Note: A nearly identical version of this column appeared last week in Forbes Online. I am reposting it here with many additional hyperlinks so that readers may more easily access the evidence supporting my conclusions.

The November 2012 elections ensure that President Obama’s war on coal will continue for at least two more years. The administration’s preferred M.O. has been for the EPA to ‘enact’ anti-coal policies that Congress would reject if such measures were introduced as legislation and put to a vote. Had Gov. Romney won the presidential race and the GOP gained control of the Senate, affordable energy advocates could now go on offense and pursue a legislative strategy to roll back various EPA global warming regulations, air pollution regulations, and restrictions on mountaintop mining. But Romney lost and Democrats gained two Senate seats.

Consequently, defenders of free-market energy are stuck playing defense and their main weapon now is litigation. This is a hard slog because courts usually defer to agency interpretations of the statutes they administer. But sometimes petitioners win. In August, the U.S. Court of Appeals struck down the EPA’s Cross State Air Pollution Rule (CSAPR), a regulation chiefly targeting coal-fired power plants. The Court found that the CSAPR exceeded the agency’s statutory authority. Similarly, in March, the Court ruled that the EPA exceeded its authority when it revoked a Clean Water Act permit for Arch Coal’s Spruce Mine No. 1 in Logan County, West Virginia.

A key litigation target in 2013 is EPA’s proposal to establish greenhouse gas (GHG) “new source performance standards” (NSPS) for power plants. This so-called carbon pollution standard is not based on policy-neutral health or scientific criteria. Rather, the EPA contrived the standard so that commercially-viable coal plants cannot meet it. The rule effectively bans investment in new coal generation.

We Can Win This One

Prospects for overturning the rule are good for three main reasons.

(1) Banning new coal electric generation is a policy Congress has not authorized and would reject if proposed in legislation and put to a vote. Once again the EPA is acting beyond its authority.

The proposed “carbon pollution” standard requires new fossil-fuel electric generating units (EGUs) to emit no more than 1,000 lbs of carbon dioxide (CO2) per megawatt hour (MWh). About 95% of all natural gas combined cycle power plants already meet the standard, according to the EPA. No existing coal power plants come close; even the most efficient, on average, emit 1,800 lbs CO2/MWh.

A coal power plant equipped with carbon capture and storage (CCS) technology could meet the standard, but the levelized cost of new coal plants already exceeds that of new natural gas combined cycle plants, and “today’s CCS technologies would add around 80% to the cost of electricity for a new pulverized coal (PC) plant, and around 35% to the cost of electricity for a new advanced gasification-based (IGCC) plant,” the EPA acknowledges.

In short, the EPA has proposed a standard no economical coal plant can meet. Not surprising given President Obama’s longstanding ambition to “bankrupt” anyone who builds a new coal power plant and his vow to find other ways of “skinning the cat” after the 2010 election-day slaughter of 29 cap-and-trade Democrats. But the big picture is hard to miss: Congress never signed off on this policy.

The only time Congress even considered imposing GHG performance standards on power plants was during the debate on the Waxman-Markey cap-and-trade bill. Section 216 of Waxman-Markey would have established NSPS requiring new coal power plants to reduce CO2 emissions by 50% during 2009-2020 and by 65% after 2020 – roughly what the EPA is now proposing. Although Waxman-Markey narrowly passed in the House, it became so unpopular as “cap-and-tax” that Senate leaders pulled the plug on companion legislation.

Team Obama is attempting to accomplish through the regulatory backdoor what it could not achieve through the legislative front door. The “carbon pollution” rule is an affront to the separation of powers.

(2) The “carbon pollution” standard is regulation by misdirection – an underhanded ‘bait-and-fuel-switch.’

In Massachusetts v. EPA (April 2007), the Supreme Court held that GHGs are “air pollutants” for regulatory purposes. This spawned years of speculation about whether the EPA would define “best available control technology” (BACT) standards for “major” GHG emitters so stringently that utilities could not obtain pre-construction permits unless they built natural gas power plants instead of new coal power plants.

In March 2011, the EPA published a guidance document assuring stakeholders that BACT for CO2 would not require a permit applicant “to switch to a primary fuel type” different from the fuel type the applicant planned to use for its primary combustion process. The agency specifically disavowed plans to “redefine the source [category]” such that coal boilers are held to the same standard as gas turbines.

