Photographer: George Frey/Bloomberg

Scott Pruitt’s conundrum over the Clean Power Plan

February 21, 2017 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.

Newly installed EPA Administrator Scott Pruitt, who is set to address the EPA staff at noon today, told the Wall Street Journal that he plans to make good on President Trump’s vow to withdraw the Clean Power Plan and Waters of the U.S. rules. The executive orders calling for those rules to be reworked may be signed today, Jennifer Dlouhy has reported.

Of course, signing these orders accomplishes exactly nothing other than establishing the goal. What we’ll be watching closely this week is how the Trump administration will try to unravel the Clean Power Plan, Obama’s regulation targeting carbon emissions from power plants. The administration’s lawyers have two early, important decisions to make.

The first step is for the government to ask the D.C. Circuit not to rule on the challenges to the Clean Power Plan. There are two different ways it could do this: It could either ask the court to hold the case in abeyance while it figures out its legal strategy, or it could ask it to remand the rule to EPA without issuing a ruling. (Of course, the D.C. Circuit could still decide to issue its ruling — and environmental advocates can be expected to object to this maneuver and push for the D.C. Circuit to issue a decision.)

Why does it matter? Well, in the long term having a ruling from the D.C. Circuit upholding the Obama-era regulation could damage the argument from Pruitt and his colleagues that this rule is manifestly illegal. For the judges, they may be willing to hold off and grant the government its wishes — if only to avoid a hard decision for a rule unlikely to remain in place no matter what they rule.

The second step is more nuanced for the agency: What does it do about carbon emissions from power plants? Assume for the sake of argument that the agency doesn’t go back and rip up the endangerment finding. It then faces a difficult choice. It could adopt some form of Pruitt’s “Oklahoma Plan” and regulate carbon emissions from power plants under 111(d), but only require that individual coal plants become more efficient. “The ‘inside the fence’ model ensures that emissions reductions are limited to the engineering limits of each facility,” according to Pruitt’s plan, released in 2014.

Under Pruitt’s way of calculating these tune-ups, the new regulation would bring about negligible gains from those plants, far different than the 32 percent power-sector wide reductions envisaged by the Clean Power Plan by 2030.

Still, by using this approach, Section 111 would be established as the way to regulate carbon emissions, and future administrations could build on this approach to require additional actions. And a future administration could build on Pruitt’s plan to require steep reductions down the road.

A more radical route would be to take the argument Pruitt and other AGs made in their challenge to the Clean Power Plan and argue that because electricity generating units are regulated for mercury reductions under Sec. 112 of the Clean Air Act, they can’t be regulated under Sec. 111. (For more on this from when this was argued at the D.C. Circuit, see here.)

In his interview, Pruitt sounded — at the least — open to this option:

“Does EPA even possess the tools, under the Clean Air Act, to address this? It’s a fair question to ask if we do, or whether there in fact needs to be a congressional response to the climate issue.”

Stay with us for a second as we go through this, though:

In the 2011 AEP v. Connecticut Supreme Court case that found individuals didn’t have a private right to sue for climate damages, the courts specifically mentioned regulation of power plants under Sec. 111 as action EPA could take. (“And we think it equally plain that the Act ‘speaks directly’ to emissions of carbon dioxide from the defendants’ plants.”)

So, if EPA decides it *can’t* regulate under Sec. 111, then that could undercut the court’s rationale in the AEP case. And so, nervous coal plant owners may wonder, could they then face private lawsuits because EPA action is foreclosed?

All of that is to say, this may be a case in which the free-market groups press for maximum rollback, but businesses industry groups urge a cautious approach that leaves some sort of carbon regulation in place.

Zinke Almost On Deck

With Pruitt out of the way, Trump’s Interior Department pick is the next energy and environment nominee on tap, but it’s looks like he won’t get confirmed until early March.  The Senate has scheduled a procedural vote on Zinke’s nomination the evening of Feb. 27, after it votes on Wilbur Ross for Secretary of Commerce.

Quote of the Day

“This past administration didn’t bother with statutes,” Pruitt told Kimberly Strassel of the WSJ. “They displaced Congress, disregarded the law, and in general said they would act in their own way. That now ends.”

“Agencies exist to administer the law. Congress passes statutes, and those statutes are very clear on the job EPA has to do. We’re going to do that job,” he told the paper. “This president is a fixer, he’s an action oriented leader and a refocused EPA is in a great position to get results.”

More Bad News for Obama-Era Climate Regs

A panel of federal appeals court judges appeared skeptical Friday that the EPA has the authority to force a phaseout of a refrigerant on the grounds that it contributes to climate change, David Schultz reported. An unfavorable ruling for the EPA in this case could hamper the agency’s power to regulate some of the most potent greenhouse gases released into the atmosphere.

The three-judge panel hearing the case—which includes two George W. Bush appointees—seemed sympathetic to the plaintiffs’ arguments during the hearing. They especially took issue with the fact that the EPA had earlier designated HFCs as a safer substitute to older chemicals that damage the ozone layer.

