D.C. Circuit Overturns Trump Administration Power Plant Rule

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In 2015, the U.S. Environmental Protection Agency ("EPA") adopted the Clean Power Plan ("CPP") pursuant to Clean Air Act ("CAA") Section 111. The CPP set out guidelines to help states develop individual plans to limit carbon dioxide emissions from existing power plants. The CPP determined that the following combination of three emissions reduction methods form the "best system of emission reduction" ("BSER") to set emissions guidelines under CAA Section 111(a)(1): (i) heat rate improvements at the coal fired power plants; (ii) substitution of coal fired units with natural gas; and (iii) use of zero-emitting renewable sources. The CPP swiftly faced legal challenges, and the Supreme Court ultimately issued a stay, preventing it from going into effect.

In June 2019, under a new Administration, the EPA adopted several rules that repealed the CPP and implemented the Affordable Clean Energy ("ACE") Rule in its place. In replacing the CPP with the ACE Rule, the EPA claimed that the CPP reached beyond the EPA's authority under the CAA because the plain language of CAA Section 111(a)(1) only allows the EPA to consider emission reductions measures that can be made "at" and "to" stationary sources when determining BSER, and the CPP's use of generation shifting BSER goes beyond the footprint of a specific source. In response, the American Lung Association and American Public Health Association filed a challenge to the rules the EPA had adopted in the United States Court of Appeals for the District of Columbia Circuit ("D.C. Circuit").

On January 19, 2021, in a per curiam opinion, the D.C. Circuit vacated and remanded to EPA the ACE Rule. Judge Walker concurred and dissented in part. The majority reached its conclusion because it found that the EPA had relied on an incorrect interpretation of the CAA in enacting the ACE Rule and repealing the CPP. The court held that the plain language defining BSER in CAA Section 111(a)(1) does not include the requirement that control methods be source-specific and there is no basis to read the source-specific language found in Subsection (d)(1) to apply to Subsection (a)(1)'s definition of BSER. In addition, even if Subsections (a)(1) and (d)(1) can be read together, the EPA has interpreted the preposition "for" in Subsection (d)(1)'s reference to "standards of performance for any existing source" to mean "at" and "to"; however, emission-reduction measures "for" sources may readily be understood to go beyond those that apply physically "at" and "to" the individual source. Furthermore, the court stated that nothing in the history or purpose of CAA Section 111 would compel the reading the EPA adopted in the ACE Rule "constrain[ing] the Agency to identifying a best system of emission reduction consisting only of controls 'that can be applied at and to a stationary source.'" The court also vacated EPA's repeal of the CPP, finding that it too was in violation of CAA. This holding puts the CPP at least temporarily back into effect.

In his opinion concurring in part and dissenting in part, Judge Walker argued that although the EPA had been correct to repeal the CPP, it did not have authority to replace it with the ACE Rule, explaining that because coal-fired power plants are already regulated under Section 112 of the CAA, the EPA does not have authority to regulate them under Section 111 of the CAA.

Moving forward, opponents of the CPP may seek Supreme Court review of this decision. However, the EPA has indicated that it will not restore the CPP. On February 12, 2021, the EPA asked the court to stay its mandate in American Lung Association, et al. v. EPA vacating the rule that repealed the CPP until the EPA issues a new rulemaking. On the same day, the EPA issued a memo to its regional administrators stating that because the D.C. Circuit vacated ACE and did not expressly reinstate the CPP, it believes there to be no CAA regulations governing greenhouse gas emissions from power plants. The Court granted EPA's motion and stayed issuance of the mandate on February 22, 2021. It remains to be seen how the Biden Administration, taking a fresh approach to climate change regulations, will regulate greenhouse gas emissions from power plants.

Ruby B. Lang, a law clerk in the New York Office, assisted in the preparation of this article.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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