Legal debate trails McConnell’s latest assault on EPA rule

By Jean Chemnick | 05/07/2015 01:27 PM EDT

Senate Majority Leader Mitch McConnell’s new offensive against U.S. EPA’s Clean Power Plan targets the draft rule for encouraging states to enter regional agreements to curb emissions of greenhouse gases.

Senate Majority Leader Mitch McConnell’s new offensive against U.S. EPA’s Clean Power Plan targets the draft rule for encouraging states to enter regional agreements to curb emissions of greenhouse gases.

States can’t take the regional route, the Kentucky Republican warned last week, without the approval of Congress.

But there’s a precedent for using the Clean Air Act to encourage interstate pollution pacts.


President George W. Bush’s EPA took that tack twice. Bush’s Clean Air Interstate Rule (CAIR) for smog- and soot-forming emissions that cross state lines and the Clean Air Mercury Rule (CAMR) — both promulgated in 2005 — relied on interstate trading of emission credits to deliver reductions. The mercury rule even used the pollution law’s same Section 111(d) as the carbon rule does.

At issue for McConnell is wording in Section 102(c) that does permit states to negotiate and enter interstate agreements and compacts to address air pollution but adds, "No such agreement or compact shall be binding or obligatory upon any State a party thereto unless and until it has been approved by Congress."

McConnell told EPA Administrator Gina McCarthy at an Appropriations hearing last week that the provision gave Congress the power to veto the rule (E&E Daily, April 30).

"Doesn’t seem ambivalent to me," he said.

If it works as McConnell says, the Section 102(c) card could be a Republican dream: a way to scuttle the Obama administration’s flagship climate rule without having to move a bill through the Senate.

McConnell has made the Clean Power Plan a top target, advising like-minded state leaders to "just say no" to the rule by refusing to submit approvable state implementation plans (SIPs) to EPA and counselling them that EPA lacks the authority to impose a stringent federal plan if they do. He has promised that the courts and Congress would provide backup (Greenwire, March 4).

But while Republicans on both sides of the Capitol are moving bills to bar EPA from implementing a federal implementation plan (FIP) in noncompliant states, Sen. Shelley Moore Capito (R-W.Va.) acknowledged Tuesday the measure she will introduce next week will face an uphill battle to the Senate’s 60-vote threshold for controversial legislation (Greenwire, May 5).

McConnell’s Section 102(c) bid offers an alternative.

Jeff Holmstead, who was EPA air chief under George W. Bush and is now representing industry clients at Bracewell & Giuliani LLP, said EPA appears not to have fully considered the impact of Section 102(c). He noted that the agency did not address that provision in documents supporting the rule, and McCarthy and the agency have not responded directly to McConnell’s statement.

"I think it’s a big issue that EPA is going to have to deal with in some way, and I think it does create a problem for them," he said.

Even though the proposal does not require interstate compliance, EPA staff and the rule’s supporters in the advocacy community have promoted the option as a way to cope with a myriad of reliability and supply concerns that stakeholders have raised about the rule, he noted.

Numerous studies — like one released last week by the Bipartisan Policy Center — show interstate compliance approaches would benefit the vast majority of states (Greenwire, April 29).

And independent system operators (ISOs) and the Federal Energy Regulatory Commission have expressed interest in interstate compliance plans that would track with the integrated nature of the grid. ISOs that back a regional approach include PJM Interconnection, the Midcontinent Independent System Operator (MISO) and ISO New England.

If Congress now must give permission for states to enter into these agreements, Holmstead said, "You will have a huge, huge uproar from ISOs, from FERC, anybody who has been looking at this from a reliability perspective or an implementability perspective, and has been thinking about regional plans.

"If regional plans are pulled off the table, it creates a whole set of issues that are way beyond the pushback that EPA’s getting now."

EPA’s only option in that case, he added, may be to propose a new version of the rule rather than finalizing it this summer as planned.

