A lawsuit filed by more than a dozen states challenging the Obama administration’s proposed rules for existing power plants underscores how polarizing the debate has become.
“These rules will hurt West Virginians by raising energy bills, making our grid less reliable, and pushing manufacturers overseas,” said a spokesman for Republican Rep. David McKinley from the coal-producing Mountaineer state. “Those costs far outweigh even the most optimistic benefits, which is cutting six one-hundredths of 1 percent of global C02 emissions. The American people deserve better.”
The lawsuit is unusual, since they are not usually filed until after a rule is finalized. The rule isn’t expected to be finished until the summer.
On one side of the debate is, of course, the supporters, which include President Obama and environmentalists, primarily. They are focused on the regulations to reduce carbon dioxide in the atmosphere, which scientists say is causing the Earth’s climate to warm.
But the other side is opposed, or at least “concerned” that the rules, once implemented, could wreak havoc in electricity markets, force consumers to pay more for electricity, prompt coal plants to close, and place the states at the mercy of the federal government on what they can and cannot use to produce electricity.
Those concerns have trade associations, K Street lawyers and lawmakers scrambling to get ahead of the rules, with many in the GOP majority opposing the rules as an affront to federalism and an illegal “power grab” by EPA. Here is a closer look at the reasons the rules are being challenged:
EPA power grab
The states argue that the rules surpass the agency’s authority under section 111(d) of the Clean Air Act. Under that section, lawyers say, EPA cannot regulate resources that are “outside the fence line” of a power plant. But the rules do just that. Instead of regulating emissions from individual power plants, the rules require states to meet targets to reduce their climate emissions. And they can do that by using a variety of resources that include energy-efficiency programs, solar energy and wind, ways that would not correspond to EPA’s authority under the air law.
The concept of a “power grab” comes from the EPA’s interpretation of the law. States argue that because they must submit their plans to EPA, they would become susceptible to federal enforcement and civil litigation under the Clean Air Act. The rules essentially would give the EPA the power to determine how a state would produce energy.
Lawrence Tribe, a highly regarded Harvard law professor and scholar, recently explained that plan would “command every state by the year 2016 to develop a package of EPA-approved laws requiring coal-fired power plants to shut down or reduce operations, consumers and businesses to use less electricity and pay more for it, and utilities to shift from coal to other energy sources a total overhaul of each state’s way of life. … EPA lacks the statutory and constitutional authority to adopt its plan.
“The obscure section of the Clean Air Act that EPA invokes to support its breathtaking exercise of power in fact authorizes only regulating individual plants and, far from giving EPA the green light it claims, actually forbids what it seeks to do. Even if the act could be stretched to usurp state sovereignty and confiscate business investments the EPA had previously encouraged and in some cases mandated, as this plan does, the duty to avoid clashing with the Tenth and Fifth Amendments would prohibit such stretching.
“The absence of EPA legal authority in this case makes the Clean Power Plan, quite literally, a ‘power grab.'”
Road to Paris
Lawyers privy to the case say the Obama administration probably does recognize that the rules extend beyond EPA’s authority. But the White House is unlikely to reverse course because the power-plant rules are considered the cornerstone in meeting its international obligations to cut emissions, they argue.
Primarily, the rules are seen as a “signal” of the country’s commitment to reducing carbon dioxide ahead of international climate negotiations in December in Paris.
“If EPA were to issue a rule based on what the statute actually authorizes EPA to do, it would not get anywhere close to the emission reductions that the White House has said it will offer up as part of the Paris climate negotiations,” said Jeff Holmstead, a partner at the law firm Bracewell-Giuliani and a Clean Air Act expert.
“Remember that, as part of the ‘landmark’ agreement with China, the president has said that he will take executive actions to reduce U.S. greenhouse gas emissions by at least 26 percent compared to 2005 levels. And the White House has indicated that this is the commitment that the president will make as part of the Paris accord.”
The Clean Power Plan seeks a 30 percent reduction in emissions by 2030.
Big cost, little benefit
The international commitment aspect of the rules has incensed the Republican majority in Congress, who say the extreme costs of the rules are not justified by the minimal impact the plan would have on improving the environment.
The GOP has latched onto the idea that the rules are meant to push the president’s agenda of reaching a new global accord on climate change without caring about the costs it will impose on the nation.
“Since the Clean Power Plan may reduce the rise of global temperatures by only .018 [degrees] Celsius by 2100, we learned from [EPA Administrator] McCarthy that the real benefit of the rule is to send a ‘signal’ to other countries that America is serious about climate change,” said Sen. Jim Inhofe, Republican chairman of the Senate Environment and Public Works Committee.
McCarthy and other administration officials have said the rules are part of the administration’s Climate Action Plan, which considers an international component.
Inhofe was referring to a March 4 hearing in which McCarthy was unresponsive to questions regarding private economic modeling and said only that she was confident the EPA assessed the rules effectively. EPA’s modeling shows the rule would cost between $7.7 and $8.8 billion, while estimating $93 billion in public health benefits “far outweighing the costs,” according to an EPA fact sheet.
Inhofe’s data refers to an industry-funded study by the private economic consulting firm NERA. The firm modeled the cost of compliance across the states, which it concluded to be $366 billion if they use all four of the options EPA gave them, including coal plant heat-rate improvements, increased natural gas use, renewable energy and energy efficiency.
The study shows the rule would cost $479 billion if natural gas and more efficient use of coal are used. Inhofe’s numbers on emissions reductions come from a variety of independent analyses that use the EPA’s modeling that were included with the rule.
Critics say that EPA purposefully did not include the rule’s impact on overall global warming because the 0.18 figure is so low it would undermine the administration’s argument for the plan.
“This so-called ‘signal’ carries a hefty price tag of $479 billion in compliance costs and a double-digit increase in electricity costs over the next decade that will significantly impact every American,” Inhofe said after the budget hearing.
Meanwhile, Energy & Power Subcommittee Chairman Ed Whitfield, whose state of Kentucky is also suing EPA, plans to announce two bills this week that would brush back the power plant rules and allow coal to remain a resource.
Power reliability
The utility industry has a range of concerns about ensuring a balanced electricity system.
“We think its solvable,” said John Shelk, president and CEO of the Electric Power Supply Association, but the EPA needs to be “really, really careful” implementing the rules.
The association represents the merchant utility industry that participates in the large restructured electricity markets overseen by the Federal Energy Regulatory Commission.
For Shelk’s members, how the climate rules affect these markets is their deepest worry. The regulations have the potential of irrevocably changing how the markets function, creating enormous uncertainty.
“We’re still talking through the members on exactly what to do,” Shelk said.
The climate rules would drive states to create a “patchwork” of electricity requirements that would undermine the efficiency of the FERC-overseen system. That could send price distortions into the market and create reliability problems, industry officials say.
Shelk sees legislation as unnecessary to address the problems the industry faces from climate rules. Instead, he recommends putting pressure on the agencies involved to coordinate better.
He says Congress helped assist the industry last year by getting FERC and EPA to hold a series of conferences to examine the issues and concerns affecting the electric grid. The last of the conferences will be held in Missouri at the end of the month.