The EPA reiterated this assurance in a Q&A document accompanying the guidance. One question asks: “Does this guidance say that fuel switching (coal to natural gas) should be selected as BACT for a power plant?” The EPA gives a one-word response: “No.”

This bears directly on the legal propriety of the “carbon pollution” standard. In general, NSPS are less stringent than BACT. NSPS provide the “floor” or minimum emission control standard for determining an emitter’s BACT requirements. BACT is intended to push individual sources to make deeper emission cuts than the category-wide NSPS requires.

Yet despite the EPA’s assurance that BACT, although tougher than NSPS, would not require fuel switching or redefine coal power plants into the same source category as natural gas power plants, the “carbon pollution” rule does exactly that.

In April 2011, the House passed H.R. 910, the Energy Tax Prevention Act, sponsored by Rep. Fred Upton (R-Mich.), by a vote of 255-172. H.R. 910 would overturn all of the EPA’s GHG regulations except for those the auto and trucking industries had already made investments to comply with. Sen. James Inhofe’s companion bill (McConnell Amdt. 183) failed by one vote. In June 2010, Sen. Lisa Murkowski’s (R-Alaska) Congressional Review Act resolution to strip the agency of its Mass v. EPA-awarded power to regulate GHGs failed by four votes. One or both of those measures might have passed had the EPA come clean about its agenda and stated in 2009 that it would eventually propose GHG performance standards no affordable coal power plant can meet.

(3) The “carbon pollution” rule is weirdly contorted, flouting basic standards of reasonableness and candor.

Under the Clean Air Act, an emission performance standard is supposed to reflect “the degree of emission limitation achievable through the application of best system of emission reduction” that has been “adequately demonstrated.” The EPA picked 1,000 lbs CO2/MWh as the NSPS for new fossil-fuel EGUs because that is the “degree of emission limitation achievable through natural gas combined cycle generation.”

But natural gas combined cycle is not a system of emission reduction. It is a type of power plant. The EPA is saying with a straight face that natural gas combined cycle is an emission reduction system that has been adequately demonstrated for coal power plants. By that ‘logic,’ zero-carbon nuclear-, hydro-, wind-, or solar-electric generation is an emission reduction system that has been adequately demonstrated for natural gas combined cycle.

A coal power plant could meet the standard by installing CCS, but, as the EPA acknowledges, CCS is too costly to qualify as “adequately demonstrated.” The only practical way for utilities to comply is to build new gas turbines instead of new coal boilers. This is the first time the EPA has defined a performance standard such that one type of facility can comply only by being something other than what it is.

The EPA sets performance standards for specific categories of industrial sources. A coal boiler is different from a gas turbine, and up to now the agency reasonably regulated them as different source categories, under different parts of the Code of Federal Regulations – Subpart Da for coal boilers, Subpart KKKK for gas turbines. The EPA now proposes to regulate coal boilers and gas turbines as a single source category — “fossil-fuel EGUs” — under a new subpart numbered TTTT. But only for CO2! Coal boilers and gas turbines will continue to be regulated as separate source categories for criteria and toxic pollutants under Subparts Da and KKKK.

Why hold coal boilers and gas turbines to different standards for those pollutants? The EPA’s answer: “This is because although coal-fired EGUs have an array of control options for criteria and toxic air pollutants to choose from, those controls generally do not reduce their criteria and air toxic emissions to the level of conventional emissions from natural gas-fired EGUs.”

The same reasoning argues even more strongly against imposing a single GHG standard on coal boilers and natural gas turbines. Coal boilers do not have an “array of control options” for CO2 emissions, and have no “adequately demonstrated” option for reducing CO2 emissions to the level of gas-fired EGUs. Subpart TTTT is an administrative contortion concocted to kill the future of coal generation.

Why Care Even If You Don’t Mine or Combust Coal for a Living

At this point you may be wondering why anyone outside the coal industry should care about this cockamamie rule. There are several reasons.

