Law and the Environment : Environmental Lawyer & Attorney : Foley Hoag Law Firm : Boston, Washington D.C.

On Tuesday, EPA filed its brief in support of its rule deferring regulation of GHG emissions from biomass facilities until 2014. I have two immediate reactions.

The first is that, as a policy matter, the deferral was absolutely the right thing to do. The science remains complex and not fully understood. Any regulations promulgated now are likely to be revised at some point. That kind of regulatory uncertainty is not any way to run an agency.

On the other hand, I find EPA’s legal justification less than fully convincing, to say the least. In fact, the more EPA defends its overall approach to GHG regulation under the Clean Air Act, the more the entire endeavor begins to feel like some vast Rube Goldberg construction, destined to come crashing down as the last domino is placed (and how’s that for a mixed metaphor?). It’s one thing for EPA to argue that the Tailoring Rule was necessary to avoid regulation of millions of de minimis sources of GHG.  It’s another to rely on the same arguments to support deferral of regulation of a much smaller universe of biomass plants, however much EPA may have logic on its side. To defer because of scientific complexity is just not the same as deferral of millions of de minimis sources.

As I’ve acknowledged previously, this fine mess we’re in is not really EPA’s fault. EPA is just playing the hand it has been dealt by the combination of the decision in Massachusetts v. EPA and the refusal by Congress to enact legislation providing specific authority to regulate GHG.

It will be fascinating to watch what the Court of Appeals does with this case. It is certainly possible that the Tailoring Rule could survive while the Deferral Rule is struck down. This is one where I leave the speculation to others.

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Yesterday, President Obama released another Executive Order on regulatory reform. The new order expands on EO 13563, and provides three new requirements on agencies:

·         Twice yearly reporting by agencies to the Office of Information and Regulatory Affairs concerning the status of reform efforts,

·         Increased public participation in regulatory reform, and

·         An obligation to prioritize agency reform efforts to “produce significant quantifiable monetary savings or significant quantifiable reductions in paperwork burdens while protecting public health”

Reactions were predictable.  According to the Daily Environment Report, Celia Wexler of the Union of Concerned Scientists decried “the latest in a series of actions by the Obama administration that reinforce the idea that environmental and public health protections are overly burdensome.” Is there any doubt that advocacy group members live in a different universe than the rest of us? Has Ms. Wexler missed the CSAPR, the mercury rule, the boiler rule, and the GHG rule?

On the other side of the aisle, as it were, Republicans in Congress complained that the EO “does little to address the job-killing regulatory costs his Administration has imposed in the last three years.”   As I have noted previously, critics of regulation sometimes talk a good game about the need for cost-benefit analysis, but they seem to spend all their time talking about the costs of regulation, and no time talking about its benefits.

(Except for Mitt Romney, of course, who spoke only of the benefits of regulation when he was Governor of my great state, but now speaks only of their costs.)

It was probably not coincidence, by the way, that on the same date that the administration released the new EO, EPA released a final rule – developed pursuant to the earlier regulatory reform efforts – waiving the requirement for states to implement Stage II vapor recovery systems at gasoline stations. The rule is estimated to save up to $90 million per year. As Sunstein said,

rules are placed on the books for good reason, but as they accumulate over time, the reason they were adopted in the first place vanishes. 

That’s not true of all rules, but it was true of the Stage II vapor recovery rule, and it’s undoubtedly true of other rules as well. Keep looking, EPA.

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Yesterday, the Chesapeake Bay Commission released a study showing that implementation of a nutrient trading system would dramatically reduce the cost to achieve nutrient reductions in Chesapeake Bay. Pardon me if I seem to be posting a lot of dog bites man stories recently.

Although it should not come as a surprise that a trading system would permit nutrient reductions to be attained most cost-effectively, the scope of the benefit is worth noting. If trading were allowed basin-wide, and among both point and agricultural non-point sources, costs are projected to decrease by about 50% of the non-trading compliance costs.

Since I have faced this issue in Massachusetts, I found it even more noteworthy that, if trading were expanded to include regulated urban stormwater sources, compliance costs are expected to be reduced by about 80% over the non-trading scenario. The report’s explanation is both simple and cogent:

Implementing urban stormwater BMPs tends to be a much less cost-effective way of reducing nutrient loads than agricultural BMPs.

To which I say, you could have knocked me over with a feather. I just hope that EPA does not limit its review of this report to the Chesapeake Bay itself, but considers its implications more broadly in the context of stormwater regulation in other areas.

