Obama Legacy Gets Second Legal Test Over Climate Rule ‘Goof’

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COAL PLANTS EPA

Emissions rise as a U.S. flag flies at the American Electric Power Co. Inc. coal-fired John E. Amos Power Plant in Winfield, West Virginia, U.S., on Thursday, July 31, 2014.

Photographer: Luke Sharrett/Bloomberg

A congressional drafting error and clunky phrase is putting a second of President Barack Obama’s signature endeavors in jeopardy. This time it’s climate change.

Challengers to Obama’s policies are exploiting imprecise amendments passed by Congress 25 years ago in a lawsuit to derail Environmental Protection Agency rules designed to curb carbon emissions. The case, using a line of attack similar to one against his massive health-care overhaul, is set for a hearing Thursday in federal court.

If coal-mine operator Murray Energy Corp. and states led by West Virginia convince a panel of judges named by Republican presidents to agree with their reading, the EPA rules could be tossed before they are even made final.

“It’s a perfect storm of timing and congressional goofs that leads to these interesting arguments,” said Thomas Lorenzen, a former government lawyer on clean-air cases and who is now a partner at the law firm Dorsey & Whitney. “And Murray Energy drew a good panel for themselves, so there will be some conflicting tendencies there.”

Courts have rejected attempts to challenge rules before they are completed, and the carbon rules won’t be done until later this year. As a result, EPA Administrator Gina McCarthy has said she’s confident Murray’s lawsuit will be dismissed.

“Since we have not issued a final rule, we believe that lawsuits challenging the rule are premature,” Liz Purchia, a spokeswoman for the EPA, said in a statement. “We will address all comments concerning the legality of the rule when we issue the final Clean Power Plan.”

Review Looms

Still, either now or later, a federal court will need to rule on these issues, and they’ve taken on great political importance as Obama has made fighting climate change a top priority in the final years of his presidency.

For the administration, this case has similarities to the challenge over the Affordable Care Act that is awaiting a decision by the Supreme Court. In that case, the fight is over a phrase that says people qualify for tax credits when they buy insurance on an exchange “established by the state.”

Obama opponents say that phrase means subsidies aren’t available in dozens of states that didn’t set up exchanges. Residents of those states instead use the federal healthcare.gov system, with an estimated 7.5 million getting taxpayer-subsidized discounts.

Health Benefits

The carbon rule’s effects are primarily on power utilities, but will have broad impacts on citizens and the economy, both supporters and critics say.

Meeting agency standards for reducing carbon dioxide would produce $90 billion in climate and health benefits and cost utilities as much as $8.8 billion, according to the EPA. Obama has also pushed a broader climate plan that would make freezers, microwaves and other appliances more efficient; curb methane from landfills; and cut the use of climate-altering chemicals in air conditioners.

Congressional Republicans are sparing no effort to fight those initiatives. Senate Majority Leader Mitch McConnell wrote state leaders this year, urging them not to implement the EPA rule, much as many states refused to establish state insurance exchanges for Obamacare.

To add legal heft, coal producer Peabody Energy Corp. hired Laurence Tribe, Obama’s law professor and mentor at Harvard University, to help. Tribe, a leading liberal constitutional scholar, has argued 35 cases at the Supreme Court, including the 2000 election case for Democratic presidential candidate Al Gore over Republican George W. Bush.

Tribe Role

Tribe, who says the EPA rule is akin to ripping up the Constitution to address climate change, is scheduled to handle part of the oral argument against the government at the U.S. Court of Appeals in Washington. The judges set to hear the case are Brett Kavanaugh and Thomas Griffith, appointed by George W. Bush, and Karen Henderson, who was named by George H.W. Bush.

Murray Energy, the biggest closely held U.S. coal company, challenged the law in June, and was joined in February by Peabody, the largest publicly held coal company.

Fifteen states, all with Republican attorneys general except coal-heavy Kentucky, have sided with coal producers, along with business groups including the National Federation of Independent Business and the U.S. Chamber of Commerce.

Dueling Sections

At issue is how the EPA used sections of the Clean Air Act to regulate pollution. The companies argue the rules violate an amendment to the Act in 1990, which they say limits regulation of the facilities for pollutants to just one section of the law. Since the EPA in 2011 mandated cuts in mercury and toxic emissions from power plants under section 112, they can’t also be regulated for carbon pollution under section 111(d), which is what the EPA proposed last year.

“The plain text of section 111(d) flatly and unambiguously prohibits EPA’s proposal,” Tribe told a congressional panel last month. “The absence of EPA legal authority in this case makes the Clean Power Plan, quite literally, a ‘power grab.’”

The EPA’s lawyers counter that a drafting error by lawmakers actually created separate amendments for that part of 111(d); one passed the House and the other by the Senate. When different versions of legislation are blended into a final document, such conflicts are supposed to be resolved. Yet both were in the bill passed by Congress and signed into law.

‘First Crack’

While the agency argues neither prohibits the carbon regulation it’s pursuing, the Senate amendment doesn’t contain any restrictions on double regulation. The House measure would only prohibit double regulation of specific pollutants, and doesn’t include a general prohibition on regulating power plants in two different areas, the EPA’s supporters say.

“This is the classic case where there is ambiguity that allows the agency to have a first crack at trying to resolve a conflict,” said Jody Freeman, a Harvard University law professor who supports the EPA’s position.

And the legal wranglings have one odd twist. Many of the states questioning the carbon rules have also taken a case to the Supreme Court arguing that the EPA failed to account for costs before issuing its mercury rule under section 112. If that rule gets tossed by the highest court, then it would remove the double regulation argument against the carbon plan.

The Supreme Court case was argued last month, and a decision will come in the next few months.

The case is In re: Murray Energy Corp., 14-1112, U.S. Court of Appeals, District of Columbia (Washington). A separate case, West Virginia v. EPA, 14-1146, was consolidated with it.

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