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EPA Moves To Repeal Clean Power Plan, But Little Impact Seen On Industry

October 17, 2017

Environmental Protection Agency Administrator Scott Pruitt signed an order last week to repeal the Clean Power Plan (CPP), initiating a process that could take years and whose ultimate impact on the power sector may not be as sweeping as supporters of the rollback believe.

The CPP, a signature climate rule from the Obama administration, targeted greenhouse gas emissions from existing power plants – primarily coal-fired. It sought to reduce carbon releases by 32 percent by 2030 compared with 2005 levels, while also increasing energy conservation and the use of renewables.

A critical component of the plan, and one that fueled much of the anti-CPP sentiment, is the so-called “outside-the fenceline” language. It set state-by-state emissions targets, which EPA said could be met by improving the efficiency of coal plants; increasing the use of natural gas-fired generation to displace coal; or buying more renewable energy.

Critics have claimed this was illegal. They contend that the EPA can only regulate actions at the facilities themselves – “inside the fenceline” – and that shuttering coal plants or building additional renewable energy were activities “outside the fenceline,” and thus beyond the agency’s authority. The Trump administration is seeking repeal largely based on this argument.

Finalized in August 2015, the CPP never went into effect. In early 2016, the U.S. Supreme Court put the regulation on hold until legal challenges were exhausted. This past April, the U.S. Court of Appeals for the District of Columbia granted a White House request to pause all ongoing litigation regarding the rule until the administration decided how to move forward, placing a 60-day hold on the case. Although the June 27 deadline has passed, the court has so far said nothing.

In signing the repeal order, Pruitt did not offer a replacement, and instead said EPA would seek input from the industry in shaping a new rule. He went on to say that any new regulation would be developed “carefully, properly, and with humility, by listening to all those affected.”

Many observers believe the CPP will ultimately be replaced with a more modest rule based on achievable emissions reductions using more traditional modifications of generating facilities (plant efficiency improvements, for example), rather than the broad, complex goals and implementation mechanisms in the Obama-era plan.

For the most part, however, EPA’s announcement last week is not expected to have a huge impact on the industry.

According to the Wall Street Journal, some of the nation’s largest power companies are continuing to move forward with investments in renewable and gas-fired electricity, and many have already incorporated climate change actions into their corporate strategies. The paper added:

“Cheap fuel, improving technology and consumer demand are creating a market for cleaner energy that is largely unaffected by what is happening in Washington.”

Underscoring that, the U.S. Energy Information Administration – after projecting in 2014 that the CPP would have a “significant impact” – has since said that lower gas prices, flat demand, and decreasing costs for wind and solar have altered the landscape. Moreover, in a January 2017 report, the agency reported that renewables and natural gas will continue to grow regardless of the CPP’s future.

Additionally, the Rhodium Group – an energy consulting firm with an expertise in climate-economic forecasting – has estimated that carbon dioxide emissions from the U.S. power sector in 2025 would be 27 to 35 percent below 2005 levels without the CPP. John Larsen, director of the company, told the Washington Post that repealing the rule would not change the current trends toward cleaner energy but could impact from 12 to 21 states that do not have significant carbon reduction efforts in place.

“If a state wasn’t already acting to scale back emissions,” he said, “the Clean Power Plan would nudge them to do it.”

But Larsen did say that questions around what the government will eventually require of utilities could throw a  blanket of uncertainty over investment decisions. “This doesn’t help steady the waters at all with regard to where the next billion dollars will be spent,” he told reporters in a conference call.

Compounding this uncertainty is a legal battle over the repeal that could extend for years.

The Post said Pruitt’s move “will trigger an immediate court fight that could result in months, if not years of litigation.” By some estimates, it could take more than a decade – factoring in a lengthy rulemaking process that would precede the litigation – before the struggle over any new rule is resolved.

Environmental groups and a number of states are planning to fight the repeal in federal courts, challenging the move on economic and scientific grounds. The Post also reported that attorneys general from four states – California, Massachusetts, North Carolina, and Oregon – have already pledged to push back against the EPA.

Meanwhile, New York Atty. Gen. Eric Schneiderman announced the day before Pruitt signed the order that he would sue to halt the repeal, saying he will use “every available legal tool” to thwart the administration’s effort.

“I think it’s safe to say it (the repeal) will be carefully reviewed by legal experts across the country,” Vickie Patton, general counsel of the Environmental Defense Fund, told PBS. Environmental organizations, she continued, “will be doing all we can to ensure that the law is carried out and these protections remain in place.”

The impact of repealing the CPP on consumers is unclear. Given that final action is likely years away, and utilities already have their strategies in place, the near-term effects are probably minimal at best. Critics, however, said that rolling back the rule actually protected ratepayers from price spikes.

“If it had gone into effect, the ‘Clean Power’ Plan rule to limit greenhouse gas emissions from coal and natural gas power plants would have been one of the most expensive regulations ever imposed, causing electric rates for consumers to go up and threatening the reliability of the electric grid,” said Myron Ebell, head of the energy and environment program at the Competitive Enterprise Institute.

Opposition to Pruitt’s order tended not to focus on financial costs to consumers, but on the larger societal costs.

For example, the League of Conservation Voters charged the action would continue “the cycle of monstrous hurricanes and wildfires that are devastating countless communities.” And former EPA administrator Gina McCarthy said repeal represents “a wholesale retreat from (the agency’s) legal, scientific, and moral obligation to address the threats of climate change.”