Obama’s Court Loss, Pennsylvania and Ex-Im Shut Down – July 5, 2015

Today we talk about five things in the news for the week of June 27, 2015:

  1. Obama Loses in SCOTUS on Mercury
  2. The Pennsylvania State Government Shut Down
  3. Export-Import Bank Loses Charter
  4. Debt Crises Have Natural Gas Implications
  5. Water Use Declining Because of Natural Gas Powerplants

1.  Obama Loses in SCOTUS on Mercury

Last week, the Supreme Court dealt a blow the the Environmental Protection Agency’s Mercury and Air Toxics Standards, called Utility MACT or MATS depending on who you ask.  Writing this mercury rule took two basic steps.  First, the agency decided that mercury regulations were “appropriate and necessary.”  Then, the EPA wrote rules while taking costs and benefits into account.  When the rule was finalized in late 2011, leaders from coal country, like Rep. Ed Whitfield (R-KY), said the rule would be the end of coal powerplant construction.  The EPA’s Gina McCarthy, at that time the Assistant Administrator for Air and Radiation, argued the rule was justified.  Its costs were estimated at $9.6 billion, while its benefits were estimated at $37 to $90 billion

That cost and benefit calculation came too late, according to Justice Scalia, writing for a five-person majority of the Supreme Court:

EPA argues that it need not consider cost when first deciding whether to regulate power plants because it can consider cost later when deciding how much to regulate them. The question before us, however, is the meaning of the “appropriate and necessary” standard that governs the initial decision to regulate…By EPA’s logic, someone could decide whether it is “appropriate” to buy a Ferrari without thinking about cost, because he plans to think about cost later when deciding whether to upgrade the sound system.

Writing for four dissenters, Justice Kagan wrote:

The comparison is witty but wholly inapt… A better analogy might be to a car owner who decides without first checking prices that it is “appropriate and necessary” to replace her worn-out brake-pads, aware from prior experience that she has ample time to comparison shop and bring that purchase within her budget. Faced with a serious hazard and an available remedy, EPA moved forward like that sensible car owner, with a promise that it would, and well-grounded confidence that it could, take costs into account down the line.

In a blog post, the EPA’s new Assistant Administrator for Air and Radiation, Janet McCabe, said she was disappointed, but:

[T]his decision is very narrow. It did not invalidate the rule, which remains in effect today. In fact, the majority of power plants are already in compliance or well on their way to compliance. The Court found that EPA should have considered costs at an earlier step in the rulemaking process than it did. The court did not question EPA’s authority to control toxic air pollution from power plants provided it considers cost in that step.

Many in the industry, like SNL Energy, expressed similar sentiments and argued the rule has already done its job:

In order to assess the potential grid effects of the ruling, SNL Energy contacted every state environment or clean air agency listed on a National Association of Clean Air Agencies survey as having granted generation owners extensions to comply with MATS, and a few states that were not included in the survey. In total, 80% of U.S. generation capacity, including half of coal-fired capacity, was in compliance with MATS by April 2015.

Some commenters believe this spells trouble for the President’s Clean Power Plan regulations on greenhouse gas emissions from powerplants, including attorney Andrew Grossman at the Cato Institute’s blog:

The Supreme Court’s failure to vacate the Mercury Rule reflects its recognition that the bulk of the rule’s costs—and it was one of the most expensive government regulations ever—has already been borne by industry. So there’s no urgency, at this point, to putting the rule on hold; to the contrary, doing so would be disruptive. But the flip side is that this means utilities and their customers spent tens of billions of dollars complying with a regulation that was always unlawful. One can imagine that the Court won’t be eager for that to happen again.

Most in the environmental community don’t think much of the ruling, including New York University Law Professor Richard Revesz, writing in The Hill:

The cost issues at the center of the mercury rule case do not apply to the Clean Power Plan, as the later rule was drafted under a totally separate Clean Air Act provision that explicitly calls for analysis of costs. The EPA has already conducted extensive economic reviews of the Clean Power Plan, which was designed to prioritize flexible compliance options and minimize costs. In short, nothing in this decision calls into question the legal legitimacy of the Clean Power Plan.

In a Supreme Court term filled with momentous cases, the repercussions of this ruling will be minor.

2.    The Pennsylvania State Government Shut Down Over Gas Tax

As of the beginning of the month, the Pennsylvania government is without a budget.  Apparently, that is not the end of the world, according to the Times Leader:

“The governor’s veto does not mean there is a shutdown. There will be little disruption,” Sheridan said. “The only impact the impasse could have now is on vendors, contractors, and grantees. State employees will continue to work and they will be paid, per a 2009 court decision.”  Christopher Craig, chief counsel for the State Treasurer’s Office, said people should not “be terribly panicked or concerned.”

