CLEAN AIR PUSH: The EPA on June 2 announced a proposed rule to cut carbon dioxide emitted by power plants—namely those fired by coal, as seen above—by 30 percent nationwide by 2030.
CLEAN AIR PUSH: The EPA on June 2 announced a proposed rule to cut carbon dioxide emitted by power plants—namely those fired by coal, as seen above—by 30 percent nationwide by 2030. (ngkaki / iStockphoto.com)

Provisions that were intended to sweeten the U.S. Environmental Protec­tion Agency’s newly proposed carbon-emissions rule for industry are also what make it legally vulnerable, lawyers say, and are likely to form the bedrock of a challenge.

“There’s a 100 percent likelihood it will be litigated,” said Roger Martella Jr., a partner in the environmental group at Sidley Austin who previously served as general counsel of the EPA. “This is likely to be the single most controversial rule from the EPA during the Obama administration.”

That a proposed EPA rule would be controversial and the subject of lawsuits is nothing new — almost everything the agency does is challenged in court. This rule, however, is broader than most in its interpretation of the Clean Air Act and its effect on the energy business.

On June 2, the EPA announced a ­proposed rule that would cut carbon emissions by 30 percent nationwide by 2030. Doing so will prevent up to 6,600 premature deaths and up to 150,000 asthma attacks in children as well as fighting climate change, according to the agency.

“The glue that holds this plan together, and the key to making it work, is that each state’s goal is tailored to its own circumstances, and states have the flexibility to reach their goal in whatever way works best for them,” EPA Administrator Gina McCarthy said in announcing the rule.

Lawyers are zeroing in on that flexibility as a potential legal weakness. The agency is acting under Section 111(d) of the Clean Air Act, a little-used provision that gives the EPA authority to establish “standards of performance for any existing source for any air pollutant” not covered by other parts of the act.

Carbon dioxide emitted by power plants — namely those fired by coal — fits the bill, but it’s no simple matter to limit output of the gas. As White & Case environmental partner Neal McAliley said, the plants can’t just install filters on their smokestacks to contain the emissions. “To do it the old-fashioned way just doesn’t work with current technology,” he said.

Instead, power plants would have to capture their carbon dioxide emissions, then pump them deep into the ground (where they might leak out anyway), a prohibitively expensive proposition.

“In essence, people view this as the shutdown of coal-fired power plants, or at least a large number of them,” said Allison Wood, a Hunton & Williams partner who focuses on climate change. “This is the testing ground for how far can the EPA go, and what can the EPA require the states to do.”

On strictly legal grounds, the ­safest way for the EPA to proceed would have been to limit carbon emissions on a plant-by-plant basis. That’s what the statute, with its reference to limits on “air pollutant sources” like power plants, seems to envision.

But the EPA in its proposed rule took a different path, one that gives industry more options but also opens the door to lawsuits. That is, the EPA said states could use a variety of methods to reduce their emissions, including cap-and-trade arrangements and promoting energy efficiency at the consumer level.

“But can those be considered standards of performance? It’s a really expansive view of what’s allowed,” McAliley of White & Case said.

Further, the statute calls for the EPA to determine the “best system of emissions reduction” — but the term “system” is not defined. The conventional reading is that it refers to a piece of equipment, like a scrubber, said McDermott Will & Emery partner Jacob Hollinger, a former EPA lawyer who is an expert in the Clean Air Act. Here, EPA argues that “system” could also mean, say, cap and trade, Hollinger said.

HIGH COURT DECISION COULD BOOST EPA

In the end, the courts will decide whether EPA’s interpretation is reasonable and entitled to deference. A recent decision by the U.S. Supreme Court gives the agency reason for optimism, Hollinger said.

In Environmental Protection Agency v. EME Homer City Generation, the high court in April upheld the EPA’s interstate pollution controls. In part, the decision turned on EPA’s interpretation of the word “significant,” which the agency said could mean more than one thing. The court agreed, which Hollinger said is “the best sign” for the EPA right now.

Challengers also might focus on the technical, specific standards required for each state under the rule. They could try to reverse-engineer how the EPA got to these targets, to see whether any part of the formula was arbitrary or capricious, Martella of Sidley Austin said.

It’s also possible that Congress might intervene before the courts have a chance to review the rule, which won’t be finalized until 2015.

Republicans on Capitol Hill decried the proposed rule as “an end-run around Congress” and introduced a bill to stop it. Senate Minority Leader Mitch McConnell, R-Ky., pressed last week for immediate consideration of The Coal Country Protection Act.

The bill would require — before the proposal could go into effect — the administration to certify the rule would not cause job losses, not reduce the gross domestic product or increase electricity rates, McConnell said. He said the EPA’s rule would favor states such as California and New York while “inflicting acute pain on states like Kentucky.” He added that “the president and his allies should not be allowed to get away with this. Congress must listen to the families who will be hardest hit by these rules — even if the president won’t.”

Senate Majority Leader Harry Reid, D-Nev., stopped consideration of the bill on June 4, saying the rule will not become effective “for a very long time.” “Members of my caucus want to weigh in on this to try to improve the suggested rule that has come from the EPA,” Reid said on the Senate floor. “I am waiting to read this, the proposed regulation myself, which I have not done. … And I will read this closely, as I’m sure every senator will.”

Contact Jenna Greene at jgreene@alm.com. Contact Todd Ruger at truger@alm.com.