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Experts See ‘Uphill Climb’ For EPA Bid To Limit Air Law GHG Authority

June 20, 2019

Clean Air Act experts say EPA faces a tough legal lift to convince a key appellate court that its just-issued Affordable Clean Energy (ACE) rule to address power sector greenhouse gases is lawful, in part because the agency opted for a relatively risky claim that its standard-setting approach is the only permissible interpretation of the law.

Obama EPA officials have noted that EPA’s stance is risky because Trump officials say section 111 of the air law unambiguously prohibits the agency from issuing broader GHG limits, rather than arguing its narrow approach is the most reasonable read of the text.

While several experts agree with this argument, some industry attorneys are more bullish on EPA’s chances because Obama officials in the Clean Power Plan (CPP) relied on a novel approach that premised standards on generation shifting to lower-emitting power sources.

In the June 19 final ACE rule, as well as a separate but closely related action that formally repeals the CPP, EPA says the best system of emission reduction (BSER) is limited to heat-rate improvement equipment that can be added directly onto a coal plant.

“The BSER must be applicable to, at, and on the premises of an affected facility,” an EPA spokeswoman says.

EPA took this approach in hopes of prevailing in court and setting a precedent limiting what future administrations can do to address GHGs under the law. EPA Administrator Andrew Wheeler said June 19 that he expected lawsuits. “But I also expect us to prevail in the courts.”

Jeff Holmstead, an industry attorney who served as EPA’s air chief during the George W. Bush administration, argued in a June 19 statement that in ACE, the agency “has simply gone back to the position that EPA had always taken until the [CPP] came along. EPA had taken this position for more than 40 years, and the courts have always upheld it,” in concluding that section 111 requires rules to rely on “inside-the-fenceline” measures.

By contrast, he noted, the Obama EPA argued that its broad BSER definition in the CPP -- which included actions throughout the power system -- was not the only way to interpret the law but that it was permissible. “Trump opponents will have to argue that the Obama position is the only acceptable one,” he said. “And they will have a real uphill battle in court.”

Holmstead could not be reached for comment at press time. But former Obama EPA air official Joe Goffman, who first articulated the opposite argument, questions Holmstead’s confidence in EPA's success, noting that EPA says its BSER definition is the “only permissible” interpretation of unambiguous statutory language.

Goffman says he doesn’t understand why the Trump EPA’s argument is not contestable on its own terms. If it is, he says, he doubts that the U.S. Court of Appeals for the District of Columbia Circuit would defer to the agency, given that it has already engaged extensively with these same issues in long-stalled litigation over the CPP.

‘Statute Is Ambiguous’

One knowledgeable observer says Goffman’s argument is correct, and that EPA took the tougher position because it “wants to tie future administrations’ hands so they can never do anything” that looks like the CPP.

“To lock that down, they had to take a Chevron step 1 approach,” the source says, referring to Supreme Court precedent on agency deference. “But that means they must convince the court that this is the only way.”

Under Chevron step 1, an agency must show that a statute is not ambiguous, which EPA is arguing here. Under Chevron step 2, an agency is entitled to deference for its “reasonable” interpretation of ambiguous text, though such an interpretation is nonbinding on future administrations.

This source points out that EPA spends more than 15 pages in the rule’s preamble to explain why the statute is “clear. To me, that is not a step 1 argument. . . . Step 2 would be easier to defend.”

EPA may prevail on the issue if the case gets to the Supreme Court during the Trump administration, this source says, but does not expect it to win at the D.C. Circuit.

During September 2016 oral argument over the CPP before the full appeals court, the observer says at least six judges appeared in favor of saying BSER can encompass generation shifting. “That means the statute is ambiguous and can go that far, at least in the opinion of the majority of active sitting judges. So unless EPA gets a very good draw here, there is a very good chance it will draw at least two judges [on a three-judge panel] who will say the statute can encompass generation shifting. . . . EPA faces an uphill climb.”

