[00:00:00] Speaker 17:
This Honorable Court is again in session.

[00:00:02] Speaker 17:
Be seated, please.

[00:00:13] Speaker 11:
All right.

[00:00:15] Speaker 18:
How are the constitutional issues?

[00:00:17] Speaker 18:
So Mr. Rivkin.

[00:00:20] Speaker 15:
Good afternoon, Judge Henderson.

[00:00:22] Speaker 15:
I may please the court.

[00:00:23] Speaker 15:
I'm David Rivkin.

[00:00:24] Speaker 15:
On behalf of state petitioners, I will address the federalism constitutional issues, and Professor Larry Tribe will tackle other constitutional issues.

[00:00:32] Speaker 15:
The Clean Power Plan unconstitutionally commandeers states, because it gives them no choice, no choice at all, but to implement the federal policy of generation shifting, which EPA cannot implement on its own.

[00:00:45] Speaker 15:
This is because, unlike the case in the traditional cooperative federalism scheme,

[00:00:50] Speaker 15:
EPA has no statutory authority to deal with virtually 90% of all the issues relating to regeneration and distribution of electricity.

[00:01:00] Speaker 15:
For that reason, the rule commandeers thousands of state officials to carry out their work, tens of thousands of hours to carry out this federal policy.

[00:01:09] Speaker 15:
Now, EPA recognized very clearly that it cannot implement the generating shifting federal policy

[00:01:16] Speaker 15:
by itself by pointing out in four different places, actually five, once in the preamble and four places in the rule, that it relies on states to exercise their traditional responsibility to maintain reliability, whether or not states promulgate a SIP.

[00:01:32] Speaker 16:
So if Congress did exactly this,

[00:01:36] Speaker 16:
They couldn't, under your theory, because it's unconstitutional?

[00:01:40] Speaker 15:
That is correct, Judge Kavanaugh, except for one thing.

[00:01:42] Speaker 15:
In a way, accountability, if Congress enacted precisely the same rule, the accountability would be somewhat more enhanced because everybody would know what Congress is doing.

[00:01:53] Speaker 15:
But yes.

[00:01:53] Speaker 07:
Was this an issue of accountability, or I thought it was an issue of commandeering and coercion?

[00:01:58] Speaker 15:
Judge Griffith, the Supreme Court jurisprudence

[00:02:02] Speaker 15:
particularly New York and Prince and other federalism cases teach us that the two cardinal virtues of federalism is to diffusion of power to ensure that no much authority is aggregated in a single set of hands, but the other thing particularly

[00:02:17] Speaker 15:
Justice Kennedy's jurisprudence in this area teaches us that accountability is absolutely essential.

[00:02:21] Speaker 15:
The people have to understand who is doing what.

[00:02:25] Speaker 15:
So who are the state officials commandeered by this?

[00:02:28] Speaker 15:
We are, if a record submitted or generated during the rulemaking, Judge Griffith, indicates that you have commandeering above legislatures, which of course isn't exactly.

[00:02:37] Speaker 15:
the teaching of New York as well as commandeering of regulatory officials in the executive branch.

[00:02:44] Speaker 15:
If I may briefly unpack what exactly states would have to do.

[00:02:49] Speaker 15:
EPA makes us think that all what would happen here is a bunch of private individuals are going to come to the states and ask them to approve particular facilities.

[00:02:57] Speaker 15:
Even that is commandeering enough because that's exactly the situation in Prince where

[00:03:01] Speaker 15:
private parties came to chief law enforcement officers and asked them to perform certain functions, but much more is at stake here.

[00:03:07] Speaker 15:
At the proposal of Judge Taylor's observations about the integrated nature of a grid earlier today, the grid is a very intricate beast requiring for it to function.

[00:03:17] Speaker 15:
Enormous amount of planning,

[00:03:19] Speaker 15:
to come together.

[00:03:19] Speaker 15:
And the only party, given the lack of preemptive authority on the part of federal government, EPA or any other agency of the states, if I can briefly unpack it for you.

[00:03:29] Speaker 15:
So a great deal of integrated resource planning would go into figuring out how to integrate both new renewable fuel facilities as well as new natural gas facilities into the existing grid in a way that preserves reliability and minimizes the impacts on affordability.

[00:03:47] Speaker 15:
There has to be a great deal of planning, all of it would be followed by execution where states also indispensable parties.

[00:03:52] Speaker 15:
But just to finish the planning part, planning for new transmission infrastructure to integrate the renewable fuel power facilities and gas-fired facilities because without that,

[00:04:03] Speaker 15:
that they were not going to deliver electricity to anybody.

[00:04:06] Speaker 15:
Another part, very important, planning for the new natural gas pipelines because you are not going to be able to operate new natural gas fire plants.

[00:04:14] Speaker 07:
That really would be the mainstay of the base... How is that different from state officials reacting to any federal initiative?

[00:04:21] Speaker 07:
I mean, there's planning that has to go on when the federal government...

[00:04:25] Speaker 15:
appreciate this question, Judge Griffith, that there's enormous constitutional significance in the federal government exercising its preemptive authority in other areas and producing unavoidable consequences, even if unavoidable consequences... But let me just give you an example to follow up on Judge Griffith's question.

[00:04:39] Speaker 05:
Suppose, under your theory, actually I think the EPA uses this example as proof.

[00:04:45] Speaker 05:
Wouldn't the Americans with Disabilities Act be unconstitutional?

[00:04:48] Speaker 05:
I mean, it requires

[00:04:51] Speaker 05:
It requires individuals and companies to build ramps, install elevators, do all kinds of things, and all of that requires zoning and building permits and all kinds of actions by state and local agencies that deal with, you know, the intricate plan of streets and how a town is set up.

[00:05:09] Speaker 05:
What's the difference?

[00:05:10] Speaker 15:
Judge Theda, we understand the unavoidable consequences of the exercise of federal power.

[00:05:16] Speaker 15:
The best way to answer you is to quote roughly, a rough paraphrase from Prince, where the court said... Could you just answer my question?

[00:05:24] Speaker 05:
What's the difference between this case and the ADA example?

[00:05:31] Speaker 05:
Both statutes require action by state authorities.

[00:05:37] Speaker 15:
The difference, the key constitutional difference, Judge Taito, in our case, the object of this rule is to administer the functioning of state government.

[00:05:49] Speaker 15:
In the ADA case, the purpose of this rule is to bring about certain results in the private sector and any consequences for state government which exist are purely incidental.

[00:06:00] Speaker 15:
It makes enormous difference.

[00:06:03] Speaker 15:
Commandeering doctrine would make no sense unless it meant

[00:06:07] Speaker 15:
one thing.

[00:06:08] Speaker 15:
The purpose of exercise is to direct the functioning of state entities, state officials, state legislatures, so as to shift accountability for unavoidable consequences, good or bad of an exercise.

[00:06:20] Speaker 05:
That's exactly what happens in my hypothetical.

[00:06:23] Speaker 05:
It forces state agencies to use their police power to issue permits and zoning changes and other things, and they're not politically accountable for that.

[00:06:35] Speaker 15:
I understand, Judge.

[00:06:36] Speaker 15:
What's the difference?

[00:06:37] Speaker 15:
The key difference in this rule, just like in New York and Prince, the federal government is telling the officials of a co-equal sovereign that they intend, expect, and desire for them to engage in the task of generating shifting, which is within the sweet spot of their police powers, which the federal government has not preempted them, unlike in Hodel.

[00:06:58] Speaker 15:
In your hypothetical, the federal government is accomplishing certain results,

[00:07:02] Speaker 15:
And it has consequences for the states.

[00:07:04] Speaker 15:
The states would indeed exercise their power.

[00:07:07] Speaker 05:
Same thing here.

[00:07:08] Speaker 05:
The federal government is issuing environmental emission standards, and that has indirect consequences for state regulation, just like in the ADA case.

[00:07:21] Speaker 15:
Your Honor, the purpose of the exercise, which sometimes may be difficult to infer, we have no problem here.

[00:07:29] Speaker 15:
In any situation where the federal government explicitly tells states that legislative or regulatory tasks have to be undertaken, the anti-commandeering canon, which is per se... Where did it do that here?

[00:07:44] Speaker 15:
It does it in five places in this rule.

[00:07:47] Speaker 15:
It doesn't use exactly the same language as when you are in France.

[00:07:51] Speaker 05:
Where does it tell the states that they have to do so?

[00:07:54] Speaker 15:
It says in, throughout the rule, what states are expected to exercise their traditional responsibility to maintain electrical liability.

[00:08:02] Speaker 15:
It mentions in four places in the rule

[00:08:06] Speaker 15:
what the states are supposed to do.

[00:08:07] Speaker 15:
And for example... It says expected, not required.

[00:08:12] Speaker 02:
Expected, not required.

[00:08:13] Speaker 02:
It's a predictive statement.

[00:08:15] Speaker 15:
I'm glad you asked this question.

[00:08:17] Speaker 15:
Let me put it this way.

[00:08:19] Speaker 15:
given the respect for the rule of law, when the officials of a co-equal sovereign, federal government, tell the officials of a co-equal sovereign that they are going to destroy, which is destroy a portion of existing energy infrastructure, where we say we cannot replace it, only you can, and we expect you to replace it, and the failure to replace... Where does it say you have to replace anything as opposed to industry might have to change something?

[00:08:49] Speaker 15:
Let me paraphrase slightly my response to one of your colleagues, Judge Millett.

[00:08:55] Speaker 15:
grid can only be created through a concerted action by state regulators given its highly intricate nature.

[00:09:03] Speaker 15:
The notion that you can throw a grid together... Collective state regulators, correct?

[00:09:07] Speaker 02:
That's not something that a single state does.

[00:09:09] Speaker 02:
Collectively, state regulators create the grid.

[00:09:12] Speaker 02:
The grid doesn't belong to any single state.

[00:09:15] Speaker 15:
Both, Judge Malik, both actions take place.

[00:09:19] Speaker 15:
Each state plans its own grid, but state regulators also

[00:09:24] Speaker 15:
can cooperate sometimes to play regional grids or national grid.

[00:09:28] Speaker 15:
But the notion that EPA puts forward that all that would happen here is the state can sit back and allow private parties to come in is risable.

[00:09:38] Speaker 15:
Let me give you a perfect example.

[00:09:40] Speaker 15:
The state regulators have a responsibility to ensure sufficient fuel diversity so that the fuel that is cheapest today that would be put forward by private individuals, because no disrespect to the market, but all they want to do is to make money.

[00:09:53] Speaker 15:
That is sufficiently, that fuel diversity is preserved so as to be resilient to future changes and prices.

[00:10:01] Speaker 15:
They have to be insured that there's a sufficient balance between close to low generation versus long distance generation, because transmission is inherently unreliable.

[00:10:11] Speaker 15:
In the great state of Oklahoma, for example, because of tornadoes, transmission cannot be, you cannot rely solely on long distance generation.

[00:10:19] Speaker 15:
The great state of Florida mentioned in their comments that, oh, because natural gas pipelines tend to run from the Gulf of Mexico, they cannot rely

[00:10:27] Speaker 15:
too too much on the natural gas fire generation because of tropical storms.

[00:10:33] Speaker 02:
All of those things are highly... Is this mandated or choices?

[00:10:36] Speaker 02:
Is this choice?

[00:10:37] Speaker 02:
I mean it seems to me like this is what you're saying is there's an interstate highway system and as a result when states maintain their roads as a practical matter they hook them up.

[00:10:48] Speaker 02:
to the interstate highway system.

[00:10:50] Speaker 02:
They have maintenance responsibilities as to that, and it's going to be driven, probably influenced, and certainly expected and encouraged from the federal level.

[00:10:59] Speaker 02:
But at the end of the day, it's not required.

[00:11:02] Speaker 02:
Your people may require you to do it, but it's not required.

[00:11:04] Speaker 15:
It is not an apropos analogy because, for example, to use Florida as an example, Florida mentions those comments that they roughly have 68 megawatts of installed capacity.

[00:11:14] Speaker 15:
What they can import from out of state is 3.8 megawatts, less than 5%.

[00:11:21] Speaker 15:
No state can ever abandon unique and distinctive responsibility at the height of their police power for structuring their own grid.

[00:11:32] Speaker 15:
And the fact that they do it day in and day out according to their own desiderata or according to the impacts of market forces and entirely constitutional and objectionable, a federal mandate tasking them in very clear and compelling language to undertake those responsibilities is the worst example of commandeering from a standpoint of... If Congress just passed a law that banned

[00:12:02] Speaker 02:
the use of coal power, coal-based power, fossil fuel-based power.

[00:12:08] Speaker 02:
They just banned it.

[00:12:10] Speaker 02:
Did that be unconstitutional commandeering?

[00:12:13] Speaker 15:
That statute would create some constitutional issues, but it would have one virtue.

[00:12:19] Speaker 15:
At least it would produce accountability.

[00:12:22] Speaker 02:
So the question is, doesn't that cause the exact same

[00:12:27] Speaker 02:
commandeering consequences that you're raising here, you're going to have to change your own internal grid, you're going to have to change your supplies?

[00:12:34] Speaker 15:
How would the consequences be different?

[00:12:36] Speaker 15:
I understand, if I may.

[00:12:38] Speaker 15:
Our case is stronger precisely because of an unambiguous indication in this rule, but the federal government lacks the ability to undertake those tasks.

[00:12:48] Speaker 15:
Congress could have actually given EPA or some other agency preemptive authority, like in HODL, to take over the entire field.

[00:12:56] Speaker 15:
They did not.

[00:12:57] Speaker 05:
That was true in my hypothetical too.

[00:13:00] Speaker 05:
The federal government can't do permits for curb cuts or for any other changes required for the Americans with Disabilities Act.

[00:13:11] Speaker 05:
The government does not have the authority to do that.

[00:13:14] Speaker 05:
Compliance with the AD can only occur if states exercise their police power to provide the necessary permits.

[00:13:22] Speaker 15:
I go back to, and if I may, an additional point.

[00:13:25] Speaker 15:
I go back to a point about incidental impacts and intentional impacts.

[00:13:31] Speaker 15:
The essence of commandeering is

[00:13:34] Speaker 15:
seeking a desired outcome in terms of the federal policy by utilizing the machinery of the states.

[00:13:43] Speaker 05:
I don't mean to be a dead horse, but that's the purpose of the ADA.

[00:13:46] Speaker 15:
No, the purpose of the EPA, Chair Stato, is to produce... But they did.

[00:13:49] Speaker 05:
The ADA, Congress passed the ADA requiring these changes.

[00:13:53] Speaker 05:
That's what they wanted, just like the EPA.

[00:13:55] Speaker 05:
here is trying to control emissions of pollution and both EPA here and Congress with the ADA knew full well that it could not be accomplished without the states exercising their police and zoning and other, but it couldn't happen.

[00:14:11] Speaker 15:
The goal in American with Disabilities Act is to produce certain changes regard to the private sector.

[00:14:18] Speaker 15:
I have no doubt that the goal is present here, but if I may, Judge Tatel, the goal here is far more profound.

[00:14:24] Speaker 15:
The goal here is to change the energy infrastructure of the states.

[00:14:29] Speaker 15:
It is not just an emission rule.

[00:14:32] Speaker 15:
We heard a concession from

[00:14:35] Speaker 15:
My colleague from EPA, Mr. Haas, and I quote, who said, this rule is about substituting clean technology for dirty technology.

[00:14:45] Speaker 15:
That means changing the grid, the grid that only states can change and maintain.

[00:14:51] Speaker 15:
It is a fundamental difference in quality.

[00:14:53] Speaker 02:
I had taken that to mean changing the types of power generation being used to feed electricity into the grid.

[00:15:08] Speaker 02:
Is that different from what you're talking about?

[00:15:11] Speaker 15:
Forgive me.

[00:15:12] Speaker 02:
Sorry, so I had understood that comment to be that what this rule does is certainly heavily encouraged that require changing the forms of power generation that feed electricity into the grid.

[00:15:27] Speaker 15:
It is that which is sufficiently objective, but it's more than that.

[00:15:31] Speaker 15:
Apropos of my point about grid being a very carefully calibrated mechanism, the essence of this mechanism is integration.

[00:15:40] Speaker 15:
You can put together a bunch of facilities that would do nobody any good, either on a day-to-day basis, but particularly on a days of peak demand or days plagued by natural disasters.

[00:15:52] Speaker 15:
The only indispensable part you can do the integration are the states.

[00:15:56] Speaker 15:
EPA knows it, EPA acknowledges, EPA expects the states to perform an apropos of my response to Judge Tatel.

[00:16:03] Speaker 15:
It is that unique sliver of desire to seize state agencies that produces such

[00:16:13] Speaker 15:
disjunctive, such unconstitutional results.

[00:16:16] Speaker 15:
And if it were not true, then the entire Supreme Court's anti-commandeering jurisprudence would make no sense.

[00:16:23] Speaker 15:
Let me also add that we do have an anti-corrosion argument.

[00:16:27] Speaker 15:
I mean, what?

[00:16:28] Speaker 15:
An anti-corrosion argument, which is a teaching of Stuart Machine, Sadek Odovidow, and NFIB.

[00:16:34] Speaker 15:
The situation we have is much more of a gun to the head than the palpable collapse of a Medicaid system.

[00:16:41] Speaker 15:
an issue in NFIB because aside from the state's police power responsibility to maintain reliable service for their citizens, states themselves would not be able to go on as functioning ongoing concerns if they don't have access to reliable and affordable electricity.

[00:17:00] Speaker 15:
State offices would close.

[00:17:02] Speaker 15:
State prisons would close.

[00:17:03] Speaker 15:
They would be unable to dispatch fire and rescue services.

[00:17:08] Speaker 15:
So we have an unprecedented mix of commandeering and coercion.

[00:17:16] Speaker 15:
If that's not true, the entire Supreme Court jurisprudence in this area has been noturized.

[00:17:19] Speaker 02:
Does your state get energy from sources outside the state?

[00:17:24] Speaker 15:
I made the point when we got to Florida.

[00:17:27] Speaker 15:
The opportunity to import power is a contributing factor to the state's integrative essential job.

[00:17:36] Speaker 15:
But it never can substitute for it.

[00:17:38] Speaker 15:
For one thing, no state, no sovereign would entirely rely on somebody else.

[00:17:42] Speaker 02:
I'm not saying that.

[00:17:43] Speaker 02:
I'm just asking whether it is a self-sufficient internal grid or whether, in fact, it's an interstate interconnected

[00:17:50] Speaker 15:
Oh, we do know one thing.

[00:17:53] Speaker 15:
The state of Texas, for example, is an entire island of its own.

[00:17:56] Speaker 15:
It's entirely decoupled from a grid.

[00:17:59] Speaker 15:
Virtually every single state, I mentioned the ratio in Florida.

[00:18:03] Speaker 15:
I mentioned a concern about resilience.

[00:18:06] Speaker 15:
Whenever you have a natural disaster, you want to have a sufficient amount of close to load generation, and not to get technical, but in order to maintain the viability of a grid.

[00:18:15] Speaker 15:
You need to have a sufficient amount of base load capacity, but by definition has to be within your generating footprint.

[00:18:22] Speaker 15:
There is both technical reasons and political reasons and constitutional reasons that inevitably make it

[00:18:31] Speaker 15:
impossible for EPA to carry out what it set out to do.

[00:18:35] Speaker 15:
And it's not even pretending to do anything otherwise.

[00:18:38] Speaker 15:
It is clearly directing state officials in multiple places to perform those tasks.

[00:18:44] Speaker 15:
And that is commandeering.

[00:18:45] Speaker 15:
That is the only thing that commandeering means.

[00:18:48] Speaker 18:
All right.

[00:18:49] Speaker 18:
Thank you, Mr. Griffin.

[00:18:51] Speaker 18:
Professor Tribe.

[00:19:02] Speaker 08:
May it please the Court.

[00:19:04] Speaker 08:
I was thinking of Judge Tatel's question.

[00:19:08] Speaker 08:
I don't think there's anything unconstitutional about the Americans with Disabilities Act.

[00:19:13] Speaker 08:
But if Congress had been unable to pass it as it was unable to enact a nationwide cap and trade system when the Senate wouldn't go along with the House,

[00:19:30] Speaker 08:
And if instead of that, some agency with relatively limited previous powers in a related area were to tell the states, each of you must pass a mini ADA,

[00:19:46] Speaker 08:
You have some room to maneuver, but if you don't pass it, then, although Congress failed to enact an Americans with Disabilities Act, we will simply exercise preemptive power and put it in place.

[00:20:02] Speaker 05:
But the EPA here was acting pursuant to the Clean Air Act.

[00:20:06] Speaker 05:
It's directed that it set goals for the states to set performance standards.

[00:20:16] Speaker 05:
It was acting pursuant to a federal statute.

[00:20:18] Speaker 05:
This morning we had a lot of arguments about whether the regulations comply with the statute, but are you saying that even if the regulations comply with the statute, then the Clean Air Act is unconstitutional?

[00:20:36] Speaker 08:
No, what I am saying is that in a case like New York versus the United States, even though Congress could have taken over the area of radioactive control all by itself, the court was concerned not just with the effect but with what some called the etiquette of federalism because of accountability.

[00:20:57] Speaker 08:
It said that if a state like New York is given

[00:21:00] Speaker 08:
an ostensible choice, either take title to the radioactive waste or regulate in accord with our standards.

[00:21:08] Speaker 08:
That's an impermissible choice, even though it had a choice.

[00:21:12] Speaker 08:
The fallback, if the state of New York did nothing, was not that the government would come in and take over in fact.

[00:21:21] Speaker 08:
It's simply that it would not allow New York to free ride and dump its nuclear waste

[00:21:29] Speaker 08:
in other states that were assuming their responsibilities.

[00:21:32] Speaker 08:
Here, the fallback is very different.

[00:21:35] Speaker 08:
That is, the states are given a theoretical formal choice.

[00:21:39] Speaker 08:
But if they do not exercise it in accord with the EPA's goals, there is a draconian alternative.

[00:21:47] Speaker 08:
And the states are warned in no uncertain terms that they'll be worse off if they don't comply.

[00:21:52] Speaker 08:
But my point is really less to talk about horizontal federalism.

[00:21:56] Speaker 08:
I think you avoid all of those issues, which are serious issues, that is, vertical federalism.

[00:22:02] Speaker 08:
My point is not to talk about

[00:22:05] Speaker 08:
vertical separation of powers.

[00:22:07] Speaker 08:
Because I think that under the horizontal separation of powers and the role of the three federal branches, this action by the EPA is impermissible.

[00:22:17] Speaker 08:
And for separation of powers reasons that came up occasionally in the morning, and you don't have to face the issue of how to make sense of the anti-commandeering doctrine of a case like Newark v. US against the backdrop of

[00:22:32] Speaker 08:
contingent preemption.

[00:22:34] Speaker 08:
The reason that I do not think that the EPA is acting within the bounds of an executive agency has very much to do with the Clean Air Act that you're referring to, Judge Tatel, and the way it is written.

[00:22:49] Speaker 08:
It's not written in a way that's perfectly ideal for the regulation of CO2.

[00:22:55] Speaker 08:
Let's admit it.

[00:22:56] Speaker 08:
And I think members of this Court have suggested that there's a kind of bait and switch going on.

[00:23:01] Speaker 08:
That is, the Supreme Court in

[00:23:04] Speaker 08:
AEP against Connecticut said that the federal government has decided to set up an agency to deal with all forms of air pollution, including, we now understand, air pollution of the ubiquitous kind, kind like CO2.

[00:23:21] Speaker 08:
That's where the solution must be found.

[00:23:24] Speaker 08:
There was no promise that 111 would necessarily solve everything.

[00:23:28] Speaker 08:
There was a question at the time of exactly what the scope of this little news provision, 111D, would be.

[00:23:37] Speaker 08:
It has only been used five times for limited localized problems, only once since 1990.

[00:23:44] Speaker 08:
And the question of whether you would be able to do it without

[00:23:49] Speaker 08:
delisting sources of power generation under 112 was very much alive.

[00:23:57] Speaker 08:
The Mercury case in this court was in the immediate background.

[00:24:02] Speaker 08:
So when the AEP court in a 6 to 1 ruling wrote that footnote 7, which very clearly, as I think Judge Kavanaugh recognized,

[00:24:12] Speaker 08:
If we take it seriously, and I think we should, though it's only a footnote, it was an important part of the decision.

