Coal industry, Hill allies target fine print of Obama climate plan

Introduction

Paul Bailey made the White House pitch on July 31. Flanked by six colleagues from the American Coalition for Clean Coal Electricity, the coal industry’s most public voice, Bailey pressed the case for “achievable” greenhouse gas emissions standards for coal-fired power plants.

At the Office of Information and Regulatory Affairs, the White House’s regulatory clearinghouse, the lobbyist presented a table full of economists with the coal group’s latest analysis — a survey of carbon pollution from 22 coal plants built in the U.S. over the past five years. Today’s most efficient coal-burning utilities, they still emit carbon dioxide at nearly twice the rate pegged as the first-ever emissions limit for new power plants.

Bailey reiterated longstanding industry arguments about the costs of stringent environmental regulation — lost jobs, higher energy costs. He offered the coalition’s own emissions standards. And he issued a plea: Don’t kill coal plants.

The pitch marked an opening salvo in the battle brewing over carbon regulations for power plants, a key pillar of President Obama’s climate plan. On June 25, in a speech at Georgetown University, Obama unveiled a national blueprint for cutting carbon pollution, framing it as “a plan to protect our country from the impacts of climate change.”

The president directed the Environmental Protection Agency to “put an end to the limitless dumping of carbon pollution from our power plants,” and laid out a schedule for the agency to issue rules for both new and existing facilities by June 2014.

For the coal industry, the stakes instantly intensified. EPA’s carbon regulations could halt construction of future coal plants, experts say, and potentially shutter many of the more than 500 plants operating today.

Now, the industry stands poised to push back against Obama’s proposals in three fundamental ways, interviews with two dozen coal lobbyists, utility executives, environmental advocates, scholars and former EPA officials suggest:

• Industry is sure to flex its muscles in the regulatory process, inundating the EPA with comments, analyses, legal opinions and technical documents, and picking apart its draft plans.
• Plan critics will engage lobbyists to influence the rules’ language, enlisting support from other federal agencies, and offering alternatives to the White House.
• And, the coal industry is sure to oppose strict rules in a scorched-earth strategy infused with aid from allies in Congress.

In the weeks since Obama’s announcement, coal companies, coal-burning utilities and their allies have begun to unfurl their show of force. The day Bailey visited the White House, executives of American Electric Power — one of the nation’s largest utilities, with coal powering 60 percent of its fleet — also appeared there, at the Office of Management and Budget, relaying concerns about the precedent set by an aggressive rule for new plants. The next day, lawmakers and industry representatives from the coal-reliant state of West Virginia sounded a similar note during a meeting with EPA administrator Gina McCarthy. Coal-heavy utilities including Duke Energy, DTE Energy and Southern Company have since followed suit.

Some utility trade groups are airing TV ads exhorting the Obama plan as “a tax we can least afford.” Others are “educating” policy makers about its perils, including those at the Energy Department, the Council of Economic Advisors and others in the White House.

“We’re talking to everybody,” said Bailey, of the coal-advocacy coalition, which is backed by 31 railroad, mining and utility companies. “We’re trying to show we have a responsible alternative.”

Industry representatives insist they are not trying to stop carbon regulations — yet. Instead, they say, they aim to shape what has come to be seen as inevitable. “The climate issue is here, and there will be regulations,” explains John McManus, American Electric’s environmental manager, who made the trip to OMB to highlight the company’s experiences with the latest technology for curbing carbon emissions at coal plants. “We want the carbon rules to be as reasonable as possible.”

Environmentalists — many advocating their own carbon agendas — see a familiar pattern.

“The industry comes out swinging whenever EPA does anything to regulate power plants,” said Abigail Dillen, who heads the coal program at Earthjustice, and who has clashed with the coal and utility lobbies in recent regulatory battles involving coal ash, mercury emissions and other plant hazards.

If past playbooks are any indication, she explains, these groups will work to delay and weaken the Obama administration’s carbon rules at every turn, from the EPA, to the White House, Congress and the courts. “What always strikes me,” Dillen adds, “is just how successful this industry is at avoiding regulation.”

