Supreme Court Showdown: EPA Defends Carbon Capture Amid Power Industry Backlash

The Environmental Protection Agency (EPA) has doubled down on its stance that carbon capture is “adequately demonstrated” in a brief filed with the U.S. Supreme Court as part of a bid to urge the high court to allow the agency’s contentious Carbon Pollution Standards to remain in effect while legal challenges continue.

The Supreme Court is expected to rule on a stay of the power plant greenhouse gas (GHG) rule in the coming days. This explainer lays out the key contentions about and arguments for and against the EPA’s controversial rule.

What Is the Issue Before the Supreme Court?

At dispute is the case, West Virginia v. EPA (No. 24-1120) and its 16 consolidated cases, which concern the EPA’s May 9, 2024–finalized so-called “Carbon Pollution Standards.” The standards are detailed in the“New Source Performance Standards for Greenhouse Gas Emissions from New, Modified, and Reconstructed Fossil Fuel-Fired Electric Generating Units; Emission Guidelines for Greenhouse Gas Emissions from Existing Fossil Fuel-Fired Electric Generating Units; and Repeal of the Affordable Clean Energy Rule.”

The EPA’s Clean Air Act Section 111 rules, which became effective on July 8, 2024, essentially set emission guidelines for existing coal-fired and oil/gas-fired steam-generating units and revisions to the New Source Performance Standards (NSPS) for GHG emissions from new and reconstructed fossil fuel-fired stationary combustion turbines and steam generating units undergoing significant modifications.

On May 9, upon publication of the rule, 24 states filed challenges to the rule at the U.S. Court of Appeals for the District of Columbia:  West Virginia, Indiana, Alabama, Alaska, Arkansas, Florida, Georgia, Idaho, Iowa, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, and Wyoming. Seven industry groups filed separate challenges: National Rural Electric Cooperative Association (NRECA), National Mining Association, Electric Generators for a Sensible Transition, Midwest Ozone Group, Edison Electric Institute (EEI), NACCO Natural Resources Corporation, and Appalachian Region Independent Power Producers Association.

On July 19, in a three-page decision, the D.C. Circuit ruled that petitioners had not met the stringent requirements for a stay of the controversial rules pending the court’s review. The court granted the EPA’s suggestion that the case be “expedited as an alternative means of protecting all parties’ interests,” looking to ensure the case will be argued and considered within the court’s 2024 term.  Petitioners were given 14 days to propose formats and schedules for briefing the consolidated cases.

In the same order, the federal court directed that the case be expedited, and it has since established a schedule under which opening briefs are due on Sept. 6, and briefing will conclude by Nov. 1, 2024. (For more on the specifics of that decision, see: Federal Court Rejects Stay on EPA’s Carbon Pollution Standards in Setback for Power Industry.)

On July 29, the states of Ohio and Kansas urged the Supreme Court to stay the rule. “If the EPA’s rule stands today, there will be no way to unwind its significant consequences. Our nation’s power plants will have no choice but to make major and irreversible changes,” their application states. “The EPA overstepped three statutory guardrails: it adopted a rule that is neither adequately demonstrated nor achievable; it denied the States their statutory powers, and it double-regulated a source contrary to the statute’s text. And because of the urgency of the harm to power suppliers and the public, the equities lean heavily in favor of pausing the EPA’s flawed rule.”

The Supreme Court has since received filings from a coalition of 21 states, the District of Columbia, four cities, and the California Air Resources Board opposing applications for a stay of final agency action. A handful of utilities have also filed opposition to a stay. These include members of the Power Companies Climate Coalition—an unincorporated association of companies that advocate for “responsible solutions to address climate change”: Pacific Gas and Electric Co. Consolidated Edison, New York Power Authority, Sacramento Municipal Utility District, and Los Angeles Department of Water and Power.

What Are the Key Contentions From the Power Industry?

A key sticking point for the power industry is that the rule emphasizes CCS as the best system of emission reduction (BSER), mandating 90% CCS for existing coal units operating beyond 2039 and new baseload combustion turbines. Compliance dates for coal units extend to January 2032, with exemptions for units ceasing operation by then.

The rule also applies stringent standards to new gas turbines operating above a 40% capacity factor and moves up the CCS compliance deadline to 2032. New baseload units also need to comply with phased standards, with an initial “phase one” standard based on efficient design and operation of combined cycle turbines and a “phase two” standard based on 90% capture of carbon dioxide (CO₂).

