In September 2014, fifteen states sent a letter to President Obama asking, among other things, for clarification on how the EPA would address non-compliance with CPP requirements.

by: Paul Augustine

Senate Majority Leader Mitch McConnell called on states to refuse to comply with the U.S. Environmental Protection Agency’s (EPA) Clean Power Plan (CPP). Senator McConnell’s statements echoed a strategy espoused by other lawmakers and industry representatives. The argument embedded in this “just say no” campaign is that the CPP forces states to do what the EPA legally cannot, so by refusing to act in accordance with the rules, states allow the courts time to determine the purported illegality of the rules. Furthermore, by delaying compliance, states can buy additional time for political and policy changes—for example, the election of a new president who may repeal or significantly weaken CPP regulations or the passage of legislation that overturns or supersedes the EPA’s authority to regulate carbon dioxide under the Clean Air Act.

In September 2014, fifteen states—Alabama, Alaska, Arizona, Idaho, Indiana, Mississippi, New Mexico, North Carolina, North Dakota, Oklahoma, Pennsylvania, South Carolina, Utah, Wisconsin, and Wyoming—sent a letter to President Obama asking, among other things, for clarification on how the EPA would address non-compliance with CPP requirements. And state legislatures in several states, including Kentucky, South Carolina, and Kansas, have proposed or enacted legislation that would inhibit or prevent compliance with the CPP. So what is the consequence of not submitting the required State Implementation Plan (SIP) to the EPA, as required by the CPP?

If a state does not comply with the Clean Power Plan and fails to submit its SIP on time or in a form that is acceptable to EPA, the Agency will require that state to comply with its own yet-to-be-determined Federal Implementation Plan (FIP). (And, taking non-compliance one step further, if power plant owners fail to comply with the FIP, they will be subject to fines and enforcement action by EPA.)

The EPA has learned a lot over the past decade through its experiences in the courts with the Clean Air Interstate Rule (CAIR), the Clean Air Mercury Rule (CAMR), and the Cross-State Air Pollution Rule (CSAPR). In structuring the Clean Power Plan, the EPA codified some of the lessons it learned, shifting the responsibility for implementation details to the states while allowing them a fair amount of flexibility to meet the EPA standards. This was smart policymaking on two fronts—first, the states have flexibility to decide how to comply, so stakeholders will likely direct much of their input/scrutiny to their own state governments; and, second, states can better tailor compliance solutions to their own energy systems, cost of compliance, and geopolitics, compared to the federal government. In developing an FIP to serve as the backstop for states that “just say no” or submit deficient SIPs, the EPA will likely not want to deal with the potential legal threats of developing a flexible approach to state implementation with “outside the fence” considerations; rather, the EPA would likely only regulate power plants under the FIP. This means that implementing the FIP could be more expensive, with ratepayers bearing the brunt of this cost.

By not preparing for the rule implementation and not engaging in the development of an SIP, states, utilities, and other stakeholders will miss out on critical time to prepare for and to design programs that will most cost-effectively meet requirements under the CPP. As many commenters on the proposed rule pointed out, the timeframe under the Clean Power Plan is already short given the significant decision and changes that will be effected, so by delaying or avoiding action, states and compliance entities within those states could end up in a disadvantageous position with fewer low-cost compliance options.

While we are waiting for the Clean Power Plan rules to be finalized and for the FIP to be proposed this summer, states should already be developing their compliance strategies, engaging stakeholders, and ensuring that they have enough resources to react to the finalized rule. “Just say no” is a credible slogan for drug use prevention; it is not a credible strategy for addressing CPP requirements. Inaction until rule finalization will put states, power generators, and ratepayers in a precarious situation. Prudence dictates that states should not wait; the time to act is now.