US Supreme Court's power plant ruling expected to hinder future climate action

Banner Image

The US Supreme Court's June 30 ruling restricting the US Environmental Protection Agency's authority to regulate climate pollution from existing power plants will likely hamper the Biden administration's ability to issue future climate and energy rules that have a major economic impact, according to legal experts.

In a 6-3 decision, the conservative justices on the high court, for the first time, invoked a legal line of reasoning known as the "major questions" doctrine in finding that the Obama-era Clean Power Plan exceeded the EPA's authority.

The major questions doctrine, according to the majority, holds that courts should not defer to agencies on matters of "vast economic or political significance" unless the Congress has explicitly given them the authority to act in those situations.

In repealing and replacing the Clean Power Plan, the Trump administration found that doing so would have no practical effect on the US power sector, in part because the industry had already met the program's emissions reduction goals before its 2022 start date.

But the Supreme Court, siding with a coalition of red states and coal producers that challenged the Obama-era rule, found that its approach to generation shifting went too far. The court's decision also focused on the possible inclusion of similar systemwide measures in a future EPA regulation.

The June 30 ruling in West Virginia v. EPA (No. 20-1530) was largely based on the idea that the EPA "must point to clear congressional authorization" in issuing regulations under Section 111(d) of the Clean Air Act, although experts predicted it will also curtail other agencies' rule-writing abilities.

"Capping carbon dioxide emissions at a level that will force a nationwide transition away from the use of coal to generate electricity may be a sensible solution to the crisis of the day," Chief Justice John Roberts wrote for the majority. "But it is not plausible that Congress gave EPA the authority to adopt on its own such a regulatory scheme in Section 111(d)."

Court expected to scrutinize 'major' rules

Supporters of the Clean Power Plan's "beyond the fence line" approach were quick to note that the US electric utility industry has long relied on generation shifting and emissions trading schemes as cost-effective ways to comply with Clean Air Act rules.

The Clean Air Act's landmark Acid Rain Program, for example, allowed older, dirtier coal-fired power plants to pay cleaner coal-fired units for emissions allowances that reduced overall compliance costs for the industry. EPA rules addressing interstate smog pollution have also adopted a similar approach.

"This notion that rules can't be controversial, that they can't be creative or expansive, is troubling," Jack Lienke, regulatory policy director of the Institute for Policy Integrity at New York University School of Law, said in an interview. "The traditional approach is when statutes are written in broad terms and are susceptible to multiple reasonable interpretations, courts defer to agency readings of that text so long as they're reasonable."

Jay Duffy, an attorney with the Clean Air Task Force, said he did not interpret the court's ruling as prohibiting generation shifting entirely.

Indeed, the court's majority said it has "no occasion" to decide whether Section 111(d)'s statutory phrase "best system of emission reduction" refers "exclusively to measures that improve the pollution performance of individual sources."

"I think you could have inside the fence approaches paired with market mechanisms, and I don't think that is eliminated by this decision," Duffy, who briefed the Supreme Court case for public health organizations, said in an interview.

Nevertheless, legal experts on both sides of the debate agreed that future EPA efforts to tackle climate pollution under the Clean Air Act will be subject to far more scrutiny by the high court.

"The majority had no trouble finding that the question of how the US electricity sector should be structured (and how much electricity should come from coal as opposed to other sources) was a major question," Jeff Holmstead, a former EPA air office chief in the George W. Bush administration, said in an emailed statement. "Because it is a major question, EPA can make such determinations only if there's a clear statement that this is what Congress intended."

Nathan Richardson, an attorney and assistant professor at the University of South Carolina School of Law, said the court's focus on the Clean Power Plan's "novel approach" could also spell trouble for other climate- and energy-related administrative rulemakings.

The EPA is in the process of finalizing rules to control methane emissions from existing oil and gas facilities. And in March the US Securities and Exchange Commission proposed requiring publicly traded companies to reveal climate risks and carbon emissions data in financial filings. That proposal has already sparked a fierce debate.

"Every time an agency tries to do something, it's subject to this kind of inquiry: is it like what you did before?" Richardson said in an interview. "Any time an agency does something that is new and different and major, with major being totally up to the whims of the judges, then there's the potential for it to get thrown out, or more precisely, thrown back to Congress."

