Clean Power Plan Legal Battles Commence while EPA Fine-Tunes Incentives and Enforcement Mechanisms

EPA published the Clean Power Plan (“CPP”) regulations in the Federal Register late last month. The CPP is the landmark climate change rule championed by the Obama Administration that requires reductions in greenhouse gas emissions from existing power plants nationwide. Almost immediately, opponents lodged petitions seeking review of the rule, with some petitioners also seeking a stay of the rule.

On the same day, EPA released the proposed federal implementation plan, a rule that would be implemented in states that do not submit their own plan for compliance with the CPP. EPA has also offered more details on the proposed Clean Energy Incentive Program (CEIP), its enticement to states planning early action in line with the CPP.

The court challenges to the CPP, the public hearing and comment period on the federal implementation plan, and the further development of the CEIP will increase the attention on and the tension surrounding the CPP in the months to come. For background and analysis on the CPP, see “EPA Releases Final Version of the Clean Power Plan” and “EPA’s Clean Power Plan: A Regional Analysis.”

Opponents Tee Up Legal Action

West Virginia led a coalition of states opposed to the CPP on two fronts, seeking both review of the rule[1] and an emergency stay of the rule as well as expedited consideration of the petition for review.[2] The petition claims that “the States are being immediately and irreparably harmed by EPA’s illegal effort to force the States to reorder their electrical generation systems,” on the basis that “EPA has vastly overstepped its authority by seeking to pick winners and losers in the energy field, and then requiring the States to take part in this unlawful regime.”[3] These challenges have come from a larger number of states than the original lawsuits filed in June and September. The additions include Arizona, Colorado, Georgia, Missouri, Montana, New Jersey, North Carolina, Texas and Utah. Notably, however, the majority of these states appear to be working on their state compliance plans even while opposing the CPP; only five state governors have openly stated that they will not submit a state implementation plan.[4]   Notably, eighteen states led by New York and several cities asked the D.C. Circuit Court of Appeals to allow them to intervene in the West Virginia-led suit in support of the CPP, stating “a compelling interest in defending the Clean Power Plan as a means to achieve their goal of preventing and mitigating climate change harms in their states and municipalities.[5]

On the industry front, the U.S. Chamber of Commerce led a coalition of industry interests also asking the court to stay the rule while reviewing its legality.[6]

The Federal Implementation Plan Opens Up for Comment

The proposed federal implementation plan proposes a model “cap and trade” program under which EPA would establish emissions limits on either a rate-based basis or a mass-based basis for states that do not submit their own implementation plans to EPA. It will establish requirements directly applicable to a state’s affected fossil fuel-fired electric-generating units that meet emission performance levels, or the equivalent statewide goal, in order to reduce carbon emissions. As an enforcement mechanism, EPA would impose fines or other penalties just as in the case of any other federal program under the Clean Air Act.   The proposed federal implementation plan will be the subject of four public hearings in November and a 90-day comment period currently slated to end Jan. 21, 2016.

The Clean Energy Incentive Program Shapes Up

On October 21st, EPA released its “Clean Energy Incentive Program Next Steps” document, a program that states may use at their own option to incentivize early investments in wind and solar power generation, as well as in energy efficiency measures in low-income communities. Through the CEIP, states may award project providers early action allowances (if implementing a mass-based trading program) or emission rate credits (ERCs) (if implementing a rate-based trading program). EPA will then provide matching allowances or ERCs up to a total equivalent to 300 million short tons of CO2 emissions. This is available to states that build this generation or install these efficiency measures between 2020 and 2022, before the final rule takes effect. EPA is asking states for a nonbinding indication that they want to participate in the program when they submit initial plans in September 2016.

EPA will be holding a series of meetings on the program with interested stakeholders. This includes two in-person training sessions between now and the end of November for tribes and communities and a meeting of the Clean Air Act Advisory Committee on Nov. 18, 2015.

We will continue to monitor and analyze developments surrounding the CPP for interested stakeholders. Readers who are interested in signing up to receive our alerts on this subject can do so here, or visit our Global Energy Law and Policy Blog to sign up for RSS feeds.

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Footnotes:

[1] http://www.ago.wv.gov/pressroom/2015/Documents/File-stamped%20petition%2015-1363%20%28M0108546xCECC6%29-c1.pdf. In addition to the states listed below, North Carolina signed this petition.

[2] See State of W. Virginia, et al. v. U.S. E.P.A., No. 15-1363, State Petitioners’ Motion for Stay and for Expedited Consideration of Petition for Review (October 23, 2015), available at http://www.ago.wv.gov/publicresources/epa/Documents/StatePetrsMotionForStay.pdf. The states that signed on to this challenges are Alabama, Arizona, Arkansas, Colorado, Florida, Georgia, Indiana, Kansas, Kentucky, Louisiana, Michigan, Missouri, Montana, Nebraska, New Jersey, Ohio, South Carolina, South Dakota, Texas, Utah, Wisconsin and Wyoming.

[3] The states that signed on to this challenges are Alabama, Arizona, Arkansas, Colorado, Florida, Georgia, Indiana, Kansas, Kentucky, Louisiana, Michigan, Missouri, Montana, Nebraska, New Jersey, Ohio, South Carolina, South Dakota, Texas, Utah, Wisconsin and Wyoming.

[4] These states include Indiana, Wisconsin, Oklahoma, Louisiana, and West Virginia.

[5] http://www.ag.ny.gov/pdfs/2015-11-04-Motion-to-Intervene-FILED.pdf. The states include New York, California, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New Mexico, Oregon, Rhode Island, Vermont, Virginia and Washington. Several cities and a county also signed on to the petition, including the District of Columbia; Boulder, Colo.; Chicago; New York; Philadelphia; South Miami, Fla.; and Broward County, Fla.

[6]http://www.chamberlitigation.com/sites/default/files/U.S.%20Chamber%2C%20et%20al.%20v.%20EPA%20%28ESPS%29%20–%20Motion%20for%20Stay.pdf