• President Obama Seeks to Build a Climate Legacy
  • April 23, 2015
  • Law Firm: Dentons Canada LLP - Toronto Office
  • In his January 20, 2015 State of the Union address, President Obama stated, "And no challenge - no challenge - poses a greater threat to future generations than climate change." To meet this challenge, the President and his Administration are constructing a broad set of regulatory programs and agreements to reduce greenhouse gas (GHG) emissions, seeking to build a lasting legacy on addressing the challenge of climate change. It may be up to a new Congress, and, more likely, the federal courts to determine how lasting that legacy may be.

    International agreements

    On November 12, 2014, President Obama and Chinese President Xi Jinping jointly announced an agreement on reducing GHG emissions from their two countries by 2030, including new targets for emissions reductions by the United States and a first-ever commitment by China. The agreement, negotiated quietly through high level contacts, was intended to spur other nations, particularly in the developing world, to make their own cuts in GHG emissions as part of a new global agreement to be reached next year in Paris. The United States committed to reducing GHG emissions by 28 percent from 2005 levels by 2025, an increase in the reduction goal the President had set out in 2009. The President’s recent Clean Power Plan (CPP) proposal, will be a key part of this commitment, setting a goal of a 30 percent reduction in GHG emissions from the power sector by 2030 based on 2005 emission levels.

    President Obama also announced the United States will contribute US$3 billion to the United Nations’ Green Climate Fund over four years to help poor countries deal with the effects of climate change. The US pledge would take the fund a long way toward its initial investment goal of US$10-$15 billion.

    These actions clearly had an impact at the recently concluded UN Climate COP in Lima (see above), helping to secure an agreement on a framework that could include broader participation by all nations in efforts to reduce GHGs globally. But it also engendered expected opposition from critics of the Administration's policies, many who are in power now that the newly elected Republican majorities in the House and Senate have begun their terms in 2015. The US financial commitment was already targeted by legislative riders in the waning days of last year's legislative session. Moreover, while the agreement with China is not legally binding, nor does it require congressional approval, it undoubtedly builds upon the recently-proposed CPP as well as potential measures to reduce methane leaks in oil and gas production. These regulatory programs, already highly controversial, will certainly be attacked in the new Congress and in the courts, leaving open to questions whether the United States will be able to live up to its commitments.

    Regulatory programs

    EPA has proposed two major regulatory pieces to reduce GHGs from the power sector under the New Source Performance Standards (NSPS) program of the Clean Air Act. The first proposal, which would place limits on GHG emissions from new fossil-fuel power plants, ("new unit rule") was originally due in final form in January 2015. It has raised significant concerns by proposing that new coal-fired plants be capable of partial carbon capture and sequestration (CCS) while new gas plants achieve the highest standards of a combined cycle natural gas plant. The new unit rule will certainly be challenged in court upon publication, which is significant because it provides a condition precedent for regulation of GHG emissions from existing power plants. Hence, were the new unit rule to be invalidated by a court, it could potentially impact EPA's even more controversial rule, the CPP.

    EPA published its proposed CPP in June 2014, setting out NSPS for GHG emissions from existing fossil-fuel power plants. In its proposal, EPA considered emission reduction strategies that went far beyond efficiency improvements at existing plants, looking at a broad range of actions across the energy sector that would reduce energy demand and so reduce GHG emissions. Based on these actions, EPA established strict targets for carbon emission rates per state to be achieved by 2030 with interim targets set in the 2020-2029 period. After extensive outreach to stakeholders, EPA provided an extended period for public comment, which ended on December 1, 2014. EPA now must consider over a million comments, many of which are very critical of the fundamental scope and authority underlying the proposal. Even EPA's staunchest allies have pressed for modifications to allow states more time and leeway to meet their 2030 targets and guidance on what actions may be acceptable, requests EPA may honor in some manner. EPA has also recently said it would issue a model rule for the CPP as guidance to states as they begin to plan for compliance and to show what requirements might apply if states do not act.

    The CPP has already come under attack both in Congress and in the courts, and the new Republican majorities are likely to consider ways of thwarting both the NSPS proposals in 2015, whether through legislation, appropriation riders or congressional review act challenges. The final CPP was originally expected in June 2015, but EPA just recently announced it would publish both the new unit rule and CPP in final form at the same time by the middle of summer 2015, reflecting the volume of comments EPA must review but also the controversy surrounding the proposals and their inherent linkages. Once published, both rules will then begin to wind their inevitable way through the courts. An administration veto and split Senate may be all that protects this rule in Congress while a potential judicial resolution may not occur for several years. Since the interim target dates for the CPP may begin soon thereafter, states will need to consider how they might comply through a combination of heat rate improvements at coal plants, natural gas dispatch and increases in zero-carbon generation and energy efficiency measures, among others.

    Other climate-related programs

    EPA has plenty more on its plate relating to GHG regulation and emission reductions, including:
    • Implementing its pre-construction permit program for GHG emissions from major industrial sources following the Supreme Court's partial reversal of its Tailoring Rule in July 2014;
    • Determining how to handle carbon dioxide emissions from biomass fuel in current and potentially future GHG rulemakings;
    • Determining new volumetric requirements for its Renewable Fuels Standard (RFS) program. EPA recently put off its 2014 RFS volumetric determination until early 2015, explaining that it needed to consider multiple comments to its proposal to lower statutory volume requirements for the first time in the program's history; and
    • Proposing a potentially broad set of initiatives to reduce releases of the potent GHG methane from the oil and gas sector. On January 14, 2015, the White House announced it would propose regulatory and voluntary measures aimed at reducing methane emissions from the sector to between 40-45% below 2012 levels by 2025. The regulatory measures would, in the first instance, be limited to new oil and natural gas production sources and natural gas processing and transmission sources for methane while reductions from existing sources would likely be based initially on state or industry-initiated practices. Regulatory proposals are expected in the Summer.
    These programs have drawn congressional scrutiny and have been or will be subjects of judicial review, so their future is just as unclear.

    All of the above elements are important components to the President's Climate Change Action Plan and thus are bricks in the edifice the Administration is constructing as a lasting legacy to address climate change. But they face an uncertain future with a new Congress hostile to allegedly "unilateral" exercises of executive authority with potentially significant impacts on power pricing, reliability and economic development. The President and his Administration will no doubt be quite busy in the next two years, trying to finalize this construction while fending off multiple and continued political and legal challenges. Ultimately, like many other Administration programs, the final word may lie with the federal courts well after the President's term ends in 2016.