Is U.S. EPA's final Clean Power Plan legally vulnerable because it is seen by many as a significant departure from the agency's proposed rule? During today's OnPoint, Jason Grumet, president of the Bipartisan Policy Center, discusses the biggest winners and losers following last week's release of the plan and talks about his organization's next steps for engaging states on crafting compliance mechanisms.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. With me today is Jason Grumet, president of the Bipartisan Policy Center. Jason, it's great to have you here.
Jason Grumet: It's good to be back. It's been a while.
Monica Trauzzi: Jason, we've all had just about a week to digest EPA's hefty Clean Power Plan. Who have you identified as the biggest winners and losers?
Jason Grumet: So, you know, there's something in there for everybody. I think, you know, a couple of winners. State planners. Very significant for the states to have enough time now to really kind of hunker down, think through these regulations. I think EPA was smart to give states that have legislative interest an opportunity to work that through. Also clearly the cleaner states have a lower obligation in this final rule. I think if you look back to the proposal, it was, like, from -- North Dakota was at, like, 11 percent and Washington was, like, 72 percent. Now I think the range is, like, 7 to 47, so actually the range of compliance has been compressed by about a third. And there's some, you know, I think, winners and losers that you might not have anticipated, so new nuclear, winner. Existing nuclear, loser. But I guess when I think about it, as we were actually joking before we got started, I think the biggest winners on, you know, absolute are the law firm partners, and I'd say the biggest losers are the poor folks who are sitting on beaches in Martha's Vineyard with a 1,500-page stack of papers while their spouses give them the Godzilla glare for not playing with their kids. So it's -- everybody's a winner.
Monica Trauzzi: And such is life for Washingtonians.
Jason Grumet: Yes, it is.
Monica Trauzzi: What do you make of the change on natural gas? Is the administration retracting on its long-standing support of the fuel?
Jason Grumet: So, you know, I think they're -- you know, obviously mitigating a bit of their kind of narrowed enthusiasm, but pretty important to recognize that what EPA projects in the kind of reduction expectation may or may not have anything to do with what actually happens. So I still believe that natural gas is going to continue to increase in its market share. I also think we're going to see a lot more energy efficiency than EPA might have imagined, and so, you know, the notion that renewables are going to get up to almost, you know, 30 percent, possible, but it depends on a lot of other market conditions. If natural gas prices stay low, if the production tax credit is not reauthorized, I think you'll see natural gas actually have a larger role in compliance than the rule might imagine.
Monica Trauzzi: But isn't the agency, the administration trying to push this to be a rule that's more about renewables rather than natural gas?
Jason Grumet: No question. I think there is certainly quite a bit of concern that you had this, you know, incredibly high reliance on natural gas in the early years, and I think it's reasonable to agree that diversity is a strength in our energy system. But again, I think, you know, the administration's been pretty pro-natural gas. They certainly have avoided regulatory efforts that would have diminished its production, and so there may, again, be a little more narrative swirl here than reality.
Monica Trauzzi: This final rule is significantly different from the draft. Do you think the agency yielded too much to some stakeholders on certain points?
Jason Grumet: You know, so when we had a forum on the rule a couple years ago, Administrator McCarthy, I think, telegraphed pretty strongly that there were going to be big changes between the proposal and the final. And she made a point which, I think, from a process standpoint, you know, I fundamentally agree with, which is that the administrative procedures process is supposed to be dynamic. It's really become almost like the election process where all the action is in the primary, and then, you know, you just roll forward. And so usually agencies will put out a, you know, proposal and then kind of hunker down and just try to defend it. I think it's pretty impressive that they've made this number of changes. Now, obviously that, you know, also can make them vulnerable legally if the final rule is seen as such a departure from the proposal that it didn't have a chance for people to actually comment on the ideas.
Monica Trauzzi: Right. Mitch McConnell continues to urge states not to file compliance plans. How many states do you think will actually do that, not just talk about it, but seriously move forward with no compliance?
