By Rich Heidorn Jr.

WASHINGTON — Obama administration lawyers squared off with opponents of the Clean Power Plan last week, as oral arguments scheduled for less than four hours stretched over seven.

We won’t know for months how those whose opinions count — 10 judges of the D.C. Circuit Court of Appeals — scored the arguments. And whatever they decide will inevitably be reviewed by the Supreme Court.

But based on the judges’ questions and comments, four of the five challenges — a Constitutional issue; a bill drafting error; EPA’s alleged failure to provide sufficient notice of changes between the original and final plan; and a claim that it relied on dubious assumptions on the growth of renewables — appeared to have little chance of prevailing.

‘Beyond the Fence Line’

For opponents, the best hope of overturning the CPP is likely the argument that was presented first, led by West Virginia Solicitor General Elbert Lin.

Lin contended that EPA overreached its authority by creating CO₂ emission limits that coal-fired generators can’t meet, forcing a “generation switch” to natural gas and renewables.

“Ninety-six percent of [West Virginia’s] power comes from coal,” he said. The rule, he said, was “clearly designed to make us change our generation source.”

Judge Brett M. Kavanaugh evidenced the most sympathy for the “beyond-the-fence-line” argument.

The CPP seeks to cut the power sector’s carbon emissions by 32% by 2030, compared with 2005 levels. It uses two different CO₂ emission rates to define the “best system of emission reduction,” one for coal-steam and oil-steam plants and a second for natural gas plants. The agency said compliance can be achieved through improving generators’ efficiency (Building Block one) and shifting generation from coal to lower-emitting natural gas plants (Building Block two) and zero‐emitting renewables (Building Block three).

Citing what he said was at least three decades of Supreme Court precedent, Kavanaugh said EPA needed explicit Congressional approval for the magnitude of the changes contemplated by the CPP. “This is a huge case,” he said. EPA is “fundamentally transforming the industry.”

Justice Department attorney Eric Hostetler, speaking for EPA, insisted the agency is entitled to deference under the Supreme Court’s Chevron decision, which held that courts should defer to agencies’ interpretations of the laws they are charged with enforcing unless the court finds their actions unreasonable.

“This is far from the first time EPA has relied on generation-shifting,” he said.

EPA’s rule is a “proper and sensible” response for the “most urgent threat that our country has ever faced,” Hostetler said.

Judge Thomas B. Griffith also expressed concern over EPA’s strategy. “It doesn’t help that the president said, ‘If Congress doesn’t act, I will,’” he said.

Judge Janice Rogers Brown asked why EPA wasn’t regulating under Clean Air Act Section 115 instead of going through “linguistic gymnastics” under Section 111(d).

No Climate Denier

While his questions indicated he may vote to overturn the CPP, Kavanaugh made clear he is no climate denier. He called EPA’s policy “laudable,” saying “I understand the climate is warming.”

He added that “I understand the frustration with Congress,” which has not been able to reach agreement on climate policy.

But he also expressed sympathy for coal states such as West Virginia, saying that national policy, authored by Congress, could incorporate a safety net such as public assistance and job training.

“Whole communities are going to be left behind,” he said, addressing EPA’s lawyers. “If you do it, all the people who will be left back will [remain] left back.”

It’s questionable that Kavanaugh will be able to carry a majority in overturning the rule, however. Less than a minute into Lin’s argument, Griffith interrupted to challenge his claim that the rule would be “transformative.”

He noted that EPA estimates that the amount of coal-fired generation will still be 27.4% of total generation in 2030 — only 5.4% less than projected without the rule. “That hardly sounds transformative,” Griffith said.

Judge David S. Tatel also expressed skepticism. The term “best system of emission reduction” is “an awful broad grant” from Congress, he said. “It says best system of emissions reduction,” he repeated twice, emphasizing “system.”

Emission Limit a ‘Lever’

Judges Cornelia T.L. Pillard and Patricia A. Millett also appeared sympathetic to EPA’s case.

Pillard asked how the CPP is that different from previous EPA rulemakings, which required coal-fired generators to add equipment such as scrubbers.

Peter D. Keisler, representing industry and labor challengers, said EPA failed to take into account the remaining useful life of coal plants. He insisted EPA’s authority is limited to “operation of the source” and doesn’t “extend to the investment decisions of the owner.”

“The emission limit here is a lever” to force subsidization of renewables, Keisler said. Renewables, he said, are not “sources.”

Millett asked whether EPA could force dual-fuel plants to make gas primary. Yes, Keisler responded.

