RGGI Fight Moves to the Courts

John Walliser, Senior VP, Legal & Government Affairs

On April 23rd the Department of Environmental Protection’s rulemaking to limit carbon dioxide emissions from the electric power sector was published in the Pennsylvania Bulletin as final. The rulemaking, more formally known as the CO2 Budget Trading Program, would link Pennsylvania to the Regional Greenhouse Gas Initiative (better known as “RGGI”) market platform to help achieve the reduction of those emissions.

As we have noted in previous posts, RGGI is an established and successful program that has lowered emissions and provided significant investment returns and cost savings to multiple states in the northeast – precisely what is needed in a state like Pennsylvania that will require several pathways to meet decarbonization goals and successfully navigate larger transitions in energy.

However, legal efforts related to the rule were already in play in the courts before the rule was even finalized. In brief, there are two separate sets of issues before the court.

The first concerns whether the Legislative Reference Bureau, which is the entity tasked with administering the Pennsylvania Bulletin, failed to publish the Co2 Budget Trading Program rulemaking in a timely fashion. This matter revolves around interpretation of the state’s Regulatory Review Act and how much time is afforded to the General Assembly in its review of proposed rulemakings; it has nothing to do with the merits or purpose of the rule itself.

The second set of issues, however, do center on the substance of the rule. There are many claims that have been made in this instance, ranging from authority delegated to the DEP to promulgate this rule to use and characterization of emission allowance fees returned to the state through participation in RGGI.

To date both matters were intertwined in the court, but it is anticipated that they will be divided into separate proceedings. The most immediate consideration at hand is whether the court should grant a preliminary injunction request to pause implementation of the rule until the challenge on the merits can be fully adjudicated.

Last week (May 10th and 11th) the Commonwealth Court held a hearing on that immediate question. Challengers and supporters of the rule presented evidence and witnesses testimony to the court, which won’t likely make a determination on the preliminary injunction request until June at the earliest. Timing of this decision is important because the rule’s design anticipates Pennsylvania’s participation in RGGI’s 2022 3rd Quarter Emissions Allowance Auction. The rule would need to remain in effect by July 1st for that to occur.

After the issue of the preliminary injunction request is determined, the court will proceed to the broader merits of the legal challenge. There is no timetable set yet for that process.

PEC continues to support the CO2 Budget Trading Program Rulemaking and is hopeful that Pennsylvania will begin implementation this year. Recent data shows that Pennsylvania CO2 emissions from the power sector are rising dramatically, outpacing the national average and reflecting more than just a post-pandemic rebound. The needs and benefits of the rule are abundantly clear; the biggest risks to our environment and economy in the energy transition arise from failing to act.