First and most obviously, banning new coal generation could increase electric rates and make prices more volatile. For generations, coal has supplied half or more of U.S. electricity, and still provides the single largest share. The “carbon pollution” standard is risky because coal’s chief competitor, natural gas, has a history of price volatility and a future clouded by the environmental movement’s hostility to hydraulic fracturing, the technology transforming gas from a costly shrinking resource to an affordable expanding resource.

The “carbon pollution” standard itself could put the kibosh on new gas-fired generation if the EPA concludes, as Cornell researchers contend, that fugitive methane emissions from hydraulic fracturing make gas as carbon-intensive as coal.

The EPA is also developing GHG performance standards for refineries. “Unconventional” oil production from shale and oil sands is booming in North America, creating thousands of jobs, generating billions of dollars in tax revenues, and reducing U.S. dependence on OPEC oil. But unconventional oil production is energy-intensive and therefore carbon-intensive. It is unknown whether or how the forthcoming GHG standard for refineries will address the carbon intensity of unconventional oil. What we do know is that the environmental groups who litigated the EPA into proposing these standards are arch foes of unconventional oil.

In any event, the “carbon pollution” standard for power plants is just the start of a regulatory trajectory, not its end point. The EPA’s settlement agreement with environmental groups and state attorneys general obligates the agency to extend the standard to “modified” coal power plants and establish emission “guidelines” for non-modified units.

Moreover, the standard sets a precedent for promulgating NSPS for other GHG source categories, and for contriving new source categories (e.g. “electric generating units”) to hammer natural gas. As indicated above, if gas can set the standard for coal, then wind and solar can set the standard for gas. And at some point the refinery standard could undermine the profitability of unconventional oil. Although initially directed against new coal, the standard puts all fossil-energy production in an ever-tightening regulatory noose.

Pandora’s NAAQS

Taking a longer view, the “carbon pollution” rule moves the U.S. economy one step closer to the ultimate environmental policy disaster: national ambient air quality standards (NAAQS) for GHGs.

In December 2009, the EPA issued a rule under Section 202 of the Clean Air Act declaring that GHG emissions from new motor vehicles endanger public health and welfare. The endangerment rule was both prerequisite and trigger for the agency’s adoption, in January 2011, of first-ever GHG motor vehicle standards. The agency now claims that it need not issue a new and separate endangerment finding under Section 211 to adopt first-ever GHG performance standards for power plants, because subsequent science confirms and strengthens its Section 202 finding.

An implication of this argument is that the EPA need not make a new endangerment finding to promulgate NAAQS for GHGs under Section 108, because the Section 202 finding would suffice for that as well.

Section 108 of the Clean Air Act requires the EPA to initiate a NAAQS rulemaking for “air pollution” from “numerous or diverse mobile or stationary sources” if such pollution “may reasonably be anticipated to endanger public health and welfare.” Carbon dioxide obviously comes from numerous and diverse mobile and stationary sources, and the EPA has already determined that the associated “air pollution” – the “elevated concentrations” of GHGs in the atmosphere – endangers public health and welfare. Logically, the EPA must establish NAAQS for GHGs set below current atmospheric concentrations.

Eco-litigants have already put this ball in play. The Center for Biological Diversity and 350.Org petitioned the EPA more than two years ago to establish NAAQS for CO2 at 350 parts per million (roughly 40 parts per million below current concentrations) and for other GHGs at pre-industrial levels.

The potential for mischief is hard to exaggerate. Not even a worldwide depression that permanently lowers global economic output and emissions to, say, 1970 levels, would stop CO2 concentrations from rising over the remainder of the century. Yet the Clean Air Act requires States to adopt implementation plans adequate to attain primary (health-based) NAAQS within five or at most 10 years. A CO2 NAAQS set at 350 parts per million would require a level of economic sacrifice vastly exceeding anything contemplated by the Waxman-Markey cap-and-trade bill or the Copenhagen climate treaty, which aimed to stabilize CO2-equivalent emissions at 450 parts per million by 2050.

The EPA has yet to decide on the CBD-350.Org petition. Perhaps this is another case of punting unpopular regulatory decisions until Obama’s second term. The one instance where the administration addressed the issue is not reassuring. In a brief submitted to the Supreme Court in American Electric Power v. Connecticut, the Obama Justice Department described Section 108 as one of the provisions making the Clean Air Act a “comprehensive regulatory framework” for climate change policy.