The coal industry has flexed its political muscle at record levels in recent years. Since January 2011, coal companies have funneled $14.2 million into federal campaign contributions, according to the Center for Responsive Politics; another $41 million went toward lobbying the federal government. A handful of large member companies, including American Electric, Southern Company and Norfolk Southern, have combined to give more than $1.9 million to the industry’s two biggest trade organizations — the clean-coal coalition and National Mining Association — the Center for Public Integrity found. And that’s just a fraction of the groups’ total lobbying budgets, since corporate disclosure reports are voluntary.

Pushback has already reached the Hill. On August 6, Republican leaders of the House Energy and Commerce Committee called on Obama administration officials to testify about the president’s climate plan. Summoning representatives from 13 agencies, including the EPA, committee leaders have scheduled hearings for September 18 — likely the first of many sessions.

“We seek to hear from relevant Federal agencies about U.S. climate change policies and the administration’s second term climate agenda,” wrote Rep. Ed Whitfield, a Kentucky Republican who chairs the Subcommittee on Energy and Power.

Whitfield is among the top House recipients of coal money. His spokesperson, Chris Pack, said the industry’s support has no impact on Whitfield’s actions. He notes that the coal industry employs 14,000-plus Kentucky residents, and provides nearly 92 percent of the state’s electricity. “The Congressman believes that eliminating coal-fired power plants will cost jobs and only put our country at a competitive disadvantage with countries like China and India, who are building new coal-fired power plants every day,” Pack added.

New focus on long-contentious issue

Obama’s speech may have signaled a new commitment to tackle the threat of climate change. Yet EPA officials have long considered how to curb carbon pollution from power plants, which produce almost 40 percent of domestic greenhouse gases. In 2011, EPA’s McCarthy, then head of the agency’s air office, began holding “listening sessions” — inviting more than two dozen utility executives, environmental advocates and policy experts to share input on how to design the novel regulatory program.

By March 2012, the EPA had published a proposal to limit the carbon emissions of new plants — by law, a necessary precursor to any rule on existing plants. In its draft, the agency put forth a uniform emissions standard for all power plants, including natural gas and coal, equal to what a cutting-edge gas facility emits. Experts say a gas plant could meet that standard, but not its coal counterpart. Under the plan, the EPA would require companies looking to build coal plants to install equipment for capturing and storing carbon pollution, a costly and nascent technology.

The draft plan left the coal industry reeling at the prospect of what it calls “an effective ban” on coal plants. “Any person looking at it would say, ‘You may be paranoid,’ ” said Luke Popovich, of the National Mining Association, “ ‘but even paranoids have enemies.’ ”

Scott Segal, a D.C. lobbyist who represents coal-burning utilities, puts it bluntly: “They wrote the rule to do away with coal-fired power plants.”

Coal and utility groups hurriedly pushed back. Entities, big and small, have flooded the EPA with official comments, some totaling in the hundreds of pages, all criticizing the proposal. Most present highly technical and legal arguments, but the industries have their climate deniers, too.

Peabody Energy, the nation’s leading coal producer, has compiled 348 pages’ worth of reports, questioning the EPA’s finding that greenhouse gases endanger public health, and contending that global-warming science is unproven.

Peabody declined an interview request, but gave the Center a three-paragraph statement saying “any actions that would reduce coal-fueled generation harm Americans, who would feel the same pain at the plug that we all feel at the pump.” Laying out a “Peabody Plan,” the company wrote: “We stand ready to partner with the President and the Congress to invest in solutions that deliver our energy and environmental goals.”

The mining association has twice met with air officials, urging them to consider the additional “public health and welfare impacts” of a stringent carbon rule, such as the loss of coal jobs. Other groups, including the Electric Reliability Coordinating Council, which Segal directs, have blasted the proposal as “regulation at its worst” in public hearings.

