A Sliver of Hope for the Government’s Remaining NSR Enforcement Cases?

Earlier this month, the 5th Circuit Court of Appeals granted something of a reprieve to EPA’s New Source Review enforcement initiative.  The Court first confirmed what everyone other than EPA and DOJ already knew – that failure to get a pre-construction permit is a one-time offense, so that penalty claims for alleged violations more than five years prior to filing are barred by the statute of limitations.

However, the Court then surprised most observers by holding that expiration of penalty claims did not doom the government’s claim for injunctive relief.  Specifically, the Court ruled that the “concurrent remedies doctrine,” which bars equitable remedies when no legal remedy is available, cannot be applied to a sovereign.

I’m not going to provide an exegesis of the doctrine, which carries more than a whiff of Jarndyce v. Jarndyce I’ll settle for three points.  First, it may not be a legal doctrine, but I’d apply the doctrine of common sense, rather than the doctrine of concurrent remedies.  Given that all courts agree that NSR does not impose ongoing operational requirements, it doesn’t even make sense to me to think of ongoing forward-looking injunctive relief with respect to a one-time violation that may have occurred twenty years or more ago.

I’ll add to that a related point.  As other NSR cases have noted, many of these facilities have changed hands since the projects at issue were constructed.  In those cases, the former owners aren’t subject to injunctive relief, because they don’t own the facilities and thus have no ability to install BACT.  The new owners aren’t subject to injunctive relief, because they did not violate the Clean Air Act.  In these circumstances, are we really going to make the availability of injunctive relief subject to the random circumstance of which facilities have been sold and which have not?  That just seems nuts.

Finally, I’ll emphasize that EPA and DOJ shouldn’t get too excited over this decision.  The Court was very clear that it was not deciding whether injunctive relief was appropriate, only that it wasn’t barred by the statute of limitations.  The Court’s language was unlike any I’ve ever seen before and is worth a read:

On remand, the district court must further consider whether any equitable relief is appropriate and proper under the legal and factual circumstances of this case in which the legal relief has been time barred. We recognize that we are not giving the district court much guidance in this task. … Perhaps the answer to this knotty question of injunctive relief will reveal itself after a full hearing and the presentations of the parties. And we hope that we are not being too cowardly when we sincerely wish the district court good luck.

And I’m sure that the District Court will appreciate the 5th Circuit’s good wishes.

Time For Another Superfund Rant: Still Stupid After All These Years.

It’s been some time since I ranted about Superfund, but that’s not because the statute’s gotten any more reasonable.  To the contrary, there’s so much to rant about that it usually just seems too futile to bother.  Take Scott Pruitt’s vow to return Superfund to the “core” of EPA’s mission.  Funny, as stupid as CERCLA has always been, it’s never been at the core of EPA’s mission, because prior administrations acknowledged that the risks posed by Superfund sites aren’t even in the top ten risks EPA has responsibility for addressing.

In any case, the decision last month in LCCS Group v. A.N. Webber Logistics reminded me why periodic rants are necessary.  The LCCS Group is remediating the Lake Calumet Cluster Site (a name which itself would prompt all sorts of comments here if this were not a family-friendly blog).  It brought a contribution claim against Interplastic Corporation, whose only connection to the Site was apparently one shipment of 50 drums of waste resin to the LCCS.

The manufacture of the resin utilizes certain CERCLA hazardous substances.  However, it’s pretty clear that, once the resin has cured, no hazardous substances can leach out of the cured resin.  The Court denied cross motions for summary judgment, largely because it wasn’t totally clear whether the waste resins sent to LCCS by Interplastic were fully cured, so that there was a genuine dispute of material fact.

Then why the rant?  Because the entire discussion has something of an angels on the head of a pin quality to it.  Because the Court made clear that whether Interplastic’s waste resins actually leached hazardous substances or whether any such releases actually caused the incurrence of response costs simply does not matter.

