I. Introduction.
Utility regulation is one of the most important subjects of government policy for American households and businesses. We are all energy consumers. Energy is not a luxury good and this is not a niche issue.
For over a century, the Federal Power Act’s division of authority has held. Federal energy regulators have jurisdiction over interstate transmission of energy, but states determine the resource mix of intrastate generation as a core area of traditional state police power. Whether Congress could ever have constitutionally asserted a federal interest in all energy-generation matters, it did not do so. The Clean Power Plan (CPP) was, notoriously, an attempted end run around this division of authority.
West Virginia’s core teaching is clear: EPA cannot reshape the utility sector in the guise of pollution control. But this Proposal is nothing more than a pretextual gambit, whose real objective remains to do just that.
CEA advocates for accountability and transparency in environmental policymaking. The new Proposal is an affront to both. Major aspects of utility regulation have been kept at the state level for good reason. But this proposal, as the CPP would have, obfuscates which players and policies will be responsible for fuel-mix changes, price impacts, and the looming threat of increased blackouts as an already challenged grid struggles to accommodate this new burden.
CEA is committed to adherence to the rule of law as an essential component of sound, durable environmental stewardship. The Proposal fails this test, as well. The Proposal is based around claiming that certain technologies are “adequately demonstrated,” the statutory requirement for using them as a basis for crafting standards under Clean Air Act (CAA) Section 111. But they’re nowhere near meeting that standard—and may never be. EPA surely knows its proposal, if finalized, is unlikely to survive judicial review. It seizes on old, permissive caselaw, although its new interpretation of its authority goes far beyond even the bygone high-water mark that this caselaw represents. And it mouths the words of West Virginia and of the statute while twisting their substance beyond recognition.
Apart from these obvious flaws in EPA’s approach, this is not garden-variety agency overreach. EPA’s crusade to force the energy transition has already led to two massive and unprecedented steps by the Supreme Court: the 2016 stay of the CPP and then the christening of the major questions doctrine in West Virginia. Yet EPA is apparently unconcerned whether its new Proposal will likewise fall afoul of that doctrine, or of the related “federalism canon,” despite retracing the same trespasses on congressional and state prerogatives.
In this regard, EPA’s distortion of the existing-source statute is especially pernicious. The existing-source provision under Section 111(d) is a regulatory backwater, languishing in obscurity for the first 35 years of its existence, used only a handful of times on sectors with relatively low importance to the political economy of the nation. But now, the mousehole has become a menace, as EPA again brandishes it to reshape the nation’s utility fleet.
The text of Section 111(d) is very plain: States are to establish standards of performance for their existing plants on an individual basis, and EPA must allow them when doing so to take into account those source’s particular characteristics. EPA completely inverts the existing-source provision’s statutory text and structure. Under its proposed interpretation and implementation, states are bound to follow EPA’s preferred policies, and must demonstrate practical impossibility before establishing a less stringent standard for any particular plant. (No extra showing is required before establishing a more stringent one).
And yet, no particular source has to be required to actually do anything, because states have free rein to apply any cap-and-trade scheme they desire, untethered from the plain statutory language establishing that their task is a source-specific one. EPA only allows this, though, because it’s planning to impose a completely atextual aggregate, statewide reduction obligation.
Adding insult to injury, EPA then gaslights the public by claiming it is the true federalist here. This is absurd. EPA cannot suffocate an explicit congressional grant of state discretion only to claim this is compensated for by an ultra vires insertion of the precise policy scheme that the Supreme Court ruled only last year was beyond its power under this section of the CAA. This is true just as a matter of regular statutory interpretation. It is confirmed by the application of the “federalism” clear-statement rule, which establishes a presumption against interpretations that would invade a core area of traditional state sovereignty.
This is also an area where EPA’s proposal would undermine core principles of environmental and regulatory accountability. State plans are not merely a matter of state law—an approved state plan also becomes federal law, enforceable as such by any NGO in a district-court suit under CAA Section 304. This means that the power to enforce these programs that Congress has not authorized would be transferred to groups with no connection to any elected officials, a double derogation of democracy. 3
By favoring speculative, uneconomic technologies the Proposal further misaligns the interests of utilities and ratepayers. This rule will also provide utilities with a prima facie case that their compliance expenditures are prudent for purposes of rate recovery. It’s not clear what ratepayers could expect to gain from this arrangement, since EPA’s topsy-turvy reading of the statute effectively forbids a state from focusing on the actual emissions performance capabilities of their existing-source fleet. But any boondoggle project employing putatively “adequately demonstrated” measures such as carbon capture and “low-GHG [greenhouse gas] hydrogen” will be infinitely subsidized, by federal taxpayers on the front end and captive state ratepayers on the other end. This is a rent-seeking machine of unprecedented ambition. It is the epitome of evading accountability.
With claims of awesome authority comes great responsibility: to voters, taxpayers, and all classes of ratepayers. In an “electrifying” world, the accountability structure around the regulation of electricity generation is more crucial than ever. But this Proposal would be a disaster for such values. This is not a good-faith, technically derived, transparent rulemaking. The courts will hopefully shut this down soon after it is finalized. But much damage may already be done, because the Proposal’s real intent is cynical: to move markets now, through the sheer boldness of the Proposal’s terms. This is no way to regulate, and if EPA does not change course, it will be up to the courts to remind it, yet again, that there are limits to its power.
