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Hole in the ACE: Legal Flaws in EPA's Proposed 'Clean Power Plan' Replacement

The comment period closed this week (October 31st) for the Affordable Clean Energy (ACE) rule, Environmental Protection Agency’s proposed replacement for the so-called Clean Power Plan (CPP), which the agency intends to repeal.

In comments submitted on behalf of the Competitive Enterprise Institute, I expose a gaping hole in the ACE. The CPP is clearly unlawful and should be repealed. However, EPA’s replacement proposal also likely exceeds the agency’s authority. Moreover, EPA knows of this vulnerability yet does not discuss or even mention it. Thus, in addition to skating on statutory thin ice, ACE may be challenged as arbitrary and capricious.

Among the CPP’s multiple legal flaws, one stands out as most bizarre. The CPP purports to establish carbon dioxide emission performance guidelines for existing coal power plants under section 111(d) of the Clean Air Act (CAA). However, 111(d) excludes from its regulatory purview “any air pollutant . . . emitted from a source category regulated under CAA section 112.” Coal power plants have been regulated under CAA section 112 since 2012. The CPP is thus unlawful under the very provision that supposedly authorizes it. Any CPP replacement rule would be unlawful for the same reason.

The argument that EPA may not regulate existing power plants under CAA section 111(d) due to the “Section 112 Exclusion” was a prominent theme in litigation to overturn and stay the CPP. It was a key point in the first state and industry briefs challenging the CPP. Petitioners pressed it throughout the litigation, including in oral argument. All motions to stay the CPP also either agreed with or featured the 112 Exclusion.

More recently, in joint comments on EPA’s Advance Notice of Proposed Rulemaking (ANPRM), the agency’s preliminary exploration of CPP replacement options, 20 state attorneys general reiterated that “EPA does not have authority to use section 111(d) to regulate ‘any air pollutant’ emitted from a source category that is already ‘regulated under section [1]12.’” The AGs also opine that the 112 Exclusion argument was one of the reasons “the U.S. Supreme Court took the unprecedented step of staying implementation of the Power Plan pending judicial review.”

CEI also reminded EPA about the 112 Exclusion in its comments on the ANPRM. EPA claims the comments it received on the ANPRM “have informed this proposed rulemaking,” but there is no way to tell, because EPA also states that it “does not intend to respond” to those comments. The attorneys general and CEI’s comments are nowhere reflected or acknowledged in the ACE rule.

Although ACE does not mention the 112 Exclusion, EPA does address it furtively, in a single anodyne sentence tucked away in the proposal’s regulatory provisions (Part 60). Section 60.21(a) states:

Designated pollutant 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.

Without a word of explanation, EPA through the above regulatory provision attempts to resolve a longstanding controversy about the text of CAA section 111(d).

Specifically, 60.21(a) would replace “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 and other greenhouse gases are not listed as hazardous air pollutants (HAPs) under CAA section 112(b).

Drawing upon the aforementioned briefs and motions in the CPP litigation, CEI’s comment letter presents a strong case that the Code language is the genuine article and the Senate language a drafting error. I won’t go into the numerous details here.

Suffice it to say that EPA has a lot of explaining to do, because the legal theory the ACE rule attempts to (surreptitiously) adopt is novel.

The Obama administration’s June 2014 proposed CPP 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 EPA considered the House version the correct language and the Senate version a clerical error. No previous administration took the position EPA implicitly takes in 60.21(a), namely, the Senate version is authoritative and the House version should simply be ignored.

CEI’s comment letter probably makes the most detailed case available that the U.S. Code language is the proper text of the statute, and bars EPA from regulating carbon dioxide emissions from existing coal power plants.

But even aside from the merits of EPA’s rejection of the U.S. Code language, the agency’s decision to revise its controlling legal authority, without stating any reasons or even acknowledging it is doing so, puts ACE in jeopardy as arbitrary and capricious. For EPA will finalize ACE without having solicited public comment on a pivotal component of the rule’s alleged statutory basis.