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Both sides in Clean Power Plan case upbeat after oral arguments

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Both sides in Clean Power Plan case upbeat after oral arguments

Supporters and detractors of the Clean Power Plan think theU.S. Court of Appeals for the District of Columbia Circuit appeared to agreewith them as it delved into state and industry groups' legal challenge of theU.S. EPA's carbon-cutting rule, making the Clean Power Plan's fate difficult topredict.

The court held nearly seven hours of oral Sept. 27 to consider demandsby half of the U.S. states and several coal and power industry groups to vacatethe EPA rule. Petitioners allege that the rule, which sets state-specificcarbon emissions rate limits for existing power plants, exceeds the U.S. EPA'sauthority to regulate emissions by encouraging a major shift in generation fromcoal plants and other higher-emitting sources to lower-emitting renewable andgas-burning facilities. They also have argued that EPA cannotregulate carbon emissions from existing plants under Section 111(d) of theClean Air Act if those sources are already regulated under Section 112, whichpertains to hazardous air pollutants.

"Most of the judges seemed to believe that the CleanPower Plan is a 'transformative' rule with 'vast economic and politicalsignificance'," said Jeff Holmstead, a partner at law firm Bracewell LLPwho is representing the American Coalition for Clean Coal Electricity in thecase. "Under a number of Supreme Court decisions, this means that EPA mustshow it is authorized by a 'clear statement' from Congress, but EPA was notable to point to any such clear statement."

Holmstead added that determining if a judge is "simplyplaying devil's advocate or revealing his or her predilections" isdifficult to know at this point, with the answer to be revealed only when thecourt rules in the case, which many expect not to occur until early 2017.

Industry petitioners also maintained that the court's raredecision to have an en banc panel of judges hear the case, and the length ofthe oral arguments, "surely demonstrates that the judges on the D.C.Circuit have profound misgivings about the statutory and constitutionalunderpinnings of the rule," said Scott Segal, a partner with Bracewell'sPolicy Resolution Group who is representing the Electric ReliabilityCoordinating Council in the Clean Power Plan litigation. Segal added that thejudges had "particular concerns" with whether the EPA asserted itsauthority beyond the emissions sources the Clean Power Plan is meant to controland said the final rule was never subject to meaningful public comment.

But supporters of the rule also concluded that the judgeswere on their side. Clean Power Plan critics have said language from the U.S.House of Representatives' 1990 amendments to the Clean Air Act barred "doubleregulation" of existing plants under Sections 112 and 111(d), the latterof which was created to cover non-hazardous pollutants. But defenders of therule, including 18 states, said that was not Congress' intention in draftingthose sections, and that EPA properly interpreted the 1990 amendments to allowregulation of different pollutants from the same source.

The court "certainly seemed to think that the Houseamendment is ambiguous," Joanne Spalding, chief climate counsel for SierraClub, said at a press gathering after the oral arguments. "That is in EPA'sfavor because … EPA interpreted the House amendment reasonably to essentiallylook at the exclusion as a pollutant-specific exclusion."

David Doniger, director of the Natural Resources DefenseCouncil's Climate and Clean Air Program, repeated an analogy from D.C. CircuitJudge Cornelia Pillard, who said calling simultaneous oversight under Sections112 and 111(d) "double regulation" would be the same as calling itdouble regulation to make motorists drive on the right side of the road whileobeying the speed limit.

The groups also dismissed arguments that EPA is oversteppingits authority by allowing plant operators to shift generation to lower-emittingsources as a compliance option, saying the practice is already underway and isnot a "transformative" action that would require direct approval fromCongress.

The organizations further said EPA is on solid groundprocedurally. Among other complaints, parties suing to overturn the Clean PowerPlan said EPA illegally includedspecific national emission rate limits for coal and gas plants in the finalrule without first proposing it. But Doniger said rule critics "got whatthey asked for" and were well aware of comments submitted to EPA on theproposed rule on the potential inclusion of subcategory-specific rates in thefinal regulation.

Petitioners also attacked EPA's record demonstrating therule is achievable. The rule is projected to cut power sector carbon emissionsby 32% from 2005 levels by 2030, a level that many states and industry groupsfear cannot be achieved without boosting electricity costs and threateningreliability.

But Clean Power Plan proponents say that goal is feasible. "Ithink the record is strong… and the court defers to an agency unless itsfactual propositions are arbitrary and capricious, and I don't think the otherside met the burden of showing that," Doniger said.

In a new report, FBR & Co. mentioned comments fromHarvard Law professor Richard Lazarus that he saw at least five votes from theD.C. Circuit in favor of EPA, suggesting more support for the agency thanpetitioners. But FBR said the court could agree with Clean Power Plan opponentson some of their "non-existential" challenges and remand the rule toEPA to be fixed, which the investment firm said could take more than a year.And if the U.S. Supreme Court agrees to hear an appeal of the D.C. Circuit'sdecision, FBR estimated a ruling from the high court may not come until summer2018.