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By Valerie Volcovici
WASHINGTON Aug 21 A U.S. appeals court on
Tuesday overturned a key Obama administration rule to reduce
harmful emissions from coal-burning power plants, sparking a
rally in coal company shares and relief among utility firms.
The U.S. Court of Appeals for the D.C. Circuit said in a 2-1
decision that the Environmental Protection Agency had exceeded
its mandate with the rule, which was to limit sulfur dioxide and
nitrogen oxide emissions from power plants in 28 mostly Eastern
states and Texas.
In the latest setback for the EPA, the court sent the
Cross-State Air Pollution Rule back for revision, telling the
agency to administer its existing Clean Air Interstate Rule -
the Bush-era regulation that it was updating - in the interim.
The EPA said it was reviewing the ruling.
The decision was cheered by some Republicans, who have made
the EPA and President Barack Obama's environmental policies a
major campaign theme ahead of November elections.
The agency is endangering a fragile economic recovery by
saddling U.S. industries with costly new rules, Republicans say.
"The Obama-EPA continues to demonstrate that it will stop at
nothing in its determination to kill coal," said Republican
Senator James Inhofe, one of the Senate's most vocal EPA
opponents. "With so much economic pain in store, it is fortunate
that EPA was sent back to the drawing board."
Power groups, which had argued that they could not meet the
timeframe or bear the financial burden of installing costly new
equipment, welcomed the court's decision. The EPA had estimated
it would cost $800 million annually from 2014.
"The court was clear in finding that EPA had overstepped its
legal authority in developing the rule," said Scott Segal,
director of the Electric Reliability Coordinating Council.
Coal company stocks, which have suffered this year as cheap
natural gas undercut demand for coal from power companies,
soared. Peabody Energy was 3.7 percent higher and Arch
Coal rose 1.1 percent.
U.S. natural gas futures briefly fell more than 3
percent after the ruling's announcement as traders bet it would
mean less demand for the cleaner fuel over the coming months. By
midday, prices had recovered those losses.
But some analysts saw little material impact from the
ruling, with dozens of coal-fired plants already slated for
closure due to other EPA regulations.
"It gives the EPA a little bit more of a black eye," said
Andrew Weissman, senior energy adviser at law firm Haynes and
Boone, which advises power and gas sector clients.
"But in the bigger picture, it many not be important in
terms of the practical consequences."
The EPA's rule was designed to reduce sulfur dioxide
emissions by 73 percent and nitrogen oxide by 54 percent at
coal-fired power plants from 2005 levels, improving health for
over 240 million people, according to the agency. The reasoning
is that unhealthy emissions from those plants, pollutants that
cause acid rain and smog, cross state lines.
Two of the three judges ruling on the case said the EPA had
exceeded its "jurisdictional limits" in interpreting the Clean
Air Act and imposed "massive emission reduction requirements" on
"By doing so, EPA departed from its consistent prior
approach to implementing the good neighbor provision and
violated the (Clean Air Act)," Judge Brett Kavanaugh said in the
The rule, known as CSAPR, also established a cap-and-trade
system that enabled power producers to comply with the emission
limits by buying, trading and selling pollution permits.
Environmental market traders said they were "surprised and
disappointed" by the ruling.
Power generators, such as Southern Co, had argued
that the Jan. 1 implementation date was too soon to design and
install the needed pollution control equipment.
Texas, along with the National Mining Association and the
International Brotherhood of Electrical Workers, also challenged
the EPA, arguing the rule would cause undue financial burden on
power producers and force companies to shut some older plants.
"Vindicating the state's objections to EPA's aggressive and
lawless approach, today's decision is an important victory for
federalism and a rebuke to a federal bureaucracy run amok," said
Greg Abbott, attorney general in Texas, where the power industry
had warned that the rule could result in peak-season blackouts.
Democratic Senator Tom Carper, who authored bills to curb
mercury, SOX and NOx emissions in previous years, said he would
try to push for new legislation if an appeal failed.
Segal of the Electric Reliability Coordinating Council said
the CSAPR, along with other EPA rules, did not show sufficient
respect or deference to state programs.
"Today's decision is a stern warning against EPA's recent
views," he said.
Luke Popovich, a spokesman for the National Mining
Association, hailed the ruling.
"This was not entirely surprising because it's the third or
fourth ruling by a federal court that shows the EPA to be
overriding the authority that the states have and conducting an
unlawful regulatory program against coal," he said.
Environmental groups warned that the decision would put
lives at risk and urged the EPA to appeal the decision.
"The court's decision significantly imperils long overdue
clean air safeguards for millions of Americans," said Vickie
Patton, general counsel of the Environmental Defense Fund.
Patton said the EPA should move in parallel to "swiftly put
in place replacement protections" and to ask the three-judge
panel and the full court to rehear the case.
John Walke, clean air director at the Natural Resources
Defense Council, said the dissenting opinion of Judge Judith
Rogers more accurately reflected the opinion of the court.
"The EPA can - and should - immediately appeal this
decision. The dissenting judge correctly follows the Clean Air
Act and prior rulings by this court. The majority opinion is an
outlier at odds with the court's own rulings as well as the
Clean Air Act," Walke said.
Judge Rogers said the other two judges were "trampling on
this court's precedent on which the Environmental Protection
Agency was entitled to rely in developing the Transport Rule
rather than be blindsided by arguments raised for the first time
in this court".
The appeals court had in June ruled 2-1 in favor of the EPA
in a challenge to the agency's greenhouse gas regulations.
(Additional reporting by Stephen James and Eileen O'Grady;
Editing by Russ Blinch, Matthew Lewis and Dale Hudson)