[00:24:19] Speaker 08:
The Court said that if the source category is regulated under 112,

[00:24:26] Speaker 08:
then you cannot regulate that category, even with respect to a non-HAP.

[00:24:31] Speaker 05:
Didn't it also say if it was regulated under the?

[00:24:35] Speaker 08:
I'm sorry?

[00:24:36] Speaker 05:
It also said if it was regulated as a HAP under the criteria program.

[00:24:41] Speaker 08:
Well, if you read the text of footnote seven,

[00:24:47] Speaker 08:
It says AEPA may not employ 111D if existing stationary sources of the pollutant in question are regulated.

[00:24:57] Speaker 08:
Sources are regulated under the National Ambient Air Quality Standard Program or

[00:25:05] Speaker 08:
the hazardous air pollutants program.

[00:25:07] Speaker 08:
And taking literally what that means is that you have to make a choice.

[00:25:12] Speaker 08:
And it's not as crazy a choice as some of those that have been positive.

[00:25:16] Speaker 08:
You know, for example, a state telling somebody you have to fix your brakes or your rear headlights.

[00:25:22] Speaker 08:
but the state can't make you do both.

[00:25:25] Speaker 08:
This isn't like that.

[00:25:26] Speaker 08:
It's quite sensible, though it may not be ideal, to require an executive agency of the federal government to make a choice, whether to proceed under national standards, under 112, or to direct the states to regulate under 111D for existing plants.

[00:25:48] Speaker 08:
Now, some people say, well, that leaves a gap.

[00:25:50] Speaker 08:
What if the pollutant is not a hazardous air pollutant and you're not going to go through the process of classifying

[00:26:00] Speaker 08:
CO2 is hazardous, though perhaps that could be done.

[00:26:03] Speaker 08:
But one person's gap is another person's choice.

[00:26:08] Speaker 08:
I mean, this court in NRDC v. EPA in 2014 in the cement plant case and three years earlier, Judge Tatel, in your opinion, dealing with ozone, made it clear that even if this court believes, or certainly the EPA believes,

[00:26:26] Speaker 08:
that it's unwise to create a situation where something is not going to be easily covered, there is a solution.

[00:26:33] Speaker 08:
And the solution is to go to Congress.

[00:26:35] Speaker 08:
And because I think implicitly it was recognized earlier, the structural principles of our government can't depend on this Court's evaluation of whether Congress is being productive or not.

[00:26:49] Speaker 08:
In fact, that was what happened in 1990.

[00:26:52] Speaker 08:
So I'm still having trouble recognizing that.

[00:26:55] Speaker 02:
I'm still having trouble reconciling this with what actually happened in the AEP case in the Supreme Court in the wake of Massachusetts versus EPA saying you've got to regulate these greenhouse gases and people were being public nuisance actions.

[00:27:12] Speaker 02:
because nothing had happened by Congress.

[00:27:16] Speaker 02:
And the Supreme Court's answer, yes, there's that footnote, but the Supreme Court's answer was that there is a federal agency empowered to make these regulatory decisions.

[00:27:27] Speaker 02:
Now, whether EPA could have decided, no, we're not going to do it consistent with MAS versus EPA is a very different answer than saying,

[00:27:33] Speaker 02:
Displacement was the word the Supreme Court was using.

[00:27:36] Speaker 02:
This is taken over.

[00:27:37] Speaker 02:
This is displaced by this scheme.

[00:27:40] Speaker 02:
And it wasn't a congressional scheme.

[00:27:41] Speaker 02:
It was that EPA has the authority to make that decision.

[00:27:45] Speaker 02:
And now we're told we don't.

[00:27:47] Speaker 02:
That in fact it had no authority whatsoever to make any decision here.

[00:27:51] Speaker 08:
Judge, the issue before the court.

[00:27:54] Speaker 08:
was not the interpretation of the intricate scheme of intersection between 111D and 112.

[00:28:04] Speaker 08:
It was the fact that Congress had decided to create, under the Clean Air Act, an agency with responsibility for all air pollution, including CO2.

[00:28:15] Speaker 08:
The court stopped quite short of saying

[00:28:18] Speaker 08:
And that problem has been solved by the design of this law.

[00:28:22] Speaker 02:
The problem there was power plant greenhouse gases in AEP.

[00:28:27] Speaker 02:
Power plant greenhouse gases.

[00:28:29] Speaker 02:
And the answer that we're being told is that as to power plant greenhouse gases,

[00:28:37] Speaker 02:
Those can't be regulated by EPA.

[00:28:39] Speaker 02:
I mean, the delisting is extremely difficult, and I'm not sure the statutory elements could be met.

[00:28:44] Speaker 02:
I'm not sure it's even a conceivable option here.

[00:28:49] Speaker 02:
So the whole reason you can't bring your public use into action is because they will make the judgment whether and how to take care of it, and now we're told they can't.

[00:28:57] Speaker 02:
That's the reasoning, the whole thrust of the decision.

[00:29:00] Speaker 08:
I understand the passion, but I don't think the reasoning quite works.

[00:29:04] Speaker 08:
It seems to me under Section 115, it's quite possible that CO2 could be dealt with.

[00:29:10] Speaker 08:
That section is specifically designed to deal with international pollution.

[00:29:15] Speaker 08:
It's also true that

[00:29:18] Speaker 08:
111B applies not only to completely new plants, but to plants that are upgraded after June 18, 2014, and a great many are in that category.

[00:29:29] Speaker 08:
In fact, something like 95 percent of the standards promulgated

[00:29:35] Speaker 08:
under 111, under 111B, which has no exception for Section 212.

[00:29:41] Speaker 08:
So I don't think it would be a case of the Court saying, well, we've looked carefully, although it's not an issue in this case, at which parts of 111 we would be able to use.

[00:29:51] Speaker 12:
It did say, the Court did say, and most relevant here,

[00:29:55] Speaker 12:
7411D then requires regulation of existing sources.

[00:29:59] Speaker 12:
So you're of course right that there's other provisions that are potentially in play, but the way the Court framed it was that the most relevant provision was 7411D as to existing sources.

[00:30:08] Speaker 08:
But of course, that can't be used if the source is one in a source category that's dealt with under 112.

[00:30:16] Speaker 08:
That's inescapable.

[00:30:17] Speaker 08:
And in fact, it wasn't just that the Court, you know, said that as a throwaway.

[00:30:22] Speaker 08:
or in light of the Mercury case without thinking about it.

[00:30:26] Speaker 08:
If you look at the language, the house language of 111D, to read it the way the EPA now reads it after years of not reading it that way, you would have to absolutely erase the language

[00:30:41] Speaker 08:
a source category which is regulated under section 112 of this title.

[00:30:46] Speaker 08:
If you cross out those words at the end of 111D1A little i, the law would mean exactly the same thing under the government's interpretation.

[00:31:00] Speaker 08:
The court has repeatedly said that an interpretation of a statute which completely nullifies a significant part of it is not likely to be undertaken.

[00:31:10] Speaker 08:
And you don't need much of a clear statement rule to say that just erasing language from the statute won't do.

[00:31:16] Speaker 08:
That is why.

[00:31:17] Speaker 19:
But Professor Tribe, the cases you're referring to are not cases in which you have the two separate provisions, both of which are equally authoritative.

[00:31:26] Speaker 19:
And we've spent a lot of time on that this morning.

[00:31:27] Speaker 08:
But those cases are not.

[00:31:29] Speaker 08:
That's what I think.

[00:31:31] Speaker 08:
The reason that the separation of powers adds more than just the usual gloss to a pure statutory argument is precisely that the EPA finally decided it has to

[00:31:44] Speaker 08:
assert a Chevron-like authority not to interpret ambiguous language in the statute, which in itself wouldn't be enough to trigger Chevron.

[00:31:55] Speaker 08:
You need a delegation.

[00:31:57] Speaker 08:
But it needs to invoke Chevron to assert this novel power, which is quintessentially legislative, as Whitman said, to take two different statutes

[00:32:10] Speaker 08:
or at least two different versions of a statute and decide which one to make the law of the United States.

[00:32:16] Speaker 08:
That is not something that Congress ever set the EPA up to do.

[00:32:21] Speaker 08:
It's not the enactment parliamentary agency.

[00:32:25] Speaker 08:
It's not even the energy policy agency.

[00:32:28] Speaker 08:
It's the environmental protection agency.

[00:32:31] Speaker 08:
That task of deciding

[00:32:33] Speaker 08:
what to make the law is really not subject to Chevron.

[00:32:38] Speaker 08:
And in particular, in this case, saying that the Senate had a distinctly separate version is a bit of an exaggeration.

[00:32:47] Speaker 08:
Judge Kovner has already pointed out.

[00:32:49] Speaker 02:
We don't let the EPA pick what the statutory text is between these competing versions.

[00:32:55] Speaker 02:
But if we take even the US Code version and we look at it and we say it's utterly confusing,

[00:33:02] Speaker 02:
Is there any separation of powers problem with saying it's ambiguous text?

[00:33:09] Speaker 02:
You may not, but if I did, we saw the ambiguity, and I don't think I'm alone in that.

[00:33:16] Speaker 02:
We saw the ambiguity, and so the agency gets to apply Chevron, it's Chevron authority to interpret ambiguity in the house version of the language.

[00:33:29] Speaker 02:
That's not a separation of powers problem, and it's not if they factor in the Senate's limits.

[00:33:32] Speaker 08:
It's interesting that the first time they ever suggested that the House language was ambiguous after all these years was in the final rule that they promulgated in this case.

[00:33:43] Speaker 08:
Until then, everybody said it may not be written, but it's quite clear that if a source category is regulated under 112, you have to deregulate it.

[00:33:55] Speaker 08:
which is what they failed to do with Mercury before you can regulate it as an existing source under 111D.

[00:34:03] Speaker 08:
It was very clear.

[00:34:04] Speaker 08:
Now, I think inventing and manufacturing it in order to give an agency power

[00:34:12] Speaker 08:
over a choice that Congress didn't really give it, that raises serious separation of powers considerations.

[00:34:19] Speaker 08:
And they are aggravated, in this case, by the fact that it's not an ordinary choice.

[00:34:25] Speaker 08:
When you add it to the broad definition of the best

[00:34:30] Speaker 08:
emission reduction system, which you were struggling with this morning, you have a simultaneous contraction of an exception that Congress wrote for plants that are categories of sources that are regulated under 112 and an expansion of the normal meaning of source category.

[00:34:52] Speaker 08:
There's a dilemma that they face in that regard.

[00:34:55] Speaker 05:
I just want to ask you a question about, I guess, both your constitutional argument and your statutory argument and a sentence in your brief.

[00:35:07] Speaker 05:
Earlier you said that EPA is only regulated

[00:35:12] Speaker 05:
two pollutants under 111D, and in your brief you distinguish it this way.

[00:35:18] Speaker 05:
And I want to ask you about the significance of this sentence.

[00:35:21] Speaker 05:
You say, as compared to those, you say none of them, that is the pollutants that are regulated under 111D, concerned a ubiquitous substance like CO2, benign in itself, emitted from sources across the nation and indeed the globe.

[00:35:40] Speaker 05:
rather than from discrete local sources.

[00:35:43] Speaker 05:
And then you go on and say atmospheric CO2 is the intermingled result of all human activity and mother nature.

[00:35:52] Speaker 05:
My question is, is that critical?

[00:35:58] Speaker 05:
Does that description of carbon dioxide affect your analysis of either the constitutional or the statutory issue?

[00:36:06] Speaker 08:
I think it sets the background against which it is not surprising that Congress did not anticipate that the law would be used in quite this way.

[00:36:18] Speaker 08:
And I don't read AEP as promising.

[00:36:20] Speaker 05:
But with the Supreme Court having ruled that carbon dioxide is a pollutant,

[00:36:26] Speaker 08:
Right.

[00:36:26] Speaker 05:
And EPA having made the endangerment finding, then this is irrelevant, isn't it?

[00:36:32] Speaker 05:
What's this got to do with the constitutional analysis?

[00:36:34] Speaker 05:
If it has something to do with it, I'd like to understand what it is.

[00:36:38] Speaker 08:
What it has to do with is that a law that was originally designed to deal mostly with highly specific localized problems from identifiable sources

[00:36:49] Speaker 08:
is not naturally adapted to dealing with so ubiquitous a pollutant.

[00:36:54] Speaker 05:
Okay, but the question before us is still how to deal with a pollutant under the statute, correct?

[00:37:03] Speaker 05:
Well, it's about how... The statutory issue and the constitutional question.

[00:37:07] Speaker 08:
Well, there's no question that an air pollutant includes CO2.

[00:37:12] Speaker 08:
There is, however, under URG a question of how it's permissible under the statute as written to regulate it.

[00:37:20] Speaker 08:
And is it permissible to regulate it

[00:37:23] Speaker 05:
But that's because it's a pollutant that's emitted by a source, regulated as a HAP.

[00:37:29] Speaker 05:
Not because it's a, not because it's a, not because it's a indomitable result of all human activity and mother nature.

[00:37:41] Speaker 08:
That is fair.

[00:37:42] Speaker 08:
I mean, I suppose as a critique of that draft, I accept it.

[00:37:47] Speaker 05:
But I don't think that... I wasn't criticizing it.

[00:37:49] Speaker 05:
I was wondering whether it related to how we should think about the constitutional issue.

[00:37:54] Speaker 08:
Only you should be less surprised by what some people call a gap.

[00:37:59] Speaker 08:
That is, this is a case that if our whole atmosphere here were not poisoned by the fact that Congress can't seem to do anything, we would be saying that's the natural way to fix this up, to deal with this ubiquitous modern problem.

[00:38:15] Speaker 05:
Well, maybe the way it handled this is just proof that it shouldn't be doing anything, right?

[00:38:20] Speaker 08:
That it shouldn't.

[00:38:22] Speaker 08:
And this court's mandate to get Congress to move would be rather challenging to write.

[00:38:28] Speaker 18:
All right, Professor Kib, you're over your time.

[00:38:33] Speaker 18:
So thank you.

[00:38:34] Speaker 08:
Can I reserve any for rebuttal?

[00:38:37] Speaker 08:
Thanks.

[00:38:40] Speaker 18:
Yes, Berman.

[00:38:51] Speaker 13:
Commissioner's 10th Amendment claim is entirely unmoored from the governing case law.

[00:38:56] Speaker 13:
Neither the Supreme Court nor this court have ever held that giving states a choice between regulating in a field and federal preemption is a problem.

[00:39:06] Speaker 13:
To the contrary, we have HODEL.

[00:39:07] Speaker 13:
We have this court's decision in Mississippi Commission that established that if you give states that choice, it's a permissible exercise of cooperative federalism.

[00:39:15] Speaker 13:
And we know from Berkeley, Mississippi that this rule applies to utilities as well.

[00:39:21] Speaker 13:
The choice may sometimes be a difficult one, as the court characterized it in Mississippi, but it's not an unconstitutionally coercive one.

[00:39:28] Speaker 13:
By way of contrast, cases where the Supreme Court has found a 10th Amendment violation all involve federal laws or rules that didn't give states that choice, but rather required them to take affirmative action to implement the federal policy.

[00:39:43] Speaker 13:
For example, in Prince,

[00:39:44] Speaker 13:
The Brady Act required state law enforcement to establish a national background check system.

[00:39:50] Speaker 13:
In train, state officials had to establish and implement a vehicle retrofit testing system.

[00:39:55] Speaker 13:
And the one provision that was found to be a 10th Amendment issue in New York, as my opponent said, required states to actually take title to radioactive waste.

[00:40:05] Speaker 13:
They could choose between regulating or taking title and affirmative action.

[00:40:10] Speaker 13:
Here, states have the classic cooperative federalism choice of regulating power plants' carbon dioxide emissions themselves through a state plan, or declining to do so, in which case EPA regulates private sources directly through a federal plan.

[00:40:26] Speaker 13:
If states choose that latter option, there are no sanctions, there are no penalties, unlike in cases like NFIB.

[00:40:33] Speaker 13:
This is bread and butter cooperative federalism, and it is indistinguishable from the criteria pollutant program at issue in the Mississippi Commission case.

[00:40:42] Speaker 16:
Now, in a desperate... I think they're saying there's more than that, not necessarily unconstitutionally more, but more in the sense that the states are going to have to do a lot to help restructure the source of energy supply, electricity in their states, and switch it from... So it's more than just the usual, I think they're saying.

[00:41:00] Speaker 13:
Well, but it isn't.

[00:41:01] Speaker 13:
That's the problem.

[00:41:02] Speaker 13:
So what they say states are going to have to do in their brief, they cited three things.

[00:41:06] Speaker 13:
Deal with new permit applications, make citing decisions and decommissioned plans.

[00:41:12] Speaker 13:
First of all, it's kind of a premature argument because we don't actually have a federal plan yet for any state.

[00:41:18] Speaker 13:
We don't know what will actually be required based on what sources might do pursuant to such a plan and what they might ask state regulators.

[00:41:26] Speaker 13:
But even, let's set that aside for a second, these sorts of ancillary regulatory action just don't give rise to 10th Amendment issues.

[00:41:34] Speaker 13:
This is the normal result of private entities like power plants or car companies or banks being subject to dual sovereignty.

[00:41:43] Speaker 13:
Petitioners made a lot of this one line from the preamble of the rule about states' responsibility to maintain a reliable electric system.

[00:41:52] Speaker 13:
To begin with, this is from a background section entitled Additional Context.

[00:41:57] Speaker 13:
It's describing, just describing the regulatory framework in which states operate.

[00:42:01] Speaker 13:
And in fact, what it actually says is that numerous entities have both the capability and the responsibility to maintain a reliable system.

[00:42:09] Speaker 13:
It lists FERC, DOE, state public utility commissions, ISOs, RTOs,

[00:42:13] Speaker 13:
Those two are private entities and other planning authorities and NERC.

[00:42:18] Speaker 13:
All contribute to ensuring the reliability of the electric system.

[00:42:21] Speaker 13:
And then it goes on to note that critical to the function are the dispatch tools that are used by RTOs and ISOs, private entities.

[00:42:29] Speaker 13:
So this passage wasn't really about states having to do things at all.

[00:42:33] Speaker 13:
It's a background description of the very complex regulatory framework that EPA was dealing with here.

[00:42:38] Speaker 13:
And it's reasonable for the agency to take that complex regulatory framework into account

[00:42:43] Speaker 13:
when it's designing air emissions regulations.

[00:42:48] Speaker 13:
You know, if petitioners are right, as the Court has already pointed out, Congress itself could not take action to require power plants to reduce greenhouse gas emissions.

[00:42:59] Speaker 13:
And indeed, I think their argument would take down much of the Clean Air Act, because there's nothing about the Clean Power Plans interaction with state regulatory processes that's any different than any other air pollution standard for this sector.

[00:43:11] Speaker 02:
Well, I take their argument to be that maybe Gregory versus Ashcroft is the better principle here, and that is

[00:43:18] Speaker 02:
Look, we all know that if this comes into play, we're going to have to do a lot because our job is to keep the power running.

[00:43:29] Speaker 02:
This strikes at the heart of a state.

[00:43:31] Speaker 02:
If it doesn't have power running where it needs to go, it can't function.

[00:43:37] Speaker 02:
It's got no choice.

[00:43:38] Speaker 02:
It can't sit on the sidelines.

[00:43:39] Speaker 02:
It is going to, as a direct result, have to, I take it as this argument, get in there, rejigger the grid,

[00:43:46] Speaker 02:
Make sure everything is balanced.

[00:43:47] Speaker 02:
It can't leave you in control of the plug.

[00:43:50] Speaker 02:
It's got to come in and do it with you.

[00:43:52] Speaker 02:
And this is the heart of state operations in sort of a Gregory sense.

[00:43:57] Speaker 13:
And Your Honor, the problem with this argument is that it has no basis in this record.

[00:44:03] Speaker 13:
There is just nothing that supports this idea that there are going to be blackouts and jails closing and a parade of other horribles if a state doesn't actively intercede to make a federal plan work.

[00:44:14] Speaker 13:
The only thing they cite is that statement I just read, which is a very background vanilla statement.

[00:44:21] Speaker 13:
To the extent they think these things are going to happen from an actual federal plan being imposed for a state, well, there will be an opportunity for any federal plan to be challenged in this court.

[00:44:31] Speaker 16:
Won't states have to do quite a bit, though, to oversee, direct, manage the restructuring of the electricity supply in the state?

[00:44:40] Speaker 13:
I don't think that's really a fair statement.

[00:44:43] Speaker 13:
Under the federal plan, we'll take it as proposed.

[00:44:46] Speaker 13:
Sources are directly regulated.

[00:44:48] Speaker 13:
It's anticipated that they'll engage in trading.

[00:44:50] Speaker 13:
The federal government will set a whole platform to allow that.

[00:44:54] Speaker 16:
I'm sorry to interrupt.

[00:44:55] Speaker 16:
Go ahead.

[00:44:56] Speaker 16:
If the coal plants go out of business, or some of them do, as they already are starting to do, then the state's going to have to do something, if it's going to serve its citizens, to find alternative supplies of electricity for the citizens.

[00:45:12] Speaker 16:
And that's going to be a busy process.

[00:45:17] Speaker 13:
The burden under a federal plan is placed directly on the regulated source.

[00:45:21] Speaker 13:
And if a source under the existing regulatory scheme, as I understand it,

[00:45:26] Speaker 13:
including federal reliability regulation, if a source

[00:45:30] Speaker 13:
asked to decommission, it actually has to find a way to replace the power that's being lost.

[00:45:36] Speaker 13:
So there is a very complex regulatory mechanism that ensures reliability, and I think EPA just reasonably pointed to the existence of that.

[00:45:43] Speaker 13:
It wasn't saying states, you're going to have to step in and make sure the lights don't go out.

[00:45:47] Speaker 13:
At the very least, we just don't have the record evidence for that in this rule or this record.

[00:45:51] Speaker 16:
Do you agree that maintaining the electricity supply is one of the traditional police functions, police power functions of the states?

[00:46:01] Speaker 13:
Yes and no.

[00:46:03] Speaker 13:
States have an important role, but as I just mentioned, there are at this point a number of other federal regulatory schemes in play, and there are also these non-state actors like RTOs and ISOs, and they all work together to do this.

[00:46:17] Speaker 13:
The states definitely have a role, but you know,

[00:46:20] Speaker 13:
There's a real difference between requiring state actors to take new affirmative actions and just sort of assuming they're going to go on doing the regulation they already do.

[00:46:29] Speaker 16:
From their perspective, it's the inevitable consequence.

[00:46:31] Speaker 16:
And I think they argue it's unconstitutional, but they also argue, I think, and maybe this has more roots, as Judge Millett was saying in the case law, that at least there needs to be a clear statement.

[00:46:41] Speaker 16:
Bond certainly suggests.

[00:46:44] Speaker 16:
that when you are altering the traditional functions of the federal-state balance, that Congress needs to speak clearly.

[00:46:53] Speaker 16:
So why...Distinguish Bond, if you can, for me.

[00:46:59] Speaker 13:
I'm sorry, I'm not prepared to distinguish Bond.

[00:47:01] Speaker 13:
I did want to talk about you a little, since you were taking us to the clear statement rule, if that's okay.

[00:47:07] Speaker 13:
I think that's their best case for the idea that a clear statement rule should apply here, either in regard to the basic questions or even the two amendments question.

[00:47:15] Speaker 13:
But I think it's important to keep in mind that that text that you read earlier from UR Judge Kavanaugh was in a very specific context.

[00:47:25] Speaker 13:
He wrote, EPA's interpretation is unreasonable.

[00:47:27] Speaker 13:
So this was a Chevron step two analysis, because it would bring about an enormous and transformative expansion in EPA's regulatory authority.

[00:47:35] Speaker 13:
And then down below, he specified that this would bring in millions of new sources.

[00:47:39] Speaker 13:
So that was the context in which a clear statement rule was found to apply.

[00:47:43] Speaker 13:
That's not the context we're dealing with here.

[00:47:45] Speaker 13:
We're dealing with an industry that's already regulated under multiple Clean Air Act programs.

[00:47:50] Speaker 13:
Now, on sort of the other separation of powers, statutory issues that have been percolating back up, I do want to briefly address the AEPP footnote, because I think this is an important point.

