Lawyers gird for fight against EPA’s Clean Power Plan based on states’ rights 

Source: Emily Holden and Rod Kuckro, E&E reporters • Posted: Sunday, December 14, 2014

One thing is certain: There will be no shortage of legal arguments from states and businesses against U.S. EPA’s Clean Power Plan to curb greenhouse gas emissions from the power sector.

If the regulation eventually reaches the Supreme Court, opponents will have to coalesce around a few choice arguments, limited by word restrictions for legal briefs. For now, they’ve made numerous legal criticisms they might need for court proceedings down the line.

But one challenge is likely to be the crux of a final court decision if earlier arguments don’t hold: that EPA doesn’t have authority under the Clean Air Act to tell states to regulate beyond the power plant fence line. If upheld, that could invalidate the entire proposal by making it impossible to reach the level of greenhouse gas reductions the Obama administration has proposed.

“They could never get to the target,” said Allison Wood, a partner with Hunton & Williams. “It would require a recalculation of the goal. They’d have to start again.”

On one side of the dispute, supporters say EPA carefully constructed the rule with a strong legal foundation, taking into consideration years of precedents affirming the agency’s right to regulate greenhouse gases. They say the standards for cutting emissions, or building blocks suggested by EPA, are based on proven methods that the energy industry itself has pursued around the country.

On the other side, critics say the scope of the rule is unprecedented and the federal agency is violating states’ rights by issuing goals that can’t be met without employing “beyond-the-source” methods, like renewable power and energy efficiency programs. They say EPA doesn’t have jurisdiction to compel states to comply with the required cuts because it would have to base them on programs that are explicitly the business of state governments.

Liberal legal icon and Harvard Law School professor Laurence Tribe — writing for coal company Peabody Energy Corp. — has even lodged constitutional complaints, citing the 10th Amendment, which divides federal and state powers (GreenWire, Dec. 8).

Depending on whom you ask, the fights are just business as usual or they are a critical opportunity for the justice system to signal to EPA how far it can regulate in the absence of congressional action on climate issues.

“Any major environmental rule these days gets challenged,” said Richard Revesz, dean emeritus at the New York University School of Law. “It’s basically the way this game is played, and it’s going to happen this time, as well. But that doesn’t mean that this rule is particularly problematic or that the agency didn’t understand the law or the Justice Department was asleep.”

Defending the rule

Revesz has criticized Tribe for leaning on his scholarly reputation to provide arguments for Peabody as a paid legal expert. He says he’s confident EPA is on “very sound legal footing,” relying on regulatory history going back 25 years that has been supported by presidents of both parties.

That’s where EPA’s defense stands, too.

“History has shown us that EPA writes solid rules and they stand up in court — courts have reaffirmed our science and reasoning time and time again,” said Liz Purchia, EPA press secretary. “The Supreme Court made clear in 2007, and recently reaffirmed, that EPA has obligation to limit carbon pollution because it’s a harm to human health. Bottom line is that we wouldn’t propose a rule that we didn’t believe was legally sound.”

EPA says the Clean Air Act’s Section 111(d) tells the agency to figure out the “best system of emission reduction (BSER) … adequately demonstrated,” Purchia said. “In this proposal, we explain how we made that determination and lay out numeric state goals based on the application of that system. Each state will get to decide how they want to plan for and achieve that goal.”

The Environmental Defense Fund has focused its legal efforts on defending EPA’s justification for the BSER, saying the Clean Air Act allows a system-based approach for cutting emissions and that it’s also the best way to reach targets through “locally appropriate and innovative solutions.”

“This system of emission reduction mirrors what is happening on the ground,” said a recent article in Environmental Law Reporter co-written by Megan Ceronsky, EDF director of regulatory policy. Ceronsky says the Clean Air Act has broad and flexible language on how EPA can determine which system is best for cutting emissions, and it doesn’t limit EPA to “choosing end-of-pipe control technologies or other mechanical interventions at the plant,” her article adds.

