2018 Outlook on the Clean Power Plan

Eversheds Sutherland (US) LLP
Susan G. Lafferty, Joshua L. Belcher and Samina M. Bharmal

January 12, 2018

Heading into 2018, undoing the Clean Power Plan, the Obama Administration’s signature regulation for addressing climate change, remains a high priority under the Trump Administration. While 2017 was rife with statements, some more formal than others, that the Clean Power Plan was facing its end, 2018 may produce actual results for industry. A repeal proposal is expected to be finalized this year. The Administration has also signaled that a potential replacement rule is in the works, which could pose significantly less, or at least different, burdens on regulated industry.

 What is the Clean Power Plan?

The Clean Power Plan, finalized in regulations on October 23, 2015, set stringent carbon emission rates for existing coal-fired power plants. The emission rates were so low, lower even than those proposed for new units, that 26 states and wide swaths of industry challenged the Clean Power Plan at the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) for a host of issues— usurping the states’ role in environmental and energy resource planning, imposing a standard that no single source could meet on its own, and acting outside of the authority granted to the Environmental Protection Agency (EPA) in the Clean Air Act under section 111(d). In February 2016, the Supreme Court of the United States stayed (i.e., delayed) the effectiveness of the rule, while litigation over the rule carried on before the D.C. Circuit into September 2016. The D.C. Circuit never issued a decision after oral arguments in 2016, likely due to the election and change in administration, and throughout 2017 granted temporary pauses in the litigation while it waited for Trump’s EPA to officially repeal or replace the Clean Power Plan. In the meantime, the Supreme Court’s ruling that industry need not comply with the Clean Power Plan has remained in effect.

What did EPA do in 2017?

 Under the Executive Order on Promoting Energy Independence and Economic Growth issued March 28, 2017, EPA began taking steps to formally remove the Clean Power Plan regulation. EPA began taking comments on October 16, 2017 on its proposal to repeal the Clean Power Plan. In the repeal proposal, EPA proposes that it only has authority to promulgate the “best system of emission reduction” achievable by a single source, as opposed to by all power plants as a single system. The latter was the Obama EPA’s interpretation used to justify regulating beyond the fenceline of a single source and effectively requiring generation shifting from coal-fired generation to natural gas or renewable generation. In addition to explaining that EPA’s current legal interpretation is reasonable, the repeal proposal suggests that section 111(d) prohibits the Obama EPA’s interpretation. It is a nuance that seems lost in a game of legal chess, but if upheld in court, the nuance could block future administrations from ever proposing a new Clean Power Plan that would require generation shifting under section 111(d).

At the end of December, EPA began taking informal comments on a potential future replacement rule for regulating carbon emissions. Existing law requires EPA to regulate greenhouse gas emissions, and EPA’s advanced notice of proposed rulemaking (ANPRM) provides the opportunity for EPA to align a future regulation with the Trump Administration’s goal of blocking a future administration from adopting a new and burdensome regulation in this area while also fulfilling its legal obligation to regulate greenhouse gas emissions. In the ANPRM, EPA requests comments on what is an achievable emission rate for a single source, and should such a rate be tailored for electric generating units using different fuel inputs. EPA is also requesting input on the proper role of states in regulating these emissions, likely seeking to ameliorate the blowback from the states on the original Clean Power Plan that the federal government was in effect forcing power plant shutdowns, an authority that is exclusive to the states. Additionally, EPA is requesting input on how a future emission standard could impact industry’s burdens in the New Source Review (NSR) program. An overarching concern is that with any heat rate improvement employed to meet an emissions standard, a power plant will become more efficient, resulting in more dispatch and more aggregate emissions, and more emissions could trigger onerous requirements under the NSR program. Thus, a power plant could face compliance burdens from NSR stemming solely from its compliance with a replacement rule.

 What’s next for 2018?

The repeal proposal will likely be finalized in 2018, and the Clean Power Plan would then be gone. Almost. The repeal faces certain challenge before the D.C. Circuit. The D.C. Circuit’s decision faces near-certain review by the Supreme Court. If the repeal survives the courts, then the Clean Power Plan will certainly be gone, for now. Unless the courts uphold the nuance discussed above, that section 111(d) prohibits generation shifting, then it is possible that a future administration could try to issue a new Clean Power Plan with emission standards set beyond the fenceline under the same statutory authority. All of this will play out in the years to come.

This year also provides industry the opportunity to educate EPA on the implications of a replacement rule through providing comments to the ANPRM. Unlike a proposed rule, the ANPRM does not serve as part of the official record for the rulemaking, and allows industry to interact with EPA before being confined to a specific proposed rule. EPA expresses interest in a wide array of issues, and in particular, the various operational realities faced by regulated industry.

EPA may choose to react to this information in a variety of ways. It could issue a proposal for a replacement rule. Or it could go so far as to revisit the so-called endangerment finding, which underpins the agency’s requirement to regulate carbon emissions from power plants. EPA may do nothing, though it will risk facing a court order to regulate.

Why should you care?

This year could bring greater certainty for regulated industry in this area, at least for the immediate future. Since the Clean Power Plan was finalized in 2015, there has been concern in the industry that expensive, and perhaps even impossible, compliance obligations could be imposed with little notice. While 2017 produced hints of change, the large amount of upheaval allowed little certainty for investment and operational decision makers. The new year may bring more regulatory certainty if the Clean Power Plan is formally repealed and the agency engages with the public on a different regulatory path forward.

This article is being provided for informational purposes only and not for the purposes of providing legal advice or creating an attorney-client relationship. You should contact an attorney to obtain advice with respect to any particular issue or problem you may have. In addition, the opinions expressed herein are the opinions of Ms. Lafferty, Mr. Belcher & Ms. Bharmal and may not reflect the opinions of Synergy Environmental, Inc., Eversheds Sutherland (US) LLP or either of those firms’ clients.

 

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