LITIGATION:

Lawyers begin to plan attacks on Obama's complex power plant rule

The final say on U.S. EPA's broadly written power plant rule will undoubtedly be made by a court, legal experts on both sides of the debate said yesterday.

After years of pressure from environmentalists to trim carbon emissions from the power sector, EPA Administrator Gina McCarthy unveiled a rule yesterday that would cut carbon emissions from existing power plants by 30 percent by 2030, the most significant climate action the administration has taken to date. As attorneys wade through the rule's 645 pages, arguments are taking shape for the next stage of the regulatory process, which is the legal battles to come.

"Though EPA has attempted to paint this as very simple, this is extraordinarily complex," said Thomas Lorenzen, a partner with Dorsey & Whitney and former assistant chief of the Justice Department's environment division. "How this is going to play out is going to be determined through a massive set of comments and certain litigation over every aspect of this thing."

According to the proposal, states would achieve the 30 percent reduction target by limiting the number of pounds of carbon dioxide plants can emit on average per megawatt-hour. The agency placed a high emphasis on flexibility, saying that states could achieve the best system of emissions reduction via four "building blocks": energy efficiency through retrofits at the facility, switching dispatch from carbon-heavy coal to cleaner-burning natural gas, investments in renewable energy and nuclear, and increasing efficiency in homes and businesses.

The agency published a list of target emissions rates for all 50 states for 2020 to 2029 and a second target for 2030 and beyond.

Even before yesterday's announcement, the most contentious issue in this rule has been whether EPA has the authority to regulate beyond an individual power plant and allow states to switch fuel sources, increase renewable energy capacity and push for demand-side efficiency -- options two through four. The first building block, in which power plant operators invest in technology to lower the amount of heat lost during operation, is the choice that most resembles traditional standards to improve air quality. But the potential savings are relatively minimal, says EPA's rule -- about 6 percent by 2020. But by using all four blocks, the country could lower emissions by 4 ½ times more.

Aiming at a 'gap filler' section

Industry has said that efforts like blocks two, three and four, which would push EPA to regulate beyond the limits of the power plant, would result in lawsuits. Kevin Bundy, an attorney at the Center for Biological Diversity's Climate Law Institute, thinks that industry's take on this regulation could make carbon-cutting efforts relatively useless.

"That might be an indication of too much flexibility," he said.

By allowing states to limit their options, but also choosing to take all of the options, EPA is saying states can have it both ways, Lorenzen said. Even a 6 percent heat rate improvement is unrealistically high for industry to achieve, he said. Most companies say the most energy they can save is 4 percent.

If the agency wants to regulate power plants under the Clean Air Act section that sets technology standards, it cannot cast a wider net for existing plants than for new plants, said Jeff Holmstead, an attorney with Bracewell & Giuliani and former assistant administrator for air and radiation in the George W. Bush administration. For the new sources rule, the best system of emissions reduction was carbon capture and storage, a technology that captures CO2 emissions and injects them deep underground. It is incorporated in the construction on the new plant.

"The key term here is what is a standard of performance," Holmstead said. "The term is exactly the same for new and existing sources."

Much of this lack of clarity comes from EPA's decision to regulate under Section 111(d) of the Clean Air Act, a seldom-used part of the law that was intended as a "gap-filler" section to cover pollutants that do not qualify for National Ambient Air Quality Standards but are still recognized as dangerous to public health, said Brendan Collins, an attorney with Ballard Spahr LLP.

Unprecedented steps?

States could also elect to institute emissions trading schemes and carbon taxes in their implementation plans, which they must submit to EPA two years from now. EPA is set to finalize the rule by next summer.

This also comes into legally questionable territory, said William Walsh, a partner in the Washington office of Pepper Hamilton LLP and a section chief in EPA's Office of Enforcement under President Reagan. The agency is treading a thin line between running a cap-and-trade program, which Walsh believes would be illegal, and suggesting that states use an existing or new trading program to get additional cuts over those provided from the building blocks.

"Directly and psychologically, there really is no complete precedent for this," he said.

Recent court cases have gone well for the agency. EPA has won a number of recent high-profile challenges to air regulations, including the Mercury and Air Toxics Standards, the Cross-State Air Pollution Rule and soot standards. This indicates that judges give EPA sufficient authority in how to interpret the Clean Air Act. Still, the novelty of climate regulation may make them difficult to compare to similar clean air cases, said several experts.

But that's not necessarily the case, said Michael Gerrard, climate law director at Columbia Law School. The acid rain regulations were achieved not through the use of nitrogen oxide and sulfur dioxide scrubbers. The use of more Western coal with less pollutants also lowered levels of these emissions, an analogy to today's utilities' switch from coal to natural gas.

Now, observers are waiting for a Supreme Court decision this month on an industry challenge to EPA's greenhouse gas permitting program. That could further solidify EPA's authority on climate rules.

"All of these cases involve different portions of the Clean Air Act, but the deference accorded to EPA's interpretation of the statute are a common theme," he said.

Twitter: @TiffanyStecker | Email: tstecker@eenews.net

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