Yesterday, President Trump signed his long-awaited executive order on climate and energy that takes aim at the Obama administration's climate policies. During today's OnPoint, James Rubin, a partner at Dorsey & Whitney, unpacks the order and explains what the next steps are for litigation and regulation. Rubin, who previously served in the Environment and Natural Resources Division of the Department of Justice, also talks about the future of the coal industry under the Trump administration.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. With me today is Jim Rubin, a partner at Dorsey & Whitney. Jim previously served in the Environment and Natural Resources Division of the Department of Justice. It's nice to have you here.
Jim Rubin: Nice to be back. Thank you very much.
Monica Trauzzi: So Jim, for those of us in the energy and climate space, this is the week we have all been waiting for since President Trump was elected. On Tuesday the president signed an executive order squarely focused on undoing much of what the Obama administration did on climate and energy. The primary target, of course, is the Clean Power Plan. Now the work begins. What will the process for undoing the CPP and proposing something new look like?
Jim Rubin: Well, first of all, the executive order will do several — it's calling for EPA to end DOI, to undo several regulations and in EPA not just the Clean Power Plan, but the new source plan, the new power plan plans. There's a number of actions being taken, but specifically the Clean Power Plan.
There's two things that have to happen. First of all, EPA, DOJ need to go do something to the court. The executive order, which I've not read all the data yet, is supposed to talk about asking for the court to hold off on ruling. The court, there's been a pending case since oral argument in September. People were expecting the opinion to come out earlier. It's still not coming out. It's likely the EPA will move to remand the rule and stop the opinion from coming down. Certainly the same thing in the new source rule.
Then they need to start the process of essentially rescinding the rule, which like developing a new rule goes to the same mechanisms under the Administrative Procedure Act. So there'll be a somewhat a notice of propose to rescind on that line and then they will publish that and there'll be some period of time for public comment and then we'll do a final rule, which would then pull the regulation out. All that could take a year or more depending on how fast they move.
So the first thing you'd expect to see is some notification in the website ultimately in the Federal Register calling for a rescission of the rule.
Monica Trauzzi: And then at that point that's when they would look to propose something new to replace it.
Jim Rubin: If they do. I don't know if that's a clear initiative that he's gonna do that. Interestingly enough the administration did not change the endangerment finding ... to rescind that. So arguably there is a clock ticking because the endangerment finding is a predicate for rule making. You make the finding and once the finding's positive you have to make a rule.
The question is how long will the agency wait to make the rule if at all in the next four years. The regulation, doing a Clean Power Plan, even a modified version could take some time and the agency could simply wait any period of time before they take a regulation subject only to essentially challenge for unreasonable delay, which takes a long time. It has to be pretty much of a delay to make those cases work. So I'm not hearing repeal and replace like the Obamacare. I'm hearing repeal. So the next question will be whether they're actually looking to do something else.
Monica Trauzzi: At this point what could the D.C. Circuit do with the pending decision or will they just wait for EPA to move?
Jim Rubin: Well, first of all, the Clean Power Plan has been bizarre all the way through. We're not usually basing on D.C. Circuit experience. It may not happen here, but it's quite likely the court's not gonna do anything except keep going to litigation till somebody asks them to stop, which is what DOJ would go into the court and say, "Please remand the rule." The D.C. Circuit would either do that based on the motion. There might be a fight among the litigants in this case, which would be very interesting because some folks who were supporting the rule might fight remanding it.
But the court would have to then either essentially agree and say, "Okay, we're gonna put the case on hold until you rescind the rule." Then there might be a move to vacate ultimately or they could go ahead and issue an opinion. I'm not sure that would happen because the court doesn't like to issue advisory opinions and if the rule's gonna go away, even if they're important ... at stake, they're based on the regulation. You take the regulation away, there's no reason to issue it.
But you don't know what the court's gonna do. The opinion could have been ready to go tomorrow. They could be bending the arms of a majority to try to come up with an opinion that would take another six months. So we're unclear, but it seems like the administration would be well-suited to move to stay as soon as they can I think.
Monica Trauzzi: What do you think the future of the new source standards could look like and could we see a time where the rules open the door for new plants to open up?
