Litigators size up potential assaults on, defenses for EPA rule
Even if November’s elections swing Senate control to the Republicans, their efforts to clip EPA authority stand little chance of overriding President Obama’s veto, given how few Democrats are likely to link arms with the GOP on the issue.
“In light of congressional paralysis, any determination regarding the actual extent of EPA’s authority under [Clean Air Act] Section 111(d) is almost certain to come from the Supreme Court, rather than from Congress,” said Thomas Lorenzen, a partner with Dorsey & Whitney and former assistant chief of the Justice Department’s environment division.
So lawyers who specialize in EPA litigation have begun plotting legal dramas that could play out over the next five years or more.
Three Supreme Court decisions now have affirmed EPA’s authority to regulate greenhouse gases under the Clean Air Act, so few expect to see that question surface again. Instead, industry lawyers are plotting attacks around an apparent contradiction in the Clean Air Act Amendments of 1990, which they say precludes the drafting of the rule in light of existing regulations to limit hazardous emissions from power plants.
Others are readying arguments to attack or defend EPA’s bid to reach outside the fence lines of power plants and compel reductions from fuel switching, demand-side energy efficiency and other indirect measures.
But supporters of the systemwide approach say the proposal can stand its ground. And by basing its standard on four “building blocks,” they say, EPA has ensured that if one block is struck down, the rest of the rule will not collapse.
“I think EPA built a pretty resilient architecture to try to anticipate legal challenges,” Conrad Schneider of the Clean Air Task Force said in a recent interview.
There will also be many state-level challenges along the way. Each state will be tasked with submitting its own implementation plan to EPA by June 30, 2016, though the draft rule provides for extensions if necessary to allow states to enact legislation or join regional programs. Each of those plans will be subject to challenges in district and state courts.
Patience is the rule on reglatory litigation. Consider that last month’s Supreme Court decision striking down a portion of EPA’s greenhouse gas permitting rule stemmed from the agency’s endangerment finding for carbon — which was issued in 2009.
Here are five key issues likely to figure in legal fights ahead.
The ‘glitch’
The surest way to prevent EPA from promulgating the power plant rule is to stop it before it’s final.
That’s what nine states and Murray Energy Corp. are trying to do by challenging EPA’s authority to write the rule under Section 111(d) of the Clean Air Act. They maintain that the same emission sources are already subject to a 2012 hazardous-emissions rule written under Section 112 of the air law.
Murray and the states — Alabama, Alaska, Kentucky, Nebraska, Ohio, Oklahoma, South Carolina, West Virginia and Wyoming — have taken the unusual step of filing suit with the U.S. Court of Appeals for the District of Columbia Circuit even before the rule is final, on the grounds that the proposal is already having an impact on industry planning (Greenwire, June 19).
But the courts are not expected to take up the case until the rule is final, having swiftly rejected a similar pre-emptive attack on EPA’s 111(b) proposal for new and modified plants in December 2012.
Their challenge stems from a language discrepancy — a “glitch” — in the 1990 Clean Air Act Amendments. 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 law (Greenwire, Oct. 24, 2013).
Each was intended to ensure that the section wouldn’t duplicate regulations already in place. The House language bars EPA from using Section 111(d) to regulate source categories — in this case, power plants — that are already subject to Section 112 rules. The Senate’s only prohibits the agency from writing two rules for the same source category that would control the same kind of emissions.
“Were the House version to be followed, it would produce a fairly absurd result,” EPA Deputy General Counsel Ethan Shenkman said at the Environmental Law Institute’s Washington, D.C., forum last week.
The House-passed wording would prevent EPA from taking steps to address emissions that are not being controlled under other regulations, only because a source was covered by a rule for another pollutant.
Shenkman, who previously worked at the Justice Department, said the courts might determine that a precedent established in 1984’s Chevron v. Natural Resources Defense Council holds that if a statute’s language is ambiguous, courts must defer to an agency’s interpretation (Greenwire, July 24). In this case, that would allow the existing power plant rule to go forward.
Roger Martella, a former EPA general counsel who now advises industry clients at Sidley Austin LLP, said that while Murray Energy’s challenge was meritorious, “I’m also realistic that I think a court is going to find that to be a heavy lift.”
The Supreme Court in past decisions appeared to show it looks favorably on EPA’s bid to use Section 111 to limit greenhouse gas emissions, he said, and it would be unlikely to issue a “thermonuclear” decision that would effectively strip the agency of the ability to do so in the future.
If the courts do strike down the rule, he said, they are likely to return it to EPA and allow the agency to incorporate that decision into its regulations — a move that may not spell the end of power plant carbon rules under the Clean Air Act.
‘Building blocks’
If EPA can proceed with a Section 111(d) rule to curb carbon, the next question will be whether it has written one that tracks with the statute, said Michael Gerrard, an environmental law professor at Columbia University.
In writing its rule for fossil fuel power plants, EPA has designated a universe of measures as the “best system of emissions reduction” — including renewable energy and nuclear power — that states can choose from in writing their implementation plans.
In fact, the draft uses four “building block” inputs — on-site reductions at coal-fired power plants, increased use of existing natural gas, zero-carbon energy and demand-side efficiency — to set state targets. It assumes a state could draw on any one of them to meet the standard. All but “building block 1” fall outside the fence line of a power plant.
A legal memorandum that EPA released with the draft rule last month argues that this “systemwide” approach met the statutory requirements. It again points to the 1990 Clean Air Act Amendments, in which Congress chose to replace the original Section 111 language calling for “the best technological system” with new wording specifying the “best system of emission reduction” (BSER) that has been deemed “adequately demonstrated.”