The most vociferous industry claim is that, by relying on the same pollution standard for separate facilities and fuels, the EPA’s draft plan violates the federal Clean Air Act. Historically, the agency has set different limits for coal and gas plants.

For the carbon rules, the “EPA proposed something that really was unprecedented,” notes Jeffrey Holmstead, who ran the EPA’s air division under President George W. Bush. Officials, he asserts, “can’t say the best technology for a coal-fired power plant is not to build a coal-fired power plant.”

Holmstead, now representing coal and utility companies at D.C. lobbyist Bracewell & Giuliani, where Segal also works, argued as much last year in an unusual lawsuit challenging the EPA proposal. Rather than wait for a final rule to be implemented, four companies, each planning to build a future coal plant, sued the agency in the federal Appeals Court for the D.C. Circuit. The case was dismissed as premature, but Holmstead says it had the desired effect.

“If EPA had finalized what it had proposed,” he asserts, “it almost certainly would have been struck down in court.”

Now, the agency is revising its proposal for new power plants — attracting a record three million comments. The “re-proposal,” currently with the White House’s Office of Information and Regulatory Affairs, or OIRA, is slated for public release “by no later than September 20,” a June 25, 2013, presidential memorandum said.

Those familiar with the rulemaking say they expect the agency will shore up the re-proposal’s policy rationale to insulate it from the legal attacks likely to follow. That could mean EPA officials will adopt a more traditional, dual standard — one for coal, and one for gas. It could also mean they will ease up on a pollution limit for coal plants, a prospect vigorously pushed by coal-friendly voices, and vehemently opposed by their environmental foes.

The EPA’s McCarthy declined to be interviewed. Obama’s top energy and climate advisor, Heather Zichal, did not respond to interview requests.

Environmentalists are hoping the EPA’s re-proposal proves to be as strong as its original. They seek an emissions standard that would still require future coal plants to capture and store some amount of carbon dioxide, thus diverting the greenhouse gas from the atmosphere.

“That’s the right answer,” said David Doniger, chief climate attorney for the Natural Resources Defense Council, who has lobbied the EPA, the White House and even utility companies on the group’s vision for carbon-limiting regulations. “That’s the only way to burn coal.”

Climate fight shifts to obscure, influential agency

On July 2, EPA air officials sent a confidential draft of their re-proposal to OIRA, shifting the battleground to an obscure yet powerful agency often criticized for favoring industry. OIRA’s staff, consisting mostly of economists, serves as the White House’s window into the regulatory world. Yet its hard-edged cost-benefit analyses and regulatory reviews, critics say, sometimes act more to impede and weaken protective environmental regulations.

“OIRA is a very politicized institution,” asserts Rena Steinzor, law professor at the University of Maryland and president of the Center for Progressive Reform, an OIRA watchdog group.

In 2011, she and two CPR colleagues catalogued 10 years’ worth of OIRA’s public meetings over federal rulemakings, 1,080 in total. Industry lobbyists and company executives had visited the OIRA staff five times as often as environmental and other public-interest groups had, they found. Invariably, industry pushback triggered delays and watered-down fixes at OIRA, the study concluded. For the EPA, according to the report, OIRA changed its proposed rules 84 percent of the time after industry lobbying, compared to 65 percent for other federal agencies.

Coal and utility companies have seen such results before. Consider the EPA’s protracted rulemaking over coal ash, waste from the production of electricity. In 2010, the agency unveiled a plan to regulate coal ash disposal for the first time, setting off a frenzy of lobbying by coal and utility groups. At OIRA, staff economists have held more meetings on this one environmental rule than on any other in the office’s history, 47 to date. Of those, 34 involved industry representatives; environmentalists and representatives of the public accounted for 13.

The imbalance has had a clear effect: Now, post-OIRA review, the EPA’s proposal features a less stringent, less costly regulatory option that amounts to guidelines for the states. “Coal ash exemplified the complete politicization of the regulatory process,” said Steinzor, yet it “was not an isolated incident.”

On the EPA’s carbon-limiting rules, she warns, “The interference has probably already begun.”

