EPA’s Clean Power Plan: Potentially New and Improved?

On Tuesday, EPA issued a Notice of Data Availability, requesting further comment on some specific issues that have been raised since it published its draft Clean Power Plan in June.  My immediate reaction?  My head hurts.

I don’t mean to trivialize the implementation issues that would likely arise if Congress enacted either a cap-and-trade system or a carbon tax, but they’ve got to pale in comparison to the Rube Goldberg-like 2014-09-08-401kfeedisclosuresystem that’s going to be in place once EPA promulgates a final rule.  This is not meant as a criticism of EPA.  To the contrary.  The agency has to know that it’s not going to get any credit from the right for any improvements that it makes to the Clean Power Plan.  Thus, the only explanation for all the agency’s efforts, including this NODA, is that they really want to get this right and have the ultimate plan be as cost-effective as possible, given the serious constrains under which they are operating.

That being said, I’ll briefly discuss just one issue raised in the NODA.  The state targets proposed in June are based on two arguably inconsistent assumptions.  With respect to Building Block 2, increased use of natural gas combined cycle generation, the proposal assumes that increased NGCC generation will replace older fossil fuel, i.e. coal, generation.  However,  with respect to Building Blocks 3 and 4, increased use of renewable energy (RE) and energy efficiency (RE), EPA assumes instead that RE and EE simply add incrementally to baseline generation, rather than displacing such generation.

In the NODA, EPA is now asking for comment regarding whether it should assume that RE and EE displace existing baseline generation and, if so, should it assume that RE and EE replace all existing generating sources pro rata or that RE and EE preferentially replace coal first.  As EPA has acknowledged, if the rule assumes that RE and EE replace baseline generation, rather than adding to it, the result would be to reduce GHG emissions, thus leading to more stringent state reduction targets.

I’m not sure I know the answer, but I admit I don’t see a reason for treating generation from RE and EE any differently than generation from NGCC.  In any case, keep those comments coming into EPA.  It appears that the agency really wants to know what you think.

Tenant Who Sublets A Superfund Site Is Not Likely To Be A CERCLA Liable Party

It is generally the rule that a lessee who does not operate the property it rents will not be liable under CERCLA except in the unusual circumstance where the lessee qualifies as an “owner” of the property.  Typically, this means that a lessee who sublets the rented property will not be liable under CERCLA.   That was the holding in a recent federal case in New York, Next Millennium Realty, LLC v. Adchem Corp.   There, the owner of a property contaminated with dry cleaning solvents sued a former tenant for CERCLA contribution because that tenant had sublet the property to a now defunct dry cleaner whose… More

FERC’s Order 745 — Still In Effect For Now

The D.C. Circuit Court of Appeals has stayed its mandate vacating FERC Order no. 745, regarding demand response.  The mandate is stayed at least until December 16, 2014, by which point FERC must petition the Supreme Court for review.  If FERC does seek cert., the stay will continue until the Supreme Court denies the petition or rules against FERC on the merits.

I don’t know if FERC will seek cert.  I know that the Commissioners supporting the order were disappointed that the D.C. Circuit did not grant en banc review, given the strong dissent by Judge Edwards.  Since FERC sought the stay, the Commission must at least be considering a cert. petition.

As I discussed when the decision was issued, the dissent has a lot of force and FERC stands a reasonably good shot before the Supreme Court.  The decision would seem to come down to whether a seemingly increasing reliance on Chevron deference overcomes the court’s strong federalism agenda, favoring state over federal authority.

News Flash: Cap-and-Trade Remains the Most Efficient Way to Reduce Emissions

Notwithstanding Congressional gridlock on climate change legislation, cap-and-trade remains the tried and true efficient method for reducing air emissions.  Although the acid rain provisions of the Clean Air Act are the most well-known example, the CAA also provides for cap-and-trade programs to implement its regional haze regulations.  regional hazeOn Monday, the 10th Circuit Court of Appeals affirmed the cap-and-trade program adopted by New Mexico, Utah, and Wyoming.

Given that conservatives have abandoned their support for market-based regulation in opposing climate change legislation, it is perhaps comforting to return to the historical lineup in which it is environmental groups who challenge the cap-and-trade program as inferior to the traditional command and control approach.  At least it’s a world I recognize, even if it’s wrong-headed.  Fortunately, the 10th Circuit was not having any of it.