Judge Sri Srinivasan cited the Supreme Court’s 2011 ruling in American Electric Power v. Connecticut, which he said gave EPA a guide to how to regulate CO₂ from power plants. But Srinivasan also saw a distinction between requiring coal plants to add scrubbers and requiring them to seek aid from other generators.

“The word ‘system’ is a capacious term,” responded Hostetler. He rejected opponents’ complaint that the agency was relying on a rarely invoked section of the Clean Air Act.

“You might not use a fire extinguisher until your house is burning down,” Hostetler said. “That doesn’t mean you shouldn’t use it.”

He also insisted the rule “doesn’t require any subsidies,” noting other compliance methods such as co-firing with natural gas.

Brown asked several questions but staked no clear position in the arguments. Judge Karen LeCraft Henderson said little and Judge Robert L. Wilkins was silent.

Although the D.C. Circuit’s decision is likely to be reviewed by the Supreme Court, its ruling would prevail if the high court — currently shorthanded following the death of Justice Antonin Scalia — deadlocks 4-4.

Mutually Exclusive? Section 111(d) vs. 112

One curious wrinkle in the legal questions concerning the CPP is a drafting error that resulted from the House of Representatives and Senate approving two different versions of Section 111(d) when it amended the Clean Air Act in 1990.

The section has long been used to regulate pollution from existing sources that is not covered under other sections of the CAA.

Opponents say the House’s version of the amendment barred EPA from using the section if the agency was already regulating power plant emissions under another section of the CAA. The Senate’s version, however, included no such prohibition. The two were never reconciled and President George H.W. Bush signed the revision into law with both amendments.

EPA regulates power plant emissions such as mercury, acid gases and other hazardous air pollutants (HAPs) under Section 112.

Lin said he believes the House version was the “substantive amendment” and the Senate’s was a clerical error. But he said the challengers should succeed even if the court decided to give the House and Senate versions equal weight. “The way to reconcile them … is to give both amendments maximum effect,” he said.

Judge Kavanaugh sided with the plaintiffs, saying he believed the House amendment applies.

But the other judges who spoke on the matter expressed no support for the opponents’ interpretation.

Srinivasan said that if both amendments were considered, EPA would be given the right to regulate under 111(d). “It seems like it’s inclusive and not exclusive,” he said.

Allison D. Wood, representing the non-state plaintiffs, also insisted the House exclusion should prevail. She said most, if not all, coal plants are already regulated under Section 112.

“Under your theory you can’t regulate existing sources [for CO₂] at all,” responded Judge Tatel.

“I just don’t see the logic of that,” added Judge Pillard.

Justice Department attorney Amanda S. Berman said a “contextual reading is the best reading of this ambiguous text,” asking the judges to side with EPA’s “reasonable middle course.”

Adopting the House version would be a “dramatic downsizing ” of 111(d), she said.

“I don’t think Congress intended something so drastic,” she said, adding that electric generators are already regulated under “at least five sections” of the CAA.

Sean Donohue, representing environmental and public health intervenors, said the plaintiffs’ arguments were an attack on the Supreme Court’s 2007 ruling in Massachusetts v. EPA, in which the court ruled that the CAA applies to CO₂ emissions from automobiles.

The court followed that up in 2011 with its ruling in American Electric Power v. Connecticut, in which the court barred common law nuisance complaints over power generators’ carbon emissions, saying it was EPA’s response to regulate the emissions under section 111(d).

Constitutional Issues

After lunch, the judges returned to hear plaintiffs’ constitutional challenge, with petitioners’ attorney David Rivkin Jr. complaining that the CPP “commandeers” state officials to implement the rule in violation of states’ rights under the separation of powers clause of the 10th Amendment.

Judges Griffith and Tatel challenged Rivkin, with Griffith asking how the CPP differed from any other federal regulation that requires state action.

Tatel, who is blind, said Rivkin’s logic would also void the Americans with Disabilities Act. Compliance with the ADA, he said, requires local governments to exercise their police powers to issue building permits for wheelchair ramps and curb cuts.

Harvard University constitutional law professor Lawrence H. Tribe supported Rivkin’s argument on behalf of the non-state petitioners. Tribe noted that the Senate had rejected cap-and-trade legislation in 2010. EPA’s supporters “are asking you to bail out Congress,” he said.

Judge Millett challenged Tribe, appearing sympathetic to EPA’s argument that rejecting the CPP would amount to a “bait and switch” after the AEP ruling.

