A Weak Hand: ACE Rule's Day in Court

An "ace" playing card and other cards, blended with a smokestack.

By David J. Hayes
October 1, 2020

Next week, the U.S. Court of Appeals for the D.C. Circuit will hear oral arguments on challenges to the repeal of one of President Obama’s signature climate regulations — the Clean Power Plan (CPP) — and the Trump administration’s replacement, the Affordable Clean Energy (ACE) rule.
Waiting for a ruling on the Clean Power Plan is like waiting for Godot. The CPP, after all, was finalized in August 2015, more than five years ago. How can it have any continuing relevance? Plus, didn’t low-priced natural gas and renewables already achieve the CPP’s greenhouse gas (GHG) reduction goals by forcing uneconomic coal-fired power plants to shut down?
Surprisingly, because of the Trump administration’s choice of legal strategies, the CPP still matters — a lot.
Most observers assumed that after an outlandishly long delay, the Trump EPA would set aside the CPP’s flexible, “generation shifting” approach to reducing carbon emissions from the power sector in favor of an alternative reading that only allows reductions achieved by retrofitting individual plants, “inside the fenceline.” But in defending the ACE rule, which embraces this narrow approach, the administration raised the stakes by arguing that imposing plant-specific controls is the only permissible reading of “unambiguous” statutory language.
By taking such a hard line, the Trump administration has exposed critical weaknesses in its argument.
First, coal-fired power plant carbon emissions will decline very little (if at all), and gas-fired plants will be left entirely unregulated, under the ACE rule’s in-plant, retrofit-only reading of the law (since the only coal in-plant option involves minor heat rate adjustments). This result does not square with the Clean Air Act’s mandatory obligation to reduce greenhouse gas emissions from major industrial sectors because they are endangering public health and welfare. With the power sector being the second largest source of U.S. GHG emissions, this is not a comfortable place for a statutory interpretation argument to land.
Second, if a court were to rule that the language requires this result, then it would be barring future administrations from adopting alternative interpretations that would impose meaningful carbon restrictions on coal plants (updated from the original CPP restrictions), while also covering gas plants — a rapidly growing source of GHG emissions. That straightjacket result may prompt a sympathetic examination of the Clean Power Plan’s “system”-based emissions trading alternative, which the Clean Air Act has embraced in other contexts (in addressing cross-state pollution, for example) and a technique which is commonly used in the power sector by states and utilities to successfully reduce CO2 emissions.
Third, it takes the government more than 200 pages in its brief to explain how the “unambiguous” language in the Clean Air Act requires a conclusion that the only emission restrictions that the EPA can impose on existing sources are inside-the-fenceline fixes. This reads a retrofit requirement into the existing sources provision of the Clean Air Act (called for elsewhere in the Clean Air Act but not in Section 111(d)) and it reads out of the statute the charge that the EPA choose the “best system” for emissions reductions (where’s the “system” if the only path is a plant-specific fix?). It also ignores the EPA’s specific role in regulating existing (as opposed to new) sources. For existing sources, the agency imposes sector-wide emissions guidelines, leaving implementation of those guidelines for states to develop and apply as they see fit.  
There are other disturbing aspects of the ACE v. CPP fight. The Trump administration argues that by giving states the option to achieve compliance by shifting from dirtier to cleaner power sources, the Clean Air Act would be impinging on the Federal Power Act’s deference to state power generation choices. The administration is making a similar argument in the clean car standard litigation where it asserts that Clean Air Act tailpipe emissions standards must yield to fuel economy standards set by the Transportation Department. Courts facing this question have rejected the dangerous notion that non-environmental statutes preempt broad-based pollution control requirements promulgated under the Clean Air Act. And, here, a gaggle of former Federal Energy Regulatory Commissioners have filed an amicus brief explaining why the Federal Power Act does not trump the Clean Air Act.
Also lurking is the Federalist Society’s “major questions doctrine,” which looks for situations in which an agency’s discharge of its regulatory obligations under a statute raises “major questions” (yes, those content-less words are the standard) that Congress had not contemplated. The doctrine asserts that in those cases, courts should not hesitate to strike down the regulations and await congressional clarification of agency authority. Should the court uphold repeal of the CPP on that unprincipled basis, virtually all climate-based regulation could be at risk, despite the Supreme Court’s rejection of the argument in its landmark Massachusetts v. EPA climate ruling, and the late Justice Ginsberg’s explicit confirmation in American Electric Power v. Connecticut that “Congress delegated to EPA [in Section 111 of the Clean Air Act] the decision whether and how to regulate carbon-dioxide emissions from power plants.”
So, yes, a lot is at stake in next week’s oral argument. In particular, will a court endorse a strained reading of the Clean Air Act that makes future administrations powerless to restrict greenhouse gas emissions from the power sector — the second largest source of emissions in the U.S.? Few legal questions have more salience in today’s climate-stressed world.

David J. Hayes is a nationally recognized environmental, energy and natural resources lawyer who leads the State Energy & Environmental Impact Center.