The ruling is too complicated to summarize here, but two points are worth noting

  • The Court gave significant deference to EPA’s interpretation of its own regulations – a notable point given that some members of the Supreme Court seem interested in revisiting the scope of Auer deference.
  • The Court affirmed EPA’s use of a “weight of the evidence” approach in determining that the cap-and-trade program would yield better results than simply imposing Best Available Retrofit Technology on all subject sources.  Specifically, it allowed EPA to rely on qualitative evidence as well quantitative evidence.

At bottom, this should not have been a difficult case.  EPA’s regulatory interpretations get deference.  Once that deference was provided, it is hard to see how a court could have concluded that EPA’s application of those interpretations was arbitrary and capricious.

Long live cap-and-trade!

More Sauce For the Standing Goose: Industry Associations Cannot Challenge EPA’s E15 Rule

I have previously noted that standing is a double-edged sword.  Most commonly, the regulated community uses standing to keep citizen plaintiffs out of court.  However, as the D.C. Circuit Court of Appeals demonstrated yesterday, the regulated community is sometimes hoist on its own collective petard.petard

The decision in Alliance of Automobile Manufacturers v. EPA in the challenge to EPA’s E15 rule wasn’t surprising.  After all, it was the second time that the Court concluded that the industry petitioners don’t have standing.  The Court stated that both plaintiffs “failed to offer evidence connecting sales of E15 under the regulation to injuries that [their] members are sufficiently likely to suffer so as to afford [them] standing.”

To me, the more interesting question is why this case was brought.  Given the prior decision in Grocery Manufacturers Association v. EPA, this case was always going to be, at best an uphill battle.  Given that the standing shoe will generally be on the other foot – so to speak – it seems to me that regulated companies might think twice before bringing cases in which standing is a close question.  Even if the court finds standing exists, the company might just have set a precedent that will come back to haunt it in the future when it is trying to argue that some citizens group does not have standing.

UCS Says to Add More Renewables to the Clean Power Plan; If It’s Better, Does that Make It Best?

The Union of Concerned Scientists today announced release of a report which attempts to document that the renewable energy energy-renewable-two-workers-installing-rooftop-solar-panels“building block” in EPA’s Clean Power Plan is not sufficiently aggressive. The report argues that, just relying on existing trends and compliance with renewable energy standards, renewable energy can supply 23% of electricity sales nationally by 2030, well above the 12% assumed by EPA. This would translate into a 40% reduction in GHG emissions, rather than the 30% that EPA says the proposed CPP would attain.

I don’t know if UCS is correct, though I’ve assumed that EPA’s projections are conservative, in order to make it easy for the skeptical to support the plan. I’m interested here in two legal issues implicitly raised in the UCS report. EPA, in regulating under § 111(d) of the Clean Air Act, must establish standards of performance based on the “best system of emission reduction” (which must take into account the cost of emission reductions). UCS’s fundamental argument is that EPA’s system is not the “best,” because EPA can obtain greater reductions than what it has proposed with almost no impact on electricity prices.

The administrative law question would then be whether promulgation of the CPP as currently drafted would be arbitrary and capricious because it would not represent BSER. I think that would be an uphill battle, but it would of course depend on the record ultimately before EPA when it promulgates the final rule.

The flip side of this issue is not new; it’s been at the core of all the questions raised about the CPP. As I’ve noted in the past, I’m sympathetic to EPA here. Climate change is a real problem. Congress hasn’t enacted legislation putting a price on carbon. EPA feels it must do something and wants to make its rules take as much advantage of market incentives as the law will allow. I get all that. What I don’t get is how the building blocks of the CPP, other than the required heat rate improvements at generation facilities, constitute “standards of performance for any existing source….” How can that be, when most of the plan has nothing to do with emissions from sources?

I think I hope EPA wins that battle, but it does not seem a foregone conclusion to me. If EPA does win, it will be interesting to see if UCS can persuade a court that EPA has failed to require what is in fact the “best” system of emissions reduction, because they have not given renewable energy its full and proper role.