While the Clean Air Act’s 1970 language might have limited rules to technological fixes at individual smokestacks, the EPA legal document states, BSER seems to allow for the kind of approach EPA maps here.
To prove that the items on its menu are “adequately demonstrated,” the agency points to actions already occurring in states, which the statute assigns a leading role in the implementation of Section 111(d) standards and which agency officials have repeatedly described as equal partners.
“The measures in each of the building blocks are ‘adequately demonstrated’ because they are each well-established in numerous states,” the memorandum says. “Many of them have already been relied on to reduce air pollutants, including CO2, from fossil fuel-fired [electric generating units] and, as noted, they may be undertaken by the affected EGUs or, in general, required by the states.”
But industry attorneys say EPA has overreached. The agency has encouraged states to compel utilities to shift baseload away from their coal-fired generating units in favor of natural gas generation that may be owned by competitors. And it invites states to make utilities responsible for their customers’ use of their product, because only covered sources can be assigned obligations under the rule.
“Who is responsible when the demand-side management program doesn’t work? Who do you sue?” Allison Wood, an attorney with Hunton & Williams LLP, asked at last week’s law forum.
The draft takes the unprecedented step of expanding a requirement for fossil fuel units to cover power sector sources that would normally fall outside its purview — renewable energy and nuclear facilities — and might even be construed to allow states to assign obligations to non-utility-sector sources like oil refineries, Martella said. These and other considerations make the June proposal broader in scope than any EPA has promulgated before — placing it on legally shaky ground, he argued.
But Megan Ceronsky, an attorney with the Environmental Defense Fund, said that Section 111 is not as prescriptive as some other sections of the Clean Air Act because Congress intended to give the agency the flexibility to make reductions.
While there are technological upgrades that can prevent power plants from spewing other pollutants — such as scrubbers to control the sulfur dioxide that contributes to acid rain — no such “widget” exists to limit CO2 except for carbon capture and storage (CCS), Ceronsky noted.
And EPA opted not to propose a CCS mandate for existing power plants because it estimates the technology would cost $120 per ton of CO2 avoided, compared with the $40-per-ton average for actions under the four building blocks. But states have already “demonstrated” that their renewable, low-carbon energy and efficiency policies are effective at limiting emissions.
“If we look around at what states and companies are in fact doing on the ground today and have been doing for a long time, what we see is that they’re doing exactly what EPA has incorporated as best system of emissions reduction,” said Ceronsky, adding that that would likely be the argument proponents of the rule would make in court.
‘House of cards’
No matter what the final existing power plant proposal looks like or how defensible it turns out to be, the Clean Air Act does not allow it to go into effect until a final rule for new and modified sources is in place.
And EPA’s Sept. 20 draft for new power plants has long been a target for agency opponents who say the agency improperly designated CCS as the BSER for new coal plants, based on a handful of Energy Department-funded projects that have yet to come online and literature that they say the agency has failed to properly vet.
If the Section 111(b) rule is thrown out by the courts, industry advocates warn, EPA’s existing power plant rule will be left in limbo while the agency reworks the rule.
Martella called the relationship between the two rules “a house of cards.” The statute, he said, envisions the two rules to be related, with the program for existing facilities more or less serving as a less aggressive version of the new source rule aimed at protecting investments that have already been made. EPA appeared to have ignored both elements, he said.
“Each entirely stands on its own feet,” he said. Not only are they distinct, but the existing power plant rule might even carry higher compliance costs than the new source mandate.
Industry advocates and a handful of EPA supporters have said the agency would have been wise to limit its September proposal to what new coal-fired power plants can achieve with state-of-the-art supercritical and ultrasupercritical technology. The CCS mandate might scuttle both rules, they argue, and will have little practical benefit, as no new coal-fired plants are slated to be built anyway.
But Gerrard notes that EPA issued a modified sources proposal June 2 to little fanfare that tapped state-of-the-art equipment as BSER. The modified source rule, written under Section 111(b), might satisfy the requirement to have a new and modified source rule in place before the existing power plant rule goes final, even if the challenge to the new power plant rule doesn’t go EPA’s way.
“It creates an argument for EPA that that is enough to satisfy the prerequisite,” he said.
Scalia’s ‘time bombs’
Last month’s Supreme Court decision throwing out a part of EPA’s greenhouse gas permitting program may have implications for the Section 111 rules, some observers say.
In writing his decision for the court, conservative Justice Antonin Scalia cautioned EPA against using “a long-extant statute” to gain “an unheralded power to regulate ‘a significant portion of the American economy.'”
Lorenzen said, “There are time bombs that Justice Scalia has peppered throughout that decision that will certainly be thrown at EPA in comments, and that will definitely be thrown at EPA in litigation” (Greenwire, June 23).
Who’ll be on the bench?
If there is a similar lapse between the time the existing power plant rule is finalized next June and the time the high court issues any decision on it — assuming it takes the case — that could mean some of the arguments lawyers are readying today won’t be assessed until 2019.
By that time, there will be a new occupant in the White House and possibly new faces on the bench. It could take four years for the high court to produce a decision.
Whatever challenges are brought against EPA’s existing power plant proposal, their resolution will in large part depend on the “happenstance of judicial personnel,” Columbia’s Gerard said.
A handful of Supreme Court justices and D.C. Circuit Court of Appeals judges will likely have more to say about the rule than all 535 members of Congress unless conditions radically change in the next few cycles. And it could take four years for the high court to produce a decision.
The Supreme Court of 2019 might look substantially different. Justices Ruth Bader Ginsberg, Scalia, Anthony Kennedy and Stephen Breyer will all be over 80, and any of them might not still be on the bench. It will fall to President Obama and his successor to name any replacements — and to determine the fate of the current administration’s carbon regime in the process.