09/26/2022 - Biden Administration Status Update - Power Sector Rules

Climate Change—Power Sector

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To go directly to our Existing Power Plant Greenhouse Gas Regulations section click here.
To go directly to our New Source Performance Standards for New and Modified Stationary Fossil Fuel-Fired Power Plants section click here.
To go directly to our Offshore Wind Developments section click here.

Existing Power Plant Greenhouse Gas Regulations

By Carrie Jenks and Hannah Oakes

EPA is developing a regulatory proposal following the Supreme Court’s decision articulating the major questions doctrine and rejecting the Clean Power Plan’s generation-shifting approach.

EPA’s efforts to promulgate regulations under section 111(d) of the Clean Air Act in order to regulate greenhouse gas emissions from existing power plants will now be shaped by the Supreme Court decision in West Virginia v. EPA. On June 30, 2022, the Supreme Court held in a 6-3 decision that EPA does not have authority to require generation-shifting as the best system of emissions reduction because it would effectively “dictat[e]” the nation’s electricity generation portfolio, which is a “major question” that Congress did not intend to leave to EPA’s discretion.

In applying the major questions doctrine for the first time in a majority opinion, the Court enumerated and relied on several broad factors. The majority opinion states that Congress does not use “oblique or elliptical language” to authorize an agency to make what it characterizes as a “radical or fundamental change” to a statutory scheme. On the contrary, in these cases it finds that “both separation of powers principles and a practical understanding of legislative intent make us reluctant to read into ambiguous statutory text the delegation claimed to be lurking there.” Now, the agency must show “clear congressional authorization for the power it claims.”

In applying the major questions doctrine, the Court concludes that EPA lacks authority to require a generation-shifting approach to reduce power sector emissions as envisioned in the Clean Power Plan. The Court found fault in setting pollution limits for the power sector based on the industry’s ability to shift production from higher to lower emitting plants. Though, as Justice Kagan’s dissent points out, “[m]arket forces alone caused the power industry to meet the Plan’s nationwide emissions target – through exactly the kinds of generation shifting the Plan contemplated.”

While the major questions doctrine is likely to be raised in challenges to more EPA regulations as well as actions by other agencies, EPA has options under section 111 to require power plants to reduce their greenhouse gas emissions. EPA can develop a rule based on other reduction opportunities such as improving the efficiency of units, co-firing of lower-carbon fuels, and carbon capture and sequestration, for example.

Additionally, the Inflation Reduction Act shifts a key consideration for EPA as it develops these greenhouse gas rules based on emerging technology for existing power plants. By extending and expanding tax incentives for carbon capture and sequestration and use of hydrogen as a fuel, there will be lower costs for power plants building those systems. While EPA will still need to evaluate the other statutory factors for both technologies, their reduced costs make it more feasible for EPA to define a best system of emission reduction reflecting those technology opportunities.

For our full analysis of the West Virginia v. EPA decision, read our blog post by Carrie Jenks, Sara Dewey, and Hannah Oakes and listen to our recent CleanLaw podcasts breaking down the decision and the implications.

New Source Performance Standards for New and Modified Stationary Fossil Fuel-Fired Power Plants, Clean Air Act Section 111(b)

By Carrie Jenks and Hannah Oakes

EPA is developing a proposed revision for new and modified power plants that would update the 2015 standards.

President Biden’s Executive Order 13990 directed EPA to consider suspending, revising, or rescinding the Final New Source Performance Standards (NSPS) Significant Contribution Rule that the Trump administration issued just seven days before the inauguration. This rule did not alter the 2015 standards for new electric generating units[1] as it would have implemented a requirement that a greenhouse gas NSPS only apply if the source category’s emissions exceeds three percent of total US greenhouse gas emissions. Given that electric generating units emit 25 percent of US greenhouse gas emissions, such a threshold would limit EPA’s authority to use section 111 to regulate other sectors such as industrial and the oil and natural gas sectors.

However, on April 5, 2021, the DC Circuit vacated and remanded the Significant Contribution Rule to EPA based on an unopposed motion for voluntary vacatur by EPA stating that “it failed to provide any public notice or opportunity for comment on the central elements of the Significant Contribution Rule, rendering it unlawful.”

