Fresh off proposing Clean Air Act vehicle emission rules in April that will mandate electric vehicles, on May 10, 2023, the Environmental Protection Agency (“EPA”) issued proposed rules that will dramatically reduce existing fossil fuel power plants. While the Supreme Court blocked President Obama’s Clean Power Plan last summer, EPA has gone back to the drawing board and issued new proposed plant rules under the Clean Air Act that will be more restrictive.
Section 111 of the Clean Air Act provides that EPA can regulate pollutants from stationary sources through the “best system of emission reduction” that is “adequately demonstrated.” In addressing the myriad of power plant rules being issued, last year EPA Administrator Michael Regan said that ‘[b]y presenting all of those rules at the same time to the industry, the industry gets a chance to take a look at this suite of rules all at once and say, is this doubling down on investments in this current facility? Or should we look at cost and say now it’s time to pivot and invest in a clean energy future.”
The rules will require fossil fuel plants to adopt carbon capture, low emissions hydrogen co-firing and natural gas co-firing for different categories of plants. The proposed rules require performance standards for new fossil fuel-fired plants and emission guidelines for existing gas and coal plants based on a variety of different categories of plants. In particular, new baseload and existing gas plants using carbon capture to comply will be required to capture 90% of CO2 by 2035. Gas plants that elect to use hydrogen co-firing will be required to burn 96% hydrogen by 2038. Coal plants are subject to more stringent limits, namely those still operating after adoption of the regulations and by 2040 will be required to co-fire with natural gas or operate less frequently. Strikingly, the rules mandate that any coal plants operating beyond 2039 will be subject to 90% carbon capture and sequestration requirements.
As with most of the Biden Administration climate change rules and orders, there are fundamental problems with the mandate that have been ignored by EPA in issuing the rule. First, the technology that EPA wants to mandate does not presently exist. While EPA has suggested that the rules will not kick in for 7 to 12 years, the utilities sector makes business and investment decisions today. To the extent that the power plants implement carbon capture, the cost of generation is projected to double. This is likely to make fossil fuel plants less competitive against federal and state-subsidized wind and solar generation facilities.
Carbon capture will also require significant permitting for pipelines and infrastructure. The EPA is not moving promptly on existing permit applications for carbon sequestration facilities. Beyond facilities, the system mandated by the new rules will require thousands of miles of pipelines to transport to carbon storage locations. Pipeline permitting, from the now canceled Keystone pipeline to regional natural gas pipelines, is fraught with uncertainty, delays, and legal challenges.
Finally, EPA’s rules attempt to mandate switching away from fossil fuel plants and will inherently impact power grid reliability. While environmental groups and President Biden’s supporters are all in on the climate change policies reflected in the proposed rules, the power industry is significantly less enthusiastic and pragmatic about potential issues. Jim Matheson, CEO of the National Rural Electric Cooperative Association, noted that “[n]ine states experienced rolling blackouts last December as the demand for electricity exceeded the available supply. Those situations will become even more frequent if EPA continues to craft rules without any apparent consideration of impacts on electric grid reliability.” In addition, the plan threatens to eliminate large numbers of coal and fossil fuel jobs.
Similar to EPA’s recent vehicle emissions rule, the power plant rules are almost certain to be challenged in the courts on various grounds. The recent decision by the United States Supreme Court in West Virginia v. EPA dealing with the Clean Air Act and the proposed Clean Power Plan established that EPA does not have unlimited authority to impose regulatory schemes that set major policy for the entire country. The decision addressed the major questions doctrine and found that “it is not plausible that Congress gave EPA the authority to adopt its own such a regulatory scheme…A decision of such magnitude and consequence rests with Congress itself, or an agency acting pursuant to clear delegation from that representative body.” West Virginia Attorney General Patrick Morrisey, who brought the challenge to the Clean Power Plan, has been critical of the proposed rules and stated that “[w]e plan on ensuring that those limits are upheld, and we expect that we would once again prevail in court against this out-of-control agency.”
The Biden Administration is intent on addressing climate change through administrative rules and regulations. In doing so, EPA seems to ignore legal constraints that exist on agency action when dramatic, economy-wide changes are not legislatively adopted by Congress and instead instituted through rulemaking. Given recent legal challenges to agency action, such as West Virginia v. EPA, the new power plant rules will certainly be subject to suit and extensive appeals through the federal courts. Due to the significance of these rule changes and massive impact on US power production, legal scrutiny seems necessary in the absence of congressional action on the plan.
George S. Van Nest is a Partner in Underberg & Kessler LLP’s Litigation and Municipal Practice Groups and Chair of the Firm’s Environmental Practice Group. He focuses his practice in the areas of environmental law, development, construction, and commercial litigation. George can be reached at gvannest@underbergkessler.com.
Reprinted with permission from The Daily Record and available as a PDF file here.