As a key part of their argument in the D.C. Circuit, some power groups detailed how the EPA’s reliance on CCS as the BSER is flawed. “CCS is not ‘adequately demonstrated’ as required by the Clean Air Act, and EPA has not shown that all three elements of CCS—capture, transport, and storage of CO₂—can be deployed nationwide by 2032, let alone such that standards based on 90% carbon capture are ‘achievable,’” said the Edison Electric Institute (EEI), a trade group representing investor-owned utilities, and other power companies in a petition for review filed at the D.C. Circuit on May 24.

While the EPA’s rule seeks to outline examples of working CCS projects, the agency’s examples merely “show that CCS is an emerging technology,” the industry has argued. To fulfill the Clean Air Act’s adequate demonstration requirement, “EPA must demonstrate that all three components can function at scale, at required efficiency levels, for all units to which the requirements would apply,” they said.

Ultimately, petitioners at the D.C. Circuit argued that “Irreparable harm is imminent and unavoidable absent a stay.” To comply with the final rule’s deadlines, “companies must spend millions of dollars and make irreversible choices among compliance options. And these significant costs cannot be recovered for utilities or their customers if the CCS provisions of the Rules ultimately are vacated,” they said.

Why Is Part of the Power Sector Supportive of the EPA’s Rule?

On the flip side, power industry supporters of the rule, including some of the nation’s largest utilities, argue in court filings that well-designed and durable emission standards could bolster regulatory predictability and help the industry make informed decisions regarding investments in the necessary technologies and resources.

A key legal argument addresses the contention that the EPA’s rule implicates a major question under West Virginia v. EPA, 142 S. Ct. 2587 (2022), a major Supreme Court decision that officially struck down the Obama-era Clean Power Plan and declined to grant the EPA the authority, under  Section 111(d) of the Clean Air Act, to set emission caps determined by what a system can achieve. While the 2022 decision restricts the EPA from requiring “generation shifting,” the power companies supportive of the EPA’s rule suggest the rule focuses only on technology that enhances the operation of lower carbon sources.

“West Virginia also made clear that EPA could—as it has for five decades—promulgate a BSER based on ‘the application of measures that would reduce pollution by causing the regulated source to operate more cleanly,’” the Power Companies Climate Coalition told the Supreme Court in an Aug. 19 brief.  Following West Virginia, moreover, Congress passed the Inflation Reduction Act (IRA), which substantially extended the tax credit for CCS, they note. 

In another key point, supporters underscore the EPA’s efforts to preserve flexibility in the rule. “EPA preserved a role for flexible compliance measures such as averaging and trading,” the brief argues, for example. “Also, the agency designed additional types of compliance flexibility, including one-year extensions for sources that are unable to comply due to challenges outside of their control or when needed by a grid operator for reliability.”

What Did the EPA Tell the Supreme Court?

In a brief filed in the Supreme Court on Aug. 19, the EPA urged the court to deny the applications for a stay of its Carbon Pollution Standards.

“Although applicants invoke the major-questions doctrine and claim that EPA exceeded its statutory authority, they do not meaningfully dispute EPA’s interpretation of the Act. They instead criticize EPA’s application of the Act to the specific technology at issue here, objecting to EPA’s technical and scientific judgments regarding the dependability, feasibility, and cost of carbon capture,” the agency argued in the brief authored by the Department of Justice Solicitor General Elizabeth Prelogar. “And in raising those objections, they largely ignore the hundreds of pages of analysis that EPA provided in the rule itself and elsewhere in the administrative record.”

As the D.C. Circuit found, applicants are “unlikely to succeed on their claims that EPA exceeded its statutory authority,” the agency said. In addition, it said applicants are also unlikely to succeed on claims that 90% carbon capture is not “adequately demonstrated” and the EPA’s standards are not “achievable.” The Clean Air Act “assigns the task of judging adequate demonstration and achievability to EPA: The best system must be one that “the Administrator determines has been adequately demonstrated” (emphasis added), it said. “And determining whether a particular degree of emission reduction is ‘achievable’ requires the type of practical scientific judgment for which the Agency has primary expertise.”

