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Oct. 16 — West Virginia and other states opposed to the Environmental Protection Agency's Clean Power Plan intend to file new challenges to the rule the day it is published in the Federal Register, sparking a second round of litigation over the carbon dioxide emissions standards for power plants.
“We anticipate we’ll be filing the day that the regulation is printed in the Federal Register,” West Virginia Attorney General Patrick Morrisey (R) told Bloomberg BNA.
States and industry groups opposed to the Clean Power Plan had prior legal challenges to the rule in its proposed stage rebuffed by federal judges as premature, but with its publication expected this month, opponents are readying a new slate of arguments to push back on President Barack Obama's signature domestic climate change achievement. While opponents are expected to reiterate many of the same objections to the rule that they aired earlier, finalization of the rule will allow opponents to challenge the content of the rule and not just procedural flaws.
“Now that we have a final rule, this will open the door to legal challenges to the design of the final rule,” Kyle Danish, a partner at Van Ness Feldman LLP, told Bloomberg BNA.
The prior lawsuits, which asked the U.S. Court of Appeals for the District of Columbia Circuit to take the unprecedented step of blocking the proposed Clean Power Plan before it was final, focused almost entirely on “threshold questions” about whether the EPA even had the legal authority to pursue the rule. Those arguments are expected to be raised again, but the next wave of challenges is expected to expand to include attacks on the agency's determination of what constitutes the best system of emissions control and whether that can include emissions reductions that occur beyond the fenceline of the power plants themselves.
“During the litigation on the proposed rule, the challenges held off on raising those sorts of issues because they thought they had the best chance of getting into court on the purely threshold statutory question,” Danish said.
The EPA Clean Power Plan (RIN 2060-AR33) sets unique carbon dioxide emissions standards for the power sector in each state that will be phased in between 2022 and 2030. State regulators are tasked with developing their own compliance plans, but the EPA will issue a federal plan for those states that choose not to write their own.
The D.C. Circuit had previously denied states and industry groups' petition to block the Clean Power Plan as premature, because the final rule had not yet been issued by the EPA (In re Murray Energy Corp., 788 F.3d 330, 2015 BL 180996 (D.C. Cir. 2015)).
The first skirmish in the upcoming litigation will be states and industries opposed to the rule asking the court to halt its implementation until the litigation is resolved.
“We anticipate we will seek a stay. It’s always been the goal of the states and the affected entities to ensure the merits can be evaluated on the case before any rule could possibly go into effect,” Morrisey said.
To win a stay from the court, opponents must show that they have a high probability of winning the case on its merits and that they would face irreparable harm by allowing the rule to go into effect in the meantime.
“The big arguments are going to be whether or not staying the rule will cause irreparable harm,” Richard Alonso, a partner at Bracewell & Giuliani LLP, told Bloomberg BNA.
Although the first emissions reductions are not required until 2022, states opposed to the Clean Power Plan are expected to argue that marshalling the resources necessary to develop the plans required to implement the EPA rule will constitute an irreparable loss of time and money should the rule later be overturned.
But Danish said getting the court to grant a stay will be “an uphill battle,” because the EPA has extended the initial compliance deadline and proposed a model federal plan that states can use to draft their own compliance strategy.
“I think it’s harder to show the irreparable harms and costs the court will take note of,” he said during an Oct. 15 forum sponsored by ICF International.
David Doniger, director of the Natural Resources Defense Council's climate and clean air program, also doubted that opponents will be able to meet the bar for getting a stay.
“We don’t think the Clean Power Plan foes will be able to show likely success on the merit or irreparable harm,” he said at an Oct. 14 event sponsored by the D.C. Bar.
Although the latest litigation is expected to broaden the range of challenges to the EPA rule, petitioners are expected to revive many of the same arguments they made about the agency's fundamental legal authority to even issue the carbon dioxide standards. Key among those challenges will be whether setting hazardous air pollutant standards for power plants under Section 112 of the Clean Air Act negates the EPA's ability to issue carbon dioxide standards under Section 111(d).
