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1 Clean Power Plan Litigation Updates On October 23, 2015, multiple parties petitioned the D.C. Circuit Court of Appeals to review EPA s Clean Power Plan and to stay the rule pending judicial review. This document summarizes key filings and decisions in this case, named West Virginia, et al. v. EPA. Table of Contents March 28, 2016: EPA Files Its Reply Brief. February 19, 2016: Petitioners File Opening Briefs. February 9, 2016: Supreme Court Grants Stay Requests. December 8, 2015, D.C. Circuit: EPA s Supporters Oppose Stay Requests. December 3, 2015, D.C. Circuit: EPA opposes stay requests. November 6, 2015, D.C. Circuit: Parties file motions to stay the rule. Key Players Who Is Challenging the Clean Power Plan? The petitioners include: twenty-seven states; coal mining companies and coal-related trade associations and unions; the American Chamber of Commerce and other trade associations; the National Rural Electric Cooperative Association along with several cooperative distribution utilities; the American Public Power Association; and a few investor-owned utilities. Who is Supporting EPA in its defense of the Clean Power Plan? Several parties have intervened in the case to support EPA, including: eighteen states; six U.S. major cities and one county; several environmental advocacy organizations; the American Lung Association; three municipal utilities; five companies that own utilities or independent power producers; and trade associations that represent renewable energy and other energy technology and service companies. Both petitioners and EPA are supported by numerous amici curiae (friends of the court). When is oral argument, and which Judges will decide? The U.S. Court of Appeals for the D.C. Circuit will hear oral argument on September 27, The court granted en banc review, meaning that all of the court s active judges will decide the case, although Chief Judge Garland has recused himself.
2 EPA Files Its Reply Brief March 28, 2016 EPA submitted a 42,000 word brief that follows the structure of petitioners two briefs (see below). About half of EPA s brief discusses its interpretation of section 111(d) of the Clean Air Act (CAA). EPA argues that the CAA requires it to establish the Best System of Emission Reduction (BSER) for regulated sources. Its interpretation of that term in the Clean Power Plan is consistent with the statutory text and best fulfills Congress s intent to cost-effectively reduce pollution and protect public health and welfare. Moreover, this interpretation is entitled to deference by the Court under standard of review established by Chevron, a 1984 Supreme Court decision. EPA proceeds to make the following points about section 111(d): EPA properly applied the statutory factors. EPA parses the CAA s definition of standard of performance and explains how the Clean Power Plan is consistent with the statute s criteria. Generation shifting is the best system of emission reduction. The rule s emission reductions are premised on shifting from high-emitting to low-emitting power plants. This generation shifting... fit[s] within the plain meaning of a system of emission reduction. Applying the statutory criteria, EPA argues that generation shifting is also the best system because it is the most cost-effective available system for sources to meaningfully limit their voluminous CO2 emissions. Generation shifting is adequately demonstrated and results in achievable targets. EPA points to the administrative record and asserts that generation shifting is widely used by power plants for controlling pollution, and the amount of generation shifting assumed in the rule follow[s] industry trends towards greater use of renewable energy and gas-fired generation, and less use of coal-fired generation. Generation shifting is uniquely suitable for power plants because they operate in a coordinated fashion. Responding to petitioners other arguments, EPA asserts that: Competing amendments passed by the House and Senate in 1990 do not preclude EPA from regulating coal-fired power plants under 111(d) because EPA has regulated those sources under section 112. Dating back to 1975, EPA regulations have established that it establishes standards under 111(d), and states submit plans to achieve those standards. Any argument to the contrary is time-barred. The rule is a textbook example of cooperative federalism because it provides States with flexibility without compelling any State action. Petitioners ignore the distinction between pollution regulation that affects energy prices (this rule) and direct regulation of energy markets. Moreover, that States may take actions to facilitate regulated entities compliance does not render the rule unconstitutional. EPA s decision to set nationally uniform performance rates, rather than state rates as it proposed, was foreseeable. EPA invited comment on that approach, and national rates are consistent with other rules. Even if that were a procedural error, petitioners cannot establish that that there is a substantial likelihood that the final rule would have been significantly changed absent the error. In response to petitioners record-based challenges, EPA points to specific facts and analyses in the administrative record and argues that it is entitled to an extreme degree of deference by the court on its record-based determinations. EPA argues that it reasonably concluded that implementation would not require substantial new infrastructure and reasonably assessed electric reliability.
