Legal Scrutiny Ahead: Assessing the Implications of EPA's Final Power Plant Rule

Justin Schwab: These views should not be imputed to any past, present, or future employer or client that I may have. Second. I should note that although we do now have a pre-publication version of the final rule preamble and of the regulatory text and we do have access to some supporting technical documents, we don't yet seem to have publicly available the fuller response to comments document that the preamble says is in existence and will be released. And that's not unusual. It's now looking - as is typical - that EPA won't release that document until the date that the final rule is published in the federal register, which will be some days or, or, or even weeks from now. So it's possible that on some of the issues I'm discussing, they have a different or better response than what's in the preamble. Although on some of these points, frankly, I kind of doubt it.

I wanted to begin by just a very little minor amount of table setting. I think we're gonna assume some degree of familiarity on the audience's part with this rule and with the underlying sort of regulatory history and statutory background. Kevin may want to amplify some of this as he discusses, but I'll just do just a minute of table setting if I can. This regulation that was just finalized but hasn't yet published in the Federal Register is a regulation under Clean Air Act Section 111, section 111-B - as in Boris - of that statute authorizes EPA to "set standards of performance for emissions of air pollutants from new stationary sources of air pollution." Those are sort of direct federal regulation. There's no state role in the first instance, although a state can apply for authority to run the program and the permitting program associated with the standards.

111-D - as in David - regulates existing sources. And this is not direct federal regulation in the first instance, it is mediated through a state planning process similar to the state implementation planning process for the NAAQ standards. In fact, there's an explicit textual cross-reference in the section here. Section 111-D says a procedure similar to that under Section 110, which is how the ambient air quality standards are implemented. Under this paradigm, states have the first crack at submitting to EPA a state plan that establishes standards of performance for their individual existing sources. We'll get into this I'm sure during the discussion, but at least to some extent, those standards have to be pegged to and tied to the work that EPA has already done and the existing source rule that EPA has already issued. But there's some complications, which I'm sure we'll get into. EPA reviews and either approves these plans or finds them unsatisfactory.

"Unsatisfactory" Is the somewhat unique language in the statute here. If EPA does not approve - to the extent that EPA deems estate's plan's unsatisfactory - EPA then has authority to issue a federal plan as a backstop to regulate those existing sources. So with that table setting out of the way as for this final rule, at a high level on the surface it does appear that EPA has made some significant changes from its proposal. The biggest change is one that was actually announced by the agency and its administrator at the end of February. So this was not a surprise to anybody, and that's that this proposal is not finalizing any requirements for existing gas fired power plants. EPA says it will get to that subject soon. In fact, there's a pending request for public input on this subject of how it should finish the job of tackling existing gas plants.

Comments on that request for public comment are due on May 28th of this year, I believe. But at the moment, the EPA is doing exactly what it did in the Trump administration in 2019 it's finalizing a rule that does not regulate existing gas plants. Now this will probably help EPA in potential litigation on sort of policy and state farm grounds. If you're regulating fewer plants, it just facially makes it easier to support your position that the final rule won't impair reliability of the supply of electricity. But they're still regulating existing coal fired power plants. And so most of the legal issues connected to existing source regulation are, I think, still going to dog the agency in the litigation arising from this final action. The second biggest change in the final rule as compared to the proposed rule has to do with hydrogen.

In the proposal, EPA proposed to identify two alternative best systems of emission reduction for gas plants - carbon capture, or co-firing with what it referred to often as low greenhouse gas, low GHG hydrogen. Well, in the final rule, EPA has ditched the hydrogen-based standard. Now, there's only one best system of emission reduction being identified and finalized for gas plants, which is carbon capture. Plants may be able to use hydrogen co-firing to comply with these standards, but the standards have not actually been formulated based on an assumption that would be the compliance strategy. EPA is also not finalizing any definition of low GHG hydrogen, nor is it finalizing any requirement definition that any hydrogen that may be used as co firing as a compliance measure for the carbon capture based standard B - low greenhouse gas this may help them avoid one potential legal objection that I noted in our previous webinar, and that was the objection that a low GHG hydrogen standard would just be the clean power plan with one extra step inserted since the clean power plant required fossil fuel plants to subsidize directly renewable generation by purchasing credits from them, whereas a low GHG hydrogen path, depending, had they finalized it, depending on the details of how they finalized it, might have been, I think, fairly portrayable as requiring them to certify that their fuel was generated by the use of their competitor's energy. So by making this the only a compliance option for the carbon capture standard, and by apparently abandoning any requirement that there be any particular characteristics or origin of the hydrogen used they're dodging, I think that issue potentially dodging that issue entirely, which is one of the potential arguments I had seen possible from the proposed rule. So other changes from the proposal include dropping some, but by no means all of the Byzantine set of subcategories that EPA is dividing power plants into for purposes of differentiating the regulations applied to them adding some purported reliability, ensuring mechanisms essentially allowing plants to stay in operation longer or to stay in operation with a less stringent set of requirements based on certain findings and showings of you know, reliability impacts or need to sort of maintain reliability of the grid and reliability of the electric supply.

Also allowing coal fired power plants more time to comply with the carbon capture based standard. I think two more years, I think is what they gave them here from 2030 to 2032, if I remember correctly. Okay. Now, let's list all the ways that EPA has not changed course, where it is either out on a limb with no meaningful support or where it's verging I would say in some instances on open defiance of the West Virginia opinion from the Supreme Court, which struck down the Clean Power Plan. First, EPA continues - at least implicitly - to take the position that there is no limit to the time horizon across which a system of emission reduction, which the statute requires EPA to determine has been "adequately demonstrated", no limit to the time horizon in which EPA can say, okay, here's the system of emission reduction that has been adequately demonstrated, but I think it's not gonna be four or five or eight - or under EPAs theory of authority - a hundred years before it will actually become sufficiently widely available that it can actually be installed or observed, or put into practice, or complied with at a meaningful percentage of the fleet.

