By David Doniger, Lissa Lynch and Ben Longstreth, Natural Resources Defense Council
At last, the Clean Power Plan has had its day in court. On Tuesday, 10 judges on the U.S. Court of Appeals for the District of Columbia Circuit heard nearly seven hours of oral argument—twice the scheduled time—in the case challenging EPA’s first-ever limits on carbon pollution from the nation’s 1,000 coal- and gas-fired power plants. Attorneys representing the Environmental Protection Agency, supportive power companies, states, and environmental organizations robustly defended the reasonableness of the Clean Power Plan and its firm grounding in the Clean Air Act.
Throughout the full day of active questioning, the well-prepared judges dug deeply into the challengers’ legal arguments and EPA’s supporting record. It’s always unwise to predict the outcome of a case based on oral argument alone, or to guess which way a particular judge will decide based on particular questions asked. But the oral argument shows that the court had a strong grasp of critical issues in the case, and we are optimistic about the outcome.
For years, the Clean Power Plan’s foes have fought to block every effort to limit carbon pollution. The Supreme Court, however, has repeatedly held that EPA has the duty to curb climate-damaging pollutants under the Clean Air Act. The challengers have shifted their positions after each case, arguing that whatever EPA proposes, always carbon pollution can be regulated only in some other way under some other provision, or not at all. The judges seemed wise to this shell game in Tuesday’s argument.
In American Electric Power v. Connecticut, the power industry’s lawyers argued, and the Supreme Court decided, that EPA has the authority to curb power plants’ carbon pollution under Section 111(d) of the Clean Air Act—the very provision EPA now used to set the Clean Power Plan—and that was why states could not sue power companies directly under federal common law. On Tuesday these same parties claimed that EPA is barred from limiting power plants’ carbon pollution using Section 111(d) because the Agency already used another part of the law—Section 112—to curb the those plants’ emissions of mercury and other hazardous air pollutants.
The oral argument exposed the shell game. In an exchange with Elbert Lin, West Virginia’s Solicitor General, Judge Patricia Millett asked whether it was the challengers’ position that “there’s nothing EPA can do” and questioned whether their shift in position since the American Electric Power case was a “bait and switch.” Even Judge Brett Kavanaugh, who expressed the most sympathy for the challengers’ claim to block EPA from setting any power plant CO2 standards, called a key part of their argument “a hall of mirrors.”
Massive Restructuring or Business-as-Usual?
The challengers’ main arguments are built on a colossal fiction that the Clean Power Plan is “transformative”—that it will force a massive and unprecedented restructuring of the power industry. But the power industry’s transition away from coal-fired power towards cleaner forms of generation has been underway for years and is actually being driven by a host of primarily marketplace factors—cheaper natural gas, cheaper wind and solar power, and cheaper energy efficiency measures that are out-competing coal-based power even without standards to curb the harm from their carbon pollution.
The challengers’ claims hit rough sledding right at the start. Judge Thomas Griffith, asking one of the day’s first questions, noted that the Clean Power Plan is expected to cause only “a marginal difference” in coal generation, which “hardly sounds transformative.”
In the other direction, Judge Kavanaugh suggested that “this is a huge case,” and thus that the court should apply an exceptional and heightened standard of review, instead of the traditional Chevron deference given to EPA’s legal interpretation. Kavanaugh focused on Utility Air Regulatory Group v. EPA, an opinion by Justice Antonin Scalia, ruling that the EPA needed a “clear statement” of congressional intent before extending Clean Air Act permitting rules to millions of small sources that were never covered before.
Judge David Tatel questioned whether there is anything comparable happening in this case: “Here these new standards apply only to sources … that have been regulated for decades, and the only authority that EPA has invoked is to set emission standards, something else it’s been doing for decades. In fact the only thing that seems transformative here is that it’s regulating CO2 for the first time, but the Supreme Court did that work in Mass v. EPA. It seems to me like the Agency is simply invoking existing authority, long established authority, and applying it to existing well-regulated plants to regulate a new pollutant. Why is that transformative?”
Justice Department attorneys added that the Clean Power Plan employs familiar emission credit mechanisms used in many prior power industry standards, and that the estimated cost of the Plan is less than the cost of other power sector standards, such as the mercury standards mentioned above, the interstate air pollution rules, and standards for new power plants set more than 25 years ago. Because the Clean Power Plan just isn’t different in either character or magnitude, they argued it deserves to be judged under the ordinary Chevron standard of review.
