PIOGA takes issue with RGGI proposal in formal comments

This article appears in the February 2021 issue of The PIOGA Press.

Department of Environmental Protection regulations that would enable Pennsylvania’s participation in the Regional Greenhouse Gas Initiative (RGGI) drew more than 13,000 responses before the public comment period closed on January 14. The proposal, championed by Governor Tom Wolf, would impose a shrinking cap on carbon dioxide emissions from electric generators.

PIOGA was among those taking the opportunity to provide input on the proposal, and our comments make the following major points:

  • Pennsylvania’s participation in RGGI without authorization by the General Assembly is unlawful.
  • Pennsylvania’s Air Pollution Control Act (ACPA) does not authorize the regulation of CO2.
  • Neither the ACPA nor Pennsylvania’s Uniform Interstate Air Pollution Agreements Act authorizes the state to participate in RGGI through this rulemaking.
  • The proposed mandatory CO2 emission allowance fees constitute taxes that the legislature has not authorized.
  • Assuming that reducing current CO2 emissions is sound policy and that becoming part of the multi-state cap-and-trade program without legislative authorization is lawful, joining RGGI is not in Pennsylvania’s best interests.

On November 7, the Environmental Quality Board (EQB) published notice of its proposal to amend 25 Pa. Code Chapter 145 (relating to interstate pollution transport reduction) to add Subchapter E (relating to CO2 budget trading program) to establish a program to limit the emissions of carbon dioxide from fossil fuel-fired electric generating units with a nameplate capacity of 25 megawatts or more. Adoption of this proposal would enable Pennsylvania’s participation in RGGI, a regional CO2 budget trading program established among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont and Virginia (joining in 2021).

PIOGA comments

PIOGA’s comments stated that without regard to whether the Commonwealth’s participation in RGGI is sound policy―which it is not―the proposal is unlawful because there is no valid Pennsylvania legislative authorization for various aspects of the proposal.

In particular, PIOGA stated that the state’s Air Pollution Control Act does not authorize the regulation of carbon dioxide, and no Pennsylvania court has ever held that CO2 constitutes air pollution or is a greenhouse gas (GHG) under the APCA.

Even assuming the APCA authorizes DEP’s regulation of CO2,  neither the APCA nor the Uniform Interstate Air Pollution Agreements Act (UIAPAA) provides the necessary legislative authorization for Pennsylvania to participate in RGGI. Section 4004(24) of the APCA merely authorizes DEP to “formulate” interstate air pollution control agreements for consideration by the General Assembly.

PIOGA also asserted that the regulation’s mandatory CO2 emissions allowance fees constitute taxes that the legislature has not authorized. The association’s comments cited testimony delivered at a hearing on the RGGI proposal by the House Environmental Resources and Energy Committee in which attorney Anthony R. Holtzman explained the difference between a “tax” and a regulatory “fee,” emphasizing that the latter is merely intended to cover the cost of administering a regulatory scheme. By contrast, the allowance trading program at the heart of RGGI is expected to generate $300 million annually, which would be greatly in excess of administering the program.

“That the ‘investment’ of the auction proceeds is the primary purpose of this proposed rulemaking―and not a significant or meaningful reduction of “CO2 emissions in this Commonwealth” or regionally, nationally or globally―is shown by the relatively small, estimated reductions in CO2 emissions in Pennsylvania, the RGGI states, nationally and globally,” PIOGA stated.

That the proposed regulations are primarily intended to raise revenue is also shown quite clearly by the fact that there is no discussion in the proposal’s preamble or Regulatory Analysis Form (RAF) regarding how or whether reducing CO2 emissions through RGGI will improve or even affect Pennsylvania climate and precipitation. “The obvious conclusion is that adopting the regulations will have no effect on climate change in Pennsylvania,” the association pointed out.

Further, Section 9.2(a) of the APCA limits disbursements of the revenue arising from the auctioning of allowances, from DEP’s Clean Air Fund “for use in the elimination of air pollution.” Distributing revenue for the wide range of energy efficiency and renewable energy projects discussed in the rulemaking’s preamble, such as upgrading appliances and weatherizing buildings, does not fall within this authority.

