Clean Power Rule Challenges Will Proceed Sooner or Later, But Its Goal May Already Be Close at Hand

Legal challenges filed almost immediately after President Obama announced the Clean Power Rule may be premature. That is what attorneys for EPA told the U.S. Court of Appeals for the District of Columbia Circuit recently in response to an action brought by West Virginia and several other states. The fundamental issue according to EPA attorneys is that a challenge is not ripe until the regulation is published in the Federal Register, and that may not occur for several weeks. (The Hill).

The particular issue raised by the petitioners is an effort to stay the effect of the Rule while the challenge is proceeding. As we have noticed previously, a failure to obtain a stay associated with a challenge to EPA’s Mercury and Air Toxics Standard (“MATS”) effectively resulted in substantial compliance with that rule during the COURSE OF lengthy litigation and before the Supreme Court invalidated MATS earlier this summer. As a practical matter, many power companies proceeded with actions necessary to comply with MATS, including the shutdown of some older power plants and a conversion from coal to natural gas for others. Indeed, the Governor of Michigan, the State that lead the challenge to MATS, announced earlier this week that the State will comply with the Clean Power Plan even though Michigan’s Attorney General is participating in the challenge led by West Virginia. (Michigan Stance Highlights Clean Power Plan Fray) EPA has indicated that publication of the Clean Power Rule in the Federal Register will occur in less than two months.

While challenges to the Clean Power Rule will certainly be pursued, the Rule’s goal of a substantial reduction in carbon emissions seems to be well along the way. This has apparently occurred primarily due to a substantial increase in the availability and use of natural gas resulting from the boom in hydraulic fracturing, particularly with respect to shale gas. Recent articles in Forbes (Fracking is Our Clean Power Plan) and (Greenhouse Gas Emissions Plunge) note the dramatic increase in the availability of fracked natural gas and that this has been a key to reducing carbon emissions in the U.S. to their lowest levels since 1988. Indeed, the argument is made that the goal set out in the Clean Power Plan for a 32% reduction in carbon emissions from 2005 levels by 2030, is substantially at hand. The indications are that there has already been approximately 25% reduction since 2007, deemed attributable to fracking specifically and the greater availability of natural gas generally. Viewed from a somewhat different prospective, by 2012, the United States had achieved approximately 70% of the CO2 emissions reductions targeted under the Kyoto Agreement.

While the coal industry has focused on what it refers as to as a regulatory “war on coal,” the dramatic shift in the source of energy for power plants appears, at least to this point, to be primarily due to the availability of relatively cheap natural gas. For example, electricity generated from coal-fired plants declined approximately 25% from 2007 to 2012 while generation from natural gas-fired plants increased by approximately 35%. While it is true that power generation from renewable sources has also increased, to date, the real shift appears to be to natural gas.

With this in mind, it bears noting that the Clean Power Plan will likely have an adverse impact on the use of natural gas for power generation. The Plan places a significant emphasis on renewable sources and away from those which generate CO2, including natural gas. Thus, and assuming that the Rule is substantially upheld in its present form, the question may become one of the significance of the individual state emissions budgets and how they might impact total CO2 emissions regardless of whether the source is coal or natural gas.


Obama Announces Clean Power Plan, Fights to Follow

On August 3, 2015, President Obama announced the finalization of the long-awaited Clean Power Plan, a policy primarily intended to further the commitment to combatting global warming. The Plan focuses on the electric power generating sector of the nation’s economy, which is responsible for approximately 31% of U.S. greenhouse gas emissions (primarily carbon dioxide, fluorinated gases, and nitrous oxide). The Plan intends to reduce greenhouse gas emissions by 2030 to levels below those generated in 2005. (Washington Post ).

A fact sheet provided by U.S. EPA to accompany the President’s announcement (Overview) indicates that the new rules call for the States to develop individual plans aimed at reducing levels of greenhouse gases from power generation for existing sources while EPA develops the standards for new sources. States will have to work under individual greenhouse emissions limits or budgets and will have incentives to encourage renewable sources such as wind, solar and nuclear. States must submit a final plan, or alternatively, an initial submission with an extension request, by September 6, 2016. Those States receiving extensions must submit final plans no later than September 6, 2018. Thereafter, the rule allows 15 years for full implementation of all reduction measures.

States may choose either source-specific requirements to require all of effected power plants to meet emissions performance rates or State-specific rate-based or mass-based goals. Alternatively, State plans can include a mixture of measures to include renewable energy standards and programs to improve residential energy efficiency. In addition, States may work together in a cooperative or multi-state approach including emissions trading. While most of the attention to the Plan has focused on the perceived ‘War on Coal’, the Plan seeks to limit greenhouse emissions from power plants regardless of fuel source. So, even though plants fueled by natural gas produce less greenhouse emissions, those will also be counted in overall State caps or limits.