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The Lower Fox River Superfund site continues to pump out decisions on key CERCLA issues.   Most recently, the federal court in Wisconsin in US v. NCR Corp. took on the issue of divisibility of harm in granting a preliminary injunction requiring one of the PRPs, NCR, to complete the removal of 660,000 cubic yards of PCB-contaminated sediments from a portion of the Lower Fox River.  In entering that injunction, the court rejected NCR’s argument that the harm was divisible, even though NCR presented expert evidence that it was responsible for only 9% of the PCBs in this portion of the river.

Although acknowledging that what NCR proposed was similar to the apportionment that that the Supreme Court had approved in Burlington Northern, the Wisconsin district court went on to distinguish that High Court precedent as not endorsing apportionment but merely upholding a lower court’s conclusion that the harm in that case was divisible. The district court went on to note that NCR’s attempts to base divisibility on the volume of PCBs each PRP released was inappropriate. First, the court found that the remedial costs were not highly correlated with sheer mass of PCBs released but with the location of those PCBs in the river. Second, the court concluded that the risk posed by the PCBs was not posed by the presence of the PCBs but by the risk to the food chain, particularly to fish. According to the court, the risk of PCBs getting into fish transformed the risk into something that could not be apportioned by volume of PCBs released.

As this decision illustrates, there is no bright line test for determining divisibility of harm in CERCLA cases.  The fact that a PRP can show present a volumetric allocation does not necessarily mean that the harm is divisible, particularly where the harm is not highly correlated with volume but is correlated with toxicity or other factors.  

In most CERCLA cases, where apportionment is denied, PRPs will simply re-purpose their apportionment arguments to the battle over the relative size of contribution shares under Section 113(f).  That will not happen in the Lower Fox River case, however, since the court in 2009 in Appleton Papers v. George Whiting Paper ruled that NCR’s culpability in knowing  the potential environmental harm caused by PCBs, in contrast to other PCB contributors, warranted that NCR bear a contribution share disproportionate with its volumetric share.  It’s worth observing that the court denied apportionment primarily on toxicity grounds but based contribution primarily on culpability, which illustrates that there are fundamentally different standards for determining divisibility of harm and contribution.  Apportionment is rooted in an objective and scientific standard whereas contribution is based on a subjective standard of equity.

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For those who think that low allowance prices mean that RGGI and the European Union Emissions Trading Scheme are failing, I recommend this post last week by my friend Rob Stavins. Money quote:

RGGI may not be particularly relevant, but it is not thereby a flawed system; surely it is not a failure.  Rather, a great environmental success has been achieved by the “fortunate coincidence” of low natural gas prices, economic recession, and mild weather.  This is hardly something to be lamented…. The low allowance prices are evidence of a success outside of the RGGI market, not evidence of failure within the RGGI market.

My lawyer’s interpretation? If the point of “cap-and-trade” is to “cap” emissions, why is the system a failure if the cap is met through other causes? We may not have high prices leading to large pots of money to fund renewable energy, but emissions are below the cap.

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On Friday, E&E News reported that EPA had – for the fifth time – missed its deadline for proposing regulations governing stormwater discharge from post-construction activities. Apparently, EPA and the Chesapeake Bay Foundation, which was the plaintiff in the original litigation, are negotiating a new deadline. Good luck with that.

EPA is not in a good place at the moment. There is significant congressional opposition to any rule, with comments questioning not just the wisdom of a rule, but EPA’s authority to issue a post-construction rule at this point. Addressing stormwater will undoubtedly be extremely expensive. The same E&E story noted that EPA just approved a new stormwater plan for Philadelphia with an expected price tag of $2.4 billion. Even though the Philadelphia plan is a separate issue from regulation of post-construction discharges, it does give some idea of the economic magnitude of the issue.

By the way, did I mention that there will be an election in the fall? I know from experience in Massachusetts that even Democratic members of Congress are very sympathetic to claims from municipalities that they simply cannot afford to comply with EPA stormwater requirements. There may be less sympathy, at least on the Democratic side, with private landowners, but EPA has to be aware that it does not have a broad popular mandate for this rule. 

EPA cannot make this about big, bad, coal companies. This is about municipalities and private landowners. The regulated community with respect to stormwater is very large. Sometimes a large number of opponents is too diffuse to act and faces free rider problems. That does not seem to be the case here, as the costs are sufficiently high that they still matter to individuals, and there are large, well-funded, trade groups to minimize the free rider problem.

There may be a rule at some point. After all, there still is litigation, and a court will likely order EPA to issue a rule if EPA continues to delay. I wouldn’t be surprised, however, if it does not happen until after the election.

On the substance of the rule, it is worth noting that the Institute for Policy Integrity sent EPA a letter last week arguing that EPA should be doing more to look at market approaches to regulating post-construction stormwater discharges. I don’t mean to put too much weight on this. The Institute for Policy Integrity proposals are not going to get widespread developer support any time soon. Nonetheless, any time an environmental NGO supports an expansion in the use of market-based regulation, it is worthy of note.

