Executive Order Ending CPP and CEQ Guidance Being Parsed for Impact

While President Donald Trump touted the improved job prospects for coal miners and energy development on March 28 as he signed a broad executive order to halt the Clean Power Plan (CPP), rescind guidance about environmental reviews of new projects, and have agencies identify and eliminate regulatory barriers that impede energy projects, the exact impact of the order is being analyzed by energy groups and others.

Because the order contains several elements designed to foster more resource development and use of American energy, such as ending a moratorium on coal leases on federal land and other policies put in place by former President Barack Obama, initial reactions from energy and environmental groups have picked certain parts of the order impacting their constituencies.

The legal implications and likely challenges to the executive order were being examined by legal and environmental groups.

Because implementation of the CPP from the Environmental Protection Agency (EPA) had been halted due to a 2/9/16 stay from the U.S. Supreme Court, the power generation sector may not be altered that much by the order’s directive for the EPA to review the rule and, if deemed appropriate, suspend, revise, or rescind it. The stay of the CPP came before an appeals court heard oral argument on the rule, which is designed to reduce greenhouse gas emissions from power plants while providing states with deadlines for action and some flexibility in achieving those goals.

Motion Filed at Appeals Court.  Attorneys for the Justice Department on March 28 filed a request with the U.S. Court of Appeals for the District of Columbia Circuit to hold any ruling on the case in abeyance while EPA conducts its review of the CPP pursuant to the executive order. EPA should be afforded the opportunity to fully review the CPP and respond to President Trump’s directive in a manner that is consistent with the Clean Air Act, the agency’s authority to reconsider past decisions and the terms of the executive order, the attorneys said in their motion.

“Deferral of further judicial proceedings is thus warranted,” said the filing from the Environmental Defense Section of the Justice Department. It asked the appeals court to hold the case in abeyance until 30 days after EPA concludes its review of the rule and any resulting subsequent rulemaking.

Because natural gas production gains have kept gas prices relatively low and gas-fired generation has been pushing coal-fired generation to reduced but still significant roles in many parts of the country, market dynamics have had a big impact on coal markets, in tandem with environmental regulations, several observers noted. Reduced gas prices will continue to be a big factor for the generation sector, along with the reduced emissions from power plants, regardless of the future of the CPP.

Officials in the Trump administration “may find facts and forces in the market will keep them from being able to deliver on their agenda,” said Ali Zaidi, senior advisor on energy at the law firm Morrison & Foerster and former associate director for natural resources, energy and science in the Obama administration. With private sector growth in clean energy, the CPP fit with the business goals of many companies, while the number of firms ignoring climate change “occupy an increasingly shrinking island,” Zaidi said in a statement.

The order’s elimination of guidance from the White House Council of Environmental Quality (CEQ) about agencies considering climate change impacts as part of any project review under the National Environmental Policy Act (NEPA) gained praise from the Natural Gas Supply Association (NGSA) and the Interstate Natural Gas Association of America (INGAA).

The order says CEQ shall rescind its guidance that federal departments and agencies consider greenhouse gas emissions and the effects of climate change in any NEPA reviews, which was issued on 8/5/16.

The CEQ guidance attempted to broaden the reach of NEPA in a way that did not serve the law’s goals or purpose, such as examination of upstream emission impacts from downstream projects, NGSA President and CEO Dena Wiggins said. “By attempting to include unquantifiable and speculative upstream impacts in an expanded guidance, CEQ risked hindering development of the very infrastructure that has enabled natural gas to reduce emissions,” she said.

“It would have been impossible to derive meaningful information about proposed projects using the CEQ’s expanded approach,” added Charlie Riedl, executive director of the Center for LNG.

INGAA on CEQ Guidance.  For its pipeline members, INGAA said it is pleased that the order returns NEPA guidance to its long-established precedent, which includes having FERC issue an environmental impact statement or environmental analysis of proposed facilities, depending on the scope of the project. The executive order “returns the scope of the climate review to that which existed before the 2016 CEQ guidance was issued,” said Don Santa, president and CEO of INGAA.

“There appears to be some misinterpretation of the impacts of this executive order as it relates to the repeal of the Obama-era climate guidance for application of NEPA,” Santa said.

That is a reference to some media reports that there would be no climate evaluation as part of the NEPA review process, an INGAA spokeswoman said. The group wanted to clarify that FERC will continue to undertake the same analysis that is has for decades under NEPA, she said.

Environmental groups have tried to use the CEQ guidance in challenging FERC’s approval of projects and the thoroughness of its NEPA review process. Thus far, they have not been successful in hindering pipeline development because the guidance was relatively new and the court petitions testing that theory have not been briefed yet, noted Christine Tezak, managing director at financial consulting firm Clear View Energy Partners LLC.

