Legal war brews over EPA power plant rule

By Niina H. Farah, Lesley Clark | 05/12/2023 06:23 AM EDT

The Biden administration’s plan to curtail carbon pollution from power plants could suffer some of the same legal setbacks that undercut its Obama-era predecessor.

EPA Administrator Michael Regan.

EPA Administrator Michael Regan speaks about new proposed limits on greenhouse gas emissions from coal- and gas-fired power plants Thursday. Nathan Howard/AP Photo

EPA has rolled out its strongest-ever proposal to slash planet-warming emissions from power plants — but before the agency can tackle one of the nation’s leading sources of climate pollution, the strategy must first survive the courts.

Legal observers say that will be no easy feat.

EPA’s draft rule released Thursday comes less than a year after the Supreme Court issued a landmark ruling that scaled back the agency’s regulatory options for controlling carbon and other greenhouse gas emissions from the power sector.


Although the Biden administration appears to have crafted its proposal with the conservative-dominated high court in mind, environmental lawyers say EPA could face legal fire for its reliance on new and unproven technologies to meet emissions goals that could prompt the closure of more coal-fired power plants.

“Some of the things they’re proposing are a real stretch, and they could still run into the very same problems again,” said Jeff Holmstead, a partner at the firm Bracewell LLP.

EPA’s draft rule — which falls short of requiring carbon neutrality from the power sector — would advance emissions reductions at new and existing power plants through efficiency improvements and carbon capture and storage technology (CCS), as well as incorporating climate-friendly hydrogen fuel.

The proposal comes nearly a decade after the Obama administration finalized an earlier version of the rule — the Clean Power Plan — which would have taken a systemwide approach to pollution reduction by forcing plants to use more renewable energy sources like wind or engage in emissions trading. But the 2015 regulation never officially took effect after it was ensnared in legal challenges and ruled out of bounds by the Supreme Court last summer in the blockbuster case West Virginia v. EPA.

President Joe Biden’s power plant regulation will likely face a new onslaught of legal challenges shortly after EPA reviews public comments on the proposal and issues a final version of the rule — a process the agency expects will conclude next summer.

One of the leading conservative challengers in last year’s Supreme Court climate case, West Virginia Attorney General Patrick Morrisey, has already vowed to bring EPA back to court over the Biden rule’s impact on coal-fired power plants.

“The U.S. Supreme Court has placed significant limits on what the EPA can do — we plan on ensuring that those limits are upheld, and we expect that we would once again prevail in court against this out-of-control agency,” Morrisey said in a statement Thursday. “We urge everyone not to fall for this clear attempt to accomplish what the law doesn’t allow.”

He added: “We need the plants to stay open.”

Jay Duffy, litigation director at the Clean Air Task Force, however, said EPA’s legal risks are minimized because the agency designed its new proposal with the Supreme Court’s West Virginia ruling in mind.

The court “spoke more favorably about ‘at the source,’ traditional pollution controls,” and EPA “wisely limits itself to considering those conventional controls,” Duffy said.

He said opponents of Biden’s power plant rule are likely to argue that the recommended pollution measures have not been proven or that the cost of compliance is too high.

“Those are a different sort of litigation engagement than ‘what’s the statutory interpretation definition of a system,’” he said, referring to the Supreme Court battle over the Obama-era Clean Power Plan.

“Now we know what a system is,” Duffy said, “and EPA is right in the wheelhouse in terms of what the court said to do.”

New technology

Court watchers say the EPA proposal’s reliance on emerging technologies to curb emissions from fossil fuel-burning plants could prove to be its legal Achilles’ heel.

That’s because the section of the Clean Air Act the proposal was written under requires EPA to set the “best system of emission reduction” that has been “adequately demonstrated.” Critics argue that EPA is requiring the use of technologies that have not yet been shown to be feasible at a commercial scale, and they point to the long lead time before the rule goes into effect as another potential legal vulnerability.

