Key Takeaways from the CPP Oral Arguments

On Tuesday, September 27, the hottest ticket in Washington, DC was for a seat in the courtroom to hear oral arguments in the US Environmental Protection Agency’s (EPA’s) Clean Power Plan (CPP) appeals. Below are some key takeaways from the proceedings.

Oral arguments were thorough and the judges were well-prepared. The discussion took almost twice as long as scheduled; the court allotted 218 minutes for arguments, and the hearing lasted nearly 7 hours.

Transforming the Sector?

A key issue was whether or not the CPP rule is transformative to the electric sector. The EPA is walking a fine line here because it wants to tout the positive impacts the rule will have on climate change and air pollution without indicating that the CPP is transformative enough to warrant a clear directive statement from Congress. Questions included whether the Clean Air Act was intended for this purpose, and what to do when Congress fails to act. The fact that a number of utilities intervened in support of the EPA and spoke to the issue of the ongoing shift to low-carbon generation sources (e.g., natural gas and renewables) may weaken petitioners’ case that the EPA overstepped its authority, meaning congressional action is required for such a change.

At Guidehouse, we have been modeling regulations on CO from power plants since President Obama first announced that this kind of regulation would be a part of his Climate Action Plan in 2013. A number of factors, including continuing low gas prices and ever lower renewable costs, make emissions reduction actions more cost-effective. This is to say that the CPP is not as costly to achieve in our current future outlook than it appeared a few years ago. The court’s focus on this point indicates that the judges recognize the nature of the ongoing energy transformation may be in line with current trends.

Other challenges brought in front of the judges on Tuesday included whether a Best System of Emission Reduction (BSER) that extends beyond the fence line (i.e., outside of the regulated generation plant) is allowed under section 111(d) of the Clean Air Act. Based on feedback from attendees, this issue did not seem as contentious as originally expected. Discussions on differences between the House and Senate versions of the 1990 Clean Air Act amendments also seemed less contentious than originally thought.

Procedural Notice

The other challenge that I found interesting was the issue of procedural notice. Petitioners’ challenge that there are major differences between the proposed and final rules and contend that the EPA should have reissued the rule allowing for additional comments prior to finalizing it. If the judges agree, the court may not have to rule on the merits of the case and the CPP could be sent back to the EPA for additional comments. At that point, it would be up to the next president and administration to move the CPP forward. Under those circumstances, the reissued CPP would also likely see appeals through the DC Circuit and US Supreme Court, likely pushing back compliance.

The case was heard in front of 10 judges, 6 Democratic appointees, and 4 Republican appointees. Regardless of the DC Circuit’s decision (expected in early 2017), most agree that this case is likely to be appealed to the US Supreme Court. In its current makeup, the Supreme Court is largely assumed to be split 4‑4 on the issue.