Regulation

Bracewell & Giuliani's Segal says 'just say no' a political play with legal teeth

With U.S. EPA expected to release a federal implementation plan for Clean Power Plan compliance this summer, how much flexibility does the "just say no" option buy states? During today's OnPoint, Scott Segal, a partner at Bracewell & Giuliani and director of the Electric Reliability Coordinating Council, discusses the politics of "just say no." He also explains why he believes a reliability safety valve is only part of the solution to ensuring reliability under the power plan.

Transcript

Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. With me today is Scott Segal, a partner at Bracewell and Giuliani and director of the Electrical Reliability Coordinating Council. Scott, nice to have you back on the show.

Scott Segal: Great to be back.

Monica Trauzzi: Scott, there's a lot of talk recently, here in Washington and some state capitals around the country, about a possible "just say no" option on the EPA's Clean Power Plan. EPA will release a proposed federal implementation plan for states, perhaps as soon as early summer. How much flexibility does "just say no," then, by the states, if they're going to have to comply with the FIP?

Scott Segal: Well, the point of it is this: EPA has this all to blame in their own hands. The fact that states might be considering noncooperation starts with the fact that the advocacy for the rule was all about flexibility. But the numbers that each state has to make are basically based on four building blocks.

Each of those building blocks is like a maxed-out credit card. If you can't make your numbers under one of those building blocks, then the EPA says, "Well, just do more on the other building blocks." Unfortunately, for their methodology, they've already maxed out the numbers.

Unless the EPA changes the actual plan itself -- the actual Clean Power Plan -- let alone does a very reasonable federal implementation plan, the result will be that the states will only have the option of noncooperation.

So if the EPA wants to minimize noncooperation among the states, they actually have to take action to change the rules. And what could they do? They need to remove the interim deadlines in the rule. That's an affront to state flexibility. That's not a maximization of state flexibility, which Administrator McCarthy has been promising all along.

They need to make sure the states have sufficient time to file their plans. They need to make sure that at the back end there's enough time, and they need to make sure that the technological assumptions and the policy assumptions that underlay things like energy efficiency are accurate. If they don't do any of that, then they don't leave the states with any choice but noncooperation.

Monica Trauzzi: But on many of these fronts they've already indicated that in the final plan we will see a lot of these changes. They're working on changing --

Scott Segal: Have they?

Monica Trauzzi: Yeah. We're hearing that they're working on altering the building blocks and some of the state targets as well as some of those interim deadlines.

Scott Segal: There has been some inconsistent statements coming out of EPA. In fact, if anything, the EPA has doubled down on the importance of interim deadlines. Now the question of whether they'll actually change those interim deadlines I think is still very much up in the air.

If the EPA wants to minimize the chances for massive noncooperation among the states -- as many as 15 or 20 states saying no and not filing plans -- then the EPA had better make some concrete changes to the Clean Power Plan, or that's the only option that's going to be on the table.

Monica Trauzzi: Is noncooperation, though, more of a political play, or does it have legal teeth to it?

Scott Segal: In fairness, I think it's both because I think it has teeth to it in the sense that, as Majority Leader McConnell and others have pointed out, the rule itself has underlying legal difficulties and the ability of the federal government to enforce a federal plan -- remember, the EPA is cleared not to call it a federal implementation plan -- but an actual federal plan probably does not include the seizure of highway funds and the like. So the states are in a far more leveraged position than they were, say, with respect to other rules.

So I think it's important to know there are legal teeth. On the other hand, from a political perspective, if the EPA has meetings with, but does not listen to, people in the regulated community or at regional transmission organizations concerned with reliability, then one way to maximize the pressure on the agency is to line up the states so that they say no.

Monica Trauzzi: The Institute for Policy Integrity's Richard Revesz was on the show last week, and he says that Laurence Tribe's constitutional arguments against the power plan are being made to influence the political process and give opponents of the power plan in Congress cover to go around the country and tell governors, "You don't have to come up with implementation plans." So is Mitch McConnell pushing this "just say no" idea because -- he's tied? His hands are tied, legislatively. Nothing's going to move in Congress.

Scott Segal: Well, with respect to the Institute of Policy Integrity, I would tell you they have seldom seen an EPA rule that they thought was illegal or had any form of legal challenge, so I'm not sure they speak with a tremendous amount of credibility or open-mindedness on what the actual legal flaws may be.

Laurence Tribe was once under active consideration to be appointed to the U.S. Supreme Court but was too liberal for Clinton to get him through. Now what that tells me is -- I don't think a man takes 40 years of work on constitutional law, including authorship of "American Constitutional Law," one of the seminal works on the subject, and mortgages it because he has a beef with the EPA. I think he has advanced serious arguments, and he brings serious credibility to the discussion.

