REGULATION:

2016 holds flurry of state planning, legal drama for Clean Power Plan

U.S. EPA's Clean Power Plan will continue to enjoy the spotlight in 2016 as the Obama administration works to follow through on international commitments to reduce greenhouse gas emissions.

States must submit at least initial thoughts about how they might cut power-sector carbon emissions by Sept. 6.

Here are the top developments ClimateWire will be tracking in the meantime:

State, utility planning advances

Most states will submit status updates in the fall and request two-year extensions to send EPA their final carbon-slashing plans.

A few states, including California, members of the Regional Greenhouse Gas Initiative (RGGI) and Pennsylvania, could be on track to submit full plans in 2016. California has not yet specified whether it will file this year, and the RGGI states are working through how to tweak their existing cap-and-trade program to be compliant with the Clean Power Plan. Pennsylvania Gov. Tom Wolf (D) would like to submit a full plan by Sept. 6, but that desire may be undercut by ongoing negotiations with the state Legislature to pass a budget (ClimateWire, Dec. 14, 2015).

North Carolina, which opposes the rule and is suing EPA, is poised to intentionally submit an inadequate plan in 2016 in order to speed court battles.

State leaders believe EPA only has authority to require emissions reductions at the source -- directly from regulated coal and natural gas plants. It will submit a blueprint for what would be feasible inside that "fence line" and likely will fall short of EPA's targets. But North Carolina will simultaneously develop a plan that will satisfy EPA's goals as a contingency in case lawsuits fail.

Other states plan to seek extensions.

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Among the 27 states that are suing, most are drafting plans ahead of the 2018 deadline as a backup option. Even those that have not officially declared they will submit plans to EPA have been meeting with utilities and public interest groups and taking other steps to prepare, according to a recent compilation of actions submitted by suing states that are arguing the U.S. Court of Appeals for the District of Columbia Circuit should halt the rule.

Almost all states are also involved in multi-state discussions about how their decisions might affect one another.

Nongovernmental organizations including the Center for the New Energy Economy in the West, the Great Plains Institute in the Midwest and Duke University's Nicholas Institute for Environmental Policy Solutions in the Southeast have coordinated some of those talks, along with the Georgetown Climate Center and the Bipartisan Policy Center.

States are also meeting with others in the same grid organization. The Midcontinent States Environmental and Energy Regulators and the PJM Interconnection states group will meet separately within the next six weeks and come together for a workshop in the spring, according to Doug Scott, vice president of strategic initiatives at the Great Plains Institute.

Modeling could help states pick path forward

The grid organizations and nonprofit groups are preparing modeling to determine the least-cost compliance options.

Most of the data will become available in the coming months, and officials say it will be key to making the first decisions about state plans.

In the West, the firm Energy Strategies will finish modeling this month for New Mexico, Utah, Wyoming, Montana and Colorado. A second phase will consider the rest of the Western states except for California. In the Southeast, the Nicholas Institute is working on modeling. The National Governors Association is providing modeling assistance to four states -- Michigan, Missouri, Pennsylvania and Utah.

A number of private firms are also developing their own assessments.

Early stakeholder meetings within states have shown most are focusing on what plan pathway to pick -- whether to pursue an average rate of emissions or cap carbon outright. If they cap emissions, they're also considering whether to include new sources of power in that cap.

Most states will write trade-ready plans so that fossil fuel power generators can purchase credits or allowances from greener sources of energy to comply with the rule even if they fall short of their own carbon budgets. Rate-based and mass-based states cannot trade with one another, so many states are waiting to see which plan type other states will pick so they can be part of the broadest and least expensive carbon market available. They hope to get a sense of that from initial plans submitted in September.

With the exception of the Southeast states and Virginia, most states that have indicated a preliminary preference are leaning toward mass-based standards (ClimateWire, Dec. 16, 2015).

States are also awaiting final model trading rules, which EPA is accepting comments on until Jan. 21 and will finalize this summer.

For more on state activity surrounding the Clean Power Plan, visit the state pages of E&E's Power Plan Hub.

State politics are still at play

As state clean air officials work through the nuances of carbon plans, they may also have to consider interference from legislators and other officials.

Electric utilities in New Mexico have worried that a regulatory oversight board that must approve the state Environment Department's Air Quality Bureau submissions to EPA might "mess around" with the proposal (ClimateWire, Dec. 21, 2015).

Pennsylvania and Ohio lawmakers have pushed to stall compliance planning (ClimateWire, Dec. 14, 2015).

Two bills introduced in Michigan would require legislative review of any state plan.

Other states passed measures before the Clean Power Plan was finalized to ensure their involvement in the process. The West Virginia Legislature tasked its Department of Environmental Protection with analyzing whether the rule is feasible for the state to implement. If it is feasible, the agency must submit a plan for the Legislature to approve before filing it with EPA.

The National Conference of State Legislatures maintains a database of legislative activity related to the Clean Power Plan.

Court battles to unfold

Twenty-seven states, along with trade groups and companies, are challenging the Clean Power Plan in lawsuits in the U.S. Court of Appeals for the D.C. Circuit. They have asked the court to delay implementation of the rule and expect to hear a decision early this year.

Eighteen states and the District of Columbia, as well as many companies and environmental advocates, are supporting the rule in the court proceedings.

Four states -- Idaho, Nevada, Pennsylvania and Tennessee -- have not taken sides.

After the court decides whether to issue a stay, judges will dive into the merits of the lawsuit and hear oral arguments. A final decision could come late this year or early in 2017.

Opponents have argued EPA illegally issued duplicative rules for coal-fired plants, infringed on states' rights, intruded on federal energy regulators' jurisdiction and exceeded its authority in forcing states to transform their energy systems to favor certain sources of electricity (Greenwire, Dec. 21, 2015).

For more background on lawsuits against the rule, check out the E&E Power Plan Hub Legal Challenges page.

Congress out of attacks, for now

Congress last month passed resolutions to block the Clean Power Plan and rules for new power plants, but, as expected, President Obama vetoed them.

Lawmakers could withhold spending to implement the rules when an omnibus appropriations package runs out in September.

For fiscal 2016, Obama proposed giving EPA its first overall budget increase in several years, but the omnibus approved by Congress keeps agency funding flat and slightly decreases state and tribal assistance grants (Greenwire, Dec. 16, 2015).

Committees will likely continue to hold oversight hearings with high-ranking officials from EPA and other agencies involved with implementation of the rule.

While the Clean Power Plan could become an issue in election battles in 2016, Congress seems to have few tactics left for fighting the regulation unless a Republican takes over the White House.

Twitter: @emilyhholden Email: eholden@eenews.net

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