But David Doniger of the Natural Resources Defense Council said the Section 102(c) argument was just the latest of many "desperate" bids to stymie EPA.

"It’s just somebody throwing something up there and hoping that they can make it stick," he said, adding it "wouldn’t go anywhere in the courts."

‘Question of interpretation’

Doniger pointed to Holmstead, who presided over Bush’s CAIR effort and evidently saw no legal problems with its interstate architecture then.

And the court challenges to the Bush rules, he said, failed to address whether interstate cap-and-trade programs were permissible.

Holmstead maintains the Section 102(c) provision was so obscure that he and his staff were unaware of it when they wrote CAIR.

"As far as I know, it was never discussed internally or raised by anyone from inside or outside the agency," he said. "I have to admit that I had never heard anything about it until now."

He added, "But Section 102 is still the law of the land, and now that it has been raised, EPA will have to deal with it."

Peter Glaser of Troutman Sanders LLP said CAIR was different, because it was a voluntary cap-and-trade program that would be administered by EPA that states would join in on via SIPs.

It’s not "states banding together and coming to an independent agreement," he said in an interview. "That’s the difference."

But other Clean Air Act experts question whether the section McConnell cites weakens states’ ability to work together or strengthens it.

They note that Section 102 was originally designed to address issues arising from the Compact Clause, a provision in Article 1 of the Constitution aimed at preventing states from assuming powers over interstate commerce and treaty making that are reserved for the federal government.

The clause is virtually identical to the sentence from Section 102 that McConnell hangs his argument on. It reads: "No State shall, without the consent of Congress … enter into any Agreement or Compact with another State."

Robert Nordhaus, a senior partner at Van Ness Feldman who has studied historical perspectives on the Clean Air Act, said it was unclear whether the Clean Air Act provision expanded the universe of interstate agreements that would require congressional approval.

"I think the issue here is that, is it referring to compacts that otherwise would require approval under the Compact Clause? Or does it refer to a much wider range of interstate agreements, which under the Constitution would not require congressional approval?" he said. "There is a question of interpretation here."

But Nordhaus noted the Supreme Court has generally taken a narrow view of which interstate agreements require congressional approval and has usually deferred to the agency when the statutory language is ambiguous.

Nathan Richardson, a visiting fellow at the think tank Resources for the Future, said agreements between states or between a state and EPA "are common in Clean Air Act practice, and have not in the past given Congress a route to independently review or reject EPA rulemakings."

The section McConnell cites does not create any new problems for the Clean Power Plan, Richardson said. That the Clean Air Act encourages states to work together in Section 102 implies Congress intended to loosen that constitutional limitation, not tighten them, he said.

And whether or not it expands on states’ constitutional authorities, he said, neither the Constitution nor the Clean Air Act provision can be used as a weapon against any federal rule that contemplates interstate cooperation.

"It doesn’t give Congress the power that McConnell alleges it does to go in and independently review any EPA regulation that might eventually lead to binding agreements between states," he said.


McConnell and Holmstead hold that the Clean Air Act provision would prevent states from entering an agreement that would be binding — or that would allow the federal government and third parties to sue to enforce participation.

This is why regional programs under the EPA rule would run afoul of the law, they say, while voluntary programs like the Northeast’s Regional Greenhouse Gas Initiative did not.

But environmental lawyers say that is not the case because EPA approves individual state plans, not regional agreements.

"It’s not the regional agreement that is going to be obligatory, it’s the state’s compliance with its own plan," Georgetown University Law Center professor Lisa Heinzerling said.

The only "hitch" in Section 102, said Heinzerling — a former climate lawyer at EPA and an architect of the agency’s endangerment finding for carbon dioxide emissions — "is that any regional agreements or state agreements can’t themselves be enforceable under the Clean Air Act."

If a state backs away from participation in a regional plan after EPA approves its SIP, she said, "then I imagine they’d have to come up with some kind of alternative."