CLEAN POWER PLAN

'Just say no' strategy appears to be crumbling

In March, Senate Majority Leader Mitch McConnell had a prescription for states unhappy with U.S. EPA's Clean Power Plan: "Just say no."

In newspaper columns, public statements and a much-publicized letter to the nation's governors, the Kentucky Republican counseled states that EPA would ultimately be unable to use the existing power plant rule to force an overhaul of their power grids (E&E Daily, March 20).

The rule was an attempt to commandeer state authority, he argued. By simply refusing to implement it, governors could bring EPA's efforts to a screeching halt and allow the courts and Congress to act.

As spring turned to summer, McConnell became so personally associated with "just say no" that Texas Gov. Greg Abbott (R) used a May meeting with the leader in Washington, D.C., to hint that he would add his state to a list of likely noncompliants that would come to include Indiana, Wisconsin, Louisiana and Oklahoma.

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But since the rule was finalized on Aug. 3, "just say no" has slowly and quietly receded. McConnell no longer references it, preferring instead to cite the legal challenges stacking up in the courts and to Congressional Review Act resolutions that have now been offered in both chambers of Congress.

Twenty-four states have filed suit, up from the 16 that launched a pre-emptive challenge of the draft. Meanwhile the list of states "just saying no" is shrinking, not growing. The trend in many states is two-pronged -- attorneys general file suit while environmental regulators and cabinet members grapple behind the scenes with compliance strategies.

The Great Plains Institute, Duke University's Nicholas Institute for Environmental Policy Solutions, the Center for the New Energy Economy and others are all involved in briefing states -- many of which are hostile to EPA's rule -- that want to explore their options.

Oklahoma Gov. Mary Fallin (R) was the first to pledge not to submit a state plan and released an executive order to that effect after the rule was final. But last week her energy secretary, Michael Teague, stunned a D.C. ballroom full of state environment regulators by hinting that Oklahoma would submit a compliance plan after all (ClimateWire, Oct. 27).

One coal industry expert said that if Oklahoma -- "the frigging poster child for 'just say no'" -- is now saying yes, it is hard to see who is still in the noncompliance camp.

Texas is also discussing compliance options, while West Virginia Gov. Earl Ray Tomblin (D) announced yesterday that his administration will begin working on a plan shortly with the hopes that it will eventually win EPA approval. The Mountain State never signed on to "just say no," but its attorney general is leading the states' lawsuit while its senators, Shelley Moore Capito (R) and Joe Manchin (D), spearhead legislative efforts to scuttle the rule (Greenwire, Oct. 27).

And as states peel off, the coal expert says, others are encouraged to do so. "Just say no" depended on safety in numbers. EPA would be forced to use limited resources to promulgate many separate state-specific federal implementation plans (FIP) and defend them -- a task that would allow opportunities for delay and litigation stretching for years.

Now any state that says no risks doing so alone. And it's unclear what form the federal plan would take. EPA proposed FIP and model rules on Aug. 3 when the final rule was unveiled, but while the model rule or rules are due to be final next summer, the agency has said it might not finalize a FIP until it needs to use it to regulate utilities in a noncompliant state.

Did McConnell's strategy work?

So, what changed?

One Senate aide familiar with the strategy said it slipped from the agenda because it succeeded. By beating the "just say no" drum, McConnell won changes to the rule that will ensure that states don't take steps to comply before the courts have ruled, incurring economic costs that may not be necessary.

The draft version of the rule would have required states to commit themselves to a compliance strategy by 2016 unless they successfully petitioned for an extra year or committed to join an interstate trading program -- in which they could submit a plan in 2018.

"As others have suggested, the EPA's deadlines were very likely designed to force states to develop and submit implementation plans before the courts can decide on the legality of the CPP," McConnell wrote in that letter to governors in March.

The final version's deadlines are very different. It still requires an initial submission next year, but EPA's acting air chief Janet McCabe and others have made it clear they are looking for a sketch, not a finished portrait. And states have ample latitude to change their minds, McCabe assured state regulators gathered at last week's Environmental Council of the States meeting in D.C.

