Motion to Stay Nails Unlawfulness of EPA “Clean Power Plan”

Summary: Recent motions to stay filed by industry groups with the D.C. Circuit Court of Appeals clearly explain the unlawfulness of the EPA’s so-called Clean Power Plan. The rule impermissibly treats an entire economic sector as a single “source.” It would establish EPA as the nation’s electricity czar armed with market-restructuring power Congress denied even to the federal energy agency, FERC. ‘Produce less’ is not a Clean Air Act performance standard, yet the rule’s so-called performance standards would force coal power plants to generate less power or simply shut down.

EPA’s “Clean Power Plan” (CPP), the centerpiece of President Obama’s climate policy agenda, is unlawful in numerous ways, as this blog has explained in many posts. The point needs to be made again and again, however, due to the damage the CPP will do if not immediately put on hold and eventually overturned, the shamelessness of Obama administration officials and their allies in reimagining the Clean Air Act to mandate cap-and-trade and renewable-electricity quota wealth-transfer schemes Congress has rejected, and the superficial plausibility of EPA’s claim that it just wants to clean up “pollution” and protect kids from asthma.

When the CPP went final last Friday, industry groups filed two separate motions with the D.C. Circuit Court of Appeals to put a stay on the rule (suspend its legal force and effect until all litigation challenges are resolved). Yesterday’s blog post briefly summarized a key argument of the motion filed by the U.S. Chamber of Commerce and 15 other trade associations. Today’s post discusses the motion filed by National Mining Association, American Coalition for Clean Coal Electricity, and Murray Energy Corporation. Both briefs are excellent and recommended reading.

On the core issue of the unlawfulness of the CPP, the coal industry motion develops three main arguments, which may be summarized as follows:

(1) An economic sector is not a “source.” Section 111 of the Clean Air Act (CAA), the purported statutory basis for the CPP, provides authority for EPA to set emission performance standards for stationary sources, a class of entities defined to include “any building, structure, facility, or installation which emits or may emit any air pollutant.” Lawful §111 rules regulate such sources, which are individual physical objects. In stark contrast, the CPP primarily regulates the investments and transactions of owners and operators outside the source. That is unprecedented and flouts clear statutory language. EPA came up with emission-rate standards for existing coal and natural gas power plants not by examining the economic feasibility of control technologies or practices individual sources might adopt but by reasoning backward from the total carbon dioxide (CO2) emission reductions the agency thinks the power sector can achieve by producing less electricity from coal and more from renewables. EPA impermissibly treats the entire electric grid as if it were a single source.

(2) EPA is not an electricity czar. EPA, the federal air quality regulator, is attempting to inflate §111(d), a 45-year old two-sentence provision plainly intended and always previously used to establish guidelines for pollution control technologies and work practices inside particular facilities, into a mandate to restructure the total U.S. electric supply system. Congress denied that power even to the Federal Energy Regulatory Commission, leaving authority over electric resource planning and development to the states.

(3) ‘Produce less’ is not a performance standard. The lawful function of §111 performance standards, whether for new or existing sources, is to improve sources’ environmental performance. In other words, the object is to reduce sources’ emissions per some specified measure of output, in this case, megawatt hours (MWh). Unlike all previous §111 standards, the CPP sets standards for existing coal and gas power plants that those sources can meet only by producing less or not at all. CPP “performance standards” are actually non-performance standards — mandates coercing owners and operators to generate less power from coal and gas and even to shut down coal power plants.

The motion makes four main arguments responsive to the four-part standard for granting a stay: (1) Petitioners are likely to prevail on the merits (demonstrate in subsequent litigation that the CPP is unlawful); (2) coal interests will likely be irreparably harmed absent a stay; (3) no parties will be harmed if the Court grants a stay; and (4) the public interest favors granting the stay.

What follows are key excerpts from the motion. I start with points 2-4, saving point 1, the most important, for last.

The coal industry, coal workers, and coal communities will be irreparably harmed absent a stay.

[T]he utility industry is highly capital intensive, with decadal-scale lead times for resource planning, preconstruction regulatory review, and construction. The same is the case with the coal industry. Thus, while actual compliance with the Rule is not due to begin until 2022, the final decision-making needed to enable compliance by that time must take place immediately. . . .EPA. . .understands that once the industry transformation is firmly underway, it becomes irreversible even if this court overturns the agency’s action through the normal appellate process.

The EPA Administrator, for instance, dismissed the Supreme Court’s decision reversing the MATS [Mercury Air Toxic Standards] rule because “[m]ost of [the regulated facilities] are already in compliance, [and] investments have been made.” The market understands the same thing. From the time EPA first proposed the Rule and condemned the coal industry to a greatly diminished future, coal company share prices have plummeted, coal companies have declared bankruptcy, and access to capital has collapsed. All of this will worsen in the coming months. . . .

The impact to local communities and coal-dependent States cannot be overstated. A number of States depend on taxes and royalties from coal mining as a significant revenue source. Moreover, coal mining takes place typically in lower-income areas of the country, many of which have per capita incomes well below and poverty rates well above the national and applicable State average. In contrast, coal mining jobs are among the best-paying blue collar jobs in the country, often paying twice what the average job pays in coal mining areas. And, in some counties in coal country, coal mining jobs are a significant percentage of all jobs.

No parties will be harmed if the Court grants a stay.

Granting the stay will free the status quo in place while the case is litigated on the merits. Participants in electric power markets therefore will continue business as usual, with none suffering injury as a result of the Court’s stay order. Any States wishing to proceed with CO2 reduction measures would continue to be able to do so if authorized under State law. As a result, entering the stay will not harm other parties.