I understand strict liability.  I don’t object to strict liability.  There are fine economic reasons for imposing strict liability.  But liability without causation?  It’s part of what resulted in Superfund being the incredibly inefficient, wasteful, program that all practitioners know it to be.

Time to move CERCLA to the core of the ashbin of history, where it has long deserved to be.

No Circuit Split Here: Second Circuit Affirms New York’s ZEC Program

As Carol Holahan discussed, the 7th Circuit last month affirmed the Illinois zero emission credit program.  Now the 2nd Circuit has weighed in, agreeing with the 7th Circuit and affirming the similar New York State ZEC program.  Whatever one’s views on the merits, it seems pretty clear at this point that state programs to encourage generation of renewable or zero-emissions energy will be upheld by the Appeals Courts, so long as the incentives are:

Untethered to a generator’s wholesale market participation.

Traditional generators are going to have an uphill battle combating these programs for at least three reasons.  First, liberal judges want to preserve programs that encourage renewable energy use.  Second, conservative judges want to preserve state authority.  Finally, in the absence of a Circuit split (which is becoming less likely by the day), the Supreme Court seems unlikely to take these cases.

Of course, we still haven’t figured out how to allow states to regulate energy production to encourage outcomes states find desirable without interfering in efficient wholesale markets.  Just because these programs are constitutional doesn’t mean that the deregulated market system developed over the past 20 years doesn’t face some significant challenges.

Are Discharges to Groundwater Potentially Subject to the Clean Water Act? A Circuit Split Tees It Up.

The Sixth Circuit ruled earlier this week that discharges to groundwater are not subject to Clean Water Act jurisdiction.  We now have the requisite circuit split, opening the possibility of Supreme Court review.  For those who might still be open-minded, I commend both the majority and dissenting opinions in the 6th Circuit; they are each as clear and as persuasive as they could be.

Although I have long thought that it does not make sense to regulate discharges to groundwater under the CWA, I have to confess that my views have evolved.  It’s a very close question, but so long as potential liability is limited in some way, such as by requiring a “direct hydrological connection” between the discharge and the ultimate receiving surface water, it’s hard to argue that the CWA shouldn’t apply.  For me, the dissent poses the key question – one which the majority, as well-reasoned as it is, fails to address:

Can a polluter escape liability under the Clean Water Act (“CWA”) by moving its drainage pipes a few feet from the riverbank?  The Fourth and Ninth Circuits have said no.  In two cases today, the majority says yes.

I’m just having a hard time seeing why the outcome on CWA jurisdiction should differ based on whether the facility owner has a pipe from its coal ash pond discharging pollutants into the river it abuts, or whether the owner instead simply allows pollutants to leach from the pond into the river.

It sure looks as though the Supreme Court may take the opportunity to explain it to me.

Seventh Circuit Upholds Illinois ZEC Program for Struggling Nuclear Units

On September 13, 2018, the Court of Appeals for the Seventh Circuit affirmed the trial court’s dismissal of claims that the zero-emission credit (ZEC) program enacted by the Illinois legislature in 2016 violated the U.S. Constitution’s dormant Commerce Clause and was preempted by the Federal Power Act. The Court took the unusual step of requesting an amicus brief from the Federal Energy Regulatory Commission (FERC).  FERC and the Department of Justice jointly filed a brief in response, arguing that the Illinois’ program neither interferes with interstate auctions nor is otherwise preempted by federal law.  Once FERC weighed in on the side of Illinois, a result in favor of the State was a likely conclusion.

Similar to the framework used for or “RECs,” Illinois’ ZEC program directs state regulators, based on defined criteria, to select certain nuclear plants to generate ZECs and then requires utilities to purchase those ZECs for a predetermined purchase price. The state-developed ZEC price is derived from the social cost of carbon, but is adjusted based on an index tied to wholesale power prices. The Electric Power Supply Association (EPSA), the national trade association comprised of many of the large, non-nuclear competitive power producers in the U.S., brought suit. The lower court dismissed those claims and the appeal ensued.