So long as EPA purports to identify a date certain in the future, when it will be the case that it will be sufficiently deployable. And so long as that is a reasonable projection, that's the word that EPA kept using in the proposal, "reasonable." There's no limit on EPA 's sort of time horizon of its planning, and its, and its crystal ball authority. Now, EPA doesn't actually use the formulation date certain in the future, in the final rule, but it's all over the proposal. And they certainly haven't disavowed this position here that I can see now EPA, again, as it did in the proposal, and this is where I'd be very interested to see the full response to comments document, but at least in the proposal that I saw, and this is a thousand page document, so you know, it's possible I missed it somewhere, but at least as I saw in this final rule in the preamble, they're completely ignoring the fact that the DC Circuit case law on which they rely for this time horizon concept was all about new sources.

And in fact, multiple of the DC Circuit cases explicitly say technological nudging based on projections of the future development of the industry is allowed because the rules at issue in those cases were regulating new sources that could be expected to incorporate different design features into their plans, contrast with retrofit and existing source. That contrast was not made explicit in the case law because there is still now no substantive 111-D case law as exactly what states do and don't have to do, and what plans to do and don't have to do under the existing source authority. This or the methane oil and gas rule, which had a little bit of an earlier start will be the fir - likely be the first that will lead to substantive case law on what exactly the metes and bounds of one 111D are. Now, notably, even the nudging contemplated and even from new sources in the DC Circuit case law seems to be on the horizon.

And the way the court discusses it is one, two, maybe three years, not the eight or more now featured in EPA's Rule, let alone the 15 plus years timeframe in the proposal, which had a escalating hydrogen co-firing that's all now been dropped, but still you have you know, it's 2024 when this rule is finalized, and the date at which you're actually going to have to start, I believe, installing a compliance CCS and sort of comply with the standards is 2032. So that's eight years. That's quite a bit, although the timescale ambition on the one hand has scaled a little back from the proposal because you don't have the longer out year phases of their original proposed best system, which would kick in in escalating stages, at least on the hydrogen side. However, they did push out the actual initial compliance date for existing coal plants for carbon capture by two years.

So it's a mixed bag at best. I think in terms of how EPA in this final rule is responding to the time horizon, and at least in the preamble - we really want to get our hands on that response to comment - I don't see any meaningful engagement or any open acknowledgement that there is no limiting principle on their claimed ability to sort of identify systems that have been "adequately demonstrated", but they won't actually come online for years or maybe decades into the future. They seem to say reasonability is the only limit, and that's certainly what the proposal said. The final is a little more ambiguous on whether there's a limiting principle, and if so, is it just a rational basis, just reason. So that's one I would say, would be time planning scope. Next, EPA continues to insist that it can fulfill the statutory command to consider the cost of achieving such reduction, which is one of the statutory factors that you have to consider when determining what the best system of emission reduction is that's been adequately demonstrated.

EPA seems to insist that it can fulfill that command by looking to the compliance costs for the company - massively subsidized as they are by tax breaks and other incentives, other policy incentives exercised by Congress that have to do with spending clause, essentially - well, this is in conflict with case law and with common sense, and we got into that in some detail in the last webinar. We may wanna get into it now, but I'm just gonna note no changing force that I see on that issue. Furthermore on the 111-D as an existing source state plan side, I see no meaningful pullback whatsoever from the positions taken in the proposal. EPA is still in my personal view, illegally restricting the statutory discretion that Congress afforded to states - a discretion to assign less stringent standards than those that EPAs regulations would indicate - to particular sources based on those sources, "remaining useful life" and "other factors."

Now, this issue is already the subject of a stay motion from Oklahoma and some two dozen other states in the pending DC Circuit challenge to the recently finalized Section 111 oil and gas methane rule. It's an issue, although there's no stay motion that I'm aware of, it's also going to be an issue inevitably in a challenge brought by a bunch of states to EPA's November, 2023 finalization of the so-called framework or implementing regulations governing generally how EPA intends to regulate existing sources in this and future rulemakings. It's sure to be a big litigation topic on this rule, too. In essence, EPA insists that it can impose considerable. Extra-Statutory substantive and procedural restrictions and requirements on a state's ability to exercise this statutory discretion. Now, notably, EPA imposes no additional requirements if the state wants to assign a more stringent standard of performance on a particular existing source within its jurisdiction.

Now, EPA says on that point, well, “Section 116 of the Clean Air Act, which is kind of a general savings clause, provides that states can always be more stringent on stationary sources, so long as that doesn't interfere with the administration of EPA standards.” Yet that's true, but that's true as a matter of state police power. That does not necessarily mean that a state can be more stringent than the BSER would - the best system of emission reduction would indicate - and then get that approved and federalized in a plan. Because when a state plan is approved by the EPA, that's what happens. It becomes not just state law, but federal law among other features, it becomes enforceable, at least in theory, under a Clean Air Act, section 304 citizen suit NGO enforcement case brought in a district court where you can establish venue in the country, and presumably where the facility is.

But, you know, so, so this is not sort of an abstract thing, nor is it purely a question of federalism or state's rights. It's a question of what process or showing is required in order to be less or more stringent with the premise that this would all be federalized in the eventually, hopefully approved plan? So, that's kind of one of the interesting issues here. EPA, also - they're a little coy on this, but I see a lot of signs in this preamble and certainly in the, the framework rule that I referred to - EPA takes the position, which it says is longstanding - in its regulations, no case law has blessed this - that it can impose an aggregate statewide reduction obligation for all the facilities of a certain type in the state of Nirvana to reduce substance X by a certain amount, certain rate, or certain mass potentially, and that EPA presumably can dial that cap down as much as it wants. The agency also continues to dangle the lure of state and company availability of compliance strategies to include averaging and trading between plants. But I don't see any reckoning here with the following fact: the Supreme Court squarely held in the West Virginia Case that that kind of policy scheme cannot form the basis of EPAs own regulations. Here they don't really get into that at all. They just punt to the final November, 2023 framework rule. They just said West Virginia is different. 'cause That's talking about standards not implementation. You know, they just, I don't see any serious engagement either in the November final rule or now with what ironically enough, the progressive policy community first developed as what they called "the symmetry principle." So back about 10, 15 years ago, this this was this principle was come up with - board symmetry, obviously is not in the statute, it's not in any case law that I'm aware of - but the position is, "If you're gonna allow trading and averaging on the backend as a compliance measure, you have to bake in the ability to do that into your formulation of the stringency of the standards."

