Unless the D.C. Circuit Court of Appeals issues a mandate to proceed with the CAIR vacature, CAIR as written will go into effect on January 1. That’s 26 days from today.

Recent Developments
Back in October the Court asked those involved in the lawsuits as well as major generators and affected states if they wanted the entire rule thrown out or kept in place until the EPA revises it or it is superseded by new legislation. All of the states except North Carolina collectively summarized their position by stating “Because vacating CAIR without any substitute in place will hinder, rather than facilitate, the States’ compliance with health-based air quality standards, all of the amici States agree that CAIR should be left in place until EPA promulgates a revised regulation that complies with [the] court’s decision.”

North Carolina continues to oppose EPA’s petition on interstate trading, but believes remand without vacature is appropriate. But the state does not oppose staying the mandate until a revised rule is implemented. In other words all affected states agree that CAIR should be preserved until a new, stronger version is administratively or legislatively put in place.

In addition, all of the major generators except FPL (Florida Power and Light) and the Florida Association of Electric Utilities stated support for keeping CAIR until a suitable replacement is implemented, with the caveat that it be preserved “Only for so long as EPA reasonably needs and no longer than the end of CAIR Phase 1 (2014).”

So based on the Court’s somewhat unusual action of requesting comments from all affected parties on their own ruling and the largely unanimous response that the rulings mandate should be stayed (i.e. be allowed to remain in-place as a federal administrative rule), it’s reasonably likely that we’ll see the Court rule sometime in the next 26 days in favor of preserving CAIR until its various legal problems are remedied, whether administratively by EPA or through new legislation.

For the Court to ask all parties their opinion on whether the mandate should be stayed and then to ignore the vast majority of the responses would seem illogical. But then again the complex interplay of legal precedent, stakeholder impacts, and administrative rule-making does not always produce logical outcomes. At least the answer will be forthcoming before the month is out. And the even the absence of a ruling means that starting next month, CAIR as-written still applies.   

If the mandate for CAIR’s vacature is not stayed, most of the states are so far behind in meeting NAAQS Regional Haze, 8-Hour Ozone, and/or PM.2.5 requirements that all of them (which had been counting on CAIR to meet this triad of emissions-related challenges) will be immediately in violation of the Clean Air Act and its amendments. In this case, we will likely see a scramble to enact rules modeled on Maryland, New York, California or North Carolina – all of whom have implemented state-level regulations that are stricter than and supersede CAIR. Other generators may follow Wisconsin’s lead and lean toward defaulting to BART regulations. These regulations are stricter than CAIR and have more of a “command and control” nature. While suppliers of SCRs and SNCRs might find this outcome in their interests (since nearly all coal-fired plants would be forced to add post-combustion controls), the economic inefficiency associated with this scenario troubles me, having spent the earlier part of my career as an energy economist. 
 
Preparing Now for Whatever the Outcome
Folks who added SCRs or SNCRs to comply with the regulations in large part won’t be affected by the CAIR decision. They have to run year-round starting next month anyway, for a variety of reasons. These include state construction permits, regulatory goodwill, and the prospect of a public relations nightmare by not proceeding with year-round operations as long planned-for. But anyone who delayed completion of combustion modifications might consider buying annual allowances now while they’re still relatively cheap. If the Court sides with the wishes of the majority of parties from which it recently received briefs, those allowances are going to be north of the $5,000/ton market prices immediately preceding the initial U.S. Circuit Court. Generators could also move quickly to adopt optimization, which would allow them to inform their plans for meeting the new, stricter regulations in the most cost-effective manner possible.

We’ll continue to follow the CAIR story here on the Optimization Blog. But whatever the outcome one thing is relatively certain: emissions regulations going forward are not going to be less stringent than CAIR.