Clean Power Plan Already Having Its Intended Impact, Experts Say

by | Sep 29, 2016

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legalWhile the U.S. Court of Appeals for the District of Columbia was forced to reconsider the Clean Power Plan, it was entirely its choice to have 10 judges hear the case instead of 3. “That’s rare,” says Brandon Barnes, a legal analyst for Bloomberg Intelligence, during a conference call yesterday.

Barnes ran down a list of legal issues that the court will consider and made an educated guess that the appeals court would reaffirm its earlier decision to give the Clean Power Plan the rule of law. It could be as high as a 7-3 in favor of EPA, he speculated.

Such a decision could come as early as December 2016, although given the number of judges who must weigh in, he thought it would be during the first quarter of 2017. The case will then get appealed back up to the US Supreme Court, which would decide in roughly 250 days. A 4-4 tie means the case is upheld; Justice Scalia was the fifth vote that declared a temporary stay earlier this year.

Therefore, the case would take effect later in 2018. That would then push back EPA’s original timetable, which had wanted the states to get their blueprints to it on how they planned to comply later this year — in time for a 2020 start date.

Right now, everything is officially on hold, although practically speaking, all the panelists on the call said that both companies and utilities are moving forward as if it will be enacted. As for utilities, there is already a move afoot to replace their older coal fired units with natural gas.

“If the next president wants to modify it, it is a whole new ruling,” says Rob Barnett, a Bloomberg analyst, in reference to the Clean Power Plan and Donald Trump’s stated opposition to it. However, “There is very strong bias in the senate of not opening this up.”

Coal is hurt the most. The US Energy Information Administration has said that coal use has declined by 33 percent in the last decade and that it would fall another 31 percent under the Clean Power Plan. If the ruling is thrown out, then the best that the coal sector could hope for is that some utilities would keep coal-fired plants that they had intended on retiring.

“The economic trends are in place and have done the work that the Clean Power Plan has intended to do,” says Kit Konolige, Bloomberg utility analyst. “A lot of what appears to have been targeted will have already occurred. And utilities don’t object to building gas, wind and solar as this can be indicative of revenue growth.”

Some history: The EPA first issued a notice of proposed rule making on carbon reductions in April 2012.

But that proposal was taken off the table after 2 million comments came in  — a move that President Obama endorsed in the summer of 2013 with the administration’s policy issuance in June 2013. EPA then issued proposed guidelines in January 2014.

In presenting his draft of the Clean Power Plan in June 2014 that examines — existing — power plants, Republicans felt that President Obama was taking it upon himself to re-write the Clean Air Act and to increase EPA’s influence.

The Supreme Court did affirm EPA’s right to regulate carbon in 2007. But earlier this year, those jurists put a temporary halt to enforcement of its Clean Power Plan and asked the district court to review it.

EPA would give the states a lot of latitude when it comes to deciding how they would comply. The range of their options is vast and include the trading of credits not just with other plants that are across state lines but also other industries such as cement and agriculture.

For what it is worth, the last few high profile cases — Cross-State Air Pollution Rule and the mercury rule — have not gone industry’s way. Still, the coal sector and its backers in big business believe they are in the legal right with respect to Obama’s Clean Power Plan that he unveiled in June 2014.

“EPA has no authority to require regulations that apply to the state as a whole,” says Jeff Holmstead, partner in the law firm of Bracewell LLP. 

“What it can do is to require states to submit a plan that establishes a ‘standard of performance’ for any existing power plant in a state — as long as EPA gives the state the flexibility in setting the standard based on the age of the facility and other economic factors,” he adds. “This standard must be based on the ‘best system of emission reduction’ that could be applied to that type of plant.” 

The essence of the EPA’s Clean Power Plan is that carbon dioxide releases would need to be cut by 32 percent by 2030. The administration reasons that both power plants and the electric grid are part of a mosaic that works in unison. As such, systems would be more efficient if the various components could be coordinated. 

That means that the states could allow all industries to trade credits among each other, commonly called a cap-and-trade program — even across state lines as they do in the Northeast. Such a plan creates a ceiling and then permits those facilities that are able to meet the requirements the right to bank or sell credits to those that cannot do so. As the ceilings are gradually lowered, the pollution rates fall.

Meantime, states could also establish renewable portfolio standards that require their utilities to offer a set percentage of green fuels to customers. Jurisdictions could also mandate the use of more energy efficiency or demand response that gives consumers a head’s up when prices are about to spike so that they can cut their energy usage. And, most conspicuously, the states may push fuel switching that would, generally, involve replacing old coal-fired units with modern combined-cycle natural gas plants, or units that can on biomass.

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