EPA is in the process of conducting significant rulemakings aimed at reducing greenhouse gas (“GHG”) emissions from the energy sector, even as the U.S. Supreme Court seeks to review the scope of the Agency’s authority in this realm.

Affordable Clean Energy Rule Litigation and Pending EGU Regulations

In October 2021, the U.S. Supreme Court granted four petitions for certiorari asking the Court to review a decision by the D.C. Circuit to vacate and remand the Affordable Clean Energy (“ACE”) Rule, which set emission guidelines for GHG emission reductions from existing coal-fired electric generating units (“EGUs”) under Section 111(d) of the Clean Air Act (“CAA”). Oral argument is scheduled for February 28, 2022. The lead case is West Virginia v. EPA, No. 20-1530 (U.S.).

The ACE Rule, promulgated in June 2019, had established GHG emission guidelines for existing EGUs based on the “best system of emission reduction” (“BSER”) and replaced the Clean Power Plan (“CPP”) promulgated under the Obama administration, which included an expansive definition of BSER that set emission guidelines at the sector level rather than the source level. In January 2021, the D.C. Circuit found that Section 111(d) does not require BSER to be limited only to those measures that can be applied at and to an individual source. See American Lung Ass’n, et al. v. EPA, 985 F.3d 914 (D.C. Cir. 2021). Because EPA expressly based its repeal of the CPP (the “CPP Repeal”) and its promulgation of the ACE Rule on the premise that Section 111(d) limits BSER to such behind-the-fence line measures, the court held that the CPP Repeal and ACE Rule must be vacated. 

The D.C. Circuit later granted EPA’s motion for a partial stay of the mandate regarding its vacatur of the CPP Repeal, which had the effect of preventing the CPP from taking effect during EPA’s process of promulgating a new Section 111(d) rule to regulate GHG emissions from existing fossil fuel-fired EGUs. The vacatur of the ACE Rule became effective, however, leaving GHG emissions from existing fossil fuel fired EGUs currently unregulated until EPA promulgates a new rule to meet the requirements of Section 111(d).

Despite the stay of the mandate regarding the vacatur of the CPP Repeal, several states and coal companies filed a petition for a writ of certiorari in the Supreme Court regarding the scope of EPA’s authority with respect to Section 111(d) and whether EPA can require emissions reductions under BSER that are beyond the fence line of a source. The Court has certified the following questions for review:

 

1. Does Section 111(d) authorize EPA to issue significant rules without limitation as long as the Agency considers cost, non-air impacts, and energy requirements?
   
   
2. Does Section 111(d) grant EPA the authority to develop industry-wide systems like cap-and-trade regimes?
   
   
3. Does Section 111(d) grant EPA the authority to require states to apply binding performance standards at the sector-wide level instead of the individual-source level, and can those regulations “deprive States of all implementation and decision-making power in creating their Section 111(d) plans?”
   
   
4. Whether Section 111(d) “clearly authorizes EPA to decide such matters of vast economic and political significance as whether and how to restructure the nation’s energy system.”

Meanwhile, EPA is working on a new set of emission guidelines for states to follow in submitting plans to establish and implement performance standards for GHG emissions from existing fossil fuel-fired EGUs. Based on EPA’s most recent regulatory agenda, the Agency intends to issue a proposed rule in July 2022 and a final rule in July 2023.

New Source Performance Standards for the Oil and Gas Sector

On November 15, 2021, EPA published proposed New Source Performance Standards (“NSPS”) designed to reduce methane and volatile organic compound (“VOC”) emissions from the oil and natural gas sector (the “Proposal”). 86 Fed. Reg. 63,110. The Proposal has several key elements. 

First, the Proposal would expand the current requirements under CAA Section 111(b) for methane and VOC emissions from sources that are new, modified, or reconstructed after November 15, 2021. It also would include standards for emission sources not previously regulated under the 2016 NSPS.

Second, EPA is proposing the first nationwide emission guidelines for states to limit methane pollution from existing designated facilities in the Crude Oil and Natural Gas category under CAA Section 111(d).

Third, the Proposal contains several actions prompted by S.J. Res. 14, a Congressional Review Act resolution that disapproved EPA’s final rule titled Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources Review, at 85. Fed. Reg. 57,018 (Sept. 14, 2020). The Proposal would reaffirm EPA’s pre-2020 interpretation of CAA Section 111(b)(1). Under this interpretation, once EPA puts a source category on the list of stationary sources to be regulated under Section 111, the Agency is authorized to promulgate an emission standard for a pollutant emitted by that source category if EPA has a rational basis for doing so. In other words, EPA does not need to make a pollutant-specific significant contribution finding (a determination that the pollutant from the source category contributes significantly to air pollution that endangers public health or welfare) as a prerequisite. The Proposal states that EPA needs to make a significant contribution finding only at the first step in the process of listing the source category, and this finding concerns the impact of the source category on air pollution, rather than the impact specific pollutants from the source category have on air pollution. 

EPA is accepting public comments on the Proposal until January 31, 2022 and intends to issue a supplemental proposal that will include regulatory language after all comments have been submitted. EPA expects to issue a final rule in October 2022.

Visit 2021 – Traditional Energy Rebounds and Increased Energy Transition, for the complete list of individual, detailed articles associated with this publication.

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