Troutman Pepper Hamilton Sanders LLP

01/22/2021 | News release | Distributed by Public on 01/22/2021 23:01

Trump EPA’s Last-Minute Surprise on Climate Standards for New Coal-Fired Utilities Intended to Block Similar Standards for Other Sectors

Just before the inauguration of President Biden, the Trump administration surprised many by failing to revise the stringent CO2 standard for new coal-fired power plants. That standard, adopted by the Obama administration, is based on the use of carbon capture and sequestration - a technology only installed once in the U.S. at a facility that has now been mothballed. When the Trump administration proposed to repeal and replace that standard in 2018, the chance of it surviving in its current form seemed slim. However, as the clock ran out, the Trump EPA failed to finalize its 2018 proposal and instead issued a 'significant contribution finding' that attempts to limit regulation of greenhouse gases from new sources to electric utilities alone. While likely to be reversed quickly by the Biden EPA, that determination erects one more barrier to broad regulation of greenhouse gas emissions under the Clean Air Act (Act).

Climate regulations under the Clean Air Act have always been controversial because the Act was not originally intended, nor is it well designed, to regulate greenhouse gases. Nevertheless, out of that inadequate toolbox, the Obama administration pulled Section 111 - a program for adopting sector-specific standards of performance. The results of that effort included CO2 standards for both new and existing fossil fuel-fired electric utility units and methane standards for the oil and gas sector. The Trump administration, believing EPA's Clean Air Act authority over greenhouse gases to be far more limited, sought to change or eliminate those standards.

Under Trump, EPA repealed and replaced the Section 111 CO2 standard for existing power plants by eliminating the Clean Power Plan in favor of the Affordable Clean Energy rule, and its 2018 proposal sought to do the same for new power plants. EPA also repealed the Section 111 rule for methane emissions from the oil and gas sector. However, the actions were inconsistent in a way - whereas EPA repealed the oil and gas methane standards in part because it had not previously determined that methane emissions from the sector 'significantly contribute' to an air pollution problem, EPA had already claimed in its power plant rules that it did not need such a finding for an already regulated industry. In short, EPA's replacement rules for new power plants suffered from the very deficiency EPA cited to justify the repeal of the oil and gas rules - the lack of a pollutant-specific 'significant contribution' finding.

EPA did not say why it was unable to finalize its proposed revisions to the new power plants standards, but EPA apparently still felt obligated to resolve the inconsistency in its rules by issuing a CO2-specific 'significant contribution' finding for power plants. As part of that finding, EPA took the opportunity to establish, for the first time, a framework for making such findings, and did so in a way that could preclude regulation of greenhouse gas emissions from any other sector under Section 111. EPA's new framework focuses on a 'natural breakpoint' between the percentage of all U.S. greenhouse gas emissions produced by power plants and that produced by all other sectors - power plants emit the most, at 25% of the total, while all other sectors individually emit less than 3% (although oil and gas is right on that line). EPA argues this fact confirms electric utilities 'significantly contribute' to the problem associated with greenhouse gas emissions, while all other sectors do not.

Since the finding was not yet effective on inauguration day, it has been frozen by the incoming Biden administration's regulatory freeze memorandum. Even so, as a final rule, the Biden EPA must now decide what to do with it. To repeal the rule, EPA will need to conduct a full notice and comment rulemaking, which will take time and may force EPA to grapple with the difficult question how to define a 'significant contribution' to climate change. Also, since the CO2 standard for new power plants remains in place, the long-dormant litigation over that standard may resume, as EPA hinted in a status report filed with the D.C. Circuit last week. So, while the Biden administration will have several strategies available for withdrawing this last-minute finding, it is yet another turn in the dense labyrinth that the Biden EPA must navigate in its efforts to use the Clean Air Act to enact climate regulations.