Under the proposal, new and existing gas plants running regularly would have to capture 90 percent of their emissions by 2035. Existing coal-fired plants slated to run into 2040 would have to capture 90 percent by 2030. Gas plants expected to operate for decades could comply with the rule by co-firing with low-emitting hydrogen, gradually ramping up to a 96 percent hydrogen blend by 2038.

A senior EPA official who spoke on the condition of anonymity to discuss the draft rules prior to their release said that the future compliance deadlines reflect the fact that power plant operators across the country need lead time to build to those standards, but the person emphasized the technology itself is ready to use at individual plants.

“And so we have evaluated as part of this proposal the kind of time that’s needed to actually on a nationwide basis carry out those kinds of control options and meet these kinds of standards,” the official said.

The deadlines “are reflecting what it takes in terms of actually rolling them out and implementing them for the fleet,” the official said.

Holmstead said EPA relied on announced projects that haven’t yet been financed to show the carbon capture for gas plants could be feasible. Hydrogen projects face a similar problem.

“I’m bullish on CCS,” he said. “I actually think it’s a technology that will be really important. But they obviously are swinging for the fences here.”

He critiqued the long window before power plants have to comply with the rule as another potential legal hurdle.

“EPA does have to allow for enough lead time,” said Holmstead, ” But when that lead time is needed to show that it’s even technically feasible, that undercuts the argument that it’s been adequately demonstrated.”

Romany Webb, deputy director of the Sabin Center for Climate Change Law at Columbia University, praised EPA’s efforts but acknowledged the inclusion of hydrogen co-firing in particular could prove to be a problem, mainly because it will be necessary to demonstrate that the fuel was produced without emitting a lot of greenhouse gases.

EPA is currently seeking public comment on how to verify hydrogen emissions and suggests creating some sort of certification system, said Webb.

“It’s unclear how that will be done,” she said. “I think that needing to verify the source potentially does open up arguments similar to those that were raised in West Virginia.”

Supporters of the new proposal rebuffed suggestions that EPA is setting carbon capture and hydrogen requirements prematurely.

Duffy said EPA first found CCS was “adequately demonstrated” and “cost reasonable” in 2015 for new coal plants. The agency now proposes to expand that finding for the rest of the fleet.

Duffy said the Clean Air Act is “technology-forcing,” noting that when EPA set standards based on sulfur scrubbers on power plants, there were only three units in operation — and one vendor working on the technology.

Post-combustion capture is “significantly more widespread and proven,” Duffy said, adding that at least 13 vendors have done testing and offer carbon capture for coal- and gas-powered plants.

Natural Resources Defense Council senior attorney Lissa Lynch said the Biden administration is “going into this round in a very different place,” with the benefit of having a Supreme Court decision outlining what EPA can and cannot do to alleviate power plant emissions.

The proposal’s lead time, she said, would give companies “clear long-term guidelines on how and when they’ll need to cut their pollution.”

EPA is “correctly basing the standards on what plants can achieve using inside the fence line measures,” she said. But states and companies will have flexibility to come up with ways to meet the standards, including carbon capture, co-firing with hydrogen or running a plant less often, she said.

“Knowing what’s coming is going to lead to a lot of industry planning and decisionmaking that will actually allow emission reductions to be achieved even in advance of 2030,” she said.

Even in the absence of the Obama rule, power producers met the regulation’s targets more than a decade ahead of schedule.

Coal plant closures

Early critics of Biden’s power plant proposal said that the rule would prompt new coal plant closures, violating the Supreme Court’s West Virginia ruling on the boundaries of EPA’s climate powers.

The proposal does not explicitly depend on coal plant closures to meet its emissions goals, but if the result of broadly adopting carbon capture and hydrogen is a nationwide transition away from coal, then EPA could run into trouble in court, said Holmstead.

He pointed to a specific part of the West Virginia ruling outlining the limits of the agency’s powers to force coal retirements.

