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We opined last week that the decisions states make in response to EPA’s power plant carbon regulations will have historic implications for their economic futures. On Wednesday, Indiana became one of the first states to chart this future path, officially informing the Obama administration that it does not plan to go along with EPA’s unprecedented attempt to force dramatic and costly changes to America’s electricity system.
In a letter informing President Barack Obama of his decision, Pence did not mince words:
If your administration proceeds to finalize the Clean Power Plan, and the final rule has not demonstrably and significantly improved from the proposed rule, Indiana will not comply. Our state will also reserve the right to use any legal means available to block the rule from being implemented. I believe the Clean Power Plan as proposed is a vast overreach of federal power that exceeds the EPA’s proper legal authority and fails to strike the proper balance between the health of the environment and the health of the economy.
As is custom, reaction to Pence’s decision among EPA allies was strong and swift. The Sierra Club feigned a sudden interest in state sovereignty, stating, “We would rather have Indiana be in control of our destiny than have a federal plan imposed on us.” The message heavily pushed by EPA and its supporters is that compliance with the rule maximizes flexibility and will be empowering and protective of states’ rights.
This narrative has increasingly been exposed as not just a hollow promise, but in fact the reverse of what will happen. A paper released by the law firm Sidley Austin last week details how compliance with EPA’s rule as proposed would weaken state sovereignty and expand state and third-party liability to lawsuits from, ahem, concerned groups such as the Sierra Club. The bottom line on “state control” from Sidley Austin:
The unprecedented beyond-the-fence line structure of the proposed ESPS, combined with EPA’s assertion that all measures in a § 111(d) SIP become federally enforceable, would substantially expand federal authority to enable enforcement actions against States as well as third parties separate and distinct from the fossil-fueled generating sources that are the subject of the § 111(d) rulemaking. It also could expose States to legal action under the citizen suit provisions of the CAA by NGOs seeking to compel such enforcement actions, as well as exposing third parties themselves to citizen suits. The net result is that, if EPA’s view prevails, approval of a SIP by EPA will entail the loss of a significant portion of a State’s authority to regulate power production, distribution, and consumption within the State and to adjust its energy policies as economic circumstances within the State change.
EPA would no doubt like the public to believe that Indiana is an outlier in this fight, and that objections to its rulemaking are isolated to a small handful of coal states. But like so much that we encounter with EPA regulatory processes, reality is a much different place. A recent Chamber guide to state comments on the proposed rule found that 32 states have questioned the legal basis of the rule, 32 said it threatened electricity reliability, 28 said it would have negative economic consequences, and 40 different states questioned the achievability of at least one of the “building blocks” upon which EPA’s rule is based.
In all likelihood, more states can be expected to follow Indiana’s lead. In fact, led by West Virginia, 15 states have already taken the extraordinary step of suing to stop advancement of EPA’s rule before it is even finalized. In addition, Governor Mary Fallin of Oklahoma has announced that Oklahoma will not submit a compliance plan to EPA, Texas Attorney General Ken Paxton said he plans to challenge the EPA rule in court after it is finalized, and a number of states (Arkansas, Kansas, Louisiana, Kentucky, Missouri and others) have passed legislation restricting the form and manner of their state response to EPA.
Governor Pence is to be commended for his leadership on this critical issue to American jobs and the economy. As EPA’s power plant proposal nears finalization later this summer and states further develop and refine their positions on the regulation, there is increasing likelihood that EPA will be forced to abandon its current unworkable and illegal approach. Stay tuned.