The U.S. Supreme Court kicked off its new term on Oct. 1 with oral arguments in Weyerhaeuser Co. v. U.S. Fish and Wildlife Service. The case centers around whether and when the U.S. Fish and Wildlife Service (FWS) can designate land unoccupied by a threatened or endangered species as critical habitat for that species under the Endangered Species Act.
The comment period has now begun on EPA’s proposal for replacing the Clean Power Plan, named the “Affordable Clean Energy”—or “ACE”—rule. The rule was published in the Federal Register on August 31. And there is plenty to keep commenters busy over the next 60 days, given that EPA expressly identified 75 distinct requests for comment, not counting potential sub-issues and issues that EPA did not count. Comments are due by October 30th. Here are the top 10 key aspects of the rule that are likely to be the subject of the most fervent comments:
- Section 111(d) Authority. As previously set forth in its proposed repeal of the Clean Power Plan, EPA has decided to return to its historical interpretation of Section 111(d) of the Clean Air Act—that it only authorizes EPA to establish the best system of emission reduction based on measures that can be employed within the fenceline of a source subject to the rule. Conversely, EPA makes clear that its historical reading of Section 111(d) precludes the use of “generation-shifting,” “reduced utilization,” or “redefining the source” as part of a Section 111(d) emission guideline, all of which were relied upon heavily under the Clean Power Plan. In the ACE proposal, EPA also characterizes its authority as merely providing “information” to states, that then have the authority to establish the enforceable, pound per megawatt hour “performance standards” on a unit-by-unit or source-category basis. EPA also leaves to the states to determine the compliance deadlines associated with those performance standards.
- The Best System of Emission Reduction (BSER). EPA has determined that the best system for reducing greenhouse gas emission reductions from existing power plants (consistent with its reading of Section 111(d)) is to improve the efficiency of those power plants. Specifically, EPA listed six equipment upgrades and a seventh catch-all for improved operating practices that could be used to improve the efficiency with which power plants convert fuel into electricity. EPA expressly rejected carbon capture and sequestration as insufficiently demonstrated and co-firing with gas or biomass as insufficiently available and unnecessarily costly.
- Affected Sources Subject to the Rule. ACE, as proposed, would apply only to coal-fired power plants, not gas-fired plants (unlike the Clean Power Plan, which applied to both). EPA’s basis for excluding gas-fired units is that it does not have enough information to establish a similar efficiency-based emission guideline for them. However, ACE is likely to set a precedent that could be important if EPA later decides that a similar program might be appropriate for gas generators after all. Exclusion from ACE might also mean that gas-fired plants will be unable to take advantage of EPA’s New Source Review reforms, summarized below.
- No Presumptive Limits or Cumulative Targets: Unlike the Clean Power Plan, which focused on national and interconnection-level emission reduction targets to establish mandatory emission budgets for each state, ACE is not based on a cumulative emission reduction target, nor does it provide any presumptive limits or a prescriptive methodology for states to follow in setting performance standards. That approach provides states maximum flexibility and authority, but it may also lead to significant variability from state-to-state, as plans are developed and submitted to EPA for approval. EPA did provide a range of expected efficiency improvement levels for each one of the seven measures proposed, which states must consider, but exactly how states are expected to incorporate those ranges into the process of establishing standards of performance remains unclear.
- Some Averaging, But No Trading: In describing the requirements for states, EPA made clear that averaging between affected units within a single facility will be allowed, but averaging or trading of emission reductions between facilities will be out of bounds. This aspect of the rule is likely to be trouble to states that have already sought to reduce greenhouse gas emissions via a trading program, such as the states participating in the Regional Greenhouse Gas Initiative.
- Cost Implications: ACE expressly allows states to decide which measures are cost-effective, and therefore a valid basis for establishing a performance standard, and which measures might be too costly. As noted above, that evaluation can be case-by-case, so states will need to conduct a detailed assessment of each covered facility’s economic characteristics. EPA has also indicated a preference for including in that analysis the costs associated with any additional permitting or control requirements that could be triggered by the measures required—something EPA has not typically considered in the past.
- New Source Review (NSR) Reform: EPA has resurrected a 2007 proposal for NSR reform that would add to the current NSR permitting applicability test a preliminary hourly emissions check. In short, if maximum hourly emissions are not expected to increase, NSR will not apply. The concept could be highly beneficial in simplifying and clarifying the controversial NSR program, and the hourly test squares nicely with the new 1-hour national ambient air quality standards. However, the exact form of EPA’s proposed preliminary hourly test leaves much to be desired, in that it relies on either a single highest hour or a flawed statistical analysis that must be compared to every single hour of emissions in the future. It also fails to implement the statutory requirement for evaluating only those emissions increases caused by a project.
- State Plan Deadlines: EPA has proposed to significantly extend the deadline for state plans and for EPA action to approve those plans or issue federal plans for states that failed to submit an approvable one. This timeline will give states much more time to work with EPA and make sure their plan is approvable, but it also means that the deadline for approving plans will not arrive until the next presidential administration.
