D.C. Circuit Strikes Down Trump-Era ACE Rule

The power sector may face changes in regulation governing their standards of performance. Why? Because the U.S. Court of Appeals for the District of Columbia Circuit recently struck down the Environmental Protection Agency’s Affordable Clean Energy (ACE) rule.

The ACE rule, issued by the EPA in the summer of 2019, replaced the Obama administration’s Clean Power Plan and would have loosened carbon reduction requirements for power plants. Under the ACE rule, the EPA left it up to the states to choose standards of performance for their power plants that “reflect a value of [heat-rate improvement] that falls outside” the ranges in the EPA’s chart. The ACE rule maintained the law only allows the EPA to set guidelines to reduce emissions at individual power plants with actions like increasing efficiency or upgrading boilers.

The D.C. Circuit’s ruling focuses on a central issue—how to use regulation to tackle climate change. The court held that the ACE rule “hinged on a fundamental misconstruction of Section 7411(d) of the Clean Air Act.” The court also held that the way the rule changed the regulatory framework to slow the process for reducing emissions was arbitrary and capricious.

Specifically, the court noted that the statute calls for federal-state cooperation in regulating existing sources. It gives distinct roles to federal and state agencies in arriving at what Section 7411 calls “standards of performance” for the emission of air pollutants.

From the court’s view, Section 7411 allows for “three distinct steps” involving three sets of actors. These include the EPA, the states, and the operations of regulated stationary sources to make sure they comply with the state agency’s standards of performance in accordance with EPA guidelines.

The D.C. Circuit told the EPA to “consider the question afresh in light of the ambiguity we see.” Several commentators have noted Justice Walker’s dissent in the opinion as a potential path forward for challenges to the ruling.

Since the ruling, the EPA has requested that the D.C. Circuit freeze the mandate vacating ACE while the EPA reviews its options for coal-fired plant carbon rules under the Clean Air Act. 

This decision shifts power back to the EPA to issue a new rule at a time when the Biden administration has made climate change a central focus of its agenda. Once the EPA’s review is complete, regulated entities, particularly power plants, may once again face changes in the standards of performance that will impact compliance.

Please contact any member of Phelps’ Environmental Law team if you have questions or need compliance advice and guidance.