WASHINGTON -- With less than two weeks to go, the Environmental Protection Agency is readying a climate rule for existing power plants that requires steep carbon reductions while allowing states and companies broad flexibility in how they limit their overall greenhouse-gas emissions.
While key aspects of the proposal are still under discussion, according to several individuals briefed on the matter, the measure will likely prompt regional carbon-trading regimes on the East and West coasts and spur a legal challenge from some utilities.
As drafted, the rule would cut greenhouse-gas emissions from the utility sector by 25 percent, individuals said, but the base line for that reduction has not been finalized.
The EPA plan resembles proposals made by the Natural Resources Defense Council, which would allow states and companies to employ a variety of measures -- including new renewable-energy and energy-efficiency projects "outside the fence," or away from the power plant site -- to meet their carbon-reduction target.
The exact level of reduction will vary by state, according to those familiar with the rule, and it will consist of a two-step process that will have smaller reductions at first and larger ones by 2030.
Coal-intensive utilities, coal-mining companies, the U.S. Chamber of Commerce, conservative think tanks and a dozen or so state attorneys general have lined up to challenge the basis for the EPA's impending draft regulations. They have taken aim at the likelihood that the EPA will set emissions targets and at any approach that isn't limited to a specific plant site.
"Any standard that is set predicated on reductions happening outside the fence line are illegal and would be overturned by the court," said Joseph Stanko, who heads government relations at the law firm Hunton and Williams and represents several utility companies. "And I think they know that."
The proposed rule, which will be announced June 2, represents the centerpiece of President Barack Obama's climate action plan. Utilities account for roughly 40 percent of the nation's carbon-dioxide emissions, with much of them coming from the nation's aging coal-fired power plants.
The EPA declined to comment on the draft rule. Both Bloomberg News and Reuters reported some of the proposals over the past few days.
Kelly Speakes-Backman, who is both commissioner of the Maryland Public Service Commission and chairman of the board of directors of the Regional Greenhouse Gas Initiative, a nine-state emissions-trading compact, said in an interview last week that a "mass-based" system allows states and utilities to cut carbon in a more efficient and cost-effective way.
Under this system, which is what the EPA is poised to adopt, states will have to meet an overall greenhouse-gas limit rather than a specific rate per hour for each power plant.
EPA Administrator Gina McCarthy is traveling this week to Utah, Washington state and Oregon, where she will meet with each state's governor and also hold public events. Democratic Washington Gov. Jay Inslee pressed the EPA to adopt a strict carbon standard and is pushing for several policies so his state can meet its goal of reducing its overall emissions 20 percent by 2020.
Other states are more resistant. Oklahoma Attorney General E. Scott Pruitt, for example, argued at the National Press Club on Tuesday that the Clean Air Act gives states the power to determine what pollution standards should be and how to achieve them.
Only later, he said, can the EPA reject a state's plan and impose its own, so the EPA's task now is to design a procedure and general emissions guidelines. He said it was reducing the states "from a substantive to an administrative role."
But David Doniger, policy director for the Natural Resources Defense Council's climate and clean-air program, said the EPA does have the authority to set an overall carbon limit. Since there was a limited amount of improvement to boost the efficiency of existing coal-fired power plants, he said, using the broader approach could help meet deeper reductions in carbon emissions at lower costs.
Doniger said that the EPA's authority had been clearly recognized by the Supreme Court both in American Electric Power Co. v. Connecticut and in Massachusetts v. EPA. "I don't think there's much ambiguity there," he said.
Some companies that have invested heavily in nuclear power, such as Exelon, back a strict carbon standard for existing plants. Joe Dominguez, Exelon's senior vice president of governmental, regulatory affairs and public policy, said several of its 24 units may not be economically viable if the EPA's proposal is not stringent.
The wind industry is also lobbying for an "outside the fence" approach so that companies can add wind power as a strategy.
"The EPA rule is going to be do-able and affordable assuming wind and other renewables count," said Tom Vinson of the American Wind Energy Association.
A Section on 05/22/2014