Reaction from opponents was quick. Several States have indicated they will directly oppose the regulations in court challenges and, yesterday, sixteen State Attorneys General sent a letter to EPA Administrator Gina McCarthy requesting that she suspend the rules while a court challenge proceeds. (Salt Lake Tribune). The States will no doubt be joined in this effort by affected industry groups. Legal challenges will not be ripe until the rule becomes final with publication in the Federal Register, although that is expected to occur soon.

While legal challenges will play out over the next several years, leaders in Congress are already moving in a variety of directions to thwart or limit the effectiveness of the rules. (The Hill). These actions are expected to take the form of both legislation to undo or limit the scope of regulations and efforts to limit appropriations necessary to implement the Plan.

To the extent that opponents view this simply as a war on coal, they may be missing the scope of the Plan and ignoring things that have already happened. It seems clear that the combined effects of cheap natural gas and the EPA mercury regulation affecting the power industry have already substantially reduced the use of coal. With respect to the mercury rule, although the Supreme Court invalidated it earlier this summer (Michigan v. EPA), the rule had not been stayed during the course of the litigation, and many power producers took significant steps to meet its requirements in the interim. As a consequence, many noted that the actual effects of the mercury rule and related efforts, by prompting closure of some older coal-fired plants, the conversion of others to natural gas, and the on-going planning for new plants, mean that the effort to reduce significantly the emissions from coal-fired power generation is already well underway. (See, for example Forbes – James Conca and comments from various utilities to BNA last April). If so, these most recent rules, while important for a variety of reasons, may prove to be significant on the issue of burning coal for power production primarily because they continue a process that has already begun.

State of Tennessee Sues EPA and the Corps of Engineers on Waters of the United States Final Rule

Today, the State of Tennessee joined in one of the many lawsuits filed by States challenging the EPA and Corps of Engineers Final Rule that defines of Waters of the United States  under the federal Clean Water Act.   See prior blog post on July 2, 2015.  The federal agencies stated in their Final Rule that they had actually narrowed the definition but most agricultural and industry groups believe the Final Rule will do the  opposite.  Tennessee joined the lawsuit already filed in the United States District Court of Ohio by the States of Ohio and Michigan.  Tennessee’s foray into the litigation marks what is believed to be the 30th state to join in a lawsuit challenging the Final Rule (the count goes up regularly).  No states have yet asked to intervene on behalf of the government. The lawsuit seeks to have the court vacate the rule permanently and require the agencies to start over.  The states allege in the lawsuit  that the agencies were in “violation of the structural federalism provisions of the United States Constitution Including the Tenth Amendment.”  According to the lawsuit the government’s position  “would result in a significant impingement of the States’ traditional and primary power over land and water use, . . . and would exceed the Commerce Clause powers of the federal government and violate the Tenth Amendment.”

All Region IV states except North Carolina have now joined in one of the various lawsuits.

New Rule Defining “Waters of the U.S.” Draws New Battle Lines Between the Federal Government and States

The Environmental Protection Agency (“EPA”) and U.S. Army Corps of Engineers (“Corps”) published their Final Rule defining “waters of the United States” on June 29, 2015.  The rule becomes effective on August 28, 2015. The rule was pre-published on May 27, 2015 by EPA and the Corps (the “Agencies”), and it has already received unprecedented attention. The Clean Water Act’s jurisdiction relates to “navigable waters” which is defined by Congress only as “Waters of the United States or the territorial seas.” This vague definition has created substantial confusion to stakeholders.   A number of U.S. Supreme Court cases attempted to provide clarification, but ensuing regulatory guidance from the Agencies just seemed to muddy the water more.

So the Agencies decided to do two things. First, they decided that their definition of Waters of the United States should be a duly promulgated federal rule, and second, they hoped to clear up any confusion by deeming just about anything that is wet as waters of the United States.  The rule will affect many industries, including construction, agriculture, energy development and transmission, transportation, and housing.

The Agencies’ rule for the first time deems all tributaries to traditional navigable waters regardless of size as jurisdictional as long as it has a bed, bank and an ordinary high water mark.   The universe of these features is significant. For adjacent wetlands the rules expanded the definition to include “neighboring” wetlands. A neighboring wetland includes all waters within the floodplain of, or within specified distances from the ordinary high water mark of, traditional navigable waters, their tributaries, and impoundments. While the rule provides some exceptions, such as swimming pools and some roadside ditches, the definition is widely regarded by the regulated community as greatly expanding the universe of jurisdictional waters.