3 Petitioners File Opening Briefs February 19, 2016 Petitioners challenging the Clean Power Plan filed two briefs, each approximately 20,000 words in length. Brief on Core Legal Issues The brief contains four sections, with the first constituting most of the document. The petitioners argue that: 1. EPA s methodology for setting the Clean Power Plan s emission performance rates for existing power plants is prohibited by the text of the Clean Air Act (CAA) for three reasons. First, petitioners assert that the rule is more far-reaching than any previous EPA rule and will have significant and transformative effects on the U.S. economy. Pointing to recent Supreme Court decisions, they claim that such sweeping assertions of authority require clear Congressional authorization. Second, petitioners focus on the word source in section 111 and argue that standards must be achievable at individual sources. Third, they argue that basing the stringency of the standard on shifting generation from highemitting to low-emitting plants is inconsistent with the CAA s definition of standard of performance. 2. A clause in section 111(d) precludes regulation of coal-fired power plants under that section because those sources are already regulated for their toxic emissions under section 112 of the CAA. 3. Section 111(d) grants authority to the States, and not to EPA, to establish standards of performance. 4. The Clean Power Plan commandeers State officials in violation of the Tenth Amendment by forcing States to review power plant siting decisions, grant permits, and make other decisions that further implementation. The Tenth Amendment prohibits using States as implements of [federal] regulation. Brief on Procedural and Record-Based Issues This brief contains five sections, with the second comprising half of the brief. The Petitioners argue that: 1. While the proposed rule was based on implementing emission reductions within each state, the final rule is premised on nationally uniform emission rates for coal and gas-fired plants. The final rule thus bear[s] no resemblance to the proposed rule and violates rulemaking procedures. 2. The best system of emission reduction that dictates the stringency of the performance rates is not adequately demonstrated, as required by section 111. EPA bears an enormous burden to demonstrate that its three building blocks improving efficiency of coal plants, shifting electricity production from coal plants to natural gas plants, and using more zero-emission plants are reliable, efficient, and not exorbitantly costly on an individual basis and operating together. Petitioners argue that EPA did not carry its burden and did not account for electric reliability or the need to build additional infrastructure to implement the building blocks. 3. The rule discriminates between identical zero-emission resources based on when they were constructed. They argue that not allowing plants constructed before 2013 to generate credits that can be sold to regulated plants for compliance is arbitrary and capricious. 4. EPA failed to consider important aspects of the rule, which renders it arbitrary and capricious. For example, petitioners contend that lignite-fired coal units face unique constraints, which EPA has recognized in other rules. In the Clean Power Plan, EPA included lignite units with other coal-fired units. Petitioners also assert that EPA failed to consider electric reliability and the need to build new infrastructure to enable implementation of the rule. 5. EPA should have tailored emission goals to individual states. Petitioners discuss how five states goals are arbitrary and capricious.
