Will the Supreme Court rein in EPA?

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BY MARLO LEWIS:

The Supreme Court will soon hear oral argument in West Virginia v. Environmental Protection Agency. The Court will examine the lawfulness of the Obama administration’s October 2015 Clean Power Plan (CPP) and the Trump administration’s June 2019 Affordable Clean Energy (ACE) Rule, which repealed and replaced the CPP.

Both rules target power plant carbon dioxide (CO₂) emissions. However, ACE aimed to improve the environmental performance of coal power plants (measured in pounds CO₂ per megawatt hour), whereas the CPP aimed to squeeze coal power plants out the electricity marketplace.

Petitioners argue that the CPP not only exceeds the EPA’s statutory authority but also implicates the Supreme Court’s “major rules” doctrine. Under that doctrine, agency decisions of vast economic and political significance that lack a clear congressional authorization are unlawful. As Judge Brett Kavanaugh explained in his dissent in United States Telecom Ass’n v. FCC (2017), the major rules doctrine “helps preserve the separation of powers and operates as a vital check on expansive and aggressive assertions of executive authority.”

In the CPP, the EPA claimed authority to restructure the U.S. electric supply system by shifting generation from coal to gas power plants, and from fossil-fuel power plants to renewables. Such authority would empower the EPA to impose tens to hundreds of billions of dollars in costs on power producers and consumers, decimate the coal industry, and vitiate States’ congressionally-protected power to plan electricity resource development within their borders.

By implication, the EPA claimed authority to force a shift in production, even to the point of bankrupting disfavored companies, within any CO₂-emitting economic sector and industry.

Section 111(d) of the Clean Air Act (CAA), the CPP’s purported statutory basis, contains nothing remotely resembling a clear statement authorizing the EPA to do any of those things.

CAA section 111 directs the EPA to establish emission performance standards for new (future) stationary sources, and a process whereby states can impose standards for existing (already built) sources. Performance standards are to reflect the “best system of emission reduction” (BSER) that the EPA determines to be “adequately demonstrated” (roughly meaning effective and affordable).

Since “systems” are designed for and apply to “sources,” the legal meaning of “system” depends on that of “source.” CAA 111 defines stationary source as “any building, structure, facility, or installation which emits or may emit air pollutants.” Consequently, a bona fide BSER must be based on measures that can be applied at and by the source.

Consistent with that reasoning, all previous BSERs, whether for new sources under CAA 111(b) or existing sources under 111(d), were based on reductions achievable at and by the individual sources.

The Obama administration refused to accept that limitation because there are no affordable technologies for substantially reducing CO₂ emissions from existing power plants.

The closest facsimile would be equipment upgrades that reduce emissions at the margins by enabling coal power plants to operate more efficiently. However, making coal generation more efficient would not advance and might even impede President Obama’s goal to “finally make renewable energy the profitable kind of energy in America.”

So, the EPA came up with a scheme to impose unattainable performance standards on existing fossil-fuel power plants. For example, the CPP set a standard of 1,305 lbs. CO₂/MWh for existing coal power plants (many of which are decades old) even though new highly-efficient supercritical pulverized coal units emit more 1,700 lbs. CO₂/MWh.

How then could existing fossil-fuel facilities comply? The CPP gave owners and operators the option to purchase power from, invest in, or buy emission-reduction credits from lower- and zero-emission facilities elsewhere on the grid. Such “generation shifting” is the CPP’s principal BSER.

How would States implement generation shifting? As the proposed and final CPP rules repeatedly advise, States should enact or join cap-and-trade programs. In short, the CPP was fundamentally a plan to herd States into regional versions of the greenhouse gas cap-and-trade schemes Congress considered and rejected during the 2000s.

To make it look legal, the CPP reimagined “source” to include power plant owners and operators in their capacity as market actors. More fundamentally, the CPP imagined the entire North American power sector to be a single source—a vast “machine” in which individual power plants are mere cogs.

But owners and operators are not sources, and neither is an economic sector, which is a market process. The electricity sector, for example, includes numerous nuclear, wind, solar, and hydro-power facilities, which are not “sources,” and millions of ratepayers who do not produce power.

Petitioners in West Virginia are challenging a January 2021 ruling by the D.C. Circuit Court of Appeals. The Circuit Court denied that the CPP implicates the major rules doctrine. Congress, it argued, made a “clear decision” to authorize the EPA to determine what system of emission reduction is best, and rather than “impose” generation shifting on all sources, the CPP allows each State to decide for itself how to meet its CPP emission-reduction targets.

The Circuit Court overlooked two obvious facts. First, the CPP’s “best system” was unprecedented in being based on emission reductions exceeding the technological capabilities of any existing source. Ceding market share thus became coal power plants’ only option to avoid even more drastic economic losses.

Second, unlike all previous “best systems” in CAA 111 rulemakings, generation shifting is designed to restrict the source’s hours of operation, which does nothing to improve its environmental performance. The CPP’s “performance standards” are actually non-performance mandates.

The Circuit Court also argued that the CPP does not trigger the major rules doctrine because, in BSER determinations, CAA 111 “significantly reins in the EPA’s judgment” by requiring the agency to consider compliance costs, non-air environmental impacts, and energy requirements.

However, compliance costs can significantly constrain the EPA’s discretion only if BSER is itself limited to measures that can be applied at and by the individual sources. For in that case industry data will indicate whether sources can or cannot afford the requisite technology investments. The compliance costs of generation shifting are more speculative and can always be made to look reasonable via dubious projections of green jobs growth and billions of dollars in climate benefits.

More fundamentally, the Circuit Court missed the big picture. The CPP was a blatant attempt to resolve an issue of major public controversy Congress was still debating. Indeed, even today, more than 30 years after Congress declined to include greenhouse gas regulatory authority in the 1990 CAA Amendments, President Biden and his congressional allies are unable to enact even non-regulatory measures to reduce power-sector CO₂ emissions.

We should thank the Circuit Court, though, for clarifying the CPP’s legal theory: Congress imposed “no limits on the types of measures” the EPA may use.

Once the EPA determined that BSER is not limited to emission reductions individual sources can affordably implement, it effectively claimed the power to make the hard choices about the nation’s economic, environmental, and energy priorities.

Congress may not constitutionally delegate such power to an administrative agency. The Supreme Court should reject the CPP’s legal theory, which entails a forbidden delegation of legislative power.

Marlo Lewis is a senior fellow at the Competitive Enterprise Institute.

This article originally appeared at Real Clear Energy

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