The EPA noted that the primary disputes in the case focus less on carbon capture in general and more narrowly on the specific rate of capture required in the rule (90% of the carbon dioxide in a plant’s exhaust stream) and “the feasibility” of developing adequate facilities for capturing, transporting, and storing the captured carbon dioxide before January 1, 2032. On that matter, “A court should not second-guess EPA’s record-based judgment on those points—and certainly not in an emergency posture,” the agency declared.

To support its claim that CCS has been “adequately demonstrated,” the EPA pointed to several projects. These include the Argus Cogeneration Plant in California, which it said has captured approximately 270,000 metric tons of CO₂ per year since 1978, and the Bellingham Cogeneration Facility in Massachusetts, which operated a carbon-capture system from 1991 to 2005. Petra Nova in Texas, in addition, achieved a 92.4% capture rate, Plant Barry in Alabama achieved a 90% capture rate, and Boundary Dam Unit 3 in Saskatchewan, Canada, achieved an approximately 89.7% capture rate. The EPA also highlighted projects under development, such as Project Tundra in North Dakota and Project Diamond Vault in Louisiana, both designed to achieve 95% capture rates, and other projects targeting “90% or above” that have completed feasibility work.

As POWER has reported, EEI, in a filing in the D.C. Circuit, explained in detail why most of these projects are faulty examples of “adequately demonstrated” projects.

The EPA also argued that it had similarly found the 90% capture rate to be adequately demonstrated for new gas plants, explaining that the evidence relating to 90% capture at coal plants applied to gas plants “as well because ‘CO₂ capture at [coal plants] is identical to CO₂ capture at [gas plants]’ in all its ‘essential[s].’” The EPA also asserted that the transport of captured CO₂ has been adequately demonstrated, pointing to the transport of 500 million metric tons of CO₂ through more than 5,000 miles of pipelines across the U.S. over the past 20 years. Additionally, the EPA found that storing CO₂ in subsurface geologic formations is “well proven,” citing Department of Energy projects that have successfully injected over 12 million tons of CO₂.

What are the EPA’s Arguments Supporting the Rule’s Economic Viability?

Addressing challenges to its cost analyses for carbon capture and gas co-firing, the EPA countered that objections rely on the applicants’ own comments while ignoring evidence supporting the agency’s estimates. Notably, it maintained that its its responsibility under Section 111 is to balance “environmental benefit” against the “possibility of economic disruption,” a complex task entrusted to it and subject to judicial review only under the deferential arbitrary-and-capricious standard.

In the same vein, it argued that its analysis of the rule’s impact on grid reliability was well-studied. “In fact, EPA devoted multiple pages of analysis to ‘Grid Reliability Considerations,’” it said. The EPA “consulted extensively with the Department of Energy, the Federal Energy Regulatory Commission, state regulators, power companies, and other entities,” it said. “After evaluating facts such as ‘the downtime necessary to install the CO₂ capture equipment,’ the agency found that the system it had identified ‘can be implemented while maintaining a reliable electric grid.’”

Ultimately, the EPA argued that the economic implications of the Carbon Pollution Standards are reasonable. It claimed that the cost of CCS  has decreased due to “process improvements,” the “availability of better solvents,” and other “technological advances.” It also cited the expansion of the tax credit for carbon capture, which “offsets a significant portion of the capture, transport, and sequestration costs.”

The agency also explained that it tailored the application of CCS requirements to ensure cost-effectiveness. It identified CCS as the best system only for “long-term” coal plants and “base-load” gas plants—those that run frequently enough to make achieving a 90% capture rate economically feasible. In addition, the agency said it analyzed the rule’s various compliance strategies, including gas co-firing, and found them to be “cost-reasonable.”

Finally, in its brief, the EPA tackled power sector inferences the EPA “manifested a forbidden intent to induce early coal-plant closures.” Section 111 directs the agency to consider “cost” in identifying the BSER, the agency noted. “EPA reasonably found that, because capital costs must be amortized over time, the costs of installing carbon-capture or gas-co-firing technologies are reasonable for long- and medium-term plants, but not for plants that will close by the end of 2031,” it said.

“Applicants contend that the availability of that option may induce some coal plants, for their own economic reasons, to retire earlier than they otherwise would have. But no plant is required to do so and the possibility of some such incremental effect provides no basis for viewing the rule as a covert effort to coerce retirements or to shift generation among different sources,” it said.

—Sonal Patel is a POWER senior editor (@sonalcpatel, @POWERmagazine).