State Sovereignty, Meet the Supremacy Clause

Earlier this week, the 10th Circuit Court of Appeals reversed a District Court decision and vacated an injunction which had prevented the U.S. Fish & Wildlife Service from reintroducing the Mexican gray wolf onto certain federal lands in New Mexico.  The decision seems fairly straightforward and plainly correct.  The interesting aspect of the case is the Court’s discussion of state sovereignty.

The State of New Mexico argued in part that the reintroduction of wolves onto federal land without a permit from the State was a violation of the State’s sovereignty.  The Court rejected the argument, without even addressing whether a state could ever assert a sovereignty claim over federal land within its borders.  The Endangered Species Act in fact generally does not exempt FWS from state permitting requirements.  Instead, it has a limited exemption from the requirement to comply with state permits, but only where the FWS has determined that to do so would interfere with the accomplishment of the objectives of the ESA.  The Court found that FWS had reasonably concluded that enforcement of the state permitting requirements would interfere with accomplishment of ESA objectives.

Case over.  The decision doesn’t even mention the Supremacy Clause, but it seems applicable to me.  I know that we live in uncertain times, but I believe federal law remains supreme, at least for now.

South Florida — The Front Lines of Climate Change?

Two related items about climate change resilience and adaptation caught my eye this week.  First, the American Academy of Actuaries issued a report on “The National Flood Insurance Program: Challenges and Solutions.”  Those wild and crazy actuaries at the AAA certainly have a gift for understatement:

Increased flooding due to higher sea levels can only increase the amount of loss from storms absent expensive investment in coastal defenses. In the face of rising sea levels and increased losses, it will be impossible to maintain current premiums, coverage, and eligibility without severe limits on building, strong mitigation requirements, or exposure to enormous program losses and additional U.S. debt.

Focusing on South Florida in particular, Bloomberg BNA (subscription required) had a report today on “The Nightmare Scenario for Florida’s Coastal Homeowners.”  The BNA story does discuss the NFIP, but only as one aspect of a range of problems that could trigger:

a housing crisis for coastal areas more severe than the Great Recession, one that could spread through banks, insurers and other industries.

I’ve been astounded for some time at the continued willingness of investors to pour money into South Florida real estate and I particularly like this discussion of someone named Ross Hancock, who sold his property in Coral Gables:

He described South Florida’s real estate market as “pessimists selling to optimists,” and said he wanted to cash out while the latter still outnumbered the former.

I love that line.  And so, to paraphrase a bumper sticker many of us have seen, I will just close by noting that climate change doesn’t care if you’re an optimist or a pessimist.

It’s Wise to Make Certain that Contracts Properly Allocate Future Environmental Compliance Costs

Last week, the 6th Circuit Court of Appeals ruled that AEP, which entered into a consent decree requiring it to install certain pollution controls at its Rockport 1 and 2 power plants, could not force the owner of those plants to pay to install the controls.  The case involved the interpretation of specific contractual language under New York law, but it still has lessons for power plant owners and operators everywhere.

AEP built Rockport 1 & 2.  It later entered into a sale-leaseback arrangement, running through 2022.  In 2007, EPA took enforcement action against several AEP facilities, not including Rockport.  Nonetheless, AEP entered into a consent decree in which it agreed to install pollution controls at Rockport by December 31, 2019.  In 2013, the government agreed to extend the time for installation of final controls at Rockport until December 31, 2028.

After entry of the modification to the decree, AEP took the position that the plant owner had the obligation to install the controls required by 2028, because the lease terminates in 2022.  While it actually persuaded the District Court, the Appeals Court was having none of it.

By reading the Facility Lease to allow AEP to settle litigation regarding alleged Clean Air Act violations at other plants by way of a consent decree affecting Rockport 2 and then encumber the owners’ interests in Rockport 2 via the 2013 modification, the district court gave AEP carte blanche authority to avoid the [contractual provisions making AEP liable for judgments entered against it.]

Why does this case matter?  I don’t know if it’s abject or object, but it’s certainly a lesson.  In the modern world of electric generation, with merchant capacity taking an ever larger role, and with power plants changing hands with dizzying frequency, the case is a useful reminder that the language of agreements matters, the parties on both sides of any transaction had better think carefully what the generation world might look going forward, and it would be wise to plan for all foreseeable contingencies.