Preparing the attack

Wood of Hunton & Williams is dug in on the other side of that argument. “Look at 40 years of the history of implementation of that section. … EPA hasn’t done anything like this ever before,” Wood said. “They talk about flexibility … but at the end of the day, the actual numbers that are given … the state targets are so hard to meet that the flexibility is illusory.”

Wood’s argument is key to states that say there’s no way to achieve their goals without going beyond plant operations. A handful of state legislatures have already enacted laws to limit what compliance options they can use (ClimateWire, Dec. 10). They want to know what EPA will do if they choose not to comply.

EPA hasn’t said how a federal plan for states would look, and it’s unclear how the agency could require certain state policies — which would likely be necessary to achieve the reductions it’s pursuing.

Put another way, “to implement EPA’s [existing source performance standards], many states would have to enact new laws and regulations to enforce the new policies set by EPA, even though EPA itself would lack the authority to implement them directly under the [Clean Air Act],” according to another Environmental Law Reporter article by Roger Martella, a partner with Sidley Austin who was EPA’s general counsel from 2006 to 2008.

The Federalist Society explores that idea in a paper from November, called “EPA’s Section 111(d) Carbon Rules: What if States Just Said No?”

“Can EPA really impose a plan on States that contains outside-the-fence measures, such as ordering the State to adopt a renewable portfolio standard or placing a limit on the amount of electricity the State’s citizens can consume?” the paper asks.

The Federalist Society concludes a federal plan would be limited to inside-the-fence measures applied to coal plants. With that uncertainty hanging over their heads, Bracewell & Giuliani partner Jeff Holmstead says states might just wait out the court battles.

“I think a lot of states just won’t submit their plans until they know if the rule is legal or not,” said Holmstead, who was EPA air chief during the George W. Bush administration.

Is it prudent to wait and see?

Opponents of the rule say the fence line question isn’t the only big legal problem, but it’s hard to know what challenges might come up based on the draft rule alone.

“The exact legal rationale and contours of the final rule have yet to be determined,” said Bob Nordhaus, a senior partner at Van Ness Feldman who has studied historical perspectives on the Clean Air Act. “It’s pretty difficult to say at which point which arguments are going to be the most important from the point of view of what the courts have to grapple with.”

Murray Energy Corp., joined by nine states, is challenging whether EPA has any authority at all to regulate the power sector under Section 111 of the Clean Air Act. Murray says the existing power sources have already been regulated under another section of the law — Section 112.

EPA expected the D.C. Circuit to dismiss the complaint as premature because the agency hasn’t finalized its rule, Holmstead said. But the federal appeals court instead set a briefing schedule and oral arguments for the claim (E&ENews PM, Nov. 13).

“It’s possible we may actually get an early decision,” Holmstead said. Other legal experts have said they would be surprised if the court weighed in on the rule before it was completed. Even so, that wouldn’t be the end of the Section 111 vs. Section 112 argument.

If it comes up again, lawyers are ready with a fallback position that could center around drafting errors in conflicting amendments made in 1990 by the House and Senate. The House amendment could be interpreted as preventing EPA from regulating existing plants under Section 111 because it already regulated them under Section 112 with the Mercury and Air Toxics Standards.

Nordhaus has written extensively about those errors.

“To my knowledge, in the federal courts anyway, there’s no precedent as to how to resolve this type of drafting error,” Nordhaus says.

EPA supporters are watching these forming legal battle lines closely, but they think the fence line question is ultimately more significant.

“What we’ve seen in recent history, unfortunately, is that a variety of folks deeply tied financially to high-polluting generation will file every challenge they can think of and hope one will stick,” Ceronsky said.

Holmstead says that’s strategic. “They’re hopeful that some of the comments will change EPA’s mind about some things,” he said.

At the end of the day, courts could be weighing all of those arguments against the need for a stronger U.S. directive on climate issues.