On October 10, 2017, EPA Administrator Pruitt signed a Proposed Rule to repeal the Obama administration’s Clean Power Plan—officially titled the Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units—and EPA published the repeal proposal in the Federal Register on October 16. EPA will accept public comments on the Proposed Rule submitted on or before December 15, 2017.

The Clean Power Plan

In 1970, Congress authorized EPA under the Clean Air Act to set “performance standards” limiting emissions from newly built or modified air-pollution sources that would endanger public health or welfare. Congress designed these “new source performance standards”—commonly called NSPS—to require new sources to employ the best demonstrated system of emission reduction as a way to reduce air pollution. Congress then further required that when EPA establishes a new source performance standard, it must also establish a procedure for the States to regulate the existing sources that would fall within the regulations if they were new.

In the 1970s, soon after receiving NSPS authority from Congress, EPA decided that large coal-fired power plants emitted pollution—such as sulfur dioxide and particulate matter—contributing substantially to the endangerment of the public health or welfare, and issued new source performance standards for them.

In 2015, EPA established first-ever performance standards for greenhouse gas emissions from new and modified power plants. In conjunction, EPA promulgated the Clean Power Plan, which regulates greenhouse gas emissions from the much larger universe of existing power plants. With its wide-ranging effects on the existing framework of traditional power generation, EPA made the Clean Power Plan one of the cornerstones of President Obama’s Climate Action Plan and push to combat climate change.

Litigation ensued, and the litigants raised several allegations and questions regarding the administrative record, whether EPA had given sufficient consideration to certain issues and—from a few different angles—whether EPA actually had legal authority under the Clean Air Act to promulgate the requirements that formed the Clean Power Plan. In 2016, the Supreme Court ordered a stay of the implementation of the regulations until the ongoing judicial proceedings end.

President Trump’s Energy Independence Initiative

On March 31, 2017, President Trump signed an executive order calling for, among other things, a review of all existing EPA regulations that unnecessarily encumber energy production, constrain economic growth, prevent job creation, undermine reliable electricity and generally burden the development or use of domestically produced energy sources, including—perhaps specifically—coal. The “Energy Independence” order also specifically directed EPA to review the Clean Power Plan to make sure that the Plan complied with this new policy direction, and “if appropriate” publish for notice and comment proposed rules “suspending, revising, or rescinding” the Clean Power Plan.

Repeal

The Proposed Rule is not unexpected, in large part because President Trump’s new EPA Administrator, Scott Pruitt, was one of many state Attorney Generals who sued EPA to prevent the implementation of the Clean Power Plan, and as EPA Administrator, he has sharply criticized the Plan.

The legal justification for the repeal is based on a change in the way that EPA is interpreting its powers under the Clean Air Act. Specifically, the question is how EPA should interpret Congress’ requirement that EPA must set NSPS that reflect “the degree of emission limitation achievable through the best system of emission reduction [that] has been adequately demonstrated.” The Clean Power Plan set state specific rate-based and mass-based carbon dioxide emissions limits which were tailored to each state’s existing electric generation sources. The states were then allowed to decide what means to implement to meet those emissions limits, possibly including a move away from higher-carbon electric generation sources and towards renewables. When it promulgated the Clean Power Plan, EPA determined that its ability to set NSPS could include these broader compliance measures that extend beyond a coal-fired or other type of power plant’s operations to bigger-picture measures designed to shift the sources of power generation towards lower carbon-emitting technology.

In the proposed repeal, EPA has changed its interpretation of its powers, and says that it is returning to what it calls a “traditional, source specific approach” to implementing Congress’ NSPS requirements. Notably, from EPA’s perspective, this revised interpretation requires repealing the whole Clean Power Plan, not merely amending or revising the regulations in the Plan.

While EPA’s proposal to repeal the Clean Power Plan is not unexpected, it is controversial. The Proposed Rule will now proceed according to the administrative rule making process. As noted above, the proposal is now subject to public comment, and it is very likely that both industry and environmental groups will submit extensive comments. Once the public comment period closes on December 15, EPA will then review and consider those comments, and will likely take several months to prepare responses and, if necessary, revisions to the Proposed Rule.

Replace?

While the Proposed Rule is moving through the administrative process EPA will also begin discussions on new regulations to replace the Clean Power Plan. EPA has indicated that it will invite public comment on a possible replacement rule, although the agency has not set a timeline for that comment period. The agency will likely begin informal discussions with stakeholders on new regulations over the course of the next few months.

Members of the energy sector and the many other stakeholders who were directly or indirectly impacted by the Clean Power Plan should strongly consider participating in those discussions with EPA.

Refuse

Several states have already reiterated their promise to sue EPA in response to any changes to the Clean Power Plan, so if the Proposed Rule passes it is likely to be immediately challenged in the courts. At the very least there will be a litigious debate regarding whether EPA’s new interpretation of the Clean Air Act is correct, including whether the reviewing court or courts should defer to EPA’s interpretation of Congress’ requirements. Meanwhile, the Clean Power Plan is mired in ongoing litigation and stayed. It is unclear whether a stay of the Proposed Rule would be sought and granted, but litigation is guaranteed, and the 2007 Supreme Court decision requiring that EPA regulate greenhouse gases will be a potential issue for EPA.

Some states have also indicated that they will continue to develop plans to meet or exceed the emissions limits in the Clean Power Plan, and others have indicated that they will at least continue to move away from coal-fired power plants and towards renewables. For example, the New York Times reported that the chairman of the Arkansas’ Public Service Commission’s assessment is “[e]ven if they repeal the Clean Power Plan, or replace it with something that doesn’t require us to do very much, you still have to reckon with the fact that ultimately regulations on carbon are coming. So we need to develop options to deal with that other than sticking our heads in the sand and hoping we can just file lawsuits forever.”

Impacted industry groups, therefore, should determine whether their states intend to continue to pursue compliance with the emissions standards in the current version of the Clean Power Plan, or some form of similar standards. If so, those industry groups should look for opportunities to participate in the design of the state implementation plans.