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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--As expected, the Obama administration's release of the finalized Clean Power Plan (CPP) on August 3 was met with sharp criticism by Republican lawmakers and coal interests, but enthusiastic support from environmental activists and clean-air advocates. The plan, the first time the federal government has regulated emissions of carbon dioxide (CO2) from coal-fired power plants, has been under development for at least two years. An earlier draft rule drew more than 4.3 million comments.
The final CPP will cut carbon dioxide (C02) emissions from coal-fired power plants by 870 million tons, or about 32% by 2030 compared to 2005. The final plan's emissions-reduction mandate is 9% tougher than the earlier draft rule, which called for a 30% cut. But the finalized CPP, about 1,560 pages long--plus an additional 343 pages for a regulatory impact analysis--also gave power producers and states two extra years (to 2022) to comply with the new emissions levels.
The final rule released Monday also differs from its draft rule, released in June 2014, in the following ways:
In a White House ceremony Monday, President Barack Obama was accompanied by Gina McCarthy, administrator of the U.S. Environmental Protection Agency (EPA) (Washington, D.C.). The nation's first-ever CO2 reduction effort also will lower other emissions that cause soot and smog. By 2030, the rule will cut emissions of SO2 by 90% and nitrogen oxides (NOx) by 72% compared to 2005, the EPA estimated.
The president announced plans for the CPP during the summer of 2013. In mid-2014, a draft CPP was released, which drew widespread public comment. For more on the administration's goal of lowering CO2 emissions from power plants, see June 27, 2013, article -- President Obama Unveils Ambitious Climate Action Plan, and June 3, 2014, article - EPA Releases Draft Carbon Dioxide Emissions Rule for Existing Power Plants.
In the days leading up to Monday's announcement, lawyers on both sides of the issue debated whether the CPP would withstand legal scrutiny. Nearly everyone expects this law will be litigated, and most see a visit to the U.S. Supreme Count as a virtual certainty.
There was a flood of news coverage before and after Monday's release of the final CPP, but one article in particular stood out: Written by a former Obama administration official and published in Politico, the article explained how changes the administration made to the final rule could "bulletproof" it from legal challenge. Authored by Jody Freeman, who now teaches at Harvard Law School, the article discussed five small but key changes that were made to the draft CPP since June 2014.
"For those handicapping the litigation," Freeman wrote, "the government's odds of success just got a significant boost. A close analysis of the language in the final plan ... suggests that EPA has addressed each of these (five) problems in subtle but significant ways, and the legal battle will now likely be much harder for the challengers."
Only time will tell. Foes and supporters of the final rule have not been shy about sharing their views, both before and after it was released Monday. Months before the CPP was unveiled, Senate Majority Leader Mitch McConnell (R-Kentucky) wrote a letter to all 50 governors urging them to simply ignore the law: "This proposed plan is already on shaky legal grounds, will be extremely burdensome and costly, and will not seriously address the global environmental concerns that are frequently raised to justify it."
For states that do not comply with the CPP's implementation plans, the rule created a model federal compliance plan that will be implemented instead.
Following Monday's release of the CPP, McConnell charged Obama was "tired of having to work with the Congress the people elected. That's why the administration is now trying to impose these deeply regressive regulations--regulations that may be illegal, that won't meaningfully impact the global environment and that are likely to harm middle- and lower-class Americans most--by executive fiat," McConnell said. "It represents a triumph of blind ideology over sound policy and honest compassion."
Arch Coal Incorporated (NYSE:ACI) (St. Louis, Missouri) echoed McConnell's view. "The administration seems increasingly desperate to salvage an ill-advised and poorly designed rule, which won't work, won't pass muster with states, and won't stand up to legal scrutiny," said Deck Slone, the company's senior vice president of strategy and public policy, in a statement. "Even prior to the expensive overhaul announced (Monday), seven governors had stated that they did not plan to comply. That number seems certain to grow as other governors realize that, rather than fix the rule, EPA has in many ways made matters worse." He added at least 20 state governors planned to challenge the rule in court.
The president's plan also was blasted by the National Mining Association (NMA) (Washington, D.C.). In a statement, NMA President and Chief Executive Officer Hal Quinn said: "EPA's final Clean Power Plan reflects political expediency, not reality for supplying the nation with low-cost, reliable power. Left in place are targets for replacing affordable energy with costly energy. These will burden Americans with increasingly high-costs for an essential service and a less reliable electric grid for delivering it. Postponing the initial deadline merely forces ratepayers into steeper cost increases in later years than originally proposed. American households and businesses will be forced to accept higher electricity rates in exchange for what EPA admits are negligible environmental gains. Low-income families will be hit hardest now as they were before. This is change without a difference. It is not a course correction; EPA is still insisting that families accept a subprime energy mortgage but now with a balloon payment."