[00:48:02] Speaker 13:
You know, the footnote is dicta, and I agree with my opponent.

[00:48:08] Speaker 16:
It's Supreme Court dicta on a key subject.

[00:48:12] Speaker 13:
Yes, but I agree with my opponent.

[00:48:14] Speaker 16:
They can call it dicta.

[00:48:16] Speaker 13:
Well, I agree with my opponent that we certainly don't think the Supreme Court had these issues before them about the two amendments, et cetera.

[00:48:25] Speaker 13:
At the same time, as Judge Tatel noted, the Supreme Court talked in the way it phrased it, it made the exclusion the same for the criteria and the hazardous pollutant programs.

[00:48:36] Speaker 13:
So as we said in our briefs, if you read it the way petitioners want you to read it, then the Supreme Court was half wrong, because the criteria pollutant program, at the very least, doesn't work that way.

[00:48:45] Speaker 16:
Yeah, that's a misdescription, right, of the NACs?

[00:48:47] Speaker 16:
That's what you're saying.

[00:48:48] Speaker 13:
Well, if you read it that way, but I think you can very easily read it as just paraphrasing the awkward language of the US code.

[00:48:55] Speaker 16:
I think you're making an important point.

[00:48:57] Speaker 16:
I want to make sure you get it, which is that the first part of the footnote, if existing stationary sources of the pollutant question are regulated under the National Ambient Air Quality Standard Program, you're saying that's incorrect phrasing.

[00:49:11] Speaker 13:
I'm saying if you read the second half the way they want you to, I think that as with the House Amendment, there is an implicit limitation to the pollutants governed by the program you're talking about.

[00:49:23] Speaker 12:
And are you saying this, that if you took out the NACS part of it, and you only kept in the HAP part of it, to use acronyms that are overused today, and you bought their reading, that when you bad back in the National Ambient Air Quality Standards part of it, it falls apart.

[00:49:41] Speaker 12:
because the description doesn't apply to the national ambient air quality part of it.

[00:49:45] Speaker 13:
Yes, nobody disputes that as a pollutant-specific exclusion, and they talk about them as though they're the same here.

[00:49:50] Speaker 13:
So I don't think this really actually supports Petitioner's argument all that much.

[00:49:54] Speaker 05:
This is a good example of why courts shouldn't express themselves on unbriefed issues, right?

[00:50:01] Speaker 13:
You know, the last thing I wanted to say about, you know, separation of power issues, actual separation of power violations are very rare, rarely found.

[00:50:11] Speaker 13:
They're different in flavor than what we're dealing with here today.

[00:50:14] Speaker 13:
You know, a classic example is Clinton v. New York, where we're dealing with the line item veto, which allowed the president to strike down particular lines of legislation.

[00:50:23] Speaker 13:
I think that case illustrates that separation of powers doctrine is about tyranny and preventing the over-concentration, seismic shifts in the balance of power.

[00:50:33] Speaker 13:
You know, EPA's use of its general long-existing Clean Air Act authority that's been delegated to it to address the major pollution problem of our day, it's not the same kind of animal.

[00:50:43] Speaker 13:
It's our government working exactly how I think it is supposed to.

[00:50:46] Speaker 16:
Well, at its core, all separation of powers issues are who decides.

[00:50:51] Speaker 13:
True, I agree with that.

[00:50:52] Speaker 13:
But I think here we have an answer.

[00:50:54] Speaker 13:
From the Clean Air Act itself, EPA decides whether and how to regulate this source category for this pollutant.

[00:51:03] Speaker 13:
Thank you.

[00:51:05] Speaker 07:
Mr. Myers.

[00:51:17] Speaker 10:
May it please the court?

[00:51:20] Speaker 10:
and address the 10th Amendment issues.

[00:51:23] Speaker 10:
The rule faithfully embodies the Act's cooperative federalism approach.

[00:51:27] Speaker 10:
There's no commandeering because states that opt out of the rule face no federal mandate to act.

[00:51:33] Speaker 10:
And there's no coercion because states may opt out without sanction.

[00:51:39] Speaker 10:
With respect to commandeering, the option of direct federal regulation to limit power plant carbon dioxide emissions defeats petitioners' claim under the Hodell Line of Cases.

[00:51:49] Speaker 10:
That's because EPA would regulate the power plants directly, not states as states.

[00:51:56] Speaker 10:
Petitioner's assertion that states would nonetheless be commandeered under a federal plan because they would be implementing the rule by approving power plan actions to comply with it fails for several reasons.

[00:52:08] Speaker 10:
First, because state oversight of power plan requests for late recovery and new licenses is independent of the rule.

[00:52:16] Speaker 10:
and it would be done to satisfy pre-existing state law requirements, not for the purpose of ensuring compliance with the federal plan.

[00:52:25] Speaker 10:
By way of example, states like Texas and Oklahoma have licensed a large amount of wind generation in recent years due to favorable market conditions.

[00:52:34] Speaker 10:
If those states were to opt out of the rule, their continued reviews of proposed wind projects under state law would not suddenly more offend a federal commandeering.

[00:52:45] Speaker 10:
Indeed, by petitioner's logic, as Judge Cavanaugh noted, nearly every Clean Air Act regulation in the power sector, and that would include the acid rain program that was enacted by Congress,

[00:52:57] Speaker 10:
Likewise, it would be unconstitutional because state agencies have issued licenses or heard rate-making requests related to those complying with those laws as well.

[00:53:09] Speaker 10:
Petitioners' commandeering claim also fails because states would retain independent authority under state law to accept or reject power plan actions related to a federal plan, as evidenced in the examples in our brief at pages 22 through 24 of state reviews concerning previous Clean Air Act rules.

[00:53:29] Speaker 10:
And in a situation where state rejects a company's proposed compliance approach, such as the retirement of a plant,

[00:53:37] Speaker 10:
The burden would fall to the owner, not the state, to come up with an acceptable alternative.

[00:53:43] Speaker 10:
Petitioners contention that the rules of mission guidelines would dictate the outcome of such reviews is also wrong.

[00:53:51] Speaker 10:
To be clear, the rules of mission requirements are modest, and industry is continuing to move to cleaner generation, even without the rule in effect providing a significant head start for compliance.

[00:54:04] Speaker 10:
So rhetoric aside,

[00:54:06] Speaker 10:
Even under federal plans, states will continue to be able to exercise policy discretion concerning licensing, weight recovery, and retirements.

[00:54:18] Speaker 16:
What about the – I unfairly asked Ms.

[00:54:20] Speaker 16:
Berman this question, but what about the bond clear statement rule?

[00:54:25] Speaker 16:
And maybe I'm unfairly asking you this question too, but I'm curious about the

[00:54:31] Speaker 16:
the clear statement rule and bond that the Chief Justice articulated of when legislation, in this case regulation, affects the federal balance, the requirement of clear statement assures that the body has in fact faced and intended to bring into issue the critical matters involved in the judicial decision.

[00:54:51] Speaker 10:
Well, two responses to that, Your Honor.

[00:54:53] Speaker 10:
First of all, as I was mentioning, neither as a matter of law nor as a matter of fact does the rule dictate any particular outcomes that a state has to come to as a result of a company action that's proposed.

[00:55:10] Speaker 16:
It's like the model penal code.

[00:55:13] Speaker 16:
Doing something knowing a result is certain to occur is considered the same as intending.

[00:55:19] Speaker 16:
that results and here I think the actions taken knowing that the states are going to have to do quite a bit and we can argue about what quite a bit means in particular context and it seems that bond reinforces the idea that before

[00:55:38] Speaker 16:
Congress does that, they should speak clearly, different from the major questions issue, but similar underlying constitutional kind of value that the court has set up a plain statement rule for, just make sure before these values are invaded that

[00:55:58] Speaker 16:
we require Congress to think about and speak clearly.

[00:56:01] Speaker 16:
What about that?

[00:56:02] Speaker 10:
Well, I don't think so, Your Honor.

[00:56:03] Speaker 10:
First of all, again, because I don't think the outcomes of those state decisions are dictated because they will have some room.

[00:56:10] Speaker 10:
Certainly they will have to do certain things, Your Honor.

[00:56:15] Speaker 19:
I'm sorry, finish answering that question.

[00:56:17] Speaker 10:
I would also point, Your Honor, to the American Farm Bureau versus EPA case out of the Third Circuit from last year, where the Third Circuit rejected a similar argument where the petitioners were arguing and challenging the EPA water pollution rule that interpreted a similar statutory term as the best system of emission reduction.

[00:56:38] Speaker 10:
In that case, it was a total maximum daily load was the rule

[00:56:43] Speaker 10:
that was being challenged or interpreted there.

[00:56:46] Speaker 10:
And the challengers were saying that EPA's interpretation was going to impact state land use decisions and that therefore Congress had to have made a clearer statement before EPA could interpret the rule that they had had.

[00:57:02] Speaker 10:
And the Fourth Circuit rejected that argument, finding essentially that it would

[00:57:08] Speaker 10:
This was a Chevron question, given that EPA was interpreting a technical term under the statute.

[00:57:15] Speaker 16:
Did they grapple with bond in that case?

[00:57:17] Speaker 16:
I haven't read that case.

[00:57:18] Speaker 10:
I don't recall, Your Honor, whether or not they specifically did, but they rejected a similar argument as to the one that you raised from the bond case.

[00:57:27] Speaker 19:
So what's your answer if West Virginia or its localities decides it doesn't want to do any licensing of wind or solar or even natural gas because it's a coal state and there's a federal plan and a state or a public utility commission entity decides we're not going to license?

[00:57:50] Speaker 19:
What happens?

[00:57:52] Speaker 10:
Well, Your Honor, we have not seen that happen before because federal and state governments typically work together on solving problems.

[00:58:02] Speaker 19:
Their implication is that at some point that might happen and that you're just accounting on everyone to go along.

[00:58:10] Speaker 10:
Well, there is some point that states will have to choose whether or not to continue to exercise their authority in a certain way under state law.

[00:58:22] Speaker 10:
But I think even the emission reductions here that we're talking about,

[00:58:27] Speaker 10:
are not particularly stringent, but states will have that discretion to be able to continue to implement their state policy the way that they had previously.

[00:58:38] Speaker 10:
It's not going to be a dramatic change.

[00:58:41] Speaker 19:
Is the answer different if, maybe this is a question for the other side, but if some smokestack regulation required a re-permitting or some kind of commission approval and the commission were to refuse?

[00:59:01] Speaker 19:
Is there something different about the way those things function in practice that would distinguish them for federalism purposes?

[00:59:08] Speaker 10:
I don't think there's a difference for purposes of the Constitutional Analysis, Your Honor.

[00:59:13] Speaker 10:
We've seen, for instance, in the past the states have rejected applications by power plants, we cite within our brief, where the plan had a particular proposal to comply with a federal plan and the state rejected that and that required the plan to go back and come up with a different alternative.

[00:59:34] Speaker 10:
So too, that would be the situation here, and that's perfectly within the confines of the Supreme Court's constitutional law.

[00:59:41] Speaker 10:
I see I've gone over, but if I may just very quickly address the coercion issue, Your Honor.

[00:59:49] Speaker 10:
As to coercion, that claim fails because states face no financial sanction for opting out of the rule.

[00:59:56] Speaker 10:
And petitioners alleged need to act to prevent blackouts under a federal plan is refuted by the facts on the record.

[01:00:06] Speaker 10:
EPA exhaustively studied reliability in conjunction with agencies such as FERC included that the rule would not impact the nation's electricity supply.

[01:00:17] Speaker 10:
And that conclusion dovetails with the experience in many of our states.

[01:00:22] Speaker 10:
One of the approaches that EPA has proposed under a federal plan

[01:00:26] Speaker 10:
and mass-based trading approach is similar to the one used by the regional greenhouse gas initiative states.

[01:00:32] Speaker 10:
Power plants under that program have cut CO2 emissions by 40 percent in eight years, more stringently and more aggressively than we would require without experiencing any reliability problems.

[01:00:45] Speaker 10:
In conclusion, the rule does not come near or coerce states.

[01:00:48] Speaker 10:
There is no constitutional obstacle to EPA's reasonable regulation of the largest source of pollution causing the most urgent environmental and public health threat we face today.

[01:00:59] Speaker 10:
Thank you, Your Honors.

[01:01:02] Speaker 18:
Does Mr. Ripken have any time?

[01:01:05] Speaker 15:
Thank you.

[01:01:06] Speaker 18:
Why don't you take two minutes?

[01:01:07] Speaker 15:
Thank you very much.

[01:01:08] Speaker 15:
EPA continues to insist that we're talking about a routine permitting actions.

[01:01:14] Speaker 15:
In fact, I heard EPA concede just a few minutes ago that affirmative actions would indeed become endearing.

[01:01:21] Speaker 15:
We have multiple affirmative actions.

[01:01:24] Speaker 15:
The difference here is that the integration and planning

[01:01:29] Speaker 15:
are there affirmative actions that only states, the indispensable actors, not the RTOs, not FERC that has limited authority, not the ISOs, only states can carry it out.

[01:01:39] Speaker 15:
And after both questions asked by both Judge Pilar and Judge Stadel, the fundamental difference between the ADA situation, which you've been mentioning in these briefs, is there you are engaging in permitting actions that are driven

[01:01:53] Speaker 15:
Consistent with federal law, it is a simple application of a supremacy clause.

[01:01:58] Speaker 15:
No effort to commandeer you into affirmative action is required.

[01:02:02] Speaker 15:
We are talking about affirmative actions.

[01:02:05] Speaker 15:
This is what makes CPP different from ADA, and this is what makes it different from this very routine picture portrayed by EPA.

[01:02:12] Speaker 15:
Point number one.

[01:02:12] Speaker 15:
Point number two, apropos of timing.

[01:02:15] Speaker 15:
You will recognize that it takes years to perform those integrative functions, which is why they extended by two years the initial application date between the proposed and the final rule.

[01:02:30] Speaker 15:
Let me read just two sentences from a submission by Florida that dramatizes exactly the magnitude of the changes.

[01:02:39] Speaker 15:
The proposed emission performance standards set by EPA necessarily require compliance and enforcement activities that include changing dispatch methodology, efficiency measures, and type of generation to be constructed, et cetera, et cetera.

[01:02:52] Speaker 15:
Few of these, by the way, has always been an area of traditional state responsibility.

[01:02:58] Speaker 15:
The federal government wanted to take it over.

[01:03:00] Speaker 15:
We have many references to Hodel.

[01:03:02] Speaker 15:
I wish I had more time, but just one quick point.

[01:03:05] Speaker 15:
The teaching of Hodel is if a state does not wish to regulate consistent statute, the full regulatory burden would be borne by the federal government.

[01:03:13] Speaker 15:
Thus, there can be no suggestion that the state would be commandeered.

[01:03:16] Speaker 15:
The same point is mentioned in New York.

[01:03:18] Speaker 15:
That is not what we have here.

[01:03:21] Speaker 15:
And as far as Mississippi is concerned,

[01:03:23] Speaker 15:
The only reference there, entitled 2 and 3 of PURPA, was to consider, and that was not enough.

[01:03:31] Speaker 15:
So this is fundamentally irreconcilable.

[01:03:35] Speaker 15:
If EPA's approach, in addition to being unsound as a matter of statutory imputation, is to be countenance with insurmountable constitutional commandeering and coercion problems, and therefore it ought to be rejected under the canon of constitutional avoidance.

[01:03:49] Speaker 15:
Thank you.

[01:03:53] Speaker 18:
Why don't you take two minutes, Professor?

[01:04:03] Speaker 08:
In a decision several years ago in the district court by Judge Wilkins,

[01:04:09] Speaker 08:
was brought by kids against global warming.

[01:04:13] Speaker 08:
There was an observation that I think is particularly pertinent here.

[01:04:16] Speaker 08:
He said, ultimately, this case is about the fundamental nature of our government and our constitutional system more than it is about emissions, the atmosphere, or the climate.

[01:04:26] Speaker 08:
And that's why, when Judge Kavanaugh refers to bond and the clear statement requirement,

[01:04:33] Speaker 08:
That sings to me because I think that's what this case is about.

[01:04:38] Speaker 08:
When the Supreme Court in bond, even though the language was, as Justice Scalia pointed out and said, hardly ambiguous, said that we are constitutionally obliged to take into account the fact that a law will change the federal state balance if applied in a given way.

[01:04:55] Speaker 08:
He was making a statement that's even more applicable here.

[01:04:58] Speaker 08:
There's a reason there are 27 states on the petitioner's side and 19 on the other.

[01:05:04] Speaker 08:
It's not only the role of the EPA to arbitrate among competing industries, competing states, yet that is what

[01:05:13] Speaker 08:
the interpretation that they are proposing would end up giving the EPA the power to do.

[01:05:19] Speaker 08:
I think in this case, a clear statement rule would not be used, as it arguably was in bond, to rewrite a law or introduce an ambiguity where there was none.

[01:05:30] Speaker 08:
Rather, it is being used to avoid a serious set of problems.

[01:05:36] Speaker 16:
What do you think a limiting principle is to that bond?

[01:05:39] Speaker 16:
because it is something of a new, made something of a new appearance in the Bond case, at least as how it was applied.

[01:05:46] Speaker 16:
And lots of federal legislation obviously affects the states, so.

[01:05:52] Speaker 08:
Well, it's a matter perhaps of a degree, but if you take a case very different from Bond, United States against Windsor, there too the idea was that because it's customary

[01:06:04] Speaker 08:
For the federal government to defer the states in areas of family law, we look a lot more closely than otherwise.

[01:06:10] Speaker 08:
Now, Judge Millett, you asked me, what if I do find an ambiguity?

[01:06:16] Speaker 08:
And presumably, you would be finding it with the help of the Senate version.

[01:06:20] Speaker 02:
I don't think I need the Senate version to find ambiguity.

[01:06:24] Speaker 08:
Well, I think many people would need it when otherwise you have to erase language from the House version.

[01:06:30] Speaker 08:
It's like the line item veto that Clinton v. New York

[01:06:39] Speaker 08:
invalidated.

[01:06:40] Speaker 08:
That is, if the president cannot decide to excise part of legislation, surely the EPA cannot decide to just cross out in order to create ambiguity.

[01:06:50] Speaker 02:
I mean, we don't need to return to our statutory arguments from this morning, but the reality is with those three or's there, if you actually read them literally, it actually requires coverage here.

[01:07:02] Speaker 08:
I'm sorry.

[01:07:03] Speaker 08:
I'm just saying.

[01:07:04] Speaker 02:
I didn't want to go backwards in time.

[01:07:05] Speaker 02:
But I'm just telling you that I don't think you have to.

[01:07:08] Speaker 02:
The excising is not what I'm talking about.

[01:07:10] Speaker 02:
The literal construction of that can be read 15 different ways.

[01:07:14] Speaker 08:
But for those who are interested in the Senate version, it seems to me we ought to notice that all it is is six characters, four of which are parentheses.

[01:07:24] Speaker 08:
It's like six characters in search of a meaning.

[01:07:26] Speaker 08:
It doesn't mean anything.

[01:07:27] Speaker 08:
It purports to remove and renumber, very much like the renumbering in Judge Tatel's opinion involved in American Petroleum Institute three years ago.

[01:07:38] Speaker 08:
It renumbers a section which doesn't exist anymore once the House version is executed.

[01:07:44] Speaker 08:
Now, you would really open a Pandora's box if you started saying that a provision which is called a conforming amendment, which occurs 107 pages later, which under the standard practice, not invariable but overwhelmingly followed, would be disregarded

[01:08:01] Speaker 08:
when it was presented to the president for signature, you'd have to go back, you'd be inviting a massive amount of litigation when people go back through the US code to see where all of these little glitches were.

[01:08:13] Speaker 08:
And this is, it's not a scrivener's error that's being corrected, it's a scrivener's error that is being relied on.

[01:08:20] Speaker 08:
And I think just as in the American Petroleum Institute case where this court said that

[01:08:29] Speaker 08:
making too much turn on what looks like a clerical mistake takes a great risk of having the Court's own policy convictions about what's a sensible approach to a problem replace what Congress did.

[01:08:43] Speaker 08:
The bottom line for me is that I think under the scheme of government we have,

[01:08:49] Speaker 08:
a plan like the one Congress almost enacted but didn't, the cap and trade plan, is radically different from trying to shoehorn something that Congress couldn't do into a little-used provision that for

[01:09:05] Speaker 08:
more than a quarter of a century has been understood differently from the way the government now asks you to understand it.

[01:09:12] Speaker 08:
I think they are asking you to basically bail out Congress and solve a problem that is beyond the expertise either of the EPA or of a federal court.

[01:09:24] Speaker 18:
In the concurring opinion in the city of Arlington... I heard you say bottom line, so you need to wind it up.

[01:09:30] Speaker 08:
I will.

[01:09:31] Speaker 08:
Justice Breyer's concurring opinion in Arlington lists criteria for Chevron deference, expertise, a long history, and so on.

[01:09:40] Speaker 08:
All of them fail to be met here.

[01:09:43] Speaker 16:
He's the godfather of the major questions doctrine, actually.

[01:09:46] Speaker 16:
1986 article, right?

[01:09:48] Speaker 16:
That comes from Justice Breyer in a 1986 article.

[01:09:50] Speaker 16:
That's right.

[01:09:51] Speaker 08:
Thank you.

[01:09:55] Speaker 18:
Next is the notice issues.

[01:10:24] Speaker 18:
Mr. Barker.

[01:10:46] Speaker 09:
Good afternoon, Your Honors.

[01:10:47] Speaker 09:
Thomas Lorenzen on behalf of all petitioners.

[01:10:50] Speaker 09:
Mr. Barker from the state of Texas will handle rebuttal on the notice issue.

[01:10:55] Speaker 09:
Your Honors, I'd like to make two points today.

[01:10:58] Speaker 09:
The first is that the chief regulatory requirement of EPA's final rule, as EPA itself calls it, the chief regulatory requirement, which are the two uniform nationwide subcategory specific rates, one for coal, one for gas, were never proposed.

[01:11:15] Speaker 09:
They were entirely new creatures to the final rule.

[01:11:17] Speaker 09:
That is unlawful.

[01:11:19] Speaker 09:
Second, time permitting, I want to address why Section 307D7B's reconsideration provisions do not apply to failure of notice.

[01:11:29] Speaker 09:
Let me start with those chief regulatory requirements, which, as I said, at JA304 in the final rule, EPA declares to be the final rule's chief regulatory requirements, the subcategory-specific rates for coal and gas.

[01:11:42] Speaker 09:
These were never proposed.

[01:11:45] Speaker 09:
They not only were never proposed, EPA never sought comment on them as an alternative to the state-specific blended rates it was proposing.

[01:11:52] Speaker 09:
It never hinted at them.

[01:11:54] Speaker 09:
In fact, the only mention by EPA of nationwide, uniform, subcategory-specific rates prior to the final rule was at JA 66, the proposed rule, where EPA specifically disclaimed any intent to promulgate such rules here.

[01:12:16] Speaker 09:
Your Honors, there are plenty of cases that are directly on point here.

[01:12:20] Speaker 09:
I would point you to, for instance, the International Union case and the Small One Finders case, which both say that where EPA makes a proposal and says in the course of that proposal, we don't intend to do X.

[01:12:34] Speaker 09:
They cannot then finalize a rule that does precisely X unless they then, unless they first, propose it and give people a proper chance to provide comment on it.

[01:12:47] Speaker 19:
Now... Mr. Rensen, clients did not seek reconsideration of the rule, did they?

[01:12:52] Speaker 09:
They did.

[01:12:54] Speaker 09:
They did seek reconsideration of the rule.

[01:12:56] Speaker 09:
There were four petitions for reconsideration filed on the notice issue, yes.

[01:13:01] Speaker 19:
And?

[01:13:02] Speaker 09:
EPA has sat on those for over a year.

[01:13:05] Speaker 19:
And so you're invoking a futility doctrine?

[01:13:08] Speaker 09:
Well, I am invoking the futility doctrine.

[01:13:09] Speaker 09:
But I do want to explore as well why I think that the court has actually been misreading 307D7B for quite some time.

[01:13:16] Speaker 09:
If you want to approach that issue right now, I'd be delighted to dive in.

[01:13:20] Speaker 09:
And I think we can start with there are three cases in 1981, 82, and 83 that show the muddle that the court was dealing with.