US Rep. Frank Pallone, D-N.J., who chairs the House Committee on Energy and Commerce, said in a June 30 statement that the decision "does not derail our commitment or ability to achieve our climate goals."

"EPA continues to have many powerful tools at its disposal and there is more both Congress and [US President Joe Biden] can do to meet the climate crisis head-on," Pallone said. "I am determined to get the job done."

Tags

  • Gas & Power

Related content

News

Infographic: Bearish Q2 signals hold sway for European gas, power markets

Europe is entering its "gas summer" with prices back at what could be considered normal levels and with gas storage stocks in robust health. Another mild winter and weak demand have left the EU's gas storage sites filled to 59% of capacity, while demand in the EU and UK is set for a 3.7% year-on-year decline in Q2 2024, according to forecasts from S&P Global Commodity Insights. Meanwhile, electricity demand across ten core markets is forecast to rise 1.7% with Europe's power markets entering spring in the best supply shape since 2020. Solar output is forecast to exceed gas-fired power generation for the first time in Q2. Carbon prices are expected to show more resilience finding stability just above Eur60/mtCO2e after EU Allowances fell close to three-year lows. The European Commission is expected to release 2023 EU ETS verified emissions data on April 3 with S&P Global analysts forecasting a drop of 11% year-on-year. Related story: US RENEWABLES TRACKER: Solar output continues to outshine other resources in Q4 (subscriber content)

News

CERAWEEK: Energy industry has trapped itself with binary technology talk

Industry must be open to new technologies Wind, solar attack natural gas’ market share The energy industry has trapped itself with binary dialogue about being for one type of technology or another, when all resources need to work together to achieve energy transition goals, Tinker Energy Associates CEO Scott Tinker said March 22. The energy transition is not just about one technology, but rather a suite of technologies, panelists said at the CERAWeek by S&P Global energy conference in Houston. “What is nice about renewables and new technology is they're much more democratically distributed around the world,” said Andres Gluski, AES Corporation president and CEO. “The reality is a little bit more complicated. But I also think it's not rocket science.” However, the industry has to be careful about status quo because things are changing rapidly, Gluski added. “In the power industry, we're seeing once in a 100-year events, like floods and heatwaves, etc., occur every year.,” Gluski said. “The weather has changed. That’s the reality.” Industry leaders need to look at how to deliver the electricity with the lowest carbon and in most sustainable way possible, he added. Renewables versus fossil fuels Solar and wind costs have dropped remarkably over the years, Tinker said. “To make it reliable requires something sitting here waiting to back it up … and that something is expensive,” Tinker said about battery storage. “I think we have to be more open and candid about the actual cost of electricity to be integrated.” The domestic production of wind turbines is strong, with battery storage production to come, while domestic of solar panels will take longer, Gluski said. And while renewables do not generate 24 hours a day, coal is not going to come back regardless of political slogans, he added. “For a lot of these new technologies we need the regulators to be on top of it as a lot more is coming," Gluski said. The energy transition has to happen at a pace that’s politically sustainable, said David Victor, a professor of Innovation and Public Policy with the School of Global Policy and Strategy at University of California, San Diego. “I'm really concerned that we are overweighting the familiar,” Victor said. “We are overinvesting in things we know how to do and probably underinvesting in things that we don't yet know how to do.” Glue that holds it together “We got to figure out the glue that holds all this together,” said Hunter Hunt, chairman and CEO of Hunt Energy. There will be less natural gas needed than the industry thinks, but more than environmentalists think, he added. “Wind and solar are absolutely attacking natural gas’ share and they've decimated coal in the industrialized world,” Hunt said. “If natural gas is going to be a transition fuel, the industry needs to do its part to make sure that we're doing it in the right way. The future of energy can be seen in Texas today, Hunt said about the battery storage growth happening. There such a diversity in approaches with new technology and “we need all of it,” said Evelyn Wang, director of the Advanced Research Projects Agency-Energy with the United States Department of Energy. Houston, we have an opportunity “One of the things that is different today versus this time last year, is just explosion of activity in energy transition-related projects in Houston and Gulf Coast,” said Bobby Tudor, CEO Artemis Energy Partners and chairman of the Houston Energy Transition Initiative. “We have enormous competitive advantages here in this region to be a leader, and it's up to us to intentionally do that. … We intend to continue to exploit that advantage.” Texas has the largest concentration of technical talent in the world related to energy systems, Tudor said, adding the state is well positioned for the task due to its ports and access to wind and solar resources. A lot of the development in Texas has to do with permitting and the ability to get projects permitted and done, Tudor said, adding that process is much more difficult in rest of the country. The catch phrase should be “Houston, we have an opportunity” instead of “Houston, we have a problem,” said Atul Arya, S&P Global Commodity Insights senior vice president and chief energy strategist.