“Capping carbon dioxide emissions at a level that will force a nationwide transition away from the use of coal to generate electricity may be a sensible ‘solution to the crisis of the day.’ But it is not plausible that Congress gave EPA the authority to adopt on its own such a regulatory scheme,” Chief Justice John Roberts wrote for the majority.

“A decision of such magnitude and consequence rests with Congress itself,” Roberts continued, “or an agency acting pursuant to a clear delegation from that representative body.”

But Cary Coglianese, director of the Penn Program on Regulation at the University of Pennsylvania, noted that while critics may point to the EPA regulation as killing jobs in coal country, the industry has already been in substantial decline as it has lost out to more competitive natural gas.

Even substantial regulation like the Obama-era rule, which would have required power plants to shift from fossil fuel-based energy to renewables, has been shown by researchers not to have discernible effects on coal’s profitability, he said.

“Economic competition has already been contributing more significantly to the industry’s decline,” Coglianese said.

Upside for EPA

It’s not all bad news for EPA.

Legal observers say the Supreme Court’s guidance in West Virginia and the presence of new climate legislation from Congress could help the agency survive yet another legal fight over its approach to slashing greenhouse gas emissions from the power sector.

“I think that the way they’ve crafted the proposal stays within the limits of the statutory authority and the constraints that were imposed by the court in West Virginia,” said Webb.

Congress’ landmark climate bill — the Inflation Reduction Act — offers key funding to advance CCS and hydrogen technologies that could make EPA’s proposal more economically feasible, though the bill itself won’t offer legal cover to the agency, lawyers said. The 2022 law revamped a tax credit for carbon storage, 45Q, offering up to $85 per metric ton of permanently stored carbon and $60 per metric ton for enhanced oil recovery.

“Without the 45Q tax credits, [the proposal] would be much more expensive,” said Holmstead. “It certainly helps them that some of the costs can be offset with tax credits.”

EPA has to take cost into account when it evaluates whether a technology is adequately demonstrated under the Clean Air Act, added Webb.

“IRA incentives and things that help to drive down cost are really important and does help EPA make that argument that these are cost-effective technologies,” she said.

Like the tax credits, EPA’s creation of subcategories that set different compliance standards based on how often plants operate, the fuel they use and other factors could also help Biden’s rule survive in court.

EPA has a lot of discretion in how it creates these categories, and the different compliance standards make sense for the power sector, said Holmstead. For example, the proposal allows higher emissions for plants that only operate about 20 percent of the time.

“I think that the decision to segment the various parts of the industry and to differentiate between different plants based on size and capacity factors was smart and makes it easier to justify different requirements for different facilities,” said Webb.

Nonlegal challenges

The Supreme Court’s conservative wing may not be the most immediate threat to Biden’s climate ambitions.

Depending how long it takes for Biden’s EPA to complete its final power plant rule, the regulation could also be at risk of a congressional smackdown if Republicans gain control of the White House or the Senate in the 2024 election.

Under the Congressional Review Act, lawmakers have the power to block recently finalized agency rules via simple majorities in both chambers. The action, however, can be vetoed by the president.

When former President Donald Trump took office in 2017, the Republican-controlled House and Senate used the CRA to unwind more than a dozen rules that had been finalized during the last months of the Obama administration.

EPA’s new power plant proposal — which is scheduled to be finalized by June 2024 but could take longer — may be similarly vulnerable if the White House or Congress changes hands next year.

Sen. Shelley Moore Capito, a Republican from West Virginia, threatened Thursday to lead the CRA charge against Biden’s power plant proposal, saying she plans to introduce a resolution of disapproval “to protect workers and families from the disastrous impacts of these latest job-killing regulations.”

The top Republican on the Senate Environment and Public Works Committee described the new rule as an “attempt by the Biden administration to revive the illegal Clean Power Plan.”

Reporter Jean Chemnick contributed.

This story also appears in Energywire.