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One of my favorite rants concerns the pessimism of most environmentalists. It’s probably a pointless rant, both because one cannot control whether one is an optimist or a pessimist and because very few people, and almost none of the environmentalists I know, will ever admit to being a pessimist. Nonetheless, it’s a real issue, because the point of the Cassandra myth wasn’t just that she could predict the future, but that she was cursed never to be believed. I am firmly convinced that environmentalists’ pessimism is self-fulfilling, because it is part of the reason why they are often ignored. 

In any case, this story from yesterday’s ClimateWire reminded me why I’m an optimist. It may perhaps be four years’ exposure to engineers at MIT – and engineers are as much Pollyannas as environmentalists are Cassandras – but I believe that solutions will be found. It seems almost incomprehensible that CO₂ could be turned into fuel, but, lo and behold, MIT engineers have done it.

I want to be clear. I don’t view this technology as the solution to climate change. It won’t be, even if it works. The point is that something will be the solution and it’s almost certainly a technology that people aren’t even envisioning today.

I also want to make clear that we do have a severe problem on our hands, and the sooner we solve it, the better. Not only that, but we’re going to solve it much faster if government spends money on basic research and if the right market-based controls (yes, I’m referring to a carbon tax or cap-and-trade program) are in place to create incentives to turn research discoveries such as this into technologies that will work in the marketplace.

Call me Pollyanna, but I still think it’s going to happen.

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Massachusetts was one of the first states to launch an ambitious greenhouse gas reduction program, setting a 2020 goal of cutting emissions 25% from 1990 levels and a 2050 goal of an 80% reduction.  With less than eight years to go before 2020, is the Commonwealth on track to measure up?  According to a report released this week by think tank MassINC and the Clean Energy States Alliance, maybe not.

The report concludes that, although Massachusetts has implemented many effective programs -- notably the renewable portfolio standard, energy efficiency programs, and Green Communities program, all of which were introduced in 2008 -- implementation of new activities and initiatives called for in the Clean Energy and Climate Change Plan for 2020, released in 2010, is lagging.  The lag is sufficiently significant that Massachusetts may miss its 25% reduction mark -- only no one's really sure. 

One of the main problems is that the 2020 Plan did not lay out specifics or create any systems to track and monitor progress and milestones along the way.  Although the authors praise the 2020 Plan as being based on solid analysis and putting forth appropriate, logical actions, they conclude that without a full work plan or monitoring programs, the state does not have specific expectations or a way to measure them.  Without a publicly accessible, central scorecard of emissions, milestones and projected effects of different initiatives, it is difficult even for those within state government -- let along outsiders -- to know how well the state is doing.  

The report also identified a number of unknowns within particular initiatives.  For instance, it is not clear how much methane is currently leaking from aging natural gas pipelines.  The report recommends that the Department of Public Utilities and Department of Environmental Protection work aggressively to measure the extent of the problem and create incentives for gas companies to fix the leaks of this potent greenhouse gas quickly.  

The authors make 4 main recommendations:

• the Governor should appoint a single individual charged with directing the overall effort and tracking progress across the government
• set up an effective, transparent process to track and monitor every item in the 2020 plan, with year-by-year milestones, metrics, progress indicators and methods to determine whether the state is on track
• make a concerted effort to educate the public about the specific goals and actions in the 2020 Plan and what citizens can do to help
• reassess the 2020 Plan's lagging initiatives and either accelerate them to achieve results in time, or replace them with other viable programs that can achieve the reduction goals

Many of the "lagging" initiatives in the 2020 Plan relate to transportation, which is responsible for 36% of Massachusetts' greenhouse gas emissions, the largest share by sector, and one of the hardest to tackle.  But it's not all bad news -- the authors conclude that the GreenDOT policy provides evidence of a gradual, but real, culture shift within the bureaucracy.  Look for GreenDOT's own 2020 Implementation Plan, expected this spring,

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Last week, the Virginia Supreme Court ruled (for the second time) that a CGL policy issued to AES Corporation did not require Steadfast Insurance to provide a defense to AES for claims brought again AES in Kivalina v. Exxon Mobil. The decision, in AES Corporation v. Steadfast Insurance, held simply that, based on the “eight corners” of the complaint and the insurance policy, the claims against AES did not allege an “occurrence" under the CGL policies at issue.

Obviously, if climate change is real, and at least unless and until courts of last resort dismiss all actions such as Kivalina, these kinds of cases are going to proliferate, and the question of who pays such potentially massive claims will continue to be of interest to power generators, oil companies, insurance companies, and their shareholders.

