Judges wonder how Congress stiffed them on climate

September 28, 2016 Mark Drajem

The First Word Energy team draws on Bloomberg’s worldwide resources to cover all aspects of energy policy. Learn how Bloomberg Government can help your energy lobbying or policy analysis—contact Peter Hsu at yhsu24@bloomberg.net or 202-416-3035.

Today’s Agenda

Judges and attorneys grappling with the legal issues raised by the Clean Power Plan had one common complaint: Congress is the reason they were all tied in knots. And over the course of a mammoth seven-hour argument yesterday some of the 10 members of the D.C. Circuit panel indicated they weren’t happy about that — at all.

Why is the debate not on the Senate floor, but “in front of a room full of unelected judges?” asked Judge Thomas Griffith, an appointee of President George W. Bush.

“The policy is laudable,” said Judge Brett Kavanaugh, according to the New York Times’ account. “The Earth is warming. Humans are contributing. I understand the international impact and the problem of the commons. The Pope is involved. And I understand the frustration with Congress.”

Oddly, industry lawyers agreed. The situation is “poisoned by the fact that Congress can’t do anything,” said Laurence Tribe, the Harvard Law School professor representing Peabody Energy. “That’s the natural way to fix this up.”

The issues with Congress were:

1. Lawmakers messed up the drafting of the Clean Air Act amendments in 1990, leaving contradictory and ambiguous language about whether regulation under Sec. 112 prohibits that under Sec. 111.

2. Congress should draft legislation to deal with global warming, allowing the government to handle all the trade offs involved, and rely on a law drafted before the extent of the problem was known. “If Congress does this, they can account for the people who lose their jobs. If we do this, we can’t,” Kavanaugh said, according to the Times.

Another oddity: While the Obama administration pushed for Congress to pass cap-and-trade legislation with the support of many the environmental groups supporting it in this case, both of them played down the epic nature of the Clean Power Plan, saying it’s just prodding along existing trends with bread-and-butter EPA regulation.

A number of issues were debated, but one theme stood out, according to what we heard from Bloomberg’s Jennifer Dlouhy, Andrew Harris and Brandon Barnes, who were there.

How “transformative” is the Clean Power Plan? If it’s just using long-established EPA methods to curb a new pollutant — and pushing along a power system already moving from coal to natural gas and renewable energy, maybe the legal issues aren’t so profound, some judges said. Peter Keisler, who represented industry groups opposing the rule, countered that this could be the start of a vast overreach by EPA into many areas of the economy beyond power plants.

But there’s nothing strange to see in how the agency designed this rule, said Judge David Tatel: “It seems to me the agency is invoking long-established authority and applying it to existing plants,” he said. The EPA is facing a new mandate created by the courts as a result of Massachusetts v. EPA to regulate CO2; it simply used its powers and applied them to these sources, he said.

Overall, challengers appear to be starting with the longer odds, as six of the 10 judges were appointed by Democrats and so two would need to vote against the agency for it to lose at this level. Some issues may get punted back to EPA on remand. But the general thrust is that the Clean Power Plan is likely to survive the D.C. Circuit, Barnes says.

Bonus

See Harris and Dlouhy’s full story here. In Up for Debate below we get initial impressions from two outside experts, Tim Profeta and Jeff Holmstead. For background on the rule and the court fight see:

Obama’s Clean Power Plan Heads to Court: What to Know

Or, there is Brad Plumer’s preview in Vox.

If you want to chew over yesterday’s arguments more, there are three options today:

1. Georgetown Law School is hosting a discussion with lawyers who participated in the argument, including Thomas Lorenzen and Elbert Lin. It’s at 9 a.m. on the Georgetown Law campus, 12th floor of the Gewirz building.

2. Bloomberg Intelligence is sponsoring a webinar on it this morning at 10 a.m.

3. And the Environmental Law Institute will discuss the case with many of the lawyers involved in the case, including Lin and Doniger. It is at 1 p.m. at 1350 I St, NW.

Also today

  • Growth Energy says ethanol can help U.S. meet mileage targets.
  • Maryland issued new fracking regulations, rules its state regulator called “the most stringent” in the country.
  • In suburban Houston retired oil industry officials are now trying to lay the groundwork for a carbon tax, the Houston Chroniclereports.
  • Elon Musk launched his plan to “make humans a multiplanetary species.” Blast off.

Drajem’s Daily Don’t Miss

Bloomberg Government and the Environmental Defense Fund are holding a discussion this morning, “On the Front Lines: The Impact of Climate Change on Latino Communities.” The panel includes Matthew Tejada, director of EPA’s office of environmental justice and it starts at 8 a.m. at 1101 K St, NW, Suite 500.

Quotable

You can look at the polling and conclude Americans don’t rate climate change as a top tier issue, and so the kerfuffle over whether Donald Trump thinks it is a Chinese hoax is not a big deal.

But the Trump campaign can’t be enjoying having to explain the 2012 Chinese hoax tweet. The argument is not necessarily “about” climate change, it is about what “climate change” signals to voters — especially young and college-educated voters. This was the mixed message from the Trump’s campaign when questioned about the issue yesterday:

“He believes that global warming is naturally occurring,” Trump’s campaign manager Kellyanne Conway said on CNN. “He believes that climate change is naturally occurring, and we don’t know what Hillary Clinton believes because nobody ever asks her.”

“The hoax is that some bureaucrats in Washington, D.C., can control the climate of the Earth,” Mike Pence said on CNN, too. “There’s no question that the activities that take place in this country and in countries around the world have some impact on the environment and some impact on climate.”

