26 January 2021

D.C. Circuit Strikes Down ACE Rule

On January 19, 2021, the U.S. Court of Appeals for the District of Columbia Circuit struck down the Affordable Clean Energy Rule (ACE), which the Environmental Protection Agency (EPA) promulgated in 2019 to replace the Obama-era Clean Power Plan (CPP). The CPP had sought to reduce greenhouse gas (GHG) emissions from existing power plants, in part, by authorizing states to increase renewable generation. As explained in a previous post, EPA had reasoned that it had the discretion to define the best system of emission reduction (BSER) at a plant under Section 111 of the Clean Air Act (Act) to include measures employed outside the facility (such as new renewable resources) that were located “beyond the fenceline.” Stayed by the Supreme Court in 2016, the CPP never went into effect. Instead, the Trump administration repealed the CPP and replaced it with ACE. In ACE, EPA reasoned that Section 111 of the Act required EPA to only find BSER to be a technology that could be applied “inside the fenceline” on the facility.

In American Lung Association et al. v. EPA, the D.C. Circuit vacated ACE, holding that EPA fundamentally misconstrued the Act and acted arbitrarily and capriciously when it adopted the rule. The court found that Section 111 of the Act does not limit BSER to only consider technologies applied “inside the fenceline” at the facility. With President Biden’s focus on reducing GHG emissions, it is clear that the new administration will not appeal the decision, as environmental groups and Democrats opposed ACE as not materially reducing GHG emissions — a point the court highlighted, but there are reports that intervenors who supported ACE may consider asking the Supreme Court to review the decision. What remains unclear is what course a Biden EPA will follow — will EPA return to a CPP-like rule, or will it take a different approach to power plant GHG emissions?

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