Time to hire good lawyer!

Environmental False Advertising: An Earth Day Green Guide Review

Earth Day is coming up on April 22, which means that a lot of consumers are going to be reminded to think green, and to buy green. What if your company is looking to access this vast market of environmentally-minded shoppers, but your product or service isn’t really that environmentally conscious? Can you just go ahead and label yourself “Green” anyway?  Who’s gonna notice?

Well,… More

Does Chevron Ever Permit EPA to Rewrite a Statute? EPA’s Release Reporting Exemptions Are Struck Down

On Tuesday, the Court of Appeals for the District of Columbia vacated EPA’s final rule governing reporting of air releases from animal feeding operations.  The Court found that EPA had no statutory authority to exempt AFOs from the reporting regulations.

The decision is also important because it is another in a recent line of cases regarding the extent of agency authority to interpret statutes.  The issue was whether EPA had authority to exempt smaller AFOs from reporting requirements, on the ground that it could not:

foresee a situation where [it] would take any future response action as a result of such notification[s].

Although EPA did not explicitly justify its rule on de minimis grounds, the Court understood EPA to be making a de minimis argument and analyzed the rule in that context.  The Court concluded that EPA had not justified a de minimis exception, because:

an agency can’t use it to create an exception where application of the literal terms would “provide benefits, in the sense of furthering the regulatory objectives, but the agency concludes that the acknowledged benefits are exceeded by the costs.”

Here, the Court found that there were benefits to requiring reporting without a de minimis exception.  That was enough to vacate the rule.

It is worth noting the concurrence from Judge Janice Rogers Brown, who agreed that EPA had overstepped, but was concerned about the panel opinion’s summary of Chevron as being focused on whether the agency’s interpretation is “reasonable.”  Stoking the anti-Chevron flames, Judge Brown wrote to make clear that the “reasonableness” inquiry does not apply at step one of Chevron.  Ever-vigilant, she wants to be certain that courts do not abdicate their duty to state what the unambiguous language of a statute means.

I don’t have any problem with that.  Phase I of Chevron is an important bedrock principle.  If there’s no ambiguity, there’s no deference.  However, it’s worth noting that Judge Brown also stated that:

an Article III renaissance is emerging against the judicial abdication performed in Chevron’s name.

Notwithstanding the congressional discussion of this issue, I remain skeptical that any such “Article III renaissance” is occurring.  One concurrence from one appellate judge who happens to be named Gorsuch does not a renaissance make.

Of course, the really important part of Judge Brown’s concurrence was her citation to Luck Be a Lady, from Guys and Dolls, the greatest musical of all time.

Should Courts Defer to EPA’s Scientific Expertise if EPA Gets Rid of Its Expertise?

Earlier this week, the 9th Circuit Court of Appeals rejected challenges to the Federal Implementation Plan EPA promulgated after finding that Arizona’s regional haze State Implementation Plan was inadequate.  I think that the result is both correct and unsurprising.

However, one part of the opinion – a recitation of black-letter law – caught my eye.  In discussing the standard of review, the court noted that the arbitrary and capricious standard is “highly deferential.”  No surprise there.  It also noted that courts are particularly deferential when reviewing agency scientific determinations.  Also no surprise.

And yet….

What happens if EPA eliminates all of its climate science expertise, and then eliminates the Endangerment Finding?  Certainly, a court could still recite the traditional level of deference, but then note that “deference is not abdication” and rule that EPA’s decision must be reversed even under the deferential threshold.

And yet….

What happens if the Trump administration repeatedly makes regulatory decisions based on a “scientific” viewpoint that is so broadly rejected by the scientific community that “scientific” must be put in quotation marks?  Might courts at some point conclude that EPA has forfeited the deference normally given to agency scientific decisions?

Just asking.  It’s purely a hypothetical, of course.

Six Years in the Making, New Ch. 91 Flexibility Washes Ashore

Last month, MassDEP and the Massachusetts Office of Coastal Zone Management released long-awaited revisions to the regulations governing waterfront development in Massachusetts (the Chapter 91 regulations, the Designated Port Area regulations, and the Municipal Harbor Plan regulations).  The changes have been in the works since 2010, when MassDEP and CZM first convened working groups to review whether the regulations could be revised to provide greater flexibility to accommodate a variety of uses along the waterfront.  We summarized the draft regulations last spring.