Coal and utility groups began visiting OIRA about the carbon rule for new power plants as far back as February 2012, records show. Like the coal ash rule, the industry sessions have outnumbered those attended by environmental groups by 10 to four so far.

Some environmentalists fear the worst, but others point to one fundamental difference between the EPA’s carbon regulations and most other environmental rulemakings submitted for OIRA’s review: President Obama’s vocal support has put a very public spotlight on the process.

“We expect OIRA to be on the team,” said the NRDC’s Doniger. “We’d be upset if it’s not.”

Coal and utility lobbyists say they are not sure what to expect. “You hope that somebody pays attention to you,” said Bailey of the coal coalition, “and you make your case wherever you can.”

In a statement, an OIRA spokesperson said the agency “maintains a balance between protecting the health, welfare, and safety of Americans and promoting economic growth, job creation, competitiveness, and innovation.”

Referring to the carbon regulations, the spokesperson said, “The Environmental Protection Agency was directed by the President to issue a proposed rule … in a timely manner, and we expect that the deadlines in the Presidential Memorandum will be met.”

Coal allies on the Hill

Certainly, coal industry allies on the Hill have begun to take notice. Already, they are convening hearings on Obama’s climate plan and sending letters to the White House opposing the carbon rules. A July 22, 2013 letter, signed by 23 House members, all but one Republican, from coal-heavy states, implores the president to reject the EPA’s proposal for new power plants and instead “stand with our constituents, our coal miners, and our coal communities.”

Members of Congress have introduced a litany of legislation meant to curtail the EPA’s ability to regulate greenhouse gas emissions. About half a dozen efforts target the agency’s regulatory authority, including a House budget “rider” that would block the implementation of carbon rules for power plants. Other efforts, such as the Energy Consumers Relief Act, take a broader aim. Passed by a 232-181 vote in the House Aug. 1, the legislation would require the Energy Department to review and perhaps veto any EPA regulation yielding economic costs of more than $1 billion — a figure sure to capture the carbon rules.

And then, there are subtler attacks. Recently, House Republicans have set their sights on a numeric formula known as the “social cost of carbon.” That’s the Obama administration’s assessment of the toll carbon pollution inflicts on public health, the environment and agriculture. In June, after a lengthy inter-agency discussion, administration officials raised their estimate, setting off GOP calls for hearings and investigations. Last month, lawmakers pushed through an amendment that would prohibit the EPA from using the social cost of carbon when crafting its power plant rules, among other regulations.

To environmentalists, the message seems clear.

“It’s the industry reminding the president that they have tremendous political power,” said Brad Johnson of Forecast the Facts, which tracks the lobbying efforts of fossil-fuel companies. “They are saying, ‘We will fight this on every front.’ ”

Some industry lobbyists are already predicting the kind of full court press evidenced by coal and utility groups in the recent regulatory battle over mercury emissions. In February 2012, after nearly two decades of fierce opposition, EPA officials issued a final rule requiring power plants for the first time to control emissions of mercury and other toxic air pollution. Viewed as a victory by environmental groups — some of which had sued the EPA to force regulation — the mercury rule will kick into effect for existing plants in 2015.

The final rule did not end coal’s fight. A coalition of coal companies and coal-burning utilities swiftly turned to the courts; by October 2012, they had sued the EPA, challenging its mercury standards in a case pending today. They turned to their friends on the Hill as well. Relying on a law allowing Congress to review major regulations, the groups tried to roll back the EPA’s mercury rule — for good. In June 2012, their resolution made it to the full Senate floor, where it failed by a 46-53 vote.

Some industry representatives believe a similar campaign over the EPA’s carbon rules would fare well. Strict EPA regulations would send shock waves through not just the coal industry, they say, but the broader, more influential fossil-fuel industry as well.

For now, the coal industry is taking a wait-and-see approach. “We’ll make our point very plain and assert it very strongly, as we always do,” said the mining association’s Popovich.

Michael Beckel contributed to this report.