Jim Rubin: Well, so the new source rule. I think arguably the door's open. I think you're probably referring to the fact that coal limits are pretty strict and require a carbon capture methodology, which already doesn't exist. You could see the administration pulling that rule back and coming up with a standard that's much less strict and can be met by new coal plants.
The gas plant standard is met by some of the most modern plants. I'm not sure it's holding anything up.
The coal plants, even if you pull that standard back, it's unclear the coal plants are gonna get built for economic reasons. So I'm not sure that rule is really holding back as much as taking advantage of the fact that nobody was building in the first place.
Monica Trauzzi: Right. Because we obviously have market dynamics at play, natural gas and renewables are getting a lot more of the action these days.
Jim Rubin: Unless it changes and then coal gets more profitable. Then people might wanna start building coal plants, which then that may be relevant, but right now I'm not sure it makes much of a difference.
Monica Trauzzi: During the EO signing President Trump called the power plan a crushing attack on coal and obviously the market dynamics tell a different story, but what do you project we'll see from the coal industry in the near term based off of this executive action?
Jim Rubin: A lot of happy faces.
Monica Trauzzi: Right. Yes.
Jim Rubin: That's a very complicated question. I think the answer, economic answer I've been hearing is the coal plants still aren't gonna get built, new plants, because there's all such other regulations that it's expensive. Carbon capture isn't really a very economic decision maker yet. There are a lot of states that have regulations on Mercury. You have to really build a coal plant super clean, super powerful. It's very difficult to do. They're expensive. People will be building gas plants.
The question whether they're gonna get jobs or not. I think that's something more thrown out there for the images on TV than anything else. It's unclear that the coal industry was creating anymore jobs, will be creating now than they had before. There could be more coal demand certainly if the exports pick up, but also domestically, but coal fire generation doesn't seem to be in the cards right now.
So I think the one thing you might see, however, is slower retirement of a coal plant. So you might be able to hold on to your plant a bit longer than you would have under the Clean Power Plan. It really accelerated those. We've seen a lot of closures in the last few years, but on the marginal side it might keep plants open a little longer, but I wouldn't expect it to be a tremendous impact, this particular rule in the coal industry.
Monica Trauzzi: The other interesting thing that's in this executive order is the removal of the requirement for the social cost of carbon to be used in the regulatory process. What's the immediate impact of that move?
Jim Rubin: Well, for that to even be relevant, the EPA agency has to regulate. The social cost of carbon was used in the cost benefit analysis as you're looking to do a regulation. This administration is all about not regulating or deregulating. They're looking at costs. Social costs of carbons actually benefit. You look at it by avoiding that cost it can certainly be a benefit, which is how you do a cost benefit analysis and some of these rules are estimated to have these great savings because of the social cost.
The agencies will go back to the normal cost benefit they've been doing under the OMB for a number of years. It'll be more difficult to sustain a far-reaching regulation on greenhouse gases without a high social cost of carbon, but the agency would have to be doing the regulation in the first place.
I don't think that EPA's gonna do any regulations in their future where the social cost of carbon would be an issue anyways. So it's an important point. Cost benefit analysis will still be done. The question is to what extent will the agency be able to regulate under all the other executive orders and directives being given to them.
One of the things in the executive order today was to have all the agencies look at whether they thought regulators were upsetting energy development. So EPA is once again being encouraged to deregulate. So the social costs probably won't come in in that aspect.
Monica Trauzzi: So looking at the executive order on the whole, do you predict a lot of litigation ahead and what are the key points for litigation?
Jim Rubin: I'd be a lot of litigation ahead. I think the NGOs and some states have really staked out the ground. Remember, if all the states and industry attacked this rule and the number of states and some industries supported this rule, they still want the rule to go into effect or at least fight for it, but I don't think any of that's gonna come up until the EPA begin to take final agency action to actually make a case just ...
I think the executive order itself is unlikely to be challengeable unlike the immigration order. It's on a constitutional issue. I predict there'll be a lot of angry lawyers, but the real litigation will come up as soon as one of these agencies, whether it's EPA or DOA, actually finally issues a regulation essentially pulling back the rule.
Monica Trauzzi: All right. We'll end it there. Very interesting stuff. I appreciate your breaking it all down for us. Thank you. Thanks for coming on the show.
Thanks for watching. We'll see you back here tomorrow.
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