Much hangs on little-used CAA provision

Since President Obama delivered his major climate change address in June 2013 and released a separate memo on regulating greenhouse gas (GHG)  emissions from power plants, a legal debate has emerged over where the EPA will find authority to regulate GHGs from existing power plants. 

In the memo, the president specified that the Agency will make use of Clean Air Act (CAA) Section 111(d).  This section is related to Section 110, which specifies the procedures states and the EPA must follow in developing state implementation plans (SIPs) for criteria air pollutants.  In addition, Section 111(b) provides the EPA with the authority to set standards for new sources of air pollution, including power plants.  Again, states must incorporate EPA’s New Source Performance Standards (NSPS) into their SIPs.

So far, the extent of the Agency’s authority it clear.  But with Section 111(d), the picture becomes cloudy.  And, as is often the case with the major federal environmental statutes, the questions relate to where federal authority ends and state authority begins.  That critical transition point is discussed in a white paper the attorneys general (AGs) of 17 states and the commissioner of the Indiana Department of Environmental Management sent to EPA administrator Gina McCarthy on September 11, 2013. 

The thrust of the paper is that EPA’s authority under Section 111(d) is limited to establishing guidelines for setting NSPS for existing sources.  The Agency may then require that states develop standards based on those guidelines, say the AGs.  But, they add, the EPA may not  establish the standards itself unless the states fail to do so in a timely manner.  However, the AGs seem to believe that the Agency’s “aggressive” pattern of behavior regarding GHG emissions raises the strong possibility that the Agency intends to usurp state authority with regard to existing coal-fired power plants and compel states to adopt a single set of federal standards.

Five rules

Part of the uncertainty regarding Section 111(d) is that it is so rarely used in federal rulemaking.  Congress included this brief section to catch any pollutant not regulated under other sections of the CAA, mainly Section 109 (the National Ambient Air Quality Standards [NAAQS] for criteria air pollutants) and Section 112 (hazardous air pollutants for categories of stationary sources).  To date, the EPA has issued only five rules governing air pollutants under Section 111(d):

1. Acid mist from sulfuric acid plants
2. Fluorides from phosphate fertilizer plants
3. Fluorides from primary aluminum plants
4. Total reduced sulfur from kraft pulp plants
5. Landfill gases from municipal solid waste landfills

The EPA has been issuing statements and conducting presentations and webinars on how it is contemplating use of Section 111(d) in the regulation of GHGs from existing power plants.  The Agency concedes that Section 111(d) uses a different approach to regulation than Section 111(b).  For the five Section 111(d) rules, the Agency describes the process it used:

• The EPA set emissions guidelines that included descriptions of the best system of emissions reduction (BSER) that has been adequately demonstrated considering costs and environmental impact.  The guidelines did not prescribe the technology that must be used to comply.
• The guidelines specified the time required to implement and a goal for reductions—or standard of performance—based on a BSER analysis.
• States developed Section 111(d) plans establishing standards of performance for the covered sources in their jurisdictions.
• States determined the combination of measures that will meet the guidelines.
• Standards of performance in SIPs can be identical to EPA’s guidelines (states adopt EPA’s model rules) or can differ from them but be equivalent to EPA’s guidelines.
• State plans provide for implementation and enforcement.  States have had flexibility when applying the standard of performance in their plans to take other factors into consideration, including the remaining useful life of the source.

A different pollutant

While past Section 111(d) actions gave the states considerable leeway, the EPA appears to view GHG emissions in a different context.  For example, in discussing the upcoming approach it may take regarding existing power plants, the EPA has noted that, in general, carbon pollution emissions differ from the pollutants that have been regulated in the past under Section 111(d).  Specifically, carbon pollution is global, an order of magnitude greater than the other pollutants covered under Section 111(d) in the past, and accumulates and remains in the atmosphere over hundreds of years.

Ultimately, the EPA believes that the “broad statutory language” of Section 111(d), the unique characteristics of carbon pollution, and the interconnected nature of the power sector afford the Agency “opportunities to explore various program designs and flexibilities.”

 In their white paper, the AGs first note that the EPA has been assertive in proposing NSPS to control GHG emissions from new power plants.  In April 2012, the Agency proposed CO2 emissions limits that could be achieved only by gas-fired power plants or coal-fired power plants that made use of carbon capture and sequestration (CCS), which is not yet a commercially viable control technology.  It was generally conceded by all parties that the proposal would have ended the construction of new power plants using traditional pollution control methods.  Following millions of public comments, the Agency rewrote the proposal somewhat, but essentially held its ground on the use of CCS as BSER for new coal-fired power plants. 

