CLEAN POWER PLAN

EPA foes threaten Supreme Court battle to freeze climate rule

Industry opponents of the Obama administration's Clean Power Plan vowed yesterday to go to the Supreme Court to challenge a federal appeals court's refusal to block the climate change regulations.

The ruling by the U.S. Court of Appeals for the District of Columbia Circuit denied requests by 27 states and numerous trade groups for a stay that would have barred U.S. EPA from implementing the carbon regulations for the electricity sector.

It was the latest in a series of setbacks to opponents seeking to stop the rule in its tracks.

"We are pleased that the court has rejected petitioners' attempts to block the Clean Power Plan from moving forward while litigation proceeds. ... We look forward to continuing to work with states and other stakeholders taking steps to implement the Clean Power Plan," the White House said in a statement last night.

But industry leaders insisted that yesterday's setback is just one chapter in a legal saga that could play out over many years.

The decision is "the first of many legal steps that will take place in the coming weeks and months as we seek to overturn Obama's costly power plan," the American Coalition for Clean Coal Electricity noted.

Coal company Murray Energy Corp., a key challenger of the rule, said it would appeal the stay decision to the Supreme Court. And West Virginia Attorney General Patrick Morrisey (R) said the coalition of states against the rule is also considering appealing the stay denial. Texas Attorney General Ken Paxton (R) said opponents will continue challenging the rule "wherever the case takes us."

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In their suit against EPA, industry groups are arguing that the agency doesn't have authority to shift the electricity industry away from greenhouse gas-producing fossil fuels. They petitioned the U.S. Court of Appeals for the District of Columbia Circuit to stay the regulation, arguing that states and companies are already undertaking great efforts to plan ahead for standards that begin in 2022.

Judges denied that petition but will speed the process for considering the lawsuits and will hear oral arguments June 2. That's just months before states must submit to EPA their initial carbon-cutting plans.

EPA officials said they were pleased with the court's decision, but Natural Resources Defense Council attorney David Doniger cautioned that not issuing a stay is a small win for rule supporters in the litigation's broader context. It signals only that states and industry didn't meet the high bar for preliminary injunction, he said.

"The court simply said that they didn't meet the very stringent test," he said. But, Doniger added, the decision does reinforce supporters' confidence that the court will ultimately uphold the rule.

"It's a preliminary ruling, but it's a very good ruling," he said. "This deals a blow to political opponents to the Clean Power Plan, as well as legal opponents, because part of their political claim is that this is grossly illegal and so on and a great harm is happening. You can make those kind of claims in public, but when you can't convince the court; it takes the wind out of their sails."

Industry eyes 'horrific scenario'

Critics of the rule argue that although EPA won't require states to start cutting greenhouse gas emissions from power plants until 2022, the electricity industry is already beginning to make decisions to prepare for that shift. Most opposing states are exploring compliance options while awaiting final court decisions that could play out over years.

Clean Power Plan opponents raised concerns yesterday about the building momentum behind the greenhouse gas regulation taking place in the states.

"Failing to stay the rule puts pressure on states to develop compliance plans for a regulation that may very well turn out to be illegal," said R Street President Eli Lehrer. "During the ensuing confusion, we expect states to struggle to comply with the rule, energy providers to overhaul infrastructure and customers to bear higher costs and less reliable energy, when the rule ultimately may be found on shaky legal ground."

The National Rural Electric Cooperative Association (NRECA) said "charging ahead with implementation of the Clean Power Plan will cause immediate and irreparable harm" to co-ops and other companies that are taking "immediate costly and irreversible steps" to achieve EPA's goals.

But Kirk Johnson, senior vice president of government relations at NRECA, said in an interview that he was encouraged by the court's decision to expedite consideration.

Johnson said his members will continue to operate on a "two-track approach," planning for compliance while challenging the rule, because it would be irresponsible not to prepare. If the lawsuits fail, "we won't lose any sleep over the investment of time in the state planning process," he added.

Coal interests warned that the electricity industry might needlessly comply with the Clean Power Plan only to see it overturned later.

Murray Energy said in a statement that not pausing the rule sets up the "same horrific scenario" under which EPA's maximum achievable control technology standards for coal plants were allowed to proceed until the Supreme Court struck them down. He called companies' victory on that case "moot" because the rule had already forced the closure of 411 coal-fired plants.

Uncharted territory for the Supreme Court

Electric Reliability Coordinating Council Director Scott Segal said the Supreme Court may be receptive to Murray Energy's arguments.

"In the area of emergency stays, there is precedent for the Supreme Court to take action," he said.

If industry and states appeal to the Supreme Court, the justices could choose to take immediate action instituting a stay. Such emergency actions are relatively well-documented in criminal law and some other areas but are considered uncharted territory in Clean Air Act litigation.

Rule supporters assailed the approach, arguing that the Supreme Court would be unlikely to get involved.

"It would be extraordinarily unlikely that the Supreme Court would have any interest in getting involved at this point," said the New York University School of Law's Richard Revesz. "It's not going to happen."

Doniger agreed, noting that he couldn't think of a Clean Air Act rule where a failed stay request was reviewed by the Supreme Court.

Groups coordinating compliance planning urged state officials not to slow down their work to write carbon-cutting blueprints in anticipation of the ruling.

The court order sets an expedited briefing schedule for the case that will culminate in oral arguments on June 2. ClearView Energy Partners LLC analyst Christi Tezak said the schedule could represent an attempt by the court to issue a decision before key advances in the rule's implementation.

"We think it is possible that the D.C. Circuit intends to issue a ruling before the rule's September 6 deadline for states to file their initial State Implementation Plans (SIPs)," she wrote in a memo yesterday.

Will states move forward?

Others said a decision might not come until early 2017.

Politicians in several states, including Alabama and Texas, have signaled that they were waiting for the stay decision before determining whether to write an initial plan and request a two-year extension from EPA in September. They criticized the ruling yesterday but did not offer further details into whether they would attempt to comply while awaiting court decisions.

"Regardless of the court's ruling today, the Obama administration's power plan not only remains bad policy but is also still unlawful," Texas' Paxton said. "This ill-advised example of federal overreach will kill jobs, result in higher electric bills and create a significantly less reliable electric grid for all consumers."

At least two Southeastern states have taken unique strategies while the rule hangs in the balance of the court.

Confident that the court would freeze the landmark rule, Alabama's air division chief said the state was going to wait before taking any steps toward writing a compliance plan. The Alabama Department of Environmental Management has formed a stakeholder group with electric and natural gas companies only and said it likely won't meet until late spring, or at least until after the court rules.

North Carolina is working on two plans after Gov. Pat McCrory (R) challenged two parts of EPA's compliance strategy, arguing that the agency's legal authority is limited to directly regulating generator emissions. The first plan covers compliance limited to efficiency improvements by the state's existing coal- and natural gas-fired power plants.

Experts expect EPA would reject that version, so North Carolina is working on a backup blueprint to avoid EPA assigning the state a federal compliance plan.

Gabriel Pacyniak, climate change mitigation program manager at the Georgetown Climate Center, said "even if states oppose the Clean Power Plan, developing a state plan may be in the best interest of their residents and stakeholders."

"I think certainly the fact that the court denied the motion for a stay means there is no reason for states to slow down" their planning processes, Pacyniak added.

Reporters Elizabeth Harball and Kristi E. Swartz contributed.

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