Best System of Emission Reduction and the Interconnected Grid
This debate over the standard of review framed the central statutory question whether EPA reasonably interpreted the terms “best system of emission reduction” and other Clean Air Act terms. EPA determined the “best system of emission reduction” for power plants taking into account the salient characteristics of the industry: Power plants are interconnected in a grid over wide areas, and are operated interdependently to supply the exact amount of power demanded moment by moment; power companies routinely shift generation among plants to supply electricity—and to meet pollution control requirements—as economically as possible. EPA also took into account the key characteristics of carbon pollution: reducing a ton of CO2 emissions has the same environmental benefit no matter which power plant makes the reduction.
As the “best system of emission reduction,” EPA set emission rates for coal-fired and gas-fired plants taking these characteristics of the interconnected grid and carbon pollution into account. EPA determined that coal plants, for example, can meet their applicable emission rate at reasonable cost using a combination of on-site combustion efficiency measures and emission reduction credits created by expanding generation from cleaner plants, such as existing gas plants and new wind and solar plants.
The judges demonstrated that they grasp these characteristics of the grid and the pollutant, more than once referring to the grid experts’ amicus brief, which explains how power plants operate through the grid as an interconnected system to meet demand. They understood that it is normal for power companies to shift generation between different plants in response to pollution limits. As counsel for power company intervenors Kevin Polancarz observed—and Judge Tatel later reiterated—this shifting generation to cleaner sources is “business as usual” for power companies.
The challengers argued that EPA may not take this capacity to reduce pollution by shifting generation into account when setting standards. Under questioning by Judge Sri Srinivasan, however, their attorneys had to admit that many companies and states had asked EPA to allow these flexible emission-credit and generation-shifting techniques to comply with standards. Judge Srinivasan asked if “it’s ok to comply by virtue of a credit system … then doesn’t it seem anomalous that it’s ok to comply that way, within the letter of the statute, but it’s not ok for EPA to contemplate a standard of performance” that captures the emission reduction potential of those same techniques?
The challengers got little traction with attacks on the Clean Power Plan’s constitutionality. Attorneys for the Justice Department and New York State made clear that the Clean Power Plan sets pollution limits on power plants, not states. Following the classic “cooperative federalism” model many times approved by the Supreme Court and lower courts, Section 111(d) gives states the choice whether to implement those limits or to leave that job to the EPA.
Building on the fiction of massive and transformative impact, David B. Rivkin argued for the State of Oklahoma that the Clean Power Plan “commandeers and coerces” state governments. Even if they leave implementation of carbon pollution limits to EPA, they argued, the states are forced into collateral actions such as issuing permits to build new plants, adjusting rates that companies may charge customers, and other state energy regulatory tasks. Judge Tatel pushed back, asking, “under your theory…would the Americans with Disabilities be unconstitutional? It requires individuals and companies to build ramps, install elevators…and all of that requires zoning and building permits and all kinds of actions by state and local agencies that deal with the intricate plan of streets and how a town is set up. What’s the difference?”
Rivkin argued the difference is EPA’s intent. It’s okay, he argued, if the effect on states is incidental, but not if it is intended, and he claimed the real intent of the Clean Power Plan is not to control pollution, but to restructure state energy mixes.
But attorneys for the Justice Department and New York explained that the Clean Power Plan is no different than other pollution control rules. The “central regulatory requirement” of the Clean Power Plan is a limit on each power plant’s air pollution, which is EPA’s core job. All pollution control rules for power plants affect the relative cost of running different plants, causing some to run more, and others less. Public utility commissions and other state authorities routinely take permitting and rate-setting actions in response. Thus, if accepted, the states’ commandeering and coercion argument would block any Clean Air Act standards to curb power plant pollution.
After the Marathon
The day concluded with arguments over a hodgepodge of specific procedural and factual issues. None of these appeared to get much traction.
At nearly 6 PM, presiding Judge Karen LeCraft Henderson concluded the long argument by saying: “I feel like we’ve all been through a marathon today. You all have done your part—I can’t imagine all the hours and days and weeks you’ve put into this case. And you have given us all we need—and more probably—to work on it, so it’s now up to us.”
The Clean Power Plan had a good day on Tuesday. Now we await the court’s decision in several months, perhaps between December and February.