 To my understanding, the EPA did not do that baking here. And so, the EPA is coming up with explicitly an asymmetrical regulation. You'll notice a big contrast from the 2019 ACE rule, which did not do that. The ACE rule did not allow any, and would not have allowed any averaging or trading between existing coal fired power plants. Some people criticized that for having a two loosey-goosey system of emission reduction, but it was not loosey-goosey in terms of you know, it would've actually required analysis and potentially reductions at every single plant, whereas under this scheme, it seems to be that you, you can, you can have some people do quite a bit and then have them sort of average that out with everybody else, and everything's fine. Although there's that looming prospect of the aggregate reduction obligation for this state. Again, not sure whether that's gonna come into play, particularly here either in litigation or implementation, but that does appear to be EPAs position that under 111-D it can sort of dial down the aggregate emission of substance X in state, maybe it can do this, maybe it can't.

Maybe it can have averaging and trading as a compliance strategy without baking it into the standards. But EPA here is - and on a lot of other issues - is, in my view, just kind of "whistling past the graveyard." And until we see the final response to comments document anyway, we do not see a particularly elaborate position on this issue, which was squarely raised in comments. They're saying, "No, we don't think it's an issue." Back on reliability, EPAs proposal falsely asserted that the EPA conducted a reliability analysis, the document that the proposal referred to did no such thing. It instead analyzed resource adequacy, which is not the same thing. Resource adequacy considers whether at a date in the future there will be enough capacity, enough power plants of various kinds, basically to generate sufficient electricity to meet demand. Reliability considers whether that energy will actually be reliably delivered to the people who have demand for it.

It's a kind of important thing. The technical support document at the proposal that EPA referenced acknowledged these were two different things, and then said it only considered the former, it only considered resource adequacy. It was not a formal reliability analysis. The red line and comments on this draft that emerged as part of the docketed interagency review materials revealed that EPA actually originally titled that document "reliability analysis" and an anonymized commenter from another agency, had to point out to them, 'Guys, no, this is not an accurate description of what you're doing here." And that commentary had to spoon feed them some general kind of hand waving citations to try to paper over this embarrassment. Well, the final technical support document accompanying this final rule, which is properly titled just a resource adequacy analysis, says, "EPAs rule in regulating emissions from electric generating units does not include specifying generation resource mixes or grid operations and planning practices."

Thus, EPA does not conduct operational studies that this is just a flat non-sequitur. EPA is saying here that because it doesn't regulate the resource mix or the grid, it has no requirement to analyze the effects of its regulations on the resource mix or the grid. I'm not aware that EPA has yet made any legally articulated defense of this position, and frankly, I cannot conceive of one. Notably it's also directly contradicted by something this same document says a few pages later. There, it says that although certain impacts, "would not be a direct result of these rules, but rather of the compliance choices source owners and operators may pursue, we have analyzed whether the projected effects of these rules would, in this regard pose a risk to resource adequacy." So EPA didn't even try to, you know, it acknowledges it's not directly regulating the adequacy issues, but then does an analysis of them.

And then as an explanation of why it doesn't analyze reliability, it says, 'cause we don't regulate those. I I didn't see EPA even try to give any explanation other than a tautology or a Bartleby - "I prefer not to" to attempt to conduct an actual reliability analysis. I haven't seen an explanation, and that's sort of a problem from an arbitrary and capricious review perspective. Now, FERC, the Federal Energy Regulatory Commission, which is a little closer to having these issues in its direct regulatory ambit FERC took the unusual step of announcing a few days before the comment period closed on EPA's proposal here, that it - FERC - would hold a reliability conference later that year - last year - to discuss the implications of EPA's rulemaking. 

EPA sent the head of its Air Office to testify at this hearing, and he essentially said nothing of substance. He just said, "Trust us." EPAs continued refusal to actually put its name to a reliability analysis is I think a big vulnerability here. Notwithstanding that it dropped existing gas plans from the final rule. I think comments on the FERC conference to some extent and testimony there, but certainly comments on EPA's proposal were sort of unusually stark and pointed from a broad group of voices, not the usual ideological suspects like yours truly are - not only those, but people whose job is making sure that the lights are kept on - saying, "Guys, we're not, you know, not saying don't do this necessarily. We're just saying we're kind of freaked out. We're not a hundred percent sure that the 'Just trust me' approach is working." we'll see if more technical support documents come out. There's a whole bunch of modeling runs. But since they explicitly on their face say they're not doing a reliability analysis, I don't know what that leaves a review in court with. EPA's story on reliability amounts to repeatedly stressing that the premature retirements driven by this rule will just be a drop in the bucket.

It's just a rounding error because all these coal plants are gonna shut down pretty soon anyway. Well, EPA can't logically, at the same time argue that this rule is vitally necessary to combat carbon pollution and stop the seas from rising - but of course, the agency and the administration are arguing that -they're following in the line of the apocalyptic/messianic rhetoric that has been the blue EPA stock and trade, at least since President Obama announced the Climate Action Plan in 2013. Distress in the reliability discussion on coal retirements also, of course, ignores the chilling effect that this rule and even the proposal had on deterring projects to build new gas plants. All observers of this scene know that this rulemaking has already made it significantly harder to proceed with such projects. The final rule will probably be even worse in that impact.

And I would submit and comments on the proposal did submit, this is all by design. It's true that the power sector saw big reductions in emissions, even though the Clean Power Plan never went into effect - in the aggregate. But what didn't happen, because the Clean Power Plan didn't ever go into effect, is that every state in the union was not required to conform to a particular preferred resource mix and a particularly preferred utility policy. Here I would submit that the goal is clearly not emissions performance enhancement. It's not even really greenhouse gas emissions reduction, as such. Instead, it is a policy drive which is not authorized under the Clean Air Act or any other statute to have every state shift from its own preferred traditional energy mix to the forms of energy preferred by this administration and its allies. This finally brings us around to the issue of pretext. Commenters on this proposal essentially asked EPA, "Who do you think you're fooling?"

