Is EPA’s Clean Power Plan “Transformative”?

In an October 31st  letter to the D.C. Circuit Court of Appeals, National Mining Association attorney Peter Glaser provides new evidence that “EPA far understated the effects of the Clean Power Plan (CPP) by exaggerating the amount of coal generation that will retire even without the rule.” Ironically, the smoking gun is the agency’s own updated modeling, albeit for a different regulation—the Cross State Air Pollution Rule (CSAPR).

Glaser’s argument may be summarized as follows:

  • The Environmental Protection Agency’s “base case” (the future absent the CPP) indicated that “in 2016, 20 percent of U.S. coal capacity would disappear even if the rule were not adopted, reducing coal generation to 214 gigawatts (GW).”
  • However, the agency’s just-published CSAPR Update eliminates the “phantom retirements” assumed in the CPP base case. Agency modeling “now shows 268 GW of coal generation for 2016.”
  • EPA is now pretty much on the same page as the Energy Information Administration (EIA), which recently reported 272 GW of coal generation in service as of August 2016.
  • EPA estimates coal generation “must decline to 174-183 GW to meet CPP requirements.”
  • That means coal capacity must decline by “about one third.”
  • The new data confirm Obama administration boasts—denied, however, in EPA’s briefs before the Court—that the CPP “will transform the power sector.”

For links and documentation, see my post on GlobalWarming.Org. For a witty debunking of EPA’s fuzzy math, see Stephen Eule’s commentary on the Institute for 21st Century Energy blog.

Why does this matter? At the outset of the CPP oral argument, Judge Thomas Griffith challenged West Virginia Solicitor General Elbert Lin to explain why the CPP is “transformative.” The term harks back to the Supreme Court’s 2014 ruling in Utility Air Regulatory Group v. EPA (2014), a case also dealing with the scope of EPA’s authority to regulate carbon dioxide (CO2).

In Utility Air, the Court ruled that EPA’s Greenhouse Gas Tailoring Rule was “unreasonable because it would it would bring about an enormous and transformative expansion in EPA’s regulatory authority without clear congressional authorization.” There is obviously no clear congressional authorization for the Power Plan, but Griffith and his colleague Judge David Tatel suggested the absence of a “clear statement” by Congress is irrelevant unless the CPP is “transformative.”

Judge Griffith cited EPA’s estimate that the Power Plan would reduce coal generation “only  . . .  five percent” below baseline projections:

How is it transformative when the change to the coal industry will actually only be a five percent difference between the rule being administered and there being no rule at all? By 2030, apparently 32 percent of power plants will be coal operated without the rule, 27 percent will be coal operated with the rule; that hardly sounds transformative [p. 6].

Glaser’s letter provides a partial rejoinder. EPA’s current modeling indicates the CPP will shut down an additional 11-13 percent of current coal generation capacity, more than double what the agency told the court.

However, Griffith was dismissive when Mr. Lin, citing EIA modeling, argued the Power Plan would reduce coal capacity by 10 percent below baseline projections: “[Y]oure talking about a marginal difference, some experts say a five percent difference, your experts say 10 percent difference, by 2030, that doesnt seem to me to be transformative.”

With all due respect, Judges Griffith and Tatel miss the point. To begin with, an unauthorized regulation does not have to be “transformative” to be unlawful. “Transformative” just makes an “unauthorized” rulemaking a more egregious case of bureaucratic overreach. Any legislative rule lacking an express or clearly implied delegation of power from Congress is unlawful. 

In the second place, a rule need not have large short-term material or financial impacts to be “transformative.” Far more important are the rule’s lasting impacts on national policy, the economy, and constitutional balances.

In Utility Air, the Court elaborated on the meaning of “transformative” as follows:

When an agency claims to discover in a long-extant statute an unheralded power to regulate “a significant portion of the American economy,” Brown & Williamson, 529 U. S., at 159, we typically greet its announcement with a measure of skepticism. We expect Congress to speak clearly if it wishes to assign to an agency decisions of vast “economic and political signifi­cance.”

EPA’s adoption of the Power Plan is clearly a matter of vast “economic and political significance.” For starters, the CPP is not just a rule, it is a regulatory framework. The 2022-2030 CPP compliance period is just Phase 1. Subsequent rulemakings will surely marginalize if not eliminate fossil generation. As petitioners point out in their core issues reply brief (p. 7), “EPA claims the power to require States to enforce emission reductions that are premised on changing the nation’s mix of electric generation—a power that would permit EPA to effectively ban the sources of generation it disfavors.”

That assessment is not alarmist. The CPP’s prerequisite rulemaking, EPA’s so-called “carbon pollution standards” for new power plants, effectively bans investment in new coal generation. It does so by basing the standards on a technology—carbon capture and storage—that is prohibitively costly and plagued with technical problems. EPA acknowledges the CPP’s current requirements will have no discernible climate impact. That obviously implies the need for more aggressive action down the road.

So the transformative character of the CPP should not be assessed by coal market shares in 2030. What matters is the precedent it sets, the policy dynamic it unleashes, and the economic developments the new policy trajectory permits and precludes. Under the CPP, coercive de-carbonization becomes the central organizing principle of federal and state regulation of electricity. Is that not a momentous change in national policy? The CPP as a framework will channel and constrain untold billions of dollars in energy-related investment.   

The CPP also entails a fundamental shift in political power from Congress and the states to EPA. The CPP mandates the replacement of fossil energy with renewables regardless of the policy preferences of Congress, state legislatures, governors, and state electorates. The rule usurps states’ authority over power-sector resource planning and development and Congress’s authority to determine national policy on energy and the environment. A rule that undermines both federalism and the separation of powers is by definition “transformative.”