DOE to Conduct Study of Electricity Markets’ Impact on Baseload Generation

Last week, Secretary of Energy Rick Perry issued a memo directing his staff to conduct a study examining electricity markets and reliability.  The memo centers around the concern of the erosion of critical baseload resources, particularly coal-fired power generation.  Secretary Perry writes that this has resulted from “regulatory burdens introduced by previous administrations that were designed to decrease coal-fired power generation” as well as “federal subsidies that boost one form of energy at the expense of others.”

As a result, Secretary Perry is directing DOE to study the “critical issues central to protecting the long-term reliability of the electric grid,” and to explore three specific topics:

  • The evolution of wholesale electricity markets, including the extent to which federal policy interventions and the changing nature of the electricity fuel mix are challenging the original policy assumptions that shaped the creation of those markets;
  • Whether wholesale energy and capacity markets are adequately compensating attributes such as on-site fuel supply and other factors that strengthen grid resilience and, if not, the extent to which this could affect grid reliability and resilience in the future; and
  • The extent to which continued regulatory burdens, as well as mandates and tax and subsidy policies, are responsible for forcing the premature retirement of baseload power plants.

This study is to be completed 60 days from the date of the memo, or June 13, 2017.  According to the memo, yesterday the DOE Chief of Staff was to present Secretary Perry with a plan for how DOE will complete the study within the prescribed time limit, but this plan has not been made publicly available.  Secretary Perry ends his memo by noting that he has committed to the President that the report will not just analyze problems; it will also provide concrete policy recommendations and solutions.

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D.C. Circuit Grants DOJ Request to Hold EPA’s 2015 Ozone Standards Cases in Abeyance

In an order issued last week, the D.C. Circuit granted DOJ’s request in Murray Energy Corp. v. EPA, No. 15-1385, to hold in abeyance challenges to EPA’s 2015 update to the ozone National Ambient Air Quality Standards (NAAQS).  The Clean Air Act requires EPA to issue NAAQS for certain air pollutants including ozone, and to review those standards every five years.  EPA previously revised the ozone NAAQS in 2008, and set primary and secondary ozone standards at 75 parts per billion (ppb).  Upon finding that a more stringent standard was required to protect the public against the health effects associated with long- and short-term ozone exposure, the Obama Administration’s EPA lowered the primary and secondary standards to 70 ppb in October 2015.  Litigation challenging the rule began almost immediately after it was promulgated.  Industry groups as well as a group of states filed petitions for review in the D.C. Circuit, arguing that the 70 ppb standard was too stringent.  Environmental organizations also challenged the rule, arguing that it did not go far enough.

DOJ’s motion, submitted to the court earlier this month, asked the court to either continue oral argument that was scheduled for April 19, or in the alternative, hold the case in abeyance until the EPA has completed a review of the 2015 update.  DOJ made arguments similar to those it offered in its motions to hold in abeyance the Clean Power Plan and New Source Performance Standards, including that, “in light of the recent change in administration, … EPA intends to closely review the 2015 Rule, and the prior positions taken by the Agency with respect to the 2015 Rule may not necessarily reflect its ultimate conclusions after that review is complete.”  In addition, DOJ argued that the “continuance is appropriate because recently-appointed EPA officials in the new Administration will be closely scrutinizing the 2015 Rule to determine whether the standards should be maintained, modified, or otherwise reconsidered.”

DOJ also stated that the industry and state petitioners did not oppose the request to hold the case in abeyance.  Public health and environmental organizations including American Lung Association, Appalachian Mountain Club, National Parks Conservation Association, Natural Resources Defense Council, Physicians for Social Responsibility, Sierra Club, and West Harlem Environmental Action, Inc. filed a motion in opposition.

The D.C. Circuit’s order removes the case from its oral argument calendar, holds the case in abeyance, and directs EPA to file status reports on the agency’s review of the rule at 90-day intervals.  The court commented that it “disfavors motions to postpone oral argument” and reminded DOJ that “it is imperative that the court be notified promptly when a potential issue arises that affects the date of oral argument.”

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EPA Asks Court Not to Issue “Advisory Opinion” on CPP

On April 12, EPA filed a response in support of its motion to hold the CPP litigation in abeyance.  In this response, EPA argues that “it is not the proper role of this Court to try to shape a potential forthcoming rulemaking through an advisory opinion, particularly where doing so would intrude upon EPA’s authority to interpret and implement a statute it administers and upon a new Administration’s authority to change legal and policy positions.”  EPA also responds to allegations that its abeyance motion is untimely, stating that issues concerning the CPP are “unfit for further judicial proceedings.”  And EPA argues that the Supreme Court’s stay of the CPP did not somehow remove the D.C. Circuit’s authority to manage the docket, as environmental groups and state opponents intervened in the cases had alleged.

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U.S. Energy-Related CO2 Emissions Continued to Decline in 2016

While global energy-related CO2 emissions remained flat in 2016, U.S. energy sector emissions fell by 1.7% according to the EIA.  This drop continues the trend of declining energy-related emissions in the U.S.  The 5,170 million metric tons emitted in 2016 is 14% lower than 2005 emissions.

The decrease in emissions from 2015 to 2016 was driven primarily by changes in fuel consumption in the power sector.  Natural gas and petroleum consumption in the U.S. increased in 2016, and correspondingly emissions from petroleum and natural gas actually increased by about 1% each.  However, this was more than offset by decreased coal consumption, with coal-related emissions falling by 8.6% in 2016.  In addition to more generation from natural gas, EIA notes that renewable sources also helped to replace reduced generation from coal.

Another way EIA analyzes emission trends is through “carbon intensity,” which relates CO2 emissions to economic output.  For example, 2016 saw a 1.7% decline in energy-related CO2 emissions and an initial estimate of 1.6% in economic growth, which combine to imply a 3.3% decline in the carbon intensity of the U.S. economy.