The public interest favors granting a stay. 

Plainly, there is no public interest in laying off mining workers, depriving small communities of the revenue coal mining provides, and hollowing out State budgets that depend on taxes from coal production. . . .It would similarly be a massive waste of time and resources for every State in the country to embark on reengineering their portions of the electric grid within the next year if ultimately the Court were to reverse the Rule. . . .Worse, changes to the grid that States would not otherwise choose to make will become locked in.

On the other side of the ledger, staying the Rule will not adversely affect the climate because the Rule will not affect the climate. . . .Using EPA’s theory of how sensitive the climate is to atmospheric CO2 concentrations, the rule will reduce global temperatures by a mere 0.016ºC by 2050 and lower sea level rise by the width of three sheets of paper. Obviously, then, delaying implementation of the Rule for the time it takes to litigate this case will have no possible effect on the climate.

Petitioners will likely prevail on the merits.

The President has made addressing climate change one of his highest priorities, and EPA’s Section 111(d) rulemaking is a key component of his domestic and international climate change strategy. Installing technology or adopting new work practices at coal plants, however, will not achieve the dramatic CO2 emission reductions the Administration wants.

To make Section 111(d) serve its policy objectives, EPA was therefore forced to reinvent statutory language. Under the agency’s outcome-driven approach, EPA determined that the BSER [best system of emission reduction] for reducing emissions from coal plants is not a system of reducing emissions that would be implemented at the regulate facilities themselves. Instead, BSER became the reconfiguring of the entire national electric grid to replace coal with other forms of generation that emit less or no CO2.

To accomplish this result, EPA rearranged the mix of electric generating resources in place in 2012 based on the hypothetical application of three “building blocks” — improved heat rates at coal plants and shifting generation from coal units to natural gas units and renewable generation (mostly wind and solar). Based on the CO2 emission reductions produced by these building blocks, EPA established an emission performance rate for coal units of 1,305 pounds of CO2 per megawatt hour (“lb/MWh”) and for natural gas units of 771 lb/MWh.

But EPA recognizes that coal units cannot meet the 1,305 lb/MHw standard. The country’s modern coal plants emit more than 1,800 lb/MWh and the fleet average is more than 2,200 lb/MWh. In fact, EPA’s performance standard for existing coal units is even more stringent than EPA’s performance standard for new coal units — set at 1,400 lb/MWh. That 1,400 lb/MWh is based on the use of carbon capture and sequestration, a technology the agency concedes is not feasible for existing units.

EPA, however, did not set the 1,305 lb/MWh rate so that coal units could continue to operate while meeting that rate. EPA’s purpose was just the opposite. In the guise of setting a performance rate, per the language of Section 111(d)(1)(A) . . . EPA is implementing a program to force the substitution of natural gas and renewable power generation for coal-fired generation. In the agency’s chain of reasoning, the “source” subject to regulation under Section 111(d) is not just the source itself but also the owner or operator of the source. EPA then maintains that the owner or operator of a coal generating plant can comply with the 1,305 lb/MWh rate by simultaneously reducing generation at the coal unit and subsidizing construction of low- and zero-emitting replacement sources — either by developing those resources itself or by paying others to do so. Of course, building alternative generation resources does not actually lower the emissions rate of a coal-fired generating unit.

Nor does EPA’s interpretation even make semantic sense within the four corners of Section 111(d). The language of Section 111(d) provides authority for EPA to devise the best system for reducing emissions from individual stationary sources within a particular source category. . . .Section 111(d) does not provide, as EPA would have it, for the agency to treat the entire electric grid — including generating facilities both within and outside the regulated source categories and even facilities like renewables that produce no emissions at all — as if it were a single “source” for which EPA can fashion a “best system of emission reduction.” 

EPA also fundamentally misunderstands the phrase “best system of emission reduction.” Under the statute, BSER must be a system that regulated facilities can adopt to meet the emissions standard. . . .Whatever else EPA’s convoluted national and regional-level calculations may prove, they do not set forth a system of emission reduction that any specific facility within the regulated source category could actually adopt to reduce its emissions.

At no time in the history of the program has EPA ever adopted Section 111(b) new source performance standards or Section 111(d) existing source guidelines that required facilities in the regulated category to reduce or cease operations as a means of reducing emissions.

EPA has seized upon a long-extant, narrow CAA provision — Section 111(d) — to effect a massive reorganization of perhaps the most important sector of the American economy. Under the Rule, coal generation as a percentage of total generation would fall to a level never before seen, renewable resource development would skyrocket, and electric consumption would fall over the course of a decade for the first time. EPA would thus transform itself from its Congressionally-created role as an air quality regulatory to the nation’s electricity czar.

But not even the Federal Energy Regulatory Commission, much less EPA, has the authority it claims to order a fundamental reorganization of the electric grid. Under the Federal Power Act (“FPA”), authority over electric resource planning and development is a state, not a federal function. EPA’s role under Section 111 is to set standards of performance for new stationary sources within a regulated source category — here coal plants — and, under Section 111(d), to call on States to set standards of performance for “any existing source” within the same category. It is not to dictate wholesale changes in the way an entire industry operates.

In the end, the most persuasive evidence of the dubious nature of EPA’s new interpretation of Section 111(d) may be the facially nonsensical result that interpretation produces, where the 1,305 lb/MWh standard EPA set for existing coal generators is lower than the 1,400 lb/MWh standard it set for new coal generators. This is not only unprecedented, it stands the NSPS [new source performance standards] program on its head. It cannot plausibly be maintained that the “best system” for reducing emissions from coal plants that in many cases are 40 years old can produce better results than the “best system” that can be incorporated into the design of new coal plants today.