Ultimately, only the people’s representatives can protect coal generation, hydraulic fracturing, and unconventional oil from hostile regulation. But nixing the “carbon pollution” standard would be a big setback to both the EPA and the eco-litigation fraternity, and would help safeguard America’s energy options until a future Congress reins in the agency.

If Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.) in the House, or Sens.  Barbara Boxer (D-Calif.) and Harry Reed (D-Nev.) in the Senate, were to introduce legislation authorizing EPA to use the Clean Air Act (CAA) as it sees fit to regulate greenhouse gases (GHGs), would the bill have any chance of passing in either chamber of Congress?

No. Aside from a few diehard global warming zealots, hardly any Member of Congress would vote for such a bill. Most lawmakers would run from such legislation even faster than the Senate last year ditched cap-and-trade after its outing as a hidden tax on energy. 

Now consider what that implies. If even today, after nearly two decades of global warming advocacy by the United Nations, eco-pressure groups, ’progressive’ politicians, left-leaning media, corporate rent-seekers, and celebrity activists, Congress would not pass a bill authorizing EPA to regulate GHGs, then isn’t it patently ridiculous for EPA and its apologists to claim that when Congress enacted the CAA in 1970 — years before global warming was a gleam in Al Gore’s eye — it gave EPA that very power?

These simple questions cut through the fog of sophistry emitted by the likes of Waxman, Markey, and Boxer to defend EPA’s hijacking of legislative power. As I have explained elsewhere in detail (here, here, here, and here), EPA, under the aegis of the Supreme Court’s poorly-reasoned, agenda-driven decision in Massachusetts v. EPA, is using the CAA in ways Congress never intended and never subsequently approved. EPA is defying the separation of powers. It should be stopped.

Last Thursday, 50 Senators voted for S. 482, the Energy Tax Prevention Act, a bill to stop EPA from ‘legislating’ climate policy under the guise of implementing the CAA. The bill did not pass because 60 votes were required for passage. The House, on the other hand, passed H.R. 910, an identical measure, by a vote of 255 to 172.  

Every Member of Congress should have voted for both measures, because every Member should resist attempts by other branches to encroach on Congress’s constitutional prerogatives. Article I, Sec. 1 of the Constitution vests “all legislative Powers” in Congress. Not in EPA. Not in the Supreme Court. In Mass. v. EPA, however, a 5-4 majority decided to ‘legislate’ from the bench, positioning EPA to ‘legislate’ from the bureau.

Sen. Boxer summed up the attitude of EPA’s apologists during last year’s debate on Alaska Sen. Lisa Murkowski’s resolution of disapproval (S.Res.26) to overturn EPA’s Endangerment Rule, the trigger and precedent for EPA’s ever-growing ensemble of GHG regulations. Boxer complained that if the public has to wait for Congress to enact controls on GHG emissions, “that might not happen, in a year or two, or five or six or eight or 10.” Yes, but how in the world does that authorize EPA to substitute its will for that of the people’s representatives? The fact that Congress remains deadlocked on climate policy is a compelling reason for EPA not to act, not a license for EPA to elevate itself into Super Legislature.

The legislative process is often slow and frustrating. It is so by constitutional design! The slow process of legislative deliberation moderates out politics, fosters continuity in law and policy, and, more importantly, forces elected officials to take responsibility for policy decisions so that ordinary citizens can hold them accountable at the ballot box.

Every Member of Congress should know from Civics 101 that the legislative process is more valuable than any policy outcome an administrative agency might achieve by circumventing and undermining it. Regrettably, the 50 Senators who voted ‘no’ on S. 482 seem to think that EPA’s climate agenda is more valuable than any constitutional scruple that might interfere with it.

Defending the separation of powers becomes all the more urgent as America slouches towards insolvency. If the next economic crisis is worse than the present one, Congress will be hard put to resist the clamor for an Imperial Executive to make the trains run on time. Now is no time to turn a blind eye to — or cheerlead for — an executive agency’s court-abetted seizure of legislative power.

The Senate may get another chance to vote on S. 482. Nonetheless, the sad fact remains that 50 Senators just voted to trash the separation of powers. They fiddle while the Republic burns.