What a Shock?! Nebraska’s Early Challenge to EPA’s Clean Power Plan Is Dismissed

Opponents of EPA’s Clean Power Plan have not been willing to wait until a final rule has been promulgated before challenging EPA’s authority. On Monday, Nebraska’s challenged was dismissed – not surprisingly – as premature.

Nebraska’s claim was simple – the Clean Power Plan relies in part on technology demonstrated with funding pursuant to the Energy Policy Act of 2005. However, that statute precludes EPA from finding that technologies have been adequately demonstrated for the purposes of § 111 of the Clean Air Act based “solely” on use of the technologies by facilities funded under the Energy Policy Act.

The Court’s response was equally simple.  EPA has not yet made any final decision to rely on technologies demonstrated with help from Energy Policy Act funding.  If it does, Nebraska can challenge the final rule when promulgated as being in violation of the Energy Policy Act. Of course, it did not help Nebraska’s case that, far from finally deciding the issue, EPA explicitly asked for comment on the extent to which it can or should rely on technology demonstrations at facilities funded under the Energy Policy Act.

While the other suits filed in advance of the final rule rely on different arguments, I don’t expect them to fare any better. As the Court here noted:

The State has jumped the gun. If Congress had wished to allow immediate, interlocutory appeals of proposed rulemaking under the Clean Air Act, it could have done so. It did not, and for good reason: making environmental regulations is difficult and complicated enough without having federal judges weigh in at every step along the way. Instead, as dictated by basic and well-established principles of administrative law, the State must wait for a final agency action.

EPA Really Does Have Authority To Withdraw Specifications Under Section 404 of the Clean Water Act

Last year, the D.C. Circuit Court of Appeals ruled that EPA has authority to withdraw its approval for the specification of sites for the disposal of fill material, even after the Army Corps has issued a permit for the discharge under section 404 of the Clean Water Act. Now, Judge Amy Berman Jackson of the District Court for the District of Columbia has ruled that EPA properly exercised that authority with respect to the Spruce No. 1 Mine in West Virginia. spruce mineThe decision, which appears bullet-proof to me, is a ringing endorsement of EPA’s authority in this area.

As an initial matter, it’s worth emphasizing that Judge Jackson originally ruled for Mingo Logan, finding that EPA could not withdraw a specification after the permit issued. Indeed, she could not resist a reminder of her original holding:

The Court is not unsympathetic to the concerns voiced by Mingo Logan, the State of West Virginia, and the amici about the importance of finality in a permitting process, and those concerns, in part, underlay the Court’s determination that EPA’s interpretation of section 404(c) as authorizing it to act after a permit issued was not reasonable at the second level of the analysis set forth in Chevron. But that battle has already been fought and lost, and this Court is not free to take up the issue again.

One has to admire trial court judges who recognize and accept their role in the system.

Mingo Logan made both legal and factual arguments and the Court rejected them all. First, Mingo Logan asserted that EPA could only withdraw a specification after the permit issued if it had “substantial new information” acquired after issuance of the permit. Not so.

Although the Court of Appeals decided only that there is no temporal limit on the exercise of EPA’s veto authority, and it left it to this Court to decide if there is some substantive limit, the emphasis the court placed on “Congress’s intent to confer on EPA a broad veto power,” sends a strong message here.

Next, Mingo Logan argued that EPA’s finding that the specifications would cause “unacceptable adverse impacts” was arbitrary and capricious. Noting that the deference always due agency decisions is heightened when “an agency’s action relies on scientific and technical information touching upon the agency’s area of expertise,” the Court had no difficulty affirming EPA’s decision.

Finally, it’s worth noting that the Court also affirmed EPA’s authority to withdraw specifications based on the impact of the disposal downstream of the actual disposal location, even if those impacts would occur downstream of detention basins which were subject to a separate permitting process under section 402 of the CWA. The existence of the Section 402 permit did not insulate the downstream impacts from EPA’s authority under section 404.

Not a good day for mountaintop mining.

The Atmosphere Is a Public Trust. So What?