The Washington Post did a full rundown of Trump’s position on climate change, and how it evolved over the years: “Eventually, his opposition to President Obama (who was exploring more clean-energy projects) merged with his opposition to turbines and his dislike of wind turbines.”

Myron Ebell and the Clean Power Plan

In a 2015 podcast with the Heartland Institute’s H. Sterling Burnett, Ebell describes the Competitive Enterprise Institute as focusing on regulations from a free-market perspective. Ebell said the Cooler Heads Coalition was founded in 1997, and has the goal of “questioning global warming alarmism and oppose energy regime policies.” He said the Cooler Heads Coalition was key to derailing the cap-and-trade legislation in 2009/2010. Of CPP, Ebell said:

“Under the Clean Air Act, the EPA has the ability to require each source, that is each power plant, to make changes to achieve a certain limit…but they do not have the authority to require a state to takeover and run its power grid on behalf of some policy. And so, the state’s targets are not based on telling each power plant what to do…and so I would say that’s clearly illegal but I wouldn’t count on the courts overturning it.”

Chart of the Day

-1x-1 (1)

Energy Recovery Inc. — a developer of technology used in oil and gas drilling, water desalination and ammonia production. — jumped more than 7 percent to an all-time high. The company’s trading history can be separated into two time frames — before October 2015 and after. In the “before” period, the stock tumbled as much as 77 percent from its initial offering price. The “after” period began when Energy Recovery sold rights to a fracking pump to the world’s largest provider of oilfield services, Schlumberger Ltd.

Outside the Beltway

In Fight Over Oil Prices With Saudi Arabia, It’s Advantage Iran
Suddenly the tables have been turned on Saudi Arabia. The biggest oil exporter has swapped its traditional role as price dove with regional foe Iran, for years OPEC price hawk. The government in Riyadh is now offering a deal — including its first output cut in eight years — to boost prices; Tehran is dragging its feet. At the center of the reversal is their contrasting thresholds for enduring economic pain.

DTE, Rice Drop After Billion-Dollar Bets on U.S. Shale Gas
DTE Energy Co. and Rice Energy Inc. fell in New York trading after announcing billion-dollar bets on eastern U.S. shale formations rich in natural gas. DTE’s credit ratings are being reviewed by Moody’s Investors Service.

Canada Approves Petronas LNG Facility
Canadian Prime Minister Justin Trudeau’s government has approved Petroliam Nasional Bhd’s C$36 billion ($27 billion) Pacific NorthWest liquefied natural gas project on British Columbia’s Pacific coast.

Up for Debate

First Impressions From the D.C. Circuit
By Tim Profeta

It was a full day in the D.C. Circuit Tuesday as ten judges heard oral arguments surrounding the Clean Power Plan. The judges were extremely engaged, with eight of the ten on the panel firing questions throughout the morning and into the afternoon. They blithely ignored all time limitations on the argument. Some early takeaways from include:

• It’s now clear that the EPA possesses the authority to regulate greenhouse gases as a pollutant under the Clean Air Act. The question now is whether the methods used by the EPA were permitted under the act. As Judge David Tatel noted, the Supreme Court “did that work” in Massachusetts v. EPA.

• The case is caught up in a larger judicial discussion about how much deference to grant the executive branch. As Congress increasingly fails to legislate on major political issues of our day, the executive branch has been looking to existing statutes for the authority to address problems. But the courts are debating whether to provide the traditional broad deference to agencies as they pursue these initiatives, or whether “major” political issues require more scrutiny. EPA’s Clean Power Plan evoked this debate, and, as a result, may create more precedent that will guide future presidents on the extent of their power.

• The court repeatedly reflected on the Supreme Court’s AEP v. Connecticut ruling, which established that the EPA had the authority to regulate existing power plants and thereby forbade Connecticut from suing those plant owners directly. Any victory for the petitioners in this case will need to explain why that recognition of authority in AEP v. Connecticut does not presume that the EPA possesses the authority underlying the Clean Power Plan.

• Several jurists expressed concern that industry was arguing that the EPA could not consider the shifting of generation to cleaner sources in setting the standard, but nonetheless wanted that low cost option as a means of complying with the rule. Can the industry have its cake and eat it, too?

• The judges’ proficiency in understanding the electric grid was impressive, clearly aided by legal briefs from grid operators. What was not as clear, however, is whether this proficiency had convinced them that managing the generation sources across that system constituted the “best system of emissions reduction” under the act.

All in all, the government came through it with clear indications of support from three or four judges. At least four other judges, however, either did not speak or evaluated the case in such a Socratic manner that their positions were more mysterious. So, there’s no definitive majority yet. Supporters will be holding their breathe until the opinion appears.

Tim Profeta is director of the Nicholas Institute for Environmental Policy Solutions at Duke University.

Three thoughts from an EPA veteran
By Jeff Holmstead

The judges are clearly taking these issues seriously. They had scheduled just over three and a half hours for oral argument, but it ended up taking almost seven hours because the judges had so many questions for each side. I don’t believe there has ever before been a case in the D.C. Circuit that occupied all the judges on the Court for a whole day.

Most of the judges seemed to believe that the Clean Power Plan is a “transformative” rule with “vast economic and political significance.” Under a number of Supreme Court decisions, this means that EPA must show it is authorized by a “clear statement” from Congress. EPA was not able to point to any such clear statement.

Most of the judges – both Democratic appointees and Republican appointees – had tough questions for both sides. It’s always hard to know if a judge is simply playing devil’s advocate or revealing his or her predilections, but it’s certainly possible that the Court may side with the challengers on some issues and with EPA on others. We won’t know until we see the decision, probably early next year.

Jeff Holmstead is a lawyer at Bracewell and a former EPA official.

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