The Clean Power Plan – Where Does It Stand, Where Are Things Headed?

Posted: November 6th, 2017

Authors: All4 Staff

On October 16, 2017, U.S. EPA proposed repeal of the Clean Power Plan (CPP). The CPP is more formally entitled “Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Generating Units.” Under the CPP, states would be responsible for implementing plans to achieve unique state-specific carbon dioxide (CO2) reduction goals for existing electric generating units (EGUs), so that by 2030 a nationwide 30% reduction in CO2 emissions would be achieved from the power sector over 2005 baseline levels. Since original promulgation, there has been a lively amount of legal activity that’s ensued. Let’s take a moment to review the highlights:

October 23, 2015 – Original promulgation of the CPP.
October 23, 2015 – Immediate filing of petitions against the CPP challenging that U.S. EPA has overstepped its legal authority in issuing the rule. Petitions are consolidated into one case (West Virginia v. EPA, No. 15-1363).
February 9, 2016 – Issuance of a stay by the U.S. Supreme Court while West Virginia v. EPA litigation is underway by the United States Court of Appeals for the District of Columbia Circuit (Court of Appeals). The stay orders U.S. EPA to halt enforcement of the CPP until a ruling on West Virginia v. EPA is made by the Court of Appeals.
September 17, 2016 – Oral argument for West Virginia v. EPA is heard in the Court of Appeals.
March 28, 2017 – President Trump issues the Presidential Executive Order on Promoting Energy Independence and Economic Growth (Order) directing U.S. EPA to suspend, revise, or rescind various Obama-era regulations intended to regulate GHG emissions from power plants, including, but not limited to, the CPP.
March 28, 2017 – U.S. EPA files a motion in response to the Order to hold West Virginia v. EPA in abeyance indefinitely, pending completion of U.S. EPA’s review and any resulting forthcoming rulemaking.
April 28, 2017 – The Court of Appeals agrees to pause West Virginia v. EPA litigation for 60 days, requiring U.S. EPA to provide monthly status reports with respect to CPP review and future rulemaking, while the case is in abeyance.
August 8, 2017 – The Court of Appeals, on its own motion, orders that West Virginia v. EPA litigation remain in abeyance for an additional 60 days, and that U.S. EPA continue to provide monthly updates with respect to CPP review and future rulemaking.
October 10, 2017 – The most recent 60-day abeyance period for West Virginia v. EPA ends.
October 16, 2017 – U.S. EPA proposes repeal of the CPP, indicating that it will accept public comment on the proposed repeal until December 15, 2017 and hold a public hearing if requested prior to October 31, 2017.
October 16, 2017 – U.S. EPA files an additional request to the Court of Appeals for indefinite extension of the abeyance for West Virginia v. EPA.

How do these various actions fit together and do they give us an indication of where things might still be headed? If you’re a member of the power sector, you’re likely feeling the stress of confusion and uncertainty. In this article, we’ll explore the proposed repeal, the role of the President’s March 28, 2017 Executive Order, what a replacement rule could look like, what a repeal without replacement rule could mean, the still influential role of West Virginia v. EPA as well as the Supreme Court stay, and the status of the other power sector CO2 actions which appeared in the Federal Register on October 23, 2015.

Proposed Repeal

On October 16, 2017, U.S. EPA proposed repeal of the CPP, indicating that it would accept public comment on the legal interpretation for repeal addressed within the proposal until December 15, 2017. A public hearing will be held if requested prior to October 31, 2017. U.S. EPA’s initial review of the CPP fulfills a requirement of the March 28, 2017 Executive Order to review, and if appropriate, initiate proceedings to suspend, revise, or rescind the Clean Power Plan. The preamble to the proposal clarifies that the change in legal interpretation that U.S. EPA is proposing and seeking comment on is that the CPP exceeds U.S. EPA’s statutory authority, which sounds similar to the underlying theme of West Virginia v. EPA.

