The comment period for the proposed Clean Power Plan ended on December 1st, and EPA is beginning to review the feedback from impacted states, utilities, and other entities. Following is a synopsis of some recent developments:
- Peabody Energy’s opposition to the CPP was validated recently by comments from Laurence Tribe — President Obama’s constitutional law professor at Harvard Law School, Vice President Gore’s Supreme Court lawyer in Bush v. Gore, and one of our nation’s leading constitutional law scholars. In joint comments filed before the EPA, Tribe and Peabody argued that the CPP is unconstitutional and should be withdrawn. Supporting this main point, the filing stated that “coal has been a bedrock component of our economy and energy policy for decades” and that the Obama administration’s measure therefore “represents a drastic change in directions from previous Democratic and Republican Administrations.” This is of course a questionable statement as there have been multiple measures from both parties in past decades to attempt to regulate coal, so the fact that the CPP attempts to do so now is not really a “drastic change.” The argument the CPP will put coal at a competitive disadvantage is really the crux of this opposition and thus it is not surprising that Peabody Energy has partnered with Tribe on this opposition. However, economic forces unrelated to the CPP are also putting coal at an economic disadvantage—namely, the record-low price of natural gas—so it is unfair and inaccurate to claim that the CPP is the sole cause of coal’s economic challenges.
- Also, on the topic of economic trends impacting coal, let’s not miss a mention of the downturn in the cost of renewables. It’s important to note that, since the EPA released its draft proposal in the summer of 2014, the cost of wind and solar projects has dropped by some accounts by as much as 46 percent! This cuts into the argument that shifting from coal to alternative forms of generation is not cost effective. Of course, load-generating entities are not required to switch from coal to renewables—the CPP does not mandate any specific course of action and allows great flexibility in state implementation plans—but the important point here is that, with the downturn in both natural gas and renewables costs, it is becoming more difficult to make the argument that load-generating entities do not have viable alternatives to coal.
- We can now add the Federal Energy Regulatory Commission (FERC) as a new regulatory agency that will be entering the mix of the CPP debate, adding to what some would say are already convoluted policy processes. New reports indicate that FERC will have a “consultant, monitor and organizer role” and will be hosting a series of technical conferences. It is not presently being suggested that FERC would have any formal authority in the CPP reporting requirements. Many opponents of the CPP appear to be happy at FERC’s involvement due to concerns about how the CPP recommendations and related state requirements could have an impact on the transmission grid. FERC Chair Cheryl LaFleur has said that she views FERC’s role as one of ensuring that the rules do not affect electricity delivery and reliability, which extends directly to the question of whether the EPA, utilities, and state regulators are adequately equipped to identify reliability and market concerns that will arise as a result of state plans to comply with the CPP. Thus, while there’s no indication of FERC having a formal role in this process at the present time, could this become a possibility? We will have to wait and see but if FERC does take on a formal role (i.e., approving state plans for compliance to ensure that grid reliability is not jeopardized) it will certainly add fuel to the fire of what is already a host of regulatory and legal challenges that could delay actual implementation of the CPP.