EPA power plant rules could be part of bigger initiative

By Jean Chemnick | 10/07/2021 05:59 AM EST

Joe Goffman is EPA's acting air chief. School of Transnational Governance EUI/YouTube

When EPA proposes its power plant rules for carbon dioxide they might be part of a larger package.

EPA officials who are crafting the next generation of Clean Air Act climate regulations have signaled publicly and in conversations with outside groups that the agency is preparing a broader “initiative” or “strategy” to address pollution.

Acting air chief Joe Goffman told POLITICO in June that EPA Administrator Michael Regan had directed EPA offices to “think broadly across the different pollutants in the different media that are affected by the power sector” and develop an electric industry “strategy.”

Goffman, who oversees the EPA office responsible for regulating CO2 and hazardous and smog-creating pollutants at power plants, has talked about an electric utility “initiative” in conversations, industry sources say.

Those sources say EPA may take an integrated approach to power sector rules, laying out the regulatory tools at its disposal to reduce CO2 and other pollutants from fossil fuel units, while setting goals for an industry shift in line with President Biden’s commitment to produce 80 percent clean energy by 2030.

The package would include new Clean Air Act rules for CO2 but also EPA’s next regulatory steps on mercury and pollution that crosses state lines. National ambient air quality standards that affect power plants indirectly might or might not be candidates for inclusion. EPA could also weave in rulemakings from other offices, like Clean Water Act limits on pollution entering streams from power plants or the regulation of coal ash disposal under the Resource Conservation and Recovery Act.

Opponents of tighter EPA regulation say this approach is designed as a backstop for the agency’s power plant carbon rules, which they predict won’t stand up to scrutiny by a Supreme Court that has moved further right since 2016, when it halted the Obama-era Clean Power Plan. The court didn’t issue a decision, but its stay was interpreted as a rebuke of EPA’s attempt to regulate the power system as a whole rather than individual generating units.

Strong non-CO2 regulations can get the same job done, regulatory opponents say, by making coal plants so costly to operate that they’re forced into early retirement.

But a packaged approach would also give industry a road map for all of the regulations expected during Biden’s first term. White House climate adviser Gina McCarthy and EPA officials have asked for industry input. McCarthy, a former EPA administrator who is overseeing Biden’s climate agenda, met virtually with members of the board of the Edison Electric Institute, the industry’s trade association, early this year.

“If the agency was able to put out a slate of upcoming standards and also think through with the industry — and the states and the environmental community — how could this phasing work in a way that enables utilities to plan to meet all these standards in the most cost-effective way possible, that would make both environmental and economic sense and certainly be appealing to the utilities,” a former EPA official said.

It might also allow utilities in regulated markets to recover investments that prepare them to meet the coming standards, the former official said.

‘On the table’

Richard Revesz, a New York University Law School professor who was discussed as a possible Biden pick for EPA administrator, said one option would be for EPA to roll out several rules as an “umbrella proceeding." The Obama administration did that when it introduced EPA tailpipe emissions standards and Department of Transportation fuel economy standards in tandem in 2009.

“Typically EPA has done [rulemakings] sort of one at a time and the government has done them one at a time, but one could sort of think of this as a whole-of-government package so that the power sector could be regulated in an intelligent way that reduces the cost of the regulation and increases the environmental benefits,” Revesz said.

“That’s clearly a possibility that’s on the table,” he added.

So-called whole-of-government climate policy has been a hallmark of the Biden administration, and it has been McCarthy’s task to coordinate it from her office in the White House. When EPA finalized its phase down last month for hydrofluorocarbons, a class of climate pollutants used in cooling and refrigeration, McCarthy joined Regan on a call with reporters to announce a raft of complementary policies at five other departments and agencies aimed at supporting EPA’s rulemaking.

For his part, Goffman, who served as senior council at EPA’s air office during the Obama administration, joined Jennifer Macedonia and Brenda Mallory early this year in publishing a blueprint for how EPA could contribute to such a strategy. They called it the Climate 21 Project. Macedonia is now EPA’s deputy associate administrator for policy and Mallory is chair of the White House Council on Environmental Quality.

The project issued climate recommendations for 12 agencies and offices, and was co-led by Tim Profeta, who has since become special counsel for the power sector at EPA’s Office of Air Quality Planning and Standards.

They also acknowledged the risk that the Supreme Court might present to climate regulations.

“While the climate crisis demands an aggressive approach, the constraints and risks of exercising regulatory authority warrant a thoughtful assessment to define where to regulate and where to apply other leverage,” the Climate 21 Project stated. “In addition to traditional regulatory authorities, EPA’s toolbox includes non-regulatory approaches built around engaging, convening, partnering with, providing technical assistance to, and educating the public and private sector.”

The recommendations by Goffman, Macedonia and Mallory point to non-CO2 rulemakings under the Clean Air Act.

“In addition to the primary air quality and public health benefits these rules would deliver, they would also produce climate benefits; in some cases, pollution control compliance measures would result in [greenhouse gas] reductions and in all cases, they would influence the economics of power generation,” they write.

“Where regulation is justified to address critical environmental damage caused by coal production and combustion, regulation can create climate co-benefits by rectifying the economics of fossil-based generation and competition with clean energy sources,” they continued. They proposed a “cross-agency power sector task force” within EPA to assess the aggregate impact of its power sector rules.

Legal redundancy

Tom Lorenzen, a former Department of Justice attorney who is now a partner at Crowell & Moring LLP, said the power sector package could go beyond EPA to include incentives administered by the Energy Department and other agencies. Federal procurement of clean energy and Interior Department steps to promote renewables could also play a role.

“A combination of carrot and stick would not surprise me at all,” he said. “They’ve been touting from day one that they’re going to take an all-of-government approach to this, so to me it would be more surprising if it were just EPA regulation alone — particularly given the uncertainties about EPA’s authority.”

The Supreme Court will announce within weeks whether it will take up a case that could limit EPA’s authority to craft a carbon rule for utilities that seeks emissions reductions beyond the fence line at a power plant — as the Clean Power Plan did.

Lorenzen said EPA staff are almost certainly looking at how to preserve a carbon rule if the high court strikes down a regulation that includes fuel-switching. That could mean the agency is considering a rule that has both inside-the-fence-line and “systemwide” components that are severable, meaning the on-site requirements would survive even if the courts threw out the systemwide elements.

But heat rate improvements by coal-fired power plants can only reduce emissions by so much.

“That’s where incentives probably come in,” said Lorenzen. “Because if you can’t force generation shifting through regulation, can you incentivize it through other programs.”

The Biden administration is hoping that Democrats on Capitol Hill send agencies a sprawling bill that would set up a new de facto clean electricity standard. But it’s unclear if the budget reconciliation package will pass or, if it does, whether the Clean Electricity Performance Program will remain part of it.