Sheridan said state parks will remain open, and public benefits like unemployment compensation, food stamps and medical assistance will continue to be disbursed. Craig said anything related to public health, safety and welfare will continue.

The lack of drama may cause the impasse to drag out, however.  How did we get here?  Gov. Tom Wolf is the new Democratic Governor of the state, and he ran on the idea of imposing a new 5% severance tax on the natural gas industry.  He won overwhelmingly, but so did the Republican legislature.  He confidently said “we’re going to place a severance tax on the extraction of natural gas” in his a inaugural address.

But really all he could do is send his tax proposal to the legislature only to have it ignored. So, his only real option to force action is to veto the budget until he gets his way.

There is no real sign of an end game coming out of a July 1 meeting of the two sides, according to ABC 27:

“I don’t want to give you the impression that we’re close,” said Representative Bill Adolph, the House Appropriations Chairman. “We are far apart on numbers and that’s because what the governor would like to spend takes a lot of taxes.”…

“Certainly there’s a level of frustration that we didn’t get to a final agreement with the governor,” said Representative Dave Reed, the majority leader. “But in the end, he (Wolf) made the decision to shut down government. Now we want to make the decision to reopen it for our neediest citizens.”

The stalemate also includes a fun sideshow debate over privatization of booze sales.

3.  Export-Import Bank Loses Charter

Right now, the Export-Import Bank homepage says “Authority Has Lapsed.”

Ex-Im Homepage

The LA Times explains:

The Export-Import Bank, created by President Franklin Delano Roosevelt to help foreign customers buy U.S. goods, has been reauthorized 16 times, usually with little fuss and often with strong Republican support.

But Congress let the bank’s charter expire this week, halting any new loans.

This is partially an energy story.  Politico’s rundown of the situation included this quote:

Other Republicans say they are looking for a path to yes but just can’t find one. Rep. David McKinley (R-W.Va.) said he wants to modify the bank so that it isn’t used as often for large corporations’ benefit and it backs off its “ideological warfare” on his state’s coal industry.

“Get rid of those two things and I can support it,” McKinley said. “But it ain’t gonna happen.”

Sen. Bob Corker (R-TN), among others, has spoken out against the bank’s decision to stop supporting coal projects, with a few exceptions.  Bank President Fred Hochberg defended this decision, saying it was partially required by law and partially an important environmental goal.

4.  Debt Crises Have Natural Gas Implications

Natural gas has a bit of a role in each of the two big debt crises that popped up last week.  Puerto Rico is heavily dependent on oil and wanting to shift its utilities to natural gas, according to the Wall Street Journal:

The Puerto Rico Electric Power Authority and its creditors were close to a deal Tuesday that would allow the cash-strapped utility to pay more than $400 million to bondholders, said people familiar with the matter, potentially staving off what investors feared might be the first default of many from the U.S. commonwealth….

Creditors have proposed a $2 billion plan to revamp Prepa, saying it would provide the agency with liquidity while replacing its antiquated, oil-burning generators with natural-gas facilities….Separately, a consortium of NRG Energy Inc., ITC Holdings Corp.and York Capital Management also is proposing a $3.5 billion plan to modernize Prepa. That would include building new natural-gas facilities and transmission lines and selling power to Prepa, saving the authority money.

Natural gas may also wind up providing an escape hatch for Greece, as the LA Times reports:

[Greek Prime Minister] Tsipras made his second visit to Russia in less than three months last week for talks with President Vladimir Putin that were seen as an exploration of what the two countries with troubled relations with the EU could do to help each other. Russia wants relief from sanctions imposed by the Western alliance for its role in the Ukraine crisis, which Greece could have delivered by voting against the six-month extension that was approved on Monday and required unanimous agreement among the 28 member states.

Tsipras went home from his meetings in St. Petersburg with a $2.77 billion contract to build and operate part of Russia’s planned new pipeline system that would bypass Ukraine, where existing lines for delivering natural gas to Western Europe are located.

5.  Water Use Declining Because of Natural Gas Powerplants

Climate Central, a group of “science journalists,” put out a great story and infographic showing that natural gas powerplants are driving down water use:

As the U.S. has undergone a rapid and massive shift to natural gas from coal, one benefit has gone almost entirely overlooked: the amount of water needed to cool the nation’s power plants has dropped substantially…

That shift has translated into big changes in the amount of water being withdrawn from lakes and rivers to cool power plants. And it’s an important shift as nationally, 38 percent of all water withdrawn is for power plants.

During the most recent 7-year period with reliable data, water use fell dramatically to 33 trillion gallons in 2012 from 52 trillion gallons in 2005. On average, the current natural gas power plants use four times less water per megawatt-hour generated than their coal-fired counterparts.