The complaint in the underlying action alleged that AES “intentionally” emits carbon dioxide and “knew or should have known of the impacts” of those emissions. In disposing of AES’s claim, the court noted that, under Virginia law, an “occurrence” basically means an “accident.” Moreover, an accident is

An event which creates an effect which is not the natural or probable consequence of the means employed… If a result is the natural or probable consequence of an insured’s intentional act, it is not an accident.

AES asserted that it was still entitled to coverage, because the complaint alleged that AES “intentionally or negligently” created the nuisance. If it was negligent, argued AES, then the claim was related to an “accident.” However, the court noted that AES’s underlying actions in emitting carbon dioxide were intentional, not negligent. It is only, at best, AES’s alleged failure to realize that carbon dioxide emissions would cause climate change that was negligent. To the court, that was not enough. If the underlying acts were intentional, it does not matter that AES may have been negligent in failing to foresee the consequences.

Under the CGL policies, Steadfast would not be liable because AES’s acts as alleged in the complaint were intentional and the consequences of those acts are alleged by Kivalina to be not merely foreseeable, but natural or probable. Where the harmful consequences of an act are alleged to have been not just possible, but the natural or probable consequences of an intentional act, choosing to perform the act deliberately, even if in ignorance of that fact, does not make the resulting injury an “accident” even when the complaint alleges that such action was negligent.

It will be interesting to see how this issue plays out in other states. The decision here seems reasonable, but I can see other courts, depending on the language in underlying complaints and insurance policies, reaching contrary results. 

It will be similarly interesting to see whether, as in Superfund litigation, the decision in here affects pleading in underlying cases. In Superfund, plaintiffs learned how to draft complaints that would maximize the likelihood of coverage, in order to bring in deep-pocket insurers. Here, I don’t know whether the plaintiffs will want to bring in insurers so that there is another deep pocket at the table (power generators are often seen to have fairly deep pockets as well) or whether they will want to minimize the likelihood of coverage, because the their goal may not simply be to maximize their cash recovery, but may instead be to cause maximum financial distress to fossil fuel generators.

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Industry groups and environmentalists continue to do battle over EPA’s efforts to update its post-Rapanos guidance. Greenwire reports that 12 different groups have met with “the White House” in the past six weeks. As this process drags on, one cannot help but ask why this guidance is even being issued at all.

At an earlier point, I acknowledged that this might actually be an appropriate situation in which to use guidance, for one basic reason. The guidance is only temporary; EPA has already acknowledged the need to pursue rulemaking as the long-term solution.

That being said, however, I think that the theoretical benefits of guidance have run into the practical realities of the current political world. It seems as though EPA compared an idealized view of how quickly guidance can get done with a real-world estimate of how long it takes to write regulations. EPA started this process several years ago, presumably not imagining that we’d be sitting here in April 2012 and it still would not have obtained authority to issue the guidance. If EPA had started the regulatory process at the same time, we would probably be equally near to a conclusion, without the necessity to go through the same process twice. Next time, if something requires regulations, just do the regulations and be done with it. 

For those interested in the substance of the guidance, the most significant remaining issue in dispute is apparently when small resources that are individually not navigable have sufficient cumulative nexus to navigable waters that EPA may subject them to regulation under the test enunciated by Justice Kennedy. Given the essentially standardless text in the statute itself, EPA probably has sufficient discretion on this issue to defend either a narrow or broad interpretation – that’s why the lobbying is so important – and that’s why it would have been better to handle this through the formal regulatory process from the get-go. If we’re going to be candid, EPA is pretty much writing the statute here, since Congress failed to do so. Shouldn't such an exercise be performed in the most formal way possible, with maximum procedural protection?

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Yesterday, Greenwire reported about speculation regarding what impact EPA’s proposed New Source Performance Standards for greenhouses gases would have on potential regulation of existing sources. As Greenwire noted, while EPA sought to downplay the impact of the NSPS on regulation of existing sources, both environmentalists and industry representatives think that regulation of existing sources is pretty much inevitable. 

My favorite bit from the story is that OMB apparently deleted the following language from EPA’s proposal:

At a future date, EPA intends to promulgate emission guidelines for states to develop plans reducing CO2 emissions from existing fossil-fuel-fired" power plants.

I suppose that that statement would qualify as what lawyers call dicta, since, strictly speaking, it’s not a necessary part of the NSPS proposal. Nonetheless, there’s dicta, and then there’s really good dicta. Put this statement in the latter category. It may be that EPA will simply wait until after election to issue regulations for existing sources. It may be that EPA will wait to get sued. What seems clear is that, absent congressional action, EPA has a statutory duty to promulgate rules for GHG emissions from existing sources under § 111. 

