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D.C. Court of Appeals Strikes Down Trump Administration’s Affordable Clean Energy (ACE) Rule

02.22.2021

The D.C. Circuit Court of Appeals announced its decision January 19, 2021 to vacate the Affordable Clean Energy (ACE) Rule that was implemented during the Trump administration. The ACE Rule repealed and replaced the Obama administration’s Clean Power Plant (CPP) Rule to regulate power plants’ emissions of greenhouse gases. The Court found the Environmental Protection Agency (EPA) acted outside its legal authority in adopting the ACE Rule as it fundamentally misconstrued Section 7411(d) of the Clean Air Act and determined its process for reduction of emissions was “arbitrary and capricious.”[1] The Court vacated and remanded the ACE Rule and its amendments to the regulations that extended the compliance timeline for regulated power plants to the EPA.

Interpreting Section 7411 to be confined to physical changes to the power plants themselves, the ACE Rule determined a new system of emission reduction for coal-fired power plants only. The EPA left unaddressed greenhouse gas emissions from other types of fossil-fuel-fired power plants, such as those fired by natural gas or oil. The EPA limited itself to techniques that could be “applied broadly” to the Nation’s coal-fired plants, which primarily amounted to upgrades to existing equipment. The ACE Rule also included new regulations under Section 7411(d).[2] These regulations significantly extended the States’ deadlines for the development and submittal of their plans for emission reduction from nine months to three years.[3] Similarly, the new regulations extended the EPA’s deadline to act on those plans from four months to one year.[4]

In contrast, the prior CPP Rule more broadly regulated greenhouse gases across the power sector by focusing on existing fossil-fuel-fired power plants. A notable CPP Rule strategy was to impose “beyond-the-fenceline” greenhouse gas emission controls. This approach allowed existing sources to lower their greenhouse gas emissions in ways not just confined to the physical stationary source; instead, it focused on state rather than source-specific requirements. The ACE Rule took a serious departure from this strategy. By rejecting the “beyond-the-fenceline” approach, the ACE Rule’s narrow stance severely limited what controls the EPA was willing to impose on existing facilities compared to the expansive CPP carbon emission budget. Of course, the CPP Rule never took effect as it was tied up in litigation until the Trump EPA dismantled and replaced the rule after taking office.

Now, circumstances are likely to change yet again. The D.C. Circuit Court’s decision to vacate and remand the ACE Rule leaves the Biden Administration’s EPA with an opportunity to recraft the CPP Rule. By sending the rulemaking back to the EPA so that the incoming Administration “may consider the question afresh,” the EPA now has the opportunity to establish new industry standards for greenhouse gas producers.[5]  All non-renewable industries which emit greenhouse gases in the energy sector should be aware of impending changes to their operations. Fossil-fuel driven energy producers such as coal-fired power plants and natural gas or oil plants should be prepared to face stricter emissions standards.

The fate of power plants’ greenhouse gas regulation now rests with the Biden Administration’s EPA. The new administration has already demonstrated a commitment to climate preservation by rejoining the Paris Climate Agreement and by requiring all federal agencies to consider greenhouse gas emissions in procurement and operations. Accordingly, the new administration’s rule will likely be similar to the CPP by attempting to regulate large amounts of greenhouse gases. However, the new rule will also be different. It has been more than a decade since the Obama administration introduced the CPP and the current landscape has changed: many of the CPP’s goals to reduce carbon emissions have been exceeded or already met. Still, the Biden Administration’s new rule will almost certainly be broader and more stringent than the ACE Rule, reflecting a return to tighter regulation across the energy and power sector.

[1] http://blogs.edf.org/climate411/files/2021/01/2021.01.19-ACE-Opinion.pdf (page 16).

[2] ACE Rule, 84 Fed. Reg. at 32,575-32,584 (2018).

[3] See See 40 C.F.R. § 60.23a(a)(1) (2018).

[4] 40 C.F.R. § 60.27a(b) (2018).

[5] http://blogs.edf.org/climate411/files/2021/01/2021.01.19-ACE-Opinion.pdf (page 147).

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