4 February 9, 2016 Supreme Court Grants Stay Requests On January 21, 2016, the D.C. Circuit denied requests to stay the rule pending judicial review. On January 27, five sets of challengers representing twenty-seven states and various industry petitioners filed applications with Chief Justice John Roberts for immediate stay of the Clean Power Plan. Challengers directed their requests to Chief Justice Roberts because he hears all stay requests from cases before the D.C. Circuit. The applications, and EPA s response, raised many of the arguments that are summarized below. On February 9, just one day after the final briefs were filed, a divided Supreme Court issued five identical, single-paragraph orders granting the stay requests. The stay prevents EPA from enforcing the Clean Power Plan, but has no effects on state planning efforts. The Court s orders tell us three things about the stay: 1. Chief Justice Roberts referred the requests to the entire Court. The Court s rules allow the Circuit Justice, which in this instance was the Chief Justice, to issue a stay immediately, prior to asking other Justices. Chief Justice Roberts chose to confer with his colleagues, rather than take action on his own. 2. The stay will only be lifted once the D.C. Circuit decides the case and either the Supreme Court denies petitions for review or the Supreme Court decides the case. 3. Four Justices Breyer, Ginsburg, Kagan, and Sotomayor would have denied the stay applications. The Court did not explain its reasons for granting the stay. Nor did any of the four dissenting Justices outline why they would have denied the applications. However, in prior stay decisions the Court has articulated how it evaluates stay requests. To grant the request, the Court or a Circuit Justice must conclude that there is 1) a reasonable probability that the Court will ultimately grant review; 2) a fair prospect that the Court will agree with the challengers on the merits; and 3) that the challengers will suffer irreparable harm if a stay is denied. Because the Court s orders did not include any explanation, we do not know if the Justices evaluated these factors, let alone how they weighed each one. While there is no evidence that the Court deviated from its test, the Court typically considers these factors when asked to stay a lower court decision or an injunction issued by a lower court. In this case, challengers asked the Court to stay a final agency action. The Court has never before stayed an agency rule prior to it being reviewed by any court, making the stay unprecedented. Despite the lack of explanation from the Court, many are speculating about the implications for the Court s ultimate decision, assuming it chooses to grant review of the D.C. Circuit s decision. Such speculation is premised on an understanding of the Court s fair prospect standard. The Court has said little about that standard in prior decisions, but we do know that: When evaluating a stay request, the D.C. Circuit typically evaluates whether the challengers have a likelihood of ultimate success. In this case, challengers asked the Court to use its fair prospect standard of review, while EPA urged the Court to use the more stringent likelihood standard. Prior opinions written by a Circuit Judge have explained that the fair prospect standard asks the Justice to determine how a majority of the Court will vote on the merits, and not what that particular Justice thinks of the merits. Regardless of how the Court interpreted the fair prospect standard in this instance, assuming it used it at all, a different Supreme Court will ultimately have an opportunity to hear the merits of this case. Justice Scalia s passing, just days after the Court issued the stay, leaves the Court split on the stay. If the Court is split on the merits as well, the D.C. Circuit s decision will control. Oral argument at that court is scheduled for June 2, 2016, and a decision could be released as early as late summer or fall.
5 EPA s Supporters Oppose Stay Requests December 8, 2015 As detailed below, in November, challengers filed motions to stay the rule pending judicial review. EPA responded on December 3. On December 8, parties supporting EPA filed motions in opposition. Who filed motions opposing a stay? Motions were filed by: 1) states, cities, and one county; 2) Advanced Energy Economy and wind and solar trade associations; 3) environmental advocacy organizations and the American Lung Association; and 4) power companies. What arguments do intervenors put forward? The motions generally amplify EPA s arguments with relevant facts and examples from intervenors experiences. This summary highlights key points of emphasis. 1. The Clean Power Plan is lawful: The States assert that the Rule respects, rather than interferes with, state sovereignty. They point out that any measures taken by power plants to comply with the Rule... will remain subject to the States regulatory oversight of the energy sector. The power companies contest petitioners arguments that EPA s inclusion of trading is illegal, noting the industry has long supported trading under the Clean Air Act and has relied on trading for decades as a strategy for shifting dispatch from higher- to lower-emitting units. 2. A stay will not cause irreparable harm: The trade associations argue that, contrary to challengers assertions, any near-term plant retirement would not be caused by the Rule but would be a voluntary, forward-looking business decision. The power companies similarly challenge assertions by some of their peers about imminent retirements if the court denies a stay, claiming that [n]o [company] would retire a financially viable source in the near term merely because its retirement was predicted by an EPA model. The trade associations also counter petitioners projections that they must immediately begin planning the development of new infrastructure to comply with the rule. They point out that half of all new capacity added to the grid from 2012 to 2014 is renewable and claim that infrastructure already in development can accommodate any generation changes associated with the Rule. In addition, regardless of whether the Clean Power Plan is ultimately upheld, the power companies argue that it would be unreasonable and imprudent not to address... the possibility of future carbon regulations in major investment decisions and contracts. They note that the industry regularly manages regulatory uncertainty, and a stay does not save utility companies from having to consider CO A stay is not in the public interest: The states aver that they have faced significant harms and costs from climate change for many years. A stay would postpone emission reductions and disrupt state programs set to coordinate with compliance planning for the Rule. The trade associations claim that a stay of the Rule would chill the continued growth of the $200 billion advanced energy market... by introducing uncertainty among investors [who] rely on policy certainty in deciding whether to finance advanced energy projects. What happens next? Petitioners replies are due on December 23.
