Regulatory Update
Industry:

by: Emily McGavisk

As the anticipated date for finalizing Clean Power Plan (CPP) rules draws closer, many states resisting compliance have begun increasing their efforts to obstruct its implementation. The proposed CPP was published in June 2014 and aims to reduce carbon emissions from power plants by 30% from 2005 levels by 2030. Between its release and December 1, 2014, over 2 million public comments were submitted. EPA is expected to publish final rules for carbon pollution standards for existing and new, modified and reconstructed power plants this summer along with a proposed federal plan for meeting Clean Power Plan goals for public review and comment.

Twelve states have brought lawsuits against the EPA to the States Court of Appeals for the District of Columbia within six weeks of the release of the proposed CPP. The states filing suits include Alabama, Indiana, Kansas, Kentucky, Louisiana, Nebraska, Ohio, Oklahoma, South Dakota, South Carolina, West Virginia and Wyoming. In 2011, the EPA entered a settlement agreement to regulate carbon emissions from power plants under section 111(d) of the Clean Air Act.  The plaintiffs believe that the settlement and succeeding proposed regulations are unlawful because carbon emissions from power plants are already regulated in section 112 of the Clean Air Act, which establishes Mercury and Air Toxics Standards, and would “impose impermissible double regulation.” The petitioning states have banded together with Murray Energy, the nation’s largest privately-owned coal company, to bring two suits against EPA, Murray Energy v. EPA, No. 14-1112 (D.C. Cir.) and West Virginia v. EPA, No. 14-1146 (D.C. Cir.).  

On April 16, 2015, a three-judge panel for the United States Court of Appeals for the District of Columbia heard oral arguments for the case of double regulation. Much of the discussion centered on whether the court had jurisdiction to overturn a rule that has not yet been finalized. Murray Energy is requesting that the D.C. Circuit use its authority under the All Writs Act to expedite the decision making because they claim the proposed Clean Power Plan is already affecting their customer base and business (see Director’s Corner). They believe that waiting until the rule is finalized may cause the company significant economic harm that will not be able to be reversed. Similarly, states are arguing that to comply with CPP in the proposed time frame, key business decision and economic investments need to be made as soon as possible. The energy industry is very capital intensive and siting and building new infrastructure takes time. The judges are expected to rule on the cases sometime this summer.

While many states continue to fight against finalization of the CPP, they are taking small steps towards compliance. Kentucky, while outspoken against the rule, by some accounts, is already half way towards meeting its carbon reduction requirements. 3,900 megawatts of coal generation has either already been retired in the state since 2012 or is  scheduled for retirement in the next two years. This is primarily due to the retirement of older less-efficient coal-fired power plants that were not compliant with other sections of the Clean Air Act and the shutdown of uneconomic coal generation relative to natural gas.  Emissions reductions associated with these shutdowns alone are expected to be sufficient for meeting the Kentucky targets (if they were replaced with carbon neutral alternatives). Perhaps these early moves towards cleaner alternatives are telling of what we can expect in the final ruling.  If the rule becomes final and the courts dismiss the claims of double regulation, states that have been taking a “waiting to see” approach to developing and implementing carbon reduction strategies may be forced to play catch-up to both develop compliance plans and see them through.

References:
http://www.lexology.com/library/detail.aspx?g=8544a096-a8a2-4443-913d-5baf922e844a
http://www.bna.com/clean-power-plan-n17179923516/
http://insideclimatenews.org/news/26052015/kentucky-may-accidentally-comply-epa-clean-power-plan-coal

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