“I don’t see how a court ignores it, because it goes to the ultimate question of whether EPA has any authority to do the Clean Power Plan,” Alonso said.
The EPA issued its Clean Power Plan under Section 111(d) of the Clean Air Act, which was last amended in 1990. At that time, two conflicting amendments—one passed by the House and one passed by the Senate—were adopted for that provision. The Senate language merely bars the EPA from regulating pollutants under Section 111(d) that are already subject to emissions limits under Section 112. The House amendment goes further, opponents of the Clean Power Plan say, barring the EPA from regulating industrial source categories under Section 111(d) for which it has already issued emissions standards under Section 112, as it has with power plants. The EPA has regulated hazardous air pollutants from power plants under Section 112 as part of its mercury and air toxics standards.
While both amendments were signed into law, only the House amendment appears in the U.S. Code, while both amendments appear in the statutes at large. Opponents of the Clean Power Plan argue that the House amendment was more substantive and therefore should take precedence.
Morrisey said the plain language of the Clean Air Act will make it difficult for the EPA to argue it can pursue standards for power plants under both sections 111 and 112.
“No matter how hard they try to stretch the language of the Clean Air Act, it’s difficult for them to overcome that thought,” he said.
But Doniger argued the court is likely to back the EPA's interpretation of its Section 111(d) authority.
“We’re quite confident the D.C. Circuit will rule the EPA has the authority, in fact the obligation, to regulate [carbon dioxide] from existing sources once new sources have been regulated,” he said.
Initial challenges to the proposed version of the Clean Power Plan—which Danish called “a scrimmage before the big game”—focused primarily on the issue of whether standards under Section 112 necessarily exclude regulation under Section 111(d). Although the D.C. Circuit ultimately chose not to address those questions while dismissing those lawsuits, that first round of litigation has given the EPA an opportunity to improve the legal underpinnings of the Clean Power Plan.
“The major thing they did is they came up with a new way of looking at that House amendment,” Danish said.
Initially, the EPA had argued that the conflicting amendments created a statutory ambiguity that the agency must be afforded deference to resolve. During the last round of litigation, the EPA developed a new argument that opponents' reading of the House amendment is not the only plausible interpretation and that the House language itself was ambiguous and could be read to support the agency's carbon dioxide standards. That updated interpretation found its way into the EPA final rule.
Morrisey said the arguments being advanced by the EPA now are “ really untested.”
“They’re being advanced for purposes of litigation,” he said.
Although the EPA is expanding its argument for the ambiguity of the statute, William Bumpers, a partner at Baker Botts LLP, said the agency's interpretations may not be entitled to deference from the court.
“The ambiguity that they’re talking about is not the ambiguity EPA typically relies on to assert they’re entitled to deference,” Bumpers said at the ICF International forum. “Normally, if there’s ambiguity in language that results in technical decisions from EPA, then EPA gets deference. In this case, the ambiguity is one of legislative construction. It’s not within the expertise of EPA to determine which portion of these two competing provisions ought to be given greater weight.”
The EPA significantly revised its final Clean Power Plan from its proposed version in an effort to shore up its legal foundation.
“The agency actually learned something during the comment period and they responded to it. So one could look at a change, at that time, as a positive,” Lisa Heinzerling, a law professor at Georgetown University and a member of Obama's EPA transition team, said at the Oct. 14 D.C. Bar event.
Among the revisions were extending the initial compliance date from 2020 to 2022 and updates to its best system of emissions reduction that dropped energy efficiency requirements for states.
“They dropped energy efficiency, and I think wisely, if they want to defend this rule. It helps their case,” Bumpers said.
However, he said the Clean Power Plan represents an unprecedented approach by the EPA, requiring power plants to achieve emissions reductions from beyond the fenceline of their own facilities by shifting generation to cleaner natural gas or renewable energy, which could mean to competing utilities. Previous rules under Section 111 only focused on the emissions reductions that could be achieved within regulated facilities themselves.
