demonstrated for a particular pollutant and a particular group of sources by looking at technologies already being used.  

Statewide Goals

The rates were established geographically by applying three different strategies to existing fossil fuel power plants. Those building blocks include the following:

  1. Operate Existing Coal Fired Power Plants More Efficiently- reducing carbon intensity of electricity generation by improving the heat rate of existing coal-fired power plants.
  2. Switch from Coal to Natural Gas-  substituting increased electricity generation from lower-emitting existing natural gas plants for reduced generation from higher-emitting coal fired power plants.
  3. Switch from Coal to Renewable Energy- substituting increased electricity generation from new zero-emitting renewable sources (like wind and solar) for reduced generation from existing coal-fired power plants.

By applying the building blocks to the existing plants, EPA determined the average coal plant can reduce emissions in from 2,160 pounds of CO2 per MWh down to 1,305 pounds/MWh by 2030.  Natural gas combined-cycle plants can go from 894 lbs/MWh to 771 lbs/MWh by 2030.  

The emissions rates are then used to establish state wide goals based upon the mix of existing coal and natural gas power plants in the state.  

States can also elect to use a rate-based goal or a mass-based target.  With mass-based targets, the states will have a total amount of CO2 emissions in 2012 and a final goal for 2030.  In otherwords, total metric tons of CO2 emission will be calculated for the 2030 versus individual plant average emission rates.

What are some the pro's and con's of rate-based versus mass-based?  EPA believes mass-based will be slightly cheaper to comply with and will allow for emission trading.  Whereas, rate-based allow overall emissions to increase with economic growth (i.e. all power plants must average a certain carbon intensity).

State Complaince Plans

State can elect from a variety of strategies to meet these goals.  Examples of strategies include:

  • Develop renewable energy sources
  • Switch to natural gas from coal-fired power plants
  • Build nuclear or increase production from nuclear
  • Energy efficiency programs
  • Emission trading (i.e. cap-and-trade programs)

Important Changes from Draft to Final Rules

Emission reductions are phased in between 2022 and 2030.  This was in response to criticism by states that the original plan demanded reductions too quickly.

As discussed below, EPA dropped energy efficiency out of concern it weakened the legal authority for the plan. 

The final plan shows more favor toward renewable energy sources to the detriment of natural gas. The final rule calls for 28% (instead of 22%) of all power generate to come from renewable energy sources.

The final rules gave an extension to states to submit compliance plans, from 2016 to 2018.  Also, compliance periods were pushed out from 2020 to 2022.

Legal Basis for the Rules

Fifteen states, including Ohio, have pledged to challenge the legal authority for the Clean Power Plan in Court.  Nine other states have pledged to defend it.  

EPA asserts that it has broad authority under Section 111(d) of the Clean Air Act - New Source Performance Standards (NSPS)- to craft the rules.  At issue is the definition of the term "standard of performance" as used in Section 111.  Does that term apply to the plant itself or can EPA use it to set standards for each state in terms of emissions from its power sector?

Opponents argue the EPA authority under Section 111(d) is limited to requiring certain technologies be installed at the plant itself.  Opponents argue that fuel switching, renewables and a trading program are all well beyond its authority.  If the opponents are successful in their challenge, the fundamental building block of the Clean Power Plan will be eliminated.

The final rule removed one of the strategies proposed for meeting reduction goals- energy efficiency. Many commentators speculate that EPA removed this component from the plan because it was the least legally defensible under Section 111(d) authority.

Another challenge to EPA's authority will be that Section 111(d) only applies to new sources.  The Clean Air Act Section 112 provides EPA the authority to regulate existing power plants.  Section 112 covers regulation of hazardous air pollutants (HAPs) from existing power plants.

EPA argues there is ambiguity between Section 111(d) and Section 112.  Therefore, where the Clean Air Act contains ambiguity, the Agency argues it entitled to deference so long as it articulates a "reasonable interpretation" of the provision.  See, Chevron USA Inc. v. Natural Resource Defense Counsel.

Chevron was the at issue in the recent MATS decision discussed in my prior post.  In that instance, the Supreme Court held that EPA went way beyond a "reasonable interpretation" of its authority.  However, in other instances, such as the Cross-State Air Pollution Rule, the Court found the EPA did articulate a "reasonable interpretation."  Therefore, it is hard to review the prior Supreme Court cases and discern definitive guidance as to whether the Court would uphold the Clean Power Plan.

The Supreme Court has shown a willingness to support EPA's effort address climate change.  First, the Court upheld EPA determination that greenhouse gases were pollutants regulated under the Clean Air Act in Massachusetts v. EPA. Second, it upheld the major components of EPA initial greenhouse gas regulations in its Tailoring Rule- UARG v. EPA.  While the Court upheld major components of EPA's authority to address climate change, the Clean Power Plan is the most ambitious effort to date.

Making matters more difficult to predict how the Supreme Court may rule is the lack of case law interpreting EPA's authority under Section 111(d).