As I noted last month in commenting on the NSPS proposal, cap-and-trade legislation never looked so good.

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It’s always satisfying to find an open-minded judge who is willing to change his decision when he is shown to be wrong, but Judge Greisbach of the Eastern District of Wisconsin may be crossing the line from open-mindedness into a chronic inability to make up his mind.  In the past 9 months, Judge Greisbach has issued three separate decisions in US v. NCR on the subject of whether a party, Appleton Papers, Inc., which purchased assets from an alleged polluting party, NCR Corp., can be held to have successor liability under CERCLA with respect to the PCB contamination of the Lower Fox River. 

To recount the bidding, Judge Greisbach initially held in July of 2011 that the government could not establish successor liability against a purchaser of assets where the seller of assets, who apparently caused the releases of hazardous substances, remained a viable CERCLA defendant.  In December of 2011, Judge Greisbach reversed himself on the dubious basis that none of the CERCLA cases expressly held that a purchaser of assets could not be held liable where the seller of assets was still a viable defendant.  In a blog post at the time, I noted that the reversal seemed driven not by the legal merits but by the Court’s desire to solve the practical problem that the United States could not get the site cleaned up unless it could issue an enforceable order to Appleton. 

Apparently recognizing that his December reversal was legally untenable, Judge Greisbach has again revisited the issue of Appleton’s CERCLA liability and issued a new decision reversing himself again.  This time Judge Greisbach appears to have gotten it right.  After carefully reviewing the language in the 1978 contract between the parties, he concludes that the contract is not broad enough to transfer liability under a statute that had not yet been enacted with respect to contamination at site that had not yet been identified. 

At one level, the lesson of this case is: keep trying -- you may eventually get it right.  But the more important lesson is that CERCLA liability decisions should be based on the legal merits of the claim and not on a willingness to stretch legal standards to solve the exigencies of facilitating site cleanups.  The legal history of Superfund is littered with wrongly decided cases driven more by a desire to ensure cleanups than to effect justice. 

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I have had a number of clients ask me recently about the status of EPA’s efforts to regulate coal combustion residuals under RCRA. It turns out that some environmental groups have been asking themselves the same question. Being environmental groups, however, they did more than ask about it. They sued.

As most readers know, EPA published two separate proposals for regulating coal ash – one under Subtitle C and one under Subtitle D – on June 21, 2010. Since then, there has been mostly radio silence from EPA, aside from a Notice of Data Availability and request for additional comment last October. Notwithstanding my occasional reluctance to speculate, one could easily infer that, in the absence of a court order, and in the presence of a firestorm of opposition from utilities, coal ash recyclers and, perhaps most importantly, coal state politicians, EPA has been content to let sleeping dogs lie.

Unlike EPA, however, the environmental groups were not content. Last week, 11 groups filed suit against EPA, requesting an order that EPA “issue necessary revisions of [the RCRA] regulations … as soon as possible.” It will be interesting to see how EPA defends the law suit, but I would be willing to make a small wager that EPA will not issue CCR regulations before the election.

The law suit is noteworthy even for those not focused on the CCR issue, because the plaintiffs also allege that EPA needs to revise its toxicity characteristic leaching procedure. The TCLP test is broadly used under CERCLA and in state superfund programs. Any revision to the TCLP test could thus have significant impacts on cleanup standards. Superfund lawyers, pay attention.

When EPA proposed two different ways to regulate coal ash, I compared it to Hamlet. Plaintiffs would seem to prefer Macbeth

If it were done when 'tis done, then 'twere well
It were done quickly:

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Deciding statute of limitations issues in CERCLA cases is not always a straightforward matter as the recent 54 page opinion in American Premier Underwriters Inc. v. General Electric Company illustrates.   There, a federal court in Ohio was faced with the unenviable task of trying to determine whether remedial actions and removal actions at four separate railroad sites located in four different states were barred by statutes of limitations under CERCLA and state law.  Unfortunately, the court seems to have surrendered its common sense in its close reasoning of the facts and the case law.

Claiming that CERCLA statute of limitations issues should not be decided on the basis of bright line tests, the court concluded that an activity could constitute a remedial action for statute of limitations purposes even though a Remedial Investigation had not been completed at the time.  Relying upon that flexibility, the court found that the early implementation of oil recovery systems at the various sites triggered CERCLA’s six year statute of limitations for remedial actions and barred claims for those remedial costs.  Strangely, however, the court went on to apply a hard and fast rule (purportedly on the basis of a Sixth Circuit decision) that CERCLA’s three year statute of limitations with respect to removal actions could not accrue until after a Remedial Investigation was completed. 