Also, EPA did not leave itself any room to later argue it is entitled to deference under Chevron step 2. “They never concede the statute is ambiguous at any point. They never invoke step 2, so they can’t post hoc create a step 2 argument. I would have preferred [that], but they did not want to because the D.C. Circuit could easily reject step 1 and say it is OK with step 2,” allowing the next administration to rewrite the rule. However, this “would not have served their policy goals,” the source says, adding that the current administration is “not a fan” of Chevron.

Additionally, Richard Revesz of the Institute for Policy Integrity (IPI) at New York University says, “Holmstead is wrong when he says that, until the Clean Power Plan, EPA always took a ‘within the fenceline’ approach to regulation under the” Clean Air Act. IPI and other CPP supporters argue the agency has taken broader approaches under both Republican and Democratic administrations.

Mercury Precedent

The most prominent example is the Clean Air Mercury Rule (CAMR), crafted by Holmstead and current EPA air chief Bill Wehrum, during the George W. Bush administration, Revesz notes. CAMR was also issued under section 111(d) of the air law and allowed trading to satisfy power sector mercury limits. That rule was vacated by the D.C. Circuit on an issue unrelated to the fenceline argument, Revesz says.

During a June 19 press briefing, a senior EPA official sought to argue that the CPP sought to address GHGs differently than any other pollutant had been regulated before under the air law but failed to mention CAMR.

The official noted that the Obama administration also wanted to reduce mercury and could have done so by requiring the same generation-shifting measures under the CPP. “They didn’t. Nobody even thinks when regulating conventional pollutants that load shifting is something we should do. They think about scrubbers. . . . Why are GHGs any different” than other types of pollutants? the official asked. “If our business is to shut people down that emit stuff we don’t like, how come we haven’t been doing that for the last 50 years?”

One environmentalist cites “no shortage of hypocrisy” in this statement, given that Wehrum and Holmstead repeatedly touted the compliance flexibility in section 111 in defense of CAMR, even when mercury inflicts great local harm, in contrast to GHGs, which do not have local impacts but cause global damage through climate change.

Revesz also predicts that EPA will have “trouble in the courts” defending its BSER definition.

Both Ann Carlson, a University of California-Los Angeles law professor, and Jody Freeman, a Harvard University law professor and former Obama administration adviser, interpret Holmstead’s statement as seeking to shift the argument and claim that the Trump EPA is in fact taking a Chevron step 2 position.

While EPA’s rule text appears to be making a step 1 argument, Carlson says, “I think Holmstead is saying, ‘No this is a step 2 case: the section 111(d) language is ambiguous and EPA’s interpretation of the statute is a reasonable one.’”

Freeman adds that Holmstead “seems to be saying that EPA will win as long as it convinces the court that its reading is at least reasonable. And the [environmentalists] and states can only win if they can show that is not true, and the statute is crystal clear and it rules out the approach EPA is now taking. [Holmstead] seems to be saying that would be an uphill battle and that even the Obama folks didn’t try to say that.”

Opponents of ACE claim EPA will have a difficult time convincing the D.C. Circuit that its interpretation is the only correct one in a bid to bind a future administration. “So, they are talking past each other,” she says.

As far as which argument is correct, Freeman says, “Both sides are making a bet about the strength of their legal arguments, but what this long legal saga points out above all is that Congress needs to act.”

Another industry source concedes there “may be some risk” for EPA “in asserting that within the fenceline is the only permissible interpretation,” but says the agency and its supporters will still be “fighting this battle from higher ground. Maybe not a mountain, but certainly a good-sized ridge.”

This source says Trump officials can argue a BSER that relies on demand or market-based systems does not “square” with legislative or regulatory history, and that the administration can say its approach “comports with statutory language that refers to ‘sources’ rather than interconnected systems.” -- Dawn Reeves (dreeves@iwpnews.com)

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