Released in June, Obama’s climate plan directed EPA to issue two new power plant rules: one governing the future construction of power plants (to be finalized in 2014) and another for existing power plants (to be finalized in 2015). Power plants are this country's largest source of greenhouse gas emissions. Coal power plants alone account for about a third of all emissions. That's why regulating them is the plan’s main focus.
Just before the shutdown, EPA proposed the first power plant rule. It would require all newly built coal power plants to install carbon capture and storage (or CCS) technology. CCS is a new technology that involves separating the primary greenhouse gas (carbon dioxide) from the power plant’s exhaust and piping it to underground reservoirs for storage.
The Clean Air Act provides that EPA cannot regulate existing power plants unless new power plants are also regulated. In other words, existing plant regulation can’t occur if EPA’s new power plant rule does not make it through the courts. And existing power plant standards are what matter from an emissions standpoint.
It’s always risky forecasting what a court might do, but many industry lawyers believe EPA’s new power plant will be on shaky legal ground if it requires CCS. That’s because EPA needs to prove that CCS is adequately demonstrated and can be installed at a reasonable cost – two tasks that will not be easy. There are no large-scale coal power plants using the technology anywhere in the world today, and CCS is hugely expensive. Challenging the new power plant rule could end up being industry's best way of beating, or at least delaying, EPA's existing plant standards. This is especially true given that legal challenges to EPA rules are filed in the D.C. Circuit Court of Appeals, a court that is quite conservative and has overturned numerous EPA rules in the last few years.
EPA is slated to finalize its new power plant rule with the CCS requirement in September of 2014. This means the D.C. Circuit’s decision on CCS will come in 2015 or 2016, the exact timeframe that EPA is planning to start regulating existing plants. If the court overturns EPA's CCS mandate, existing plant regulation will have to halt until EPA replaces the new plant rule or until the U.S. Supreme Court decides the case. Either situation would delay the existing plant standards by years.
The utility industry is smart and is not afraid to fight. They will challenge EPA’s CCS requirement – not necessarily because they want to build new coal power plants – but because it might be the best way of beating or at least delaying EPA’s existing plant rule. And in the end, EPA’s overzealousness in regulating new power plant construction could end up backfiring in a big way.
Potts is a partner at the law firm of Foley & Lardner LLP and has authored numerous articles on the Clean Air Act.