In the end, the court reached the truly bizarre result that remedial actions were barred under CERCLA’s six year statute of limitations whereas removal actions at the same sites commenced prior to those remedial actions were not barred under CERCLA’s applicable three year statute of limitations.   To paraphrase Dante, anyone entering the world of Superfund should be prepared to leave hope and reason behind

.

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The decision last week by Judge Amy Berman Jackson – an Obama appointee – to reject EPA’s authority to withdraw its “specification” which authorized the Army Corps of Engineers to issue a § 404 permit to the Mingo Logan Spruce No. 1 mine would be important in its own right. In combination with the recent Supreme Court decision in Sackett, and given the language used in both cases, the combination rebuke to EPA is worth attention.

The permitting history of the Spruce No. 1 mine was lengthy and complicated, but the facts relevant here are not. After a multi-year process, the Corps issued a § 404 permit to Mingo Logan in January 2007. This happened after EPA emailed the Corps, stating that “we have no intention of taking our Spruce Mine concerns any further from a Section 404 standpoint.”

Well, that held true for all of two years. In September 2009, EPA requested that the Corps suspend, revoke, or modify the permit. The Corps rejected EPA’s request and EPA then formally withdrew its specification of the disposal sites identified in the permit. 

Judge Berman’s framing of the legal issue crisply encapsulates just how broadly EPA’s claimed authority would reach.

            EPA’s position is that section 404(c) grants it plenary authority to unilaterally modify or revoke a permit that has been duly issued by the Corps – the only permitting agency identified in the statute – and to do so at any time. This is a stunning power for an agency to arrogate to itself when there is absolutely no mention of it in the statute. It is not conferred by section 404(c), and it [sic] contrary to the language, structure, and legislative history of section 404 as a whole.

Note to agency lawyers – when courts use the word “arrogate” to describe your behavior, you are in big trouble.

Review of the court’s complete analysis is beyond the scope of this blog, but it is worth noting that, like Justice Alito in Sackett, Judge Berman too managed to heap scorn on Congress as well as EPA. Trying to parse section 404(c), Judge Berman described it as “poorly written”, “clumsy”, and something that “does not make a great deal of sense.” 

The bottom line for Judge Berman was pretty simple. The statute does not grant EPA explicit post-permit withdrawal authority. The Corps is the agency that issues the permits and it does have authority to suspend, revoke or modify. The structure of the statute indicates that one may not discharge without a permit, but that one may do so with a permit. EPA was not able even to explain to the court whether its action actually constituted a withdrawal of the permit. As the Court noted:

            First and foremost, EPA’s interpretation fails because it is illogical and impractical. EPA claims that it is not revoking a permit – something it does not have the authority to do – because it is only withdrawing a specification. Yet EPA simultaneously insists that its withdrawal of the specification effectively nullifies the permit. To explain how this would be accomplished in the absence of any statutory provision or even any regulation that details the effect that EPA’s belated action would have on an existing permit, EPA resorts to magical thinking. It posits a scenario involving the automatic self-destruction of a written permit issued by an entirely separate federal agency after years of study and consideration. Poof!

And “poof” went EPA’s authority.

It is important to remember that this decision was not on the merits and does not limit EPA’s authority to prohibit the specifications required for the Corps to issue § 404 permits. I still think that EPA’s science is sufficiently strong that it would survive arbitrary and capricious review – if made before a permit is issued. The decision also does not limit the Corps’ authority to withdraw a permit; the Corps simply refused to do so here. Thus, this decision does not allow mining companies to run roughshod. All it does is provide those companies with the degree of finality that permits are supposed to provide.

To paraphrase Justice Scalia in Sackett, regulatory necessity does not conquer all. 

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On Tuesday, EPA announced release of its proposed New Source Performance Standards for carbon pollution from new power plants. I’m feeling like a broken record here. Everyone’s acting on rational motives (if not rationally), but the result remains, to put it mildly, suboptimal. On the paramount environmental issue of the day, we’re going about it all wrong, when we know that there is a better way.

I cannot really blame EPA or the environmentalists.  Indeed, at a certain level they cannot be faulted unless you don’t believe in climate change, and I am not in that camp. Since climate change is real, they have to do something. In fact, as they have pointed out in the recent arguments before the D.C. Circuit Court of Appeals, they have statutory obligations to act – but they haven’t been given the right tools. 

On the other hand, no matter how much effort EPA puts into describing the flexibility it has put into the rules (for example, coal plants may comply based on a 30-year window, allowing time to install CCS down the road), this rule remains a dinosaur among regulations – a technology-based standard when we know that market-based rules provide equal levels of environmental protection much more cheaply (or more protection for the same cost). As I’ve opined in the past, the entire NSPS program should wither away and die, and instead we’re pegging arguably our most important environmental initiative to it.