The crux of EPSA’s preemption argument rested on the premise that: (1) by propping up uneconomic nuclear units with ZECs, the state’s program impermissibly altered the total supply within the wholesale market, thus decreasing the amount ultimately paid to all generators in the annual capacity auction; and (2) that because the ZEC payments are made in connection with energy sales in the wholesale markets, over which FERC has exclusive jurisdiction, states may not interfere with that regulation. The court, however, rejected EPSA’s preemption argument, concluding instead that, “a state policy that affects price only by increasing the quantity of power available for sale is not preempted by federal law.” In reaching this result, the court distinguished the Illinois law from the state program rejected by the U.S. Supreme Court in Hughes v. Talen Energy Marketing. In upholding the ZEC program, the Seventh Circuit joined the Second Circuit in Klee, along with the Third Circuit’s pre-Hughes decision in Solomon, to rule that federal law does not preempt state policies that provide incentives to new or existing capacity.

Nor, according to the court, was the fact that the Illinois law tied the price for ZECs to capacity prices in FERC-regulated auctions a fatal flaw.  Unlike the state program rejected in Hughes, which incentivized new natural gas-fired generation facility by “tethering” state contract payments to the unit’s participation in the federally-regulated wholesale market auction, the receipt of the ZEC is not dependent on wholesale market participation.  Moreover, because, under the Illinois’ statute, every producer of power receives the same price for the ZEC, it did not impermissibly intrude on federal jurisdiction over the markets, even if that price may adjust based on market auction rates.  The Court determined that, “’[S]o long as a State does not condition payment of funds on capacity clearing the [interstate] auction, the State’s program [does] not suffer from the fatal defect that renders Maryland’s program unacceptable.’”

Neither was the court swayed by EPSA’s argument that the Illinois’ program violated the Constitution’s dormant Commerce Clause.  The Court stated that the “Commerce Clause does not ‘cut the States off from legislating on all subjects…[just because] the legislation might indirectly affect the commerce of the country.’” Instead, the court determined that the Federal Power Act calls for a balancing of federal and state interests with respect to the regulation of electricity.  Because the ZEC program did not overtly discriminate against out-of-state power producers, and the effects of the statute would be felt wherever power is used, the court concluded that the statute did not violate the dormant Commerce Clause.

The effect of the Seventh Circuit’s decision should not be underestimated.  One day following the release of the Seventh Circuit’s decision, the Ninth Circuit determined that Oregon’s low-carbon fuel standard did not unconstitutionally favor in-state versus out-of-state power producers.  So far, every decision since Hughes has distinguished Hughesand upheld such state regulatory programs.

Moreover, while not binding, the decision will likely play heavily into the case currently pending before the Second Circuit evaluating New York’s ZEC program.  While EPSA has not announced whether it will appeal the Seventh Circuit’s decision to the U.S Supreme Court, given FERC’s participation in the proceeding, and the fact that that the impact of state-sponsored programs can be mitigated through changes to the wholesale market rules, any appeal will face an uphill battle.  Indeed, the more interesting developments from the Seventh Circuit’s decision will not likely come from the federal courts, but will be what, if any, market reforms related to price formation FERC will institute as a result.

A Leaking Settling Pond Is Not A Point Source

On Wednesday, the 4th Circuit Court of Appeals reversed a District Court ruling and rejected the Sierra Club’s citizen suit against Virginia Electric Power alleging that releases of arsenic from a coal ash landfill and settling ponds at its Chesapeake Energy Center power plant violated the Clean Water Act and the plant’s NPDES permit.  Notably, the issue that most concerned me at the time of the District Court opinion, whether discharges to groundwater are subject to the CWA, it is now settled law in the 4th Circuit and the Court did not revisit it.  Discharges to groundwater with a direct hydrological connection to surface water are subject to the CWA in the 4th Circuit.