Comments on New Source Performance Standards for Greenhouse Gas Emissions from New, Modified, and Reconstructed Fossil Fuel-Fired Electric Generating Units; Emissions Guidelines for Greenhouse Gas Emissions from Existing Fossil Fuel-Fired Electric Generating Units; and Repeal of the Affordable Clean Energy Rule; Proposed Rule
I. Introduction.
Utility regulation is one of the most important subjects of government policy for American households and businesses. We are all energy consumers. Energy is not a luxury good and this is not a niche issue.
For over a century, the Federal Power Act’s division of authority has held. Federal energy regulators have jurisdiction over interstate transmission of energy, but states determine the resource mix of intrastate generation as a core area of traditional state police power. Whether Congress could ever have constitutionally asserted a federal interest in all energy-generation matters, it did not do so. The Clean Power Plan (CPP) was, notoriously, an attempted end run around this division of authority.
West Virginia’s core teaching is clear: EPA cannot reshape the utility sector in the guise of pollution control. But this Proposal is nothing more than a pretextual gambit, whose real objective remains to do just that.
CEA advocates for accountability and transparency in environmental policymaking. The new Proposal is an affront to both. Major aspects of utility regulation have been kept at the state level for good reason. But this proposal, as the CPP would have, obfuscates which players and policies will be responsible for fuel-mix changes, price impacts, and the looming threat of increased blackouts as an already challenged grid struggles to accommodate this new burden.
CEA is committed to adherence to the rule of law as an essential component of sound, durable environmental stewardship. The Proposal fails this test, as well. The Proposal is based around claiming that certain technologies are “adequately demonstrated,” the statutory requirement for using them as a basis for crafting standards under Clean Air Act (CAA) Section 111. But they’re nowhere near meeting that standard—and may never be. EPA surely knows its proposal, if finalized, is unlikely to survive judicial review. It seizes on old, permissive caselaw, although its new interpretation of its authority goes far beyond even the bygone high-water mark that this caselaw represents. And it mouths the words of West Virginia and of the statute while twisting their substance beyond recognition.
Apart from these obvious flaws in EPA’s approach, this is not garden-variety agency overreach. EPA’s crusade to force the energy transition has already led to two massive and unprecedented steps by the Supreme Court: the 2016 stay of the CPP and then the christening of the major questions doctrine in West Virginia. Yet EPA is apparently unconcerned whether its new Proposal will likewise fall afoul of that doctrine, or of the related “federalism canon,” despite retracing the same trespasses on congressional and state prerogatives.
In this regard, EPA’s distortion of the existing-source statute is especially pernicious. The existing-source provision under Section 111(d) is a regulatory backwater, languishing in obscurity for the first 35 years of its existence, used only a handful of times on sectors with relatively low importance to the political economy of the nation. But now, the mousehole has become a menace, as EPA again brandishes it to reshape the nation’s utility fleet.
The text of Section 111(d) is very plain: States are to establish standards of performance for their existing plants on an individual basis, and EPA must allow them when doing so to take into account those source’s particular characteristics. EPA completely inverts the existing-source provision’s statutory text and structure. Under its proposed interpretation and implementation, states are bound to follow EPA’s preferred policies, and must demonstrate practical impossibility before establishing a less stringent standard for any particular plant. (No extra showing is required before establishing a more stringent one).
And yet, no particular source has to be required to actually do anything, because states have free rein to apply any cap-and-trade scheme they desire, untethered from the plain statutory language establishing that their task is a source-specific one. EPA only allows this, though, because it’s planning to impose a completely atextual aggregate, statewide reduction obligation.
Adding insult to injury, EPA then gaslights the public by claiming it is the true federalist here. This is absurd. EPA cannot suffocate an explicit congressional grant of state discretion only to claim this is compensated for by an ultra vires insertion of the precise policy scheme that the Supreme Court ruled only last year was beyond its power under this section of the CAA. This is true just as a matter of regular statutory interpretation. It is confirmed by the application of the “federalism” clear-statement rule, which establishes a presumption against interpretations that would invade a core area of traditional state sovereignty.
This is also an area where EPA’s proposal would undermine core principles of environmental and regulatory accountability. State plans are not merely a matter of state law—an approved state plan also becomes federal law, enforceable as such by any NGO in a district-court suit under CAA Section 304. This means that the power to enforce these programs that Congress has not authorized would be transferred to groups with no connection to any elected officials, a double derogation of democracy. 3
By favoring speculative, uneconomic technologies the Proposal further misaligns the interests of utilities and ratepayers. This rule will also provide utilities with a prima facie case that their compliance expenditures are prudent for purposes of rate recovery. It’s not clear what ratepayers could expect to gain from this arrangement, since EPA’s topsy-turvy reading of the statute effectively forbids a state from focusing on the actual emissions performance capabilities of their existing-source fleet. But any boondoggle project employing putatively “adequately demonstrated” measures such as carbon capture and “low-GHG [greenhouse gas] hydrogen” will be infinitely subsidized, by federal taxpayers on the front end and captive state ratepayers on the other end. This is a rent-seeking machine of unprecedented ambition. It is the epitome of evading accountability.
With claims of awesome authority comes great responsibility: to voters, taxpayers, and all classes of ratepayers. In an “electrifying” world, the accountability structure around the regulation of electricity generation is more crucial than ever. But this Proposal would be a disaster for such values. This is not a good-faith, technically derived, transparent rulemaking. The courts will hopefully shut this down soon after it is finalized. But much damage may already be done, because the Proposal’s real intent is cynical: to move markets now, through the sheer boldness of the Proposal’s terms. This is no way to regulate, and if EPA does not change course, it will be up to the courts to remind it, yet again, that there are limits to its power.