House of Representatives Energy and Commerce Committee Issues New Report Citing Problems with EPA’s Clean Power Plan
On December 16, 2014, the Energy and Commerce Committee majority staff released a report highlighting what it considers to be the shortcomings with EPA’s Clean Power Plan. These criticisms highlight the ongoing divide over what actions the administration should take to regulate greenhouse gases.
As discussed in a previous post, EPA published a proposal this summer in the Federal Register to create GHG emission standards for existing power plants (the Clean Power Plan). The proposal is considered part of President Obama’s Climate Action Plan that he announced in June 2013.
In the proposal EPA invoked a rarely-used provision in the Clean Air Act, section 111(d), as the statutory authority under which it proposes to require states to meet mandatory carbon dioxide (CO2) targets. EPA is proposing to set individual state GHG reduction targets. The proposed rule includes an individual “interim goal” for each state to meet in 2020 and a “final goal” that states must meet beginning in 2030. These mandatory goals vary among the states and were calculated by EPA based on four building blocks:
- Making coal-fired power plants more efficient;
- Using low-emitting natural gas combined cycle plants more where excess capacity is available;
- Using more zero- and low-emitting power sources such as renewables and nuclear; and
- Reducing electricity demand by using electricity more efficiently.
The proposal allows states latitude to determine how they will meet the regulatory goals. States have the option to use either the rate-based goal or to convert the rate-based goal to a mass-based goal. EPA has proposed that states adopt plans that incorporate a combination of “strategies” and noted that states “may work alone or in cooperation with other states to comply with the proposed rule.” The proposed rule requires that each state submit a plan for meeting these goals to EPA by June 30, 2016. Under the proposed rule, states could either submit individual plans or work together and submit a multi-state plan. The Clean Power Plan proposal is unique in that it involves actions “beyond the fenceline” of the regulated stationary sources. This aspect of the proposal has led many commentators to question whether the Clean Power Plan is actually federally enforceable under section 111(d) of the Clean Air Act.
This proposed rule is likely to have a significant effect on power plants, electric providers and consumers, and the total U.S. GHG emissions. As a result, it has drawn both criticism and support from a wide range of parties. A number of states, regulators, industry groups, and environmental organizations have provided comments to EPA about the substance of the Clean Power Plan. As discussed in this previous post, EPA granted a 45-day extension to the time period for the public to comment on the proposed rule. Comments finally closed on December 1, 2014, and the Agency is now in the process of reviewing comments. According to the Committee report, more than 1.4 million comments were submitted to EPA. President Obama has asked EPA to issue a final rule by June 2015.
The Republican-led House Energy & Commerce Committee has been carefully tracking the Clean Power Plan since it was first released. The energy and power subcommittee first heard testimony regarding the proposal in June from EPA’s Acting Assistant Administrator for Air and Radiation, Janet McCabe. In July, the subcommittee also heard from the Federal Energy Regulatory Commission (FERC) Commissioners. In September, regulatory representatives from Texas, Montana, Arizona, Indiana, Rhode Island, Maryland, and Washington testified before the subcommittee in a third hearing titled, “ State Perspectives: Questions Concerning EPA’s Proposed Clean Power Plan.”
The Committee has also released public announcements regarding studies on the potential costs of the Clean Power Plan. For example, the Committee highlighted a study by NERA Economics (“NERA”) that was critical of the costs associated with the Plan. Now, the Committee’s majority staff has released a report summarizing its finding from the hearings. In the accompanying press release, several Republican members of the Committee voiced their own concerns with the proposal. Much like the report itself, these criticisms centered around the rise in electric costs, the implications for federal and state relations, and questions about EPA’s legal authority to regulate in this manner under the language of the Clean Air Act.