By the way, when EPA was rolling out its GHG BACT guidance, I considered whether BACT for a coal plant is now gas. While EPA has not yet answered the technical question regarding whether requiring coal plants to consider gas plant emissions as BACT would be to “redefine the source”, the broad answer to that question was provided in Tuesday’s proposal. BACT for a coal plant is indeed gas.

I wish I saw a way out of this dilemma. The long run solution remains either a cap-and-trade system or a carbon tax, and the quid pro quo should be elimination of technology-based standards. I will not speculate on how long it will take for cooler heads to prevail so we can get to that outcome.

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The auction held last Wednesday, March 14th, by the Regional Greenhouse Gas Initiative (RGGI) was the fifteenth held so far -- making it seem far from novel --  but as we highlighted in January, this first auction of RGGI's second compliance period could provide interesting insight into the future of the program.   

According to the market monitor report, 21.5 million (62%) of the 34.8 million allowances offered for sale by the 9-state group sold at last week's auction, with the 20 participating bidders paying $1.93 (the new floor price).  Although two of the entities who submitted bids for allowances were not compliance entities, 99% of the allowances purchased were sold to the generators regulated under RGGI or their corporate affiliates.  Participation in this quarter's auction was slightly lower than December's auction, which featured 38 bidders, but much more robust than the September 2011 auction, which set a record low, with only 18% of the allowances offered for sale being purchased.  The next auction, held in June, will bring the total cumulative proceeds since the beginning of RGGI to over a billion dollars, as the total currently stands at $993.7 million.

The first compliance period for RGGI ran from January 1, 2009 through December 31, 2011 and regulated generators had until this month to prove that they had purchased enough allowances to cover the tons of CO2 they emitted during that period.  The RGGI states plan to release more information about such compliance in June.  RGGI's second compliance period began on January 1 and runs through the end of 2014. 

One of the big changes between the 2011 and 2012 auctions is that at last year's auctions, a small offering of 2012-2014 vintage allowances were also offered for sale in a parallel auction.  RGGI announced in January that they would discontinue this practice for the upcoming auctions.  

This change may be as simple as RGGI, Inc.'s response to changes in market demand -- at both the September and December 2011 auctions, no one bid on the future-compliance period allowances.  Especially since running two auctions for two sets of allowances increases RGGI's costs, eliminating this parallel auction makes sense.  We noted in January that this change could be seen as a statement about RGGI's own view of its future beyond this compliance period's end in 2014, but it also seems likely that it is another way that RGGI can make small adjustments to the cap, while awaiting the official determination by the RGGI member states of what to do with the cap going forward. 

Through the future compliance period auctions held in 2009-2011 and last week's auction, RGGI has already sold over 43 million allowances for the 2012-2014 period.  This amount is nearly a quarter of the current annual cap, and will likely be an even higher percentage of the eventual cap for 2012, because the cap is expected to be reduced to correspond to decreased emissions in the comprehensive review process currently under way. 

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In its unanimous decision yesterday in Sackett v. EPA, the Supreme Court’s communicates more than a little exasperation with its co-equal branches of government.  Justice Alito’s concurrence is an outright broadside attacking Congress for failing over decades to clarify the scope of the Clean Water Act which enabled the Executive Branch in the form of an arrogant EPA to employ what Justice Scalia in the majority opinion describes as the “strong-arming of regulated parties”. 

The language used in Sackett is both sarcastic and highly personalized.  In a sentence dripping with sarcasm, Justice Scalia notes that EPA’s order concluding that there was a violation of the Clean Water Act constituted the end of EPA’s administrative deliberation; however, he goes on to comment snidely: “the agency may still have to deliberate over whether it is confident enough about this conclusion to initiate litigation, but that is a separate subject.”  Significantly, in the opening salvo of his Concurring Opinion, Justice Alito speaks not of EPA but of EPA’s employees – “[the federal government’s position] “would have put the property rights of ordinary Americans entirely at the mercy of Environmental Protection Agency (EPA) employees”.  Justice Alito’s reference to the EPA’s employees personalizes the point.  This is not a case about the correctness of EPA’s policies; it’s a case about government employees not behaving consistent with fundamental American values. 

In the end, Sackett represents a defense of the judiciary’s central role in our democracy from encroachment by Congress and the Executive Branch.  As Justice Scalia noted, the Executive Branch’s power to regulate does not trump the judiciary’s right to review:  “The APA’s presumption of judicial review is a repudiation of the principle that efficiency of regulation conquers all.”  While the Court stopped short of constitutionalizing its decision in Sackett, it’s hard not to read between the lines that the judiciary will not sit quietly by while administrative agencies attempt to block judicial review of their coercive tactics against regulated parties.