[01:13:28] Speaker 09:
Let's start with the American petroleum industry

[01:13:32] Speaker 09:
Institute case versus Costell back in 1981.

[01:13:35] Speaker 09:
There, the court was dealing with a report that was put into the record one week before the final rule was published, was signed, pardon me.

[01:13:51] Speaker 09:
And the API court said, well, you can't raise it right now.

[01:13:55] Speaker 09:
You need to raise it in a petition for reconsideration before the EPA under 307D7B.

[01:14:00] Speaker 09:
But it specifically characterized that result as disturbing.

[01:14:04] Speaker 09:
That's the precise word it used, but it felt compelled by the language.

[01:14:08] Speaker 12:
Can I just ask you not to skip ahead too much, but is what you're suggesting that if we applied our decisions before,

[01:14:16] Speaker 12:
we'd reach a conclusion that you wouldn't like, but because we're sitting as an en banc court, we shouldn't apply those decisions?

[01:14:21] Speaker 12:
Is that what you're saying?

[01:14:22] Speaker 09:
I think as an en banc court, it is time to clarify the law on 307 and D7B, which is a muddle right now.

[01:14:27] Speaker 09:
Because let me go to the next decision, which is the Kennecott decision in 1982.

[01:14:31] Speaker 09:
Now in Kennecott, the petitioners did actually file petitions for reconsideration, having obviously read the decision in API.

[01:14:41] Speaker 09:
But again, it was the same kind of information put into the docket one week before the rule was finalized and the EPA denied the petitions for reconsideration saying, you had notice or we're not concerned about this.

[01:14:54] Speaker 09:
And what the court said in Kennecott,

[01:14:57] Speaker 09:
was that a petition for reconsideration can never be an adequate substitute for an opportunity to comment on the proposed rule before the rule is finalized, because it is only prior to promulgation of the final rule that that comment can have any hope of influencing the trajectory of the rule.

[01:15:18] Speaker 09:
So it identified that it really makes no sense

[01:15:21] Speaker 09:
to read lack of notice as being within the sorts of procedures that are covered by 307D7B.

[01:15:26] Speaker 09:
Now let's go to 1983, the small refiners decision, which was cited by counsel for EPA this morning on a different point.

[01:15:35] Speaker 09:
In the small refiners case, what the court was dealing with was, okay, you had a situation actually very similar to here.

[01:15:42] Speaker 09:
EPA proposed a standard for lead and gasoline.

[01:15:47] Speaker 09:
And they said in the proposal, when we finalize our rule, we're going to finalize it with sufficient lead time for everybody to comply.

[01:15:56] Speaker 09:
When they finalized the rule, they actually finalized an interim standard as well that applied immediately.

[01:16:03] Speaker 09:
And what the court in small refinery said is, no, you gave no notice of your intent to do that.

[01:16:08] Speaker 09:
In fact, you specifically disclaimed it.

[01:16:11] Speaker 09:
Interestingly, though that rule is covered by 307D,

[01:16:15] Speaker 09:
There is no mention of 307D7B reconsideration.

[01:16:20] Speaker 09:
Why?

[01:16:21] Speaker 09:
Because the court said there that the sorts of procedures that 307's standard of review is about, remember you have to show that where you're making an objection to a procedure, it must be arbitrary and capricious, it must be central to the rule, and so forth.

[01:16:38] Speaker 09:
are the procedures that EPA implements under 307D.

[01:16:42] Speaker 09:
In other words, EPA gives you 30 days for comment, you think you need 60 or 90, you have to petition EPA for reconsideration of that affirmative procedure provided by EPA.

[01:16:55] Speaker 09:
If EPA says we'll have a hearing but we won't allow witnesses and you want witnesses, you must petition EPA to allow those witnesses.

[01:17:02] Speaker 09:
But what the court also says in small refiners is that

[01:17:08] Speaker 09:
Lack of notice, failure to provide notice is a violation of the Administrative Procedure Act.

[01:17:14] Speaker 09:
And something that is a reversible error under the Procedure Act is also a reversible error under Section 307D8.

[01:17:21] Speaker 09:
And failure of notice is such a reversible error.

[01:17:27] Speaker 09:
Thus, the court didn't feel it even needed to deal

[01:17:32] Speaker 09:
with whether reconsideration procedures under 307D7B applied.

[01:17:37] Speaker 09:
Failure of notice is not a procedure.

[01:17:39] Speaker 09:
It's the complete absence of procedure.

[01:17:42] Speaker 09:
So that's the first point.

[01:17:45] Speaker 09:
The second point is that I think that if you read 307D7B, it makes no sense to apply it to lack of notice.

[01:17:53] Speaker 09:
The first sentence of 307D7B says, Your Honors, that only an objection to a rule or procedure which was raised with reasonable specificity during the period for public comment, including any public hearing, may be raised during judicial review.

[01:18:09] Speaker 09:
Well, if EPA says you've got 30 days to comment, you can comment.

[01:18:13] Speaker 09:
You can object to that procedure during the period for public comment.

[01:18:19] Speaker 09:
But by definition, failure of notice is something you don't know about until the rule is final.

[01:18:25] Speaker 09:
You simply cannot know.

[01:18:26] Speaker 09:
You cannot predict that EP will fail to give you notice of something because it hasn't issued a final rule.

[01:18:32] Speaker 09:
You only know after the fact when it's too late to avail yourself of this provision.

[01:18:39] Speaker 09:
Reading 307D7B this way turns that section or 307D entirely.

[01:18:47] Speaker 09:
from a revision to the Clean Air Act that was intended to expand upon the protections that are given to commenters and regulated parties under the Clean Air Act, beyond those provided in the EPA, into something that can be used as a weapon by EPA to shield rules that were never proposed.

[01:19:03] Speaker 09:
Indeed, it kind of invites that, because the more egregious the violation of 307D3's notice requirements, the more thoroughly that rule is protected from judicial review.

[01:19:17] Speaker 09:
Because according to EPA's theory, as it states in its brief, you may not challenge this rule.

[01:19:23] Speaker 09:
It is in effect and it applies to you unless and until you file a petition for reconsideration with us and maybe someday we rule on it.

[01:19:33] Speaker 09:
Third, yes, Judge Rogers.

[01:19:35] Speaker 17:
What about the notice of data availability?

[01:19:38] Speaker 09:
Well, the notice of data availability, let's go back to EPA's defenses where they say we have noticed that this is a logical outgrowth somehow of the proposal.

[01:19:47] Speaker 09:
The NODA to which EPA refers said to the public, we're thinking about using regional renewable energy data.

[01:19:57] Speaker 09:
to inform the state-specific blended rates.

[01:20:01] Speaker 09:
What is lacking from the NODA, again, is any mention of the idea of establishing subcategory-specific rates.

[01:20:07] Speaker 09:
Remember that the only mention by EPA of subcategory-specific rates in this entire rulemaking until the final rule was at JA 66 of the proposal where they said, we're not doing them here.

[01:20:23] Speaker 09:
How can anyone comment

[01:20:26] Speaker 09:
on what those rates should look like, what methodology EPA ultimately adopted, what the BSCR was, what the numbers are, when they simply never proposed them and never even proposed a number of year honors.

[01:20:37] Speaker 09:
This is exactly like the international union case.

[01:20:42] Speaker 09:
Now that's an MSHA case, different statute.

[01:20:45] Speaker 09:
MSHA was promulgating air ventilation standards for mines.

[01:20:49] Speaker 09:
And MSHA said, we're going to promulgate a minimum air velocity standard at 300 feet per minute.

[01:20:56] Speaker 09:
But we don't think it's necessary.

[01:20:59] Speaker 09:
In fact, we think it would be counterproductive.

[01:21:01] Speaker 09:
to promulgate a maximum air velocity standard, so we're not doing it.

[01:21:06] Speaker 09:
And during the public comment period, some commenters said, you know what?

[01:21:08] Speaker 09:
We think you should promulgate a maximum air velocity standard as well.

[01:21:13] Speaker 09:
And lo and behold, in the final rule, there was a maximum air velocity standard of 500 feet per minute.

[01:21:22] Speaker 09:
And what the court said in International Union is, uh-uh.

[01:21:27] Speaker 09:
You can't promulgate a rule

[01:21:31] Speaker 09:
that you said you weren't going to do.

[01:21:33] Speaker 09:
You've got to propose it at some point.

[01:21:35] Speaker 09:
You've got to propose how you would do it.

[01:21:37] Speaker 09:
You've got to propose a number, at least, because EPA itself is required to publish the notice of what it intends and direct comments towards what it is intending.

[01:21:49] Speaker 09:
It cannot bootstrap

[01:21:51] Speaker 09:
notice from a comment, as this court said in Fertilizer Institute.

[01:21:55] Speaker 09:
What EPA is trying to do here is bootstrap notice from the fact that a few commenters said, EPA, your state-specific blended rates are unlawful.

[01:22:05] Speaker 09:
You should consider proposing

[01:22:10] Speaker 09:
subcategory-specific rates as you've traditionally done.

[01:22:12] Speaker 09:
That comment doesn't obligate those commenters to then spell out for EPA exactly what that subcategory-specific rate should look like.

[01:22:23] Speaker 09:
That's EPA's job.

[01:22:25] Speaker 17:
Yes, Judge Rogers.

[01:22:25] Speaker 17:
Under the Clean Air Act, there are a number of requirements normally that have to be made to excuse

[01:22:34] Speaker 17:
your failure.

[01:22:35] Speaker 17:
So you say none of those apply here for the reasons you suggest.

[01:22:39] Speaker 17:
But haven't we held that once you do know what the final rule says, then you have to ask EPA to reconsider giving you an opportunity to comment on the final rule before you come to the court?

[01:23:02] Speaker 09:
Well, let's talk about what that provision is about.

[01:23:05] Speaker 17:
Let's remember that as the court... Do you want to talk about what this court has said?

[01:23:10] Speaker 09:
In URG and Mexicam and recent cases, yes.

[01:23:15] Speaker ?:
And you say we're all wrong.

[01:23:17] Speaker 09:
I do.

[01:23:19] Speaker 17:
Yes.

[01:23:20] Speaker 17:
In bank, we have this authority to overrule.

[01:23:25] Speaker 17:
But I just wonder, what is the rationale here?

[01:23:29] Speaker 17:
Now we're sitting in bank on a final rule.

[01:23:33] Speaker 17:
You've had notice as to what the final rule said.

[01:23:37] Speaker 17:
You could have gone back to EPA.

[01:23:39] Speaker 09:
Yes, to EPA.

[01:23:42] Speaker 09:
And in fact, we did.

[01:23:43] Speaker 17:
You said, we didn't get notice and comment

[01:23:47] Speaker 17:
And that's a violation.

[01:23:51] Speaker 17:
An EPA might have said, we agree.

[01:23:54] Speaker 17:
Let's set up a notice and comment period on this precise issue.

[01:23:59] Speaker 17:
Or it might have disagreed with your position that this was not a logical outgrowth.

[01:24:07] Speaker 09:
And it would be wonderful, Your Honor, if EPA had done that.

[01:24:11] Speaker 09:
Because for what?

[01:24:14] Speaker 09:
Four petitions for reconsideration on the notice issue, at a minimum, were filed around a year ago.

[01:24:21] Speaker 09:
And EPA has sat on them for a year, all the time.

[01:24:25] Speaker 09:
We are subject to a rule that we never had notice of.

[01:24:29] Speaker 17:
We don't know if EPA is going to tell us we get reconsideration or not, but I would tell you that in their brief, their first argument... But your argument, though, is not, this is undue agency delay.

[01:24:43] Speaker 17:
You're arguing that this court has, for generations, misread this provision of the statute.

[01:24:53] Speaker 17:
So I'm wondering, aren't you a little premature?

[01:24:56] Speaker 09:
No, I don't think so, Your Honors.

[01:24:58] Speaker 09:
First of all, I think EPA has effectively filed petitions for reconsideration.

[01:25:02] Speaker 09:
I think in EPA's brief, they argue that's the very first argument we had notice.

[01:25:07] Speaker 09:
They've effectively resolved those petitions.

[01:25:09] Speaker 09:
They just sit on the petitions for reconsideration in order to argue here.

[01:25:14] Speaker 17:
Sometimes three years can become 22 years.

[01:25:18] Speaker 17:
Here, we're just talking about petitions that were filed a year

[01:25:22] Speaker 09:
But petitions on a very simple issue, which is, did you tell us about the final rule before you promulgated, or did you not?

[01:25:29] Speaker 09:
This is not an issue that requires the exercise of UPA's expertise.

[01:25:32] Speaker 02:
Were the petitions for reconsideration filed before or after the petitions were filed here for review?

[01:25:38] Speaker 09:
Some of them were filed before.

[01:25:39] Speaker 09:
Some of them were filed before.

[01:25:41] Speaker 09:
I think the earliest.

[01:25:42] Speaker 02:
The petitions were filed the same day the final rule came down.

[01:25:45] Speaker 09:
Oh, I'm sorry.

[01:25:46] Speaker 09:
You're right.

[01:25:47] Speaker 09:
Yes.

[01:25:49] Speaker 09:
Or the final rule.

[01:25:50] Speaker 09:
No, they were filed before.

[01:25:53] Speaker 09:
Good point, Your Honor, and I'll come back to that.

[01:25:55] Speaker 09:
No.

[01:25:57] Speaker 09:
They were filed after the petition of the rule was signed, and the rule was signed in August, even though it wasn't published until late October.

[01:26:04] Speaker 09:
So yes, some of them were filed in September, even though petitions for review weren't filed until October 23rd.

[01:26:09] Speaker 09:
Now, EPA could have very easily resolved those.

[01:26:12] Speaker 09:
As I said, in its brief, it argues we had notice.

[01:26:15] Speaker 09:
What more does it need to do with those petitions on that point?

[01:26:18] Speaker 09:
It has effectively resolved them.

[01:26:20] Speaker 09:
But I want to go back to 307D7B for a moment, because I think this is important not just for this case, but generally for Clean Air Act.

[01:26:28] Speaker 09:
307D7B, as the court explained in the API case, is merely the codification of Oljato.

[01:26:38] Speaker 09:
I don't know if your honors all remember Ohato versus Train.

[01:26:42] Speaker 09:
Ohato versus Train was about when can you present late evidence to the court.

[01:26:49] Speaker 09:
Because remember 307B1 says that you can petition for review based on grounds arising solely after the 60th day.

[01:26:57] Speaker 09:
new evidence arising after the 60th day seems to meet that requirement.

[01:27:01] Speaker 09:
What the court said to Ohato, and Ohato is pre-307D7B of course, it's 1975, is even though the statute says you can bring that to us as a new grounds,

[01:27:14] Speaker 09:
We don't really have a record on which to evaluate it because that new evidence that you've got is stuff on which EPA should first opine so that we have a record on which to review that question.

[01:27:24] Speaker 09:
So take it to EPA first.

[01:27:26] Speaker 09:
If EPA considers it, your problem is solved.

[01:27:29] Speaker 09:
If EPA denies your request for reconsideration or for consideration of that evidence, then you can bring that denial to us.

[01:27:37] Speaker 09:
What API says, what the House report accompanying 307D's amendments

[01:27:43] Speaker 09:
say is that this provision 307D7B is merely the codification of the rule in Ohato.

[01:27:52] Speaker 09:
It is about presentation to the agency of evidence that you couldn't present during the rulemaking

[01:28:01] Speaker 09:
because it was impracticable to do so.

[01:28:03] Speaker 09:
For instance, let's say EPA gives you 30 days to comment on the rule, but you're doing... This is way over your time, so... I will wrap it up.

[01:28:10] Speaker 09:
I will wrap it up.

[01:28:12] Speaker 09:
But you couldn't present that information because it either takes too long to develop it or it didn't exist yet.

[01:28:16] Speaker 07:
And what 307D said... Did you ask us in your briefs to overturn our precedent?

[01:28:21] Speaker 07:
Maybe I missed it.

[01:28:21] Speaker 07:
I thought you said the precedent didn't apply.

[01:28:24] Speaker 09:
When we wrote that brief, we were before a three-judge panel that has no authority to overturn opinions of prior panels.

[01:28:30] Speaker 09:
I'm now before you.

[01:28:31] Speaker 09:
Thank you, Your Honors.

[01:28:34] Speaker 09:
I think, Your Honors, that really concludes my argument.

[01:28:36] Speaker 09:
Unless you have further questions, the rule should be vacated because the central regulatory requirement of it, these subcategory-specific rates, was never proposed.

[01:28:46] Speaker 09:
And 307D7B was never intended to act as a bar to claims that EPA simply didn't provide notice of the rule.

[01:28:56] Speaker 09:
Thank you, Your Honors.

[01:29:02] Speaker 07:
Mr. Rayburn.

[01:29:06] Speaker 01:
Good afternoon, your honors.

[01:29:07] Speaker 01:
May it please the court, Norman Ray for responding EPA, to me at council table, or Chloe Coleman from DOJ, and Matthew Marks from EPA's Office of General Counsel.

[01:29:18] Speaker 01:
The Clean Air Act imposes three statutory requirements that the court, that petitioners must meet before this court can act or can find that the rule is defective for lack of notice.

[01:29:30] Speaker 01:
First, the lack of procedure must be arbitrary and capricious.

[01:29:34] Speaker 01:
I'll get this in a minute, but the petitioners' claims of the difference between the proposal and the final rule are greatly exaggerated.

[01:29:42] Speaker 01:
And the petitioners did have adequate notice and they did have an adequate opportunity for comment.

[01:29:48] Speaker 07:
It's important to recognize, Your Honor, that the amount of public participation and comment... But why isn't your lead argument that there's a petition for reconsideration pending that hasn't been ruled on and that we have a whole bunch of cases that say end of matter?

[01:30:02] Speaker 07:
Why isn't that your argument?

[01:30:04] Speaker 01:
Well, Your Honor, I agree that that is in fact the case and we made that case in our brief and believe that the Court can in fact dismiss this claim on those grounds.

[01:30:13] Speaker 01:
I also think that the Court could dismiss the claim on the grounds that they have completely failed to even address the requirement in the Clean Air Act that they must demonstrate that their objection is of central relevance and that there is a substantial likelihood that the rule would have been changed.

[01:30:30] Speaker 16:
The provision is not jurisdictional then, you agree?

[01:30:33] Speaker 01:
But it may not be jurisdictional, Your Honor, but it is a prerequisite, and it is an essential element of the claim.

[01:30:37] Speaker 16:
I'm talking about the rule that requires EPA to wait until EPA considers that that's not jurisdictional.

[01:30:43] Speaker 01:
Yes, Your Honor.

[01:30:43] Speaker 01:
The Supreme Court has decided that that's not jurisdictional, but it is mandatory.

[01:30:47] Speaker 01:
And so the court, in fact,

[01:30:51] Speaker 01:
can reject their claim and should reject their claim.

[01:30:55] Speaker 01:
In fact, the court is precluded from vacating the rule on notice and comment grounds until EPA completes its reconsideration process.

[01:31:04] Speaker 01:
When will that be?

[01:31:05] Speaker 01:
Well, Your Honor, the agency is working on them.

[01:31:08] Speaker 01:
It does not have a specific timeframe.

[01:31:10] Speaker 01:
The agency received

[01:31:11] Speaker 01:
38 petitions for reconsideration, many of which raise many, many issues.

[01:31:17] Speaker 01:
So there are hundreds and hundreds of issues being raised.

[01:31:21] Speaker 01:
Most of them were filed in the fall, some of them up until December.

[01:31:25] Speaker 01:
In that same timeframe, the same personnel who work on this rule have addressed the reconsideration petitions on the new source rule.

[01:31:34] Speaker 01:
they've been heavily involved in this litigation.

[01:31:37] Speaker 01:
There was the extensive stay briefing.

[01:31:39] Speaker 01:
There was the expedited merits briefing and preparation for arguments.

[01:31:43] Speaker 01:
So the agency is working on them.

[01:31:48] Speaker 01:
They're working diligently, but they have not been able to establish a timeline for completing them.

[01:31:55] Speaker 01:
And I think another point that's very important

[01:31:58] Speaker 01:
Mr. Lorenzen asserts that, well, it's just a procedural issue, you can just dismiss it.

[01:32:02] Speaker 01:
But there is no, the distinction between procedural and substantive is illusory.

[01:32:08] Speaker 01:
If you're objecting that you didn't have notice, you have to be objecting that you didn't have to have notice of something, of some specific aspect of the rule that you're objecting to.

[01:32:20] Speaker 01:
So when you're asking the agency for reconsideration, what you're saying is, I object to these particular parts of the rule.

[01:32:28] Speaker 01:
I wasn't given an opportunity to comment on them.

[01:32:31] Speaker 01:
And this is the information that I would have provided you.

[01:32:34] Speaker 01:
307-D-7 specifically says that that's one of the requirements for the agency to grant reconsideration, is that the petitioners must show that there was a substantial likelihood that the rule would have been different.

[01:32:49] Speaker 01:
And I don't believe, as we've argued in our briefs, that they have not presented that evidence.

[01:32:54] Speaker 01:
They certainly have not presented that evidence to this Court.

[01:32:58] Speaker 01:
The lack of notice, they claim, is greatly exaggerated, Your Honors.

[01:33:03] Speaker 01:
The agency did not...

[01:33:06] Speaker 16:
I mean, there were a lot of switches, which is to your credit, actually.

[01:33:09] Speaker 16:
There were a lot of changes to the rule, Your Honor.

[01:33:12] Speaker 16:
And those were touted by the administrator when the final rule came out, again, to your credit.

[01:33:17] Speaker 16:
You listened, but it was significantly different.

[01:33:19] Speaker 01:
There are significant difference.

[01:33:20] Speaker 01:
But there is a lot of case law saying that the fact that a rule is different, even if a rule does something completely different.

[01:33:27] Speaker 16:
Yeah, I agree with you on that.

[01:33:28] Speaker 01:
I'm just saying.

[01:33:28] Speaker 01:
The unanimous Supreme Court decision in Long Island Care, this court's decision in Arizona Public Service.

[01:33:36] Speaker 01:
And I think what the court said in that case is very apropos here.

[01:33:38] Speaker 01:
The proposal raised a highly visible and controversial issue and elicited responses from both tribal and industry commenters.

[01:33:45] Speaker 01:
Furthermore, any reasonable party should have understood that EPA might reach a different conclusion after considering public comments.

[01:33:53] Speaker 02:
The agency... What's your best site for notice of the national rates?

[01:34:00] Speaker 01:
So they were on notice that national rates are... They were on notice that EPA would set a national standard or a standard that applied uniformly.

[01:34:07] Speaker 01:
In fact, the agency specifically asked for comments.

[01:34:11] Speaker 01:
The citation that they've given on J66 is not a statement by the agency that it's not going to do national rates.

[01:34:21] Speaker 01:
It's simply a statement of what it was doing.

[01:34:23] Speaker 01:
And in a separate part of the proposal,

[01:34:28] Speaker 01:
on JA71, the agency specifically stated that it was considering alternatives to its methodology.

[01:34:36] Speaker 01:
The methodology EPA used to establish the proposal was based on small region, multi-state regions, and what the agency did was it looked at

[01:34:46] Speaker 01:
what these states, whether they had plans, how much effort they had put into developing renewable energy, and then they applied that rate of increase based on not on what they were capable of doing, but on what they had planned, what was in their regulations to the existing level in each state.

[01:35:06] Speaker 01:
And that resulted in a state by state

[01:35:10] Speaker 01:
state by state set of rules that EPA expressed as a uniform blended rate.

[01:35:17] Speaker 01:
I should point out, Your Honors, that the final rule also contains, as one option for state plans, a uniform blended rate that is exactly in form, the same thing as what was in the proposal, is calculated differently.

[01:35:32] Speaker 01:
And the reason EPA

[01:35:35] Speaker 01:
changed its approach was that it was inundated with comments objecting to that state-by-state approach because it gave, it meant that states that had done little or nothing to address CO2 emissions had much less stringent rates than states that had already taken substantial efforts because of the way it was

[01:35:58] Speaker 01:
it was set up.

[01:35:59] Speaker 01:
And that created an uneven playing field in the market for electric power.

[01:36:04] Speaker 01:
Utilities in states with the more stringent standards would have higher costs, which would disadvantage them in the market for electricity and would also disadvantage their customers who had to pay higher rates.

