by megan mcLean

On January 19, the U.S. Court of Appeals for the District of Columbia vacated the former President Donald Trump administration’s Affordable Clean Energy (ACE) Rule for power plants and concluded that the ACE Rule “rested critically on a mistaken reading of the Clean Air Act.”

The court’s decision will send the U.S. Environmental Protection Agency (EPA) back to the drawing board, opening the door for President Joe Biden’s administration to pursue its own rule making.

Behind EPA’s Controversial Greenhouse Gas Regulations

The Clean Power Plan (CPP) and the ACE Rule both have the same goal: reduce greenhouse gas emissions from existing fossil fuel-fired electric plants. But the two rules are extremely different. While the CPP set a goal of reducing greenhouse gas emissions by 32% below 2005 levels by 2030, the ACE rule was only expected to reduce greenhouse gas emissions by 1.5% by 2030.

The CPP was the centerpiece of former President Barack Obama’s ambitious “Climate Action Plan” to address climate change. The CPP set the first-ever national emissions guidelines designed to reduce greenhouse gas emissions from existing fossil fuel-fired electric plants. The CPP included “beyond the fence line” methods to meet its carbon reduction goals, including actions that reduced demand by shifting generation to facilities not in the source category being regulated under the plan.

The ACE Rule reversed the EPA’s prior position and instead limited the rule’s scope to “emission reduction measures that can be applied to or at an individual stationary source” (83 Fed Reg. at 44,752). The EPA based this shift on a narrow interpretation of the Clean Air Act, which would only allow the agency to consider greenhouse gas control methods “based on a physical or operational change to a building, structure, facility or installation at that source rather than measures the source’s owner or operator can implement at another location” in determining the best system of emission reduction (83 Fed Reg. at 44,752). Accordingly, the ACE Rule relied entirely on on-site (within the fence line) efficiency projects, such as heat rate improvements as a means of controlling greenhouse gas emissions and did not impose any carbon reduction goals for coal-fired facilities.

Shortly after the ACE Rule was promulgated, state and municipal governments, power utilities, renewable energy trade associations, and public health and environmental advocacy groups challenged the rule in the D.C. Circuit. The primary question before the court was whether the EPA had authority to regulate “outside the fence line.” In other words, can the EPA require greenhouse gas emissions from power plants that would require generation switching? In its opinion, the court concluded that the EPA’s rescission of the 2015 CPP and its subsequent promulgation of the 2019 ACE Rule failed because they were based on an incorrect assertion that Congress, through the Clean Air Act, intended to limit the agency’s authority to control greenhouse gas emissions to the imposition of at-the-source measures. The court found no support for the Trump EPA’s new interpretation of the statutory text remarking that “[p]olicy priorities may change from one administration to the next, but statutory text changes only when it is amended.” To the contrary, the court found that the Clean Air Act does not limit the EPA to only controls that can be applied at and to fossil fuel-fired electric plants.

Moving Forward

The timing of the court’s decision to vacate and remand the ACE Rule came just a day before the inauguration of President Joe Biden. As such, President Biden and his EPA will have a third bite at the apple, yet another attempt to come up with a plan to regulate greenhouse gas emissions from power plants. Indeed, the Biden administration no longer has to go about the rigorous and time-consuming process necessary to roll back an official regulation, and can immediately begin considering how it wants to regulate greenhouse gases from power plants. The decision not only opens the door for the Biden administration to promulgate new rules regarding emission reductions, but also restores the agency’s flexibility in developing those rules.

This presents a great opportunity for the Biden administration as he has stated many times that one of his administration’s key focuses will be on climate change and he has already nominated key figures to lead the charge in addressing greenhouse gas emissions, including the appointment of a first-ever climate czar in his Cabinet. Regardless, it will be interesting to see whether the Biden EPA can issue a rule that can withstand the inevitable court challenges that have held up the last two iterations of the rule.

Megan McLean is a senior associate for Husch Blackwell. She can be reached at megan.mclean@huschblackwell.com.

 

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