Could EPA carbon rule be overturned?

Power industry lawyer Jeffrey Holmstead believes the plans that the Environmental Protection Agency (EPA) has forwarded to reduce carbon dioxide from the power sector are legally flawed and likely to be overturned in the courts.

During a June 18 appearance before the Bipartisan Policy Center in Washington, D.C., Holmstead said there was an 80 percent chance that either the EPA CO2 proposal for new power plants or the just-issued proposed rule for existing plants will be overturned, according to GenerationHub.

Holmstead served as EPA’s assistant administrator for air and radiation during the George W. Bush administration. He now heads the environmental strategies group at the Bracewell & Giuliani firm in Washington, D.C.

Susan Tierney, a senior advisor at the Analysis Group, declined to debate the legal aspects of the proposed rules but said she is bullish on the EPA proposals from an economic and public policy perspective.

Tierney is a former assistant secretary for policy at the Department of Energy (DOE) in the Clinton administration, and a former state energy official in Massachusetts. She also chairs an advisory board of the National Renewable Energy Laboratory, and is a director of the World Resources Institute.

Tierney considers the EPA proposal seeking a 30 percent CO2 reduction below 2005 levels by 2030 “reasonably ambitious” and flexible enough to allow “every state to take some action.”

In particular, Tierney thinks EPA has done a good job of providing enough flexibility for states to pursue regional solutions, such as cap-and-trade organizations like the Regional Greenhouse Gas Initiative (RGGI) in the Northeast.

The EPA program could create a scenario where New Jersey might consider rejoining RGGI and Pennsylvania might consider joining the group as well, Tierney said.

Tierney also believes there could be the potential for regional cooperation among utility holding companies in the Southeast who do business in multiple states.

“As someone who believes in the rule of law, I think this clearly goes beyond what EPA is allowed to do under the Clean Air Act,” Holmstead said. EPA seems to think it can regulate the electric utility industry in every state and that is “pretty far-fetched.”

In many states it will be the state utility commission, rather than the state environmental regulators, who would be responsible for carrying out the EPA mandate, Holmstead said. In some cases, new state legislation might have to be passed to enable full implementation of the EPA cuts.

Technically, EPA can step in and take over if a suitable state implementation plan, or SIP, is not submitted. That could prove difficult in reality, Holmstead said.

“This is not the first time this has ever happened,” Tierney countered. The EPA has already had states draft SIPs for ozone, she said.

“The politics of this are quite different than the politics of ozone,” Holmstead said. The industry attorney also said that in past litigation over EPA mercury rules, some environmental groups argued in favor of uniform compliance standards for all power plants – and that’s not the case here, Holmstead said.

Tierney, however, believes that one reason EPA has given states the leeway to try a number of approaches is that EPA wants to rely predominantly on existing technology options.

It is important for the United States to take a leadership role on climate change because one ton out of every 15 tons of CO2 emitted globally come from the U.S. electric power sector, Tierney said.

When asked, Holmstead said the proposed EPA CO2 regime does not do enough to encourage carbon capture and storage (CCS) without heavy government subsidization.

Holmstead also said that heavy manufacturing states like Texas will face a tough time under the proposed EPA rule for existing plants. It appears that nearly 20 percent of all power generation CO2 cuts will have to come from Texas, Holmstead said.

One issue that Holmstead and Tierney did agree is that the current version of the EPA rule for existing plants does not sufficiently credit power companies for taking early action before 2020.

There was also one other issue that Holmstead and Tierney agreed upon. Both said that regardless of what happens with the current EPA CO2 proposals that Congress is likely to pass some type of CO2 bill within the next decade. They also believe that some of type of international CO2 agreement is apt to be reached in the next 10 years.

“They will not be exactly what people envision today,” Holmstead said.

Holmstead will be speaking at the PennWell GenForum conference Aug. 19 in Nashville. A webcast of the June 18 discussion involving Holmstead and Tierney can be found at the Bipartisan Policy Center website.

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