Pencils Down: Briefing Concludes in West Virginia v. EPA

Last Friday, April 15, 2016, petitioners challenging the Clean Power Plan and like-minded intervenors filed their rebuttals to EPA and its supporters’ defense of the rule.  The reply briefs wrap up briefing in West Virginia v. EPA, and set the stage for the D.C. Circuit to hear oral argument in June.

In their 168-page opening brief on the “core legal issues,” petitioners—a collective of 28 states, numerous coal producers, utilities, and trade groups—attack the CPP on four broad grounds, arguing the rule far exceeds EPA’s authority under section 111 of the Clean Air Act (CAA), is in direct conflict with section 112 of the CAA, unlawfully abrogates the CAA’s cooperative federalism system, and unconstitutionally commandeers states into carrying out EPA’s federal policy.  Citing the Supreme Court’s 2014 decision in Utility Air Regulatory Group v. EPA, petitioners urge the court to “greet … with a measure of skepticism” claims by EPA to have “discover[ed] in a long-extant statute an unheralded power to regulate a significant portion of the American economy.”  In a separate opening brief on “procedural and record-based issues,” petitioners also attack the CPP as procedurally deficient.  In the reply briefs filed last week, petitioners further elaborated on their legal and procedural arguments in response to EPA’s brief.

The opening and reply briefs of the intervenors supporting petitioners—a group of six mining and transportation companies–allege similar legal defects with the rule.

Various amici curiae have also offered the court their perspectives on the rule. Amicus curiae briefs supporting petitioners were filed by:

Amici filing briefs in support of EPA include:

With briefing now complete, the parties have just over a month to prepare for oral argument, which is scheduled for June 2-3, 2016.

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Supreme Court Says Maryland’s Program to Encourage Generation is Preempted

Yesterday, April 20, 2016, the Supreme Court issued its opinion in Hughes v. Talen Energy Marketing, LLC.*  The Court unanimously found that Maryland’s program was not permissible under the Federal Power Act (FPA).  Justice Ginsburg, writing for the Court, affirmed the lower court decision and held that Maryland’s program “contravenes the FPA’s division of authority between state and federal regulators.”  The opinion, however, concludes by noting the narrowness of the holding:

We . . . need not and do not address the permissibility of various other measures States might employ to encourage development of new or clean generation, including tax incentives, land grants, direct subsidies, construction of state-owned generation facilities, or re-regulation of the energy sector.  Nothing in this opinion should be read to foreclose Maryland and other States from encouraging production of new or clean generation through measures “untethered to a generator’s wholesale market participation.” . . . So long as a State does not condition payment of funds on capacity clearing the auction, the State’s program would not suffer from the fatal defect that renders Maryland’s program unacceptable.

(internal citation omitted).  Justice Sotomayor concurred to note that the question of pre-emption in the context of the federal-state relationship envisioned by statutes such as the FPA is “particularly delicate.”  Justice Thomas concurred in part and in the judgment, noting that the finding that Maryland’s program “invades [FERC’s] exclusive jurisdiction” is sufficient and that the Court need not apply an implied pre-emption analysis.

*Spiegel & McDiarmid LLP represented petitioners, the Maryland Public Service Commission.

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EPA Issues Guidance Relating to RICE 100-Hour Emergency Engine Provision

On Friday, April 15, EPA issued non-binding guidance on its Reciprocating Internal Combustion Engines (RICE) regulations.  The guidance relates to the D.C. Circuit’s decision last summer in Delaware v. EPA, 785 F.3d 1 (D.C. Cir. 2015),* overturning the provisions that would have allowed emergency RICE engines to operate for up to 100 hours per year for demand response or deviations in voltage or frequency (100-hour provision).  Shortly after issuing its decision in Delaware, the D.C. Circuit agreed, at EPA’s request, to stay the issuance of a mandate vacating the 100-hour provisions until May 1, 2016.  With only two weeks left before the stay expires, EPA issued guidance stating that it expects the court to issue a vacatur mandate on May 2, 2016 (May 1 is a Sunday) after which the 100-hour provision “will cease to have any legal effect.”

The guidance states that after the mandate is issued, the engines that qualified as “emergency engines” under the 100-hour provisions may no longer operate unless their operations either: (a) comply with the emission standards and other applicable requirements for a non-emergency engine; or (b) qualify under the remaining valid criteria for emergency engines (e.g., emergency use, limited hours for maintenance checks/readiness testing, or limited hours to supply non-emergency power as part of a financial arrangement with another entity).

The guidance further states that engines that become non-emergency engines due to the mandate may be subject to numerical emission limits or work-practice standards, notifications, and performance testing, but that the regulatory requirements that will apply to a particular engine will depend on that engine’s technical specifications (e.g., engine type, horsepower, and age).  The compliance deadlines for filing initial notifications and performing initial performance testing are short.  The guidance directs owners/operators of engines that will become non-emergency engines because of the mandate to EPA’s Regulation Navigation Tool for the RICE NESHAP for assistance in determining which regulatory requirements are applicable.

