EnergyFederalSupreme Court Rules EPA’s Coal Restrictions Exceeded Authority as Texas Grid Sheds Thermal Generation

While coal is not king in Texas like it is in West Virginia, coal producers in Texas are taking note of the court's ruling that the EPA overstepped its bounds.
June 30, 2022
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The U.S. Supreme Court clamped down on the energy regulatory authority of the federal government this week in a ruling that could affect the current direction of electricity generation in Texas.

In a 6 to 3 Thursday decision, the U.S. Supreme Court ruled that the Environmental Protection Agency (EPA) exceeded the authority granted in the Clean Air Act (CAA), passed in 1970 and amended in 1990, to regulate emissions. The Obama EPA levied regulations at power plants aimed at reducing their carbon dioxide emissions based on the premise that carbon dioxide, then the foremost greenhouse gas, was causing “climate change” — previously labeled “global warming,” which supplanted the 1970s-era theory of “global cooling.”

Under the CAA, carbon dioxide and other greenhouse gases are not classified as toxic pollutants under the National Ambient Air Quality Standards. But with these new rules, the EPA aimed to regulate carbon emissions as if they were toxic pollutants.

Both new and existing coal and natural gas power plants found themselves under the EPA’s regulatory microscope through the Clean Power Plan rule.

But under this regulatory scheme, the EPA deliberately chose a path toward supplanting coal-fired generation with natural gas-powered generation because “much larger emission reductions [were] needed from [coal-fired plants] to address climate change.” They also permitted investment in renewable energy generation infrastructure as a way to offset emissions or engage in a cap and trade system — which caps the market’s ceiling on emissions and allows generators to trade emission shares with one another.

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The agency’s calculus projected that with these changes, the nation’s coal-fired generation would drop from 38 percent to 27 percent by 2030.

In his opinion, Chief Justice John Roberts summarized the scheme as, “The point, after all, was to compel the transfer of power generating capacity from existing sources to wind and solar.”

“By contrast, and by design, there is no control a coal plant operator can deploy to attain the emissions limits established by the Clean Power Plan,” he added. “In the words of the then-EPA Administrator, the rule was ‘not about pollution control’ so much as it was ‘an investment opportunity’ for States, especially ‘investments in renewables and clean energy.’”

This transition, though, would come at a cost. The Energy Information Administration pegged that cost at 10 percent higher retail electricity prices across the country, along with a $1 trillion reduction in the nation’s gross domestic product by 2040.

Immediately after the rule was announced, 27 states sued the federal government, pausing its effect pending the litigation — litigation now reaching its finale with this ruling. Under the Trump administration, the EPA repealed the rule but the question of its authority continued.

Finding that the EPA exceeded its delegated authority, Roberts wrote, “The agency instead must point to ‘clear congressional authorization’ for the power it claims.”

Echoing Roberts in his concurring opinion, Justice Neil Gorsuch wrote, “When Congress seems slow to solve problems, it may be only natural that those in the Executive Branch might seek to take matters into their own hands.”

“But the Constitution does not authorize agencies to use pen-and-phone regulations as substitutes for laws passed by the people’s representatives.”

The court’s three Democratic-appointed justices dissented, defending the EPA’s authority to issue broadly sweeping regulations as necessary to reverse environmental projections such as “[r]ising waters, scorching heat, and other severe weather conditions [that] could force ‘mass migration events[,] political crises, civil unrest,’ and ‘even state failure.’”

“The Clean Air Act was major legislation, designed to deal with a major public policy issue,” Justice Elana Kagan wrote. “As Congress explained, its goal was to ‘speed up, expand, and intensify the war against air pollution’ in all its forms.”

This command to “go find the best system of emission reduction,” Kagan wrote, “gives broad authority to EPA.”

Overall, the court did not eliminate the EPA’s ability to regulate power plant emissions — simply that it cannot do such things without a more specific congressional directive than provided by the CAA.

In Texas, power generation gained new prevalence in 2021 when a statewide winter storm knocked the lights out.

An influx of renewable generation is gushing into the Texas power grid at the expense of thermal development. From 2015 to 2027, the Electric Reliability Council of Texas (ERCOT) will see 40,000 megawatts (MW) of wind and solar generation come online and lose 25,000 MW of mothballed coal and natural gas generation.

Data from ERCOT

The Public Utility Commission is in the midst of its market reform deliberations, with its signature goal being to create more grid reliability by countering the federal government’s renewable energy incentives that have led to the imbalance.

But where the coal industry is pivotal to West Virginia’s economy and electricity generation, it has much less of a footprint in Texas. Coal generation makes up slightly less than a fifth of total grid capacity — about 19,000 MW.

State Rep. Jared Patterson (R-Frisco), a retail electricity broker in his day job, told The Texan he doesn’t see the ruling altering the state’s current generation course much. “I think the coal ship has sailed, it’s too little too late,” he said, alluding to the nationwide trend spreading across the globe of natural gas power supplanting coal as a way to reduce emissions and increase efficiency.

“To reverse course, Texas generators need more regulatory stability to incentivize thermal generation. But this could certainly help coal generators be more competitive in the ERCOT market than they otherwise would be.”

Patterson stipulated that while this ruling may be too late for coal generation, it may raise a barrier to future efforts by the agency to clamp down on other thermal generation sources.

Brent Bennett, policy director for the conservative Texas Public Policy Foundation’s Life:Powered initiative, echoed Patterson’s assessment.

“While this ruling takes away one avenue for the EPA to destroy the reliability of the Texas electric grid, the agency is already shifting toward other avenues, such as tighter ozone standards,” Bennett told The Texan.

“The application of the major questions doctrine to this case is important to combat the EPA’s assault on reliable energy because it will limit the EPA’s ability to impute regulatory authority that Congress does not expressly give it.”

The “major questions doctrine” was cited by Roberts as a factor limiting the EPA’s ability to pursue ends not explicitly tasked by Congress.

Jennifer Hadayia, executive director of the environmental activist group Air Alliance Houston chapter, reacted to the ruling in a statement, saying, “The government has an obligation to protect public health and the environment.”

“Today’s ruling — on an EPA plan that was never even implemented — tells the public that industry’s concern for profit and power even in the future are more important than our climate crisis and its impact on people’s health. Now, the focus must turn to passing strong federal legislation that allows the EPA to regulate air pollution fully and from all sources, a mission that the vast majority of Americans support.”

Pro-coal lobbying organization America’s Power said of the ruling, “We are pleased the Court agreed with us that EPA does not have unlimited authority to do anything it wants to do.”

This decision is only another point along the fault line of America’s raging debate over the future of its energy sector.

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Brad Johnson

Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.