[01:36:17] Speaker 01:
For instance,

[01:36:18] Speaker 01:
Petitioner, State of Texas' comments at JA 1709-10 objected very strongly to that.

[01:36:25] Speaker 01:
And so states and utilities objected to the state-by-state approach, asked the agency to have rates that were uniform and national, and the agency then issued the note, the notice of data availability, once again asking for comments on an alternative approach.

[01:36:43] Speaker 01:
And it said, it pointed out that it had received all of these comments objecting to the unique state by state setting of standards and saying that it was going to look at, instead of effort, it was going to look at capacity and the ability of

[01:37:02] Speaker 01:
renewable energy to be developed and gas plants to be used on a regional basis and use that to develop the standard.

[01:37:10] Speaker 01:
It then received comments on that and then, in fact, comments that clearly demonstrate that the regulated community understood what EPA was doing.

[01:37:20] Speaker 01:
For example, the comments JA2295 from LG&E and KU, which are Kentucky utilities, recognized that EPA was establishing a standard, calculated, gave us a, reported a calculated rate, blended rate standard that had been calculated by the state of Kentucky.

[01:37:41] Speaker 01:
and complained that it was going to be too stringent.

[01:37:44] Speaker 01:
It was, in fact, more stringent than what was promulgated.

[01:37:47] Speaker 01:
And the agency received other comments that indicate that the utilities knew what EPA was doing.

[01:37:54] Speaker 01:
It knew how it was recalculating them.

[01:37:57] Speaker 01:
And that's what the final rule does.

[01:38:00] Speaker 01:
It uses the same building blocks.

[01:38:02] Speaker 01:
It takes the same approach.

[01:38:04] Speaker 01:
It uses three building blocks instead of four.

[01:38:06] Speaker 01:
But as I think we've talked about earlier, building block four had a number of issues that commenters objected to, and they dropped it.

[01:38:13] Speaker 01:
But building block one was efficiency, which we've looked at on a regional basis.

[01:38:18] Speaker 01:
Building block two is increased utilization of existing gas combined cycle plants, which was now done on a regional basis.

[01:38:26] Speaker 01:
And the region that was chosen was the interconnects, which are the large regions over which

[01:38:31] Speaker 01:
electricity moves and are connected and regulated and building block three was the amount of renewable energy.

[01:38:40] Speaker 01:
It based all of those and it calculated two separate rates and then it used those two separate rates to also calculate mass-based goals by each state which is just a matter of taking each rate and multiplying it by the amount of that generation and then it calculated a rate-based goal which is a blended rate for

[01:38:59] Speaker 01:
gas plants and fossil fire and steam plants.

[01:39:04] Speaker 01:
And states can use any one of those three options.

[01:39:07] Speaker 01:
So it's not that the states, the regulated community knew what EPA was doing in developing a standard.

[01:39:15] Speaker 01:
EPA had hundreds and hundreds of meetings with stakeholders, over 600

[01:39:20] Speaker 01:
meetings with stakeholders.

[01:39:22] Speaker 01:
It had four public hearings over eight days.

[01:39:25] Speaker 01:
There were millions of comments filed.

[01:39:26] Speaker 01:
The amount of public opportunity, the amount of outreach by the agency, the opportunity for stakeholders to comment on the rule

[01:39:35] Speaker 01:
was massive.

[01:39:37] Speaker 01:
They had the opportunity to comment.

[01:39:39] Speaker 01:
And I think the fact that they have not come here in their briefs, even after we raised this issue in our brief, and identified a single piece of factual information, a single piece of data that they could have presented to the agency but didn't have the opportunity to, it speaks a lot.

[01:39:55] Speaker 01:
It says that they don't have anything.

[01:39:57] Speaker 01:
They did know what was going on.

[01:39:59] Speaker 01:
They don't have any information.

[01:40:01] Speaker 01:
There is no reason why

[01:40:04] Speaker 01:
why the rule would be substantially different.

[01:40:06] Speaker 01:
And I think that the court could rule on that ground because it is a threshold requirement that they have to make.

[01:40:11] Speaker 01:
The court could also, of course, find that they have not met the reconsideration problem, which is a statutory requirement.

[01:40:17] Speaker 01:
It's an exhaustion requirement intended to, as I said much earlier,

[01:40:22] Speaker 01:
This distinction between procedural and substantive is essentially illusory because they are always linked.

[01:40:27] Speaker 01:
You are always complaining about something in the rule that you want EPA to get and what Congress clearly intended as this Court has recognized, EPA to get the first opportunity to look at whatever information that the petitioners claim that they didn't have an opportunity to present and make a decision on it.

[01:40:45] Speaker 01:
And therefore, they think the Court could rule on that as well.

[01:40:49] Speaker 18:
All right.

[01:40:49] Speaker 18:
Thank you.

[01:40:50] Speaker 18:
Mr. Barker.

[01:41:04] Speaker 00:
May it please the court.

[01:41:05] Speaker 00:
In defending its unprecedented claim of executive power to issue a cap-and-trade system that Congress refused to pass, EPA is wrong in arguing that this court cannot even resolve whether this rule was issued with proper notice, and it was not.

[01:41:20] Speaker 00:
I'd like to first turn to the exhaustion arguments and then turn to the notice arguments.

[01:41:27] Speaker 00:
To rule for us on exhaustion and consider the merits of our notice and comment claim, the court did not do any more than recognize the reasoning of its earlier small refiner case in 1993.

[01:41:36] Speaker 00:
We do agree that later decisions in New York and Mexico went the other way and interpreted 3070 to apply to a notice and comment claim.

[01:41:45] Speaker 00:
But as early as small refiners in 1983, the court walked pretty exhaustively through the legislative history of Section 307D7 and explained, in fact held there, that it should not be interpreted to bar judicial review of a procedural claim that is also a claim of procedural error under the APA, such as a fundamental failure of notice and comment.

[01:42:06] Speaker 00:
And for all the reasons there, this Court's 307D is not a bar.

[01:42:12] Speaker 00:
If you look at what happened in UARG, the 307D argument there was almost an afterthought.

[01:42:16] Speaker 00:
It was addressed at oral argument.

[01:42:18] Speaker 00:
And there wasn't any extensive consideration of the legislative history of 307D or D7 or how it fits together.

[01:42:26] Speaker 16:
The UARG decision from 2014?

[01:42:28] Speaker 16:
Is that what you're talking about?

[01:42:30] Speaker 16:
Yes.

[01:42:32] Speaker 16:
That wasn't an afterthought.

[01:42:34] Speaker 00:
No, it was the court's basis for resolving the notice claims there, but the question there of whether the D7 exhaustion should be applied to procedural issues was not addressed extensively in the briefs.

[01:42:46] Speaker 00:
The court didn't walk through the reasoning of Small or Finer and try to grapple with it.

[01:42:49] Speaker 00:
So all I'm suggesting is that the court's cases are in conflict.

[01:42:52] Speaker 16:
Pretty thorough opinion.

[01:42:53] Speaker 16:
I didn't write it just for the record.

[01:42:56] Speaker 00:
The overall opinion is thorough, but smaller finer is also thorough.

[01:42:59] Speaker 00:
And all I'm suggesting is that smaller finer has the better reasoning on this, because it does actually grapple with not only the text of 3077, but its structure as well as the legislative history.

[01:43:09] Speaker 00:
And I'd encourage the court to look at that as it considers the issue, because 3077 is not a good fit for notice issues.

[01:43:15] Speaker 00:
If EPA's reading of that was right, then EPA could propose a final rule saying, we propose to do not X. And then it could have a final rule that does X. That final rule could be stayed for only three months.

[01:43:29] Speaker 00:
That's what D7 provides.

[01:43:31] Speaker 00:
And judicial review of that rule would be barred under their reading, so long as EPA set on a petition for reconsideration, as long as it wanted.

[01:43:40] Speaker 00:
So the agency could, without any... There's always mandamus.

[01:43:43] Speaker 05:
A lot of people use that.

[01:43:45] Speaker 00:
Could you repeat your question?

[01:43:46] Speaker 05:
I said there's always mandamus.

[01:43:47] Speaker 05:
That's what that's for.

[01:43:49] Speaker 00:
Perhaps there is, but there's also the futility doctrine.

[01:43:51] Speaker 05:
Well, what do you mean perhaps?

[01:43:52] Speaker 05:
I mean, that's what mandamus is for.

[01:43:55] Speaker 00:
Well, even if the court disagrees with us on that argument, our second argument on exhaustion is the futility doctrine.

[01:43:59] Speaker 00:
We cite that at page 6 of our brief.

[01:44:01] Speaker 00:
And after EPA has sat on our petition for over a year, but told us in its merits brief here exactly what it thinks of our notice claim,

[01:44:09] Speaker 02:
the futility doctrine is triggered because there is no reasonable chance that EPA... When did you file your brief raising this futility argument?

[01:44:16] Speaker 02:
It wasn't a year after the petitions for reconsideration were pending.

[01:44:20] Speaker 02:
It would have been a few months?

[01:44:23] Speaker 00:
The delay is part of our futility argument, but the stronger part of our futility argument is that we know from EPA's merits brief here exactly what it thinks it is.

[01:44:29] Speaker 02:
When you filed your opening brief, you hadn't yet seen EPA's merits brief, so I'm really trying to figure out what your futility argument is.

[01:44:37] Speaker 02:
It can't be that

[01:44:38] Speaker 02:
We think their merits brief will answer this, and so we therefore have an argument.

[01:44:44] Speaker 02:
And if they don't, maybe they'll wait a really long time.

[01:44:47] Speaker 00:
Our lead argument is that 307D7 is not a good fit for this, and as small or fine or held, if procedural error is reversible under the EPA... Not a good fit for this adequate notice problem.

[01:44:57] Speaker 00:
If that's rejected, at page 6 of our reply brief, we raise the futility argument and point out that the waiting for EPA to rule in the administrative reconsideration petition would be futile.

[01:45:07] Speaker 00:
It sat on it for over a year, and we know from its merits brief here exactly what it thinks.

[01:45:12] Speaker 00:
There is no reasonable chance it's going to reach a different conclusion.

[01:45:14] Speaker 00:
So the court should reach the merits of our notice and comment claim here.

[01:45:18] Speaker 00:
And the final rule was not issued with proper notice because the EPA specifically said that it was not proposing a subcategory specific emission rate, but instead was proposing source specific rates.

[01:45:32] Speaker 19:
But Mr. Berger, what about the part of our test where you're supposed to show a substantial likelihood that the rule would come out differently?

[01:45:38] Speaker 19:
I haven't heard anything from either of you on that.

[01:45:42] Speaker 00:
Right, the prejudice prong.

[01:45:43] Speaker 00:
And in small and final, the court held that if procedural error is reversible under the APA, it's also reversible under 3077.

[01:45:49] Speaker 00:
So we think that those two elements are really just one prejudice prong.

[01:45:54] Speaker 00:
that is the same as the APA's Prejudice Test.

[01:45:57] Speaker 19:
And as the Court knows, we don't have to convincingly show that EPA would have... But I just want to hear the substance of it, because we've heard from the EPA that they've had millions of comments, they've had hundreds of meetings, that this, you know, a lot of what they did that's different is stuff that was proposed by industry.

[01:46:12] Speaker 19:
And so, you know, can you give us your counterpoint to that?

[01:46:17] Speaker 00:
The high level picture on this is that regulating a state's energy grid is an intricately detailed process and that we need notice of

[01:46:27] Speaker 00:
with some specificity what EPA is proposing to do.

[01:46:29] Speaker 00:
And I think this is captured at JAA 1706, which is a comment by the Texas Commission on Environmental Quality, where it was perhaps a bit prescient in thinking ahead to the notice in common issue and said, if the EPA intends to deviate substantially from the state goals included in the proposed rule, then the APA should withdraw and repropose the rule to allow states and other affected parties adequate opportunity to provide meaningful comment and the rest of that

[01:46:55] Speaker 19:
But can you point to specific things or categories or types of things that you would have liked to be able to say to them about what they've done that you were unable to say to them?

[01:47:05] Speaker 00:
First of all, there was no number for subcategory specific rules.

[01:47:08] Speaker 00:
1305 for coal plant, 771 I guess.

[01:47:11] Speaker 00:
There was no number at all.

[01:47:12] Speaker 00:
So this is not a case where it was just a binary decision.

[01:47:16] Speaker 19:
So you would have said to them, we don't want that number?

[01:47:18] Speaker 00:
Some petitioners would have explained why that was too high.

[01:47:21] Speaker 00:
For example, the state of Wyoming, under the proposed rule, it could largely go on with how it was doing things with some adjustments because it didn't have a lot of potential for renewable energy.

[01:47:31] Speaker 00:
But under the final rule, it got much stricter.

[01:47:33] Speaker 00:
EPA acknowledges at page J224 that the rates got much stricter for many of the petitioner states.

[01:47:39] Speaker 00:
But even apart from that, there's just a question of, and you're going to hear in a little bit in the record-based argument,

[01:47:45] Speaker 00:
about some of the flaws in EPA's methodology and the final rule, some of the assumptions it makes that aren't well founded.

[01:47:51] Speaker 00:
The record as it exists now shows that that is a reversible error, but if that had been issued in the proposed rule, we would have had even more opportunity to put on affirmative evidence.

[01:48:01] Speaker 00:
Now, of course, it's EPA's burden to show adequate demonstration, and that's all going to be addressed in the next part of the argument.

[01:48:07] Speaker 00:
That's helpful.

[01:48:07] Speaker 19:
That's responsive to what I was asking.

[01:48:10] Speaker 00:
And then my final point on noticing comment is that it is usual and normal for an agency when it realizes that the approach in its proposed rule is not going to work, to republish the rule.

[01:48:24] Speaker 00:
That is what EPA did here with the new source rule.

[01:48:27] Speaker 00:
It originally had a new source rule proposing a statewide goal, much like the proposed rule here, but then when it decided to switch, it republished its rule.

[01:48:36] Speaker 00:
That's all that we're asking be done here.

[01:48:39] Speaker 18:
Thank you.

[01:48:41] Speaker 18:
Come to the last issues, which are the record-based issues.

[01:49:05] Speaker 18:
This isn't right.

[01:49:32] Speaker 04:
Judge Henderson, may it please the Court, William Brownell on behalf of the non-state petitioners.

[01:49:41] Speaker 04:
Let me take just a minute to explain how my colleague from Wisconsin, Mr. Satlin, and I are going to handle the argument.

[01:49:49] Speaker 04:
In this last portion of the argument today, we're going to focus on EPA's failure to satisfy its statutory burden to show that even if its generation shifting system can ever be used under Section 111D, that system must be demonstrated to work in the real world in all of the states to assure that the national performance rates

[01:50:14] Speaker 04:
and electric demand can be met.

[01:50:17] Speaker 04:
I'm going to begin with a brief explanation of the rule and then focus on why this demonstration cannot be based on national performance rates that are derived from projections of total region-wide building block capacity.

[01:50:33] Speaker 04:
My colleague will then explain why the extreme reductions in coal-fired energy that are derived from the regional analysis cannot be met by many states in the regions, as the statute requires.

[01:50:46] Speaker 04:
And also, he's going to address the practical problems that result for states from EPA's heavy reliance on a shift to renewable energy.

[01:50:57] Speaker 04:
Now, because it was discussed this morning,

[01:51:02] Speaker 04:
No individual unit can achieve these national performance rates with any emission control system that can be applied at the unit.

[01:51:12] Speaker 04:
EPA created a system of emission reduction that is based on what is called in the rule emission rate credits.

[01:51:20] Speaker 04:
that are derived from a vast expansion in alternative generating capacity across three vast geographic regions.

[01:51:30] Speaker 04:
In the case of the eastern region, for example, this region includes all or part of 38 states that vary greatly in their renewable energy capacity.

[01:51:41] Speaker 04:
The rule establishes a formula that appears at Joint Appendix 490, it's 60.5790C of the rule, but this formula must be used by existing fossil units to calculate compliance with the national performance rates.

[01:52:03] Speaker 04:
Under the rule, each existing fossil unit must hold enough emission rate credits to calculate a fictional, or what EPA calls an effective, average megawatt hour rate that's equivalent to the national performance rates.

[01:52:21] Speaker 04:
Now these emission rate credits are the only best system of emission reduction based compliance method that's available

[01:52:31] Speaker 04:
the fossil units to calculate compliance.

[01:52:34] Speaker 04:
So as a result, a shortfall in available emission rate credits is going to prevent fossil units from generating the megawatt hours that they are being relied upon to supply.

[01:52:47] Speaker 04:
And a shortfall in emission rate credits is also going to reflect a shortfall in replacement generation, which then increases the need for fossil megawatt hours that cannot be supplied due to a lack of ERCs or emission rate credits.

[01:53:04] Speaker 04:
For three reasons.

[01:53:07] Speaker 04:
The rules requirement of what is in effect a megawatt hour by megawatt hour authorization to operate each fossil unit based on regional projections of as of yet to be constructed alternative generation to provide both emission rate credits and to meet electric demand has not been demonstrated nor shown to be achievable.

[01:53:37] Speaker 04:
First, this system to create the emission rate credits that fossil units must have in order to operate does not exist now.

[01:53:51] Speaker 16:
To meet the rates, this regional system requires, across each of the purposes of this argument, we're assuming, arguing now, that EPA has legal authority.

[01:54:02] Speaker 04:
Absolutely, Your Honor.

[01:54:05] Speaker 16:
So of course it hasn't happened yet.

[01:54:09] Speaker 16:
How could we?

[01:54:11] Speaker 16:
I'm trying to figure out how we could say what you're talking about.

[01:54:14] Speaker 16:
I guess I'm trying to understand the nature of your argument.

[01:54:17] Speaker 16:
What will we be saying?

[01:54:18] Speaker 16:
It's arbitrary, capricious?

[01:54:19] Speaker 04:
The first point goes to whether the system is demonstrated, Your Honor.

[01:54:23] Speaker 04:
In order the case law of this court to be demonstrated, the system has to be something that's more than speculative or experimental or theoretical.

[01:54:30] Speaker 04:
There has to be actual historical experience.

[01:54:34] Speaker 16:
Why on that don't they have the practice that's gone on first with other programs, which are similar but not identical, obviously, and then state

[01:54:41] Speaker 16:
state efforts, they're relying on those as well.

[01:54:45] Speaker 16:
And I agree, it's not all perfect fit, but this is the idea of administrative practice, is to

[01:54:53] Speaker 16:
come up with a program that hasn't been used before, but that doesn't mean it's not adequately demonstrated necessarily, does it, if they're relying on similar proven programs?

[01:55:04] Speaker 04:
If I can break that down into two points, because it really covers a first point I want to make about whether this system of replacement generation to create emission rate credits is demonstrated, and a second point about whether, regardless of that, whether the rates are achievable with that system.

[01:55:21] Speaker 04:
On the first point, I'd start by analogizing to what went on in this court's Sierra Club decision with SO2 scrubbers.

[01:55:32] Speaker 04:
In that case, the court found that SO2 scrubbers, they were out there.

[01:55:35] Speaker 04:
They existed.

[01:55:36] Speaker 04:
There was a database.

[01:55:38] Speaker 04:
The court said you can project based on that system that's demonstrated that

[01:55:43] Speaker 04:
the system can achieve a higher level of reduction in the future.

[01:55:47] Speaker 04:
But what the court did not say and could not have said is that if scrubbers do not then exist,

[01:55:54] Speaker 04:
it could not have said that they were demonstrated based on a prediction that they would develop at some point in the future.

[01:56:00] Speaker 04:
And that's what we have here with this system.

[01:56:02] Speaker 04:
EPA says in the record at Joint Appendix T22 that the location of generating resources and loads matter first.

[01:56:14] Speaker 04:
And second, at Joint Appendix

[01:56:16] Speaker 04:
3895 that local reliability conditions are critical to the functioning of the system.

[01:56:25] Speaker 04:
Therefore, they say at that page as well that there's no, that any reliable analysis of electric reliability cannot be undertaken

[01:56:38] Speaker 04:
until the rule is implemented when we know what the system looks like, because you need to know where the generating resources are located.

[01:56:44] Speaker 04:
Recall we are talking about a vast region, all according to 38 states.

[01:56:48] Speaker 04:
If you don't know where the generating resources are located, you don't know where the infrastructure is required, you don't know what the flow of ERCs, emission rate credits, or megawatt hours looks like, and as a result EPA says at 3895 that a realistic assessment of reliability is not possible yet.

[01:57:08] Speaker 04:
This system does not exist now, has to be developed in the future, system that must be created for the future, and that can't even be realistically assessed now is not a system that's demonstrated under this court's case law.

[01:57:20] Speaker 04:
It's theoretical.

[01:57:21] Speaker 16:
But this language, the statutory language here, which the administrator determines has been adequately demonstrated, which the administrator determines, this gives you an extra boost to deference.

[01:57:38] Speaker 16:
This seems the classic example of a situation where of course they're making predictive judgments about the future and those will be turned out, some of them will turn out to be not true.

[01:57:47] Speaker 16:
That's how it works when you're doing things like this.

[01:57:50] Speaker 16:
But does that mean, and how would you do the first time you were trying something, would that always be not adequately demonstrated?

[01:57:57] Speaker 04:
Let me answer that in this way, Your Honor, that EPA's demonstration here never goes beyond projections of total region-wide building block capacity.

[01:58:08] Speaker 04:
So they look at building block one, two, and three and say across this vast eastern region,

[01:58:15] Speaker 04:
This is what we project for building block two.

[01:58:17] Speaker 04:
This is what we project for building block three.

[01:58:20] Speaker 04:
The disconnect comes that they never take it down from this vast regional projection of total building block capacity to what this system actually looks like.

[01:58:30] Speaker 04:
Where do the generation resources go?

[01:58:32] Speaker 04:
Where do the loads go?

[01:58:33] Speaker 04:
What do the flows of electricity look like?

[01:58:35] Speaker 04:
Without that, you can't really assess adequacy, reliability, or availability of those products.

[01:58:43] Speaker 04:
Why not?

[01:58:44] Speaker 04:
because if you don't know, Your Honor, where the generating resources are located, you don't know where the infrastructure goes, you can't assess what the impacts are going to be, what the permitting difficulties are going to be, what the electricity flows are going to have to be from those

[01:59:03] Speaker 04:
renewable rich areas to the fossil areas that is going to be critical both to meet the rates, to provide the policies.

[01:59:10] Speaker 19:
I'm not sure that I'm following your point.

[01:59:12] Speaker 19:
You don't have to control which kind of energy comes into your jurisdiction, do you?

[01:59:18] Speaker 04:
It just goes on to the grid.

[01:59:20] Speaker 04:
Absolutely you do, and that's my point, that because the only way a fossil unit can comply under this compliance formula at Joint Appendix 430, you need emission rate credits.

[01:59:32] Speaker 04:
We know and you will hear more from us.

[01:59:34] Speaker 19:
Those don't have to be for units in your state, do they?

[01:59:39] Speaker 04:
No, they don't have to be for units in your state and that's where the problem comes in because there are many states that do not have the in-state building block capacity.

[01:59:49] Speaker 04:
And that's one of the big changes from the proposal to the final rule.

[01:59:52] Speaker 04:
A state like Kentucky, for example, EPA assessed in the proposed rule in-state building block capacity and came up with a

[02:00:00] Speaker 04:
a state goal of 1935 pounds per megawatt hour for Kentucky.

[02:00:06] Speaker 04:
When they went to this region-wide approach in the final rule, they changed that to the national performance rate of 1305.

[02:00:13] Speaker 04:
The only way a state like Kentucky and many other states that are rich in fossil resources can make up for that is to acquire emission rate credits from areas that are rich in renewable capacity.

[02:00:25] Speaker 02:
They didn't pull us out of thin air.

[02:00:27] Speaker 02:
This is a situation where they studied for some time trends that had already been happening within the industry and then projected forward based on existing trends.

[02:00:41] Speaker 02:
Now I know there's debates about those types of things, but this isn't

[02:00:45] Speaker 02:
just sitting back and speculating, this was, we looked at this for a period of time, here's what's going on in the industry, I haven't heard anyone dispute that in fact these generation shifting and the capacity to switch to gas and all of these things are going on out there, it's just they projected forward and people are fighting about the lines they drew and the projections they made.