One day after the rules were published, two separate lawsuits were filed.   In what might be considered a battle of the states versus the federal government, 22 states claim that the Final Rules usurp states’ rights. In the first case, Georgia, et al. v. McCarthy, nine states, including all but two Region IV states, are plaintiffs. Claiming the rules infringe on state sovereignty, these States are asking the Court to vacate the rules. To get a flavor of the case, one of the allegations in the Georgia lawsuit states:

The Agencies’ unlawful attempt to expand their authority to broad categories of non-navigable, intrastate waters and lands imposes great harm upon the States and their citizens. Once a water is determined to fall within the Agencies’ authority, this determination eliminates the States’ primary authority to regulate and protect that water under the State’s standards, and imposes significant federal burdens upon the States. Such a federal jurisdictional finding also places significant burdens upon homeowners, business owners, and farmers by forcing them to obtain costly federal permits in order to continue to conduct activities on their lands that have no significant impact on navigable, interstate waters.

The second case, North Dakota, et al. v. McCarthy, includes 13 states. Two of the states do not have delegated NPDES permitting authority under Section 402 of the Clean Water Act. They allege, among other things, that Agencies failed to meaningfully consult with the states and the rule will place a burden on those states by requiring much more permitting. One of the allegations states:

The Final Rule will harm the States in their capacity as owners and regulators of the waters and lands within their respective boundaries. The States’ use and management of the waters and lands they own or regulate will be subject to greater federal regulation under the Final Rule.

While states have been parties to other environmental lawsuits challenging the federal government, these lawsuits are somewhat unprecedented in the appeal for State’s rights and the 10th Amendment. The battle lines are now drawn by 22 states. Based on comments to the Proposed Rule, it is clear that a number of other states are with them in spirit. Of course, it is expected that industry groups will also challenge the rule, but these cases highlight what many states believe is an erosion of the concept of cooperative federalism.

Supreme Court Halts Implementation of EPA Rule on Mercury Emissions from Electric Power Plants: The Practical Effects Are Debatable

On Monday, the U.S. Supreme Court halted further implementation of a U.S. EPA’s regulation limiting mercury and other hazardous air toxic emissions from coal- and oil-fired electric power plants. In a 5-4 decision, the majority held that EPA failed to take costs into account when deciding to regulate power plants under this rule, thereby imposing substantial and costly emissions limits and control requirements on them. However, the Court did not strike down the rule, instead remanding the case for further proceedings.   The Opinion can be viewed here.

Members of Congress and industry officials cheered the decision as a significant limit on EPA authorities (The Hill), but the effects are not quite so clear. Under the procedures used to bring the litigation, the rule was not suspended pending the outcome of the court challenge, meaning that the challenged rule has been in effect for several years. As a consequence, much of the power industry has already taken extensive and expensive steps to comply. Thus, while EPA will find it necessary to address deficiencies associated with the rule, specifically its economic impacts, this may be too late for most power plants. (For example, The Anniston Star’s article on the likely impact on Alabama Power).

The Court’s decision turned on EPA’s failure to assess the potential costs of the rule at the outset of the rulemaking process when the Agency made the initial decision to apply the regulation to the power industry. Although EPA sought to supplement the rulemaking record with an economic analysis done after the rule was promulgated, the Court said this was too late. However, the opinion left open the possibility that EPA could revive the rule and made clear that it was not requiring a formal cost benefit analysis (which would effectively require attribution of costs and benefits to each advantage and disadvantage). The assessment of costs is left to EPA’s discretion so long as it is exercised reasonably.

Prospectively, the ruling may have a greater impact on future rules related to the electric power industry. While the mercury rule’s impacts have already been substantially imposed, and are not likely to be removed entirely, or even modified substantially, future rule making associated with this industry and coal combustion generally will almost certainly receive greater scrutiny from the standpoint of costs related to benefits.

EPA Issues Clean Water Rule Defining Waters Of The United States

On Tuesday, May 26, 2015, EPA issued a long-awaited rule defining “Waters of the United States.” The final rule is available as a prepublication version. Elsewhere, on EPA’s Clean Water Rule webpage, there are a number of fact sheets and information intended to explain and support the rule as proposed. EPA apparently found this scope of detail and explanation necessary due to the significant opposition to the rule.

Even before publication, the rule had generated a great deal of opposition. The proposed definition has been viewed by a number of groups as effecting a broad expansion of federal authority over water-bearing bodies that had previously not been considered to fall within the definition of “Waters of the United States.” For example, the National Association of Manufacturers provides a detailed graphic on its website reflecting that Association’s view of the expansive nature of the rule.