- Adopting Standards Less (or More) Stringent than Guidelines: EPA’s ACE proposal confirms that a state’s standards of performance may be less stringent than the “information” comprising EPA’s emission guidelines. However, for a less-stringent state plan to be approvable, states must demonstrate the reasonableness of their decisions. How much or little deference EPA will pay to the state’s demonstrations will be, as noted above, up to the next presidential administration.
- Rule Benefits and Costs: In evaluating the potential impacts of its proposal—its costs and benefits—EPA compared its ACE proposal to two baselines, one with the Clean Power Plan in place, and one without it, which reflects the current state of the law in light of the Supreme Court’s stay of the Clean Power Plan. EPA also relied on the social cost of carbon (but only domestic benefits) and co-benefits of particulate matter reductions (but noting that it has low confidence in the vast majority of the health benefits calculated). All told, the rule predictably provides fewer benefits and imposes lower costs than the Clean Power Plan, but greater benefits and costs than doing nothing.
This morning, the Environmental Protection Agency (EPA) released its proposed replacement for the Clean Power Plan (CPP) titled the “Affordable Clean Energy Rule,” which would regulate greenhouse gas emissions at existing coal-fired power plants. The proposed rule gives discretion to states for determining the greenhouse gas performance standards achievable for existing coal-fired power plants within their state. Specifically, the proposed rule would require states to evaluate a menu of heat rate improvement options and, taking into account the unit’s remaining useful life and other factors, determine the lb/MWh CO2 emission rate achievable at each affected unit. While the rule proposes to allow for emissions averaging among affected units at an individual source, it does not provide for broader averaging or emissions trading. To facilitate the heat rate improvement projects, EPA also has proposed an option for states to adopt a new emissions test under the New Source Review program for EGUs that is based on both hourly and annual emissions.
On July 20, 2018, President Trump signed into law two pieces of legislation alleviating complex federal land use issues for two FERC-licensed hydropower projects in Alaska. Strongly supported by the entire Alaska congressional delegation, Public Law No: 115-200 and Public Law No: 115-201 respectively allow the Swan Lake Hydroelectric Project (“Swan Lake”) and Terror Lake Hydroelectric Project (“Terror Lake”) to pursue needed and scheduled updates to their operations to maintain sufficient electric capacity for their customers in the Last Frontier.
Last Thursday, in South Carolina Coastal Conservation League v. Pruitt, South Carolina Federal District Court Judge Norton issued an order which made the Waters of the United States (WOTUS) Rule take effect in twenty-six states. As background, the CWA prohibits discharges to WOTUS without a permit, but does not define the term. In 2015, the Obama Administration finalized the WOTUS Rule, which applied an expansive meaning to the term to broaden federal jurisdiction. In October 2015, the Sixth Circuit delayed the effective date of the WOTUS Rule pending judicial review. In January 2018, the Supreme Court concluded its review and ordered that the Sixth Circuit, among other actions, lift its stay of the Rule. In order to delay the implementation of the WOTUS Rule, the Trump Administration responded with yet another rulemaking – referred to as the “Suspension Rule” – which delayed the effective date of the WOTUS Rule by two years while the Administration considered a replacement for the Obama-era WOTUS Rule.
The unprecedented legal battles over the Clean Power Plan have been on ice for quite some time. However, recent events suggest the rule may start making headline news once again very soon.
On April 26, 2018, a North Carolina jury awarded 10 neighbors $51 million in the first North Carolina hog farming case to be heard before U.S. District Judge W. Earl Britt. Almost a week later on May 9, 2018, Judge Britt reduced the jury’s award of $23 million in punitive damages to nearly $3 million in punitive damages because of a North Carolina state law that limits punitive damages to $250,000-per-plaintiff. This was the first case tried of 26 lawsuits brought by 500 neighbors complaining about hog operations in eastern North Carolina against Smithfield Foods, the world’s largest pork producer.
On July 30, the United States Fish and Wild Service (“USFWS”) published notices in the Federal Register withdrawing the USFWS Mitigation Policy and the Endangered Species Act Compensatory Mitigation Policy (“ESA-CMP”). Both of these policies were published in late 2016, at the tail end of the Obama Administration.
On July 20, the U.S. Fish Wildlife Service (“USFWS”) and National Marine Fisheries Service (“NMFS”) (collectively, the “Services”) released pre-publication versions of three proposed rules that would significantly affect applicability and implementation of the Endangered Species Act (“ESA”). These regulations relate to the process and standards for listing species and designating critical habitat, the scope of protections for threatened species, and the process for consultations with federal agencies under Section 7.
In addition to implementing the Trump Administration’s general deregulatory goals and Executive Order 13777, several of these proposed changes appear directly responsive to negative court precedent from the Ninth Circuit that the Services indicate improperly have extended the ESA beyond its intended scope, while other changes are intended to rollback expansions that were implemented by the Obama Administration. Continue Reading Trump Administration Proposes Broad Changes to Endangered Species Act
On June 18, 2018, the U.S. Environmental Protection Agency (EPA) and the Army Corps of Engineers (USACE) clarified their guidelines for when offsets are required for wetlands impaired by development on the Last Frontier. The new policy recognizes the uniqueness of Alaska for wetlands permitting, by allowing alternatives and flexibility related to compensatory mitigation as Alaska is home to 174 million acres of wetlands covering 43 percent of the land area.