United States: EPA Takes Initial Step To Replace Clean Power Plan

Uncertainty and speculation have swirled over the last few months regarding whether U.S. Environmental Protection Agency (EPA) Administrator Scott Pruitt would replace the Clean Power Plan (CPP) after proposing to repeal the plan in October. Or would the agency simply move forward with repeal without a replacement regulation? Administrator Pruitt has hinted at a replacement rule in interviews and in prepared remarks, but on Monday, the EPA provided the best evidence yet that the agency may be moving to replace the CPP.

What happened? The EPA issued an Advanced Notice of Proposed Rulemaking (ANPRM) seeking public input on how the EPA should move forward to limit greenhouse gas (GHG) emissions from existing power plants. A copy of the ANPRM and the announcement can be found on the EPA's website here.

What Is the Clean Power Plan?

Before we discuss the replacement, let's discuss the CPP. As you may recall from earlier blog posts, the CPP was finalized in August 2015 and was the Obama Administration's key regulation aimed at cutting GHG emissions. More formally entitled the "Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units," it set carbon dioxide emission reduction targets for existing power plants—targeting a 32 percent reduction in nationwide emissions from 2005 baseline levels by 2030.

Under the CPP, states were required to develop implementation plans to meet federally-set state-specific emissions reduction goals through such actions as heat rate improvements at the power plant and switching from coal to natural gas and renewables for energy generation. The EPA expected and intended much of that compliance work to occur at locations outside power plant boundaries, a considerable departure from past practice.

As discussed in an earlier post, the CPP was immediately challenged as regulatory overreach and was subsequently stayed by the U.S. Supreme Court in February 2016. As a direct result of the new administration's March 28, 2017 Executive Order 13783 entitled "Promoting Energy Independence and Economic Growth," the EPA announced in October that it would scrap the CPP. Administrator Pruitt disagreed with the Obama-EPA's interpretation that Section 111(d) of the Clean Air Act (CAA) permitted the agency to regulate "outside the fence line" of the power plant and bring cleaner renewable energy generated at other locations, such as solar and wind, into the energy mix.

The U.S. Court of Appeals for the District of Columbia Circuit heard arguments en banc in September 2016, but has not yet ruled on the merits of the challenge to the CPP, West Virginia v. EPA, No. 15-1363 (D.C. Cir. filed Aug. 17, 2016). The Court granted a stay in the litigation in early August 2017 as the EPA continued to reexamine the rule. Whether or not the court will entertain continued stays or whether the court will proceed to rule on the merits is unknown at this time. If the court decides to uphold key parts of the CPP before the repeal is finalized, the EPA's efforts would be undercut. On the other hand, if the court refrains from ruling, the issue would remain in limbo as the EPA identifies how it plans to satisfy its statutory obligations.

What Type of Comments Is the Notice Seeking?

The ANPRM requests and encourages the public to submit any comments that may assist the EPA in considering setting guidelines to limit emissions from existing power plants. The agency however does solicit specific comments on several discrete issues, including comments on:

• the respective roles of states, the federal government (particularly the EPA), and regulated industries in developing guidelines and regulating GHG emissions from existing power plants;
• the reading of CAA Section 111(a)(1) as "limited to emission measures that can be applied to or at a stationary source, at the source-specific level";
• how to define and identify the Best Systems of Emission Reduction (BSER) that are applicable to power plants;
• compliance measures, focused solely on physical or operational changes to a building, structure, facility, or installation at that stationary source;
• state planning requirements under the CAA; and
• the potential interaction with other regulatory programs such as the New Source Review (NSR) Program and the New Source Performance Standards (NSPS) Program.

The ANPRM also clarifies two major issues for which the agency is not soliciting comments. First, the ANPRM touches on the issue of the EPA's endangerment finding. In 2009, pursuant to the U.S. Supreme Court decision in Massachusetts v. EPA, 549 U.S. 497 (2007), the EPA determined that GHGs endanger the public health and welfare, and thus, the agency must regulate them. The EPA was reminded of this obligation in a concurring statement by Circuit Judges David S. Tatel and Patricia A. Millett to the court's grant of the August stay order in West Virginia v. EPA.

Footnote 3 of the ANPRM clarifies that nothing in the ANPRM should be construed as addressing or modifying this endangerment finding. The same footnote also states that the ANPRM does not address the EPA's regulations of new stationary sources. This regulation, entitled "Standards of Performance for Greenhouse Gas Emissions from New, Modified, and Reconstructed Stationary Sources: Electric Utility Generating Units," was finalized at the same time as the CPP and was also immediately challenged in the U.S. Court of Appeals for the District of Columbia Circuit. North Dakota v. EPA, No. 15-1381 (D.C. Cir. filed Oct. 23, 2015). Many view this litigation as inconsequential as no new coal-fired plants are in the development pipeline. Several factors have contributed to this reality including more competitively priced and available natural gas, more difficulty in financing such projects, and the growth of low-cost renewable energy sources. The NSPS rule, however, is significant for existing plants because it will affect "major modifications," an issue on which there was considerable litigation over old coal-fired power plants over the last 15 years, where changes to keep old plants in operation were claimed to be modifications triggering more stringent limitations.

How Can You Get Involved?

The public can comment on the notice for 60 days after the ANPRM is published in the Federal Register, which is expected soon. Comments can be sent to the EPA electronically, fax, mail, or by hand, and should reference Docket ID No. EPA-HQ-OAR-2017-0545. Due to the high stakes involved, and the controversial nature of how this litigation and administrative process has and will play out, we expect a high volume of comments will be submitted. After the 60-day comment period ends (unless the EPA extends the comment period), the EPA will work to assess whether further regulatory action to reduce GHG emissions is necessary, and how it could be accomplished in a manner consistent with the CAA and other law.

Also note that the public can still submit comments on the proposed repeal of the CPP. Comments on the repeal are due by January 16, 2018 and should reference Docket ID No. EPA-HQ-OAR-2017-0355.

Conclusion

It is clear from the ANPRM that the EPA is not interested in "outside the fence line" compliance options in any CPP replacement, and will focus instead on source changes such as heat rate improvement technologies, operation and management practices, and carbon capture and storage technology to reduce emissions. The ANPRM also makes clear that the EPA will provide states with more flexibility in reducing emissions, including possibly implementing less stringent plans. States that were supportive of the CPP may use the process to try to vindicate their ability to impose more stringent limits, and to keep major parts of the CPP in place for their state programs, including the use of offsite renewable power generation as a compliance measure.

Though it remains uncertain if or when a new replacement rule will be issued, it is widely expected that CPP supporters will challenge the EPA in court to stop the repeal and/or to force the EPA to develop new regulations to replace the CPP. It is very possible that a resolution to this issue remains several years away.

Because this issue remains fluid, please check back to the blog for any further updates.

Amicus Curiae Participation in Clean Power Plan Litigation

Van P. Hilderbrand Jr. assisted a consortium of major consumer brand companies with significant energy footprints in nearly every state in the nation prepare and file a joint amicus curiae brief in the U.S. Court of Appeals for the District of Columbia Circuit supporting the CPP. The motion to participate and brief described the challenges that these major brands from diverse industries face in procuring electricity from low—and zero—GHG emitting sources, and the challenges that climate related risks pose to their businesses.

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