The EIA report also dives into the differences in emission trends among different consumption sectors.  In recent years the power sector has shown the greatest decline in emissions, while the industrial, residential, and commercial sectors have been more consistent.  The U.S. transportation sector was the only one with an increase in CO2 emissions from 2015 to 2016.  Transportation-related emissions increased by 1.9% in 2016 and surpassed power sector emission levels.

As EIA has previously reported, its analysis shows that if the Clean Power Plan is not implemented coal will become the leading source of electricity generation by 2019.  Consequently, the outcomes of EPA’s review of the Clean Power Plan and the continuing litigation over this rule will shape these trends in the future.

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To Abey, or Not to Abey. That is the Question.

Parties on both sides of the Clean Power Plan (CPP) and New Source Performance Standards (NSPS) litigation have filed responses to the Department of Justice’s (DOJ) motions to hold the cases in abeyance, with those challenging the rules filing in support of the motion, and those supporting the rule opposing.  In both dockets, the DOJ’s motions, and the filings of the parties that overlap between the two cases, are similar.  They are not identical, however, as the procedural postures of the respective cases differ—i.e., the Clean Power Plan has been fully briefed and argued and is stayed pending judicial review, versus the New Source Performance Standard which has been fully briefed but not yet argued and is in effect.

The DOJ’s motions provide notice to the court of: (1) the President’s “Promoting Energy Independence and Economic Growth” Executive Order (EO) directing EPA to review the rules; (2) EPA’s initiation of a review of the rules; and (3) “if appropriate, a forthcoming rulemaking related to the Rule and consistent with the Executive Order.”  The motions go on to state that, “[p]ursuant to these developments, the [Rule] is under close scrutiny by the EPA, and the prior positions taken by the agency with respect to the Rule do not necessarily reflect its ultimate conclusions.  EPA should be afforded the opportunity to fully review the [Rule] and respond to the President’s direction.”

As to West Virginia v. EPA (the CPP case), the DOJ claims that abeyance is warranted “to avoid compelling the United States to represent the current Administration’s position on the many substantive questions that are the subject of EPA’s nascent review.”  The DOJ further claims that a D.C. Circuit decision will likely lead to a cert petition and further briefing “prior to EPA’s completion of its review,” and that “[t]his could call into question the fairness and integrity of the ongoing administrative process.  Holding the present challenges in abeyance will preserve the status quo.”

Similarly, as to North Dakota v. EPA (the NSPS case), the DOJ claims that were the Court to hold oral argument “in the midst of the new Administration’s review … counsel would likely be unable to represent the current Administration’s position on the many substantive questions that are the subject of that nascent review.  Nor would it be proper for counsel to speculate as to the likely outcome of the current Administration’s review, as any such speculation could call into question the fairness and integrity of the ongoing administrative process.”

The DOJ requests the “Court to hold these cases in abeyance while the agency conducts its review …, and requests that the abeyance remain in place until 30 days after the conclusion of review and any resulting forthcoming rulemaking, with motions to govern further proceedings due upon expiration of the abeyance period.”

In their responses supporting the Motions (CPP response here, NSPS response here), Petitioners and Petitioner-Intervenors state that courts have granted the government’s request for abeyance in pending litigation “when an agency is revisiting a challenged regulation, especially during a transition from one presidential administration to another” (CPP) and “to afford it the opportunity to address policy changes due to changes in presidential administrations” (NSPS).  Petitioners and Petitioner-Intervenors further claim that abeyance would “avoid the possibility of the Court issuing an opinion that could be rendered both moot and advisory by EPA’s action to revise or rescind the Rule.”  As to the CPP, Petitioners and Petitioner-Intervenors claim that abeyance would “simply preserv[e] the status quo” because, due to the stay, a Court decision “would have no practical effect while EPA revisits the Rule.”

State and Municipal Intervenor-Respondents’ oppositions to the Motions (CPP response here, NSPS response here) point to the lengthy proceedings that have already taken place (including oral argument before a full court in West Virginia and that briefing has been completed in North Dakota).  As to the CPP, the State and Municipal Intervenors state that EPA is asking “for an open-ended delay in the litigation” and that “[t]he practical effect of an abeyance would be to improperly delay the implementation of the Rule indefinitely without either timely completing the judicial review contemplated by the Supreme Court or engaging in the notice-and-comment procedures required to revoke or modify a regulation.”  As to the NSPS, the Intervenors state that “[n]either the Rule nor EPA’s duty to regulate can be repealed by executive order,” and that “any change to the Rule is merely speculative at this time.”  In both cases, the intervenors make clear that even if EPA may alter its positions, they will continue to defend the rules.

The Public Health and Environmental Intervenor-Respondents also filed oppositions to the Motions in both cases (CPP response here, NSPS response here), raising similar concerns as the State and Municipal Intervenors, stating, among other things, that a future rulemaking is speculative and that “[t]hrough the abeyance motion, EPA seeks the Court’s assistance to do what it could not do otherwise: effectively and indefinitely suspend a duly promulgated rule without proposing, taking comment on, justifying, or defending in court any legal or factual premises that might support such a result.”  The Public Health and Environmental Intervenors additionally discuss the lengthy administrative history behind the promulgation of the rules, stating that “Respondent-Intervenors have, for well over a decade, sought EPA standards to limit power plants’ climate-destabilizing and health-endangering carbon dioxide emissions.”  These intervenors state that if EPA is unwilling to defend the rules, they “stand ready” to do so.

Additional oppositions were filed by Advanced Energy Economy, American Wind Energy Association/Solar Energy Industries Association, and a group of power companies who intervened to support the rule.

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