D.C. Circuit Affirms EPA’s Utility Air Toxics Rule: An “Appropriate” Rule Need Not Be Justified By Cost-Benefit Analysis

Yesterday, the D.C. Circuit Court of Appeals affirmed EPA’s rule setting limits for emissions of mercury and other air toxics from fossil-fuel-fired electric steam generating units.  The focus of the decision – and the issue on which Judge Kavanaugh dissented – was whether EPA was required to consider the costs that would be imposed by the rule.  EPA said no and the majority agreed.

Section 112(n) of the Clean Air Act required EPA to perform a study of the health hazards related to hazardous emissions from EGUs prior to regulating them.  How was EPA to utilize the results of the study?

The Administrator shall regulate [EGUs] under this section, if the Administrator finds such regulation is appropriate and necessary after considering the results of the study required by this subparagraph.

The industry petitioners and Judge Kavanaugh took the position that Congress’s use of the word “appropriate” evidenced an intent to require EPA to consider costs.  To Judge Kavanaugh, “that’s just common sense and sound government practice.”  However, persuasive Judge Kavanaugh may be as a matter of policy, the majority was not persuaded that the law requires a consideration of cost.

As the majority noted, nothing in section 112(n) requires that EPA consider cost.  Indeed, the word “cost” is not mentioned in section 112(n).  Moreover, Congress required EPA to make the “appropriate and necessary” determination based on a study of health impacts, not a study of costs.  Finally, as EPA and the majority noted, the Supreme Court, in Whitman v. American Trucking Ass’ns, cautioned against finding authority – let alone a mandate – to consider costs in ambiguous provisions of the CAA, given that there are sections of the Act which do address costs.

I’m with Judge Kavanaugh as a matter of policy (though it’s worth noting that EPA in fact did a cost-benefit analysis and found that the benefits of the rule substantially outweigh its costs).  On the law, however, the dissent seems pretty much a case of ipse dixit.  When the rule was promulgated, I said that I would be “stunned” if the rule was not upheld on judicial review.  Notwithstanding the dissent, I’d be equally stunned if the Supreme Court flips this decision.  I don’t think that there’s anything here warranting Supreme Court review.

Enforcement of Municipal Stormwater Ordinances Is Tricky Business: Failure to Enforce an Ordinance Required Under a Permit Is Not a Violation of the Permit

Stormwater pollution has become an increasingly important problem.  Part of the difficulty in solving it is that it’s not obvious who should be responsible.  Should cash-strapped municipalities be on the hook or should it be developers and others who own and maintain large properties with acres of impermeable surfaces?  Often, the answer given by EPA and state regulators is that municipal separate stormwater sewer systems, or MS4s are responsible, but they have the authority – and sometimes the obligation – to impose appropriate requirements on property owners.

That was the case in Citizens for Pennsylvania’s Future v. Pittsburgh Water and Sewer Authority.  Pennsylvania DEP issued an NPDES permit to the PWSA.  The permit required that the City of Pittsburgh and the PWSA enact ordinances:

to address (1) illicit discharge detection and elimination; (2) construction site runoff control; and (3) post-construction stormwater management in new development and redevelopment.

They did so.  However, according to the plaintiffs, the City failed to enforce the ordinance in the case of what appears to be a large urban renewal project in Pittsburgh.  The plaintiffs sued the PWSA and the City, alleging that the failure to enforce the ordinance constituted a violation of the NPDES permit.

The Court was having none of it.  After noting that NPDES permits are a form of contract and must be interpreted according to their plain meaning, the Court reviewed the permit and found that:

it in no way imposes a condition that if the ordinances are violated that this results in a violation of the permit itself.  Nowhere in the permit does it explicitly say that it is a violation for a failure to enforce an ordinance enacted pursuant to the permit’s terms. We will not implicitly read this requirement into the permit, which sets forth various ways in which the permit is violated or the action or inaction of the permittee would impose penalties on the permittee.

That’s the end of this battle, but it’s almost certainly not the end of the war.  As EPA, state agencies, and citizen groups all continue to focus on stormwater issues, we can expect to see more cases in which municipalities, federal and state regulators, and courts are forced to figure out who bears ultimate responsibility for solving this seemingly intractable issue.

Fasten your seatbelts.  It’s going to be a bumpy night.

What’s the Difference Between ExxonMobil and Shell When It Comes To Climate Change? What’s A Trillion Tons (or Tonnes) Among Friends?

Earlier this week, I posted about ExxonMobil’s shareholder disclosure.  The bookend to ExxonMobil’s disclosure is the release of the Trillion Tonne Communique by the Prince of Wale’s Corporate Leaders Group.  The Communique calls for total carbon emissions to be capped at one trillion tons, a level at which the signers have confidence that global temperature increases can be kept at or below two degrees Celsius.

In order to attain the one trillion ton cap, the Communique calls for a transition over the course of the century to planet-wide net zero carbon emissions.  In order to reach net zero emissions, according to the signers, there will have to be a “robust carbon price.”

Although the Communique does not define robust, something tells me that such a robust price is where the Communique’s signers and ExxonMobil probably part ways.  I don’t see ExxonMobil supporting a robust carbon price, enforced by regulation, any time soon.

One final note.  The Communique web site shows where its signers are located.  To date, there are 61 in Europe and 8 in North America – none of the North American signers is a large energy resource company.  Until that changes, I think that the Communique faces an uphill battle in the US.

ExxonMobil Admits Climate Change Is Real. It also Imposes an Internal Cost on Carbon. Still Not Enough to Get Any Love From the Greens (Interesting Reading, Though)

Last week, in response to shareholder requests that it disclose information regarding how climate change might affect it in the future, ExxonMobil released two reports, one titled Energy and Climate, and one titled Energy and Carbon – Managing the Risks.  They actually make fascinating reading and seem to represent a new tack by ExxonMobil in its battle with those seeking aggressive action on climate change.

