Richard Alonso, Bracewell & Giuliani LLP Texas Environmental Superconference August 7, 2015 Richard Alonso, Bracewell & Giuliani LLP Texas Environmental Superconference August 7, 2015 EPA’s Clean Power Plan The Sky is the Limit

2 Let’s Get This Party Started “Legacy Issue” Federal standards for new plants State standards for existing plants Overview of Clean Power Plan Legal vulnerabilities What to expect over next 2 years

3 A Legend In His Own Mind State of the Union Message – 2013, 2014, 2015 President’s “Climate Action Plan” White House National Security Strategy Proposed 2015 Budget $7.4 billion to subsidize deployment of clean energy $4 billion for states that go beyond Clean Power Plan $500 million for new “Green Climate Fund” $239 million for EPA’s “Clean Power Plan” $100 million for expedited permitting of renewable energy projects

4 International Efforts – World of Trouble Paris Conference in December 2015 “Landmark” U.S. – China Agreement China’s GHG emissions to peak by 2030 China to get 20% of power from renewables by 2030 U.S. to Reduce GHG emissions from 2005 levels 26-28% by 2025

5 WHERE’s THE BEEF? US Commitment: Reduce GHG emissions from 2005 levels 26-28% by 2025 Submitted as the U.S. “Intended Nationally Determined Contribution” (INDC) for the Paris Conference No evidence of how goal was calculated Bookbinder analysis, shortfall of 330 MMT -- climate-promises/

6 Where Do Reductions Come From? Wishing Upon a Star Clean Power Plan fuel economy standards for light duty vehicles 2019 fuel economy standards for heavy duty vehicles Energy efficiency standards “Actions to cut methane emissions from landfills, coal mining, agriculture and oil & gas systems”

7 Section 111(b) NSPS – Down and Out for New Coal Apply to any plant constructed after proposal date An emission rate standard that can be achieved with the “best system of emission reduction that has been adequately demonstrated” (BSER) Coal-fired units 1,100 lbs/MWh (nail in the coffin) NGCC > 850 mmBtu/hr 1,000 lbs/MWh NGCC < 850 mmBtu/hr 1,100 lbs/MWh

8 Section 111(d) – the Clean Power Plan for Existing Power Plants – The Star of the Show With new source standards in place, EPA can require states to submit a plan with standards for existing sources EPA publishes “Emissions Guidelines” to guide states in setting standards for existing sources Emissions Guidelines based on “best system of emission reduction that has been adequately demonstrated” State plan must be submitted for EPA approval. If not “satisfactory,” then EPA must impose a federal plan

9 Proposed Clean Power Plan – A House of Cards Best System of Emission Reduction includes 4 Building Blocks An average heat rate improvement of 6% for all existing coal-fired plants Change dispatch to disfavor coal until combined cycle natural gas plants have average capacity factor of 70% Requirements for construction and operation of more wind and solar End-user energy efficiency programs to improve statewide efficiency by 1.5% a year from 2020 to 2030

10 Proposed Clean Power Plan – State Targets – Picking Winners and Losers

11 What’s Wrong with this Picture; On Shaky Ground Threshold Issue – Section 112 vs. 111(d) House Language – No source category regulated under Section 112 can be regulated under Section 111(d) Senate Language – No pollutant regulated under Section 112 can be regulated under Section 111(d) Constitutional Issues Statutory issues – “outside the fence line” Issues with Individual Building Blocks Multi-State Plans

12 Doesn’t Have a Chance (Not A Chance in H*ll) “When an agency claims to discover in a long- extant statute an unheralded power to regulate ‘a significant portion of the American economy,’ … we typically greet its announcement with a measure of skepticism. We expect Congress to speak clearly if it wishes to assign to an agency decisions of vast ‘economic and political significance.’” UARG v. EPA, No , slip op. at 19 (U.S. June 23, 2014). “We acknowledge the potential for greenhouse- gas BACT to lead to an unreasonable and unanticipated degree of regulation, and our decision should not be taken as an endorsement of all aspects of EPA’s current approach, nor as a free rein for any future regulatory application of BACT in this distinct context.” Id. at 28.

13 Why Issue a Legally Vulnerable Rule? – Opportunity Doesn’t Knock Twice; You Have To Start Somewhere The 2010 Settlement Agreement CO 2 Standards for new and existing power plants by May 2012 CO 2 Standards for new and existing refineries by November 2012 The Obama Legacy – June 2013 Climate Action Plan The U.S.- China Agreement The Paris Conference

14 One Step At A Time Final Rule – Late Summer or Early Fall Proposed Federal Plan – Before year end Final Federal Plan – Year end 2016 State Plans due – Fall 2016, 2017, or 2018 (for multi-state plans) Approval or Disapproval of 49 state plans Proposed Federal Plans for States that are not participating in CCP or those with disapproved plans Final Federal Plans

15 Possible Federal Plan – Life is A Box of Chocolates; You Never Know What You Are Going to Get CO2 Trading Program Applicable to Sources; not States Mirror of NRDC Proposal Credit smokestacks with beyond fence-line activities Enforceability Issues

16 Litigation – Fighting Like Cats and Dogs Petitions to Stay the Rule Pending Review – DC Circuit and perhaps Supreme Court Challenge to CPP– DC Circuit Challenge to CPP – Supreme Court Challenge to Federal Plan – DC Circuit Challenge to Federal Plan – Supreme Court Challenges to State and Federal Plans – State courts and every U.S. Court of Appeals?

17 Timing of Key Legal Challenges – Time Will Tell DC Circuit Decision on Stay: late early 2016 Possible Supreme Court Decision on Stay: early - mid 2016 DC Circuit Decision on CPP – late early 2017 Supreme Court Decision on CPP – Late early 2018

18 At the End of the Day Highly Unlikely to be Implemented Political and Practical Reasons Legal Reasons Final rule will be quite different from proposal If implemented, won’t be on proposed schedule Only enforcement mechanism against a State is a federal plan This is not the end of GHG regulation – The Ship Has Sailed

19 T: E: T: E: Contact Us Her prior work experience as a chemical engineer at one of the world's largest energy companies provides her with an inside understanding of her clients’ concerns, including the interplay between environmental compliance and business planning considerations, as well as maintenance, safety, and equipment issues. Sandra Snyder represents refiners, natural gas exploration and production companies, manufacturers, industry trade associations, and other energy companies in environmental litigation in state and federal courts, as well as before regulatory agencies. Sandra Y. Snyder Associate bgllp.com/snyder His practice focuses on Clean Air Act issues such as complex New Source Review applicability and permitting, mobile source regulations, EPA rulemaking efforts, legal challenges to EPA actions, and Clean Air Act enforcement defense and compliance counseling. Richard Alonso advises manufacturers and energy companies on environmental, permitting, compliance and enforcement issues before state and federal agencies. Richard Alonso Partner bgllp.com/alonso