Debate rages on what ruling means for power plant curbs

Source: Jean Chemnick, E&E reporter • Posted: Tuesday, June 24, 2014

The Supreme Court ruling that limited some of U.S. EPA’s permitting program for greenhouse gases raised a big question: What does it mean for hot-button proposals for curbing heat-trapping emissions from power plants?

The decision handed down by a divided high court barely touched on the use of the Clean Air Act’s Section 111(d), which EPA is using to regulate carbon from power plants. Written by Justice Antonin Scalia, the opinion specified in a footnote that it doesn’t decide whether the provision EPA has used for its new and existing power plant rules is “ill suited to accommodating greenhouse gases.”

Environmental attorneys pointed to that statement as a vindication of EPA’s two power plant proposals that form the heart of President Obama’s Climate Action Plan.

“There is a reaffirmation of the use of the Clean Air Act to address large sources of air pollution,” said Megan Ceronsky, an attorney with the Environmental Defense Fund. She said the court’s decision on Utility Air Regulatory Group v. EPA focused solely on the number of small sources that would have been brought under regulation by rules that began to be phased in by EPA in 2011.

The court said the agency improperly required stationary sources to obtain Prevention of Significant Deterioration, or PSD, permits if they qualified for the program only because of greenhouse gas emissions and also struck down the “tailoring rule,” which limited the PSD rule to very large emitters of CO2 (see related story).

But Ceronsky said the decision didn’t hint that the courts might not defer to EPA in the future when it comes to industry challenges regarding the best system of emissions reduction for carbon dioxide — such as the carbon capture and storage (CCS) requirement for new coal-fired power plants or its “beyond the fence line” approach to existing power plants.

“The decision very clearly responds to the extension of the permitting program to the very number of small sources; that is what the court is objecting to,” she said.

But others who track the issue say the decision might include important indicators that EPA might not be afforded the deference it counted on from the courts — especially where the existing power plant rule proposal is concerned.

The decision also included language that appears to apply to the proposal released earlier this month for existing units under Section 111(d) of the Clean Air Act.

Scalia noted that EPA guidance on the PSD permitting requirements “lends some credence to petitioners’ fears” that EPA may be preparing a sweeping regulation that could affect all aspects of the power system. The proposal relies heavily on energy efficiency and other measures to “be the ‘foundation’ of greenhouse-gas” regulation, the opinion noted.

But the court pointed to “important limitations” on the Clean Air Act’s definition of best available control technology (BACT) “that may work to mitigate petitioners’ concerns about ‘unbounded’ regulatory authority. “For one, BACT is based on ‘control technology’ for the applicant’s ‘proposed facility,’ therefore, it has long been held that BACT cannot be used to order a fundamental redesign of the facility,” it said. “For another, EPA has long interpreted BACT as required only for pollutants that the source itself emits.”

Thomas Lorenzen, a partner with Dorsey & Whitney and former assistant chief of the Justice Department’s environment division, said this language appears to strike at the June 2 proposal for existing units currently undergoing public comment.

“You can perhaps only do those things that you can apply to a unit,” he said. “And maybe you can’t do any of the more creative things that EPA is proposing.”

The 111(d) proposal relies on measures from greater renewable energy integration to demand-side efficiency to draw down emissions from today’s units. The approach has been billed as an overreach by industry lawyers, who have cautioned that they will challenge in court any rule that requires changes to the power grid.

Roger Martella of Sidley Austin LLC said “there’s good and bad news for EPA in the decision for regarding its [power plant] rules.”

“EPA will probably be relieved to see footnote 5, where Justice Scalia indicates the decision is not intended to address EPA’s authority under [Section 111],” he said. “At the same time, other language might send a bit of a chill up EPA’s spine, particularly language that says EPA lacks the authority to use ‘a long-extant statute an unheralded power to regulate a significant portion of the American economy.'”

Peter Glaser, a lawyer who represents industry clients at Troutman Sanders LLP, said the decision is good news from the industry’s perspective.

“First, by overturning the tailoring rule, it shows that the court will not sanction EPA’s creative interpretations of the [Clean Air Act] to make the statute say what EPA wishes it would say,” he said.

“Second, even more important, the court made a number of observations as to the limited nature of a [greenhouse gas] BACT analysis that sound very much like the type of inside-the-fence [rule] analysis that industry thinks EPA should have limited itself to in the 111(d) proposal,” he said.