It’s déjà vu in arguments as EPA foes challenge another rule

Source: Amanda Reilly, E&E reporter • Posted: Friday, October 21, 2016

The lawsuit over U.S. EPA’s carbon rule for new power plants features similar battle lines, many of the same attorneys and the same federal court as the litigation over the Clean Power Plan.

And opening briefs filed last week in the case show that challengers intend to make the Clean Power Plan a part of their legal arguments, too. Foes cited the Clean Power Plan, which aims to reduce carbon dioxide emissions from existing power plants, more than a half dozen times to boost their arguments against the rule for new power plants.

Industry and state foes pointed to the Clean Power Plan to show that they had legal standing to sue and that EPA had not adequately demonstrated it can rely on carbon capture and storage to reduce emissions from new power plants.

“In the Clean Power Plan, EPA stated that CCS was experimental and heavily subsidized when it rejected a best system of emission reduction that included CCS,” industry petitioners wrote in their court brief last week.

Court decisions in each case could have an impact on the fate of the other.

The two rules are inextricably linked under the Clean Air Act: EPA cannot require existing power plants to meet carbon dioxide limits under Section 111(d) of the law, as it has done in the Clean Power Plan, without requiring new or modified plants to meet limits under Section 111(b).

If the U.S. Court of Appeals for the District of Columbia Circuit — and then the Supreme Court — toss out the new source rule, legal experts agree it could spell trouble for the Clean Power Plan.

Whether that goes the other way — meaning, will the court’s decision on the Clean Power Plan have an impact on the new source rule — is less clear. But legal experts this week said the Clean Power Plan litigation, which the D.C. Circuit will decide first, could play a role in the eventual decision on the legality of the new source rule.

“Because these are both under the same provision and they both involve EPA’s efforts to review the particular source category and make judgments about what is feasible and cost-effective and what is happening in the industry, the question could arise: How much deference does EPA get?” said Sean Donahue, an attorney representing environmentalists in both cases.

The chances for the new source rule “would certainly be much better” if the court upholds the Clean Power Plan, Donahue said.

EPA issued both final rules at the same time in August 2015.

EPA’s New Source Performance Standards require both new and modified fossil-fuel-fired power plants to meet carbon dioxide limits. The standards for new coal plants cannot be met by efficiency improvements alone, meaning operators will have to capture carbon and sequester it in deep saline formations.

The Clean Power Plan, on the other hand, requires states to develop and put in place plans to lower carbon dioxide emissions from existing power plants. In February, the Supreme Court stayed the rule until litigation is resolved.

Together, the Clean Power Plan and the new source rule are “two parts of one overall effort by the agency essentially to codify the direction the power sector is going,” said James Rubin, a partner at law firm Dorsey & Whitney.

Last month, 10 judges on the D.C. Circuit heard nearly seven hours of oral arguments in the litigation over the Clean Power Plan rule (Greenwire, Sept. 27). Arguments haven’t yet been scheduled in the litigation over the new source rule; last Thursday, challengers filed their opening briefs in the D.C. Circuit (Greenwire, Oct. 14).

In both cases, challengers say EPA doesn’t have the authority under Clean Air Act Section 111 to do what it’s doing.

“Like the Power Plan Rule, which has been separately challenged before this Court, this rule far exceeds the agency’s authority,” a group of 23 state petitioners, led by West Virginia, wrote in an opening brief. “Congress has not granted EPA the power to choose winners and losers in the energy marketplace.”

Both cases challenge EPA’s interpretation of the phrase “best system of emission reduction” in the law.

“I think what really connects both cases is that … EPA really just overreached here and went way beyond what the statute allows, and that really is the fundamental argument,” said Jeff Holmstead, a partner at Bracewell who represents industry clients.

But the lawsuits contain key differences in their details. In the new source rule suit, foes are challenging whether carbon capture and storage has been adequately demonstrated as an emission-reduction technique. The key challenge in the Clean Power Plan case focuses on whether EPA can rely on generation shifting to force emission reductions.

While there are differences, the links between the two rules came into play in the opening briefs filed by state and industry challengers last week in the new source rule litigation.

Both states and industry opponents argued they have standing to challenge the new source rule because it’s a legal prerequisite for the Clean Power Plan, which they say causes harm in the form of high costs and untenable requirements. Opponents argued the court could redress their injury by getting rid of the new source rule.

States and industry also are using the Clean Power Plan to boost their arguments that EPA illegally relied on small-scale carbon capture pilot programs and facilities that have received federal funding to show that CCS is a feasible way for new power plants to reduce emissions.

State opponents pointed to language in the Clean Power Plan in which EPA says a system consists of “an assemblage or combination of things or parts forming a complex or unitary whole.” EPA has not shown that its entire system of emission reduction in the new source rule is adequately demonstrated, the states said.

“By purporting to show merely that components of a system are technically feasible without proving that they can be successfully integrated in a full-scale commercial plant,” the 23 states said in their brief, “EPA impermissibly relies on ‘”crystal-ball” inquiry’ to attempt to demonstrate its system.”

States also try to use EPA’s own words against the agency, citing an argument that an attorney representing the agency recently made in front of the D.C. Circuit.

“As counsel for EPA recently conceded to this Court, sitting en banc to hear challenges to the Power Plan Rule, ‘the statute directly requires that any system of emission reduction be adequately demonstrated,'” the states said.

EPA’s response to the arguments is due in December. The agency did not comment on the opening briefs.

“EPA is going to be saying here are all these examples of people looking at CCS or pointing to the fact that nobody’s building any coal anymore,” Rubin said.

Rubin said the makeup of the three-judge panel of the D.C. Circuit that hears the new source rule litigation and where those judges fall in the Clean Power Plan decision may signal how they’ll view EPA’s authority when it comes to deciding the new source rule case.

“If the court were inclined to think that EPA was acting in excess of authority” in the Clean Power Plan, he said, “and the same judges who were in the majority are in the panel for the 111(b) rule, that might show some inclination toward where they think the limits on authority might be.”

In any event, “the court will certainly be more educated on these issues by the time they hear 111(b),” he said.

The bigger impact could be on the Clean Power Plan if the courts strike down all or part of the new source rule.

If EPA loses the case, “then at a minimum it puts on hold — and may take down completely — the Clean Power Plan,” Holmstead said. “It’s puzzling they did this given their view that no new coal-fired power plants are being built. Why did they take on all this legal risk if no one’s building new coal-fired power plants anywhere?”

EPA and environmentalists will likely argue that if the court finds the requirement for carbon capture and storage is illegal but it upholds the rule’s other requirements for modified power plants, that’s enough to satisfy the prerequisite for the Clean Power Plan.

Donahue, the attorney for environmentalists, called all the litigation part of a “familiar pattern” of aggressive attacks on anything EPA does to regulate greenhouse gas emissions.

“It seems that the arguments are constructed,” he said, “so that it would be extremely difficult for any rule that requires some effort to control greenhouse gases would survive.”