Not in Pennsylvania’s best interests

Assuming for the sake of argument that reducing current CO2 emissions is sound policy and joining RGGI without legislative authorization is lawful, joining RGGI is not in Pennsylvania’s best interests. PIOGA offered these points to bolster that contention:

  • Pennsylvania’s CO2 emissions have decreased without RGGI. CO2 emissions from fossil-fuel-fired electric generating facilities in 2018 were roughly 33 percent below 2005 emissions. Pennsylvania emissions have declined at about the same rate since approximately 2005 as they have in the RGGI states.
  • Pennsylvania natural gas is the foundation for reducing GHG emissions. GHG emissions from the electricity production sector decreased approximately 38 percent from 2005 to 2017 at a time when natural gas was overtaking coal as the primary generation source.
  • Pennsylvania is an energy producing and net-energy exporting state, unlike all other RGGI states. Our generation will decline under RGGI because generators will be operating in a higher-cost environment as compared to generators in neighboring Ohio and West Virginia.
  • Predicted Pennsylvania CO2 emissions reductions with RGGI are trivial.
  • Joining RGGI would cause Pennsylvania electricity generation to migrate to non-RGGI neighboring states, resulting in significant economic losses to Pennsylvania.
  • Joining RGGI would significantly increase Pennsylvania energy prices to manufacturers and industrial users.
  • Natural gas is essential to the reliability and resiliency of the electric grid with increased use of wind and solar energy.
  • Oil, natural gas and coal all are essential to life as we know it, and essential for the foreseeable future.

Finally, PIOGA pointed out that DEP has not appropriately considered the effects of its proposal on small business—something required under the Regulatory Review Act (RRA). PIOGA asserted that a more thorough analysis of the projected increased cost of electricity to Pennsylvania’s industrial and commercial customers is required in view of DEP’s failure to do what is required by the RRA.

Legislative and other comments

Members of the General Assembly also submitted comments against the RGGI proposal, with many making the same arguments as PIOGA.

In a joint letter, the legislature’s top four officials—Speaker of the House Bryan Cutler, House Majority Leader Kerry Benninghoff, Senate President Pro Tempore Jake Corman and Senate Majority Leader Kim Ward―emphasized that not only would adoption of the regulation harm the citizens of Pennsylvania and the energy industry, but DEP lacks the authority to promulgate the rule. The legislative leaders asserted that the mechanism at the core of the regulation is a tax and not a fee, and only the General Assembly can levy a tax. Further, the APCA does not give DEP authority to control carbon dioxide emissions, and while DEP may work with other states to formulate interstate air pollution control compacts, ultimate approval of any such agreements lies with the legislature.

The legislative leaders also strongly expressed their concerns about the economic impacts on Pennsylvanians of adopting the RGGI regulation.

Comments submitted by the House Environmental Resources and Energy Committee reiterated DEP’s lack of statutory authority to join RGGI and impose a tax in the guise of a fee. The committee also pointed out that DEP violated the APCA’s mandate to hold public hearings within impacted communities (DEP held a series of open virtual hearings), argued that the modeling on which the regulation is based is obsolete, noted that Pennsylvania’s CO2 emissions are declining significantly without RGGI and warned that the economic and fiscal risks of participation in RGGI are very real.

Comments from the House Environmental Resources and Energy Committee urged the Independent Regulatory Review Commission to disapprove the proposed regulations, again making the point that DEP lacks authority under the APCA and that the program’s fee is in reality a tax. The House committee made note that all other RGGI states except New York joined the initiative after specific legislative authorization.

RGGI-related provisions in the governor’s proposed budget

The FY 2021-2022 state budget proposed by Governor Wolf on February 3 would create an Energy Communities Trust Fund to provide direct support to dislocated workers and communities experiencing impacts from the closure of existing power plants. The fund would be financed by a portion of the expected $300 million in revenue generated by the sale of allowance under Pennsylvania’s RGGI program.

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