We're not operating on a blank slate here. The Clean Power Plan explicitly tried to set the nation's electric fuel mix as such, SCOTUS said in West Virginia, "You can't do that", and so EPA comes right back with the rule that in form doesn't do that, but in effect does - because EPA knows full well that many, even most companies will likely respond to the rule by prematurely retiring existing plans and by foregoing plans to construct new ones. Rather than pursue the boondoggle compliance mechanism, no matter how heavily subsidized that mechanism is for the time being, EPA insists that it's obeying West Virginia because it's only picking systems of emission reduction that can be carried out at individual plants. First, it's not entirely clear that's true. Carbon capture requires an enormous amount of ancillary infrastructure and offsite activity that EPA is just assuming it can will into being. But let's accept that. Even if it is true that this is a so-called "inside the fenceline" rule, EPA is staking everything here on this gamble that the DC Circuit and eventually the Supreme Court will buy EPAs line that all that SCOTUS forbade in West Virginia was the particular form of the Clean Power Plan, rather than its goal, which was to reconstruct, restructure our fuel mix and restructure our utility sector.

 We have ample evidence that this is also the goal of the new rule, and we have the smoking gun. In particular, EPA administrator Regan said, during the comment period, that EPA was working on, "a proposed power plant standard in the United States that helps us to transition from heavily fossil fuel resources to clean resources." This is directly parallel to statements from then-Administrator McCarthy about the Clean Power Plan that it was quote, "an investment opportunity", especially "investments in renewable and clean energy." SCOTUS has found that statement from then-Administrator McCarthy weighty enough to quote in West Virginia, and we have - to my mind - a quite similar statement here. EPA is essentially asking the public and the courts to forget the last decade of regulatory history. Forget the Clean Power Plan, forget this administration's stated goal of transforming our utility sector and abandoning fossil fuel as an electricity source and trust it over our lying eyes. We'll see if SCOTUS plays along, but I have my doubts as to whether they will. And that concludes my opening discussion.

Kevin Poloncarz: Well, thank you Justin, for that. And also thank you to the Federal Society for inviting me. And like Justin, I'll just preface by saying that the views I I'll express while I lead coalitions that have been part of prior litigation concerning the Clean Power Plan in West Virginia and in this rulemaking and my comments will certainly reflect views of the coalition writ large, they can't be ascribed to any individual members. Folks have a very diverse resource mix and very diverse interests. I just wanna start and I really appreciate Justin's table setting and also one of the reasons I agree to do this is because Justin has a really great way of being thoughtful in distilling what the legal issues are. There's a lot of noise out there about what this case is about, and I thought I would just take a moment to say what the case is not about and then talk about what really are the legal issues?

 You know, first of all, you know, there's a lot of talk out there when West Virginia came down saying that, "Oh my God, EPAs hands are tied. They can do nothing to regulate greenhouse gas emissions." that somehow Massachusetts v. EPA was subterfuge-ly overruled. That's not true. And you know, in 2007, the court said in Massachusetts that if EPA found there was an endangerment related to carbon dioxide pollution, they could regulate it from tailpipes. And then in 2011, in the case of AEP v. Connecticut, there, the court held that any common law nuisance theory going after the largest producers of power was displaced by EPAs authority to regulate power sector CO2 emissions under Section 111. That's still good law. And so what the court held did not in any way eviscerate those principles that EPA has the authority to regulate CO2 pollution from power plants.

Also, the court did not state that the Trump Administration's view of what the limitations on authority were correct. It bypassed the question of whether systems of emission reduction are limited to only those that can be applied at or to an individual generating unit. It specifically said that, you know, trading might be allowed- in a footnote it says, "We're not deciding this, but we are certainly not taking it off the table" - and it also said that incidental generating shifting was not in and of itself offensive to the statute. What they said was, and my clients argued in the case of West Virginia, that no matter how you set a standard for power plant pollution because of the way the grid is interconnected and because of the way individual sources are dispatched to meet demand, which fluctuates throughout the day, that when you impose costs on an individual source, you are going to result in generation shifting to the cleaner sources.

That's the same thing if you're putting a mercury scrubber on the end of a coal fired power plant or doing what the Bush administration did and, and having a rule that issues allowances for mercury and allows trading of them, because the companies that are gonna have to buy the allowances are gonna have higher variable operating costs, won't bid as effectively into the competitive markets, and will be dispatched less. And so it's really important that the court did not take the position that EPA can't set a standard that in any way changes the dispatch because that happens. And if Section 111 means anything, it means that EPA, according to AEP, can regulate CO2 pollution from power plants, and that will have an effect however they do it, unless they do nothing. What was most offensive to the court about the Clean power Plan was the way that EPA used generation shifting.

 It figured there is just this arbitrary determination that EPA made on the appropriate amount of coal fired generation in the country. And then EPA back-calculated to get these rate -based numbers. They set mass-based targets because states asked for them. And it looked a lot like a cap and trade system. In fact, the court bought that characterization that, look, Waxman-Markey only passed one House of Congress. It couldn't get through the Senate. We do not have a nationwide carbon price, and here EPA - based upon the Senate and the statements of the administrator - Justice Gorsuch cites the statement of Obama when he goes to the East Room to announce the Clean Power Plan that you tried to do an end-run on Congress there, you tried to put in place a cap and trade program under 111, and that is not allowable, at least not where it's not tethered to a technology-based standard or a health-based standard.

And so that's what the court threw out in West Virginia. And so where that leaves us today is that this rule is truly about what does it mean under Section 111 for a system to be "adequately demonstrated"? And what does it mean for a system of emission reduction and the resulting limitation to be achievable? There is 50 years of jurisprudence in the DC Circuit, as Justin correctly points out, that is limited to new sources which goes to the fact that something can be adequately demonstrated even when it's not commercially deployed at scale today. And you know what, what I hear a lot in the media and what I hear a lot from folks who aren't really in the weeds on the statute is that "No carbon capture is not adequately demonstrated because we don't have plants up and running doing this everywhere. And the only way that EPA can require this is if it's been proven that it can be done and it's actually being done at scale at numbers of units."

That's not what the DC Circuit jurisprudence holds. The DC Circuit, through a string of cases that are older than me or nearly as old as I am - a half century old, they basically come to the conclusion that its source doesn't need to currently be in operation, and it doesn't necessarily need to be routinely achieved prior to its adoption. And as Justin pointed out, EPA can consider what level of required control will encourage the development of innovative technology. There is a technology forcing component to the Clean Air Act, and the legislative history speaks to that. But what they set as guardrails is that what EPA envisions is the best system of emission reduction - it can't be purely theoretical or experimental in the very precise legal terminology they use - EPA can't be doing a crystal ball inquiry. They need to be basing their judgments on what is the best system of emission reduction, taking into account cost, energy, environmental considerations, based upon a reasonable survey of what the world provides as available systems of emission reduction.

