On Tuesday lawyers representing everybody from the State of Texas to the International Brotherhood of Boilermakers to Google will file into a Washington courtroom to argue over whether President Obama overstepped his authority by ordering a sweeping restructuring of the U.S. electricity grid.
The stakes run to tens of billions of dollars, since if the president’s Clean Power Plan is upheld, states will have to shut down hundreds of coal-fired power plants and replace the lost generation with natural gas and renewables like wind and solar. The conservative justices on the U.S. Supreme Court have already signaled the extraordinary nature of this case, staying the Clean Power Plan back in February until the U.S. Court of Appeals for the D.C. Circuit issues its opinion. The case will almost certainly make its way back to the Supreme Court after that.
What’s the big issue here? Federalism, or the 18th-century idea that states and the federal government share sovereignty derived from their citizens. The President and his supporters in the environmental community and Democratic-leaning states say the federal government, whose powers under the Constitution include regulating interstate commerce, must have the authority to regulate CO2 emissions that float across borders and threaten the entire globe with human-induced atmospheric warming. Tech giants including Google, Microsoft and Amazon have filed briefs supporting the government, saying renewable electricity from sources like wind and solar provide better long-term supplies with lower price volatility.
Opponents, including 28 mostly Republican states, the coal industry and a number of labor unions, say the Tenth Amendment of the Constitution doesn’t allow the federal government to commandeer such a large portion of their economies, especially when the plan requires state officials to carry out the President’s politically unpopular dirty work. Under the CPP, states would be given strict – and according to the utility industry, unachievable – CO2 limits that would leave them no choice but to shut coal-fired plants down and find electricity from other sources.
This so-called “outside the fence” regulation exceeds the Environmental Protection Agency’s authority to regulate individual power plants, opponents say.
Under the law, “the actual structuring of the electric generation grids of the states is the province of the state government,” said Thomas Lorenzen, a partner with Crowell & Moring in Washington who until 2013 was a top Justice Dept. lawyer on environmental affairs.
Lawyers on Tuesday will present their arguments in pieces before a 10-member panel of the court of appeals consisting of six Democratic appointees and four Republican appointees. Industry lawyers will start out in the morning, followed by former Obama mentor Laurence Tribe of Harvard Law School and David Rivkin of Baker Hostetler, who will present the core constitutional argument.
That argument focuses on accountability: Can the feds order state officials to do their bidding, and thus avoid the political consequences?
The U.S. Supreme Court tackled this question back in 1992 in New York v. U.S., when Congress passed a law requiring states to either participate in a federally designed plan for disposing of radioactive waste from nuclear power plants, or take title to the waste and dispose of it themselves according to federal standards.
The court, in a 6-3 decision by Justice Sandra Day O’Connor, ruled that Congress could order the states to deal with nuclear waste and even provide financial incentives and penalties to make sure they did it according to federal standards. If the states refused, Congress could use the Supremacy Clause of the Constitution to write a law pre-empting state laws and taking control of the situation itself.
But Congress couldn’t order the states to take title to nuclear waste, the court ruled, because that would effectively dispense a subsidy on privately owned nuclear generators and force state officials to bear the political consequences of designating local sites for storing the waste.
If the citizens of New York, for example, do not consider that making provision for the disposal of radioactive waste is in their best interest, they may elect state officials who share their view. That view can always be pre-empted under the Supremacy Clause if it is contrary to the national view, but in such a case it is the Federal Government that makes the decision in full view of the public, and it will be federal officials that suffer the consequences if the decision turns out to be detrimental or unpopular.
The Supreme Court similarly struck down a federal law requiring state law enforcement officers to conduct background checks on handgun purchasers in Printz v. U.S. Rivkin and Tribe will likely cite both cases in their arguments Tuesday, as well as the Supreme Court's rejection of the Affordable Care Act's Medicaid expansion plan in NFIB v. Sibelius, saying the CPP requires states to destroy and remake their utility grids without the option of shoving the job off on the federal government.
“Your sovereignty or your economy” is the EPA’s ultimate demand, he writes in a Cato Institute article laying out the constitutional case.
The federal government barely acknowledges such deep constitutional concerns in its briefs. Already the EPA has overseen pollution rules that have reshaped the utility industry, including restrictions on mercury and other toxic emissions that required the states to establish cap-and-trade programs under which plants that couldn’t install scrubbers and other control equipment at a reasonable cost were shut down. The federal government says the CPP is no different – potentially sweeping in its effects, but based upon requiring the states to meet standards devised by expert administrators at the EPA.
The CPP goes into uncharted territory, however, said Lorenzen of Crowell & Moring. With the mercury regulations, the EPA was still imposing conditions on individual power plants that were mostly achievable given the best available technology. With the CPP, lawyers and regulators at the EPA expanded the definition of best available technology to include changing the format of the entire electric grid.
“The problem with this rule is there is no technology that can get you to the levels EPA is demanding,” he said.
The rule establishes a limit of 1,305 tons of CO2 per megawatt/hour for existing fossil-fuel steam plants, for example, while the standard for new coal-fired plants using expensive carbon-capture technology is 1,400 tons. Under last year’s Michigan v. EPA, the EPA must consider costs when it is handing down new rules, and opponents of the CPP will argue the EPA is trying to impose regulations that are so costly they force the shutdown of large swaths of the generating fleet.
Two other arguments that might prove important include a seemingly arcane fight over whether the law even allows the Obama administration to do what it did. Due to what many consider a legislative error, Section 111(d) of the Clean Air Act, upon which the CPP relies, also says it can’t be used to regulate existing plants subject to regulations under Section 112. The federal government barely acknowledges the argument, but opponents say the clear text of the law prohibits this plan.
Lorenzen, representing electric cooperatives opposed to the rule, will also argue that the administration enacted a very different rule than the one they put out for public notice and comment, including the strict limits on CO2 emissions for coal and gas plants. In the proposed rule, Lorenzen said, the agency said there would be no such rate limits.
“That is what is called a surprise switcheroo,” he said, and it may reflect the Obama administration’s zeal to achieve 30% reductions in CO2 emissions required under the Paris Accord. Regulators knew applying existing technology to individual plants would get them no more than 3% reductions, he said, “so they got creative.”
