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DC Circuit eyes US EPA's power plant rule with skepticism during oral arguments

A panel of federal appeals court judges Oct. 8 appeared skeptical of the Trump administration's narrow replacement for the Obama-era Clean Power Plan, pressing a government lawyer defending the regulation on how it would actually work in practice.

The U.S. Environmental Protection Agency's Affordable Clean Energy, or ACE, rule is based on the legal theory that the agency's 2015 Clean Power Plan's broad, systemwide approach to cutting carbon pollution from existing power plants exceeded the EPA's authority under Section 111(d) of the Clean Air Act.

Instead of requiring states to meet specific emissions reduction targets, the ACE rule requires states to submit implementation plans, or SIPs, that reflect potential efficiency gains existing coal-fired power plants can achieve through a menu of upgrades called heat-rate improvements.

Under the rule, some states may determine that no upgrades, and therefore no emission reductions, are required if a coal plant is nearing the end of its useful life. According to the EPA's analysis, the ACE rule is only expected to achieve less than 1% in emissions reductions by 2030 beyond a business-as-usual approach.

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During more than nine hours of oral arguments on Oct. 8, a three-judge panel for the U.S. Court of Appeals for the District of Columbia appeared concerned with how a reviewing court might assess the EPA's SIP approvals pursuant to the ACE rule.

Judge Justin Walker, a Trump appointee who was seated on the D.C. Circuit in September, was notably perplexed with how a court would apply the Administrative Procedure Act's arbitrary and capricious standard of review in determining whether the EPA acted appropriately.

"At first I thought we were going to do arbitrary capricious review based on five factors, which seems to me, mushy, and now you're telling me you don't even know what the factors are," Walker said when questioning Jonathan Brightbill, a U.S. Department of Justice deputy assistant attorney general representing the EPA. "I guess what's going to happen is EPA is going to approve a state plan … and then the EPA is going to get sued, because it always does, and we're not even going to exactly know as a court what standard we're supposed to apply in terms of figuring out what's arbitrary and what's not. Maybe this approach is defensible, but I haven't heard the defense."

In response, Brightbill cited a section of the ACE rule stating that SIPs must include enforceable retirement dates for units that forego efficiency improvements because they are approaching the end of their useful lives.

But Judge Patricia Millett, an Obama appointee, still worried that courts could struggle to review the EPA's approval of state plans that set retirement dates for coal plants well after the capital for the facilities has been recovered.

"I've looked over this stuff and it made me even more nervous that there's 'no there there' on how someone's supposed to review if the EPA approved a state plan that said what my hypothetical did," Millett said. "I just don't see where the standard is for reviewing the EPA's approval of a state plan that says this power plant can't do anything."

The exchange punctuated a marathon day of oral arguments during which the panel also assessed whether the EPA's repeal of the Clean Power Plan was legal.

Environmental and public health groups are asking the D.C. Circuit to vacate the ACE rule and remand it back to the EPA for further rulemaking without reinstating the Clean Power Plan, explained Sean Donahue, an attorney with Donahue, Goldberg, Weaver & Littleton. "We don't think putting the Clean Power Plan in effect with deadlines passed and the power sector a very different place makes any sense," said Donahue, who represented a 13-group coalition in the case.

In public comments on the ACE rule, the Edison Electric Institute noted that the U.S. power sector will have already complied with the final 2030 goals of the Clean Power Plan in terms of gross emissions reductions before the 2022 start date for the program.

ClearView Energy Partners LLC said in an Oct. 8 note to clients that it does not expect the D.C. Circuit to rule on the case before mid-2021 if an opinion is ever issued at all. "We think the D.C. Circuit may uphold EPA's decision to revisit the CPP but it could find that ACE does not meet the agency's statutory obligation to set a clearer minimum reduction level," ClearView said.

The EPA is also expected to withdraw the ACE rule if former Vice President Joe Biden wins the presidency in November, and the D.C. Circuit has not ruled on the matter by the time he assembles a new administration. American Lung Association v. EPA. (No. 19-1140)