Legislative glitch could doom rules for existing power plants

Source: Jean Chemnick, E&E reporter • Posted: Friday, October 25, 2013

An error that Congress made more than 20 years ago may be industry’s only hope of avoiding carbon dioxide regulations for existing power plants.

When Clean Air Act amendments were enacted in 1990, the new statutory language contained a rare glitch. Two different and contradictory amendments to Section 111(d) — one from the House, the other from the Senate — were never reconciled in conference, but instead passed both chambers and both became enrolled into law.

Each was intended to ensure that the section — which requires states to develop performance standards for existing sources under guidance from U.S. EPA — would not duplicate regulations already in place under other sections of the law.

The House language bars EPA from using Section 111(d) to regulate source categories — like power plants or refineries — that are already subject to hazardous emissions rules under the Clean Air Act. The Senate’s, meanwhile, prevents its use to regulate a source category for a pollutant that is already being regulated.

Both are law. And the House language hands industry its best and probably only chance of scuttling EPA’s current effort to craft carbon dioxide rules for today’s power plants, because the same units are already being regulated for hazardous emissions under Section 112 of the law

“It was one of those things that almost never happens,” said C. Boyden Gray, President George H.W. Bush’s White House counsel at the time the amendments were enacted.

Speaking on the sidelines of a recent event in Washington, D.C., hosted by the Atlantic Council, an international affairs leadership organization, Gray said the House language might prevent EPA from promulgating the rule. “That could be the little tail that wags the great big dog,” he said.

Gray, who had a hand in crafting EPA’s cap-and-trade program for acid rain during the Bush administration, said Section 111(d) might allow EPA to set up a similar market-based mechanism for power plant CO2.

But the glitch with the legislative language might “foreclose that,” he said.

Industry attorneys are considered likely to mount a challenge on those grounds, because if they succeed they could avoid the task down the road of challenging EPA’s guidance or the state implementation plans for the rule. The rulemaking itself would be halted.

“Sometimes the simplest arguments are the most appealing,” said Adam Kushner of Hogan Lovells U.S. LLP.

“I think it’s an intriguing argument,” said Peter Glaser, a lawyer who represents industry clients at Troutman Sanders LLP.

Glaser said he could see how such an argument could be made. “It really is one of a kind, which gives it kind of a wild card quality,” he said.

To go this route, litigants must convince the courts that the House language represents the clear intent of Congress to bar EPA from regulating the same group of sources under two sections of the law, even for different pollutants. If congressional intent is not clear, the precedent established by the Supreme Court’s 1984 decision on Chevron USA Inc. v. Natural Resources Defense Council would mean that EPA is entitled to deference if it proposes a reasonable interpretation of its own.

The key to showing clear intent would be to demonstrate that the House and Senate language are not contradictory after all.

“The issue here is whether or not you really can harmonize the language,” Glaser said. “It is possible in theory to harmonize the language where it comes out that EPA doesn’t have authority to regulate greenhouse gases from existing power sector sources.”

A paper published in March by the conservative Federalist Society argues that the best way to make sense of the language is to assume that both the House and the Senate versions should have effect. In that case, the House language would prohibit EPA from regulating CO2 under 111(d) in light of the agency’s 2011 rule for power plant mercury and air toxics.

“Moreover, this text of the amendments is the only one that is consistent with Congress’ intent in enacting both provisions,” the Federalist Society report states.

Challengers can also point to a 2007 D.C. Circuit Court of Appeals decision on the George W. Bush-era Clean Air Mercury Rule (CAMR), which found that EPA did not follow the proper procedure in delisting power plants from the section of the law that governs hazardous emissions. The agency instead moved to regulate mercury under Section 111(d), using a flexible mechanism. The court vacated that rule, leaving the Obama administration to write its own.

“[T]he court characterized EPA as conceding that sources regulated under Section 112 cannot be regulated under Section 111(d), even though EPA may not have actually intended to concede the point and in fact devoted a significant portion of its brief to arguing otherwise,” Kushner and Judith Coleman, his colleague at Hogan Lovells, wrote in an article exploring the issue.

EPA would have to address the court’s characterization in its guidance for existing power plants, though it may be able to draw from its own briefs from the CAMR case for that, they wrote.

EPA “will have to deal with it head-on,” Kushner said.

But Michael Livermore, senior adviser at New York University’s Institute for Policy Integrity, said the courts are likely to defer to EPA on its interpretation of the statute, rather than try to mine the law’s language for congressional intent.

“Basically what you have is a statute that reads a little nonsensically,” said Livermore, who teaches law at the University of Virginia.

The only sensible interpretation is that Congress intended to prevent the same sources from being regulated for the same pollutants under two separate sections of the law, he said, not to prevent the same sources from being regulated for different emissions, as the House language would indicate. And the agency is moving ahead under that first, more sensible reading of that law.

The courts should side with EPA, he said. “The agency should get deference here.”