Jason Grumet: It's an interesting, and I think, frankly, a little bit of a disappointing strategy because just to step back, Senator McConnell has done a really terrific job bringing regular order back to the Senate. He promised he was going to do it, and I think as we've seen in the first, you know, half of this year, we have had far more amendments -- we have three times as many amendments in the Keystone bill then they had all of the prior year, right. Harry Reid didn't want tough votes for his caucus, and so I think McConnell deserves a ton of credit for that. The committees are functioning, so I mean, he's really expressed the notion that we have to have kind of the spirit of the way the rules are supposed to be engaged, and so this is, frankly, a little bit outside the lines, you know, urging states -- I mean, he should pass legislation, he should pass riders. I mean, he has a lot of tools if he wants to interrupt this. So I actually don't think it's a great suggestion that states don't comply. In terms of how many don't, you know, it's anybody's guess. I have been very impressed that the states have been able to have their political figures express their vehement opposition while their EPA and their PUC folks really hunker down and try to understand these rules. You know, BPC's doing a lot of work with a lot of the Midwest states, and they are, you know, trying to have the best options if, in fact, the rules are upheld.
Monica Trauzzi: So what are BPC's plans, then, moving forward to sort of influence the conversation on the plan as we get into this period of aggressive legal action and potentially also congressional action to take the rule down?
Jason Grumet: So the idea behind the Bipartisan Policy Center is the good fight, right. We're non nonpartisan or postpartisan. We don't want people to hold hands and sing "Kumbaya." This is going to be an aggressively debated issue. Our sense is that when people have a shared sense of fact, you then can advance the conversation. So we've been doing a lot of gritty economic analysis. We've been working with states so they understand the different compliance options. We've been pretty surprised that the extent to which the states are focused on mass-based trading, you know, after the 2010 legislative debacle, the whole notion of cap and trade was really quite disfavored, and the extent to which, when the state officials look at their different options, they look at the mass-based stuff and kind of just say this is a hot mess. I mean, it's hard to even figure out how it works and while, you know, there may be a couple of places where it's advantageous, the fact that regions are coming together, looking at those kinds of kind of shared approaches is something that we're going to continue to encourage.
Monica Trauzzi: The public seems to have a growing interest in some type of action on climate change, but do you think that we'll see public opinion get behind this rule specifically?
Jason Grumet: So yeah, I don't think the public is focused a lot on, you know, updating output-based allocations and the rest. I think there's a general sense in the debate that the issue's moving forward. I think the pope is going to have a pretty significant influence on this discussion. A lot will depend on what happens in the presidential primary, but there does seem to be a growing asymmetry between the continued, kind of really strong opposition from a lot of political leaders and the shift from the industry. You know, I think that we're starting to see the industry -- I mean, this has been going on for a while, right. It was 2007 when Mass. v. EPA was passed. So I think there's generally a sense that over time something here is going to happen. I don't think the power sector can stay outside the boundaries of a climate proposal.
Monica Trauzzi: What does this rule and the controversy surrounding it tell you about the potential for bipartisanship on climate, energy, other issues moving forward?
Jason Grumet: So, you know, there really again is a really strong separation between bipartisanship, which is traditionally always kind of accompanied energy legislation and the partisanship around climate. So we're very encouraged to see Senator Murkowski and Cantwell, Congressmen Upton and Pallone moving forward on bipartisan legislation. You know, we recognize that there's a lot of stuff that got left on the floor, but if Congress can demonstrate its capacity to legislate, we think that builds momentum. And, you know, I do think that you may see in 2017 some people start to talk about multi-pollutant legislation. That clearly didn't work when the White House threatened Congress and said if you don't pass this piece of legislation, we're going to get you with this, you know, regulatory approach, but once it's in place, I think you might see people step back and say is there a better, more bipartisan way to kind of approach this.
Monica Trauzzi: Very interesting. Thank you for your thoughts. I appreciate your time.
Jason Grumet: Always fun. Thanks.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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