Under the CAA, a Section 111(d) rulemaking for existing sources may proceed only after issuance of a Section 111(b) rule for new sources.  According to the AGs, the NSPS for new sources will likely face legal challenges.  However, under the assumption that the standards will be upheld by the courts, the AGs believe the EPA will continue its tendency “to seek to expand the scope of its jurisdiction at the cost of relegating the role of the states to merely implementing whatever Washington prescribes, regardless of the wisdom, cost, or efficiency in light of local circumstances.” 

Will federalism be averted?

The AG’s white paper includes the following observations.

• The EPA does not have authority to promulgate prescriptive limitations for existing coal-fueled (EGUs).  Section 111(d) invokes the principle of cooperative federalism—with roles clearly delineated for both the EPA and the states. Under Section 111(d), the EPA must recognize that states have broad discretion to determine the nature of NSPS requirements for existing power plants. The EPA may require states to adopt standards, and the EPA may guide how states do so procedurally, but the states are vested with the legal authority to decide the ultimate standards.
• EPA’s authority under Section 111(d) is limited to establishing, in the statute’s term, a “procedure” by which the states submit plans for regulating existing sources.  The EPA cannot promulgate rules establishing the substantive standards to be imposed on existing sources.
• EPA’s general procedural regulations relating to the states’ adoption and submittal of plans establishing standards of performance for existing sources require the Agency to issue a guideline document concurrently with the standards of performance for the control of a designated pollutant from affected facilities or after the standards are proposed.  The content of the guideline document is of great importance to the preservation of the states’ role in the development of performance standards for existing sources.
• Under EPA’s Section 111(d) regulations (40 CFR 60.20-31), the SIP for control of the designated pollutant must include emissions standards that prescribe allowable rates of emissions, except when it is clearly impracticable.  The states have significant discretion in formulating these plans.  Although the emissions standards are to be no less stringent than the corresponding emissions guideline(s), the states may make case-by-case determinations that specific facilities or classes of facilities should be subject to a less-stringent standard or longer compliance schedule due to the cost of control, physical limitation of installing necessary control equipment, and other factors making the less-stringent standard more reasonable.
• Although these regulations have never been tested in court, the EPA undoubtedly has the power to adopt procedural regulations governing state adoption of plans setting forth performance standards.  But, importantly, and consistent with the statute, the determination of the actual substantive standards is left to the states.
• Section 111(d) and EPA’s own regulations require that emissions reductions be made through adequately demonstrated systems of emissions reduction technology.  “It seems incontrovertible that no post-combustion reduction system has been adequately demonstrated for CO2 emissions from EGUs on a broad, commercial scale,” say the AGs.  As a result, the EPA may attempt to force coal-fueled EGUs to decrease operation time or retire early, or force utilities to rely more heavily on natural gas and other resources in an effort to ensure greater CO2 emissions reductions.  Such proposals, often offered as ways of providing “flexibility,” do not conform to the limitations Congress has placed on EPA in the CAA.
• To the extent Section 111(d) provides authority for flexible approaches to establishing performance standards to seek reductions in CO2 emissions, that authority is vested in the states, not the EPA.  And, of course, under CAA Section 116, states retain authority to adopt more-stringent CO2 controls than EPA has the authority to mandate.
• The CAA imposes responsibility for air pollution control at the state and local levels because of their close proximity to existing sources and familiarity with local operating conditions.   SIPs are thus the primary architecture of emissions controls.

Economic repercussions       

“These concerns are serious,” say the AGs.  “EPA regulations may harm the nascent economic recovery.  Moreover, our federalist system of government, as implicated in the CAA, requires that EPA recognize the rights and prerogatives of States.  The extent and form of greenhouse gas regulation is important to the States; it is critical that States be allowed to play their proper roles in making the significant policy judgments that are required in adopting any such regulation.”

The AGs also believe that if the EPA does in fact proceed against existing coal plants with the “same hostility” the Agency has demonstrated against new sources, the resulting NSPS is likely to be reversed in court.   If and when those court actions proceed, we can expect to see most if not all of the AG names at the bottom of the letter sent to Gina McCarthy presenting briefs to support the state-first position espoused in the white paper. 

The AG letter and white paper

William C. Schillaci
BSchillaci@blr.com