The fact of the matter is -- everyone will admit this, from NRDC on to Richard Revesz, and others -- there has never been a rule like the Clean Power Plan. This concept of going beyond the fence line is not just an interesting phraseology. What this really means is there is no practical limit on the assertion of EPA authority, and I think each of Laurence Tribe's arguments are to be viewed in that context. There is no limiting principle, as the professor says. And, in fact, he says that it reduces the states to mere marionettes.

We have not seen anything like this in any other rulemaking. So the burden of proof really is on Richard Revesz and on Gina McCarthy to demonstrate why this exceptional assertion of EPA authority should be acceptable under a constitutional or statutory framework.

Monica Trauzzi: But is Tribe being financially backed by industry?

Scott Segal: Well, as Tribe says on the cover of his document that he filed, for example, with the House of Representatives, he says that he was asked to review the rule based on his coordination with his client, Peabody, but his views are his own. And this gets us back to the question of 40 years of excellence in constitutional law. I don't think the adoption of a particular client is enough to overcome all of that experience and expertise that he brings to bear on the issue.

Monica Trauzzi: Let's talk about reliability. There are a number of competing reports on reliability.

Scott Segal: Indeed.

Monica Trauzzi: One, released by your group ERCC, is opposite to what the analysis group says in their latest report. Is a reliability safety valve an effective way to sort of resolve a lot of the questions surrounding reliability on the power plan?

Scott Segal: It's a piece of the puzzle, but it's only a small piece of the puzzle. Let me describe. When most people say "safety valve," what they mean is, "Let us fully implement the rule, and if over time there's a problem with reliability, then we'll blow the whistle and everyone can get out of the pool."

Let me say this: That kind of brinksmanship standing alone is not an acceptable way to resolve the reliability problems with the rule. The reliability problems of the rule have to begin with the rule itself, and this is true in a couple of ways.

I've already mentioned taking out the interim deadlines infuses the rule with more flexibility at the get-go to respond to problems that may crop up as an implementation proceeds. But further, there are other mechanisms, like reliability mechanisms that could be adopted at the front end, which allow states to consider those options and allow reliability operators to consider those options at the front end and make sure we don't get into problems.

And look, even if we do have a safety valve, we still have to fix the underlying law. Just this past week, Senator McCaskill, from Missouri, and Congressman Olson, from Texas, reintroduced important legislation, which resolves a conflict between the emergency authority the Department of Energy has to order a facility to keep running to meet reliability demands and EPA's penchant for saying, "OK, well, that's fine, but we're going to keep fining you and enforcing against you, even if you're doing it on an emergency basis." So we have to resolve things like that in order to make sure that safety valves can be functional.

Do I like safety valves? Yes, I do, but they're part of a broader picture, which includes reliability mechanisms at the front end and includes fixing the rule so that it doesn't impose adverse impacts on reliability from the get-go.

Monica Trauzzi: The administration has proposed draft NEPA guidance on pipeline and export facility approvals that would require FERC to consider climate change in its reviews. If enacted, could it make it more challenging to comply with the power plan due to hurdles with bringing new infrastructure online?

Scott Segal: Well, yes, it would. And first, let me just say that is an overbroad reading of NEPA. Think about it. It's almost metaphysical in its scope. It would be like saying, anytime I turn on the light switch in a room, that will cause an increase in energy demand, and we have to know the source of the energy, which could then cause climate change. You could really bring NEPA down to its most ridiculous point of view. We have never asked agencies to place every single piece of infrastructure in some kind of a global perspective; that's just not what NEPA was designed to do.

But if that is the direction the administration wants to go, I wonder how Building Block 2 of the administration's Clean Power Plan gets done. That's the one that says bring every power plant that is a natural gas fire-powered plant in the country -- combined-cycle plant -- from 40 percent utilization rate to 70 percent utilization rate. Easier said than done. You have to make sure that you have infrastructure to support that, and you have to make sure that you have production to feed the infrastructure to support that.

And if we take these moves -- I'd add on top of that the new rules from the Department of Interior on hydraulic fracturing as well -- in addition to the NEPA guidance, and you have a policy which is speaking out of both sides of its mouth. The Clean Power Plan says use more gas, and then these proposals make it harder to produce the gas and to move it around.

Monica Trauzzi: All right. We'll end it there. Thank you for coming on the show. Very interesting as always.

Scott Segal: My pleasure.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow. Very nice. Thank you. Good job.

[End of Audio]

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