The new deadline for submission of a detailed plan is 2018. And that roughly coincides with when the Supreme Court is likely to have handed down a decision on the rule -- either settling questions of its legality for good or sending EPA back to the drawing board on substantial sections of the rule.

Governors can sit back and wait for two years for the courts to throw out the rule or for the power structure in Washington to change, the aide said.

"At a minimum we've kicked this into the next president, and quite frankly, a Republican president would be in a good position to roll it back," the aide said.

Meanwhile the strategy's legal architect is staying mum. Peter Glaser, the Troutman Sanders LLP partner who first floated the "just say no" strategy in a paper published by the Federalist Society for Law and Public Policy Studies last year, declined to comment on the grounds that he is now involved in the litigation against EPA's rule.

"Lawyer hat is now the only one I'm wearing," he said in an email to Greenwire.

But Bill Becker, executive director of the National Association of Clean Air Agencies, said deadlines weren't the only thing that changed between the draft and final versions of the power plant rule. It also became clear, he said, that "there was really no reason at all for a state to give up its authority just to make a point."

If a state opts not to comply with a rule, it cedes control of how it is implemented to EPA, which would then impose its own plan in the state. And there is no industry support for that chain of events. Even leaders of the National Rural Electric Cooperative Association -- which has expressed grave concern about the rule's possible effects on poor rural ratepayers -- has said they want to deal with state regulators, not EPA.

"If public, private and rural utilities are all saying they prefer state flexibility under a state compliance strategy over a federal implementation plan, then it's no wonder that no one is seriously considering standing down," Becker said.

This all played out before with EPA's 2011 greenhouse gas permitting rule, said Becker. After the rule was proposed, numerous states said they would not comply but were later persuaded by their private sector to reverse course. Finally, only Texas refused to integrate greenhouse gases into its state permitting plan, and EPA took over permitting. Austin enacted legislation to allow Texas to take over greenhouse gas permitting in 2013, and the state began issuing permits a year later.

State opposition fading

Becker said resistance to state implementation of the power plant rule will also be short-lived. Faced with the certainty of a federal plan, he said, states will opt at least to make some changes to the proposal that will make it more user-friendly -- even if they continue to dislike the rule.

Think tanks around the country are working to help states understand the rule and their compliance options. Doug Scott, vice president of strategic initiatives for the Great Plains Institute, said at last week's meeting of state regulators that most of the states he works with are litigating to stop it. But the governors' offices, energy departments and environmental regulators that Great Plains advises want to know what their compliance options are to help them decide how and whether to craft a plan. He called this "prudent."

"I've been a lawyer a long time, and you don't always win when you go to court," Scott said. "So the question becomes, if that doesn't win for the states that are upset with the rule and are challenging it, what's the plan B?"

By pushing back the date at which states must submit a detailed plan, EPA also gave them longer to decide to "just say no."

"Until September of 2016 and arguably until September of 2018, you really don't know who the 'just say no' states are," Scott said.

Association of Air Pollution Control Agencies Executive Director Clint Woods said states were holding their fire in part because they are genuinely trying to get a handle on the many changes that have occurred between draft and final. If the agency can change the rule so much, he said, states wonder how drastically it could change the proposed FIP.

The next three years could change the balance of power in state capitols across the country, as well as in D.C. Kentucky Gov. Steve Beshear (D), for example, has never heeded his senior senator's call to "just say no," but the Democrat and Republican in this year's tight race to replace him both pledged not to submit plans if elected -- but they, too, could change their minds.

Bob Perciasepe, president of the Center for Climate and Energy Solutions, said states should comply because it is in their best interest to do so.

"If they feel like they have to sue, that's part of their responsibility, but another part of the responsibility is to prepare," said the former EPA deputy administrator.

"Why a state would either say, 'We're not going to do anything or what we're going to do is demonstrably not approvable at this early stage,' other than for political reasons, I don't know what they would gain one way or the other," he said.

Twitter: @chemnipotEmail: jchemnick@eenews.net

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