What impact could next year's legal and regulatory landscape have on the power and energy sectors? During today's OnPoint, James Rubin, a partner at Dorsey & Whitney, who previously served for 15 years in the Environment and Natural Resources Division of the Department of Justice, discusses the pending legal and regulatory U.S. EPA-related actions expected in 2016. Rubin details the hurdles facing the Clean Power Plan, mercury rule and methane regulations.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. With me today is James Rubin, a partner at Dorsey & Whitney. Jim previously served for 15 years in the Environment and Natural Resources Division of the Department of Justice. Jim, it's nice to have you back on the show.
James Rubin: Thank you for having me.
Monica Trauzzi: Jim, 2015 was an exceptionally busy year of regulation for U.S. EPA, and as we look to 2016, the expectation is that that will continue and that litigation matters will take a big focus. How quickly will the legal action on the Clean Power Plan pick up, and what is the trajectory you envision for the litigation?
James Rubin: Well, I mean, it's already picked up. I mean, there's the stay motion will be fully briefed by the middle of next week. I'm sure the justices will have nice Christmas reading. I would expect to see some kind of ruling early in 2016. I think it would be fair to expect that. I'm not sure I could tell you what's going to happen on that ruling. I have my own thoughts, but it'll be a close call. But, you know, at the same time, the petitioners have now filed a motion to expedite the briefing, which is almost to say really they want it all done in the first round by May before any submissions are due, so I'm not sure that motion will go anywhere, but the stay motion may be a little bit more powerful. So it all depends on what the D.C. Circuit does. If the D.C. Circuit decides to issue a stay, the whole complexion of 2016 changes. A lot of states will probably stop their opportunity. Some will keep going, but you know, I think it'll seriously slow down the process. And this does bode poorly on the merits for EPA because it's part of the stated determinations. If the stay is denied, it doesn't mean the rule is going to survive, but there's now a period of time that's going to go out where the states are going to be implementing and, you know, it will be some time before that litigation is resolved, even at the D.C. Circuit level.
Monica Trauzzi: And beyond the power plan, which has received much of the critical focus that we've seen in 2015, what are the key regulations we're anticipating in 2016 that will impact the power and energy sectors?
James Rubin: Well, first of all, you know, the Clean Power Plan obviously was a big play in 2015. It will be the big play of 2016 because even with the litigation, there's still regulation to be done there, so they have to finish the federal rules for trading, they have to finish the federal rule, and then there's also going to be state submissions. But outside of that, there are a number of other things going down the pike that will affect the power sector. First and foremost, if we're focusing still on greenhouse gases, you know, the -- Paris was made possible, in a sense, by the Clean Power Plan is one way of looking at it. But that only got the United States part of the way to where they want to be on their declared targets. Methane regulation is pretty critical, and there -- regulations were put out in August. Theoretically will be done by August of next year, which we can talk about may have a timing issue. But that's a pretty key piece of the administration. It's not a power sector. It's an oil and gas sector, but because it involves fracturing natural gas, it has an impact on it. You've got the MATS regulation, which just survived the court. At least it's not vacated, it's still in effect, but EPA has a rule they'll have to come out by April 15th because the D.C. Circuit bought the argument, said yes, please put the regulation out. That will involve rulemaking. And there's also the clean state -- Cross-State Air Pollution Rule, which -- 2.0 which is out. Maybe it's one and a half because it's only one part of the CSAPR is out as well. So those are kind of the big-ticket items that will be finalized by the end of next year, but EPA is going to put out a proposed regulation in aviation. It's going to finalize the regulation on transportation, heavy trucks. There's a whole series of things down the line that are going to drop in 2016.
Monica Trauzzi: But there are things that could happen that could potentially unravel some of these efforts.
James Rubin: Well, the -- on methane, the only thing that will unravel that at this point is not putting a regulation out or doing it in a way that's too late that allows there to be a congressional attack. There's a lot of things that have to happen -- that's if -- different president in power and so forth. But you know, the litigation is going to be key for a number of these issues, and that's what will be litigated once the EPA comes up with a new cost determination that will be litigated. The Cross-State Air Pollution Rule will be litigated probably into 2017, but you've got the Clean Power Plan and also the new source plan, which is the predicate to the Clean Power Plan, is now in litigation, and that might be fully litigated and decided by the end of the year, which a ruling against that rule could very negatively impact the Clean Power Plan. So there's a lot of litigation that will be dealing on just in 2016.
Monica Trauzzi: So EPA has taken on a significant number of new employees recently. Even with that expanded workforce, do you believe the agency and other relevant agencies will be able to complete their work on these regulations prior to the president leaving office?
James Rubin: I don't necessarily think a lack of FTEs in EPA would be holding things back. I mean, things that tend to hold the agency back are as political as anything else. I think in -- that the, you know, the methane regulation particularly will be -- if it's held back will be because they are trying to get the regulation right in a way that will be surviving scrutiny. I think that the legal scrub that's being done on these regulations is impressive, and I think EPA's spending a lot of time on that. They're done when they're done, but I'm not sure the lack of employees will be impacting the timing of it. It may be more a sense of where the political resources exist in the middle of 2016. They're going to be -- at some point, they're going to have to start looking at the clock and realizing they can only get so much done before administration changes, you know, depending which administration's going to take over, but they'll have to take a hard look on where they need to put their effort, you know, at the political level as well as the technical level.
Monica Trauzzi: We're awaiting the Supreme Court's decision on FERC's Order 745. It's the demand response case. How will this decision impact markets and subsequent regulations pertaining to the power sector that we see coming out of this administration? Do you think it'll have an impact?
James Rubin: Well, again, the -- it will certainly have an impact. I think that what you see in this administration, at least in the interface of energy and environment, is an attempt to essentially capture where the market's going anyway and maybe push that a bit further and at least lock in what's being done. And there is such a move toward demand side and other aspects of energy development that way. I think that, obviously, a negative ruling would impact, but the states are still going to be working their areas, I think, in a way that will minimize impact.
Monica Trauzzi: I want to go back to the mercury rule that you touched on at the top. What shape could the legal challenges take following this week's circuit court ...
James Rubin: Well, I actually heard someone mention to me -- someone mentioned to me that there might be a ... attempt on just this ruling, which I think is a bit of a stretch. This was a very quick ruling, almost procedural in nature. I think the next litigation will be when EPA puts out a final consideration of -- it's a finding, they call it, of whether to regulate or not. That'll be challenged. That's probably the next piece of litigation that will be a D.C. Circuit challenge 60 days after April 15th.
Monica Trauzzi: So a busy 2016 ahead.
James Rubin: Very busy 2016.
Monica Trauzzi: All right. Thank you very much for coming on the show.
James Rubin: Thank you very much.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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