[02:01:10] Speaker 04:
Does that matter?

[02:01:11] Speaker 04:
Your Honor, if I can respond to that.

[02:01:12] Speaker 04:
The generation shifting that's been going on is at the balancing authority area, the sub-regional area, and is designed to ensure the least cost supply of electricity to consumers in that sub-regional area.

[02:01:25] Speaker 04:
EPA is talking about in this generation shifting or generation replacement or emission rate credit creation system is something that is entirely different in terms of magnitude and character.

[02:01:39] Speaker 04:
Not one emission rate credit is created by any of the existing generation shifting as EPA characterizes it.

[02:01:47] Speaker 16:
What they are projecting... One of the thoughts thinking about EME Homer is, is this the right time

[02:01:54] Speaker 16:
to consider something like this because you're raising points that I think are hard to know whether they're going to prove out to be true or not in the future, but EMEA Homer suggests as applied challenges to particular problems could happen in the future as opposed to vacating the entire rule based on something like this.

[02:02:14] Speaker 04:
Your Honor, in contrast to E&E Hummel, which dealt with EPA's decision to disapprove specific state implementation plans and issue federal implementation plans for those states, once the Supreme Court clarified what the law was that applied to those determinations with respect to state-specific plans, they then directed that those plans be reviewed and evaluated in accordance with that law.

[02:02:42] Speaker 04:
We're dealing here with a national performance standard.

[02:02:44] Speaker 04:
which either rises or falls based on the demonstration and achievability.

[02:02:49] Speaker 05:
This morning we heard from interveners on the side of the EPA intervening power companies.

[02:03:00] Speaker 05:
that the generation shifting that EPA is talking about is I think he called it business as usual.

[02:03:07] Speaker 05:
He said this is the way the grid works now.

[02:03:11] Speaker 05:
That it is a generation shifting machine and because of the way it works with constrained lease cost dispatch that the economic system and the way the grid work is in the process of shifting already

[02:03:28] Speaker 05:
from more expensive higher emission fuels to lower cost renewable fuels.

[02:03:35] Speaker 05:
And they said that's the way they do their business.

[02:03:38] Speaker 05:
Is that all wrong?

[02:03:39] Speaker 04:
Your Honor, it's perhaps right with respect to the states where they're located.

[02:03:44] Speaker 04:
There are states on both sides of this case and there are states that are rich in renewable resources and there are states that are rich in fossil resources.

[02:03:54] Speaker 04:
And we have a national performance rate

[02:03:57] Speaker 04:
that requires for those states that cannot meet the national performance rates or for states with sources that cannot meet national performance rates to go out and do something different that has never been done before.

[02:04:09] Speaker 05:
Which states can't meet it, do we know?

[02:04:12] Speaker 04:
of fossil-rich states such as Kentucky and Montana and Wyoming and North Dakota.

[02:04:19] Speaker 04:
And I think there are about 18 or 19 states in all that had at the time of proposal when EPA focused on what is in-state building block capacity.

[02:04:31] Speaker 04:
emission rates that were higher than the national performance rates that came out in the final rule.

[02:04:38] Speaker 17:
The second point I wanted to make in response to Judge Kavanaugh's earlier question is EPA had this data over a decade of what was it, 884 coal steam plants, which account for 96 percent of the carbon dioxide emissions from such plants nationwide.

[02:04:59] Speaker 17:
And so it took that data and did all kinds of scientific and analytical things and expert things.

[02:05:08] Speaker 17:
And so it looked at what was going on.

[02:05:11] Speaker 17:
It's not as though, as Judge Millett says, it just came up with this sort of out of thin air

[02:05:16] Speaker 17:
And then when it finally got all these figures together, it chose the lowest.

[02:05:23] Speaker 17:
And I don't understand why Judge Kavanaugh's point isn't correct here.

[02:05:28] Speaker 17:
It's simply too early in the game to address these very state-specific objections since EPA has yet to receive the state-proposed plans to see what

[02:05:44] Speaker 17:
might be required and what's doable and not doable.

[02:05:47] Speaker 17:
And that's a whole negotiation that will start at the state and then, as we heard, and then come to EPA.

[02:05:55] Speaker 17:
And so unless EPA was totally arbitrary and capricious in using this as a data source to identify the best system for emissions reduction based on what was going on and the statutory factors,

[02:06:14] Speaker 17:
Aren't your arguments foreclosed at this point?

[02:06:18] Speaker 04:
No, Your Honor, I don't believe so.

[02:06:20] Speaker 04:
And let me make one point in response to that, and then I'll come back to my second point.

[02:06:24] Speaker 04:
That EPA did make these national and regional projections based on all of the data you talk about regarding building block capacity.

[02:06:33] Speaker 04:
So they projected that with respect to renewable energy.

[02:06:39] Speaker 04:
renewable energy would develop to provide the needed power and rate credits at a rate at the maximum rate for the maximum year it had ever developed in the past.

[02:06:50] Speaker 04:
And that rate would be applied going forward, year after year.

[02:06:54] Speaker 04:
They assumed that

[02:06:56] Speaker 04:
every gas-fired unit could increase its operations to 75 percent capacity factor, even though historically only 15 percent had operated at that level.

[02:07:06] Speaker 04:
And they assumed that every coal-fired steam generating unit could operate at its highest historic efficiency, even though that had not been attained on a sustained basis by any unit in the past.

[02:07:19] Speaker 04:
That was all to come up with region-wide capacity numbers

[02:07:24] Speaker 04:
which doesn't answer the question that needs to be answered for the states that need to implement this.

[02:07:28] Speaker 04:
That projection of total region-wide capacity doesn't tell you what each state can do with respect to its units, its in-state capacity, and that brings me to the second point.

[02:07:42] Speaker 04:
The rule for compliance for those states that lack in-state building block capacity depends on the availability of an interstate system for acquisition and transfer of emission rate credits.

[02:07:57] Speaker 04:
A system – basing the system on regional averages works only if alternative generation anywhere in the region is available to all of the individual units in the region.

[02:08:13] Speaker 04:
But EPA's Bureau provides no program that is going to make emission rate credits transferable to and available in each state.

[02:08:23] Speaker 04:
Rather, and this comes to Judge Rogers' points about the state plans, it provides a whole range of mutually exclusive state plan options derived from the national rates

[02:08:38] Speaker 04:
each subject to different programmatic requirements and potentially different state requirements.

[02:08:43] Speaker 04:
Collectively, these programs assure that there is going to be no uniform interstate method to acquire and to transfer emission rate credits.

[02:08:53] Speaker 04:
And the EPA recognizes that these multiple options cannot be relied upon

[02:08:58] Speaker 04:
to establish that its system is demonstrated to assure a reliable supply of electricity.

[02:09:05] Speaker 02:
Suppose you get through building block one, you get to building block two, and then it turns out that things are not materializing as anticipated.

[02:09:14] Speaker 02:
State's plans can't work.

[02:09:18] Speaker 02:
The federal plan, if that's what's being used, just isn't working.

[02:09:21] Speaker 02:
Is there not a mechanism, almost to get to Judge Kavanaugh's ripeness point, if that's what I can label it.

[02:09:28] Speaker 02:
Is there no mechanism under the rule for state?

[02:09:33] Speaker 02:
I thought there was a mechanism in which you could go to the EPA and say this isn't working and we can revisit it then.

[02:09:38] Speaker 02:
It just seems a little hard now to predict.

[02:09:41] Speaker 02:
that they're wrong about the trends, but you're not injured yet.

[02:09:44] Speaker 02:
You can fix this.

[02:09:46] Speaker 02:
Even when you get to that point, can you not go to the EPA and then rejigger it then?

[02:09:51] Speaker 04:
The point is that we are injured now.

[02:09:52] Speaker 04:
EPA is promulgating a rule that

[02:09:56] Speaker 02:
I don't mean article free sense or anything like that.

[02:09:59] Speaker 02:
I'm really just talking about, you know, we don't know what's not going to be there until we get somewhat closer in time and see what happens through the other building blocks.

[02:10:08] Speaker 02:
So isn't it better to wait and deal with the processes that are available to go back to an agency at the time when it's pretty clear it's not going to work and deal with it then.

[02:10:19] Speaker 02:
And if they don't deal with it then, then come back to the court and say, look, this is not working.

[02:10:23] Speaker 02:
Their predictions were wrong and they will not

[02:10:25] Speaker 02:
be flexible about this or work with us on this.

[02:10:30] Speaker 04:
It would be nice if we did not have any compliance options obligations in the interim and could come back and have the agency fix problems.

[02:10:39] Speaker 04:
With respect to your comment, it recognizes at 407 of the Joint Appendix that there is no reasonable certainty right now regarding implementation of any planning measure at any location.

[02:10:51] Speaker 04:
So we don't have any reasonable certainty regarding what is going to develop.

[02:10:56] Speaker 04:
with respect to trading, with respect to generating capacity.

[02:11:01] Speaker 04:
And that is a problem under a statutory provision that requires EPA to demonstrate that it's established that its system is demonstrated and that its national rates that impose compliance obligations are achievable with that system.

[02:11:17] Speaker 04:
My third point is that

[02:11:20] Speaker 04:
In response to comments on achievability problems with the rates, EPA repeatedly asserts throughout the rule that, well, the rule is achievable because it's flexible.

[02:11:30] Speaker 04:
The agency's obligation is to establish that the rates can be met and electricity demand can be met with its best system of emission reduction.

[02:11:40] Speaker 04:
The flexibility mechanisms include, first, measures that are not

[02:11:46] Speaker 04:
a Section 111 best system of emission reduction by EPA's own emission, demand-side energy efficiency, for example.

[02:11:54] Speaker 04:
Second, measures that restrict the regional availability of the emission rate credits on which the system depends.

[02:12:02] Speaker 04:
That's the multiple state plan options.

[02:12:04] Speaker 04:
Third, measures that do not provide generation shifting.

[02:12:08] Speaker 04:
Even EPA agrees that electricity does not flow freely between interconnects, yet their whole headroom analysis is based on investing, relying on renewable energy and other interconnects.

[02:12:21] Speaker 04:
And finally, it's based on measures that do not even yet exist.

[02:12:24] Speaker 04:
And I'm thinking of the Clean Energy Incentive Program, it's still out for public comment.

[02:12:28] Speaker 04:
So anytime EPA says flexibility,

[02:12:30] Speaker 04:
It's merely highlighting that its generation-shifting system is not demonstrated now.

[02:12:37] Speaker 18:
All right.

[02:12:38] Speaker 18:
Let me let your colleague have some time.

[02:12:41] Speaker 04:
OK.

[02:12:42] Speaker 04:
Thank you.

[02:12:42] Speaker 04:
Thank you, Your Honor.

[02:12:52] Speaker 06:
Thank you, Your Honor.

[02:12:53] Speaker 06:
Michit Salem on behalf of state petitioners.

[02:12:56] Speaker 06:
I'd like to make two points.

[02:12:58] Speaker 06:
One is about the unachievability of the state goals, and second is about renewable energy.

[02:13:02] Speaker 06:
But before I do that, I'd like to address the questions from Judge Kalanar and Judge Millett, because they, I think, rest upon an incorrect assumption of what we are trying to decide here with regard to record-based issues.

[02:13:14] Speaker 06:
This is from this court's decision in National Lyme Association.

[02:13:19] Speaker 06:
At this point, we need to determine whether EPA has affirmatively shown that the rates that it set, the 1305-771, are going to be achievable under the, quote, most adverse circumstances which can reasonably be expected.

[02:13:34] Speaker 06:
That decision has to be made now, not on an as-applied basis later.

[02:13:38] Speaker 06:
That is unquestionably the question before the court.

[02:13:41] Speaker 06:
Now, with regard to the unachievability of the state rates, there is only two propositions this Court must take.

[02:13:49] Speaker 16:
This plunge into the statutory authority argument.

[02:13:52] Speaker 16:
They're not going to be achievable by certain plants.

[02:13:56] Speaker 16:
You're talking about achievable by in the states as a whole for the whole system.

[02:14:02] Speaker 16:
What are you talking about?

[02:14:05] Speaker 06:
There's two potential statutory arguments with regard to achievability.

[02:14:09] Speaker 06:
One would be with utilities, and that's not the argument that I'm making.

[02:14:12] Speaker 06:
What I'm making the argument is that the state goals that EPA set, the blended 1305-778, those numbers are not achievable by the states.

[02:14:22] Speaker 06:
And the test, again, is EPA must affirmably show now.

[02:14:26] Speaker 16:
How do we know that?

[02:14:28] Speaker 06:
If I could, I'll walk through my analysis.

[02:14:32] Speaker 06:
It involves two steps and it's ultimately pretty simple.

[02:14:35] Speaker 06:
There used to be two propositions the court would accept for the rule to be vacated on this basis and this basis alone now.

[02:14:42] Speaker 06:
First, that EPA has not affirmably shown that many states can meet these national blended rates within their own borders.

[02:14:51] Speaker 06:
That's Proposition 1.

[02:14:52] Speaker 06:
Proposition 2, that EPA has not affirmably shown that there will be sufficient intrastate measures for these shortfall states to achieve these rates.

[02:15:03] Speaker 06:
Now let me talk about the first point.

[02:15:05] Speaker 06:
This point should really be indisputed and undisputable.

[02:15:09] Speaker 06:
And I'd like to illustrate the scope of this problem by turning the course attention to 2878, which is one of the charts that I submitted in my letter yesterday.

[02:15:20] Speaker 06:
And I'll kind of walk through one state example to show the scope of this problem.

[02:15:24] Speaker 06:
Now, at the proposal stage, EPA told the world what it thinks each state could obtain from each building block within its own borders.

[02:15:34] Speaker 06:
This chart that I submitted yesterday and it's in the GA, that is those numbers.

[02:15:38] Speaker 06:
The reason this chart is so important for this discussion, yeah, that's correct.

[02:15:43] Speaker 06:
The reason this chart is so important for the purpose of the discussion is this is EPA's latest word on what the states could do within their own borders on a block-by-block basis.

[02:15:53] Speaker 06:
But I would just caution the Court that this chart grossly understates the real problem for the states because at the proposal stage, EPA was giving states credit for existing renewable energy, which they don't get.

[02:16:04] Speaker 06:
But in any event, the problem will be illustrated by just taking the chart's understated problem at their word.

[02:16:09] Speaker 06:
And in order for illustration, I'd like the Court to please look at the Montana number.

[02:16:13] Speaker 06:
Now, with regard to Montana, the third number there is 2114.

[02:16:18] Speaker 12:
So could I, just as a framing question, is this part of your argument, are you arguing that EPA cannot look beyond a state's borders?

[02:16:28] Speaker 06:
No, Your Honor.

[02:16:29] Speaker 06:
As I mentioned at the beginning, I have two parts to my argument.

[02:16:31] Speaker 06:
One is it's not achievable within a state's borders.

[02:16:34] Speaker 06:
Two, once I establish that, that there's not, EPA has not provided that the shortfall, which you will see is extremely... But this is just a factual predicate.

[02:16:42] Speaker 12:
It's not a legal point.

[02:16:43] Speaker 06:
So they're both necessarily good points for me to prevail, and I guess it's factual too.

[02:16:47] Speaker 06:
They're both factual points for me to prevail, so I don't have to establish both.

[02:16:51] Speaker 06:
So the first number I'd like to point to is the third number in the Montana chart, which is 2114.

[02:16:56] Speaker 06:
That's what EPA said at the proposal stage, Montana could obtain just from block one.

[02:17:01] Speaker 06:
The next number I'd like to look at is the very next number in the chart, 2114.

[02:17:06] Speaker 06:
Again, that is what EPA is saying Montana can achieve from blocks one and blocks two.

[02:17:11] Speaker 06:
Now the reason those numbers are exactly the same is that block two relies on increase in natural gas capacity usage.

[02:17:18] Speaker 06:
Montana has no natural gas capacity, so we can't get anything from Block 2 within its borders.

[02:17:23] Speaker 06:
Now the third number, and this is the critical number, is 1936.

[02:17:26] Speaker 06:
That is what EPA told the world Montana could achieve by applying Blocks 1, Block 2, and Block 3 within its borders.

[02:17:35] Speaker 06:
Now, with regard to that number, when we go to the final rule, Montana's goal is 1305.

[02:17:42] Speaker 06:
That is 600 more reductions, 600 more pounds per megawatt hour.

[02:17:48] Speaker 06:
That is an incredibly big gap.

[02:17:50] Speaker 06:
To be absolutely clear, there is no way, there is no way Montana can make up that gap.

[02:17:56] Speaker 06:
And the easiest way to understand that is that 1305 number involves Montana achieving a national average from natural gas.

[02:18:05] Speaker 06:
From block two, Montana has no natural gas.

[02:18:08] Speaker 06:
It can't possibly achieve that 1305 number.

[02:18:11] Speaker 06:
And that's just the tip of the iceberg.

[02:18:13] Speaker 06:
States from North Dakota, West Virginia, Wyoming, Wisconsin, my home state, Kentucky, Indiana, all have similar problems.

[02:18:20] Speaker 06:
There's not enough time to talk about those states now, but if the court wants to see the scope of the problem, just please compare line F

[02:18:28] Speaker 06:
Column F in this chart I talked about with the other chart that I inserted into my letter, which is JA442.

[02:18:34] Speaker 06:
You'll see the massive scope of this problem.

[02:18:37] Speaker 06:
Now, before I move on from this chart, I'd like to make one more point.

[02:18:40] Speaker 06:
The court will notice in Column F, which is the 1, 2, 3 block column, there's a couple of states with really known numbers.

[02:18:47] Speaker 06:
States like California, Washington, Massachusetts, New York.

[02:18:51] Speaker 17:
Those are the states.

[02:18:52] Speaker 17:
I'm looking at your chart.

[02:18:53] Speaker 06:
Yes.

[02:18:54] Speaker 17:
I don't see the 1305 number for Montana.

[02:18:57] Speaker 17:
Your Honor, the chart... It's on the first page, affected EGU.

[02:19:05] Speaker 17:
The interim rate and the final rate.

[02:19:07] Speaker 17:
Is that Montana?

[02:19:08] Speaker 06:
Yes, Your Honor.

[02:19:08] Speaker 06:
If you look at the Montana number for the final rate, it's 1305.

[02:19:12] Speaker 06:
So the last point I'd like to make before moving on from the chart that I've been discussing is you'll see some states with low numbers, California, Massachusetts, New York, et cetera.

[02:19:21] Speaker 06:
Those are the states that by their own word can over-comply.

[02:19:24] Speaker 06:
So what do we have here?

[02:19:26] Speaker 06:
We have a bunch of states, Montana, Wyoming, Wisconsin, Kentucky, that can't possibly comply within their borders.

[02:19:32] Speaker 06:
Then you have a bunch of other states, Massachusetts, California, New York, Washington, that can over-comply.

[02:19:38] Speaker 06:
And now the other part of the presentation, Judge Srinivas.

[02:19:44] Speaker 06:
EPA has failed to affirmably show that its only answer to this problem, the interstate imbalance, will occur in the most adverse circumstances that can reasonably be expected.

[02:19:57] Speaker 06:
EPA has not mandated interstate trading or cooperation.

[02:20:00] Speaker 06:
Indeed, it specifically said at JA 147 that, quote, each state can do it on its own.

[02:20:07] Speaker 06:
That means that the states that can easily over-comply, California, Massachusetts, New York, Washington, retain the authority to lock out Montana, Kentucky, North Dakota, West Virginia, who need their credits and cooperation to comply.

[02:20:21] Speaker 06:
That lockout scenario is

[02:20:23] Speaker 06:
the most adverse circumstances which can reasonably be expected.

[02:20:27] Speaker 06:
And there is no way those states can meet those rates under that most adverse circumstances.

[02:20:32] Speaker 17:
And it's not even... Any evidence of that?

[02:20:35] Speaker 17:
This is a regional system where the grid is a single entity, as it were.

[02:20:42] Speaker 17:
It's not a state-by-state matter.

[02:20:47] Speaker 17:
The states cooperate in so many different ways.

[02:20:51] Speaker 06:
Your Honor, with respect, state compliance is a state-by-state matter.

[02:20:57] Speaker 17:
I think you're saying there's no way Montana can comply if the surrounding states, as I understood your point, block them from getting natural gas.

[02:21:11] Speaker 06:
No, no, Your Honor, it's not lockout, it's very important to kind of correct something that was said earlier.

[02:21:18] Speaker 06:
Credits.

[02:21:18] Speaker 06:
Forget the credits, because you can get the gas without getting the credits.

[02:21:21] Speaker 06:
And the most adverse scenario is exactly this lockout scenario.

[02:21:24] Speaker 05:
We have the most compelling possible... Is there any reason to believe that this over-colliding state won't cooperate?

[02:21:32] Speaker 06:
There is every reason to believe that.

[02:21:37] Speaker 06:
California law, the biggest state, sixth largest economy of the world, one of the world leaders in renewable energy, their state law, by their own admission, they will not link with Montana or any other state, except if Montana surrenders its authority to California

[02:21:57] Speaker 06:
and sets rules that are significantly more stringent than the Clean Power Plan requires.

[02:22:03] Speaker 06:
This is not just the most adverse circumstance possible.

[02:22:06] Speaker 06:
This is a likely scenario.

[02:22:08] Speaker 06:
I will note that California, in its letter to the court yesterday, did not disclaim its state law.

[02:22:13] Speaker 06:
It just said, we're linked to a state.

[02:22:15] Speaker 05:
If Montana agreed to that, could it then meet its emission goals?

[02:22:18] Speaker 05:
I said, if Montana agreed to California's conditions, could it then meet its performance standards?

[02:22:27] Speaker 06:
Right, Your Honor.

[02:22:28] Speaker 06:
I don't take EPA to be arguing that it is constitutional or legal for it to put Montana the following choice.

[02:22:36] Speaker 06:
Either it be governed by a federal plan,

[02:22:39] Speaker 06:
or surrender your sovereignty to California by over complying with the rule.

[02:22:44] Speaker 06:
That cannot possibly be the regime.

[02:22:46] Speaker 17:
See, what I'm getting at is we have this letter from the Attorney General of California that says you're misrepresenting the California situation.

[02:22:54] Speaker 17:
Now, I don't want to get into the issues because all of this stuff is coming to us sort of after the fact.

[02:23:01] Speaker 17:
But are we going to get into this fight now when at least even the data you're submitting to us

[02:23:08] Speaker 17:
says this is an unlikely worst case scenario?

[02:23:13] Speaker 06:
Your Honor, as I said at the beginning of the presentation, the legal standard now is whether EPA has affirmably shown that this will be achieved by the states in the most adverse circumstances which can reasonably be expected.

[02:23:24] Speaker 06:
The only way this court can uphold the rule here is to determine that the very thing that California told you is likely to happen in that statute and in that letter

[02:23:34] Speaker 06:
That letter, Your Honor, I would ask the Court to read it very carefully.

[02:23:38] Speaker 06:
It does not say California will waive its state law that prohibits it from linking to any other state that doesn't establish a regime as stringent as California.

[02:23:47] Speaker 17:
If you all do respect counsel, it doesn't say quite what you say.

[02:23:51] Speaker 17:
So if this is the type of evidence that EPA had before it, why couldn't it proceed?

[02:23:58] Speaker 06:
Your Honor, this is very important.

[02:24:00] Speaker 06:
It is EPA's burden, not our burden.

[02:24:03] Speaker 17:
EPA's burden to affirmably show that the... California says our proposal explicitly anticipates multi-state trading, consistent with California's long-standing support for multi-state collaboration to reduce emissions... Your Honor, I don't have... So my point is, if this is what the record is before the agency,

[02:24:28] Speaker 17:
Why hasn't it met its burden?

[02:24:32] Speaker 17:
It's puzzling things that seem to be outside the record.

[02:24:36] Speaker 06:
Well, Your Honor, if you read on in that letter, California then offices of its own state law.

[02:24:42] Speaker 06:
And its state law, and this is completely, completely undisputed, its state law says we will not link with another state.

[02:24:48] Speaker 06:
unless the other state rashes up its program to a stringent result, which is indisputably more stringent than the Clean Power Plan.

[02:24:54] Speaker 12:
Can I just ask this question?

[02:24:55] Speaker 12:
Let's just assume for present purposes that we get past all the threshold issues and we actually focus on this question, notwithstanding what Judge Rogers raised.