News

CERAWEEK: Hydrogen could play role in decarbonizing power despite logistical challenges

Hydrogen presents a complicated challenge when used as a power source, but these challenges could be addressed with incremental gas blending and artificial intelligence tools, industry participants said March 20. The use of hydrogen in power is generally controversial, speakers at a CERAWeek by S&P Global panel said, saying it's "not the first application that comes to mind." S&P Global Consulting Director Natallia Pinchuk referenced an analogy that says using hydrogen in power "is like using champagne to flush a toilet." "If you can do it, it will do the job, but why would you?" she said. Highlighting potential downsides, Steve Smith, director of strategy and innovation at National Grid, shared concerns on how a hydrogen-powered system would respond to peaks in demand "when the wind stops blowing and the sun is not shining." "In the US Northeast or the UK where we operate, where we might go days without renewable resources," Smith said. "So people need dispatchable generation both to cover peaks." A storage mechanism that works alongside regular generation would be necessary to address system spikes, Smith said. During peak stress or periods with high power prices, electrolyzers could be ramped down to allow the power to instead flow directly into the system, Neeraj Bhat, hydrogen lead at AES Clean Energy, suggested. A mixed fuel source could also help keep the lights on, Smith said. Hydrogen could have a role in regions with a concentration of natural gas infrastructure by blending hydrogen into networks and reducing the carbon intensity of delivered energy, he said. "Particularly in the northeast, our gas systems just face a huge volume of energy," Smith said. "Our ability to electrify our systems at a pace and scale required is the challenge, given the challenges of building new infrastructure." Low-carbon alternative for backup power Hydrogen tends to increase pipeline leakage, limiting its usage in pipelines where it could be blended with natural gas, research by the Argonne National Library shows. Few demonstrations of the process have occurred in recent years and further research is needed across the hydrogen and natural gas supply chain, a 2023 collaborative National Renewable Energy Laboratory report shows. Hydrogen also has a lower energy per unit volume than natural gas, reducing a pipeline's transported energy, the NREL report shows. Hydrogen fuel cells could provide a low-carbon alternative to backup power generation, Hany Soliman from Microsoft's energy and resources team said, referencing a study on data center power usage. "We can actually build [hydrogen] containers that can ramp up power to 60 MW," Soliman said. "That gave us 48 hours of backup power ... and that should be all we need from a backup power generation standpoint." Microsoft aims to use 100% green power for data centers globally by next year, Soliman said. Breakthrough technologies like smaller quick-start electrolyzers could allow hydrogen to play a larger role in meeting this goal, he said. A proliferation of new data centers amid the rise of AI technologies and their respective power needs will increase demand for breakthrough low-carbon power sources, including hydrogen, Soliman said. AI could help speed up the innovation process, track outages and help distribute power across data centers needing support, he said. More hydrogen electrolysis projects must be tested and deployed to bring down costs and incentivize testing its implementation in the power sector, Bhat said. Areas willing to pay the "green premium" like areas mandated by low-carbon fuel standards could be early movers in this field, he said. When asked if hydrogen will be "a significant part" of decarbonizing the US power sector by 2035, Soliman and Smith both said it would. Bhat said his outlook was "more nuanced," saying hydrogen use cases are currently "very selective" and that areas with "real" net-zero commitments are more likely to see innovation in the space.

News

Metals: Saudi Arabia’s new oil?

