Just before the New Year holiday, separate federal court actions dealt body blows to stiffer air pollution limits on vehicles and power plants. Industry sources hailed the rulings as a break for consumers facing higher fuel and energy costs.

Critics such as the industry-backed Institute for Energy Research (IER) in Washington, DC, were warning that not only higher power prices but a good chunk of generating capacity — up to 30 GW — could be lost as a result of the stiffer EPA requirements.

A judge in U.S. District Court for Eastern California last Thursday blocked implementation of California’s landmark Low Carbon Fuel Standard (LCFS) as discriminating against out-of-state and foreign crude oil producers and fuel ethanol suppliers.

On Friday the U.S. Court of Appeals for the District of Columbia Circuit stayed the U.S. Environmental Protection Agency’s (EPA) Cross-State Air Pollution Rule (CSAPR) affecting major electric generation plants while legal challenges are ongoing. The EPA rule would require more than 1,000 power plants in 27 states to cut smog-creating emissions that drift downwind to neighboring states.

In California, where the Air Resources Board (CARB) had taken action to modify the fuel standards, the decision by Judge Lawrence O’Neill was hailed by two organizations opposed to the LCFS — the National Petrochemical & Refiners Association (NPRA) and the Consumer Energy Alliance.

Calling the district judge’s ruling a “victory” for Californians traveling throughout the state in vehicles using gasoline or diesel, NPRA President Charles Drevna said the CARB standard would have raised the cost of gasoline and diesel for all consumers in a state where drivers already “pay the highest fuel prices in the nation. If fully implemented, the standards would have hurt consumers by discriminating against their use of renewable fuels from the Midwest and crude oil from our neighbor and ally Canada.”

O’Neill ruled that the defendants (CARB, et al.) failed to establish that no alternative means exist to address their legitimate concerns of combating global warming. Because of the standard’s discrimination and CARB’s inability to satisfy the test of an absence of adequate alternatives, the judge decided that LCFS violated the “dormant commerce clause.”

A CARB spokesperson said the state agency “respectfully disagrees” with the court’s decision and is filing an appeal. “The LCFS is an even-handed standard that encourages the use of cleaner low-carbon fuels by regulating fuel providers in California. It does not discriminate against any fuels on the basis of geography,” the spokesman said. “We will also ask the District Court (and if necessary the Ninth Circuit) to stay its preliminary injunction order in the shortest time possible.”

The decision in the DC Circuit appellate court dealt with the rule finalized by EPA last July, and for which the federal agency’s third-party cost-benefit analysis estimated benefits of $120 billion annually, compared with costs of about $2.4 billion. The benefits were mainly attributed to eliminating some 13,000 premature deaths annually.

Some states and major power generators, such as Ohio-based American Electric Power (AEP), filed lawsuits alleging that the 2012-14 timeline for implementing the EPA rule was too short. AEP said the rule would force it to close a number of coal-fired generation plants, including ones in Ohio and West Virginia (see Daily GPI, July 8, 2011).

From the gas industry’s perspective, a side benefit of the EPA move to cut power plant emissions was the prospect for higher gas prices (see Daily GPI, Sept. 26, 2011). However, an analysis of the rule by Bentek Energy LLC concluded that the addition to the Clean Air Act would wreak havoc on power and natural gas transmission grids if implemented as planned (see Daily GPI, Aug. 25, 2011).

The court action came after IER issued an updated report in mid-December alleging that the EPA rules could force enough coal-fired generation offline to threaten national security. An update of a previous report added coal-fired plant closures in Wisconsin, Michigan and Georgia, totaling 1.5 GW, along with canceled coal-to-natural gas conversions, that would threaten security and add to consumers’ financial burdens, according to IER’s Dan Simmons, director of state and regulatory affairs.

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