Governors' Wind Energy Coalition

Two years ago, EPA officials proposed relaxing Obama-era carbon regulations on new power plants after arguing that the rules relied on unready technology and would cripple the coal-fired power industry.

Then in a surprise move yesterday, the agency posted a final rule that does nothing to change those regulations.

Instead it doubles down on an issue that was raised only in a footnote in the December 2018 proposal: whether EPA should create a new metric for which industrial sectors contribute to climate change enough to trigger regulation.

The remarkable shift in direction is viewed by environmental lawyers as a bid to undermine the incoming Biden administration, which has signaled an intention to limit the amount of emissions industry can release, including for sectors that have never before been regulated.

EPA is aiming to do that by heading off regulation for stationary sources of greenhouse gas emissions from sectors like refineries or industrial boilers.

The rule, which would take effect 60 days from today, argues that industrial sectors don’t qualify as “significant contributors” of greenhouse gases — a finding that is a prerequisite for regulation — unless they account for 3% of overall U.S. carbon emissions.

Only one fits the bill: the power sector. That sector’s greenhouse gas emissions are now controlled under the Obama-era regulations for new units that EPA proposed dismantling in 2018 but which now looks likely to survive the administration. That rule, which remains on the books, requires new coal plants to use partial carbon capture and storage to limit emissions. For existing power plants, EPA finalized its tamped-down Affordable Clean Energy rule in 2019, replacing the more stringent Clean Power Plan of the Obama era.

For all other sectors, however, this week’s rule argues that regulations under Section 111 of the Clean Air Act would be inappropriate because they each individually are responsible for less than 3% of the country’s overall carbon output.

Environmental lawyers said yesterday that the rule was a transparent attempt to hamstring the Biden EPA. But they predicted that the Biden EPA would have little difficulty dispensing with it.

“I think there’s very little practical effect,” said Jack Lienke, regulatory policy director at the Institute for Policy Integrity at New York University School of Law. “It’s a banana peel, and the Biden administration is very unlikely to slip on it, I trust.”

Lienke and others say the 3% threshold appears to have been selected with the express purpose of helping non-power industrial sectors escape regulation.

EPA acknowledged in this week’s rulemaking that three major industrial sectors sit just below that threshold — with each releasing between 2.5% and 3% of U.S. emissions. They are oil and gas production and processing, refineries, and industrial boilers.

So what’s the agency’s justification for setting the threshold at 3%, instead of the traditional 1%, of U.S. greenhouse gases?

EPA argues that the 3% threshold would capture 43% of all greenhouse gas emissions from industrial sources that could be regulated under Section 111, while the lower threshold would regulate more source categories while capturing 60% of overall emissions.

But it would require 10 additional source categories to come under regulation to achieve those additional emissions reductions — a result EPA frames as undesirable without fully explaining why.

Environmental lawyers say there’s no legal basis for EPA to define a criterion for a so-called significant contribution, especially if it comes in the form of a percentage of overall U.S. emissions. That could leave high-emitting source categories unregulated simply because there are many contributors.

Industrial emissions are set to grow relative to the power sector’s emissions over the coming years as coal-fired power plants continue to retire. But subsets of manufacturing, like steel and cement, are still unlikely to reach the 3% threshold that EPA proposes as the basis for all future rules.

Environmental lawyers say the rule is legally vulnerable.

“There are just so many things wrong with this,” said Joanne Spalding, chief climate counsel at the Sierra Club.

For one thing, the agency never proposed the 3% threshold, even as part of a range.

“The primary grounds for pulling this back is that the agency can’t finalize something that it never proposed,” said Spalding.

Nor did it conduct a cost-benefit analysis for the finalized rule. That’s likely to run afoul of the Administrative Procedure Act.

The rule would also take effect more than a month after President-elect Joe Biden’s inauguration, giving his EPA ample time to slap an administrative stay on it and begin the process of undoing it.

The lateness of the rulemaking makes it a candidate for a Congressional Review Act resolution that would strike it down. But Lienke of NYU said there would likely be no need for Biden’s EPA to enlist the help of Congress for a rule that would face such long odds in court.

The agency might not even find it necessary to undertake a formal rulemaking, he said. That it impacts sectors yet to be regulated for emissions means the earliest EPA would need to address the significant contribution issue is when it regulates a new set of sources, like petroleum refineries.

By then, EPA could simply state in the body of its proposed rule that it had decided on a different means of determining significant contribution.

“There’s no argument that the Clean Air Act requires the determination of significance,” Lienke said, referring to the wording of this week’s rule. “So there will be no problem for the Biden administration in terms of saying it rejects this interpretation.”

While the core proposal from 2018 is absent from the final rule, it does imply in several places that EPA plans to revisit the Obama-era requirement that new coal plants employ partial carbon capture and storage to capture some of their emissions.

Most observers say they don’t expect that to happen in the final week of Trump’s term. But Christine Tezak, managing director of ClearView Energy Partners LLC, said she wouldn’t put it past EPA Administrator Andrew Wheeler to roll out a revision of the power plant rule — if only to create more work for Biden’s team.

“I’m not taking anything off the table, because that guy has got an agenda,” she said. “And I don’t know everything that’s on it, but he certainly seems to have every intention of staying through the last hour to help make the transition really uncomfortable by the time he’s gone.

“He’s there to do a job. And he may only have eight days left, but he’s not done,” she added.