Judicial Timeout

Supreme Court puts EPA’s carbon plan on hold till courts rule on its many legal challenges

Posted on Feb 26 2016 in Features, General

judicial artIn what many see as a stunning — even unprecedented — action, the United States Supreme Court halted the Obama administration’s sweeping rule to cut carbon emissions from power providers until the many legal challenges surrounding the 2015 regulation are reviewed by the courts.

The 5-4 order came Feb. 9. For now, the stay stops the federal Environmental Protection Agency from imposing its Clean Power Plan and enforcing upcoming compliance deadlines. A final court ruling on the legality of the plan, likely by the Supreme Court, might not come until 2017 or even 2018, putting the plan on hold.

The stay from the high court was welcomed by the National Rural Electric Cooperative Association, representing America’s electric co-ops, which was among the many organizations and states seeking the reprieve. Utilities, coal miners and more than two dozen states say the EPA’s rule oversteps its authority and intrudes on states’ rights.

“Never before in the history of the country has the Supreme Court blocked a regulation before the circuit court has heard the case. Never!” emphasized Kirk Johnson, senior vice president for government relations at NRECA. Johnson made the comments while speaking to local co-op directors and staff from around the nation during an educational forum at NRECA’s annual meeting last month (please see pages 14-15).

“Charging ahead with implementation of the Clean Power Plan would have caused immediate and irreparable harm to America’s electric co-ops,” said Jeffrey Connor, NRECA interim CEO. “Had the stay not been granted, co-ops would have been forced to take costly and irreversible steps to comply with the rule, which is a huge overreach of EPA’s legal authority. The Clean Power Plan is a direct threat to co-ops’ ability to provide affordable and reliable electricity to their member consumers.”

After the final Clean Power Plan was released last September, 39 generation and transmission cooperatives (G&Ts), including the two Indiana G&Ts — Hoosier Energy and Wabash Valley Power Association — joined NRECA in petitioning the U.S. Court of Appeals District of Columbia Circuit to review and ultimately reject the plan. In addition, 29 states and state agencies and groups representing coal and business interests filed legal action to halt the plan.

“It’s the farthest reaching, most complex rule,” said Donna Snyder, executive vice president and chief financial officer at Hoosier Energy, power supplier to the REMCs in the southern half of Indiana. “It touches every consumer of electricity in the nation. That’s each and everyone of us. So, it’s very broad and very sweeping. And it’s also one of the most, if not THE most legally-challenged. When you have over half of the states lining up in court to challenge it, that tells you something right there.”

Requests made to the D.C. circuit court for a stay on implementation of the plan until it ruled on the plan’s legality were denied in late January, but it set an expedited schedule to hear the case by summer. The nation’s electric cooperatives then petitioned the Supreme Court for a stay.

“That seemed like an extraordinary step,” Snyder said. “But we felt it was absolutely necessary so that EPA, if the rule is ultimately struck down through the court process, doesn’t get a backdoor kind of win.”

Snyder said that by setting compliance deadlines so soon, the EPA was putting utilities on the path to compliance and forcing them to begin making irreversible decisions that would cost consumers a lot of money for a rule that may ultimately not hold up as legal in the courts. The first deadlines for individual states to submit an initial blueprint of their compliance plan is this September.

Putting time on the clock

The Clean Power Plan gave states individual targets for carbon reductions from their fossil-fuel power plants. Indiana was required to reduce carbon by 39 percent from a 2012 baseline by 2030. But more than half of that had to come within six years, by 2022.

Snyder pointed out it usually takes at least six years for permitting, siting and constructing the new, cleaner power plants — most likely using natural gas and renewable sources — to replace the coal-fired plants compliance with the Clean Power Plan will require. Nuclear power plants take even longer to get online.

Snyder also noted the additional infrastructure for transmission of electricity or gas also take time to plan, permit, site and build. “When you back up that timeline for how long it takes to construct the units, you have to start today,” she said.

As a separate, but equally important legal issue, the EPA’s plan assumes new and existing coal plants could meet strict carbon emission standards through a technology — carbon capture and storage — not yet affordable or even feasible for large, utility-scale application.

“There won’t be any new coal plants,” said Lee Wilmes, vice president of power supply at Wabash Valley Power Association. “Theoretically, under the Clean Air Act, you’ve got to regulate to best available technology. If it can’t be achieved, that’s one of the arguments against the legality of the plan.”

Scratching coal from an “all-of-the-above” energy strategy is one of the biggest effects of the plan already being felt. “Every time you have a major expenditure at an existing coal plant,” Wilmes said, “you’ve got to stop and say, ‘Am I going to be able to utilize this asset 10 years from now with the Clean Power Plan?’”

Hoosier Energy has already retired one of its two coal-fired facilities earlier than originally planned. The 250-megawatt Ratts power plant in Petersburg, which came online in 1970 and was the first cooperative-owned power station in Indiana, closed last March. Ratts was to be retired in 2019. But the venerable coal plant could not cost effectively meet other recent increasingly stricter environmental regulations.

NRECA and other petitioners said that for each power plant retired or curtailed, co-ops and other utilities must carefully plan and implement changes to the electric system to replace the lost generation — requiring a very significant outlay of expenses over the next few years. This, they say, will lead to lost jobs, economic harm to rural communities and unrecoverable costs where power plants are shut down before the end of their remaining useful life. Not only would consumers still be paying off stranded costs of prematurely retired plants, they’ll be paying for new plants needed to replace the old ones.

NRECA estimates that compliance costs for all co-ops could reach as high as $28 billion over the tight 2022-2030 timeframe.

“As not-for-profits serving 93 percent of America’s persistent poverty counties, electric co-ops are especially concerned about the significant electric rate increases this would impose on some of our nation’s most vulnerable citizens — families living on fixed incomes or in poverty,” said Connor.

The Supreme Court ruling is seen as a major setback for President Obama, who has made limiting carbon the centerpiece of a broader policy to combat climate change.

“We’re disappointed the rule has been stayed,” EPA press secretary Melissa J. Harrison said in a statement. “But you can’t stay climate change and you can’t stay climate action.”

“We certainly have to be planning for some type of carbon-constrained world,” said Wilmes, who said it’s likely the plan eventually will be implemented in perhaps a modified way. “But the stay does buy additional time and, hopefully, may result in a more rational rule.”

Back to the court

From here, the legal challenges continue on. Arguments in the D.C. circuit court will be heard in early June. A ruling could come by late summer or fall. No matter the outcome of the circuit court, its decision will more than likely be appealed to the Supreme Court by the losing side.

The Supreme Court could possibly hear arguments as soon as early 2017 with a decision in June 2017. However, it is also possible the review would not occur until the fall of 2017 with a decision in June 2018.

In the meantime, a presidential election is being held and a new Supreme Court justice will be seated either before or after the election. Each could create a whole new political or judicial dynamic.

The jubilation co-op leaders had after the Feb. 9 stay was tempered by the sadness of the untimely death of Justice Antonin Scalia less than a week later. He was among the five siding with the stay. “When the Supreme Court gave us the 5-4 decision to stay the rule, it sent a clear signal there were issues with the regulation,” NRECA’s Johnson said.

While no one knows how the Supreme Court would have ruled on the legality of the Clean Power Plan even with Scalia, until a new justice is confirmed the court is likely now at a 4-4 tie on the regulation, Johnson noted at the national meeting.

“There’s a lot of uncertainty ahead of us,” Johnson said. “We have to play this game to the last whistle.”

Story by Richard G. Biever, senior editor. Some information was provided by NRECA.