The other error I see in some folks who are even a little bit more aware of this DC Circuit jurisprudence and the language of the statute is that adequately demonstrated when the statute says, "has been adequately demonstrated", that's past tense. Past tense means it's been done, actually has been demonstrated, has been adequately demonstrated, is not the past tense. It's a form of the present perfect tense. And that is described as a tense that is used to indicate that an ongoing action started in the past but has not yet been completed. And let me provide just one example of how this plays out. So consider the phrase "Physics has been studied". Would we say that that means the laws of physics have been adequately demonstrated? Does that mean that we stop the study of physics or we stop interrogating those laws of physics when we encounter new things like quirks or whatever they are?

I'm not a physicist. No, it just means that we continue onward. And the word adequately also affirms that interpretation because it's saying, look, adequately - It's not complete, not done. And so when folks get into tense they really should look at the language of the statute, which uses a very different tense than says "was demonstrated." And so another term in the statute that really affirms EPAs view is that the standard must be achievable. It doesn't say it must be achieved. It's achievable based upon our prognostications, our informed judgment. And what we view is the available scientific evidence out there. And very interestingly, when I was going back in preparation of comments for clients, it was when we're all considering Loper Bright and Relentless, and there are these cases all which long predate Chevron in the DC Circuit where they basically say the administrator determines what has been adequately demonstrated, taking into account cost, energy, other environmental requirements.

And they say "We defer to their scientific judgment", and that's different than their deference to interpret an ambiguous statutory term. It's saying "Far be it from us as judges when EPA is the expert agency." And there is language in AEP v. Connecticut - the case about displacing federal common law by EPA's authority - that affirms that, yeah, EPA has been charged by the statute with making this highly technical determination. And here EPA has made a determination based upon existing plants, boundary dams and others that in, in announced projects, that carbon capture this technology that's been in place for a very long time in lots of industries is adequately demonstrated. Sure, it's gonna take some lead time to get the technology deployed, but the DC Circuit case law says that adequate lead time is a really important part of determining whether a requirement is achievable and the agency can afford that lead time.

Now, in comments, we basically told EPA that yes, the standard needs to be adequately demonstrated with adequate lead time, and we think CCS can meet that mark because EPA is providing lead time for the deployment of the technology. And this is very similar to a view that the Bush administration took of what they could do under section 111 in the Clean Air Mercury Rule where they said, "We are gonna set more aggressive budgets out for eight years in the future because we don't think the technologies deployed today can be deployed today at scale, but by eight years from now, we think it can be." And so I think that that's a really fine point. So what we're going to be arguing about is what is adequately demonstrated and will the DC Circuit and possibly the Supreme Court, will they affirm 50 years of jurisprudence under this statute against which Congress has legislated and amended the Clean Air Act a number of times? Or will they say "adequately demonstrated" means past tense end of story, done? I think my view is that EPA took a very traditional approach in response to West Virginia and they basically said, "What are the technologies that are out there?" And we've got boatloads of money under the infrastructure investment and Jobs Act, and we've got a ton of money under the Inflation Reduction Act, $85 a ton to capture carbon from these power plants. And when we do the calculus, we think that that should put plants in a position that fossil generation can continue, fossil generation can continue for some time, and it's going to be needed, because guess what? We are increasing electricity demand and we cannot be in a world tomorrow where we are only talking about renewables and storage, and we are going to need dispatchable fossil generation to fill in the gaps.

Sure, fossil plants are gonna operate a lot less, gas plants that operate today at 45 to 55% capacity factor might be operated at much lower levels, but they're still gonna be needed to assure reliability. And that gets to the point, Justin, the distinction between a resource adequacy analysis and a reliability analysis. EPA took - it learned its lesson in a number of cases that said "EPA, you are not the expert on power sector and power system engineering and design. You're not even the expert who puts out standards like - that's NERC - for what are the requirements to maintain the reliability of the grid." Instead, they said, "We are a pollution regulator, but we have made these determinations based on our modeling that there will be adequate capacity to assure that the lights stay on. And we've provided a number of mechanisms to ensure that the lights stay on and that, and that implementation of a rule that requires these standards won't stand as an obstacle to reliability."

And they did a number of things first. Folks, like my clients, raised that if you're gonna base a standard on CCS, there are huge infrastructure issues associated with that. And assuming that you can get all of that infrastructure deployed, that you could get classic swells built, and that these sources could be online by 2030, that might be a leap too far. And so EPAs pushed the date out a bit and they've also provided this mechanism that provides, "Hey, source owner, if you can't comply and you planned on installing CCS, but you can't comply because you can't get the permits somebody's issued - a judge has issued an injunction because Center for Biological Diversity has challenged your pipeline, then you get extra time." If it's more than a year, then we're gonna go and probably require a state plan revision. But there's kind of this automatic extension thing in there, and there's similarly an automatic extension where a reliability coordinator says, “Uhuh, you can't come offline, plant. We know you told your state and your state plan that you were gonna retire and that that was gonna be how you complied with the standard, but you can't do it because we're seeing a demand for electricity that can't be met by the renewable resources and the non-fossil generation resources.”

So you need to stay on, and EPA says, "Okay, in that instance, you could do, you could stay on for up to a year more. We're gonna consult with FERC if it's greater than six months, if it's greater than a year, that needs to be something that's dealt with a state plan amendment", then you could apply "remaining useful life" for other factors. Those are the determinations EPA makes about unavailability of infrastructure, unavailability standard, because guess what? Not every existing source is located in a location where it's perfectly available for CCS. If you're planning a new gas plant, you can decide to put that gas plant near infrastructure that will allow you - over time - to install CCS as it becomes available in many utilities that see a role for gas generation over decades and also have net zero strategies.