EPA’s issuance of guidance so close to the end of the stay is telling.  When EPA initially requested the court to stay the vacatur mandate, it did so, in part, on grounds that it needed “reasonable time to evaluate the need for—and potentially promulgate—a rule” addressing the use of emergency engines for voltage and frequency deviations.  EPA is not intending at this time to propose new or amended provisions in response to the vacatur.

In addition to the 100-hour provision, the guidance also discusses another regulatory provision related to RICE emergency engines—the provision allowing up to 50 hours of non-emergency use to “supply power as part of a financial arrangement with another entity” if certain conditions are met.  The review of the 50-hour provision was initially consolidated for review with the 100-hour provision, but the D.C. Circuit severed the issue into a separate case under the title Conservation Law Foundation v. EPA, Docket No. 13-1233.  After the order in Delaware was issued, EPA asked, and the court agreed, to voluntarily remand without vacating the 50-hour provision; the court also ordered EPA to provide regular status reports.  In the April 15th guidance, EPA notes that because the 50-hour provision was not vacated, emergency engines may continue to operate under it.  EPA is still considering the 50-hour provision.

*Chief Judge Garland sat on the Delaware v. EPA panel.

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PJM Presents Reference Model for Clean Power Plan Analysis

PJM’s Clean Power Plan Analysis Modeling Plan set out the Regional Transmission Organization’s ideas for analyzing economic and reliability impacts of the Clean Power Plan.  At this point the analysis will not be used to inform specific transmission upgrades.  It is instead meant to assess potential economic, operational, resource adequacy, and transmission usage implications of different scenarios. PJM has taken input from the Organization of PJM States, Inc., state agencies, and interested stakeholders into account.

For this analysis, PJM developed a reference model, described in a recent presentation.  PJM describes this scenario as the clearing of multiple markets in PJM to model potential system futures based on policy, regulatory, and market drivers.

The reference model notes that long-term lower gas prices will lead to CO2 emission reductions through retirements and new natural gas units.  The combination of low avoidable costs and high capacity prices will allow natural gas combined cycle units to enter the market.  Lower gas prices will push coal and nuclear generation into the capacity market for cost recovery, with coal resources at greater risks than nuclear from the low gas prices.  PJM observed that wind and solar can continue to grow in spite of low gas prices as long as renewable portfolio standards are in place, and that solar has a higher capacity value than wind, so solar can better take advantage of resource retirements.

PJM’s timeline for its CPP analysis consists of a Long-Term Analysis in April, followed by a Short-Term Analysis that includes a more detailed reliability evaluation, and then a final Compliance Assessment Report in early June.  PJM states that its economic and reliability analyses of the final CPP should be completed in a timely fashion for incorporation into state compliance discussions.  Additional reliability analysis and economic sensitivities and coordination with MISO are also on the horizon.

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World Bank Group Releases Climate Change Action Plan

U.S. Global Change Research Program’s recent report analyzing the health impacts of climate change found that certain populations are “disproportionately vulnerable.” On April 7, 2016 the World Bank Group issued its own Climate Change Action Plan, weighing in on the impact of climate change on extreme poverty.

The plan notes that poor people are more vulnerable and less able to adapt to climate shocks and that certain groups—such as those without access to basic infrastructure, children, women, the elderly, indigenous populations, refugees, migrants, and those living on small islands and deltas—are extremely vulnerable to climate change-related risks. As a result, the World Bank Group concludes that climate change is a threat to its core mission of ending extreme poverty and increasing shared prosperity in a sustainable manner.

The World Bank Group’s Climate Change Action Plan details the actions the World Bank Group intends to undertake to help countries and companies address climate risks and opportunities.  It is broken down into four priorities:

  • Support Transformational Policies & Institutions – The World Bank Group plans to encourage the transformation of policies and institutions in order to increase the focus on development and climate agendas, particularly for the poorest and most vulnerable.
  • Leverage Resources – The plan aims to facilitate greater private capital investment in resilient and low-carbon projects in countries that are World Bank Group borrowers.  By 2020, the plan seeks to mobilize at least $13 billion per year in private sector investments.
  • Scale Up World Bank Climate Action – The World Bank Group intends to increase its investments with climate co-benefits, which are projects that contribute to either mitigation (such as reducing GHG emissions) or adaptation.  By 2020, it plans to have at least 28% of its operations generate climate co-benefits.
  • Strengthen Partnerships – Finally, the plan emphasizes coordination with client countries on issues relating to climate change.  In particular, the World Bank Group expects to help countries implement their Nationally Determined Contributions under the Paris Climate Agreement.
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