REGULATION

Industry groups wary of Clean Power Plan precedent

Manufacturers and oil refiners are paving the way for a hard-fought battle over U.S. EPA's greenhouse gas standards for the power sector, fearing the agency could use similar tactics to write climate regulations for their industries.

The Chamber of Commerce, the National Association of Manufacturers (NAM) and the American Petroleum Institute, along with more than a dozen other business trade groups, argue that the framework of the draft rule is outside EPA's authority. They say that if the courts uphold the rule, it will set precedent for how the agency might limit carbon emissions from other sources, including petroleum refiners and iron, steel and cement manufacturers.

The Clean Power Plan reaches "beyond the fence line," or outside power plant operations, to reduce demand for coal-fired power by laying out how states could use more natural gas, build up renewable power and cut back on electricity use. Supporters say the strategy offers states more flexibility to implement plans in a cost-effective way.

Opponents, on the other hand, worry that EPA is making it standard to tell states to reduce demand for certain products, says David Bookbinder, a former chief climate counsel for the Sierra Club who now represents natural gas interests.

"I'm not sure how well any industry would react to that," Bookbinder said. His theoretical comparison is if EPA asked the construction industry to build with less steel to reduce the demand for it and cut back on the amount of energy used to make it.

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"That's what industry is afraid of, because the analogy is that's exactly what they're telling the power companies with the efficiency stuff. ... Use less power and make less power."

But EPA spokeswoman Liz Purchia has said the agency isn't telling states how to pursue the cuts and is just offering a menu of options. Purchia said the proposal isn't a broadening of EPA's authority but a natural continuation of the regulations it has written under the Clean Air Act for more than 40 years.

Leading the opposition

It's nothing new for the chamber and industry groups to chime in on EPA regulations that they think might affect business, and their lobbyists have written at length about the potential for increasing energy costs and reliability problems. Still, experts say trade groups are more involved with the rule than with any previous regulation as a matter of precedent.

"The level of concern is probably higher than I've ever seen before. Part of it is just principled. ... Genuinely, their people are philosophically opposed," said Jeff Holmstead, a former EPA air chief who is now an industry attorney at Bracewell & Giuliani. "There is also concern, if this approach is upheld, on exactly what EPA could do to other industries."

The chamber and NAM submitted comments opposing the draft rule along with 15 other groups, from the Portland Cement Association and the American Chemistry Council to the Corn Refiners Association. Those associations could be key players in legal challenges, as well as lobbying efforts at the state level to influence whether states resist the regulation or how they write their plans.

NAM's Ross Eisenberg, vice president of energy policy, said EPA has "the ability, and some would argue a mandate, to go after other sectors" next.

The American Petroleum Institute has been another vocal opponent of the rule, saying in comments that it is concerned the agency will use a similar approach in future rulemakings for other source categories. The group hasn't said yet whether it will sue, but API's Regulatory Affairs Director Howard Feldman says the rule, "the way it has been proposed, is unacceptable."

"Once you see this proposal, it makes you say, really, you think you have the authority to regulate the entire power sector through this rule?" Feldman said. "What could they do to the refining industry that's beyond the fence line?"

Holmstead says he's been in industry discussions on the potential impacts of that precedent on the petroleum sector, where some are wondering whether EPA might be able to reduce demand for gasoline by pushing electric vehicles, for example.

EPA agreed in a settlement with environmental groups to regulate greenhouse gas emissions from refineries after setting out rules for the electric sector, but the agency doesn't have immediate plans for that rulemaking.

'Lawyers are going to have a field day'

Roger Martella, a former EPA counsel and partner who represents electric utilities at the Sidley Austin law firm, said other sectors are taking the rule personally because of the potential precedent.

"They're putting 100 percent effort into addressing it as they would if they were being regulated directly," Martella said. "It's a bit of a line-in-the-sand exercise."

That might lower the threshold for groups finding the rule worthy of litigation.

"Everyone is going to sue EPA for this," Bookbinder said. "There's no doubt about it -- the lawyers are going to have a field day."

The Chamber of Commerce isn't seeking narrow fixes to the rule, said Dan Byers, a senior policy director for the chamber's energy program.

"We're strongly opposed to the rule front to back," he said. "It's hard to envision any way that it could be repaired based on current form."

Megan Ceronsky, director of regulatory policy with the Environmental Defense Fund, said that attitude is a mistake. Ceronsky said that time after time, environmental regulations see broadside attacks rather than targeted, constructive litigation.

NAM is one of the groups calling for the rule's outright withdrawal, but Eisenberg says the association is willing to work with the administration to get to a better place, starting with lengthening compliance timelines.

Opposition groups hope to at least set back the timetable for EPA to start working on regulations for other industries, Bookbinder says. Refining is just one industry in a long list of sources EPA could potentially regulate, including landfills, iron and steel production, animal feeding operations, and portland cement manufacturing, according to EPA's 2015 budget justification.

Meanwhile, the high interest in the rule could crowd the field of lawyers working on challenges -- which eventually will have to be whittled down to a few key points for briefs for the Supreme Court -- should it choose to review the rule. Bookbinder cautions that "more lawyers does not necessarily equal a better outcome," and Dentons attorney James Rubin compares the process to a "food fight."

"There's more at stake. It's a bigger rule. It's got a lot of bells and whistles," Rubin said. "It ratchets up the level of worry."

Twitter: @emilyhholden | Email: eholden@eenews.net

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