And so they might want to do that, but for the existing coal fleet, it's gonna be really tough to figure out how to get all plants able to achieve the standard? And that's not necessary - to defend the standard - because there are enough mechanisms in the rule, there's remaining useful life ,or other factors, and there are enough reliability mechanisms that we think EPA has taken a pretty darn traditional approach and done exactly what the Supreme Court told it it had to do, which was premise its standards upon available and achievable technology. I see we're kind of getting close on time, so I think I'll turn it back over to Justin for us to have a conversation or answer audience questions.

Justin Schwab: Well, thank you very much, Kevin. I'd like to echo, I was ecstatic when I heard that you were gonna be doing this again because I said on the last thing, and I didn't mean this as a dig to anybody else, but I said, you're often an enabler and defender of these regulations, and the people whose official remit is to do that. And I I said that in jest, because I have affection for those people as well. But you give the best case for this rule, both as a policy and a legal matter that possibly could be made. So thank you very much, for joining us here. I have a few responses just in kind of a lightning fashion to some of the things you said and I think either turn it back to you or turn it to questions or however we wanna do it.

 Further, I think you're entirely right that there's a lot of misunderstanding of what West Virginia did and didn't do, and what this new rule does and doesn't represent. It is true that Massachusetts was not surreptitiously overruled in any way. However, and I don't have the case in front of me, so I'm paraphrasing, but people don't focus very much on the very last substantive words of the 2007 Massachusetts opinion. So right before just saying "remanded for proceedings", they said, We are not holding that EPA needs to make what it did eventually make, which is the endangerment finding that greenhouse gas emissions from cars and and SUVs were endangering human health and welfare through global warming or through climate change as it's now called. We are not, nor are we holding, what policy considerations may come into play if and when EPA does in fact make that endangerment finding.

And so you're right that there are two lines of cases. There's Massachusetts and then there's the AEP case, but there's also I would say the UARG case because with the UARG case - Utility Air Regulatory Group, EPA had kind of in a odd fashion - we won't get into the details - incorporated greenhouse gas into the new source review permitting program and the details, you know, they ended up being able to regulate a lot of those sources anyway, but let's not get into that. The important thing there is that the holding of that court was the holding of Supreme Court in UARG was just because we said in Massachusetts the act wide definition and the cars and trucks definition of pollutant or the, or the use of the word pollutant is capacious enough to encompass greenhouse gas and climate change theory does not mean that you just say "everything goes" in every downstream section when you're meaning to implement regulation, you have to really look from the ground up at the text and context of the particular program.

And I think we both actually completely agree on that. We may part ways radically on whether in fact that's what's at play here. But on first principles, I think we agree. On the question of AEP - American Electric Power v. Connecticut - its holding that whatever state common law to deal with climate change that might have theoretically existed in 1788 was displaced maybe by the creation of the federal government, but certainly by the enactment of the Clean Air Act in general, and Section 111 in particular. So the cheap shot there, and I'm, this I am not saying the following, I am not accusing this of being the syllogism, "Something must be done. This is something, therefore this must be done." That would be a very cheap shot. The classy shot is to note that AEP was not saying it was any particular regulatory action taken by EPA that might displace state tort because no greenhouse gas standards for power plants had even been attempted, had been proposed, I think when AEP came out, let alone finalized it's the existence, it may be the creation of the federal government, but they didn't need to get into that very difficult question because it is the enactment of the Clean Air Act in general in Section 111 in particular, and I believe AEP used a phrase like "The decision of whether and how to regulate these emissions has been delegated to EPA." So it is at least theoretically possible that EPA could say either we do not identify any best systems of emission reductions, that colors within the statutory lines - that meets the statutory factors - or, and/or some other argument they came up with to not regulate. That's, that's just something to note out there. It's true that West Virginia did not touch the so-called "fence line question" of whether the best system of emission reduction can only consist of measures that can be done at and to a particular plant.

 It did however say that it found it relevant that EPA had more or less stuck to those constraints for decades before getting into utilities. There's another instance I can't pass up, which is in footnote three of West Virginia. Footnote three of West Virginia says Justice Kagan's dissent says we're full of it because EPA could get to exactly the same results that it wanted to get in the Clean Power Plan by just ordering all coal plants to become gas plants to just retrofit them so they can run on gas. It says, of course, EPA has never ordered such a thing and we doubt that it could. Well, the current proposal and it's complicated, but essentially for those coal plants that wanna remain in operation after 2032, but then shut down before 2039 - I think I've got that right - but essentially plants that want to operate through the bulk of the 2030s but then shut down before let's say 2040 or a year before that, they have to achieve a standard that's based on - they can get their other ways including potentially hydrogen doesn't have to be low GHG hydrogen - but the standard is based on a 40% co-firing with natural gas.

And again, I really wanna see that fuller response to comments because here they just say, "Eh, we're not talking about complete fuel switching, we're just talking about 40% co-firing so we don't think that the footnote in West Virginia causes us any hesitation here." You know, we'll see what the Supreme Court thinks - if and when it gets there - as to whether that was actually adequately listening to not just the letter, but also the spirit of what the Supreme Court was saying there, but I have to note that. On the case law real quick, so the DC Circuit case law, it's certainly true that two principles emerged from the case law such as it is. One is that some nudging or sort of anticipation of the course of technological and market development can come into play so that when you issue your new source performance standards - that's what the court was talking about in these cases - you can sort of look to where the ball's gonna be in a couple years and then phase in compliance and deployment rather than what actually is currently ready to go immediately that day.

That's certainly true. Where however, did the DC circuit get that principle? So the Supreme Court has never talked about, let alone affirmed any of this. So when the DC Circuit said that in a Section 111 case, it was I think the very first 111 case from, I wanna say 1973, it borrowed that analysis by an express reference to a Title II case from 1972. Title II deals with cars. The Title II statute explicitly talks about lead time for compliance. Section 111 doesn't at all. I don't know what that kind of purpose and spirit - and not really looking at the text - I don't think that, I mean, it's not a coincidence this was happening, you know, in the early seventies. I don't think that kind of analysis would fly today, even with the DC Circuit, let alone with the Supreme Court.

And so it's a very interesting question as to how, you know, the Circuit's precedent is what it is. 

