04.05.2017

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Updates

President Donald Trump recently signed Executive Order 13783, an omnibus executive order aimed at reducing burdens on further development of domestic energy resources, with “particular attention” to oil, natural gas, coal and nuclear energy resources.[1] The executive order, which is both wide-ranging in its scope and far-reaching in its aims, seeks to ensure electricity in the United States is affordable, reliable and comes from all domestic resources. The executive order attempts to accomplish these goals in three principal ways:

  • It identifies and calls for review of several key Obama-era administrative rules aimed at curbing greenhouse gas (GHG) emissions, including the Clean Power Plan, which concerns existing power plants, and the New Plants Rule, which sets new source performance standards (NSPS) for GHG emissions from new power plants;
  • It rescinds key Obama-era policies and guidance, including National Environmental Policy Act (NEPA) guidance calling for GHG and climate change analysis and social cost of carbon (SC-CO2) guidance to be used for agency cost-benefit analysis; and
  • It requires all federal agencies to review their regulations and to eventually eliminate those regulations that are identified as burdening the development or use of domestic energy resources as well as those regulations enacted pursuant to Obama-era policies or guidance rescinded or revoked by the order.

It is important to note that the executive order did not affect the “endangerment finding,” an EPA determination that current and projected levels of GHGs, including CO2, are a threat to public health and welfare.[2] The endangerment finding itself did not impose limits on GHG emissions, but it provided the legal basis for federal agency actions to regulate GHG emissions under the Clean Air Act. If the endangerment finding remains in effect, it may provide a basis for challenges to federal agencies’ efforts to relax or rescind regulations and policies that are intended to control GHG emissions.[3]

The notable regulations and guidance specifically affected by the executive order are outlined below.

Power Plant Emissions Rules

One of the central components of the executive order is the section that requires review of the Clean Power Plan, the New Source Rule and other GHG regulations implemented pursuant to President Obama’s climate-related executive orders.[4]

Clean Power Plan. As discussed in our prior update, the Clean Power Plan is an EPA rule that represents the Obama administration’s effort to limit CO2 emissions from existing fossil fuel plants.[5] It requires states to adopt plans to collectively reduce 2005 levels of carbon emissions from the power sector by 32% by 2030.

In February 2016, the U.S. Supreme Court issued a stay of the EPA’s implementation of the Clean Power Plan, which is discussed in our prior update. In September 2016, the U.S. Court of Appeals for the D.C. Circuit heard oral arguments on the Clean Power Plan, but it has not yet issued a decision on the merits of the plan. On the same day the executive order was issued, the U.S. Department of Justice asked the D.C. Circuit to stay action on the Clean Power Plan until 30 days after the conclusion of the EPA’s review and any resulting rulemaking. And EPA Administrator Scott Pruitt has already issued a Federal Register notice initiating the Clean Power Plan review required by the executive order. The EPA administrator has also issued a Federal Register notice to withdraw several proposed rules for implementing the Clean Power Plan, including model trading rules.[6]

New Plants Rule. The New Plants Rule sets performance standards for GHG emissions from new coal-fired and natural gas-fired power plants at levels achievable through application of the “best system of emission reduction” that the EPA determined has been “adequately demonstrated.” Finalizing the New Plants Rule for new sources is a prerequisite for the EPA’s use of authority under Section 111(d) of the Clean Air Act to regulate existing sources in the Clean Power Plan. The legality of the New Plants Rule is also before the D.C. Circuit, but unlike the Clean Power Plan, its implementation has not been stayed.

Given these developments, one can assume that the result of the executive order will be one or more rules that are more favorable to the domestic fossil-fuels energy production industry, and the coal industry in particular. But new or revised rules may face significant regulatory hurdles and legal challenges. The ongoing litigation of the Clean Power Plan and the New Plants Rule may further complicate matters, as the D.C. Circuit is poised to decide the legality of these rules. Such a decision could have an impact on further rulemaking on these subjects.

Environmental and Climate-Change Guidance and Policy

The executive order revokes or rescinds several key actions, reports and guidance issued by the Obama administration, including the following:

CEQ Guidance for NEPA Review of GHG Emissions. In August 2016, the Council on Environmental Quality (CEQ) issued guidance for federal agencies on how to assess GHG emissions and the effects of climate change in NEPA reviews. The executive order directs CEQ to rescind that guidance and directs other federal agencies to “suspend, revise or rescind” actions arising from that CEQ guidance, e.g., agency-specific guidance on NEPA and climate change.[7]

The rescission of the CEQ guidance does not necessarily alter any obligation that federal agencies may have to consider GHG emissions and the effects of climate change in their NEPA reviews. Several courts have held or presumed that NEPA requires federal agencies to consider GHG emissions and the effects of climate change as part of an environmental impact statement.[8] With the rescission of the CEQ guidance, agencies will still need to consider whether to address climate change in NEPA documents in light of the evolving NEPA case law.