Read the Full Story: Judges Question EPA Phaseout of Refrigerants

The Daily Don’t Miss

ThirdWay is hosting a discussion today on the future of nuclear energy, aimed at promoting ways to boost advanced nuclear technologies. As this weekend’s story in the New York Times shows, nuclear energy is in a bit of a pickle.

The article details how regulatory changes meant to help the industry build actually ended up slowing down construction. The full article is worth a read:

Under the old system, companies received construction permits based on incomplete plans and then applied for an operating license, often leading to rebuilding and lengthy delays. The idea for the new system was that companies would submit much more complete design plans for approval, and then receive their operating licenses as construction started. That way, as long as they built exactly what they said they would, the process could move more quickly. (In the case of Westinghouse, that didn’t happen, the article said.)

Tweet of the Day

@EPAScottPruitt I’m dedicated to working w/stakeholders – industry, farmers, ranchers, business owners – on traditional values of environmental stewardship.

(It’s weird, no? If the rap against you is that you are an industry shill who doesn’t care about protecting the environment, wouldn’t you try to combat that in your initial comments? You don’t need to be a Sun Tzu scholar to realize a bit of subtlety could help your long-term goals. And, to his credit, Pruitt made a strong case for his approach in his interview.)

Inside the Beltway

Gas-Station Owners Group Faces Divide Over Biofuel Requirements
Smaller retailers in the Petroleum Marketers Association of America are pushing the trade group to reverse its opposition to shifting which entity is responsible for complying with federal biofuel mandate. Small retailers say they are at disadvantage to their larger rivals, which can make a profit on blending ethanol with gasoline.

PMAA had opposed shifting so-called point of obligation from refiners to fuel blenders; During a telephone meeting Friday, PMAA’s Fuels Committee voted to adopt a neutral position on a proposal to shift the burden. The matter still must be considered by group’s executive committee.

Shimkus Aims to Rewrite Parts of Nuclear Waste Law
Representative John Shimkus wants to give life to the stalled Yucca Mountain project by crafting legislation this Congress to include a federal funding stream for interim nuclear waste storage before the permanent storage site opens.

Shimkus, chairman of the House Energy and Commerce Committee’s Environment Subcommittee, told Rebecca Kern he wants the legislation to also address both land and water rights issues that have led to 300 contentions with the Nuclear Regulatory Commission adjudicatory hearings related to siting a permanent repository for the country’s high-level nuclear waste at Yucca Mountain.

Shimkus, an ardent Yucca Mountain backer, said he’s considering as part of the bill an option allowing a portion of the Nuclear Waste Fund to pay for interim storage. The fund was established in Nuclear Waste Policy Act for utilities to pay into to cover the cost of transporting spent nuclear fuel from nuclear reactors to a permanent repository, but after a lawsuit, payments into the fund stopped in May 2014.

Bloomberg BNA News

Daily Environment Report: Highlights

Outside the Beltway

First Earthquakes Linked to Fracking Recorded in Pennsylvania
A series of small earthquakes in Lawrence County, Pa., has been linked to nearby hydraulic fracturing of Utica shale, the Pennsylvania Department of Environmental Protection concluded. Houston-based Hilcorp Energy Co. immediately and voluntarily stopped drilling at the North Beaver NC Development well pad after earthquakes began at 4:17 a.m. on April 25, 2016, in North Beaver, Union and Mahoning townships, the report said.

Alaska Gold Mine Owner Fires Back at Critics
Northern Dynasty Minerals Ltd., the owner of the troubled Pebble Mine project in Alaska, has fired back at a scathing report earlier this week that sent the company’s stock price tumbling. The company now says it is in a strong financial position to move forward with the project, and is “entirely committed to advancing the political and public consensus necessary” to acquire the necessary permits — a process that Northern Dynasty concedes will take years.

Saudis Kick Off $50 Billion Renewable Energy Plan to Cut Oil Use
Saudi Arabia is kicking off its $50 billion renewable-energy push as the world’s top crude exporter turns to solar and wind power to temper domestic oil use in meeting growing energy demand. Bidders seeking to qualify to build 700 megawatts of wind and solar powerplants should submit documents by March 20, and those selected will be announced by April 10, Saudi Arabia’s energy ministry said Monday in an e-mailed statement. Qualified bidders will be able to present their offers for the projects starting on April 17 through July.

U.S. Coal Mines Are Opening in a Year of ‘Cautious Optimism’
Add Corsa Coal Corp. to the short list of U.S. coal producers doing something that’s become a bit of a rarity these days: opening mines. The Canonsburg, Pennsylvania-based company will start a new operation in Pennsylvania as early as May. It joins Ramaco Resources Inc., which began producing at its first mine in West Virginia in December and plans to open two more this year in Central Appalachia. They’re among the few turning more bullish on the business following an unprecedented market collapse that has shut hundreds of mines and left thousands jobless in recent years.

“There’s definitely cautious optimism after years of being brutally beaten down,” Jeremy Sussman, an analyst at Clarksons Platou Securities Inc., said in a phone interview.