The preamble goes on to explain that Section 111(d) of the CAA requires U.S. EPA to promulgate emission guidelines for existing sources that reflect the ‘‘best system of emission reduction (BSER),” but that all other CAA Section 111 regulations promulgated to date are based on a BSER that can be applied to or at a single source. “The CPP departed from this practice by instead setting CO2 emission guidelines for existing power plants that can only realistically be effected by measures that cannot be employed to, for, or at a particular source.” What U.S. EPA speaks to here is their “beyond the fenceline” argument, where they warn that power generators would need to fully alter their energy portfolios to comply with the CPP (“such as a grid-wide shift from coal-fired to natural gas-fired generation, and from fossil fuel-fired generation to renewable generation”) rather than comply with the rule through facility-specific (“inside the fence”) efficiency improvements. Supporters of the CPP have long said the “beyond the fenceline” argument is weak given that the power sector has been fuel-switching as a technique to comply with other rules for years, offering that it would be difficult to argue that requiring only efficiency improvements could ever constitute BSER.

The preamble further states that U.S. EPA “has not determined the future scope of any potential rule under CAA Section 111(d) to regulate GHG emissions from existing EGUs, and, if it will issue such a rule, when it will do so and what form that rule will take. (U.S. EPA) is considering the scope of such a rule and is intending to issue an Advance Notice of Proposed Rulemaking (ANPRM) in the near future. That ANPRM will solicit information on systems of emission reduction that are in accord with the legal interpretation proposed in this notice (i.e., those that are applicable at and to an individual source).”

Despite that ANPRMs are used to begin rulemaking processes, since an ANPRM for the CPP was already issued 10 years ago that resulted in the submittal and consideration of 4.3 million public comments, and since the proposed repeal included such language as “and, if it will issue such rule,” some have regarded the ANPRM as a potential stalling tactic that could potentially result in repeal without replacement. However, what is clear in the immediate future is that the ANPRM is going to be focused on the “beyond the fenceline” argument – that is, reversing the CPP’s BSER formula for setting GHG reduction targets. U.S. EPA has already sent the draft ANPRM to the Office of Management and Budget (OMB) for review, and that process typically takes about 90 days before being published in the Federal Register.

Prospects for a Replacement Rule

In an October 18, 2017 interview with Time Magazine, U.S. EPA Administrator Scott Pruitt relieved some of the uncertainty people had around the ANPRM when he implied that a replacement rule, as opposed to a repeal without replacement, is in the future. “We’ve been spending many months evaluating Section 111 of the Clean Air Act to ask and answer the question what authority exists…There is some modest authority…for us to take action.” These affirming comments were surprising, as many have speculated that Pruitt has no intention to regulate GHG from the power sector, and may even go as far as to use the ANPRM to tee up a review of the Endangerment Finding. His comments during the interview, however, suggested that the Endangerment Finding is held as a separate issue. And in leaving the Endangerment Finding untouched (although not necessarily embraced), U.S. EPA maintains some obligation to replace the CPP.

What Pruitt did not indicate in the interview, however, or suggest within the proposed repeal, is how long the replacement rulemaking process could take or what the replacement rule might look like. Notwithstanding the feedback U.S. EPA receives on the ANPRM, I would suspect that a narrow replacement rule that includes facility-specific, scaled-back targets, and echoes something along the lines of Building Block 1 of the CPP may eventually present itself. As a reminder, Building Block 1 of the CPP BSER requires “improving heat rate at existing coal-fired steam EGUs on average by a specified percentage.” (Building Block 2 requires “substituting increased generation from existing affected NGCC units for generation from affected steam EGUs in the specified quantities” and Building Block 3 requires “substituting generation from new zero-emitting Renewable Energy generating capacity for generation from affected EGUs in specified quantities.”) Building Block 1 was expected to be technically feasible and of reasonable cost, and already a common and well-established practice capable of achieving meaningful reductions in CO2. Such a narrow replacement would resonate with Pruitt’s comment that the Agency has “modest authority” to regulate GHG from the power sector but, I think even more importantly, be in alignment with The Oklahoma Attorney General’s Plan (OKAG Plan), written by Scott Pruitt himself in 2014. The OKAG Plan promotes state primacy and state involvement through the CAA Section 111(d) process, unit-by-unit analyses, promulgation of “inside the fence” measures, consideration of the remaining useful life of existing sources, consideration of each state’s unique economic and environmental attributes, and consistency with CAA Section 111(d). The OKAG Plan also gives each state the ability to prescribe less stringent emissions standards for particular designated facilities or classes of facilities, extension and/or formulation of individual unit compliance schedules, and adoption of more stringent emission standards or earlier compliance deadlines.