A significant number of groups and organizations have expressed opposition to the proposed rule, and the U.S. House of Representatives passed legislation that would force the EPA and the Army Corps of Engineers to rewrite and modify the rule in consultation with the States. (Politico, May 27). The House enactment came before EPA’s final action, and the Senate is considering a similar measure. The White House has promised a veto.

Regardless, the rule is likely to be the subject of a court challenge as soon as it becomes effective. EPA’s action on Wednesday was the final required agency action. However, by its terms, the rule will not become effective until sixty days after publication in the Federal Register, which has yet to occur.

New Coal Ash Regulations Causing Additional Controversy

Last December, EPA announced its final rule regarding the management of coal combustion residuals (“CCR” a/k/a “coal ash”). This came several years after initial alternative proposals were offered for public comment, and the Agency’s subsequent review of over 450,000 written comments. The announcement reflected a decision to regulate CCR as a non-hazardous waste under Subtitle D of the Resource Conservation and Recovery Act (“RCRA”). Such a classification had been supported by the power industry and industry groups and businesses that use coal ash in manufacturing and construction. This meant, in turn, that the material would not be regulated as a hazardous waste under the more stringent requirements of Subtitle C of RCRA, a classification that had been urged by many environmental interest groups during the comment period and in subsequent lobbying with the Agency and the White House.

Although the rule has not yet become final since it has not yet been published in the Federal Register, Congress appears to be moving quickly on legislation intended to limit certain aspects of the rule. As a result, the opposing sides in the original rulemaking process are at odds again, but now urging different positions regarding the merits of the rule announced by EPA. Environmental groups find themselves in a position of supporting the rule as announced by EPA while industry groups are seeking changes through the Congressional process.

After urging EPA to adopt the less restrictive Subtitle D classification, utilities and coal ash recyclers are supporting a bill sponsored by Representative David McKinley (R-W.Va.) that would put into law a version of the rules, but with certain changes that would address industry concerns. The legislation is intended to formalize the process of regulating coal ash by focusing primarily on state enforcement authorities and requiring the states to develop enforceable permits for such units. In part, this is intended to address industry concerns that the EPA may impose more stringent regulations under the hazardous waste program at a later date.

Rep. McKinley’s bill appears to be on something of a fast track in the House. It was publicized in draft form in mid-March. (The Hill, March 12). Within two weeks, a House subcommittee of the Energy and Commerce Committee had conducted hearings and passed the legislation out of subcommittee to the entire committee. (The Hill, March 25). During committee hearings prior to the vote, Mathy Stanislous, EPA’s Assistant Administrator for Solid Waste, voiced concern that the legislation eliminated certain key components of the regulations including the availability of information to the public. However, EPA did not take the position in opposition of the legislation, and three Democrats on the subcommittee supported it along with all of the Republican members.

As noted, many in the environmental community are now supporting the EPA’s rule even though it does not regulate coal ash as a hazardous waste. Thus, environmental groups are seeking to organize opposition to the McKinley legislation. (See for example: the Clean website)

The issue certainly has practical ongoing effects. A recent NPR report (here) about the coal ash spill into the Dan River in North Carolina reflects not only the substantial monetary penalty that the State has proposed for Duke Energy, but also the effort to identify and approve a location for a landfill to receive the CCR.

EPA’s Rules Related to Carbon Emissions and Climate Change Prompt A New Focus By The Opposition

EPA’s new rules for limiting emissions of carbon dioxide for both existing power plants and proposed plants have prompted at least two substantive reports by public policy institutes focusing on the economic aspects of the proposals. The Beacon Hill Institute at Suffolk University and The Heritage Foundation have recently published reports that estimate the potential costs, particularly in terms of jobs, associated with the adoption of these regulations. These reports can be viewed here (Beacon Hill) and (Heritage Foundation).

