United States: Legal And Political Fights Loom For Clean Power Plan

Last Updated: August 12 2015
Article by John A. Rego

At a White House ceremony on August 3, 2015, President Obama and the U.S. Environmental Protection Agency issued the Clean Power Plan, the administration's regulatory plan to reduce carbon dioxide emissions from existing fossil fuel power plants to 68 percent of their 2005 levels by 2030. The plan does not directly regulate any sources. Instead, EPA has specified emission rates that each state in the continental U.S. must achieve and a set of regulatory methods that the states may use to achieve those rates. EPA also issued a proposed "federal implementation plan" that would be used to achieve the necessary reductions in states that either decline to participate or fail to submit a state implementation plan that EPA finds approvable.

The Clean Power Plan represents the most far-reaching single action EPA has ever taken under the Clean Air Act. Far from simply regulating certain emissions from certain industrial sources, the plan seeks to dramatically restructure the U.S. power system to reduce the contribution of coal from 36 percent of total generation capacity today to 27 percent over the next 15 years, while stimulating much broader deployment of renewable technologies as an alternative to both coal and natural gas. Indeed, opponents of the plan assert, and plan to argue in upcoming legal challenges, that many elements of the plan extend beyond the bounds of environmental regulation and simply exceed the authority Congress conferred on EPA in the Clean Air Act.

EPA has relied on Section 111(d) of the Clean Air Act as authority for the plan. That Section does not permit direct regulation of existing power plant emissions, but rather authorizes EPA to require state implementation plans based on the "best system of emissions reduction" that has been "adequately demonstrated" for the emissions at issue. In the Clean Power Plan, EPA concludes that the best system for reducing carbon dioxide emissions from fossil fuel power plants consists of three "building blocks": (i) increasing the operational efficiency of such plants; (ii) shifting generation from higher emitting plants, generally coal-fired, to lower emitting plants, generally natural gas-fired; and (iii) increasing generation from "zero-emitting" energy sources, primarily wind and solar. As initially proposed by EPA in 2014, the plan included a fourth building block—improving demand-side energy efficiency, such as better insulation of homes and the use of LED light bulbs. Although energy efficiency is not a formal building block in the final version of the plan, EPA continues to emphasize the importance of the concept throughout the text.

The final Clean Power Plan also includes standards for new, reconstructed, and modified sources. As in EPA's 2014 proposal, the standards for new sources continue to be based on partial carbon capture and sequestration, a technology whose commercial viability remains far from certain.

While 2030 may seem a long way off, the requirements of the Clean Power Plan will begin affecting states much sooner. Proposed plans must be submitted to EPA for review by September 6, 2016, and the final plans must be submitted within two years after that. In addition to the 32 percent emissions reduction that must be achieved by 2030, the plan establishes interim targets that must be achieved between 2022 and 2029.

Emissions trading, either within or among states, is not required by the final plan, but EPA strongly endorses the concept and encourages states to view emissions trading as a market-based tool that allows emissions reductions to occur in the most cost-effective manner. A group of nine northeastern states have already been administering an emissions trading program for power plants, known as the Regional Greenhouse Gas Initiative, for six years, and California began implementing a multisector cap-and-trade program several years ago. Moreover, EPA's proposed federal implementation plan for states that do not submit approvable state plans is based in large part on emissions trading.

Predictable political battle lines were well established even before the final Clean Power Plan was released. A coal company and a group of 15 states, largely Republican-led, attempted to have the U.S. Circuit Court for the District of Columbia Circuit block the plan even before it was finalized, while a similarly sized group of states, largely Democrat-led, publicly supported the proposal. While the D.C Circuit deemed the legal challenge premature pending a final plan, that litigation will presumably resume as soon that the final plan is formally published in the Federal Register, probably in September 2015. Trade groups and additional states will likely file their own actions challenging the plan, while environmental groups and additional states will undoubtedly weigh in on the side of EPA.

In addition to arguments that the Clean Power Plan's broad regulation of energy markets exceeds EPA's authority under the Clean Air Act, opponents have raised the more specific objection that EPA lacks authority to regulate power plant emissions under Section 111(d), because EPA is already regulating such emissions under the Act's "air toxics" program. In a fascinating issue of statutory construction, this argument turns on the fact that the Senate and the House of Representatives passed different versions of the key language back in 1990, a discrepancy that Congress never resolved. It seems likely that the legality of the plan will ultimately be decided by the U.S. Supreme Court several years from now.

In Congress, partisan positions on the Clean Power Plan mirror those from 2009–10, when a Democrat-controlled House passed the American Clean Energy and Security Act, a national greenhouse gas cap-and-trade program that the Democrat-controlled Senate never brought up for a vote. As was the case in the 111th Congress, current Republicans overwhelmingly oppose the Clean Power Plan, while current Democrats overwhelmingly support the plan.

With majorities in both house of Congress, Republicans appear to have the votes to pass a joint resolution of disapproval to invalidate the plan under the Congressional Review Act, a statute that allows Congress to invalidate rules with a simple majority vote that is not subject to filibuster. However, a major—and likely dispositive—difference between then and now is that in 2010 opponents needed only 40 Senate votes to defeat legislation via filibuster, while in 2015 they will need support from two-thirds of Congress to prevail. Since a joint resolution of Congress is subject to the President's constitutional veto power, ultimate success under the Congressional Review Act will require 290 votes in the House and 67 votes in the Senate to override a certain presidential veto. Absent very vocal public opposition to the Clean Power Plan, it seems unlikely at this time that opponents would be able attract sufficient votes.

However, even if direct disapproval fails, with Republicans in control of the agenda in Congress, repeal measures will likely be incorporated into various measures, beginning with EPA's annual appropriation bill. And the plan will undoubtedly become a very visible point of debate in the 2016 election cycle, with Republicans denouncing the plan as "Democrats' job-killing national energy tax" and Democrats raising the specter of ever-increasing hurricanes, droughts, and wildfires for generations to come.

The Clean Power Plan is more than 1,500 pages long, not counting its companion proposal for a federal implementation plan, which adds another 755 pages. Jones Day will be releasing in the near future a special edition of The Climate Report to provide a deeper dive into the structure, requirements, and legal issues associated with the plan.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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