Southern Crop

Southern Crop

States Eye Trump To Tilt ‘Cooperative Federalism’ Balance In Their Favor

Many states are looking to President-elect Donald Trump’s administration to curb the authority of EPA and other agencies and shift decision-making on air quality policies to the states, hoping to tilt “cooperative federalism” — the Clean Air Act’s balance of EPA and states’ powers — in their favor after years of claiming EPA neglected the principle.

Under the Obama administration, a number of states in the South, Midwest and Mountain West have complained of stringent federal regulation and environmental policies imposed on them without adequate state consultation. Examples of such rulemakings include the Cross-State Air Pollution Rule (CSAPR), which some critics as far back as 2012 warned was at odds with a fair cooperative federalism approach by imposing air controls on some states.

Indications from the Trump transition team are that the incoming president will likely afford states more freedom to determine their own policies, sources agree, as part of broader push to pare back regulations by EPA and other agencies that Trump sees as inhibiting economic growth. This could mean, for example, more deference to states in their air law implementation planning, and fewer federal rules binding states to reduce ozone pollution.

Such an outcome could help to address concerns raised in recent years from some state environmental officials that EPA’s air rules have ignored the air law’s idea of cooperative federalism through which the agency sets emissions standards and then gives states significant leeway on implementing them as they see appropriate.

EPA’s critics say that the Obama administration’s air rules have been overly prescriptive on states and increased their costs of implementing the rules significantly without additional federal funding to states.

Although sources say that a Trump EPA shift in giving states more powers on air rules could help them reduce what they see as burdens of federal regulations, it would also mean giving more freedom to those that favor regulation of greenhouse gases (GHGs), or tougher measures to curb ozone or its precursors.

Some observers question whether Trump will allow greater federalism for all, or will “twist arms” in states that pursue environmental policies at odds with Trump administration doctrine.

Regulatory Battles

Many of the clean air battles between states and EPA have been over issues with specific relevance to the Western states, including the regional haze program that aims to restore visibility in national parks and wilderness areas, and ozone standards that Western state regulators fear will be very difficult, if not impossible to meet.

A related issue is EPA’s recently-revised “exceptional events” rule that aims to provide states with Clean Air Act regulatory exemptions for events such as wildfires or dust storms, common in the West, that can push pollution beyond permitted levels. While EPA touts the rule as a means to meet its ozone national ambient air quality standards (NAAQS), some state regulators view the rule as inadequate to meet that goal.

Oklahoma Attorney-General (AG) Scott Pruitt (R) — Trump’s intended nominee for EPA administrator — has often clashed with the agency and criticized what he sees as regulatory overreach in areas including GHG regulation, ozone limits, and regional haze. An avowed advocate of states’ rights, Pruitt established a “federalism unit” within his office with the goal of restoring state sovereignty and clawing back powers from federal government.

Industry attorney Scott Segal, with the Bracewell firm, said Dec. 7 that Pruitt as AG was “present and accounted for in the battle to keep EPA faithful to its statutory authority and respectful of the role of the states in our system of cooperative federalism. These skills will serve him well not only in leading EPA but also in participating meaningfully in the legislative and regulatory reform efforts promised by the next Administration.”

Even before Trump’s announcement of Pruitt as his intended nominee, state and industry representatives on EPA’s Clean Air Act Advisory Committee (CAAAC) at a Dec. 1 meeting in Washington, D.C., voiced expectations that EPA will grant more flexibility to states under Trump. But some also underscored that this will mean states and industry forging ahead with a “clean energy” agenda Trump does not necessarily condone.

‘Not Retreating’

CAAAC member John Busterud, an environmental executive with electric utility PG&E, said the country is likely moving toward a more federalist system, where federal agencies defer more to the states on policy issues.

With respect to utilities’ established technology investments and choices of fuel supply, “we are on a path we are not retreating from. We are not turning back,” he said.

Expecting more responsibility may fall to states under Trump, and less to EPA, CAAAC member Nancy Kruger of the National Association of Clean Air Agencies (NACAA) — representing many state and local air agencies — made the case for increased grant funding to state air agencies to help pay for this work.

Similarly, John Linc Stine, Minnesota’s top environmental official and also president of the Environmental Council of the States, which represents many state environmental agencies, told Inside EPA in a recent interview that he expects to win greater flexibility in how to implement EPA rules under Trump’s administration.