The fortunes of Arch and other coal-mining companies have been badly hurt by environmental regulation of their product in recent years, as well as the growing use and lower cost of natural gas. Five years ago, Arch stock traded for more than $300 per share. But today, it trades for about $1.50 per share. Several other coal companies, including Alpha Natural Resources (NYSE:ANRZ) (Bristol, Virginia), Walter Energy Incorporated (Birmingham, Alabama) and Patriot Coal Corporation (Scott Depot, West Virginia) have filed for Chapter 11 bankruptcy protection from creditors. The companies are trying to restructure their business, sell assets and close mines.
Shares of other coal companies, including Peabody Energy Corporation (NYSE:BTU) (St. Louis, Missouri), Cloud Peak Energy Incorporated (NYSE:CLD) (Gillette, Wyoming) and Westmoreland Resource Partners (NYSE:WMLP) (Englewood, Colorado), fell after the release of the CPP.
S. William Becker, executive director of the National Association of Clean Air Agencies (Washington, D.C.), an independent group that represents state regulators, said: "EPA has struck the right balance. The agency has strengthened its legal defense of the program without sacrificing environmental integrity."
Writing in The New York Times, Richard L. Revesz, a professor at the New York University School of Law, and Jack Lienkeaug, an attorney with NYU law school's Institute for Policy Integrity, said, "If the (CPP) appears likely to spur a larger number of plant retirements than its predecessors, that is mainly because it is taking effect during a period when natural gas is affordable and abundant as never before," wrote Revesz and Lienkeaug. "In the current market, shuttering old coal plants and ramping up the use of gas plants is simply many utilities' most cost-effective option for cutting their carbon emissions."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
The final CPP will cut carbon dioxide (C02) emissions from coal-fired power plants by 870 million tons, or about 32% by 2030 compared to 2005. The final plan's emissions-reduction mandate is 9% tougher than the earlier draft rule, which called for a 30% cut. But the finalized CPP, about 1,560 pages long--plus an additional 343 pages for a regulatory impact analysis--also gave power producers and states two extra years (to 2022) to comply with the new emissions levels.
The final rule released Monday also differs from its draft rule, released in June 2014, in the following ways:
- State governments can form regional pacts to facilitate emissions-cutting projects across state lines using a cap & trade mechanism, similar to the way sulfur dioxide (SO2) and other emissions allowances are traded.
- There is a "safety valve" feature where states can seek additional compliance time to prevent disruptions to the power supply.
- New incentives for utilities to construct renewable-energy projects in poorer neighborhoods, reducing pollution-related illness and eventually lowering electricity rates for those areas.
- The elimination of one of the draft rule's original "building blocks," which states could use in designing their own carbon-reduction plans. Gone from the final rule is a feature that would have allowed states to claim credit for reducing emissions by adding programs that improve energy efficiency for electricity consumers. While the revised rule still encourages energy efficiency, the provision was dropped over concerns about future legal challenges, administration officials said.
- The new version also includes an expanded Clean Energy Incentive Program that offers extensive credits to states for acting quickly to invest in renewable energy, the administration officials said. The program is structured specifically to reward investment in solar and wind power, essentially ensuring greater reliance on renewables in the future, they said.
In a White House ceremony Monday, President Barack Obama was accompanied by Gina McCarthy, administrator of the U.S. Environmental Protection Agency (EPA) (Washington, D.C.). The nation's first-ever CO2 reduction effort also will lower other emissions that cause soot and smog. By 2030, the rule will cut emissions of SO2 by 90% and nitrogen oxides (NOx) by 72% compared to 2005, the EPA estimated.
The president announced plans for the CPP during the summer of 2013. In mid-2014, a draft CPP was released, which drew widespread public comment. For more on the administration's goal of lowering CO2 emissions from power plants, see June 27, 2013, article -- President Obama Unveils Ambitious Climate Action Plan, and June 3, 2014, article - EPA Releases Draft Carbon Dioxide Emissions Rule for Existing Power Plants.
In the days leading up to Monday's announcement, lawyers on both sides of the issue debated whether the CPP would withstand legal scrutiny. Nearly everyone expects this law will be litigated, and most see a visit to the U.S. Supreme Count as a virtual certainty.