Yesterday (Feb. 16), House Energy and Power Subcommittee Chairman Ed Whitfield (R-KY) engaged in a colloquy with Interior and Agriculture Subcommittee Chairman Mike Simpson (R-ID) on Sec. 1746 of H.R. 1, the One-Year Continuing Appropriations Act of 2011.

Sec. 1746 of H.R. 1 states:

None of the funds made available to the Environmental Protection Agency by this division or any other Act may be expended for purposes of enforcing or promulgating any regulation (other than with respect to section 202 of the Clean Air Act) or order, taking action relating to, or denying approval of state implementation plans or permits because of the emissions of greenhouse gases due to concerns regarding possible climate change.

Sec. 1746 would block EPA regulation of greenhouse gases from stationary sources for the remainder of fiscal year 2011, which ends on September 30. “The funding limitation will allow Congress to carefully and thoroughly debate a permanent clarification to the Clean Air Act to ensure it remains a strong tool for protecting public health by regulating and mitigating air pollutants, and that it is not transformed into a vehicle to impose a national energy tax,” explains Chairman Whitfield’s press release. Whitfield is a co-sponsor of the Energy Tax Prevention Act, which would overturn the legal force and effect of EPA’s Endangerment Rule, Tailoring Rule, and other rules imposing greenhouse gas permitting requirements on state governments and stationary sources.

In the colloquy, Chairman Simpson states: ”EPA’s GHG regulations need to be stopped in their tracks, and that’s what section 1746 does – it provides a timeout for the balance of the fiscal year, during which time EPA will be prohibited from acting on them or enforcing them.” In Whitfield’s words: “This CR [Continuing Resolution] provision is Congress hitting the pause button during the very brief period of the CR, allowing time to go through regular order and pass the Upton-Inhofe bill.”

Whitfield spotlights the constitutional principle at stake: “EPA’s regulations are an attempt by unelected bureaucrats to slip in through the regulatory backdoor what Congress has thus far wisely blocked from coming in through the front door.” The Energy Tax Prevention Act takes no position on climate science. As Simpson remarks, one need not be a global warming skeptic to be an ”EPA GHG [greenhouse gas] regulation skeptic.”

The political benefits of Congress passing Sec. 1746 are obvious. It would be a clear rebuke to EPA’s shocking power grab. It would put Team Obama on notice that Congress is determined to defend the separation of powers. It would energize congressional and public support for a more permanent solution to the ’EPA problem.’ It would draw a big bright line in the sand helping the public identify which Members of Congress want to raise energy prices and which do not.

This defunding, or appropriations rider, strategy, as it is sometimes called, however, is not without economic risk.

“Rider striking funds for EPA regs could cause unintended consequences for industry,” yesterday’s Greenwire (subscription required) reports. The article explains:

The rider does nothing to nullify the 2009 finding that greenhouse gases endanger human health, or to reverse EPA’s final rules, including its prevention of significant deterioration guidelines or the tailoring rule, which lays out the agency’s timetable for regulating greenhouse gases from large stationary emitters.

By simply defunding the agency’s greenhouse gas permitting programs, Congress would do nothing to remove EPA’s obligation to address greenhouse gases through the permitting process, the [unidentified industry] attorney said.

“It doesn’t change the fact that those rules and regulations are final,” the attorney said.

Which means, notes Rep. Jim Moran (D-VA):

“The legislation is there, you’re not repealing the legislation, so EPA has a legal responsibility to implement the Clean Air Act, the Clean Water Act, other pieces of legislation that are still on the books,” he said yesterday. “That’s their responsibility, and they really can’t shirk that responsibility just because Congress doesn’t provide them the resources. The Congress has to either repeal the law, or be it reluctantly, they’re just going to have to fund the resources to carry out the law.”

Both Moran and Greenwire miss a more important point. The Clean Air Act imposes obligations not just on EPA but also on regulated entities such as power plants, refineries, factories, and other emission sources.

Under the Act, before a firm may build or modify a “major emitting facility,” it must undertake a “best available control technology” (BACT) analysis and, on that basis, apply for and obtain a “prevention of significant deterioration” (PSD) pre-construction permit. Similarly, before a firm may operate a major emitting facility, it must obtain a Title V operating permit.