Could there be an en banc plea, maybe, although with the current composition of this court, I wouldn't recommend it, on the DC Circuit, but the Supreme Court is gonna be looking at this, you know, on a blank slate and kind of saying, what, if anything, of this DC Circuit case law do we think goes, and so that's entering into very treacherous territory for those who are putting a lot of weight on the DC Circuit case law. And then crystal ball, the other thing where it says, yes, EPA can do technological nudging and technological projections. Now, all the instances I found in the case law were limited to, let's say less than one presidential term - EPA in its proposal tried its best to give regulatory precedent. The only ones I saw going out anywhere near eight years, let alone beyond it, were in the utility sector, and we'll get to that in a second - never affirmed by a court by the way - but the one thing that the case law says EPA can't do is it can't engage in crystal ball inquiry. Well, again, EPA seems to have never - including in the final as far as I can tell - decided where did this phrase come from when the DC Circuit used it? Again, the DC circuit, when it used that phrase, "crystal ball inquiry," is the no-go. That's the limit - a projection beyond which EPA can't build out a plan that long, "crystal ball" was adopted from a NEPA case, an early NEPA case the previous year in that NEPA case, the DC Circuit rejected a challenge to an interior department, I think NEPA analysis, where the interior department had declined to consider certain technologies that wouldn't come online until, what do you know, about eight years in the future?

This was a 1972 case and they were talking about stuff that wouldn't be ready until the eighties and the DC Circuit said, "Yeah, you don't need to consider that. That's a crystal ball. You don't need to have a crystal ball to do NEPA." Well, I would argue - and comments did argue - a fortiori, if an agency is not required to consider technological developments at a span of eight years, that's crystal ball - you can't possibly expect 'em to think out that far, a fortiori - You cannot make your projections of technological and market development eight years into the future to be the substance of a binding regulation. Now, it's entirely possible that a lot of regulated parties and stakeholders, including parties that are gonna have to comply with this rule, really liked it, and thought it was compatible with their business model, especially with the incentives and the tax credits.

That's all great, that's all good. There are plenty of other companies and stakeholders in this country that fought this vigorously that presumably will sue on it and that do not think that this is a: legal or b :policy appropriate. Our remarks are focusing more on the legal - the mention of the Clean Air Mercury Rule is very interesting - the Bush Administration's 2005, so-called CAMR - Clean Air Mercury Rule. It is certainly true that the concept of trading and averaging and the concept of very long compliance times to my understanding, came from this rule, at least what you're doing with Section 111. It is very notable that the only meaningful precedent EPA can cite for these kinds of measures are its own rules, both under the Obama Administration and to some extent under the Bush Administration. Well, none of this had been blessed by a court.

And so it's, it's kind of weird, you know, if the agency's preparing to say to the court, "We've been doing this for decades." Well, no court has ever had a chance to weigh in on it because all of the various attempts by red and blue EPAs to do this have blown up on the launch pad for one reason or another, having nothing to do with the issues we're discussing now. So it's still a complete blank slate, at least from SCOTUS 's perspective, and I would argue when you unpack the true provenance and derivation of this DC Circuit case law, arguably even under the DC Circuit's case law as well. In terms of an analogy here that there had been averaging used for limited purposes in Section 111 rules prior to the Clean Power Plan, and opponents of the repeal of the Clean Power Plan and the defenders of the Clean Power Plan in the Supreme Court said, "Oh, we got all this precedent," That didn't slow SCOTUS down at all. The idea here was that little nibbles taken in a certain kind of policy area at time one, are not necessarily gonna help you defend taking a big old bite out of it at time two. Well, I would say similar to the time planning, if you're looking at precedent, which - let's be real - regulatory and case law precedent has mostly been out the next couple years and then getting it onto eight years and booking, remember the eight year compliance is pegged to units that wanna stay into operation beyond 15 years from now. So I think the 15 year plan objection raising the comments still has some force, at least rhetorically you're just getting into, is this just nibbles or have you finally taken the big old bite? And if so, what is the Supreme Court gonna do about it?

Very, very good gambit on the present-perfect construction of has been. In a former life. I did a lot of linguistic stuff, and so I was jumping up for joy. That's a good one. That's, yeah, that'll be interesting to see how that plays out for those judges and justices who still, you know, put their dictionaries right next to their rules of procedure. That'll be, that'll be, that'll be an interesting one to chew on. I'd also finally just say though, that when you look at "has been adequately demonstrated", the question is for what purpose? So fine, I'll grant you that there's some progressive - small p progressive - sense of it's an action that's still ongoing. But for what purpose? For the purpose of issuing binding regulations with the force of law. This is not a demonstration program, EPA in the preamble points to the use of "demonstrate" in Section 103 where it talks about demonstrations and research and all this stuff, and says, look, this is supposed to be inco- hey, well, no, that's not regulatory. That's the old Clean Air Act, which was just handing out research money, basically. That's, I will say, with all respect to EPA, you are making a much better argument than the one that I see them fleshing out there, although I guess you can make them both simultaneously. Finally, you're entirely right that whatever happens to Chevron, which is deference on the linguistic text, the interpretation of the words of a statute, you're entirely right to say that there's the other doctrine of deference that doesn't really have a name. Baltimore Gas, I guess, but I mean, no one really talks about it that way. That when you know there's complicated mumbo-jumbo happening that you know, "Hey, I don't have a PhD, I'm just a judge right? I defer to the agency's scientific and technical judgment.” You're entirely right that that principle is still there, regardless of what happens to Chevron, that principle's still gonna be there. But I would say that's why it's so important that you have meaningful guardrails on the agency's exercise of that judgment within the box. And in the Clean Power Plan, EPA tried to come up with limiting principles. "Well, It has to actually reduce emissions from the sector, and you can't just go plant trees. There has to be some kind of physical connection on the grid happening here" that didn't really look, I think, like a meaningful limiting principle. It was just saying, "We can do whatever we want, but here's a Clean Power Plan shaped box that we're drawing you with limiting principles”, I think here too, in terms of pushing some of the time, the cost question, I think you're really getting into that. Finally on cost, I can't help but note that Kevin did not spend a lot of time talking about the cost factor.