According to Committee Chairman Fred Upton, “It seems like the deeper we dig into this proposal, the more problems we uncover. . . . The administration is trying to push through an unprecedented plan that will fundamentally change the way we generate and consume electricity. And while EPA’s legal authority remains in question, the consequences for consumers and our economy are certain – higher prices, fewer jobs, and reduced reliability. A runaway regulatory train is barreling toward us, and we must do everything we can to stop it.”
Energy and Power Subcommittee Chairman Ed Whitfield was also critical of the Agency. According to the congressman, EPA had “not provided the true cost and consequences” of the proposal, and not “adequately explain[ing] how the Agency will address the myriad of legal and feasibility issues. . . . While we all agree that climate is changing, we simply cannot agree with this plan which will dramatically increase electricity costs, affect the reliability of the grid system, and will create additional obstacles to economic growth.”
The report reached five key conclusions:
1. There are fundamental legal questions about EPA’s authority to regulate in this area and, assuming such authority, the scope of that authority. The report concludes that “based on review of the legislative history, it does not appear that this rulemaking falls within ‘the four corners of 111(d).’ When corrected for technical drafting imperfections, as the U.S. Code revisions have done, EPA cannot regulate existing power plants under section 111(d) because these plants are already regulated as sources under section 112 [of the CAA].”
2. EPA’s plan would transform federal and state decision-making concerning the transmission and delivery of electric power in the United States. The report notes testimony from FERC Commissioners, who stated that states currently have exclusive jurisdiction over intrastate electricity matters. Under the Clean Power Plan, FERC Commissioner Clark testified that there could be a drastic change where states begin seeking EPA approval of a state’s overall regulation of the electric industry, rather than consulting EPA on a case-by-case basis.
3. Many of the key assumptions in EPA’s proposed “building blocks” are unrealistic. The report highlights testimony from state regulators, such as Montana Public Service Commission Commissioner Travis Kavulla who testified that “[t]hese four building blocks, as the EPA calls them, are in general already being used by states to varying degrees for a variety of purposes, including carbon reduction. Yet, the EPA essentially ignores the details of a state situation and instead applies a cookie cutter formula that uses sweeping regional or national assumptions about the degree to which each individual building block is achievable.”
4. The proposal would not be workable for potentially many states because of a host of implementation challenges. The report notes that the Plan could significantly increase electric costs, threaten electric reliability, and did not give states sufficient time to implement the changes. Texas Commissioner Anderson testified that, “We build transmission faster than about anywhere in the country, but it’s still a 5-year – it is 5 or 6 year from inception to it being energized. A combined cycle power plant takes anywhere from – and this is not counting permitting – it takes anywhere from 20 – from 24 months to 36 months.”
5.The accelerated timeline for completing the rulemaking appears inadequate to respond fully to all substantive comments. The report notes that “[t]o date, more than 1.4 million comments have been submitted, including thousands of pages of substantive comments on the proposal.” This raises questions about EPA’s ability to truly review and consider all of these comments before promulgating a final rule next year.
These concerns are not unique or new. Each of these complaints has been previously raised by commentators and those commenting on the rule. These concerns do, however, highlight the differences in opinion on the likely impacts of the Clean Power Plan, as well as the ongoing struggles that the administration is likely to face as it tries to limit domestic GHG emissions. While some businesses and environmental groups have praised EPA for trying to take on climate change, a number of states, industry groups, and members of Congress are pushing back.
On the international stage, the administration has promised to make aggressive cuts to U.S. emissions in the upcoming years. The U.S. just entered a joint agreement with China to combat GHG emissions. Under this agreement, the U.S. “intends to achieve an economy-wide target of reducing its emissions by 26%-28% below its 2005 level in 2025 and to make best efforts to reduce its emissions by 28%.” The U.S. is also part of a group of almost 200 nations that will make commitments to limit their emissions as part of an anticipated U.N. agreement next December in Paris. In order to meet those goals, the administration will need to institute domestic policies like the Clean Power Plan. This recent Committee report is another indication of the legal and political push-back that the administration will likely face if it moves forward with the Clean Power Plan as written.