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Supreme Court and EPA’s Clean Power Plan

February 15, 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

Supreme Court Dynamics  

  • The sudden death of Justice Antonin Scalia robs the Supreme Court of a consistent critic of the EPA, and a skeptic of the agency’s efforts to combat climate change.
  • Scalia, a 1986 appointee of President Ronald Reagan, was a core member of the conservative wing of the court, which voted in many cases to trim or rework environmental regulation by President Barack Obama. Without Scalia, the court is now evenly divided between Republican and Democratic appointees. President Obama says he will appoint a successor.
  • Scalia wrote last year’s opinion for the court that sent the EPA’s regulation of mercury from power plants back to the agency for a review, and just last week joined with four other jurists — also appointed by Republican presidents — to issue a stay in the EPA’s Clean Power Plan, which regulates carbon emissions from power plants.
  • Analysts say the stay is likely to remain for now, but the underlying dynamics of the decision on the Clean Power Plan have changed. Lawyer Brian Potts writes below that the likelihood the EPA rule survives intact just jumped to 75% from 10% last week. Read his piece in Up for Debate.
  • “Scalia’s death changes everything,” according to Potts, who specializes in environmental law. “Although the stay will likely stay (because the order has already been issued), the Supreme Court now appears to be evenly split as to the Clean Power Plan’s legality. And a 4-4 tie means the Supreme Court can’t overturn a D.C. Circuit decision upholding the EPA Plan.”
  • And, it’s not just climate rules set to come to the high court. Federal courts are trying to work through whether EPA’s and the Army Corps of Engineers’ Clean Water Rule passes legal muster (it’s been halted, too), and that may also be headed to the Supreme Court. Also, Interior has rules on fracking, offshore drilling and endangered species that may also garner high-court review. Still, the Clean Power Plan, with its wide-ranging national implications and impact on producers of coal, natural gas and renewable energy, is the biggest case.
  • What’s not clear is how a Republican-led Senate would handle an Obama appointee to the high court. (Early indications are they will try block whomever Obama chooses.) But there’s two things that are clear. Obama would never appoint a justice with views on the environmental regulation anywhere near those of Scalia; and, two, a delay by the GOP-led Senate would not stop EPA rules. A 4-4 deadlock, if that happens, keeps a lower-court ruling in place. (Of course, we don’t know yet how a lower court will rule; predicting judicial decisions is a fool’s errand.)
  • One candidate being mentioned as a possible Obama nominee is Sri Srinivasan, a D.C. Circuit judge. Srinivasan was part of a three-member panel that voted against a stay of the Clean Power Plan before the high court reversed that.
  • Andrew Revkin of the New York Times wrote about Scalia’s views on CO2, here.
  • For more on what the change to the high court may mean more generally, see Greg Stohr’s analysis. Stohr says another case of interest to energy companies, Citizens United, may be overturned if a more liberal majority was put in place. That case cleared the way for companies to donate to political campaigns. Washington Post contributor Linda Hirshman gets at some of the dynamics in the court here. (Although, the article seems to misunderstand what’s happening with CPP. )
  • For more on Scalia, read what Cass Sunstein wrote for Bloomberg View on why he will be missed.
  • And, there’s one more aspect of the new dynamic: A hard-fought nomination fight may undercut any possibility of bipartisan compromise on other issues in the Senate, according to Kevin Book of ClearView Energy: If Republicans don’t cooperate on confirming a nominee of Obama, “Senate Democrats, for their part, would probably not choose to cooperate with Republicans on otherwise-consensus issues (i.e., the Energy Policy Modernization Act) if they believe the GOP is stalling the nomination,” he wrote.