There was a flood of news coverage before and after Monday's release of the final CPP, but one article in particular stood out: Written by a former Obama administration official and published in Politico, the article explained how changes the administration made to the final rule could "bulletproof" it from legal challenge. Authored by Jody Freeman, who now teaches at Harvard Law School, the article discussed five small but key changes that were made to the draft CPP since June 2014.
"For those handicapping the litigation," Freeman wrote, "the government's odds of success just got a significant boost. A close analysis of the language in the final plan ... suggests that EPA has addressed each of these (five) problems in subtle but significant ways, and the legal battle will now likely be much harder for the challengers."
Only time will tell. Foes and supporters of the final rule have not been shy about sharing their views, both before and after it was released Monday. Months before the CPP was unveiled, Senate Majority Leader Mitch McConnell (R-Kentucky) wrote a letter to all 50 governors urging them to simply ignore the law: "This proposed plan is already on shaky legal grounds, will be extremely burdensome and costly, and will not seriously address the global environmental concerns that are frequently raised to justify it."
For states that do not comply with the CPP's implementation plans, the rule created a model federal compliance plan that will be implemented instead.
Following Monday's release of the CPP, McConnell charged Obama was "tired of having to work with the Congress the people elected. That's why the administration is now trying to impose these deeply regressive regulations--regulations that may be illegal, that won't meaningfully impact the global environment and that are likely to harm middle- and lower-class Americans most--by executive fiat," McConnell said. "It represents a triumph of blind ideology over sound policy and honest compassion."
Arch Coal Incorporated (NYSE:ACI) (St. Louis, Missouri) echoed McConnell's view. "The administration seems increasingly desperate to salvage an ill-advised and poorly designed rule, which won't work, won't pass muster with states, and won't stand up to legal scrutiny," said Deck Slone, the company's senior vice president of strategy and public policy, in a statement. "Even prior to the expensive overhaul announced (Monday), seven governors had stated that they did not plan to comply. That number seems certain to grow as other governors realize that, rather than fix the rule, EPA has in many ways made matters worse." He added at least 20 state governors planned to challenge the rule in court.
The president's plan also was blasted by the National Mining Association (NMA) (Washington, D.C.). In a statement, NMA President and Chief Executive Officer Hal Quinn said: "EPA's final Clean Power Plan reflects political expediency, not reality for supplying the nation with low-cost, reliable power. Left in place are targets for replacing affordable energy with costly energy. These will burden Americans with increasingly high-costs for an essential service and a less reliable electric grid for delivering it. Postponing the initial deadline merely forces ratepayers into steeper cost increases in later years than originally proposed. American households and businesses will be forced to accept higher electricity rates in exchange for what EPA admits are negligible environmental gains. Low-income families will be hit hardest now as they were before. This is change without a difference. It is not a course correction; EPA is still insisting that families accept a subprime energy mortgage but now with a balloon payment."
The fortunes of Arch and other coal-mining companies have been badly hurt by environmental regulation of their product in recent years, as well as the growing use and lower cost of natural gas. Five years ago, Arch stock traded for more than $300 per share. But today, it trades for about $1.50 per share. Several other coal companies, including Alpha Natural Resources (NYSE:ANRZ) (Bristol, Virginia), Walter Energy Incorporated (Birmingham, Alabama) and Patriot Coal Corporation (Scott Depot, West Virginia) have filed for Chapter 11 bankruptcy protection from creditors. The companies are trying to restructure their business, sell assets and close mines.
Shares of other coal companies, including Peabody Energy Corporation (NYSE:BTU) (St. Louis, Missouri), Cloud Peak Energy Incorporated (NYSE:CLD) (Gillette, Wyoming) and Westmoreland Resource Partners (NYSE:WMLP) (Englewood, Colorado), fell after the release of the CPP.
S. William Becker, executive director of the National Association of Clean Air Agencies (Washington, D.C.), an independent group that represents state regulators, said: "EPA has struck the right balance. The agency has strengthened its legal defense of the program without sacrificing environmental integrity."
Writing in The New York Times, Richard L. Revesz, a professor at the New York University School of Law, and Jack Lienkeaug, an attorney with NYU law school's Institute for Policy Integrity, said, "If the (CPP) appears likely to spur a larger number of plant retirements than its predecessors, that is mainly because it is taking effect during a period when natural gas is affordable and abundant as never before," wrote Revesz and Lienkeaug. "In the current market, shuttering old coal plants and ramping up the use of gas plants is simply many utilities' most cost-effective option for cutting their carbon emissions."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