“This is an unprecedented change in the interpretation of 111(d), and I think it’s going to be greeted with a large dose of skepticism by the courts,” Bumpers said.
Although the EPA has moved to improve the legal arguments for the Clean Power Plan, Bumpers said another significant vulnerability to the rule will be that including natural gas and renewable power generation in the emissions rate calculations effectively creates a performance standard for existing power plants that is more stringent than that being imposed on new units. Though best system of emissions reduction is defined only once under Section 111 of the Clean Air Act, Bumpers said the EPA has offered multiple interpretations of that provision that vary from regulation to regulation.
“I think the court might be skeptical of setting standards that are so inconsistent,” he said.
Opponents of the Clean Power Plan are also expected to renew constitutional arguments against the rule, although lawyers said those challenges are less likely to be persuasive to judges than those grounded in the Clean Air Act itself.
“As a general rule, the constitutional issues are important, but the strongest case for both parties would be to formulate their arguments based on the actual language of the Clean Air Act and not the Constitution,” Alonso said.
Harvard Professor Laurence Tribe, who represented Peabody Energy in early challenges to the Clean Power Plan, had argued to the D.C. Circuit that the Clean Power Plan violates the 10th Amendment because it commandeers state resources to enforce a federal regulation. Energy policies remain the purview of state regulators and not the EPA, he argued.
Morrisey predicted those arguments will once again be raised in new challenges to the Clean Power Plan.
“In essence, one of the real problems we’re seeing with this final regulation is the federal government is trying to invade the states’ space and states are in possession of police power,” Morrisey said. “The federal government doesn’t have the power to come in and manage state energy portfolios or commandeer state machinery to effectuate its will. So we expect those issues will get tested in court.”
However, other attorneys said judges would be much less likely to strike the rule on constitutional grounds than they would for statutory reasons.
“Most lawyers would agree the constitutional challenges, those present a somewhat higher bar,” Danish said.
One other avenue for opponents seeking to block the Clean Power Plan will be legal challenges to the EPA's new source performance standards for new power plants (RIN 2060-AQ91) issued under Section 111(b) of the Clean Air Act. The Clean Air Act only allows the agency to regulate existing sources under Section 111(d) if it has already regulated new units under Section 111(b).
“There are not a lot of coal plants being proposed to be built, so it’s not about that so much as the linkage to the existing source rule,” an environmental attorney who participated in the previous litigation over the Clean Power Plan told Bloomberg BNA.
Chief challenge to the new source performance standards will be the EPA's decision to set a carbon dioxide emissions rate for new coal-fired units that effectively would require the use of partial carbon capture technology.
“There are some questions about the way EPA has proposed to regulate new power plants and, in particular, its assumption about the availability of carbon capture and sequestration technology for new coal-fired power plants, which is a technically disputed area,” Danish said at the ICF International forum.
Morrisey said states opposed to the EPA rule are also looking closely at the option of challenging the new source performance standards as well as another avenue to attack the Clean Power Plan.
“We’ve been looking closely at that, and we believe there are severe deficiencies associated with 111(b),” he said.
Although the Clean Power Plan will face myriad legal challenges, attorneys are still advising utilities to work with state officials on their compliance strategy. Though some opponents of the rule, including Senate Majority Leader Mitch McConnell (R-Ky.), have urged states to boycott compliance, a strategy dubbed “just say no,” attorneys said utilities need to be prepared should the rule ultimately be upheld.
“I’ve been telling our clients to work with the states on developing the initial submittal,” Bumpers said. “Assume this rule is going to be upheld. It’s bad policy, bad economics, bad business judgment to just assume it’s not going to be there.”
States that choose not to develop their own implementation plans are effectively handing over their compliance strategy to the EPA, Bumpers said.
“Not submitting an initial plan is abdicating to a federal plan,” he said.
With assistance from Anthony Adragna in Washington.
To contact the reporter on this story: Andrew Childers in Washington at email@example.com
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