Quotable

  • “An agency may not rewrite clear statutory terms to suit its own sense of how the statute should operate,” Scalia wrote in the case Utility Air Regulation Group v. EPA, which concerned the scope of EPA greenhouse-gas permitting. “We are not willing to stand on the dock and wave goodbye as EPA embarks on a multiyear voyage of discovery” about how it wants to regulate.
  • “In other words, regulating the buildup of CO2 and other greenhouse gases in the upper reaches of the atmosphere, which is alleged to be causing global climate change, is not akin to regulating the concentration of some substance that is polluting the air,” Scalia wrote in his dissent to Massachusetts v. EPA, which required the agency to determine if carbon dioxide should be regulated as an air pollutant.
  • “Troposphere, whatever,” Justice Scalia said in arguments for that case, Revkin reported. “I told you before I’m not a scientist.”

(Editor’s note: We are publishing this edition of the newsletter in light of the tragic events this weekend. We’ll be back with a full newsletter tomorrow.)

Energy Week Ahead: State Regulators Muddled Path for Carbon  

By Mark Drajem and Catherine Traywick

State regulators meeting in Washington this week will focus on setting tariffs for rooftop solar projects, New York’s clean-energy goals and technologies to eliminate the carbon released when burning coal for electricity.

In other words, the agenda of the National Association of Regulatory Utility Commissioners is examining how states can reduce carbon emissions from their electric system, and address the problem of climate change. Up until a week ago that looked like the future for electricity production in the U.S. But now the participants — who are beginning their conference today — have a new complication, and one that’s set to be the biggest subtext of this week’s gathering.

The Supreme Court halted the Clean Power Plan pending a court fight over the merits of the EPA rule. This put state officials in a bind: With the deadline still looming in 2022, do they sit back and hope the rule is tossed altogether, or do they begin planning how to rework their electricity system so that they boost solar, wind and natural gas?

“It might undercut your political momentum,” Nathan Richardson, a fellow at Resources for the Future, said in an interview. “It makes it harder to get agreement on the tougher issues.”

The federal rule is the centerpiece of President Barack Obama’s climate agenda, and aims to cut carbon dioxide emissions to 32 percent of 2005 levels by 2030, encouraging states to rely less on coal to generate electricity and use more wind, solar power and natural gas. Under the regulation EPA set mandates for each state to cut carbon emissions from their power plants; it’s up to state officials to figure out how to accomplish it. Industry critics and more than half the states are arguing in federal court that EPA exceeded its authority in setting standards that effectively mandate coal plants close or run less, and can’t be reached with technology attached on smokestacks.

The meeting this week includes discussions on how to set rules for metering of rooftop solar, and an update from a visit to Southern Co.’s long-delayed Kemper County project, which is a coal plant with carbon capture technology. It also includes presentations from both lawyers and industry lobbyists fighting the EPA rule. They’re set to tell regulators that EPA’s rule is fatally flawed.

Paul Bailey, the senior vice president for the American Coalition for Clean Coal Electricity is set to tell the regulators that EPA’s rule would increase electricity costs by 10% or more in 40 states, while having an effect on rising sea levels of just two millimeters, according to an advance copy of his presentation.

Still, so far regulators say they aren’t sticking with the strategy Richardson dubbed “delay and pray.” And the sudden death of Justice Antonin Scalia this past weekend further muddies the waters. “Those who advocate stopping the process and doing nothing are being short-sighted,” said Mike Dowd, director of the air division of the Virginia Department of Environmental Quality. “One of the lessons I’ve learned is to never predict what a court will do.”

But Richardson says it makes sense for states to think that the initial deadline will be delayed, and some states are putting their compliance efforts on hold.

“I can’t see our legislature working with me to figure out” how to comply, said Alan Minier, chairman of the Wyoming Public Service Commission. “At this point, there’s a hard decision they don’t have to make if they table it for a while. So my suspicion is they’ll table it for a while. I’m OK with that.”

Still, even Wyoming, the nation’s top coal producer won’t entirely roll up the carpet. “I think the governor will allow us to have stakeholder meetings. I think it’s really important for people to begin to fathom what is in this program as a whole before we try to push people to make decisions,” he said.