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For once, speculation about oral argument proved solid. The Supreme Court’s unanimous ruling today in Sackett v. EPA means that EPA must allow judicial review of enforcement orders issued pursuant to its authority under the Clean Water Act. The question now is what the true scope of the decision will be. That question really has two parts.

The first is what will happen to CWA enforcement. On that score, I actually largely share Justice Alito’s view:

The Court’s decision provides a modest measure of relief. At least, property owners like petitioners will have the right to challenge the EPA’s jurisdictional determina­tion under the Administrative Procedure Act. But the combination of the uncertain reach of the Clean Water Act and the draconian penalties imposed for the sort of viola­tions alleged in this case still leaves most property owners with little practical alternative but to dance to the EPA’s tune.

Unfortunately, the heavy hand of government regulation only got a little lighter as a result of this decision, and Justice Alito is absolutely correct that uncertainty about jurisdiction does not help land owners. We’re not done with post-Rapanos litigation. 

The broader question of course is what happens to EPA’s authority under other statutes. It’s difficult to see how EPA’s authority under the Clean Air Act fares any better than its CWA authority. The language in the CAA is very similar – and it certainly does not contain an explicit statutory preclusion on pre-enforcement review. 

CERCLA, on the other hand, likely survives, at least for now. It specifically provides that

No Federal court shall have jurisdiction … to review any order issued under section 9606(a) of this title, in any action except one of the following:

(1) An action under section 9607 of this title to recover response costs or damages or for contribution.

(2) An action to enforce an order issued under section 9606(a) of this title or to recover a penalty for violation of such order.

Analysis of whether the Clean Water Act bars judicial review of enforcement orders seems critical to the Court’s holding in Sackett. The Court specifically noted that “nothing in the Clean Water Act expressly precludes judicial review under the APA or otherwise.” The italics on “expressly” are Justice Scalia’s, not mine. One might almost conclude that those italics were provided precisely so that GE would not get too excited about renewing its challenge to CERCLA’s order authority.

Turning back to Justice Alito, his concurrence suggests that he would probably be willing to entertain a constitutional challenge. However, given the path of GE’s challenge and the unanimous decision in Sackett grounded squarely in the language of the Clean Water Act, rather than due process, I’m going to go out on a limb and suggest that it’s going to be difficult to win a challenge to EPA’s bar on preenforcement review of enforcement orders under CERCLA.  Of course, stranger things have happened, so perhaps I shouldn't speculate.

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2012 is shaping up to be the Year of the Commerce Clause.  Not only is the Commerce Clause at the center of the Supreme Court ‘s impending review of the Affordable Care Act later this spring; it is also at the heart of a statement made by a federal district judge in Voggenthaler v. Maryland Square, LLC  that the Constitution bars the application of RCRA’s citizen suit provision in the case of a local groundwater contamination plume:

The central issue in this case is an alleged contamination plume located in Las Vegas, Nevada.  As noted by [defendant] the contamination is a local and isolated plume that does not affect the channels of interstate commerce or the instrumentalities of interstate commerce.  As such, the subject matter of this lawsuit exceeds the authority granted by the Commerce Clause and this Court lacks subject matter jurisdiction over the claims asserted.

Although the court went on to note that it couldn’t formally rule on the Commerce Clause issue because the defendant had been dismissed on other grounds, several commentators  (here and here) have suggested that RCRA citizen suits may be subject to constitutional challenge where the contamination does not cross state lines. 

While hope springs eternal among defendants in environmental contamination cases, it’s hard to see how the Commence Clause can be construed to bar RCRA citizens suits on the ground that the contamination is local.  The Commerce Clause has repeatedly been held to permit regulation of local activity in order to further a wide range of  national objectives affecting interstate markets, such as preventing discrimination or regulating the use of marijuana.  “Cradle to grave” regulation of hazardous waste would seem to be precisely the type of national objective permitting  regulation of local activity.  Moreover, if RCRA citizen suits cannot pass constitutional muster, the same would apply  to CERCLA cases involving only “local” contamination.  At this point, the constitutionality of CERCLA seems beyond reasonable challenge.  Indeed, my friend and partner Seth Jaffe blogged in 2009 that the various challenges to CERCLA’s constitutionality reminded him of the Saturday Night Live bit in which Chevy Chase endlessly reported that Francisco Franco was still dead and CERCLA was still constitutional.  RCRA is likewise still constitutional. 

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