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Supreme Court Puts Brakes on EPA Effort to “Aggressively Transform” Domestic Energy Industry

Karen Harned February 10, 2016
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It is no secret that climate change policy has been at the top of the Obama Administration’s priority list from the beginning. In many respects, the President and the Environmental Protection Agency have been very successful in their efforts to “aggressively transform” the domestic energy industry so that carbon emissions are dramatically reduced. But on February 9, the Supreme Court—which has clearly been observing the Administration’s penchant for governing with a ‘pen and a phone’—decided the courts and the country needed to take a collective deep breath to review (on the front end) whether this whole “transformation” is even legal.

By a 5-4 decision, the Supreme Court ruled that EPA could not go forward with its “Clean Power Plan” rule until the courts decide whether or not it passes legal muster. In short, the rule would permit EPA to impose strict new standards for carbon dioxide emissions from coal-fired power plants. The result of this new regulatory regime will be higher electricity costs for small businesses and all Americans.   

States would be required to overhaul their power sectors. The rule purports to require states to enact new laws to ensure the permitting, construction, and funding of EPA’s preferred sources of power, as well as the decommissioning of existing disfavored coal plants. EPA’s mandated reductions would require a fundamental shift in energy policy—one that would force States to take initiative to ensure the construction of costly renewable energy sources and infrastructure, and to shutter coal-fired plants that would otherwise be the most efficient, reliable, and cost-effective option for providing power.

This “aggressive transformation” of the energy industry would be done through a stroke of the pen–an EPA rule–not through Congress. Indeed, Congress expressly rejected many of these transformative policies when it failed to pass President Obama’s “cap-and-trade” legislation. And that was before Republicans retook the House and Senate—back when the Obama Administration was working with a Democrat controlled Congress in both houses.

Given what is at stake for all Americans, 26 States and various industry groups—including the National Federation of Independent Business, representing 325,000 small business owners—collectively asked the Supreme Court to give us a chance to argue our case in the courts before States, industry, and businesses are required to start implementing a rule that may ultimately prove to be illegal.

As the Court considered our request it may well have been reminded of a case it decided not even a year ago, Michigan v. EPA, in which the Supreme Court ruled that the Clean Air Act requires EPA to consider costs as well as benefits before imposing limits on mercury, arsenic and acid gases emitted by coal-fired power plants, known as mercury and air toxics (MATS). That decision was labeled a “win” for regulated industries, small businesses and all Americans who think that agencies should analyze costs and benefits of new mandates before they take effect. But, in reality, it was nothing more than a pyrrhic victory.

As EPA Administrator Gina McCarthy put it on the eve of the Court’s decision during a discussion on “Real Time with Bill Maher,” the agency had already achieved success as a practical matter, regardless of what ultimately happened in the courts:

 “[The rule] was [made effective] three years ago. Most of … [the power plants] are already in compliance, investments have been made, and we’ll catch up. And we’re still going to get at the toxic pollution from these facilities.”  In other words, regardless of how the Court rules, the Administration had already won—the agency had successfully forced the hand of the regulated community.

And many believe that is exactly the attitude that resulted in the Supreme Court’s unprecedented action to stay the Power Plan rule until the courts review its legality. To be sure, if the States begin enacting laws to comply with EPA’s mandates under the Clean Power Plan, those enactments will be very hard to undo. Businesses will not be able to recoup their losses to the extent they invest in compliance either. For these reasons, the states and industry groups challenging the rule were immensely pleased with the Court’s decision to issue a stay.

This Administration has been relentless in its efforts to push the proverbial envelope as far as it can to get industry actors to capitulate to its policy goals. They do so knowing full well that the process for reviewing whether or not agencies are obeying the law takes years to complete. But it appears the Supreme Court has finally caught on to the Administration’s game and has decided enough is enough.

The Court has effectively put the brakes on this aggressive transformation and it’s up to the courts to decide whether or not this is a road EPA can legally travel.

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