He did note we've got boatloads of money flying around there, right? Well, boatloads of money are being expended in the form of tax credits. Another word for that is societal costs. And so, again, go to case law, smoking gun DC Circuit, the original version of the parenthetical in the definition of standard performance, so now it has three factors in it. You determine what the best system of emission reduction is, take into account the cost of achieving the reductions, energy requirements, and any non-air quality, health, and environmental impact. That originally - my memory is - that originally in 1970 just said "cost." That was it. And based on that, the DC Circuit in the early case laws, so well, yeah, of course this entails a consideration of environmental harm and sort of what I would call broader societal costs. So we know that that's not coming in from any other secret sauce in the weighing or the blender of all detection factors.

The DC circuit very early on thought that the word "costs" allowed - possibly required - that kind of analysis. I do not know how EPA is going in briefs to defend its position that it is allowed to only look at the subsidized sticker cost to the regulated party. It says at one point in the preamble of the final rule, something like "The costs to the regulated facility are the most relevant costs under the statute." What, what does that mean? That means we're allowed to look at the other societal costs, but then divide them by a thousand? You know, I mean, I don't know what they mean by that. I'm not sure the DOJ will know what they meant by that either. And then I promise this is the last point. I'm gonna take at least a couple questions on resource adequacy versus reliability.

You're certainly right that the EPA has been dinged in the past when it started to act too much like an energy regulator. And so I think EPA's defenders will say, well, what are we supposed to do? Right? We're either supposed to just punt to FERC and everybody else, or we're not, like you can't be one or the other depending on whether you, you know, how you want to kill our rules, and I get that. But there's another side to this story. What EPA is doing here after West Virginia is the equivalent to the Marbury v. Madison sort of pullback jump shot, which is like, "Oh, no, you can do whatever you want, but we're the ones really in charge here". They say, "Oh, we're just pollution regulators. We don't know anything about any grid", but they're really still inserting themselves just as in the joint vehicle rules done by Department of Transportation and EPA, because Department of Transportation only regulates emissions coming out of the tailpipe, whereas EPA regulates emissions from the whole car including refrigerant evaporation and passive evaporation, that because its standards have more things at play, it will become the dominant regulator dog. That's what happened after the first joint rule. So to here, EPA by inserting itself here, it becomes the big dog, sort of at the expense of FERC. Finally, the Federal Power Act of more than a hundred years ago, or a hundred years ago, very clearly made a demarcation that wholesale energy rates and transmission, that's the province of the federal government, resource mix and facility location decisions are to be left to the states. The clean power plan was an end-run around this. This is a more subtle end-run around this. That's my story and I'm sticking to it.

Kevin Poloncarz: Well, respondents don't get rebuttal time, so I will turn over to see are there any questions? We only have a couple minutes, but we'd love it if there were questions from the audience for certainly Justin or me.

Jack Capizzi: Certainly. Well, it looks like we've got one to start, and as a reminder, if anyone has any remaining questions, you can just type them into the Q&A function. This one guest asks that "In addition to this particular case, could you provide policy insights into how the EPA is regulating and supporting geothermal power or energy power plants?'

Kevin Poloncarz: EPA does not have a standard of performance for geothermal power plants at this time. And there are many open questions as to how geothermal will qualify given the various technologies that are available for geothermal under the tech neutral tax credit that's available under the Inflation Reduction Act. But EPA has not to my knowledge yet done what it did in the 45-V instance concerning qualified clean hydrogen and opined as to what it thinks should qualify for treasuries purposes. So we don't quite know what EPA has done. EPA has said a lot of good stuff about geothermal, but other than, you know, my understanding is that most of the federal focus there is from DOE.

Justin Schwab: That is why they pay you the big bucks. Kevin, because I know very little on this subject. I will note, however, to people I mentioned at the beginning, there was a pending re there's a pending request for public input. The deadline, I believe is May 28th on how EPA should complete this regulation and finalize regulation of existing gas plans.

Kevin Poloncarz: And there's a, there's a-

Justin Schwab: Any mention, is there any mention of geo there? Because it, they talk about "other technologies'' and the possibility - reading between the lines a little - they ask questions about co-locating other technologies such as wind, solar, energy, storage - 

Kevin Poloncarz: Storage, renewables,

Justin Schwab: Yeah yeah.

Kevin Poloncarz: So geothermal could be part of that.

Justin Schwab:  This is inside the facility of an existing gas fired power plant. They are really, you know, I understand it's a policy matter. They want to get all possible input, both sort of argumentation, but also ideally factual submissions they want from the public as to what's going on here. I will note that if I were still in EPA giving them advice, which I'm not, I would say you better wait to finalize that until you see how the courts are gonna treat what you're up to here. Because there is no point in going down that road if the Supreme Court is gonna breathe life into footnote three of West Virginia and say you can't do fuel switching. If you can't do fuel switching, I would argue a fortiori, you can't Frankenstein it into a different type of power plant altogether.

Jack Capizzi: Well, it looks like we've got one more question that seems like it might be a good spot for us to wrap up. This guest says that they wanted to get the panelists to weigh in on the chances that arguments against the EPA power plant standards will attempt to argue that it falls under the major questions doctrine rather than arguments about the technology being adequately demonstrated or cost effective.

Kevin Poloncarz: I'll just start quickly 'cause I'm gonna need to jump, and say that any lawyer who's worth his or her weight in salt would make a major questions argument against any EPA regulation these days. And so that's going to happen, and they're gonna make a major questions argument, and we are still defining and understanding what the contours of that doctrine are. But from my perspective, there's nothing here that implicates a major question.

Justin Schwab: I, I think that you are likely to see people attempt. And I think a lot of the comments teed up a sort of hybrid major questions and pretext argument, which is to be saying, "If you were operating in the first instance on a blank slate, and if this were what you would come out with in 2014, maybe these arguments wouldn't be activated." But the history of what happened in the Clean Power Plan and the way it was defended and now saying, "Oh, actually this is a totally traditional thing", that I think is an oblique way to sort of try to activate those sort of omens, and let's be real, most likely the in the justices and the judge's minds, but you never know what panel you're gonna get.

Jack Capizzi: Well, with that, on behalf of the Federalist Society, I want to thank our audience, as well as Justin and Kevin in particular, for being with us today and for sharing their time and expertise with us. As always, we encourage you to check out our website fedsoc.org or to follow us on all major social media platforms to stay up to date with announcements and upcoming programs. And with that, thank you all very much for tuning in. We are adjourned.