Social Cost of Carbon. An important part of the Obama administration’s climate change initiative was guidance for agencies to quantify costs associated with GHG emissions and climate change. The SO-CO2 is a metric designed to quantify climate damages and is intended to represent the net economic cost of CO2 emissions.

President Trump’s executive order effectively eliminates the Obama-era guidance on calculating the social cost of carbon.[9] While acknowledging that agencies should utilize the “best available” science and economics, the order requires that cost benefit analyses be consistent with regulatory guidance from 2003, which contains no mention of GHGs or climate change. Despite this provision, federal agencies that do not include the social costs associated with GHG emissions as part of their cost-benefit analysis may be challenged in the courts.

Policy on Mitigating Impacts on Natural Resources. As discussed in our prior alert, President Obama released a memo in 2015 that established principles for mitigation to guide several federal agencies in their planning and permitting practices. It also required agencies to set a “no net loss” goal for natural resources, and instructed agencies to design policies to promote avoidance of impacts and minimization and compensation of impacts as necessary. The executive order revokes this policy and instructs agencies to revise or rescind any regulations arising from the prior policy. In response to the executive order, the U.S. Department of the Interior has already revoked Secretary’s Order 3330, which created a framework for incorporating landscape-scale planning into the department’s mitigation policies.[10]

Energy Exploration and Coal Mining Regulation 

The executive order also includes significant revisions to the regulatory landscape for oil and natural gas extraction and coal mining on both private and federal lands that are intended to remove burdensome regulatory requirements and promote domestic energy development. Three of these changes are discussed below.

New Source Performance Standards for Oil and Natural Gas Sector. On May 12, 2016, the EPA issued its final updates to the New Source Performance Standards for the oil and natural gas sector. The EPA’s final updates would reduce methane emissions from new, reconstructed and modified sources. The updates also include additional sources, such as hydraulically fractured oil wells, and require owners and operators to find and repair leaks. The executive order directs the EPA to review the rule and to develop new regulations as appropriate.[11] As with the emissions rules discussed above, while the executive order may ultimately result in rules that are more favorable to the energy production industry, a new or revised rule may face significant regulatory and legal challenges.

Oil and Natural Gas Fracking Rules. As discussed in a prior alert, in March 2015, the Interior Department and Bureau of Land Management (BLM) issued regulations setting standards for hydraulic fracturing, commonly known as “fracking,” on federal lands. The executive order directs BLM to review these rules and to issue new rules and regulations consistent with the goals of fostering the development of domestic energy resources.

While the executive order may scale back these federal requirements, states remain free to enact their own standards. Some states have begun to use the Obama-era BLM rules as a template for their own standards. Still, other states may follow the example provided by the executive order and reduce regulations for oil and gas exploration. And overall, the rollback of these rules represents a significant shift in policy and may contribute toward lowering the extraction cost of oil and increasing the competitiveness of the oil and gas exploration industry.

Coal Mine Leasing and Regulation. The executive order also marks a significant change in policy regarding coal energy production. It specifically directs the Interior Department to commence new federal coal-leasing activities, which are currently largely suspended or subject to a moratorium. Although any new rulemaking and leases will remain subject to regulation, the executive order marks a shift in policy in favor of the coal industry and domestic energy development.

Given the range and scope of the executive order, there remains considerable uncertainty as to how it will ultimately be implemented, and some provisions would require additional regulatory proceedings that could encounter significant delay in their implementation. Despite its sweeping nature, it is likely that the executive order is only the first step in what may be an ambitious overhaul of the Obama administration’s efforts to address climate change. Perkins Coie will continue to provide updates as the executive order is implemented, and agencies adopt rules and other regulations as directed by the order.

ENDNOTES

[1] Presidential Executive Order on Promoting Energy Independence and Economic Growth § 2(a).

[2] 40 C.F.R. ch. 1.

[3] See, e.g., Am. Elec. Power Co. v. Connecticut, 564 U.S. 410 (2011).

[4] Executive Order §§ 4.

[5] 80 Fed. Reg. 64661 (October 23, 2015).

[6] 82 Fed. Reg. 16144 (April 3, 2017).

[7] Executive Order § 3(c).

[8] High Country Conservation Advocates v. United States Forest Serv., 52 F. Supp. 3d 1174, 1192 (D. Colo. 2014) (citing Ctr. for Biological Diversity v. Nat’l Highway Traffic Safety Admin., 538 F.3d 1172, 1217 (9th Cir. 2008), for the proposition that “NEPA requires agencies to analyze the effects of its actions on global climate change”).

[9] Executive Order § 5(b).

[10] Order 3330 actually preceded the president’s memo on mitigation but was closely related to the mitigation policies set forth in the memo.

[11] Executive Order § 7(a).

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