The last frontier of citizen climate litigation has been state-based litigation alleging that states have a public trust obligation to mitigate climate change. As I have previously noted, I’m skeptical that these cases are viable. A decision last month by the Supreme Court of Alaska suggests that such skepticism is well-founded.  Kivalina Aerial View

In Kanuk v. Alaska, a number of minors living in Alaska brought suit, claiming that Alaska had violated its public trust obligation to protect the atmosphere. While finding that the plaintiffs had standing, the Court held that the claims were non-justiciable due to “the impossibility of deciding [them] without an initial policy determination of a kind clearly for nonjudicial discretion.”

Following the lead of the decision in American Electric Power v. Connecticut, the Court stated that:

The limited institutional role of the judiciary supports a conclusion that the science- and policy-based inquiry here is better reserved for executive-branch agencies or the legislature, just as in AEP the inquiry was better reserved for the EPA.

Is there any guarantee that courts in other states will follow the Alaska Supreme Court’s lead? Certainly not. However, I’ll admit to being greatly surprised if they don’t.

The Expanding Availability of Apportionment To Limit Liability in Superfund Cases

In Burlington Northern in 2008, the US Supreme Court ruled that Superfund liability could be apportioned whenever there was a reasonable basis for showing that the harm was divisible, such as by considering the length of time a PRP had been operating a site, the volume of waste contributed, or the percentage of the site utilized by that PRP. Notwithstanding that ruling, many courts since 2008 have continued to shy away from apportionment, content to relegate the division of liability to “equitable factors” pursuant to Section 113(f) contribution. Indeed, I blogged several years ago on the reluctance of the Seventh Circuit to follow Burlington Northern in connection with the Lower Fox River Superfund matter.

In a new decision on the Lower Fox River case, US v. P.F. Glatfelter Company , however, the Seventh Circuit has now reversed field, ruling that the trial court erred in failing to recognize the possibility that the harm might be shown to be divisible. Originally in enforcing a preliminary injunction on behalf of the government, the Seventh Circuit had agreed with the trial court that PCB cleanup costs in one portion of the Lower Fox River were not susceptible to apportionment because the PRP’s contribution was sufficient by itself to trigger the cleanup level of 1 part per million. In its new decision, the Seventh Circuit notes that information adduced at trial shows that the issue of divisibility is more complex than a binary test whether the PRP’s contribution was over 1 ppm:

As a result, we think the harm would be theoretically capable of apportionment if [the PRP] could show the extent to which it contributed to PCB concentrations in [that portion of the River]. And if [the PRP] cleared that hurdle, we think a reasonable basis for apportionment could be found in the remediation costs necessitated by each party.

In the end, the Seventh Circuit decision underscores that PRPs should not overlook the opportunity to limit their CERCLA liability through apportionment.  It’s hard to imagine a multiparty Superfund site where expert opinion cannot be found to offer a basis for dividing up the response costs in some mathmatical way.  Such a division of liability avoids the uncertainty of contribution proceedings where it is difficult to know what equitable factors will be found to be controlling or what parties will have the resources to pay their share of the liability.   






EOEEA Releases Draft Ocean Management Plan Update: Now with Fees

The Massachusetts Executive Office of Energy and Environmental Affairs (EOEEA) recently released for public review and comment a draft update to the Ocean Management Plan for the Commonwealth. The Oceans Act, signed by Governor Patrick in 2008, required the Secretary of EOEEA to develop a comprehensive ocean management plan to be reviewed every five years. The first plan was released in 2009, and the recently released update is a result of this five year review. The plan addresses the areas of habitat, fisheries, sediment resources, recreational and cultural services, transportation and navigation, and… More

CERCLA Preempts Local Cleanup Bylaws; PRPs Everywhere Breath a Sigh of Relief

In an important decision yesterday, Judge Douglas Woodlock of the District of Massachusetts confirmed that CERCLA preempts local cleanup bylaws. The case involved one aspect of the cleanup of the W.R. Grace Superfund Site in Acton, Massachusetts. In 2005, EPA issued a Record of Decision requiring operation of a groundwater pump and treat system in what is known as the Northeast Area of the Site. However, EPA recognized that the contamination in the area was limited and stated in the ROD that the treatment system might be turned off in three years if certain criteria were met. After three… More

The SAB Enters the “Waters of the United States” Fray: Guess Which Side the Scientists Support

The Science Advisory Board has now provided its advice to EPA and the ACOE concerning their proposed rule clarifying the definition of “waters of the United States” BM-NeedToKnow-WetlandBanking-GALunder the Clean Water Act. In a brief letter that can only worry the National Farm Bureau and embolden those who thought that the EPA/ACOE proposal did not go far enough, the SAB concluded that:

the available science supports the conclusion that the types of water bodies identified as waters of the United States in the proposed rule exert strong influence on the physical, biological, and chemical integrity of downstream waters.

