In a much-anticipated move, the U.S. Environmental Protection Agency (EPA) is proposing repeal of the Clean Power Plan (CPP).  The draft proposed rule outlines EPA’s revised interpretation of its authority under Clean Air Act section 111(d) to regulate greenhouse gas (GHG) emissions from power plants only within the fenceline.  EPA concludes in the proposed rule that the CPP “system of emission reduction” for GHGs is inconsistent with section 111(d), given that only one of the three “building blocks” of the CPP directly applies to or at fossil fuel-fired power plants themselves, rather than to the owners or operators of plants, who could take action outside the fenceline to meet the CPP GHG performance standards.

To arrive at the revised interpretation, the proposed rule looks to how certain terms and phrases in section 111, particularly ‘application of the best system of emission reduction’ and similar terms, are used in other sections of the Clean Air Act and related legislative history of the language.  The proposed rule also takes stock of the Agency’s prior “understanding” of section 111 as applying to physical or operational changes to a source, reflected in previous regulatory actions.  EPA noted that the revised interpretation will avoid illogical results in light of other provisions of the Clean Air Act and avoid a policy shift in the relationship between federal and state government and conflicts with other federal legislation and the jurisdiction of the Federal Energy Regulatory Commission.  The proposed rule’s Regulatory Impact Analysis provides a revised accounting of the costs and benefits of the CPP, versus its repeal.  EPA has also proposed the express rescission of the legal memorandum that detailed the Agency’s previous legal analysis in support of the CPP.

Anticipating criticism of its about-face in the legal arguments underpinning the CPP, the proposed rule notes judicial precedent, including Chevron v. NRDC, in support of reconsidering prior decisions “on a continuing basis.”  The draft proposed rule directly addresses several perceived legal flaws with the CPP as it was adopted, but this will not head off legal challenges to the final rule, assuming the repeal goes forward as proposed.  Multiple states, as well as environmental groups that stepped into the fray in the current litigation over the CPP, are expected to bring suit once a final rule is adopted.  Opponents would likely challenge the repeal based not only on the arguments EPA advanced in 2015 on why the Agency is required under the Clean Air Act to regulate GHGs from existing power plants, but they are also expected to take issue with EPA’s unabashed change in stance driven by policy preferences rather than a legislative change or new scientific evidence.  The revised Regulatory Impact Analysis is another anticipated target for lawsuits.  With the likelihood that the Supreme Court would eventually hear any lawsuits challenging a repeal, in one twist of interest to SCOTUS watchers, Justice Gorsuch, the newest member of the Court appointed by President Trump and a strident critic in his appellate decisions of deference to agency action under Chevron, could hear arguments from EPA underpinned by Chevron deference.

EPA is not proposing or taking comment on a CPP replacement, but is considering whether to propose a new rule under section 111(d) to address GHGs from existing fossil fuel-fired power plants.  Per the draft proposed rule, EPA intends to solicit information on systems of GHG emission reductions that would be consistent with EPA’s revised interpretation of section 111(d) in a forthcoming Advanced Notice of Proposed Rulemaking.

The proposed rule notes that the New Source Rule issued under Clean Air Act section 111(b) – that is, the regulation of GHGs from new and modified power plants – is also undergoing review and reconsideration pursuant to President Trump’s March 28, 2017 Executive Order that launched the reexamination of the CPP.