MassDEP’s regulatory changes offer enhanced flexibility by allowing waterfront developers to meet their Ch. 91 obligations to provide public access to the waterfront through a new category of uses, called Facilities of Limited Accommodation.  These “FLAs” include uses that are open to the public by appointment or enrollment, such as photography studios and childcare centers.   These uses may are now permitted in up to 50% of the ground floor of a project within jurisdiction, if a demonstration can be made that a market does not exist for a traditional Facility of Public Accommodation (such as a restaurant or hotel) at the project site.  In exchange for this flexibility, developers must devote 20% of the net operating income of the FLA to fund specific construction or activities in geographic proximity to the project site that enhance public waterfront access.

Developers of smaller projects (less than 75′ in height) are given more flexibility in that they can license FLAs for fifteen-year terms before they must re-evaluate the feasibility of siting FPAs.  Developers of larger projects are limited to 10-year terms, and must, in the first instance, demonstrate that they have attempted to market the site for FPA use for at least 1 year without success, including offering rents at 50% below market rate to non-profits.

These changes are an innovative response to long-acknowledged difficulties with the Chapter 91 licensing process, in which space on the ground floor of waterfront buildings in less-trafficked areas set aside for public accommodation would remain vacant for lack of ability to attract an appropriate tenant. A report prepared for the former Boston Redevelopment Authority back in 2005 noted,

“no provisions currently exist in the regulations encouraging developer concessions such as below market rent, free utilities or a build-out of the raw space. Without such concessions, waterfront sites lie beyond the reach of most cultural uses, generally non-profit in nature.”

In response to comments received after the publication of draft regulations last spring, MassDEP made minor revisions (see MassDEP’s summary here and the final redline here).  MassDEP clarified certain provisions, including the division between smaller and larger projects and the method by which net operating income is to be established for an owner-occupied building.  Some in the regulated community were hoping for additional changes that would allow Chapter 91 applications, public notices and hearings to proceed while the applicant is undergoing MEPA review.   MassDEP declined to adopt these proposed changes, leaving in place the current requirement that Chapter 91 review cannot begin until the Secretary issues a Certificate on a Final EIR.

As part of the same set of regulatory revisions designed to introduce more flexibility into waterfront licensing, MassDEP finalized its Designated Port Area regulations (see summary and redline), and CZM modified its corresponding regulations.

Our takeaway?  It will be interesting to see how quickly licensees adopt the flexibility provided by these new provisions, particularly in hot market areas like the downtown Boston waterfront.  But civic and cultural non-profits should be on the lookout for 50%-below-market rates in large new waterfront buildings, and other providers of waterfront-activation uses should seek opportunities to partner with FLA licensees to receive the 20% net operating income bonus.

 

Exxon Case Against AGs Transferred to New York: Judge Kinkeade Fires a Parting Shot

On Wednesday, Judge Ed Kinkeade ordered that Exxon Mobil’s suit against NY Attorney General Eric Schneiderman and Massachusetts Attorney General Maura Healey be transferred to the Southern District of New York.  The AGs must be breathing sighs of relief this morning.

It’s a very curious order.  It’s 12 pages long, yet contains just one sentence explaining why the case is being transferred:

The United States District Court for the Southern District of New York is the proper venue for this case because “a substantial part of the events or omissions giving rise to the claim occurred” in New York City, New York at the AGs United for Clean Power press conference on March 29, 2016.

The entirety of the rest of the Order is basically a summary of why Judge Kinkeade thinks that there is merit to Exxon Mobil’s complaint and all the shameful actions he believes that the two AGs have taken.  I don’t think I’m going out on a limb in asserting that Judge Kinkeade’s statements fall under the heading of dicta.  I have a hard time seeing that they constitute any kind of binding law of the case on the judge who draws the case in New York.

Something tells me that Exxon Mobil is not likely to find as much sympathy in the Southern District of New York.