EPA has issued regulations applying PSD and Title V to greenhouse gases. Those are already on the books, and they impose legal requirements on private entities as well as on EPA and state permitting agencies. Thus, even if EPA lacks the funds to administer PSD and Title V for greenhouse gases, major greenhouse gas emitting facilities must still obtain PSD and Title V permits or they cannot lawfully build, modify, or operate.

Moreover, even if EPA lacks the funds to prosecute firms for failing to obtain permits, eco-litigation groups could still drag those firms into court under Clean Air Act citizen-suit provisions. Trial lawyers could have a field day as affected firms find themselves in a Catch-22. On the one hand, the law (the Clean Air Act as interpreted by EPA rules) would require firms to obtain PSD and Title V permits for greenhouse gases. On the other hand, the law (the appropriations rider) would prevent them from doing so.

It’s not even clear that Sec. 1746 would stop the government from enforcing EPA’s greenhouse regulations. The language says nothing about withholding funds from the Department of Justice, so DOJ prosecutors could enforce EPA’s regs even if EPA couldn’t.

The side effects of this bizarre situation are potentially serious. Construction projects might have to be mothballed or cancelled for lack of proper permits. Otherwise healthy firms facing novel litigation risks might be unable to obtain financing or venture capital.

Considerations of this sort led Alaska Sen. Lisa Murkowski to abandon an appropriations rider strategy she had been exploring in late 2009 and instead introduce legislation to overturn EPA’s Endangerment Rule — the headwaters of EPA’s greenhouse regulatory surge.

The question for opponents of EPA’s power grab, therefore, is whether the political benefits of a defunding strategy outweigh the economic risks. This is a prudential matter about which reasonable people may disagree. I will hazard two observations.

(1) The best way to minimize the potential collateral damage to regulated entities is to quickly enact legislation that overturns EPA’s greenhouse gas rules. If passage of Sec. 1746 galvanizes congressional action toward that end, then it would likely do more good than harm. (2) However, if enactment of Sec. 1746 leads to construction bottlenecks and an upsurge of anti-business litigation while Congress is still debating the Energy Tax Prevention Act or similar measures, the rider strategy could damage the credibility of EPA’s congressional critics.

There’s only a month left on the Senate calendar, and elections are looming, so many Senators are wary of an issue as divisive and nuanced as is cap-and-trade energy rationing. As a result, there’s been a lot of procrastinating.

Two weeks ago, Senate Majority Leader Harry Reid convened a meeting of Senate Committee chairs in order to figure out how to proceed with climate legislation. They agreed to punt, by having a meeting of the entire Senate the following week.

A week ago, all Democratic Senators met, and they listened to three of their colleagues pitch variations of climate/energy legislation, as well as a pep talk from Sen. Barbara Boxer (my favorite environmentalist Senator). But the pleas fell on deaf ears, and the DNP Caucus session ended inconclusively.

Following that failure, President Obama requested yet another meeting of Senate energy/climate principles and moderates from both parties. The discussion will take place today, and the guest list includes Sens. John Kerry, Joe Lieberman, Richard Lugar, Judd Gregg, Susan Collins, Sherrod Brown and Lisa Murkowski, according to a survey of offices by Energy & Environment Daily.

Meanwhile, the clock is ticking, and elections are nearing. The punditry seems to be in consensus that the prognosis for cap-and-trade is dire, although there has been some discussion about a sinister back door strategy, by which the Senate would pass bare-bones energy bill, sans an energy tax, and then leadership would insert a cap-and-trade into the bill that is reconciled with the American Energy and Security Act, the climate legislation that the House passed last June. Evidently, proponents of this strategy are banking on the reconciliation conference to take place during the lame duck session after upcoming elections, a time when some Members of Congress would have nothing to lose, because they would have already lost.

**Update: 8:20 A.M. E&E Daily’s lede story this morning reports that President Obama has postponed the climate meeting, due to the ongoing imbroglio over the Afghan general who put his foot in his mouth. Fortunately, there’s not much further down the road the majority can kick this can, before the clock runs out on the legislative calendar.