ALSO WORTH WATCHING

ALASKA ENERGY: Energy Sec. Ernest Moniz on Monday joins Alaska Gov. Bill Walker for a Bethel, Alaska, field hearing on energy technology opportunities in the state. The hearing is organized by the Senate Energy and Natural Resources Committee chairman Sen. Lisa Murkowski.

OIL MARKET BLUES: EIA Deputy Administrator Howard Gruenspecht on Wednesday headlines a CSIS panel on what the oil market may look like in 2016. The panel will discuss how supply and demand forecasts affect the outlook for unconventional production and the midstream and refining sectors. That’s at 10 a.m. at 1616 Rhode Island Ave.

MIDDLE EAST: On Thursday, the Atlantic Council looks at how Middle East politics have contributed to low crude prices, including Saudi Arabia’s refusal to cut production and Iran’s re-entrance into the global marketplace. Former Prime Minister of the Palestinian Authority Salam Fayyad joins IHS Energy Managing Director Raad Alkadiri for the 9 a.m. event at 1030 15th St.

 

Up for Debate

 The Changing Dynamic for the Clean Power Plan  

By Brian H. Potts

The Clean Power Plan is doomed. That was the conventional thinking given the U.S. Supreme Court’s shocking decision last week to stay the rule while the legal challenges to it grind their way through the courts. After last week’s stay decision, I would have given the rule a less than 10% chance of surviving legal review unscathed. But that was before Justice Antonin Scalia’s sudden death.

Now I put those odds at better than 75%.

There was good reason for so much pessimism last week. In a 5-4 decision split along party lines, the court determined that the challenging states, utilities, industry and coal companies would be irreparably harmed unless the Clean Power Plan is stayed while the courts review it. But more importantly, to issue the stay, these five conservative-leaning justices also had to decide that the challengers are substantially likely to win the case on the merits. This latter point is critical.

There was almost universal agreement prior to the decision that the court wouldn’t issue a stay because showing immediate and irreparable harm is incredibly difficult. In the case of the Clean Power Plan this is particularly true because the rule doesn’t even go into effect until 2022 and, in any event, monetary damages don’t count as irreparable harm. That means the court really must have thought the challengers were going to succeed on the merits, given the weakness of the challengers’ irreparable harm case.

Scalia’s death changes everything. Although the stay will likely stay (because the order has already been issued), the Supreme Court now appears to be evenly split as to the Clean Power Plan’s legality. And a 4-4 tie means the Supreme Court can’t overturn a D.C. Circuit decision upholding the EPA Plan.

D.C. Circuit Judge Sri Srinivasan – whose name is also being floated as Scalia’s replacement – is probably the swing vote on the three judge D.C. Circuit panel that is set to hear the Clean Power Plan case this summer. One of his fellow panel members, Judge Judith Rogers, has been a reliably pro-EPA judge, and has given the agency lots of deference. The other decision-maker, Judge Karen Henderson, has been much more skeptical of EPA rules. Because that panel declined to issue a stay, I don’t think they will gut the rule. And once that happens, even a 4-4 high court is advantageous for the EPA. In the end, however, regardless of what this three-judge panel decides, the full court (in what’s called en banc review) can uphold the EPA’s Plan, and a large majority of the justices were appointed by Democratic presidents. Because the case is on a fast-track, a final D.C. Circuit decision should happen by late 2016 or early 2017, with Supreme Court review shortly thereafter.

What does all of this mean? It means the Republicans’ only real chance of thwarting the Clean Power Plan is to refuse to allow President Obama to appoint someone to the Supreme Court, and then put someone in the White House in 2017 that can either try to gut the Plan through administrative or legislative processes, or appoint a conservative justice to the high court who would vote to overturn it. Anything else looks like a win for the EPA.

(Brian H. Potts is a partner at Foley & Lardner LLP. He has authored articles on the Clean Air Act in law journals published by Yale, Harvard, N.Y.U. and Berkeley.)