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Affordable Clean Energy Rule Improves Obama-era Policy, Still Contains Fatal Flaw

The Federal Register yesterday published the Environmental Protection Agency’s final Affordable Clean Energy (ACE) rule, along with the agency’s response to public comments on the August 2018 draft ACE rule. ACE repeals and replaces the Obama administration’s signature climate policy, the so-called Clean Power Plan (CPP), which imposed first-ever carbon dioxide emission standards on existing (already built) fossil-fuel power plants.

ACE is a massive improvement over the Clean Power Plan. It repudiates the Obama-era EPA’s unlawful ambition to play electricity czar to the states, rescinds the CPP’s impermissible imposition of unattainable standards on fossil fuel power plants, and establishes a regulatory roadblock to any future administration tempted to resume the war on coal.

Nonetheless, as argued in the Competitive Enterprise Institute’s October 2018 comment letter, ACE retains one of the Clean Power Plan’s fatal legal flaws.

Both ACE and the CPP purportedly derive their authority from section 111(d) of the Clean Air Act (CAA). However, section 111(d) excludes from its regulatory purview “any air pollutant . . . emitted from a source category regulated under CAA section 112.” The EPA has regulated coal power plants under section 112 since 2012 and natural gas power plants since 2004. Thus, the CPP is unlawful under the very provision that supposedly authorizes it, and any CPP replacement rule is out of bounds for the same reason. Naturally, I was curious as to how the EPA would address the Section 112 exclusion issue in its response to comments.

The EPA organizes its responses into a book with 10 chapters, each with a specific subject matter. Chapter 1 deals with legal issues. Pages 10-21 excerpt, summarize, and respond to 11 separate Competitive Enterprise Institute comments, which are numbered Comments 8-18.

The EPA’s responses to CEI’s comments are terse and uninformative. The agency repeatedly states that it “disagrees with these comments.” Then, with minor variations, instead of explaining its reasons, it simply cites other documents: “The basis for the EPA’s position on this issue has been stated in the preamble to the CPP (see 80 Fed. Reg. 64662, 64710-64715 (Oct. 23, 2015)) and in the EPA’s brief in the CPP litigation (State of West Virginia v. EPA, No 15-1363 (D.C. Circuit), Document # 1609995, filed April 22, 2016, at 76-98).”

That’s funny. To buttress (rather than explain) its “position,” the EPA invokes the Clean Power Plan, the very rule it has just withdrawn, and Obama-era legal argumentation that did not dissuade the Supreme Court from staying the CPP.

Also amusing, the EPA repeats the same verbiage in response to Comment 11, which notes how the ACE rule’s interpretation of the 112 exclusion differs from the opinions of all previous administrations, including those of the Obama administration.

Although ACE never discusses the 112 exclusion, it does address the issue, albeit furtively, in one anodyne sentence included among several regulatory definitions. Section 60.21(a) states:

Designated pollutant [i.e., a pollutant subject to regulation under section 111(d)] means any air pollutant, the emissions of which are subject to a standard of performance for new stationary sources, but for which air quality criteria have not been issued and that is not included on a list published under section 108(a) or section 112(b) of the Act.

Section 60.21(a) replaces “any air pollutant . . . emitted from a source category regulated under CAA section 112,” language passed by the House and published in the U.S. Code, with “any air pollutant . . . not included on a list published under . . . section 112(b),” language passed by the Senate and retained in the Statutes at Large. Whereas the U.S. Code language bars the application of 111(d) to power plants, the Senate language does not, because carbon dioxide is not listed as a hazardous air pollutant under section 112(b).

CEI’s comment letter objected that ACE surreptitiously revises EPA’s controlling legal authority. ACE replaces the U.S. Code language with the Statutes at Large language, yet without soliciting public comment on the legal propriety of the switch, and even without acknowledging that it was effectively amending the statute.

The EPA’s response: “The EPA disagrees that there is any procedural or other legal defect arising in regard to the section 112 Exclusion issue. Interested persons were clearly able to make comments related to the section 112 Exclusion, and did so.” Yes, some did—those not lulled to sleep by the EPA’s unbroken silence about the 112 exclusion in both the August 2018 draft ACE rule and December 2017 advance notice of proposed rulemaking.

This is stunning. The claim that prior regulation under section 112 bars the EPA from regulating power plants under section 111(d) was a key theme of the first state and industry briefs challenging the Clean Power Plan. Petitioners pressed it throughout the litigation, including in oral argument. All motions to stay the CPP also either agreed with or featured the U.S. Code version of the 112 exclusion.

Whether or not one agrees with CEI’s assessment that the U.S. Code version is the genuine article, ACE relies on a novel legal opinion for which the EPA adduces no specific support.    

The Obama administration’s June 2014 proposed Clean Power Plan rule, the accompanying CPP Legal Memorandum, and the final CPP rule wrestled at length with the alternative House and Senate versions of 111(d). The Obama administration concluded that EPA should “give some effect” to “both” versions, and attempted to mix and match elements of each. The George W. Bush administration also tried to combine elements of the two versions in its Clean Air Mercury Rule (CAMR). The Clinton-era EPA considered the House version the correct language and the Senate version a clerical error. No previous administration took the position that the EPA implicitly takes in 60.21(a), namely, that the Statutes at Large version is authoritative and the Code version should simply be ignored.

The ACE rule is almost certain to be litigated. If petitioners press the issue of the 112 exclusion, judges will likely not be satisfied by invocations of the Clean Power Plan preamble or the agency’s Obama-era brief in West Virginia et al. v. EPA.