Washington, 8 October (Argus) — Merchant power generators Calpine and Exelon filed a joint petition late last week asking the DC Circuit Court of Appeals to reconsider its decision that struck down the Cross-State Air Pollution Rule.
The companies' petition was submitted on 5 October, several hours after the Environmental Protection Agency (EPA) filed its own request for a rehearing before all active judges in the DC Circuit. The petition said the 2-1 decision to void the cross-state rule “directly contradicts” prior court orders and “makes it practically impossible” for EPA to implement market-based regulations to address interstate air pollution.
The court's 21 August decision determined that the methods EPA used to include states in the cross-state rule's SO2 and NOx allowance trading programs would result in some states being forced to reduce emissions beyond their significant contribution to downwind states that are unable to meet federal air quality standards. The majority opinion outlined a method that would require EPA to establish proportional emissions reduction targets based on each upwind state's contribution to non-attainment areas in multiple downwind states.
The generators' petition includes several examples that illustrate the inherent complexities EPA faces in developing an equitable program to achieve mandatory air quality improvements. It explains that a state may be required to make significant emissions cuts to reduce its impact on one neighboring state that would cause over-compliance related to its impact on another state, which violates the court's proportionality requirement.
EPA could address these conflicting goals by establishing source-specific regulations for power plants that contribute to different non-attainment area. That approach “was universally rejected by industry” and “undermines the goals of economic efficiency” that market-based regulations are designed to achieve under the Clean Air Act.
“EPA cannot possibly develop a market-based scheme that meets all of these requirements [which] fail to survive reality,” the petitioners wrote. “Under the majority's approach, interstate trading could not occur.”
Calpine and Exelon intervened in support of the cross-state rule, arguing that they had invested in cleaner generating technologies to comply with the more-stringent SO2 and NOx reduction requirements, while other utilities delayed investment in environmental controls. They argue the cross-state rule would level the playing field by forcing other utilities to upgrade older, uncontrolled units that currently enjoy a price advantage.
Public Service Enterprise Group joined the two power companies in support of the cross-state rule during the litigation process, but did not submit a petition for rehearing by the 5 October deadline. The company declined to comment on why it did not request a rehearing.
Petitions for rehearing were also filed by a coalition of nine states and several major cities, and environmental advocacy groups that include the Natural Resources Defense Council and the Environmental Defense Fund. There is no hard deadline for the DC Circuit to grant or deny the petitions, but most legal observers expect a response in three to four months.
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