Judges Skeptical of Clean Power Plan Authority but Wary of Setting Precedent

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By Andrew Childers

April 16 — Federal appellate judges questioned whether the Environmental Protection Agency exceeded its legal authority when it proposed the Clean Power Plan, but they appeared skeptical of taking the unprecedented step of blocking the rule before it's finalized.

Public statements by EPA Administrator Gina McCarthy defending the legal basis for proposing the first-ever carbon dioxide emissions standards for existing power plants may indicate the agency hasn't seriously considered legal arguments against the rule, judges from the U.S. Court of Appeals for the District of Columbia Circuit said during oral arguments April 16.

“That's not going to change with comments” on the proposed rule, Judge Karen LeCraft Henderson said. “The only thing that's going to change is a court telling them, ‘You're wrong on the law.' ”

However, judges feared intervening before the Clean Power Plan is finalized, saying such action could create a flood of new lawsuits challenging federal actions at the proposed rule stage.

The proposed Clean Power Plan (RIN 2060-AR33) would establish unique carbon dioxide emissions rates for the power sector in each state. Those standards would be implemented by the states, which would choose for themselves the best options for compliance.

The Clean Power Plan is the EPA’s most expansive reading of its authority under the rarely used Section 111(d) of the Clean Air Act, which has never been interpreted by the courts.

The proposed rule is being challenged by Murray Energy Corp. and various states opposed to the regulation such as West Virginia.

EPA Has ‘Closed Mind.'

Henderson said the EPA appeared to have a “closed mind” to arguments that it can't regulate carbon dioxide emissions from existing power plants under Section 111(d) of the Clean Air Act because they are already subject to hazardous air pollutant limits under Section 112 of the act.

When the Clean Air Act was amended in 1990, the House and Senate approved conflicting amendments to Section 111(d).

The Senate amendment would prevent the EPA from regulating pollutants under Section 111(d) if they already are subject to hazardous air pollutant standards under Section 112. The House amendment can be read as barring the agency from regulating industrial sources under Section 111(d) if they are subject to standards under Section 112, as are power plants.

Both amendments exist in the statutes at large, but only the House amendment was included in the U.S. Code.

Opponents Say EPA Barred From Activity 

Opponents of the rule argue that means the EPA can't regulate carbon dioxide emissions from power plants because they are already subject to mercury and air toxics standards, currently being reviewed by the U.S. Supreme Court.

Judge Thomas Griffith also expressed concern with public statements by McCarthy defending the EPA's interpretation of its Section 111(d) authority even as it reviews public comments on the proposed Clean Power Plan. 

That the EPA has announced it plans to finalize the proposed rule this summer may indicate it might not give full weight to public comments opposed to the agency's proposal, Griffith said.

“What is the purpose of notice and comment in the face of statements like that? It's a sham,” he said.

Conflicting Amendments Need Resolution 

The judges struggled with how to reconcile the two seemingly conflicting amendments to Section 111(d).

The argument presented “an administrative law 101 course in some sense,” Ethan Shenkman, EPA deputy general counsel, said during an April 16 forum on the argument sponsored by the D.C. Bar.

“I don’t think there’s anything about this case that makes it exceptional from a jurisdictional perspective,” Shenkman said.

If the court accepts that the two amendments present a conflict—and aren't the result of a scrivener's error as argued by challengers—then the EPA is due an opportunity to interpret that language in keeping with the Supreme Court's decision in Scialabba v. Cuellar de Osorio, Griffith said (Scialabba v. Cuellar de Osorio 2014 BL 158583, 134 S. Ct. 2191 (U.S. 2014)).

No Typographical Error Seen 

“That's not a scrivener's error,” Griffith said. “There's no mistake here. There are no typographical errors here. You have two conflicting provisions.”

Geoffrey Barnes, a partner at Squire Patton Boggs LLP representing Murray Energy, had argued that the conflict would best be resolved by Congress and that it would be “completely inappropriate and wrong” to give deference to the EPA interpretation

Amanda Shafer Berman, a Justice Department attorney representing the EPA, argued that those two amendments create an ambiguity in the statute, which the EPA must be given an opportunity to reconcile in its proposed rule.

“If there is a scintilla of a shred of potential ambiguity in the statute, EPA must be given that opportunity,” she said.

Lawsuits Said Premature 

The EPA hasn't yet issued the final Clean Power Plan and as such hasn't made any final determinations for how the rule will be structured and how it will read its authority under Section 111(d) of the Clean Air Act, making lawsuits premature, Justice Department attorneys representing the agency argued.

In fact, the EPA in its brief to the court had refined its argument for regulating power plants under Section 111(d).

In a legal memorandum issued with the proposed rule, the EPA had argued that the conflicting amendments created an ambiguity to be resolved. In its brief, the agency had argued that the House amendment alone contained enough ambiguity to justify its proposed rule.

Laurence Tribe, a Harvard Law School professor representing Peabody Energy Corp., had argued that there is no ambiguity in the statute because the two amendments can be read together harmoniously and that would bar the EPA from regulating carbon dioxide from power plants after it has already regulated their toxic pollutant emissions.

“You follow them both,” he said. “They're not inconsistent.”

Court Fears ‘Morass.'

Though the judges appeared skeptical of the legal reasoning for the EPA proposed rule, they also were wary of setting a precedent that could open all federal regulations to legal challenges at the proposed rule stage.

“You're inviting us into a morass,” Griffith said.

Murray Energy and the states opposed to the rule argued that the extraordinary writ is warranted in this circumstance because the proposed Clean Power Plan is an egregious violation of the provisions of Section 111(d). They argued that the unique legal issues presented by the current litigation are unlikely to arise with enough frequency to overburden the courts.

However, Judge Brett Kavanaugh questioned whether the issues raised in the current lawsuit were so truly unique as to warrant issuing an extraordinary writ to block a proposal, which the D.C. Circuit has never done before. The issues could better be resolved in litigation after the rule is finalized, he said.

“For us to get in the middle of this before that happens seems highly unusual,” Kavanaugh said.

Official Concedes Unusual Nature of Action 

West Virginia Attorney General Patrick Morrisey conceded the unusual nature of the lawsuits to block the proposed rule.

“We recognize that providing relief in this circumstance is not typical; we heard that today in court,” he told reporters April 16. “But we do believe it's warranted because the harm to states is extraordinary and, separately, we think it's only a matter of time before EPA's flawed interpretation is struck down by the courts.”

When pressed by Griffith, Tribe was unable to name a precedent for the D.C. Circuit blocking a rule before it's finalized.

“I'm afraid I can't give you a bright line there,” Tribe said.

No Unique Grounds Established 

Sean Donahue, an attorney representing environmental groups in the litigation, said the arguments brought by the challengers did not establish unique grounds for the court to take the unprecedented step of blocking a proposed rule.

“Fights about whether an agency is authorized to do something is routine,” he told reporters April 16.

The EPA expects to finalize its rule this summer, and proponents of the regulation suggested there may be no harm to states and industry groups by waiting for that process to be completed.

Additionally, that time would allow the U.S. Supreme Court to issue its ruling in a lawsuit challenging aspects of the EPA's mercury and air toxics standards for power plants, which was argued March 25.

Though the Supreme Court only considered the narrow issues of whether costs should be considered when determining whether it was appropriate to regulate toxic emissions from power plants, a decision striking that rule, issued under Section 112, would moot many of the challenges to the Clean Power Plan.

With assistance from Patrick Ambrosio in Washington

To contact the reporter on this story: Andrew Childers in Washington at achilders@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com