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Indiana joins other states challenging EPA regulatory authority

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Indiana has joined 11 other states in filing a lawsuit against the U.S. Environmental Protection Agency, taking the unusual tactic of challenging the federal government’s authority to regulate greenhouse gases rather than challenging the rule itself.

The complaint, filed Aug. 1 in the U.S. Court of Appeals for the District of Columbia Circuit, asserts the federal agency overstepped its authority by attempting to regulate greenhouse gases from existing power plants. At the center of the dispute is a section of the federal code which was passed by Congress and signed by the president without two separate amendments being reconciled between the U.S. House of Representatives and the U.S. Senate.

iplcoalplant-1-15col.jpg Indianapolis Power & Light’s Harding Street plant will stop burning coal in 2016. (IL Photo/Eric Learned)

That Indiana is among the states bringing this lawsuit is not surprising. The Hoosier State is heavily dependent on coal-fired power plants and is one of the highest consumers of coal among its neighbors.

Any EPA regulation tightening greenhouse gas emissions would mean higher electric bills for both industry and households in Indiana.

The states challenging the EPA’s authority have significant hurdles to clear. By arguing the agency is exceeding its authority, they

are trying to convince the court to take the uncommon step of stopping a proposed rule rather than a final rule. In addition, they are trying to persuade the court to hear their suit even though it was filed well after the deadline.

Still, Jeff Stemerick, associate at Taft Stettinius & Hollister LLP, was not quick to dismiss the states’ chances. Should they prevail, there would be serious consequences for the federal government.

“I think if (the states) win,” Stemerick said, “I don’t think the EPA could do much to curb emission from existing power plants.”

Source of the dispute

The lawsuit stems from a settlement agreement the EPA reached in 2010 with a collection of states, mostly from the Northeast, and environmental groups including the Sierra Club.

Under the agreement, the EPA proposed rules under Section 111(d) of the Clean Air Act for regulating carbon dioxide emissions from new and modified power plants. The agency also proposed rules under the same section for existing power plants.

coal-bars.gifIndiana and its co-petitioners contend regulating power plants already in operation was a step too far.

Specifically, the states argue the EPA is prohibited from regulating emissions from existing sources under CAA Section 111(d) because it has already placed limits on those sources under CAA Section 112.

“It’s a Hail Mary,” said Joanne Spalding, senior managing attorney at the Sierra Club, referring to the lawsuit.

Spalding expects the D.C. Circuit will dismiss the lawsuit “in the blink of an eye” because the court typically does not consider challenges to proposed agency actions. It is unlikely the court will stop the EPA from making the rule.

In addition, Spalding said, the states are attacking the settlement but, regardless of the settlement agreement, the federal agency has an independent legal obligation to follow the law. And the law requires the EPA to regulate new as well as existing sources of carbon dioxide.

Amy Romig, partner at Plews Shadley Racher & Braun LLP, said the states have made a solid legal argument in their lawsuit. The petition is asking the court to provide guidance to clear up confusion surrounding the Clean Air Act.

“I really do think that this will result in an important decision saying how the various sections of the Clean Air Act interact with each other,” Romig said.

The states argue for a plain reading of Section 111(d). They bolster their claim by citing the U.S. Supreme Court’s 2011 decision in American Electric Power Co. Inc., v. Connecticut. In a footnote, the court held the EPA cannot use Section 111(d) if the “existing stationary sources of the pollutant” are regulated under the “hazardous air pollutants’ program” of Section 112.

The conflicting interpretation of the Clean Air Act arises from 1990 amendments. Both chambers of Congress passed separate amendments to Section 111(d) but they were never reconciled during the conference committee. Both were enacted into law.

The Senate amendment excludes the regulation of any pollutant “included on a list published under Section 112(b).” Conversely, the House amendment excludes the regulation of any pollutant which is “emitted from a source category which is regulated under Section 112.”

The EPA maintains that since the two versions create an ambiguity, it may “reasonably construe” it has the authority to regulate greenhouse gases under Section 111(d).

Coal country

Indiana Attorney General Greg Zoeller said the state’s lawsuits against the federal government, including this one over greenhouse gases, are a way of preserving the balance between Washington, D.C., and state governments. In a letter sent to Indiana newspapers, Zoeller said the lawsuits are not policy debates but rather are testing whether the federal government’s actions are permissible under law.

The state’s residents might see the lawsuit as more of a pocketbook issue.

Although the economy and the increased use of natural gas have eaten into Indiana’s coal consumption, the state depends primarily on coal to generate electricity. According to statistics from the U.S. Energy Information Administration, Indiana gets more than 80 percent of its electricity from coal.

“To comply with carbon limits, no question that will cost money,” said Douglas Gotham, director of the State Utility Forecasting Group at Purdue University. “That will be reflected in higher electric rates than we would have otherwise.”

While consumers do not like paying more for utilities, many do not like the pollution that often pours from coal plants’ smoke stacks.

Recently, Indianapolis Power & Light responded to such criticism when announcing it plans to stop burning coal at its complex on Harding Street in 2016. The decision came after numerous complaints from residents and environmental groups over the pollutants which accounted for about 88 percent of Marion County’s toxic industrial emissions, according to The Associated Press.

Other plants around the state have been retired as they have outlived their usefulness, Gotham said. Also, retrofitting them to meet the current environmental regulations is too expensive.

Even with the closures, Indiana will still be a coal state. The amount of investment and money needed to significantly reduce Indiana’s dependence on coal “would be kind of astounding,” Gotham said.

Too late?

Before getting to its arguments over the EPA’s authority, the states have a significant procedural hurdle to clear. The petitioners filed their lawsuit well beyond the 60-day limit to comment on the 2010 settlement agreement.

Stemerick said the states made a “pretty good argument” in explaining their reason for filing beyond the deadline. They contend the issue ripened only when EPA announced its “flawed view of its Section 111(d) authority.”

Whether the lawsuit is too late to challenge the 2010 settlement is a close call, Romig said. Especially since the American Electric Power decision was not handed down until 2011.

Even if the lawsuit is dismissed, Romig said the fight against greenhouse gas regulation will not die. The final rule will likely be challenged, although the effort might be more limited because the rule will have been finalized.•

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