Repeal Without Replacement

If you’re a member of the power sector, you might be feeling grateful right now that a replacement rule is simply being contemplated. After all, it provides some insulation from non-governmental organization (NGO) legal actions. Not having a replacement rule effectively leaves open the door to civil suits, tort litigation, and the like from states and others regarding GHG emissions from your sector. It would also leave a void in policy that could be filled by a different administration.

U.S. EPA could also expose itself to legal risk if the court confirms that U.S. EPA is obligated to regulate GHG from the power sector. However, if the February 9, 2016 stay is indefinitely left in place, U.S. EPA’s obligation to regulate GHG from the power sector could be rendered moot. Possibly hinting at this, judges at the Court of Appeals have suggested to proponents of the rule that they approach the Supreme Court to lift the stay.

Status of West Virginia v. EPA

What would it mean if the Court of Appeals rules on West Virginia v. EPA before U.S. EPA finalizes its proposed repeal of the CPP? You may recall that on the same day of U.S. EPA proposing repeal, U.S. EPA also filed an additional request to the Court of Appeals asking that they further extend the abeyance of the West Virginia v. EPA case. Some speculate that repeated requests for abeyance may tax the patience of the Court of Appeals enough that they would rule prior to finalization of the repeal. If the Court of Appeals decides to uphold key parts of the CPP before the repeal is finalized, U.S. EPA’s efforts to repeal the rule would be undercut. On the other hand, if the Court of Appeals refrains from ruling, U.S. EPA would be relieved of identifying how it plans to satisfy its statutory duties for the indefinite future.

Status of Other Power Sector CO2 Rules

You may recall that on October 23, 2015 U.S. EPA also published the following two actions intended to reduce CO2 emissions from the power sector:

So, what are the statuses of these actions?

Consistent with the March 28, 2017 Executive Order, U.S. EPA announced on April 2, 2017 that it is “reviewing, and if appropriate, will initiate proceedings to suspend, revise, or rescind” the October 23, 2015 Standards of Performance for Greenhouse Gas Emissions from New, Modified, and Reconstructed Stationary Sources: Electric Utility Generating Units. Prior to this announcement, these Standards of Performance were not without their own challenges; 24 states and several other parties sought separate judicial review of the Standards of Performance in State of Dakota v. EPA, No. 15-1381, with oral argument heard April 17, 2017.

Also consistent with the March 28, 2017 Executive Order, U.S. EPA withdrew the October 23, 2015 proposed Federal Plan Requirements for Greenhouse Gas Emissions From Electric Utility Generating Units Constructed on or Before January 8, 2014; Model Trading Rules; Amendments to Framework Regulations.

Conclusions

I hope this article helps remove at least some of the confusion and uncertainty surrounding the history and the future of GHG regulation for the power sector. To summarize, U.S. EPA’s proposed repeal of the Clean Power Plan will be followed by an ANPRM that specifically requests comment on what systems of emission reduction are in accordance with the CAA, which is likely to inform development of a future replacement rule. If it is a narrow replacement of the CPP, we may find that it draws from elements of Pruitt’s own OKAG Plan as well as Building Block 1 of the CPP. Repeal without replacement does not come without possible legal action by NGOs. Finally, activity by the Court of Appeals’ with respect to West Virginia v. EPA as well as activity by the Supreme Court with respect to the February 2016 stay can still influence the direction of future GHG rulemakings for the industry.

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