Meanwhile, the Western Governors Association (WGA), at its Dec. 14 winter meeting in San Diego, issued a new policy resolution aimed at boosting states’ rights in environmental and other policies under the incoming administration. The resolution says, “the balance of power has, over the years, shifted toward the federal government and away from the states,” and increasingly “prescriptive regulations infringe on state authority, tie the hands of states and local governments, dampen innovation and impair on-the-ground problem-solving.”

The states call on the federal government to avoid preemption of state laws, and to involve state officials earlier and more extensively in crafting policy. However, WGA acknowledges that deference to states does not in all circumstances mean looser environmental regulations. Where federal standards do preempt state rules, the federal government should permit “states that have developed stricter standards to continue to enforce them,” WGA says.

A source with the Association of Air Pollution Control Agencies (AAPCA), which represents 20 primarily Southern and Midwestern air agencies, says that AAPCA’s member states feel there is a need for states to have a voice earlier in the rulemaking process. The source cites EPA’s slow processing of Clean Air Act compliance plans, which has created a backlog, and EPA’s “outdated” new source review permit guidance as two areas that frustrate states.

States’ Flexibility

One western environmentalist says that Pruitt’s vision of state freedom is not likely to extend to those states seeking tougher environmental protections, such as stricter air rules than EPA’s policies. “The pick of Scott Pruitt sends a strong signal that this Administration will be aiming to demolish the EPA, both in terms of downsizing it, crippling its enforcement and oversight, and weakening any and all environmental rules that it can,” the source says.

Pruitt “has gone to such extreme lengths to protect polluters, mainly in the fossil fuel industry, that we have to conclude that he will set about to lift, weaken, rollback, or obliterate bedrock protections for our environment and public health. Perhaps it will mean giving leeway to states, but at the same time, Pruitt and his ilk have been avidly opposed to states that dare to limit fracking and other industry endeavors,” the source says.

“I firmly believe that under the incoming administration, states that do dare to buck Pruitt will face repercussions and that it will not prevent EPA from twisting arms,” the source adds.

The goal of preventing stricter emissions rules could be achieved through federal regulation, but there is also a pent-up demand for Clean Air Act reform among Congressional Republicans that may translate into Clean Air Act reform in the next Congress, and this could force weaker environmental protections on states. Previously unsuccessful bills could see new support, including measures to delay the five-year NAAQS review process.

Industry sources consulted by Inside EPA generally felt a targeted approach to changing specific air law provisions is perhaps most likely in the near future, although some are promoting the new administration as a chance to entirely re-write the Clean Air Act to eliminate outdated concepts.

Comprehensive air law reform, however, would involve tradeoffs and complex discussions that could take years to resolve, even with GOP control of all branches of the federal government. Nor would all major industry groups support a wholesale re-write if the result is regulatory uncertainty and possible unintended consequences, sources say.

EPA Oversight

Industry sources welcome the prospect of less EPA power over states, particularly in states such as Texas that have their own extensive regulatory regimes and have clashed the agency over what they see as overly strict rules.

Under Obama, Texas has fought with EPA in court over the state’s “flexible” air permits, several aspects of the EPA GHG program, state implementation plans (SIPs) for regional haze, and regulatory exemptions in SIPs for excess air emissions generated during periods of startup, shutdown and malfunction. Trump’s chosen nominee for the Energy Department, former Republican governor of Texas Rick Perry, has been a fierce critic of EPA, and the state during his tenure signed onto several lawsuits also championed by Scott Pruitt in neighboring Oklahoma.

“In general Texas has been more aggressive about” promoting its own environmental regulations than most other states, says one industry lawyer. Texas regulations strike a better balance than federal ones on environmental issues, the source says — for example on startup, shutdown and malfunction (SSM) exemptions, where Texas is keeping its affirmative defense provisions, but adding language to its SIP to clarify that the provisions “are not intended to limit a federal court’s jurisdiction or discretion to determine the appropriate remedy in an enforcement action.”

However, Texas adds a caveat that the change in language does not take effect until all judicial appeals against the rule are finished. Texas is also still one of several states suing EPA over the “SIP Call” rule requiring removal of the SSM exemptions in the U.S. Court of Appeals for the District of Columbia Circuit case Walter Coke, et al. v. EPA.

Another industry source says Trump’s appointees at EPA “are definitely going to be more deferential to the states,” and the SIP Call is a case in point where the final decision on enforcing the rule will fall to a Trump EPA. Enforcing the SIP Call is unlikely to be a policy preference of the incoming administration, the source says. — Stuart Parker

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