EPA is now reviewing the NSPS requirements for new and modified electric generating units. To assess the opportunity to use emerging technologies for reducing greenhouse gases from new and modified natural gas combustion turbines, EPA released a draft white paper on April 21, 2022, and is now reviewing comments submitted in June 2022. In the white paper, EPA describes technologies for more efficient combustion turbine design, CCS, co-firing with hydrogen, and considerations for lifecycle emissions from power plant construction and fuel sources. EPA highlights examples of companies implementing each option.

As EPA considers a CAA section 111(b) rulemaking for new gas-fired units, the agency can set a standard that is technology-forcing,[2] but it must be “adequately demonstrated,” and consider costs, non air-quality health and environmental impacts, and energy requirements. EPA must also consider the impacts of the decision in West Virginia v. EPA and the Inflation Reduction Act’s tax credits and other funding that could lower the costs of the technologies. Stakeholders’ comments offered additional detail on existing projects and provided various perspectives on how EPA should consider the opportunities and challenges for each technology option.

You can read more about this issue and stay updated on our New Source Performance Standards for Power Plants Regulatory Tracker page.

Offshore Wind Developments

By Hannah Oakes

The Department of the Interior’s (DOI) Bureau of Ocean Energy Management’s (BOEM) is drafting proposed rules which will clarify siting and permitting requirements for renewable energy production in offshore waters consistent with the Biden administration’s offshore wind commitments.

The Biden administration has set ambitious goals to reach 100 percent carbon pollution-free electricity in the US by 2035, while making progress toward electrifying buildings and deploying electric vehicles. Reaching these goals will require a significant increase in renewable energy resources. While continued development of onshore solar and wind is needed, offshore wind is an alternative to finding sites for large land-based developments for states on the seacoasts and Great Lakes.

BOEM manages the development of offshore wind projects in the US Outer Continental Shelf, subject to environmental safeguards including National Environmental Policy Act (NEPA) reviews. While the US has significant technical resource potential for offshore wind development, offshore wind projects in the US have encountered legal opposition from the commercial fishing industry, homeowners, and environmental advocates. As a result of these legal challenges and other economic factors, the US had only 36 megawatts (0.036 gigawatts) installed when President Biden took office.

Executive and Legislative Actions

President Biden announced his first executive action on offshore wind on March 29, 2021. It contained a directive for the US to deploy 30 gigawatts of offshore wind by 2030. It also directed BOEM to “complete review” of at least sixteen Construction and Operations Plans by 2025. On June 23, 2022, President Biden announced a new Federal-State Offshore Wind Implementation Partnership, which will enhance collaboration on the East Coast to build a US-based supply chain for offshore wind development. On July 20, 2022 President Biden directed the secretary of the interior to advance clean energy development in the Southeast in an effort to eliminate uncertainty around President Trump’s executive order prohibiting leasing in the region from July 2022 to 2032. Through the Inflation Reduction Act, Congress removed the leasing moratoriums. On September 15, 2022 President Biden announced a goal to deploy 15 gigawatts of floating offshore wind by 2035 as BOEM works to deploy floating turbines in the deep waters of the West Coast.

Agency Actions

Under these directives from the White House, BOEM is conducting a comprehensive review of its offshore review siting and permitting processes to streamline its regulations and increase renewable energy production in an environmentally sound manner. In the spring of 2021 DOI proposed to revamp this initiative and renamed it the “Renewable Energy Modernization Rule” with the goal of “facilitating offshore renewable energy development in a manner that is safe, environmentally sound, and provides fair return to U.S. taxpayers.” DOI anticipates issuing a notice of proposed rulemaking for the Renewable Energy Modernization Rule this year.

BOEM has also enhanced its collaboration with other agencies to leverage their resources and expertise to process more offshore wind permit applications to help meet the administration’s goals. For example, it has developed agreements with NOAA to collaborate on environmental reviews, with California Department of Defense to responsibly open up development on the West Coast, and with the Army Corps of Engineers to conduct technical reviews of permits. BOEM also collaborated with other federal agencies that participate in its environmental reviews to develop a standardized process for identifying reasonable alternatives for evaluation in Environmental Impact Statements when reviewing Construction and Operations Plans from lessees. The Inflation Reduction Act appropriated $150 million to DOI to conduct environmental reviews, which may help expedite the process.