McDonalds Won’t Be Serving Utah Prairie Dog Burgers Any Time Soon

On Wednesday, the 10th Circuit Court of Appeals held that regulation of takes of the Utah prairie dog, a purely intrastate species, does not violate the Constitution.  Reversing the decision below, the 10th Circuit joined all four other circuit courts to have dealt with the issue thus far in upholding the ESA against such Commerce Clause challenges.

I will note that I predicted this outcome when the District Court case was decided, though I can’t claim that much credit.  As the Court noted, more than 2/3 of protected species are purely intrastate.  Moreover:

Because a species’ scientific or other commercial value is not dependent on whether its habitat straddles a state line, Congress had good reason to include all species within the protection of the Act. It did not behave irrationally by taking the broader approach.

Given the absence of a circuit split, I don’t see the Supreme Court taking this case.  I do hope that People for the Ethical Treatment of Property Owners keeps fighting the good fight, though.  I just love that name.

The Latest Executive Order: Any Kind of Consistency Is the Hobgoblin of Little Minds

Make no mistake, the Executive Order signed by President Trump at EPA yesterday is a big deal.  Time will tell whether the Administration’s U-turn on the Obama rules currently in litigation, such as the Clean Power Plan and the rule on fracking on federal lands will make any difference to judicial review of those rules.  There are plenty of states and NGOs ready to step into EPA’s and BLM’s shoes to defend those rules.

Regardless, though, it’s important.  Social cost of carbon?  Poof.  Gone.  Climate Action Plan?  Gone.  Consideration of climate change in environmental impact reviews?  Gone.

We already know all this, though.  I’d like to focus on a few details concerning the EO that might have gone unnoticed.

  • The order states that development of domestic natural resources “is essential to ensuring the Nation’s geopolitical security.”  I found this statement interesting in light of the recent statements by Secretary of Defense Mattis, who very clearly stated that climate change is real and is itself an important security risk.
  • The order states that environmental regulations should provide “greater benefit than cost.”  I found this statement somewhat odd, given that the President’s prior EO known as the 2-for-1 order, essentially requires agencies to ignore the benefits of regulations and focus solely on the costs that they impose.
  • Similarly, the Order requires agencies, in “monetizing the value of changes in greenhouse gas emissions resulting from regulations,” ensure that their analyses are consistent with OMB Circular A-4, issued in 2003.  The Order states that Circular A-4 embodies “best practices for conducting regulatory cost-benefit analysis.”

I’d be interested in knowing if a single one of the authors or peer reviewers of Circular A-4 have anything nice to say about the 2-for-1 Order?

Promulgation of TMDLs Does Not Create a Non-Discretionary Duty to Require NPDES Permits

When EPA approved total maximum daily loads for the Charles River, but failed to require NPDES permits for persons discharging stormwater to the Charles, CLF sued.  CLF alleged that EPA violated a non-discretionary duty when it failed to require the permits.  Last Friday, Judge Richard Stearns dismissed CLF’s suit.

EPA’s regulations provide that it will issue NPDES permits where it:

Determines that the discharge, or category of discharges within a geographic area, contributes to a violation of a water quality standard or is a significant contributor of pollutants to waters of the United States.

CLF argued the nature of the TMDL process means that, in approving the TMDLs, EPA necessarily made a determination that certain stormwater discharges were contributing to violations of water quality standards and thus that permits were required.  EPA took the position that its regulations require a separate and explicit determination that any particular source or category of sources requires a permit.

The Court rightly sided with EPA.  As the court noted, the regulations provide that an RDA determination may be:

based on wasteload allocations that are part of ‘total maximum daily loads’ (TMDLs) that address the pollutant(s) of concern.” This language clearly implies that the RDA will be exercised separately from the TMDL process; it would be an oddity, if not an outright oxymoron, to say that a determination is “based on” a TMDL’s wasteload allocations if the TMDL itself constitutes the determination.

In other words, to say that the RDA determination should be “based on” the TMDL by definition means that it is a decision separate and apart from the issuance of the TMDL itself.

This was more than enough for the Court, since EPA’s interpretation of its own regulations is entitled to deference under Auer v. Robbins.  Since the word “determines” is used in the CWA itself, the Court noted that Chevron deference also supports EPA’s position.

In short, this case, while important in its own right, also qualifies as Chapter 4 in the conservative case for Chevron deference and Chapter 2 in the conservative case for Auer deference.