[02:25:05] Speaker 12:
If California has this provision and it works in the way that you posit that it works, it's not true that California wouldn't give credits to any state, right?

[02:25:14] Speaker 12:
There's at least some states to whom California would give credits.

[02:25:18] Speaker 12:
We go on and those states can comply with the rule.

[02:25:20] Speaker 12:
And then can those states then turn around and give them to a third state?

[02:25:23] Speaker 06:
I know you're on it.

[02:25:23] Speaker 06:
In order to get a credit from California and Montana, it has to enter into an agreement with California.

[02:25:29] Speaker 06:
That's the only way that works.

[02:25:30] Speaker 12:
But I mean, if there's some other state that enters into an agreement with California and therefore gets a credit, this is just a factual question.

[02:25:35] Speaker 12:
I don't know the answer to this.

[02:25:37] Speaker 12:
If some other state enters into an arrangement with California and gets a credit, and then that other state doesn't have the same rule that California does, is there then a secondary market for the credits?

[02:25:47] Speaker 06:
No, Your Honor.

[02:25:48] Speaker 06:
Once the two states enter an agreement, they're treated like a pool.

[02:25:52] Speaker 06:
So they can't work with another state unless both states agree with the third state.

[02:25:56] Speaker 06:
And this is another point, and this goes to EPA's burden to affirmably show, if California withdraws, just with California, and that's very likely to happen, but it's probably going to happen with some other states as well.

[02:26:08] Speaker 06:
If that happens, all of EPA's numbers break.

[02:26:11] Speaker 06:
The whole point of the national average rate, especially on the renewables, is based on what happened in the whole nation in certain years between 2010 and 2014.

[02:26:21] Speaker 06:
Once California is removed from that assumption, all of the numbers that EPA and all of the insufficient modeling it did completely, completely falls apart.

[02:26:29] Speaker 06:
Now, I would like to move on to my second point about renewable energy.

[02:26:33] Speaker 06:
Even if EPA could set its national rates at rates that some states could not possibly achieve.

[02:26:40] Speaker 06:
The rates that it set, 1305, 771, are not achievable by just the three building blocks.

[02:26:46] Speaker 06:
And I would like to focus on renewable energy and its specific wind energy.

[02:26:49] Speaker 06:
And the reason that this is so important is renewable energy is the biggest building block and wind energy is the majority of that building block.

[02:26:56] Speaker 06:
How did EPA get its wind number?

[02:26:58] Speaker 06:
What it did is it took one year, 2012, which is a year where everyone agrees that the amount of wind energy increase was astronomically spiked by the expiration of a massive federal tax credit.

[02:27:11] Speaker 06:
And what EPA did is they took that year and they said that expanded year is going to happen for seven straight years, year over year.

[02:27:19] Speaker 06:
Now, what's amazing about this is if the court looks at that year, there's a huge amount of wind growth.

[02:27:25] Speaker 06:
The very next year, the wind growth was one-thirteenth.

[02:27:29] Speaker 06:
Let me repeat that again.

[02:27:31] Speaker 06:
One-thirteenth of what happened in 2012.

[02:27:33] Speaker 06:
We were given assurances earlier that the reason this is not an unbounded is because there's all these other important constraints on EPA, including assurance achievability.

[02:27:43] Speaker 06:
If EPA can take a year

[02:27:44] Speaker 06:
where the very next year was one-thirteenth of late, and project that completely unsustainable year for seven straight years, there is no way this does anything but become completely unbounded.

[02:27:56] Speaker 06:
And I would also like to point out that EPA's win number is not the product of any modeling, it's not the product of any reasoned analysis, and it's not the product of any economics analysis.

[02:28:05] Speaker 06:
EPA just kind of picked this number.

[02:28:07] Speaker 06:
It could have just as easily discounted the obvious outlier year, which was 2012.

[02:28:12] Speaker 06:
And EPA failed to demonstrate this entirely unrealistic wind number will provide a reliable supply of energy.

[02:28:21] Speaker 06:
Now the biggest single challenge with adding a huge amount of wind to your power grid is that wind is not controllable.

[02:28:27] Speaker 06:
The wind blows when it blows and the energy must be consumed at that time.

[02:28:32] Speaker 06:
Which means that if it's not windy on a hot summer day in Texas,

[02:28:37] Speaker 06:
You're not going to get much wind energy and you're going to ramp up your natural gas capacity all the way up in order to fill that gap.

[02:28:43] Speaker 06:
That is undisputed.

[02:28:45] Speaker 06:
And this is a striking point that I really didn't understand until I began preparing for this argument.

[02:28:49] Speaker 06:
EPA never modeled any situation where wind is that high and also natural gas is running at the rate that's required under Block 2.

[02:28:59] Speaker 06:
EPA never did that analysis because those numbers don't work.

[02:29:03] Speaker 06:
What EPA did in its modeling was that it took just wind at that level and it let anything happen with natural gas that it wanted to happen.

[02:29:12] Speaker 06:
Of course, at that point, natural gas was running at only 48 and then it was able to ramp up.

[02:29:16] Speaker 06:
But EPA has never shown a model which achieves

[02:29:19] Speaker 06:
wind at that incredibly high rate, but also has natural gas at the Block 2 level.

[02:29:25] Speaker 06:
That is a fatal defect in the rule, and that's not a technical judgment, that's just an error in fact.

[02:29:30] Speaker 18:
Thank you, Your Honors.

[02:30:04] Speaker 03:
Good afternoon, Your Honors.

[02:30:12] Speaker 03:
My name is Brian Link from the Department of Justice, representing EPA.

[02:30:16] Speaker 03:
Let me briefly explain how I'm dividing this segment with my colleague, Mr. Rave.

[02:30:21] Speaker 03:
I'm prepared to address record issues concerning the determination that the building blocks are the best system, achievability of rates, and costs.

[02:30:31] Speaker 03:
Mr. Rave will address reliability and transmission adequacy, trading issues, and specific state objections not submitted on the briefs.

[02:30:44] Speaker 03:
In this case, EPA made the reasonable determination that the best system of emission reduction of carbon emissions from power plants consists of measures that power plants already widely use to reduce carbon and can do so cost-effectively and more cost-effectively than the other measures EPA considered.

[02:31:06] Speaker 03:
EPA took in the final rule a regional approach reflecting the regional nature of the interconnected electricity system and the region-wide scope of opportunities available for affected plants to access emission reduction measures.

[02:31:18] Speaker 03:
It quantified the building blocks at a level that did not project their maximum possible level of emission reduction, but rather did so at a reasonable level of stringency.

[02:31:29] Speaker 03:
And there were multiple ways in which, in constructing those building blocks, EPA was conservative.

[02:31:36] Speaker 03:
In Building Block 1, EPA used three different statistical approaches to calculate heat rate potential and picked the lowest one.

[02:31:44] Speaker 03:
In Building Block 2,

[02:31:46] Speaker 03:
EPA looked at the ability of gas plants to increase their rates of utilization and set a target that was well below what gas plants owners themselves report as their availability.

[02:32:00] Speaker 03:
Availability typically 87 to 92 percent.

[02:32:04] Speaker 03:
The target was 75 percent to be met gradually by 2030, not in the first year of compliance.

[02:32:11] Speaker 03:
In Building Block 3, EPA projected levels of renewable growth that were middle of the road, not at the high end.

[02:32:18] Speaker 03:
And EPA documented that extensively in the record in showing how industry estimates, the estimates of the National Renewable Energy Laboratory and other sources had all concluded that similar levels of growth or even higher levels of growth were likely and that the grid could support that.

[02:32:37] Speaker 03:
EPA then set emission limits not at a level that equaled full implementation of these conservatively constructed building blocks, but at the least stringent level after applying them to sources in each region.

[02:32:54] Speaker 03:
So this meant this even further assured the achievability of the rates by leaving headroom, as EPA called it, because it's not necessary to implement fully the building blocks in all three regions.

[02:33:06] Speaker 16:
They're basically arguing that the whole thing or parts of it, not the whole thing, parts of it are going to fall apart in a couple years, if not sooner.

[02:33:15] Speaker 16:
And I don't know how we assess that.

[02:33:18] Speaker 16:
But suppose it does start falling apart in parts.

[02:33:23] Speaker 16:
Are there avenues, legal avenues, open to them?

[02:33:26] Speaker 16:
I'd like to know, to the extent we were to on this issue,

[02:33:31] Speaker 16:
agree with you and uphold the rule on this issue, depending on what happens on the other issues, but uphold the rule, are there avenues to bring future challenges if all these predictions turn out to be wrong?

[02:33:44] Speaker 03:
Well, and I'll answer that.

[02:33:46] Speaker 03:
Let me start by saying the Court has always understood there would be a degree of uncertainty in any standard under this section, as in other regulations.

[02:33:56] Speaker 03:
That's right.

[02:33:57] Speaker 03:
The Court's upheld rules based on test data from just representative plants, as in the Essex case, whereas here, as the Court noted earlier, EPA had data from the entire coal and gas industry.

[02:34:08] Speaker 03:
The court has upheld a standard that extrapolated from the performance of utility boilers to set limits for industrial boilers in the Midnight Energy Council case.

[02:34:20] Speaker 03:
Here there was no extrapolation.

[02:34:21] Speaker 03:
EPA looked at what this industry was doing.

[02:34:25] Speaker 03:
There is, of course, the state planning process.

[02:34:27] Speaker 03:
My question, I appreciate all that.

[02:34:30] Speaker 16:
I gave you about four there, but my question was what happens if things start unraveling?

[02:34:36] Speaker 03:
Well, I mean,

[02:34:38] Speaker 03:
The state planning process is obviously the first outlet, but if there were actually new significant information change circumstances that somehow demonstrated EPA should reach a different conclusion about what's achievable, someone could still petition for a new rule.

[02:34:54] Speaker 03:
There's nothing stopping that.

[02:34:56] Speaker 03:
And obviously the question would be, are those the facts?

[02:34:58] Speaker 16:
Will those facts emerge?

[02:34:59] Speaker 16:
And the denial of that would be judicially reviewable?

[02:35:02] Speaker 03:
So denial of that petition in that circumstance would be a judicially-reviewable action.

[02:35:06] Speaker 16:
I know everything always has uncertainties, but they're saying the uncertainties in this case are quite significant.

[02:35:16] Speaker 03:
I think, again, the way that given the robustness of the record, the extent of its consultation with all the other agencies that have expertise in the grid and energy markets and renewable energy, the enormous unprecedented public outreach in response to comments.

[02:35:34] Speaker 03:
I mean, no one can ever say there's no uncertainty, but it's hard to imagine what more in any one rule

[02:35:40] Speaker 03:
the agency could do to meet its obligation as defined in Small Work Finder.

[02:35:44] Speaker 02:
I just want to follow up on that, though, because I think it's important.

[02:35:46] Speaker 02:
Instead of someone petitioning for a new rule, imagine it's pretty much working for 47 states.

[02:35:55] Speaker 02:
Or I know two of them aren't in, so I guess I have to go to 46 states.

[02:35:59] Speaker 02:
And there's two of them, two of the 48.

[02:36:01] Speaker 02:
for which it's not the alternative sources of power just aren't showing up there or proves not to be capable.

[02:36:09] Speaker 02:
Short of petitioning for a new rule, can you explain to me how the state plan process works in a way that would allow

[02:36:18] Speaker 02:
if it would, allow EPA to work with that state to address its particular concerns and needs.

[02:36:25] Speaker 02:
Are these state rules updated each year or is there ongoing dialogue about this?

[02:36:32] Speaker 02:
Would you have the capacity to alter emission limitations or adjust them, at least temporarily, for a particular state that had a need?

[02:36:43] Speaker 03:
Well, one of the reasons the state planning classes would help is that, and obviously on the legal side of the case there are different views about what's permissible and what's not, but from a record perspective, one of the things EPA did here to assure achievability is

[02:36:59] Speaker 03:
there is a far broader array of measures that a state could include in its plan that would qualify for compliance beyond the building blocks.

[02:37:10] Speaker 03:
Energy efficiency measures, just to give one example.

[02:37:13] Speaker 03:
To give another example, distributed renewable generation technology, which EPA noted at 291 of the Joint Appendix,

[02:37:20] Speaker 03:
there's preliminary analysis from NRL and DOE suggesting that alone could potentially achieve a third to one half of the building block three stringency.

[02:37:30] Speaker 03:
But that wasn't counted instead in the building block.

[02:37:32] Speaker 03:
So the point being that the state, when it devises a plan, has so many more options available, often even more cost effective.

[02:37:39] Speaker 02:
My question is about if they try their best, the state is doing its darndest and it just doesn't get there for some sort of, you know,

[02:37:49] Speaker 02:
either the nature of resources within that state, what can be, because I don't have any... I'm sure there would be opportunities.

[02:37:57] Speaker 02:
The fact that they could meet it some other way, if it just can't be met in good faith, then what happens to that state?

[02:38:03] Speaker 03:
I have no doubt that EPA would be available to consult with the state in this process as it went on.

[02:38:10] Speaker 03:
And, you know, to give an example of that, the preamble, for example, on the reliability issue, which I'd prefer mostly to leave to my colleague, but notes that EPA explicitly plans to continue consultation on that front.

[02:38:21] Speaker 03:
So there's no reason why it wouldn't also continue to consult with states who

[02:38:27] Speaker 03:
encounter stumbling blocks in the process of developing an approvable plan, same thing happens under the SIP process, which of course this is an analog to.

[02:38:36] Speaker 02:
There was some... Are they done year by year, or are they adjusted year by year, or are they done... Are these state plans supposed to project out for 15 or 20 years as well?

[02:38:45] Speaker 02:
I just don't know mechanics of how it works.

[02:38:47] Speaker 03:
As a factual question, I actually don't know how often a state plan would have to be updated in the course of the compliance.

[02:38:55] Speaker 03:
I think maybe my colleague may be able to answer that one.

[02:38:59] Speaker 03:
You did have a question earlier about is there a place in the record that actually says most of the industry is cross-invested.

[02:39:08] Speaker 03:
Joint Appendix 277 says that 77 percent of coal-fired generation in the country is co-owned with natural gas.

[02:39:18] Speaker 03:
and that 80 percent of the modeled shift in Building Block 2 could be achieved just by those cross-invested entities.

[02:39:27] Speaker 03:
And again, of course, the emission rates were not set at the full level of the modeled shift.

[02:39:33] Speaker 03:
John Appendix 286 says that 82 percent of the fossil fuel capacity in the country, coal and gas, is co-owned, co-invested, cross-invested with renewable energy.

[02:39:44] Speaker 03:
Most of this industry already has a diversity of generation sources.

[02:39:50] Speaker 03:
So again, when we talk about uncertainty and difficulties in implementation, we shouldn't overstate that.

[02:39:55] Speaker 16:
Now, EPA... Not understated either.

[02:39:57] Speaker 16:
It's going to be quite a burden.

[02:39:59] Speaker 16:
I mean... Who knows?

[02:40:01] Speaker 16:
Who knows?

[02:40:02] Speaker 16:
I agree.

[02:40:02] Speaker 16:
Who knows?

[02:40:04] Speaker 16:
Yeah.

[02:40:04] Speaker 16:
And EPA did not, in this rulemaking, ignore... Our record of predictive judgments as a country on big things is not ideal over the last generation.

[02:40:13] Speaker 03:
I should note too that, you know, MAS versus EPA itself recognize the idea that when you regulate, typically you do it incrementally.

[02:40:20] Speaker 03:
You don't necessarily answer every question in the first fell swoop.

[02:40:24] Speaker 03:
And that's just the same thing as a legislator.

[02:40:26] Speaker 03:
Agencies are the same way.

[02:40:29] Speaker 03:
EPA did not ignore the compliance needs of smaller entities.

[02:40:33] Speaker 03:
It documented again in the record 286, for example, that co-ops are amongst those entities cross-invested between technologies.

[02:40:40] Speaker 03:
So again, it's not as if this is a rule that only some entities can implement and not others.

[02:40:47] Speaker 03:
Even if, for some reason, a source didn't want to choose the most cost-effective measures available, there are other ways that a source, even without acquiring emission rate credits, even without shifting to another source, could meet the standards.

[02:41:05] Speaker 03:
EPA, for example, documented in the proposal that the more stringent proposed coal emission limit could be met just by conversion to natural gas at the source.

[02:41:17] Speaker 03:
So again, if you're talking about other hypotheticals, yes, that's possible as well.

[02:41:21] Speaker 03:
It could meet the limit that way.

[02:41:22] Speaker 03:
It could meet the limit with on-site renewable investment, again.

[02:41:24] Speaker 03:
Of course, EPA expects

[02:41:27] Speaker 03:
that sources will have these opportunities to implement these measures that were identified as the best system because they are cost effective.

[02:41:35] Speaker 03:
And it anticipates reasonably that many states will likely engage in trading because some have already said they want to do it, some are already doing it under the state RGGI program.

[02:41:46] Speaker 03:
So it was reasonable to assume that those things will emerge here.

[02:41:48] Speaker 03:
But again, the rule isn't dependent on that.

[02:41:51] Speaker 03:
It is achievable even without those things.

[02:41:54] Speaker 03:
They just make it even more cost effective.

[02:41:56] Speaker 05:
What's the answer to the argument that Council made about the 2012 wind power calculation, that that was based on a year that where wind power was, or are you not, is that your colleague's question?

[02:42:10] Speaker 03:
I guess there's an argument that that was unrepresentative.

[02:42:13] Speaker 05:
I mean, first of all... He said it was based on a year when it was excessively, there was huge amounts of wind power because it was the last year of a tax credit.

[02:42:22] Speaker 03:
There was actually a renewal of a tax credit that supports investment in renewable energies recently, which means it will extend through the rest of this decade.

[02:42:30] Speaker 03:
So to that extent then, circumstances haven't changed.

[02:42:35] Speaker 03:
We also addressed in our brief regarding Building Block 2, the argument that 2012 was unrepresentative.

[02:42:41] Speaker 03:
And the counter to that is EPA didn't just look at that year, it looked at long-term trends.

[02:42:45] Speaker 03:
Gas utilization has grown almost every year since the early 1990s.

[02:42:52] Speaker 03:
renewable energy has been growing at an incredibly rapid pace in recent years.

[02:42:58] Speaker 03:
It's not that aggressive to assume that 15 years from now it might grow at the maximum rate observed in the early part of this decade, considering the continuing decline in its price, its cost of construction, and the increase in its competitiveness.

[02:43:13] Speaker 03:
It's a new technology.

[02:43:14] Speaker 03:
That's what new technologies generally do when they're successful.

[02:43:16] Speaker 03:
They become more competitive.

[02:43:18] Speaker 16:
Do you want to speak to the standard of review the Solicitor General of Wisconsin argued that this burden was on you to affirmatively demonstrate?

[02:43:26] Speaker 16:
Do you disagree with that?

[02:43:28] Speaker 03:
I think that the small refiner case continues to be an authoritative articulation of what EPA's burden was, and that was to consider the factors required by the statutory provision, in this case Section 111, and show a reasonable connection between the facts on the record and the policy choices EPA made.

[02:43:47] Speaker 03:
But importantly, this Court has long recognized that a rule can be reasonable

[02:43:52] Speaker 03:
even if the court itself would not necessarily have made the same policy choices, assuming they're lawful.

[02:43:57] Speaker 03:
And so for that reason, I don't think, I think that the notion that there's a burden of persuasion or proof is not quite right and doesn't fit the administrative context.

[02:44:09] Speaker 03:
If I can briefly address as well, I know my time is running short, but just to make one more point, that the costs here, if costs were the criterion for determining what rule is transformative, this is not it.

[02:44:22] Speaker 03:
We showed in the McCabe Declaration attached to our opposition to the stay motion, paragraph 43, that the costs of this rule were less than or at most comparable to, for example, care.

[02:44:34] Speaker 03:
the NOC SIP call, and the 1979 new source performance standards for power plants.

[02:44:40] Speaker 03:
So if this rule were transformative, then you'd have to say they all were.

[02:44:45] Speaker 03:
We also showed that the costs here are not on the same lead with MATS.

[02:44:48] Speaker 03:
MATS was estimated to cost $10 million within four years of implementation.

[02:44:53] Speaker 03:
Within the first 10 years, this rule is only estimated to cost one to three million.

[02:44:58] Speaker 03:
And even that estimate is conservative for reasons EPA explained on the record.

[02:45:03] Speaker 03:
Thank you, Your Honors.

[02:45:05] Speaker 18:
All right, Mr. Rove.

[02:45:21] Speaker 01:
Good afternoon again, Your Honor.

[02:45:22] Speaker 01:
Norman Ray from the Department of Justice representing Respondent.

[02:45:26] Speaker 01:
Judge Millett, to answer your question about state plans, the rule provides that states will do a one plan that will cover the setup of the system that is designed to achieve the interim and final goals.

[02:45:39] Speaker 01:
However, there are a number of mechanisms available for both EPA to work with the states and for plans to be revised.

[02:45:48] Speaker 01:
EPA specifically

[02:45:50] Speaker 01:
put in the final rule or the preeminent final rule at JA 213, footnote 37, where it specifically stated that if a state is having trouble developing its plan and having trouble finding partners to coordinate with or has some other difficulty that it anticipates in being able to implement the rule, that EPA will work with the state.

[02:46:13] Speaker 01:
And also going forward, EPA, DOE, and FERC have an agreement where they will meet regularly and they have been meeting regularly and will monitor the implementation of the rule to address any reliability issues that might come up.

[02:46:31] Speaker 01:
The rule itself requires that state plans address the question of reliability and includes a specific provision that allows states to come in to modify their plans if there are reliability issues.

[02:46:45] Speaker 01:
So the rule does contain a number of mechanisms and EPA has committed to working with the states

[02:46:52] Speaker 01:
to working with the other federal agencies that are associated with regulation of the electric utility industry to ensure achievability and unreliability.

[02:47:01] Speaker 02:
And which of those, if the state said it didn't get the cooperation it needed, would be judicially reviewable?

[02:47:09] Speaker 02:
Would that latter one where they could come in and try to amend the state plan, if that was denied, would that be judicially reviewable?

[02:47:14] Speaker 02:
Because this cooperation and working together is a great thing.

[02:47:17] Speaker 02:
I'm not dismissing it.

[02:47:18] Speaker 02:
That's a wonderful thing to do.

[02:47:19] Speaker 02:
But if we needed later to be able to

[02:47:22] Speaker 02:
revisit the question, whether in a particular instance, a particular region, a particular state, these predictions had just collapsed, it didn't work and it wasn't working, how would that happen?

[02:47:33] Speaker 01:
Well, it would depend on the situation, Your Honor.

[02:47:36] Speaker 01:
For instance, if a state submits a revision to, and states can always revise their plans, but if a state submits a revision to its plan and EPA denies the revision, that is reviewable.

[02:47:45] Speaker 01:
if a state or any other entity petitions EPA for rulemaking to monitor, to change the rule claim?

[02:47:52] Speaker 02:
They have to petition for rulemaking as in a whole new rule as opposed to just getting a change or an adjustment to our obligations under this rule?

[02:48:01] Speaker 01:
I'm not talking about, I mean, I'm talking about outside the state plan process.

[02:48:05] Speaker 01:
In the state plan process,

[02:48:07] Speaker 01:
The states can modify their plans.

[02:48:09] Speaker 01:
They can submit a modification.

[02:48:11] Speaker 02:
They can change their plans, but what if they cannot meet the emission targets as predicted because things have gone awry or they haven't turned out the way predicted, at least for that state or for that portion of a region?

[02:48:27] Speaker 01:
Well, again, EPA has committed to working with states in that situation.

[02:48:31] Speaker 01:
They can certainly come in.

[02:48:32] Speaker 01:
They could, I assume, perhaps bring another action based on newly arising grounds if that qualifies.

[02:48:40] Speaker 01:
I mean, there certainly are mechanisms by which either that EPA will act or that if absolutely necessary, it can come to the court.

[02:48:49] Speaker 01:
But however, we certainly don't think that there is any reason to believe that

[02:48:54] Speaker 02:
Just to make clear, so EPA agrees that if somebody was really in a pickle, and they said to EPA help, we need to adjust our plan, we can't make the targets, we're going to need another five years or 10 years, and you said no, we think you haven't done enough to reduce consumer demand, that could come to court.

