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Realistic Expectations for Carbon Policy – A Response

This is a guest post by Brian Potts, a partner at law firm Foley & Lardner, LLP in Madison.  Yesterday I (Nathan) critiqued some arguments he’s made recently regarding prospects for EPA’s future carbon performance standards for power plants. I’m happy to offer Brian space here to respond to that critique. -Ed

First, I would like to thank Nathan for his comments. There has been a substantial amount of conversation in the press about what EPA might do with its climate rules, but there has been a striking lack of discussion about what EPA can do with those rules under the Clean Air Act. This is therefore an important dialog. Let’s start with the areas where Nathan and I agree. Nathan is right to point out that there is a range of risk that EPA can take with these rules. And we obviously agree that these rules are not going to achieve the President’s target of a 17% economy-wide emissions reduction by 2020 on their own. But he has a few facts wrong, and is making a mistake in assuming that the agency’s past BACT determinations won’t impact what EPA can do now (to be fair, Nathan’s comments were based only on my op-ed in The Hill, and not on my longer article that was just released yesterday in the Yale Journal on Regulation). Here are my problems with Nathan’s analysis:

  • Nathan seems to assume that BACT only applies to new power plants. However, EPA’s Tailoring Rule that went into effect in 2011 requires CO2 BACT to be conducted for both new plants and significantly modified existing plants. Most of the CO2 BACT determinations to date have been for existing sources (one of which I site in my article), and these determinations have only led to a few percentage point reductions in emissions. To my knowledge, they have also uniformly concluded that carbon capture and sequestration is either not commercially available or is too expensive, and fuel switching is not allowed (I’ll come back to this point below).
  • Nathan argues that EPA can set NSPS/ESPS standards that are more stringent than previous BACT limits, otherwise “EPA would have a hard time ever strengthening NSPS, or writing new ones.” But EPA has historically set NSPS standards first as the floor and then BACT determinations happen on a plant-by-plant basis later. The NSPS were created as part of the 1970 Clean Air Act, and BACT requirements were added to the Act later in 1977. I’m not aware of a situation where the agency has first set a bunch of BACT limits, and then tried to establish a new uniform NSPS/ESPS. And while EPA does revise NSPS standards from time to time, I’m also not aware of a situation where they revised the NSPS to be more stringent than the recent BACT determinations that were set for the same types of sources.
  • Perhaps more importantly, the technology tests under the Clean Air Act are the same in all material respects for the NSPS/ESPS and BACT. The chosen technology has to be both commercially available and cost-effective. So – even if the courts agree that the Act does not bar the EPA from adopting NSPS/ESPS that are more stringent than previous BACT determinations – the courts would almost certainly find that the EPA was arbitrary and capricious if the agency set an NSPS/ESPS at a significantly more stringent level than past BACT determinations that were recently set for the exact same types of sources.
  • Finally, the suggestion that EPA can regulate coal plants and gas plants together is tenuous. EPA’s proposed CO2 NSPS that it released last year did just that – and after receiving comments from industry that pointed out the unlawfulness of the approach, the word on the street is that EPA is going to re-propose separate NSPS for new coal and gas plants. This is because a natural gas plant is not a carbon control technology for coal plants. It’s a completely different kind of power plant. And it has long been EPA’s policy that technology-based limits should not “redefine the source.” This position has also been adopted by the courts, and is the reason why fuel switching is not BACT in any of the prior determinations.

EPA knows it will have an uphill battle regulating power plant emissions using the Clean Air Act. Amy Harder in the National Journal back in 2010 quoted now EPA Administrator Gina McCarthy as admitting at the time that “GHG permitting is not a process for reducing overall GHG emissions.” My position is that EPA should take a conservative approach with these rules, or it will end up with nothing at all.

About Brian Potts

Brian Potts is a partner at law firm Foley & Lardner LLP in Madison, Wisconsin.

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