Wind Powers Texas. What Does That Say About the Future of Coal?

According to Bloomberg BNA (subscription required), last week, for the first time ever, more than 50% of the load in the Electric Reliability Council of Texas service area was supplied by wind power.  This is the state that consumes more coal than any other.  Installed wind capacity is now more than 18,000 megawatts and is projected to be as high as 28,000 MW by 2020.

In an important note for regions such as New England, Bloomberg points out that, in order to support wind generation growth, Texas

Went as far as building out an entire network of transmission lines to reach supplies in wind-rich areas.

Let me know when the coal renaissance arrives.

Court Orders EPA to Promulgate Air Toxics Standards: A Taste of What’s to Come?

On Wednesday, federal Judge Christopher Cooper ordered EPA to promulgate emissions standards for 13 sources of hazardous air pollutants by June 30, 2020.  EPA admitted that it missed statutory deadlines to do so; the only argument was over how much time EPA should have.  EPA asked for 4 ½ years, while the plaintiffs suggested two.  Judge Cooper pretty much split the difference.

Why is the case important?  Only as a potential harbinger of injunctions to come.  

If Congress enacts even a significant portion of the budget cuts requested by President Trump, we’re going to see a lot more such cases, so the Court’s analysis is useful background.  Here are some key takeaways:

  • The agency has a “’heavy burden’ to demonstrate that a remedial timeline poses ‘an impossibility’”.
  • The heavy burden becomes even heaver “where the agency has failed to demonstrate any diligence whatsoever in discharging its statutory duty.”
  • Courts “should be wary of agency arguments that more time is needed to improve the quality or soundness of the regulations.

Perhaps the key point is yet another reminder that judicial restraint does not necessarily lead to conservative outcomes:

If the EPA finds the schedule set by the Clean Air Act to be unreasonable, the agency’s remedy lies with Congress, not with the Courts.

My crystal ball says that we’re all going to become much more familiar with this language in the next few years.

The Conservative Case for Chevron Deference, Chapter 3 (Plus an Auer Bonus!)

The conservative cases in support of Chevron deference keep arriving.  This week, the 9th Circuit Court of Appeals affirmed EPA’s federal implementation plan for compliance with its regional haze regulations by the Navajo Generating Station, which is apparently the largest coal-fired power plant in the western United States.  Environmentalists challenged the FIP on a number of grounds, including EPA’s decision to grant Navajo Generating emission credits for some early NOx reductions as well as the amount of time the FIP gave the facility to attain the required reductions.

The 9th Circuit upheld the FIP, largely on the ground that it had to defer both to EPA’s reasonable interpretation of the Clean Air Act under Chevron and to EPA’s reasonable interpretation of its regional haze regulations under the related concept of Auer deference.

Affirming EPA decisions to give a regulated entity more flexibility in how it attains compliance, on the ground that those decisions are entitled to deference because they were based on EPA’s reasonable interpretation of the Clean Air Act and its implementing regulations, would seem to be something conservatives should support.

In fairness, the case is much more about Auer deference than Chevron deference, but the Court did also cite Chevron four times, so I’m adding this to the list.

Has EPA Region I Lost Its Treasured Independence?

Earlier this month, Trump transition team member David Schnare sent a memorandum to EPA Assistant Administrators and Regional Administrators.  The one-paragraph memo directs AAs and RAs:  

to identify and send upward any proposed decisions or final agency actions for the Administrator’s review which, in the judgement of the Acting RA’s and AA’s would limit the flexibility of the States, limit energy resource use, impose significant costs on industry or commerce, or otherwise likely result in significant public attention on the proposed decisions or final agency actions.

Uh-oh.

At a certain level, one can understand Scott Pruitt wanting to make sure that decisions made on his watch are consistent with his priorities.  On the other hand, as Bloomberg BNA reported (subscription required), no current or former EPA employee interviewed by Bloomberg had ever seen anything like this memo in prior transitions.

Here in EPA Region I, we are used to the regional office acting as though headquarters were nothing more than an occasional nuisance.  I know that my friends at EPA would deny this, but we went through eight years of the Bush administration with the private sector wondering the entire time whether Boston paid any attention to Washington.

No longer.  Boston is once again a fiefdom.