Tezak said she and others, including members of Congress, have maintained that the CEQ guidance from 2016 went beyond the intention of NEPA and veered into the realm of trying to nudge agencies into rejecting infrastructure projects if there was a net increase in emissions, regardless of what is called for in the Natural Gas Act.

Given that much of Washington was prepared for Trump to sign the executive order addressing the CPP, the CEQ guidance and regulatory review elements were somewhat new elements.

When Trump signed the executive order at EPA headquarters, he was surrounded by coal miners and three cabinet members — Scott Pruitt, administrator at EPA, Rick Perry, secretary of the Department of Energy (DOE) and Ryan Zinke, secretary of the Interior Department. “With today’s executive action, I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion and to cancel job-killing regulations,” Trump said.

The order, dubbed the Energy Independence Executive Order, directs agencies responsible for domestic energy production to submit plans to the White House that identify and seek to revise or remove barriers that impede progress towards energy independence, EPA noted in a March 28 statement.

The order says that the head of each agency shall submit a report detailing such actions to various offices within the White House within 120 days of the order. “The report shall include specific recommendations that, to the extent permitted by law, could alleviate or eliminate aspects of agency actions that burden domestic energy production,” according to the order.

The order also calls for leaders at EPA and Interior to review, and if necessary revise or rescind regulations that may place unnecessary costs on coal-fired generators, coal miners, or oil and natural gas producers.

“President Trump has a clear vision to create jobs and his vision is completely compatible with a clean and healthy environment,” Pruitt said, adding that EPA is turning to “its core mission of protecting public health while also being pro-energy independence.”

The National Mining Association (NMA) lauded the executive order for halting the CPP and its lifting of the Obama administration moratorium on coal leases on federal land. Ending the moratorium “would remove the cloud over future investments in a coal region responsible for 40% of the U.S. coal supply,” the group said.

The review of the CPP will restore common sense priorities and a balance between costs and benefits that have been missing from federal regulatory policies, said Hal Quinn, president and CEO of NMA.

Environmental Group Reactions. Environmental groups blasted the move, asserting that the CPP did not kill coal industry jobs and that an executive order will not make the rule go away. The CPP resulted from years of judicial review and scientific findings related to the public health impacts of greenhouse gases and carbon dioxide, Sierra Club said in a statement.

The executive order is likely to trigger lengthy legal reviews, since the Supreme Court in previous rulings found that EPA has a duty to regulate greenhouse gas emissions from power plants, Sierra Club said. “An effort to repeal the Clean Power Plan would potentially run afoul of that, triggering years of delay and litigation,” the group said.

The Natural Resources Defense Council (NRDC) also had a strong reaction, saying the Trump administration’s attempt to halt the CPP is a bid to stop the U.S. Court of Appeals for the District of Columbia Circuit from ruling on the merits of the rule and reveals a fear that the CPP is on solid legal ground.

Ending the moratorium on new coal leases of federal land “is nothing short of a full retreat from the promise of cleaner and smarter ways to power our future. Today’s actions only deepen our dependence on fossil fuels and all the danger and damage they bring,” said Rhea Suh, president of NRDC.

It is clear that Trump has EPA on a course to strike down climate change regulations that they claim hinder energy development, and energy interests in the fossil fuel sector can expect a more supportive regulatory environment, said James Rubin, attorney with the law firm Dorsey & Whitney and former environmental attorney at the Department of Justice with the Obama administration.

“It remains to be seen, however, what kind of effect these actions will ultimately have on a power sector that has moved away from coal in favor of cheaper natural gas and growing renewables,” Rubin said in a statement.

The Edison Electric Institute (EEI) and American Gas Association (AGA) took a somewhat cautious view of the order in their initial statements.

As of 2016, the power industry’s carbon dioxide emissions were nearly 25% below 2005 levels, noted EEI President Tom Kuhn.

“Regardless of what major policy initiatives are put in place going forward, our emissions likely will continue to decline due to historically low prices and a stable supply for natural gas, decreasing costs for renewables, and increasing efficiencies. We look forward to working with EPA, states, and other stakeholders as they revisit the Clean Power Plan and other clean energy and environmental initiatives,” Kuhn said.

For AGA members, “today’s news does not change the fundamental principles about natural gas utilities and our customers: Americans want natural gas,” said Dave McCurdy, president and CEO of AGA. The group believes the price of gas will remain affordable and stable for decades into the future and policymakers will seek innovative ways to deliver gas to communities to use the fuel to their advantage, he said.

By Tom Tiernan TTiernan@fosterreport.com

This article appears as published in The Foster Report No. 3142, issued March 31, 2017

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