7 November 6, 2015 Parties File Motions to Stay the Clean Power Plan On October 23, 2015, multiple parties petitioned the D.C. Circuit Court of Appeals to review EPA s Clean Power Plan. The court has consolidated the petitions into a single docket (named The State of West Virginia, et al., v. EPA ) and will set a briefing schedule. In addition, parties have filed nine motions to stay the Clean Power Plan pending judicial review. If the court grants a stay, deadlines in the rule will be suspended at least until the D.C. Circuit issues its decision about the legality of the rule. Who filed Motions for a Stay? 1) Twenty-four states led by West Virginia; 2) Murray Energy and coal-related trade associations; 3) various investor-owned utilities and cooperative utilities, utility lobbying groups, and two unions; 4) the American Chamber of Commerce and other trade associations; 5) the State of Oklahoma; 6) the State of North Dakota; 7) Mississippi environmental regulators; 8) Basin Electric; and 9) Peabody Energy. Is the D.C. Circuit likely to grant a stay? The D.C. Circuit has denied stay requests in most recent challenges to rules promulgated by EPA under the Clean Air Act. However, each case is unique and the court will decide based on the arguments and evidence put forward by the parties in this case. What factors will the court consider? Parties requesting a stay must demonstrate the following: 1. That they are likely to win their challenge: Petitioners rely primarily on three arguments: that the Clean Air Act forbids regulation of coal-fired power plants under section 111(d) because they are already regulated under section 112 for their toxic pollution; that EPA s methodology for setting the stringency of the Clean Power Plan is not permitted by the text of the statute; and that the rule impermissibly expands EPA s authority into electricity regulation. 2. That they will be irreparably injured absent a stay: States claim that they will expend considerable resources planning for compliance, and that implementation will displace long-standing state policies. Oklahoma contends that the rule inflicts per se irreparable injury on the State by commandeering the state and thereby interfering with its sovereign status. Coal interests assert that utilities will shut down coal-fired plants to comply, which will affect coal companies and employees. Utilities and the Chamber of Commerce argue that planning must begin immediately, and actions taken while the rule is before the court cannot be undone. Utilities point to compliance costs associated with EPA s mercury rule that was invalidated by the Supreme Court in The Chamber adds that local governments may reduce services to respond to lower tax revenues due to plant and mine closures. The Supreme Court has held that speculative injury is not sufficient, nor are costs alone a basis for irreparable harm. 3. That the public interest favors a stay: States argue that the effects of the rule, particularly retirements of coal-fired power plants, weigh in favor of delaying the rule until courts decide its legality. Industry points to the costs and local harms described in the previous section. 4. A stay will not injure other parties: Petitioners claim that the rule will have little effect on global greenhouse gas emissions, and therefore delaying its implementation will not have significantly negative environmental effects. They also note that EPA missed its own deadline for issuing the rule, which demonstrates that a delay will not have any material effect. What happens next? EPA s response is due on December 3. Other parties defending EPA s rule, which will includes 18 states, generators, utilities, advocacy organizations, and trade associations must file responses by December 8. The D.C. Circuit is likely to decide whether or not to grant the stay in early 2016.
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