Saudi Arabia’s economy has historically been dependent on oil exports, but the country is eager to diversify. Mining valuable minerals hidden under its vast deserts could help to reduce its reliance on oil and grow its share in the energy transition. The kingdom is thought to hold significant deposits of key critical and battery metals including copper, nickel, lithium and bauxite. In January, mining CEOs and investors headed to Riyadh to attend the two-day Future Minerals Forum and rub elbows with the kingdom’s influential energy minister Prince Abdulaziz bin Salman and multiple ministers from the Ministry of Industry and Mineral Resources. “We need to show that we are serious about change, that we can change,” said Saudi Arabia’s Minister for Industry and Mineral Resources Bandar Al-Khorayef in his opening speech on the first day of the forum in an overcrowded auditorium, alluding to previous failed attempts to get the big players of the commodities world to invest in Saudi Arabia. In the 1990s, the government attempted to get international oil companies to develop the country’s gas resources with a $25-billion incentive. It was followed by the Rub-al-Khali non-associated gas project in 2003-2004, which also failed as upstream projects showed no results. Now, under Saudi Arabia’s Vision 2030 – an economic, social and cultural diversification program – metals and mining are in focus. Vision 2030 to overhaul the country While Saudi Arabia is the biggest oil exporter in the world, its current metals and mining market is comparatively small. According to the Ministry of Mining and Mineral Resources, Saudi Arabia is a net importer and the ministry aims to change this. As part of its Vision 2030, Saudi Arabia aims to double its current steel production output, triple its gold and copper production, and remain in the top 10 of primary aluminum producers. Looking more closely at actual mining and metals production shows that the country will have to catch up, if it can. While there is a lot of uninhabited landmass, what can be extracted remains unknown. The country has no current upstream production of iron ore and is producing up to 13 million mt/year of crude steel from iron ore imports. Its copper and zinc production is around 100,000 mt/year, without any current smelting or refining capabilities. The current lack of copper midstream production is particularly crucial as the country aims to speed up its electric vehicle production with a localized battery supply chain. The aluminum value chain, on the other hand, can already be fully produced in Saudi Arabia as its biggest metals company Ma’aden is well established. The country has an annual bauxite production of 4.8 million mt, while its alumina and primary aluminum production amounts to 1 million mt/year. In December 2023, Ma’aden said it discovered several high-density gold deposits near its existing Mansourah Massarah mine. Saudi Arabia currently mines 500,000 oz/year of gold. Unlocking mining licenses, providing investment incentives and international roadshows with key ministers are all aimed at making Saudi Arabia a big player with negotiating power on the international stage. Unlike its status in the global oil industry, Saudi Arabia is a minnow in metals and mining when compared to giant producers in Africa and South America. Cutting regulation and red tape is a strategy to catch up. Permits – usually a pain point for project developers – are now comparatively easy to obtain, with untapped deposits of critical minerals. Although not as big as in the Democratic Republic of Congo (DRC), the kingdom’s mineral deposits are bigger than those in Europe. For investors, it is unusual to have such a big area of uninhabited land available for mining with swift paperwork and enthusiasm from the government to attract partners. Mining is nothing new to the kingdom from the perspective of an investor. The Saudi Arabian Public Investment Fund and investment company Manara Minerals have a 10% stake in Brazil’s Vale Base Metals. The merged Ministry of Industry and Mineral Resources is a very young entity. It was created in 2019, carved out from the powerful Ministry of Energy as part of Vision 2030. The heads of the ministry, Minister Bandar Al-Khorayef and Vice Minister of Mining Affairs Khalid bin Saleh Al-Mudaifer, have been dubbed a “dynamic duo” in their efforts to attract investments into the sector. Despite their enthusiasm, headwinds to developing mining in Saudi Arabia exist. The conflict in the Red Sea and the Israel-Hamas war have not necessarily impacted interest from international investors in Saudi Arabia so far, but any further escalation could push away potential miners. The ministry announced signings of memorandums of agreement on an almost hourly basis during the Forum, with partners ranging from Finland to the DRC. “I’m sure it was a lot of work in the lead up to the conference but they are putting a lot of pressure on themselves with these announcements,” a trading head at a major bank told S&P Global Commodity Insights. The biggest task for the government this time is to deliver and turn the MoUs into projects. The approach under Vision 2030 looks more comprehensive than its previous attempts. But Saudi Arabia will have to continue to prove that it is serious about change by creating a framework that works for international companies to explore its untapped resources. Whether metals and mining are the kingdom’s new oil remains to be seen. Platts Connect: News & Insights (spglobal.com)