In fact, the SAB explicitly called for EPA to include within the definition of WOTUS certain categories of waters that the rule would exclude. “Some of the exclusions listed in the proposed rule do not have strong scientific justification and the SAB recommends that several should be reconsidered.”

In a nice little swipe at the lawyers among us, the SAB also found that:

the term “significant nexus” was not well defined in the proposed rule and recommends that the EPA clarify in its general communications and in the preamble to the final rule that “significant nexus” is a legal term, not a scientific term.

I have posted often about the role of EPA’s scientific oversight committees in judicial review of EPA rules. It’s not obvious how that process will play out here, because, as the SAB itself noted, these are legal questions as much as they are scientific questions. However, while the SAB thinks that “significant nexus” is a legal term, I’m not sure that Justice Kennedy agrees. At the very least, he may consider it a mixed question of fact and law and I’d bet that he’d consider the SAB’s conclusion that the science supports the rule relevant in passing on the any final rule promulgated by EPA and ACOE.

More Than (You Thought) You Ever Wanted To Know About Waters Of The United States

Over the past few months, I worked with a number of colleagues from the American College of Environmental Lawyers to provide the Environmental Council of the States with a balanced review of the history and background of how the term “waters of the United States” rapanos-cartoonhas been defined and interpreted under the Clean Water Act. In announcing the release of the memorandum, Dick Pedersen, President of ECOS, thanked “those members of ACOEL who spent significant time and effort developing this comprehensive memorandum.”

To which I can only add, that’s for darn sure. There is a reason this stuff is so controversial. It’s really difficult to develop a comprehensive and neutral explanation of the sometimes inscrutable judicial opinions in this area. I was honored to work with a truly distinguished group of lawyers to develop the memorandum. It really is everything you ever wanted to know about WOTUS. Enjoy.

Some PURPA Qualifying Facilities are More Qualified Than Others

In a fascinating decision last week, a divided panel of the 5th Circuit Court of Appeals held that the Texas Public Utilities Commission had authority to limit the universe of “Qualifying Facilities” under the Public Utilities Regulatory Policies Act which can choose to enter into a “legally enforceable obligation” requiring a utilities to purchase power from a renewable energy producer. The decision could be a big problem for wind power facilities in jurisdictions less than fully hospitable to renewable energy.

FERC’s rules implementing PURPA provide in part that:

Each qualifying facility shall have the option either:

(1) To provide energy as the qualifying facility determines such energy to be available for such purchases, in which case the rates for such purchases shall be based on the purchasing utility’s avoided costs calculated at the time of delivery; or
(2) To provide energy or capacity pursuant to a legally enforceable obligation for the delivery of energy or capacity over a specified term.

The Texas PUC, however, issued a rule stating that only Qualifying Facilities which could provide “firm power” were entitled to enter into a “legally enforceable obligation.” The majority concluded that nothing in the FERC rules precluded Texas from promulgating its limiting regulation. The dissent, not surprisingly, noted that the regulation provides that “each qualifying facility” is eligible to enter into such obligations. As the dissent also noted, the use of the word “each” in a context such as this, generally means “every.”

It is important to note that the Texas PUC did not take the position that wind facilities per se cannot supply “firm power.” However, the reality is that an obligation to do so makes it much more difficult for wind facilities to utilize the “legally enforceable obligation” option that PURPA appears to provide qualifying facilities.

I don’t foresee en banc review here and Supreme Court review would be a reach, since the case turns so much on the specifics of the Texas PUC approach, but I think that the dissent’s plain language interpretation of the FERC rule might appeal to the Supremes if they were ever to have an opportunity to review it.