The reports do not deny the reality of climate change.  Indeed, the reports acknowledge climate change, acknowledge the need for both mitigation and adaptation, acknowledge a need to reduce fossil fuel use (at some point), acknowledge the need to set a price on carbon, and acknowledge that ExxonMobil in fact already is making future planning decisions utilizing an internal “proxy” price on carbon that is as high as $80/ton of CO2 in the future.

The reaction of the shareholder activists who pushed for the disclosures?  They are not happy.  Why not?

Because ExxonMobil has said explicitly that it doesn’t believe that there will be sufficient worldwide pressure – meaning government regulations imposing very high carbon prices – to reduce fossil fuel use sufficiently quickly enough to limit global temperature rise to 2 degrees Celsius.  It also does not believe that worldwide carbon regulation will leave it with any “stranded assets.”

I understand the moral case against fossil fuel use.  Personally, however, I’d rather rely on a carbon price that provides the appropriate incentives to get the reductions in CO2 emissions that we need to mitigate climate change.  On that score, sadly, it’s not obvious to me at this point that ExxonMobil’s analysis of likely outcomes is actually wrong.

My biggest complaint with the reports is the refusal to recognize that markets react dynamically to new regulatory requirements.  The history of big regulatory programs is that they pretty much always cost less than the predictions made before the regulations are implemented.  The lesson then is that the current projections of energy cost increases resulting from a high cost of carbon are likely to be overestimated.

Time will tell.  At least I hope so.

Dispatches From the “Sue and Settle” Front: Trade Groups Do Not Have Standing to Challenge Settlements Regarding ESA Listing Procedures

Last week, a federal court, for the fourth time, found that property owners’ groups do not have standing to challenge a settlement between the administration and conservation groups under which the administration agreed to make listing decisions under the Endangered Species Act on more the 250 candidate species by 2016.  Judge Emmet Sullivan, who entered the original settlements, ruled that settlements imposing procedural deadlines on the Fish and Wildlife Service did not cause any redressable injuries to the plaintiffs.

The case has been something of a poster child for those complaining about so-called “sue and settle” agreements between the administration and environmental groups.  However, I think that it’s time for the trade groups to give up, move on, and defend, as appropriate, individual listing decisions made by the FWS in pursuant to the settlement.

As Judge Sullivan noted in systematically taking apart each of the plaintiffs’ claims, several courts have already rejected the claims, and the D.C. Circuit Court of Appeals rejected almost identical claims in the context of a Clean Water case as well.  The bottom line is that an agreement by FWS to decide whether to list candidate species does not cause any injury; the plaintiffs still retain their rights to challenge the individual listing decisions.

I also wonder about the big picture.  The standing shoe is often on the other foot.  Regulated entities often rely on standing to keep environmental groups out of court.  Is it really in their interests to expand standing?  I think that this is a sauce for the goose situation.

sauce for the goose

Definitely a Victory For Regulations Over Guidance: EPA Issues Proposed Rule Defining Waters of The United States

Tthe Supreme Court issued its decision in Rapanos almost 8 years ago and EPA has been struggling ever since to figure out what “waters of the United States” are within the meaning of the Clean Water Act.  After several failed attempts at guidance, EPA finally acknowledged that this issue is too important and too contentious for guidance – and that it merits formal notice and comment regulation.  On March 25, EPA sent a proposed rule for publication in the Federal Register.  It’s only 370 pages.  Sounds like guidance to me.

Although one might have thought that defining waters of the United States shouldn’t be so difficult, one would have been wrong.  Summarizing the rule and the issues is certainly beyond the scope of this space.  I will note some highlights:

As we noted when the draft rule was leaked last fall, EPA proposes to include certain key areas within the meaning of “waters of the United States” by rule.  These include:

(1) All waters which are currently used, were used in the past, or may be susceptible to use in interstate or foreign commerce, including all waters which are subject to the ebb and flow of the tide;

(2) All interstate waters, including interstate wetlands;

(3) The territorial seas;

(4) All impoundments of waters identified in paragraphs (a)(1) through (3) and (5);

(5) All tributaries of waters identified in paragraphs (a)(1) through (4); and

(6) All waters, including wetlands, adjacent to a water identified in paragraphs (a)(1) through (5).

For example, any wetland adjacent to a tributary of an impounded waterbody that used to be used in interstate commerce would be subject to CWA jurisdiction as a matter of law.

EPA also included a Rapanos catch-all category – other waters that have a “significant nexus” to any of the first three categories.  Importantly, such “significant nexus” waters will not be jurisdictional as a matter of law, but will be subject to case-by-case review.

Finally, I’ll note that EPA has finally gotten religion and seems to be taking the regulatory process quite seriously.  EPA has invited comment on a number of key issues – and I’m sure that it will receive many! – including whether it may be possible to refine any of these categories and create either more or fewer jurisdictional waters.  It is also exploring whether, over time, waters in the catch-all category can move into the jurisdictional by rule category.

My last thought is one that is probably terrifying for House Republicans and large landowners.  Because the science is so complex, and because EPA has undertaken formal notice and comment rulemaking, I’m going to go out on a limb now and say that, unless Justice Kennedy is replaced by someone more conservative before this rule reaches the Supreme Court, any rule EPA promulgates that is anywhere close to what is in this proposed rule will withstand judicial review.  It’s just hard to see under Chevron why EPA’s interpretation wouldn’t get deference.

See, EPA; I told ya.  Regulation, not guidance.

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