Nebraska Files Suit, Alleging EPA Exceeded Authority in GHG NSPS Proposal

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On Wednesday, the state of Nebraska filed suit over EPA’s recently proposed greenhouse gas new source performance standards for power plants. Nebraska is challenging EPA’s proposal as a violation of the Energy Policy Act of 2005.

The specific issue relates to whether the EPA can lawfully determine that partial carbon capture and sequestration (partial CCS) is “adequately demonstrated” and therefore can be selected as the best system of emission reduction under section 111 of the Clean Air Act.

As Nebraska explains in its complaint, section 402 of the Energy Policy Act of 2005 expressly prohibits EPA from considering facilities receiving federal funds to implement CCS in an evaluation of whether the technology is adequately demonstrated for the purposes of section 111 of the Clean Air Act. Nebraska challenges EPA’s proposed NSPS on the grounds that it has unlawfully considered these projects in determining that partial CCS is “adequately demonstrated” and setting the NSPS for coal-fired units at an emission rate that is comparable to the implementation of partial CCS. These issues were earlier raised in a letter from Congressman Fred Upton, urging EPA to withdraw its NSPS before publication to avoid the risk that EPA would exceed its statutory authority in relying upon federally-funded projects in the Agency’s evaluation of partial CCS.

Nebraska seeks both a declaration that EPA’s consideration of federally financed CCS projects in the Proposed Rule is “not in accordance with the law” and an injunction requiring EPA to cease its rulemaking activities and withdraw the proposed rule.

Nebraska seeks to challenge EPA’s action under the Administrative Procedure Act (APA). Agency rulemaking cannot be challenged under the APA until there is a final agency action. Typically, this means that the Agency has completed its rulemaking process and issued a final rule. Here, Nebraska alleges that EPA’s reliance on coal plants receiving federal funding in proposing the GHG NSPS is a final agency action because it expressly violates the Energy Policy Act of 2005.

This is not the first time that EPA’s GHG rules have been challenged at the proposal stage. In fact, EPA’s now withdrawn April 2012 proposal to establish GHG NSPS for power plants was challenged by a number of entities that would have been subject to regulation under the rule if finalized. The challengers alleged that because the NSPS are applicable to any facility that commences construction after the proposal date, the proposal of the rule created legal obligations that were sufficiently final to be challenged. The claim was dismissed by the D.C. Circuit on December 13, 2012, after the court concluded that the proposed rule did not constitute final agency action.

In the instant challenge, the district court may have to address various threshold issues, including whether the case was properly brought in a district court, rather than the court of appeals. Nebraska will likely also argue that EPA completed the prohibited act of considering government-funded CCS projects when it proposed an emission limitation relying in part on the performance of these projects. However, in light of the D.C. Circuit’s dismissal of a challenge to the prior NSPS proposal, Nebraska may have difficulty establishing that there is a final agency action that is ripe for challenge. Assuming the court reaches the merits, the key legal issue will likely be the interpretation of the Energy Policy Act’s prohibition, which states no technology receiving federal funding “shall be considered to be (1) adequately demonstrated for the purposes of [section 111 of the Clean Air Act] . . . .”

Posted by Margaret E. Peloso at 1/17/2013 4:21 PM