Climate:

Former EPA General Counsel Martella discusses next steps for industry following NSPS release

What are the possible legal challenges to U.S. EPA's New Source Performance Standards? During today's OnPoint, Roger Martella, a partner with Sidley Austin and the former general counsel at EPA, discusses the key legal issues surrounding the agency's NSPS. He also explains how this rule may influence future regulation by EPA.

Transcript

Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Roger Martello, a partner with Sidley Austin and the former general counsel at U.S. EPA. Roger, thanks for coming on the show.

Roger Martella: Great, Monica. Thanks for having me back.

Monica Trauzzi: Roger, with EPA releasing its New Source Performance Standard last week, there are already questions circulating about possible legal challenges to the rule. We had Jeff Holmstead on the show yesterday and he sort of indicated he doesn't think this rule will be around for that long. So, what do you see as the key legal issues coming out of this?

Roger Martella: The rule is unprecedented in some ways. This is the first time that EPA is going to apply a New Source Performance Standard to greenhouse gases. And there's going to be a number of legal issues that arise, but one for example is the fact that EPA is defining New Source Performance Standards for both coal-fired power plants and natural gas power plants together. But it's setting the standard for coal based on the performance of natural gas power plants. So that implicates a doctrine called fuel switching or redefining a source that EPA in the past has said it doesn't have the authority to do and courts have said it doesn't have the authority to do. So that's an example of kind of one of the prime legal issues that's going to be coming up.

Monica Trauzzi: And in the debate after they release the rule, there is this discussion about whether they're making an attack on coal or whether they're just simply trying to make things more efficient. Where do you come down on that?

Roger Martella: Well, clearly the impact here is on coal. The standard they set takes, you know, any new conventional coal-fired power plant off the table. Basically a coal-fired power plant would have three options. The preferred option seems to be to not use coal and switch to natural gas. EPA says, oh, we're going to leave two other options on the table. One would be to use supercritical technology, coal technology for the first 10 years, but over 30 years, we're going to even hold you to a more stringent standard and expect you to phase that out. The third option is to use carbon capture and sequestration, which EPA says today is technically feasible. There's probably a good amount of debate about that, but I think at the end of the day this looks like the beginning of the end of the era for new coal-fired power plants if the rule is finalized.

Monica Trauzzi: And you actually don't believe that EPA is legally compelled under Massachusetts v. EPA to move forward with this rule. Why is that? Because EPA does feel that they absolutely need to do this.

Roger Martella: Sure. I don't think this is mandated by Mass v. EPA. Clearly Mass v. EPA did mandate EPA to do a number of things and, frankly, it's done those things. It's fulfilled those obligations, but the decision was limited to mobile sources and an endangerment determination. It didn't touch upon stationary sources. It didn't touch upon New Source Performance Standards. Twice since Massachusetts v. EPA groups have asked EPA to do exactly this, New Source Performance Standards for various sectors, once with the petroleum refineries, once with the Portland cement industry. EPA said both times we have the discretion to not do New Source Performance Standards. And back in December, the D.C. Circuit actually affirmed EPA's decision to not do this. So, they may have other reasons for doing it, but it's not compelled by Mass. v. EPA.

Monica Trauzzi: This is considered a moderate or modest rule for the most part, isn't it?

Roger Martella: EPA is clearly limiting the immediate impact. I mean I think their position would be we're opening the door to New Source Performance Standards, but just a crack, just a slight crack. I think the question that's unanswered is how much wider do they swing the door open? Will they then address existing sources down the road? There's a couple points in the proposal where they are clearly anticipating an upcoming rulemaking on existing sources. There's also the question about whether this becomes precedent for other sectors, other industries that also would be subject to similar greenhouse gas requirements.

Monica Trauzzi: And this question about existing sources has also been swirling over the last couple of weeks. Lisa Jackson had said there are no plans to move forward with such a rule, but you seem to think that it's kind of written in the tea leaves?

Roger Martella: Yeah, I think it would be a little naïve to assume that they're not going to address existing sources for a couple of reasons. Again, there's a bit of foreshadowing at various parts of the proposal where they reference a future proposed rule for existing sources. They reference states addressing existing sources and we know that this rulemaking comes out of an agreement with certain groups that committed them to address existing sources. So, it may be on the shelf for now, but I imagine at some point it's going to be dusted off.

Monica Trauzzi: So, what are the broader ramifications of all of this? What does this mean for future rulemakings?

Roger Martella: I think this is, you know, they're opening the door for the first time to the affirmative regulation of greenhouse gases for stationary sources. What they've done for the last year, the last 15 months is they've only addressed greenhouse gases from stationary sources in a very passive way through the preconstruction PSD permitting process. There's about 15, 18 applications that have gone through and I think to EPA's credit they've been very flexible in the way they have approached this. This is fundamentally different than that. This is the first time they will be applying an affirmative regulation. In other words, a standard that applies to all sources within a category in a uniform way. So it's precedent there and we, you know, should assume that they may be looking at this precedent, applying it to other sectors. There's reasons to make distinctions with those sectors, but nonetheless this seems to be kind of the first chapter of this affirmative type of greenhouse gas regulation.

Monica Trauzzi: OK, interesting stuff. We're going to end it right there. Thank you for coming on the show.

Roger Martella: Great, thanks Monica.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

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