[02:49:12] Speaker 01:
I believe, I'm sure there would be a mechanism by which that could come to the court, Your Honor.

[02:49:18] Speaker 01:
But of course, we don't believe that that is likely to occur.

[02:49:22] Speaker 01:
The rule provides numerous options and ways for states to comply.

[02:49:27] Speaker 01:
They can utilize a rate-based plan, which would be based on emission rate credits.

[02:49:36] Speaker 01:
And there are numerous ways that facilities in a state can obtain credits.

[02:49:41] Speaker 01:
They can obtain it through a trading program, or they can obtain it by direct interactions with renewable sources in other states.

[02:49:50] Speaker 01:
Even if two states do not have a trading agreement, a state in, say, Georgia, someone who develops renewable energy in Texas or Georgia that wants to sell emission credits to a

[02:50:07] Speaker 01:
A utility in another state can go to the second state to Ohio or Montana or whatever and that that state can issue states can issue.

[02:50:16] Speaker 01:
They're called ERCs, emission reduction credits, to sources in, renewable sources in other states.

[02:50:21] Speaker 01:
They don't, it doesn't have to be an agreement.

[02:50:22] Speaker 01:
There are some restrictions to ensure that emission credits meet the same, you know, speak the same language as the same currency, but there are flexible options so that even if two states are not in a trading arrangement,

[02:50:38] Speaker 01:
that a state in a utility, an effective utility in one state can access emission credits for resources in other states.

[02:50:48] Speaker 02:
So this is a real... I thought there was an issue though if you have a mass-based program, mass-based rate program that almost, it doesn't translate into credits that you could get from a rate-based system program.

[02:51:04] Speaker 01:
There are actually, in some circumstances, it does, Your Honor, and I have to look this up because this is a complicated part of the statute.

[02:51:14] Speaker 01:
But states can, there are mechanisms for states and rate-based states to obtain credits for renewable resources in mass-based states.

[02:51:29] Speaker 01:
where the rate-based state can issue the credit directly to that facility.

[02:51:34] Speaker 01:
You don't have to, if you're a renewable energy source building one, you don't have to get the credit issued by your own state.

[02:51:41] Speaker 01:
You can go to another state and have it issue the credit and then facilities in that state can utilize it.

[02:51:46] Speaker 01:
So even if one state's a mass-based state, renewable energy sources in that state can provide credits to utilities in other, in rate-based states.

[02:51:58] Speaker 16:
We were presented an example of Montana and California.

[02:52:01] Speaker 16:
Can you respond to that?

[02:52:03] Speaker 16:
Yes, Your Honor.

[02:52:05] Speaker 01:
There's a number of misstatements, I believe, in that analysis.

[02:52:09] Speaker 01:
The first is it misrepresents how EPA applied Building Block 3 in the proposal.

[02:52:16] Speaker 01:
EPA did not analyze how much capability each state had to develop renewable energy.

[02:52:24] Speaker 01:
Building Block 3 in the proposal was based on state

[02:52:28] Speaker 01:
Right, renewable performance standards that states had.

[02:52:33] Speaker 01:
In other words, what if any goals states had already developed in a region, not the Interhec, but in certain subregions, what goals they had for developing

[02:52:44] Speaker 01:
renewable energy and then applied that to the amount of renewable energy already in a state.

[02:52:50] Speaker 01:
And that was, as I talked about in the notice section of the argument, this was the big complaint that many people had.

[02:52:56] Speaker 01:
That system, because it was based on what states had already done or what states hadn't already done in the case of a state like Montana,

[02:53:04] Speaker 01:
It meant that states that had done nothing to address CO2 emissions had much less stringent rates than states that already had done.

[02:53:13] Speaker 01:
So it basically said, you know, if you were out working out every day and running really hard in training, you're going to have to do more.

[02:53:20] Speaker 01:
Somebody who sat on a couch in order to get fit would have to, you know, walk out to the refrigerator or something, you know.

[02:53:26] Speaker 01:
It was not a system, and the system generated many negative comments, and that's why EPA switched to a system that is based on what is achievable on a regional basis using the least stringent of the three interconnects.

[02:53:40] Speaker 01:
So that it's not true to say that the column that he's referring to in his chart

[02:53:46] Speaker 01:
2878 to 79 reflects some determination by EPA of what could be achieved in Montana.

[02:53:54] Speaker 01:
Montana has a lot of wind resources and can develop renewable energy if they can.

[02:53:58] Speaker 01:
So it's based on a false premise.

[02:54:01] Speaker 01:
You can't compare the numbers

[02:54:04] Speaker 01:
in this to the numbers in the final rule, because they're calculated on a different basis.

[02:54:09] Speaker 01:
Secondly, it misstates California, as I think California pointed out in its own letter, it misstates what California requires.

[02:54:16] Speaker 01:
Yes, California requires, if it's going to enter into a trading program, that there be a common currency.

[02:54:23] Speaker 01:
In other words, that a rate, a unit of rate in one state represents the same thing as a unit of rate or reduction in the other, that they have the same, excuse me, that a quantity of generation

[02:54:33] Speaker 01:
in the state it's linking with represents the same amount of reduction deductions as a quantity of generation in California.

[02:54:41] Speaker 01:
But that's just necessary for any trading system to work.

[02:54:46] Speaker 01:
And it has applied that system very, very flexibly.

[02:54:49] Speaker 01:
California has taken the lead in trying to

[02:54:52] Speaker 01:
reach out to other states.

[02:54:54] Speaker 01:
It's already established some linkages with other states and even into Canada to set up a system for trading.

[02:55:01] Speaker 01:
The rule, as the state's letter that it filed yesterday indicated, its proposed rule is very open to state trading.

[02:55:10] Speaker 01:
So it's simply not the case that California wants to lock itself away.

[02:55:13] Speaker 01:
It's just the opposite.

[02:55:14] Speaker 01:
And let me also point out, Your Honor, that nine northeastern states on their own, the regional greenhouse gas initiative states, set up a nine-state trading block to deal with greenhouse gas emissions.

[02:55:29] Speaker 01:
And as Mr. Myers stated, it has resulted in 40% reduction in CO2 emissions in eight years.

[02:55:35] Speaker 01:
There's simply no reason to believe that trading programs are not going to develop.

[02:55:40] Speaker 01:
The utilities ask for them.

[02:55:42] Speaker 01:
The State asks for them.

[02:55:44] Speaker 01:
Every time EPA has set one up in the NOXIP call, for instance, the CARE rule, the CASPER rule, and when Congress set one up in Title IV, successful trading programs have developed.

[02:55:56] Speaker 01:
And there's absolutely no reason to believe that won't happen here.

[02:55:59] Speaker 01:
One of the State EPA received

[02:56:01] Speaker 01:
reams of comments saying, we want to be able to use trading, make the rule trading friendly, and that's what EPA has done here.

[02:56:07] Speaker 01:
It provides for either emission-based trading credits or rate-based trading credits.

[02:56:13] Speaker 01:
It also provides mechanisms for states to exchange or utilize facility units, as I was speaking earlier, even if they're not specifically trading.

[02:56:22] Speaker 01:
And it is important to understand what we mean by trading, because petitioners, particularly in their briefs, have

[02:56:28] Speaker 01:
use it a couple of different ways.

[02:56:30] Speaker 01:
They've used trading, to some extent, to talk about any interstate interaction.

[02:56:35] Speaker 01:
So even if it is a one-to-one, state A buys credits directly from or arranges for renewable energy in state B and gets credits, that's not what EPA considers to be trading.

[02:56:49] Speaker 01:
Trading is some sort of marketable, fungible, freely tradable emission.

[02:56:57] Speaker 01:
credit or reduction, some sort of instrument that's used for compliance that's traded on the market.

[02:57:02] Speaker 01:
The difference being between contracting with a farmer to buy whatever his one apple tree produces as opposed to buying apples at the grocery store.

[02:57:12] Speaker 01:
It's important to remember what we're talking about.

[02:57:14] Speaker 01:
And EPA did do modeling to show that

[02:57:19] Speaker 01:
that states could, that the rule could be achieved even without trading.

[02:57:24] Speaker 01:
It didn't involve some back-to-back interstate.

[02:57:28] Speaker 19:
Mr. Ray, if you're drifting a little bit from your speaker, I think it's going to be hard for people to hear in the overflow.

[02:57:36] Speaker 01:
So EPA has demonstrated that the rule is achievable without trading.

[02:57:41] Speaker 01:
There are many things states can do in their plans to achieve reductions.

[02:57:46] Speaker 01:
They can use demand reduction and energy efficiency measures.

[02:57:50] Speaker 01:
They can

[02:57:52] Speaker 01:
There's just local sliced solar panels on people's roofs and things that reduce demand.

[02:57:57] Speaker 01:
There are many things states can do.

[02:58:00] Speaker 01:
Cold plants can meet their limits simply by changing to gas, not necessarily building a new plant, just re-powering to gas.

[02:58:07] Speaker 01:
So there are many things states can do.

[02:58:09] Speaker 01:
States have many options.

[02:58:10] Speaker 01:
There is a lot of flexibility built into the rule.

[02:58:14] Speaker 01:
As I heard Judge Kavanaugh, Judge Mullett said earlier, the record is trading programs have developed.

[02:58:20] Speaker 01:
They've been very successful.

[02:58:21] Speaker 01:
And there's simply no reason to believe they won't be here.

[02:58:25] Speaker 18:
If there are no more questions, your time is up.

[02:58:30] Speaker 01:
OK.

[02:58:30] Speaker 18:
Thank you, Your Honor.

[02:58:31] Speaker 18:
All right.

[02:58:32] Speaker 18:
Mr. Pollard.

[02:58:42] Speaker 14:
Good afternoon, Your Honors.

[02:58:46] Speaker 14:
My time is short and it's late, so I will quickly cover a few points.

[02:58:51] Speaker 14:
We've heard a number of arguments challenging EPA's technical determinations of whether the best system is adequately demonstrated and achievable.

[02:58:58] Speaker 14:
I'm just going to respond to points regarding building blocks 2 and 3 and the role of trading in the rule.

[02:59:03] Speaker 14:
With respect to Building Block 2, petitioners contend that a 75% utilization rate for the existing gas fleet can't be maintained over time or will result in excessive wear and tear on their equipment.

[02:59:15] Speaker 14:
My clients include the operator of the largest gas-fired fleet in the country.

[02:59:19] Speaker 14:
Based on my client's collective experience, a 75% utilization rate is eminently reasonable and the record demonstrates that even higher rates can be achieved.

[02:59:27] Speaker 14:
The fact that the existing fleet was operated at a lower rate in the past reflects nothing more than the failure of the system to factor the cost of carbon emissions into dispatch decisions.

[02:59:37] Speaker 14:
This rule would cause utilities to start accounting for those costs in those decisions, aligning well with the market shift away from coal into gas and with the way the power sector works.

[02:59:48] Speaker 14:
Petitioners also argue that building Block 3 is unachievable, but the record reflects incremental renewable generating capacity well in excess of the amounts needed to comply.

[02:59:57] Speaker 14:
EPA assumed that the amount of new renewable capacity added to the grid will never exceed the rates at which it was added between 2010 and 2014.

[03:00:07] Speaker 14:
The reality is, is technology advances and prices decline and even more rapid penetration of renewables is inevitable.

[03:00:15] Speaker 14:
But EPA conservatively capped its projections at rates the grid has already successfully demonstrated it can integrate.

[03:00:21] Speaker 14:
So from the perspective of my clients, its rates are modest and reasonable.

[03:00:26] Speaker 17:
On the role of trading... Could I just ask you, regarding building block number two, you had a sentence in there about the only reason more hasn't happened is because of something of conservation or... The only reason it hasn't happened in the past is because the current system as it exists doesn't factor the cost of carbon emissions into dispatch decisions.

[03:00:53] Speaker 14:
On the role of trading, petitioners don't come out and say trading is unlawful.

[03:00:57] Speaker 14:
They can't.

[03:00:59] Speaker 14:
That's because many of them advocated for EPA to include trading within the rule and because trading enjoys near universal support within the power sector as the most cost-effective means of achieving emissions reductions.

[03:01:10] Speaker 14:
So, to avoid contradicting themselves, petitioners don't argue that trading is per se unlawful.

[03:01:15] Speaker 14:
Instead, they make a series of claims that all boil down to the central contention that the rules' goals are inadequately demonstrated or can't be achieved in the absence of a federally mandated trading program.

[03:01:28] Speaker 14:
These claims are meritless.

[03:01:30] Speaker 14:
First, trading isn't necessary to achieve the rules of mission performance rates.

[03:01:34] Speaker 14:
Utilities can invest directly in lower emitting generation and thereby generate the credits their own fossil units need to comply.

[03:01:41] Speaker 14:
While petitioners say that's not possible, the record and experience of my clients demonstrates otherwise.

[03:01:47] Speaker 14:
My clients operate in over 20 states.

[03:01:50] Speaker 14:
and nearly as many different markets.

[03:01:52] Speaker 14:
The one thing they have in common is that they've all managed to reduce emissions in their generation portfolios by investing in lower-emitting generation.

[03:02:00] Speaker 14:
Petitioners have no good answer for why they can't do the same.

[03:02:04] Speaker 14:
All that trading does is it allows utilities to void making those direct investments themselves and let somebody else who might have more experience building something like a wind farm do it instead.

[03:02:14] Speaker 14:
This has consistently resulted in the required reductions being achieved at least cost to consumers.

[03:02:20] Speaker 14:
And that's the reason so many states and utilities, including both my clients and many petitioners alike, advocated strongly for EPA to include trading within the rule.

[03:02:28] Speaker 14:
And EPA gave us all exactly what we asked for, with a final rule that makes it simple for states to incorporate trading into their plans.

[03:02:37] Speaker 14:
Petitioners contend that EPA had to show sources in each state could comply using only those credits generated in their own state.

[03:02:44] Speaker 14:
Nothing in the statute commands EPA to take such a balkanized approach and pretend each state would function as an island.

[03:02:51] Speaker 14:
Electricity doesn't observe state boundaries, and transactions for power and renewable energy credits regularly cross state lines.

[03:02:59] Speaker 14:
So petitioners' attempt to suggest EPA had a burden to demonstrate the system would work if credits never crossed state lines is a fabrication that makes no sense and has no basis in the statute.

[03:03:11] Speaker 14:
As a final point,

[03:03:13] Speaker 14:
I'd simply like to remind the Court that the strategies on which this rule is based are exactly those my clients have been implementing through their investments in lower-meaning generation, and they've done so while continuing to provide reliable and affordable power to their customers.

[03:03:26] Speaker 14:
Their collective experience doing so, and our very presence here today, demonstrates the reasonableness and achievability of the rule.

[03:03:33] Speaker 14:
Thank you.

[03:03:35] Speaker 18:
Mr. Brownhill, how about two minutes?

[03:03:39] Speaker 04:
Thank you, Your Honor.

[03:03:41] Speaker 04:
I just have three points I'd like to make.

[03:03:43] Speaker 04:
The first point is that under the statute, it's EPA's burden to show that its system is demonstrated and that its rule is achievable with its best system of emission reduction, not with non-best system measures that have not met the best system criteria.

[03:04:00] Speaker 04:
Under the case law of this court, that demonstration takes place under, must show that the rights are achievable under the variable conditions that confront the industry, and as my colleague said, under the most adverse reasonable conditions.

[03:04:14] Speaker 04:
Those include things like

[03:04:16] Speaker 04:
The electric utility system includes municipal utilities and rural co-ops that may only have one electric generating station for one load of demand and that has very little opportunity for replacement generation.

[03:04:32] Speaker 04:
That's discussed at 3345 to 46 of the Joint Appendix.

[03:04:37] Speaker 04:
The other thing about trading, coming back on the point that I think Judge Millett and others raised earlier, the rule makes interstate trading optional.

[03:04:48] Speaker 04:
That's 60.5810C and provides a variety of interstate trading options that states can adopt that don't

[03:04:57] Speaker 04:
communicate with each other.

[03:04:59] Speaker 04:
As Judge Millett raised, there are restrictions between – I'm trading between rate-based and mass-based plans.

[03:05:04] Speaker 04:
One of the restrictions is that the power has to follow the emission rate credit.

[03:05:09] Speaker 04:
That is, there has to be a power purchase agreement or a production agreement.

[03:05:13] Speaker 04:
And that's a real problem for this headroom analysis because power doesn't flow across interconnects, so that investing in renewable energy in California is not going to provide the power that's needed to meet demand while complying with the rates.

[03:05:26] Speaker 04:
Multi-state plans don't communicate with states outside the multi-state plans.

[03:05:32] Speaker 04:
Under the proposed federal plan, a federal rate plan doesn't communicate with a state mass plan and vice versa.

[03:05:38] Speaker 04:
We don't even know what federal plan is going to be adopted yet because it's set out for proposal.

[03:05:42] Speaker 04:
The second point goes to what happens if things unravel.

[03:05:46] Speaker 04:
The only way fossil units comply, as I said earlier, is with emission rate credits.

[03:05:51] Speaker 04:
Emission rate credits are defined in the Bureau of Joint Appendix 441 as a tradable compliance instrument.

[03:05:59] Speaker 04:
One creates in some other jurisdiction or acquires from some other jurisdiction this tradable compliance instrument.

[03:06:08] Speaker 04:
Emission rate credits cannot be obtained if they're not available.

[03:06:12] Speaker 04:
One can't operate the fossil unit because you have to back up each megawatt hour of fossil generation with an emission rate credit.

[03:06:19] Speaker 04:
And if one doesn't have an emission rate credit, that means that megawatt hour that was needed to generate the emission rate credit isn't being generated, so you lose that generation as well.

[03:06:29] Speaker 04:
Under this regional system that EPA has created of generation shifting, achievability must take into account

[03:06:36] Speaker 04:
the ability to satisfy electricity demand as well as the national rates.

[03:06:39] Speaker 04:
There must be enough emission rate credits so that enough fossil units can operate in compliance with the national rates that together with the renewable energy megawatt hours can meet demand.

[03:06:53] Speaker 04:
My final point is that my

[03:06:56] Speaker 04:
A friend from EPA mentioned costs.

[03:06:59] Speaker 04:
EPA considered costs but not benefits.

[03:07:02] Speaker 04:
They concede they didn't do any cost-benefit analysis under the Supreme Court's decision in Michigan.

[03:07:07] Speaker 04:
No regulation is rational if it does substantially more harm than good.

[03:07:14] Speaker 04:
The failure to consider cost-benefit analysis here is another reason to set aside the rule.

[03:07:19] Speaker 18:
Thank you, Your Honor.

[03:07:28] Speaker 06:
Thank you.

[03:07:29] Speaker 06:
Thank you.

[03:07:29] Speaker 06:
Just four very quick points.

[03:07:31] Speaker 06:
On the standard review, Council cited small refiners.

[03:07:35] Speaker 06:
That's a 211C case.

[03:07:37] Speaker 06:
That was generic arbitrary capricious review.

[03:07:39] Speaker 06:
The standard here is sufficiently higher on EPA.

[03:07:43] Speaker 06:
It's the Lyme Association case, the Exis case, and the Portland case.

[03:07:46] Speaker 06:
It's a hard-look standard, and EPA has the burden.

[03:07:49] Speaker 06:
That's undisputable.

[03:07:50] Speaker 06:
Second, on the question of what happens if it's not working for states,

[03:07:54] Speaker 06:
There is no mechanism in the rule to fix that problem, period.

[03:07:58] Speaker 06:
There's a footnote that council cited in the preamble.

[03:08:00] Speaker 06:
The preamble is not binding, does not provide any legal authority.

[03:08:03] Speaker 06:
The actual rule has no mechanism.

[03:08:05] Speaker 06:
If a state can't comply, it's gonna be forced into a federal plan, which takes away Montana's legal right to be governed by a state plan instead of a federal plan.

[03:08:14] Speaker 02:
Would that moment of force, of giving up on your state plan and being forced into a federal plan be a judicially reviewable action or point?

[03:08:24] Speaker 06:
You could challenge the federal plan, but again, the burden is for EPA to show achievability now.

[03:08:30] Speaker 06:
That's undisputed.

[03:08:32] Speaker 06:
The third point, the wind number, Judge Tatel.

[03:08:35] Speaker 06:
The wind number in 2012 was 130131.

[03:08:41] Speaker 06:
The Wynn number in 2013 was 1,087.

[03:08:45] Speaker 06:
EPA is telling the court that it can base a rule on assuming that higher number happens for seven straight years.

[03:08:55] Speaker 05:
Well, is government counsel wrong that the tax credit has been renewed?

[03:08:59] Speaker 05:
The tax credit expired.

[03:09:02] Speaker 05:
He told me, he said it's been renewed.

[03:09:04] Speaker 06:
Let me please explain.

[03:09:06] Speaker 06:
So what happened is the tax credit expired.

[03:09:09] Speaker 06:
So everyone knew it was expiring.

[03:09:10] Speaker 06:
So they took all the 2013 wind and blew it into 2012.

[03:09:16] Speaker 06:
If the tax credit keeps running, then it will back at the average rate, around 6,000.

[03:09:21] Speaker 06:
The problem is the 2012 year is inflated by the expiration of the tax credit.

[03:09:27] Speaker 19:
I'm not saying that you can't... I don't think the record reflects that that wasn't the only data that they used.

[03:09:33] Speaker 19:
They used a lot of other data to come up with their figure.

[03:09:35] Speaker 06:
Your Honor, no.

[03:09:36] Speaker 06:
That's not accurate.

[03:09:37] Speaker 06:
That was the only basis.

[03:09:39] Speaker 06:
The only basis.

[03:09:39] Speaker 06:
And I urge your argument for choosing that number.

[03:09:42] Speaker 06:
It was the only basis.

[03:09:44] Speaker 06:
It's not the product of a model.

[03:09:46] Speaker 06:
It's not the product of economic analysis.

[03:09:48] Speaker 06:
That was the only, only basis in the rule.

[03:09:51] Speaker 06:
And then the final point on trading.

[03:09:54] Speaker 06:
Montana and states like it absolutely need California.

[03:09:58] Speaker 06:
They need it for trading and even for this notion that if you don't have trading you need cooperation.

[03:10:03] Speaker 06:
But you can't get reductions from existing renewables.

[03:10:06] Speaker 06:
You need renewables.

[03:10:08] Speaker 06:
You have to get California's permission to cite the renewables in California's

[03:10:12] Speaker 06:
jurisdiction under a sovereign authority, you're not going to get that unless California is cooperating.

[03:10:16] Speaker 06:
And that's what this rule creates.

[03:10:18] Speaker 06:
It creates a situation where the states that can over-comply, California, Massachusetts, Washington, etc., are given significant power and leverage over states like

[03:10:29] Speaker 06:
Montana, like West Virginia, like Wyoming.

[03:10:32] Speaker 06:
And this is a really big problem in this particular area, because those states, California, Massachusetts, Washington, think that we're laggards.

[03:10:40] Speaker 06:
They think that the Clean Power Plan does not go far enough.

[03:10:44] Speaker 06:
They think it should go further.

[03:10:45] Speaker 06:
So what the states are going to do, and this is a natural economic incentive, is they're going to follow California's example.

[03:10:51] Speaker 06:
They're going to say, hey Montana, hey Wisconsin, hey Wyoming, if you don't want to be governed by a federal plan, which is really bad, this is what you need to do.

[03:10:58] Speaker 06:
This is your price of admission.

[03:11:00] Speaker 06:
You've got to comply with what we are doing in California, not what the EPA has mandated.

[03:11:05] Speaker 06:
That is the system the Clean Power Plan creates.

[03:11:08] Speaker 06:
That is patently unlawful.

[03:11:09] Speaker 06:
Thank you very much.

[03:11:11] Speaker 18:
All right.

[03:11:13] Speaker 18:
Let me just say on behalf of the whole court, I feel like we've all been through a marathon today.

[03:11:19] Speaker 18:
You all have done your part.

[03:11:20] Speaker 18:
All of you have, I can't imagine the hours and days and weeks you've put into this case.

[03:11:25] Speaker 18:
And you have given us all we need and more probably to work on it.

[03:11:31] Speaker 18:
So it's now up to us.

[03:11:32] Speaker 18:
But I just want to thank you on behalf of the court for all of your efforts and all of your time.