Clean Power Plan

Former EPA general counsel Martella says final rule legally vulnerable

Following yesterday's White House release of the final Clean Power Plan, what are the possible legal vulnerabilities that exist for U.S. EPA in its final rule? During today's OnPoint, Roger Martella, a partner at Sidley Austin and a former general counsel at EPA, explains how changes made to the rule may not strengthen EPA's legal standing before the courts.


Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. With me today is Roger Martella, a partner at Sidley Austin and a former general counsel at U.S. EPA. Roger, great to have you here.

Roger Martella: Thanks for having me in.

Monica Trauzzi: Roger, the White House yesterday released its final Clean Power Plan, and we've all been sorting through the details of this more-than-1,500-page document. What are the most significant developments that you see in this final plan?

Roger Martella: Well, when I was reading through it, I thought of three things. First was a sense of déjà vu. This is, I think, the closest we've come to comprehensive climate change regulation or legislation since the legislation at the beginning of the Obama administration. This really looks and reads and is as complex as climate change legislation. It talks about trading, incentive programs, multiple state plans. So I think this is really an effort to have economywide climate change controls, similar to what the president was trying to do towards the beginning of the administration, but now do it through regulation.

The second is that this truly seems to be one of the most significant energy policy decisions at the federal level of a generation, if not more. The original proposal was focused primarily on coal-fired power plants. Here we've seen a theme from the White House, from EPA, that this is more about fossil fuels generally, not just coal, but also natural gas, and also a discussion of setting the state for even post-2030 -- they're already thinking that far ahead -- for a zero carbon or de-carbonization of the energy sector.

And then the third thing was kind of -- I imagine we'll talk about this -- kind of the legal chess game going on, the fact that there were some levers that were pulled and some things that were changed to address some of the legal issues, but at the same time I would say this is even further unhinged from the statutory text. The statutory text, which is basically a paragraph in the Clean Air Act, a paragraph that's only been invoked on five occasions and has now led to 1,500 pages, as you pointed out, of effectively comprehensive climate change controls. And I think this has actually gone a step in the direction of being more legally vulnerable.

Monica Trauzzi: So we are going to dig into the legal vulnerability in just a bit. Let's talk about the Clean Energy Incentive Program, because that is kind of -- it's new, and it's kind of this major part of the final rule. Its focus is on renewables, and it takes focus away from natural gas. What do you think the agency's intention is here moving from natural gas to renewables in the final rule?

Roger Martella: Well, I think it's a combination of two things. I think again in some of the lead-up documents, we saw that since the proposal, the administration I think is going bigger, basically, and saying we now want to set the stage not only between now and 2030 but even referencing beyond 2030 to creating de-carbonization, as they put it, or a zero-carbon energy society, and so promoting renewables in the short term over natural gas and over fossil fuels. And part of it, I think, is in response to some of the legal issues. They're pointing out -- they're pushing back some of the compliance dates in response to some legal concerns, but they don't want to wait that long. They don't want to wait till 2020 to get results. And so they're creating more incentives in the short term to drive results sooner that are consistent with the zero-carbon generation of electricity.

Monica Trauzzi: So it sounds like you're saying this is more of an energy policy than an environment policy, and to that end, then, is this within EPA's jurisdiction?

Roger Martella: Yeah, absolutely, and I think we should step back for a second. After all, this is called the Clean Power Plan, and it was the Clean Energy Incentive Program. Even the White House and EPA are recognizing this is primarily an energy program. It will have greenhouse gas impacts, but again, it's hard to fathom a more significant energy policy, federal energy policy over the states than what is being promulgated here.

Monica Trauzzi: Let's talk about the legal aspects. I know you've argued that a stay on the rule is a likely option. With the final rule giving stakeholders more time to comply, do you think that that strengthens EPA's legal argument and then decrease the likelihood of a stay?

Roger Martella: Sure. I think a stay is something that parties always look at when they engage in litigation, and I imagine what everybody's doing right now is -- they always look at it as an option and say, "Is this something that we can wait for the courts to entertain cases in the ordinary course? Do we need to seek relief sooner?" It normally takes about two to four years to get a decision from the court, and so there's different mechanisms, including a stay, including expedited review. I think what's going to happen in the short term is everyone's going to have to really digest these 1,500 pages. And it's not only the 2020 deadline people are going to be looking at, but the sooner deadlines like 2016 when states have to start submitting state plans, that could drive irreparable harm and potentially create arguments for a stay. But again, it's too soon to prejudge that because everybody's fresh to looking at the rule.

Monica Trauzzi: Right. On a press call on Sunday, Administrator McCarthy said the final rule stays within the four corners of the Clean Air Act, and that the language of the rule effectively explains that. When you and I discussed the draft rule last year, you said it would not survive a court challenge. What are your thoughts on this rule? Is it still too early to say? Overall, what do you think?

Roger Martella: As I mentioned, there's something of a legal chess game going on. There's no doubt that EPA carefully looked at the legal arguments and made some changes here and there. But the fundamental structure for this, the fundamental approach under Section 111(d), which we believe is pre-empted by Section 112, and the beyond-the-fence-line approach, which goes beyond a specific source and for the first time in the 45-year history of the Clean Air Act sets standards for a source beyond what's achievable from that source. Those are just fundamental, inherent flaws with the legal approach that cannot be reconciled. And given the direction of the Supreme Court in the last year, and even the D.C. Circuit to some extent, the decisions have gone the wrong way in terms of using this one paragraph from the Clean Air Act to engage in a comprehensive kind of economywide regulation that includes incentive programs and trading programs and all these complexities, is exactly what the court's been pushing back against.

Monica Trauzzi: But then what about the removal of Building Block 4? Greenwire reporter Jeremy Jacobs reported that one suggestion is that EPA may have removed that to boost the legal defensibility of the rule, and it kind of takes away that beyond-the-fence-line argument.

Roger Martella: Sure. So Building Block 4 would've been very legally vulnerable, but so is Building Block 2, so is Building Block 3. Beyond the fence line goes anytime you step beyond Building Block 1, so removing Building Block 4 hasn't significantly increased the likelihood of the rule surviving judicial review on the whole, and you still have other arguments like the constitutional arguments, the pre-emption argument of Section 112, and the general beyond the fence line. And Building Block 4 is still well and alive in the rule itself. It's fully incorporated in terms of a compliance option. Every time the rule mentions renewable energy, it always says "and energy efficiency," and so holistically, atmospherically, the rule definitely keeps Building Block 4 front and center in terms of the options that the rule can address.

Monica Trauzzi: And you're predicting that this will hit the Federal Register in early September. When could we start seeing filings?

Roger Martella: Sure. It's always hard to predict the Federal Register. I don't think EPA could predict it soon, but I think this is a case where they have incentive to get it published sooner, both the kickoff, the proceedings, and also because they need to bring some certainty to the states. The states have a one-year deadline for those initial plans or requesting extensions, so they're going to want that in the Federal Register as soon as possible. And the normal course is 60 days after the Federal Register publication is the deadline for filing lawsuits. Nothing's been quite of the ordinary so far with this rule, so it's hard to predict what could happen immediately after the Federal Register, what might happen after that, what might happen sooner. But there's probably going to be a lot of legal developments through the end of the year.

Monica Trauzzi: We'll be watching. Thanks for coming on the show.

Roger Martella: Yeah, thank you, Monica.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

[End of Audio]



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