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EPA Proposes Clean Power Plan Repeal Rule

On Tuesday, October 10, Environmental Protection Agency Administrator Scott Pruitt is expected to release the agency’s proposed rule to repeal the Clean Power Plan (CCP). The CPP, which aims to reduce U.S. electric power sector carbon dioxide (CO2) emissions by 32 percent below 2005 levels by 2030, was the Obama administration’s marquee domestic climate policy and principal regulatory component of the U.S. emission-reduction pledge under the Paris Climate Accord. On Friday, October 6, someone leaked the repeal rule a few days before its official debut. In this post, I provide excerpts and offer commentary on the leaked document.

Although there are no shortage of policy arguments against the CPP, the repeal proposal is based solely on a legal argument. The CPP is to be repealed because it exceeds the agency’s statutory authority. As the proposal states:

Specifically, the EPA proposes a change in the legal interpretation as applied to section 111(d) of the Clean Air Act (CAA), on which the CPP was based, to an interpretation that the Agency proposes is consistent with the Act’s text, context, structure, purpose, and legislative history, as well as with the Agency’s historical understanding and exercise of its statutory authority. Under the interpretation proposed in this notice, the CPP exceeds the EPA’s statutory authority and would be repealed. The EPA welcomes comment on the legal interpretation addressed in this proposed rulemaking.

What is that interpretation? In brief, CAA section 111(d) authorizes the EPA to adopt emission-reduction guidelines individual sources can meet via modifications to or at those facilities. In contrast, the CPP requires emission-rate reductions that no individual coal power plant or natural gas power plant can achieve via changes in the facility’s technology or operation. To comply, owners and operators must shift generation from coal to gas, and from fossil fuels to renewables, either by investing in new renewable generation or purchasing emission credits from renewable facilities.

Thus, putting it now in my own words, the CPP is a plan to transfer wealth from politically disfavored to favored power generators and restructure the nation’s electricity marketplace. Neither the text of 111(d), nor the handful of previous 111(d) rules, nor legislative history provides any support for such grandiose ambitions.

Here’s how the EPA summarizes its argument:

CAA section 111(d) requires the EPA to promulgate emission guidelines for existing sources that reflect the “best system of emission reduction” (BSER) under certain circumstances. Notwithstanding the CPP, all of the EPA’s other CAA section 111 regulations are based on a BSER consisting of technological or operational measures that can be applied to or at a single source. The CPP departed from this practice by instead setting carbon dioxide (CO2) emission guidelines for existing power plants that can only realistically be effected by measures that cannot be employed to, for, or at a particular source. Instead, the CPP encompassed measures that would generally require power generators to change their energy portfolios through generation-shifting (rather than better equipping or operating their existing plants), including through the creation or subsidization of significant amounts of generation from power sources entirely outside the regulated source categories, such as solar and wind energy. This raised substantial concerns that the CPP would necessitate changes to a State’s energy policy, such as a grid-wide shift from coal-fired to natural gas-fired generation, and from fossil fuel-fired generation to renewable generation.

Let’s dig into that a bit deeper. In the CPP, the “best system of emission reduction” consists of three “building blocks”: (1) Improve the heat rate (thermal efficiency) of coal power plants, (2) shift baseload generation from coal to gas, and (3) replace generation from fossil-fuel power plants with generation from new renewable facilities. “While building block 1 constituted measures that could be applied directly to a source—that is, integrated into its design or operation—building blocks 2 and 3 were expressly designed to shift the balance of coal-, gas-, and renewable-generated power at the grid-wide level.”

Building blocks 2 and 3 make the CPP unprecedented in two obvious ways. First, unlike previous 111(d) rules, the CPP establishes emission performance standards “well below that which could be met by existing units through any retrofit technology of reasonable cost available at the time.” Consequently (though the repeal rule does not put it so bluntly), CPP “performance” standards are actually non-performance mandates. Owners and operators of fossil-fuel power plants can comply only by producing less power from their facilities (including, for example, by shutting them down).

Second, the CPP imposes tougher emission performance standards on existing sources than the corresponding and prerequisite new source rule imposes on new sources. For example, for natural gas combined cycle power (NGCC) plants, the new source rule sets a performance standard of 1000 lbs. CO2/MWh. The CPP standard for NGCC plants is 700 lbs. CO2/MWh. That flouts statutory logic and common sense, “because the costs of controlling existing facilities will ordinarily be greater than those for control of new sources.”

One might wonder why the EPA proposes to repeal the CPP “in its entirety.” Why not leave the building block 1 thermal efficiency requirements in place? The agency explains:

The EPA proposes to take this action because it proposes to determine that the rule exceeds its authority under the statute, that those portions of the rule which arguably do not exceed its authority are not severable and separately implementable, and that it is not appropriate for a rule that exceeds statutory authority—especially a rule of this magnitude and with this level of impact on areas of traditional state regulatory authority—to remain in existence pending a potential, successive rulemaking process.

Although the EPA has no current plan to replace the CPP with an alternative scheme for regulating CO2 emissions, the agency “is considering whether it is appropriate to propose such a rule and is intending to issue an Advance Notice of Proposed Rulemaking (ANPRM) in the near future.” The ANPRM will solicit information on “systems of emission reduction that are in accord with the legal interpretation proposed in this notice.” However, the EPA is not soliciting such information at this time.

A 60-day comment period on the proposed repeal rule will begin on the date of publication in the Federal Register. The EPA will also hold a public hearing during the comment period.

Turning to the big picture, the CPP repeal rule is a key part of President Trump’s broader commitment to  “suspend, revise, or rescind those [regulations] that unduly burden the development of domestic energy resources beyond the degree necessary to protect the public interest or otherwise comply with the law.” Mr. Trump approved the Keystone XL and Dakota Access pipelines, repealed all of President Obama’s climate policy executive orders, signed 14 Congressional Review Act resolutions of disapproval overturning Obama administration regulations, challenged the Obama EPA’s Waters of the United States rule, initiated repeal of Obama’s Arctic offshore drilling ban, disbanded the Interagency Working Group on the Social Cost of Carbon, and announced his intention to withdraw from the Paris Agreement.

Conservatives and free marketers should be grateful. It’s not just that Hillary Clinton would have pushed America farther down the progressive rabbit hole had she won the 2016 elections. No GOP establishment candidate would have dared and done anywhere near as much as President Trump to repeal Obama’s climate “legacy” policies—the CPP and Paris Agreement—and roll back federal regulatory burdens on U.S. energy producers.