In another action early in the Biden presidency, on April 9, 2021 DOI Principal Deputy Solicitor Robert Anderson issued a legal opinion that helped to open up the Outer Continental Shelf to offshore wind permitting. The Opinion, M-37067, revoked a Trump-era legal opinion (M-37059) and rejected the reasoning in M-37059 concluding that “subsection 8(p)(4) of [the Outer Continental Shelf Leasing Act] imposes a general duty on the Secretary to act in a manner providing for the subsection’s enumerated goals” and that the secretary “retains wide discretion to determine the appropriate balance between two or more goals that conflict or are otherwise in tension.” The revocation of the Trump administration’s approach signals a clear intent to move forward with projects based on the secretary’s consideration of several potentially competing factors including “protection of the environment,” “prevention of waste,” “protection of national security interests of the United States,” and the “fair return to the United States.”

Offshore Wind Projects

DOI’s actions resulted in substantial progress, and in the administration’s first year BOEM approved two Construction and Operations Plans, for Vineyard Wind 1 and South Fork Wind (for more on South Fork you can listen to our recent podcast), and began reviewing the Construction and Operation Plans for ten additional offshore wind projects in North Carolina, New Jersey, Rhode Island, New York, Massachusetts, and Virginia. In 2022, BOEM is working to enable additional projects in seven other areas on the Outer Continental Shelf: New York Bight, Carolina Long Bay, Gulf of Mexico, Humboldt, Morro Bay, Coos Bay, and Brookings. If BOEM continues at this pace, it could reach its goal of deploying 30 gigawatts of offshore wind generation capacity by 2030 and reviewing sixteen Construction and Operations Plans by 2025. Notably, the Inflation Reduction Act provides significant tax credits for offshore wind projects but requires DOI to offer oil and gas leasing before it approves an offshore wind right of way; read more about the Inflation Reduction Act’s federal leasing provisions here.

Legal Durability

BOEM’s actions to support offshore wind are primarily in the form of agency guidance. Issuing guidance instead of promulgating rules has the benefit of facilitating swift action and speeding up offshore wind permitting review. However, under the same authority, a new administration could expeditiously revoke many of these policies and slow the pending reviews of offshore wind leases and Construction and Operations Plans.

Ongoing litigation risk under NEPA could impact offshore wind projects as they progress through BOEM’s application review process before they reach commercial operation. Offshore wind leasing and construction requires significant technical environmental review of sensitive underwater habitats under NEPA, which has led litigation by stakeholders including wildlife advocates and the commercial fishing industry. BOEM will need to engage with stakeholders on solutions to address such concerns and develop robust technical, science- and data-based records consistent with NEPA requirements. Additionally, coastal landowners have historically opposed offshore wind projects that disrupt their viewsheds. On April 2021, BOEM released guidance describing BOEM’s methodology to assess whether a project’s visual impacts are consistent with NEPA, which may help to mitigate such litigation risks.

There are also potential legal obstacles outside of the administration’s control that are endemic to the power industry that may impede the administration’s offshore wind goals. These include obtaining Federal Energy Regulatory Commission (FERC) and utility commission approvals and acquiring rights of way for the offshore and onshore transmission lines to reach power consumers.

You can read more about this issue and stay updated on our Federal Offshore Wind Deployment Tracker page.

[1] The Obama administration EPA’s final 111(b) rule required new coal-fired EGUs to implement partial carbon capture and storage (CCS) and base load natural gas-fired combustion turbines to meet an emissions rate of 1,000 lb CO2/MWh-g, among other requirements.

[2] “Recognizing that the Clean Air Act is a technology-forcing statute, we believe that EPA does have authority to hold the industry to a standard of improved design and operational advances” when setting standards under section 111. Sierra Club v. Costle, 657 F.2d 298, 364 (D.C. Cir. 1981).