Justice department attorney Berman called the CPP “bread and butter cooperative federalism,” saying the plaintiffs’ arguments would “take down much of the Clean Air Act.”

She said there was nothing in the record to suggest the “parade of horribles” opponents have predicted: price spikes, blackouts and jails being forced to release prisoners.

Throughout the afternoon’s arguments, only Kavanaugh consistently expressed support for the challengers. Several times, he cited the Supreme Court’s 2014 ruling in Bond v. U.S., which he said established limits to the deference granted executive agencies under Chevron. The court ruled unanimously that a woman who attempted to poison a romantic rival could not be prosecuted under Section 229 of the Chemical Weapons Convention Implementation Act of 1998. The court said there must be “a clear indication that Congress intended to reach purely local crimes before interpreting Section 229’s expansive language in a way that intrudes on the states’ police power.”

‘Notice’ Issue

Plaintiffs also complained that EPA failed to provide sufficient notice of its proposal because the final rule, issued in August 2015, included provisions not mentioned in the draft rule a year earlier.

The plan uses two different CO₂ emission rates to define the best system of emission reduction, one for coal-steam and oil-steam plants and a second for natural gas plants. The draft rule had proposed a blended rate. (See Revised Clean Power Plan Allows More Time, Sets Higher Targets.)

The final rule also made significant changes in the carbon-reduction targets for some states, increasing them by 27% for Kentucky and 19% for Indiana and West Virginia. (See Final Clean Power Plan More Suited to Carbon Trading, Experts Say.)

John Campbell Barker, representing state petitioners, said EPA should be required to withdraw the rule and restart the process, as it did in withdrawing its 2012 draft rule on CO₂ emissions from new electric generators.

The Justice Department’s Norman L. Rave said EPA changed the way it calculated state targets because it was “inundated” with comments objecting to state-by-state rates. Critics said the original plan would mean states that had done nothing to curb greenhouse gas emissions would have less stringent rates than those that had already taken action.

Rave said there was no shortage of opportunities to comment on the rule, noting the more than 600 meetings EPA held with stakeholders. The agency said it received more than 4.3 million comments in total.

He also cited the notice of data availability EPA issued between the draft and final rule, which signaled that it was considering factoring in states’ ability to tap out-of-state renewable resources to meet their targets. (See EPA Signals Flexibility on Interim Carbon Targets, Coal-Gas Shift.)

Rave said the petitioners had failed to clear any of the three tests needed to overturn the rule on notice grounds and had not identified any data they would have offered to EPA had they received more notice.

Record-Based Issues

The final arguments dealt with plaintiffs’ claims that EPA failed to demonstrate that its proposed compliance measures are achievable.

William Brownell, representing the non-state petitioners, said the agency failed to provide “real-world proof” that generation-shifting will work, saying the CPP envisioned “something entirely different in terms of magnitude and character” than current utility operations under least-cost security-constrained economic dispatch.

He challenged the rule’s reliance on combined cycle plants operating at 75% capacity factors, saying only 15% of them currently run that often. He also mocked EPA’s projections for the growth in wind generation, saying the agency assumed seven years of growth at the rate seen in 2012, when growth spiked because of the impending expiration of the Production Tax Credit.

Millett said EPA was projecting from existing trends. “They didn’t pull these numbers out of thin air,” she said.

Wisconsin Solicitor General Misha Tseytlin said the court must determine whether the plan is achievable under the “most adverse circumstances.” That means, he said, considering the possibility that California and other states with excess renewables will “lock out” states that need them by setting onerous requirements.

“If that happens, all of EPA’s numbers break,” he said.

Justice Department attorney Brian Lynk responded that EPA was conservative in “multiple ways” in its projections, citing its assumptions on heat rates and renewable growth.

Millett asked how the agency would respond if the rule was unachievable for some states.

“I have no doubt that EPA would be amenable to consult with that state,” Lynk said. And if states were not satisfied with EPA’s response, Rave said, “I’m sure there would be an opportunity for them to come to court.”

Kevin Poloncarz, representing Calpine and other power companies supporting the rule, said the 75% capacity factor for combined cycle plants was “eminently reasonable.”

The reason such dramatic fuel switching hasn’t happened in the past, he said, is because the cost of carbon hasn’t been included in economic dispatch calculations.

EPA shouldn’t be required to take a Balkanized state-by-state approach to regulating the industry, he insisted.  “Electricity,” he said, “doesn’t observe state boundaries.”