The Heritage Foundation report has apparently generated the greatest interest due to its effort to detail the number of jobs that the regulations may cost each state. Thus, a recent article on covering several Alabama news sources, noted that the regulations may cost Alabama as many as 10,700 jobs or about 4.14% of the State’s manufacturing employment. (Wake Up Call 2/20/15 ). Overall, the Heritage Foundation estimates that over a half million manufacturing jobs will be lost nationwide

Although the very issue of climate change continues to have prominent deniers, the arguments put forth by those who oppose climate change regulations seem to be edging away from absolute denial of the science supporting the fact of any change in the earth’s average temperature and towards the potential economic and social impacts of the issue. Until fairly recently, there has been a vocal group of individuals with scientific credentials who openly rejected the scientific basis for the position that the world’s climate is warming. As scientists have moved to a general consensus that the problem is real, the argument has generally moved from outright denial that the earth’s temperatures are rising to one that questions the cause. Many who originally denied that there was any climate change now acknowledge that temperatures are increasing, but argue that the cause is primarily the result of a natural climate cycle and not the result of human activity such as through the combustion of coal. Even that debate tends to be between scientists and senior policy-makers. These recent studies may indicate a further shift towards more practical aspects of climate change issues: the impacts of the various regulatory proposals the situation has prompted. Regardless of whether the estimates of costs, particularly in jobs, are valid, the fear of the loss of jobs in significant numbers seems much more likely to raise concerns on the part of the general public than has a debate between scientists.


Fracking: To Ban Or Not To Ban?

The process of hydraulic fracturing (also known simply as “fracking”) continues to divide the public and public policymakers, even as resulting lower natural gas prices have encouraged industries, including many power plants, to convert from coal-fired boilers as one means as coping with coming limitations on the emissions of carbon monoxide.

Local concerns about fracking activity have their origin in concern about pollution of drinking water sources. Those concerns have now expanded to include concerns about the management of fracking fluid wastes and the possibility that the activity may prompt localized seismic activity. For example, scientists at the Universities of Miami and Ohio have asserted that fracking activity prompted localized earthquakes in a part of the state. (Ohio earthquakes).

A number of anti-fracking proposals were on state and local ballots this past year and many of them were adopted. (Local measures). And New York recently imposed a fracking ban by executive action, prompting suggestions that there may be similar actions in other states. (National Geographic).

At least part of the Obama Administration is arguing against such localized bans. Interior Secretary Sally Jewel recently criticized the bans stating that they prompt confusion for the oil and natural gas industries. (The Hill). She acknowledged the need for more scientific research, but in the interim, will rely on scientists at the U.S. Geological Survey to help guide her decisions about allowing fracking on federal lands. Ultimately, she believes it would be better to have uniform regulations for the activity. The Administration is, in fact, pursuing a set of regulations that would direct fracking activities on federal lands, but these have been pending for almost a year. (White House reviewing fracking rules). And EPA initiated a scientific study of fracking in 2011 with the intention of providing a final report last year. That report is yet to be issued. (EPA Fracking Study)

If broader regulation covering activities in the industry, both on federal lands and non-federal lands, is coming, the Administration may need to move promptly if it hopes to get out ahead of local action.

Environmental Issues and The Republican Majority

Expectations are running high among some that the incoming Republican majority in both Houses of Congress will act to change or eliminate various environmental regulations and statutory provisions that they claim harm the economy. Interest groups are extending these efforts to enlist State officials in opposing these regulations at that level and, for his part, President Obama has indicated an intent to use his veto authority in an effort to prevent major changes in regulation and policy.

One of the foremost issues of concern on the part of many Republicans is the proposal to limit carbon pollution from coal-fired power plants. In mid-December, 99 House members sent a letter to the President asking that he direct EPA to withdraw its proposed Clean Power Plan rule. (House letter). Similarly, various conservative groups have contacted State legislators and other elected officials calling on them to resist the Plan in any way possible. (The Hill). The States have substantial authorities for the implementation of air pollution control regulations under the federal Clean Air Act, just as they do with the implementation of other major federal environmental statute.

However, there are some indications that these position may not be quite as unified across the Republican leadership as first thought. For example, a recent interview given by Senator James Inhofe of Oklahoma to the Tulsa World indicates that initial efforts may focus elsewhere. Senator Inhofe, a leading denier of climate change science, will become the Chairman of the Environment and Public Works Committee the Senate’s key environmental committee. Yet, he indicated in the interview that initial focus of his chairmanship of would be on transportation and infrastructure. (Tulsa World). Also of interest, a recent poll conducted jointly by the Associated Press-NOR Center for Public Affairs Research and Yale University indicates that, while 6 in 10 Americans support regulation of carbon dioxide pollution, fully half of persons identifying themselves as Republicans hold the same position. (StarTribune). Even if the Republican majority eventually pushes substantial legislation through both Houses to affect environmental issues, including climate change, President Obama has promised a veto. (ABC Report).

While it seems clear that environmental issues will be at the forefront of Congressional debate in the upcoming Congress, it is not so clear how far this may go, or in exactly what direction. As we have seen before, exercising the powers of leadership often imposes restraints that are not in place when campaigning for leadership positions.