Instead, the 4th Circuit reversed on the ground that the landfill and settling ponds are not “point sources” under the CWA.  The Court concluded that neither a landfill nor a settling pond would constitute a:

discernable, confined and discrete conveyance.…  “Conveyance” is a well-understood term; it requires a channel or medium — i.e., a facility — for the movement of something from one place to another.…  [T]he landfill and ponds were not created to convey anything and did not function in that manner; they certainly were not discrete conveyances, such as would be a pipe or channel, for example. Indeed, the actual means of conveyance of the arsenic was the rainwater and groundwater flowing diffusely through the soil.

This all makes a certain amount of sense.  However, as the court itself noted:

The definition includes, “but [is] not limited to[,] any pipe, ditch, channel, tunnel, conduit, well, discrete fissure, container, rolling stock, concentrated animal feeding operation, or vessel or other floating craft.” (My emphasis.)

I haven’t reviewed the briefs and I don’t know if it was argued, but if I were the Sierra Club attorney in this case, I would certainly have noted that a concentrated animal feeding operation, included by statute in the definition of a point source, would not constitute a point source under the 4th Circuit’s approach of focusing on a traditional understanding of the meaning of the word “conveyance.”

This case is not likely to be a one-off and I’ll be interested to see if other courts take a similarly narrow view of the “conveyance” language in the statute.

We May Not Always Have Paris, But Perhaps We Can Do Better Than Paris

Earlier this week, the Climate Leadership Council released an analysis demonstrating that the “Baker Shultz Carbon Dividends Plan” would result in greater reductions in greenhouse gas emissions than the US committed to attaining under the 2015 Paris agreement.  I don’t doubt that the CLC analysis is right.  If I had to guess, I’d predict that they probably underestimate the reductions that would be reached with a robust carbon tax.

I understand the difficulty in convincing what passes for the GOP base at this point – and the GOP members of Congress – to endorse the carbon tax.  Oops, I meant dividend.  I’m hopeful that enough members will come around at some point.  My real worry is that the environmental movement will reject the plan because it calls for elimination of current regulations concerning carbon.

Years ago, Gina McCarthy used to say quite freely that the Obama administration would get most of its carbon reductions, not from direct regulation of GHG emissions, but instead from all of the other air regulations it was promulgating, such as the power plant MACT standards.

What environmentalists have to remember is that the reverse is also true – any robust program to reduce carbon emissions will also lower emissions of conventional pollutants.  Indeed, in defending the Clean Power Plan, environmentalists have made that very argument.  Why not acknowledge the same point in connection with a carbon tax and give up on a set of regulations that have always been clunky at best, are nowhere near as efficient a regulatory tool as a carbon tax, and which, as compared to a carbon tax, really benefit no one other than environmental lawyers and consultants?

God, wouldn’t it be a breath of fresh air to see Congress actually get something big done for the American people?  Let’s not screw this one up.

Municipalities May Regulate the Local Impacts of Pipelines Without Violating the Commerce Clause

On Friday, Judge John Woodcock held that an ordinance enacted by the City of South Portland, Maine, that prohibited loading crude oil from a pipeline terminating in South Portland onto tankers in South Portland Harbor, in order to prevent certain adverse local impacts, did not violate the Constitution’s Commerce Clause.  It’s potentially a very important decision in this area.  Congratulations to my partner Jonathan Ettinger and our entire team that worked on the case.  You can read more about it here.

EPA Proposes To Replace the Clean Power Plan. How About a Proposal To Replace Its Benefits?

EPA has finally released its proposed replacement for the Clean Power Plan, dubbed the Affordable Clean Energy Rule.  More affordable than clean, I’d say.

What’s really telling is that EPA’s own analysis shows that the CPP would have delivered significantly more benefits than ACE.  And that goes for both direct benefits in GHG emissions reductions and indirect benefits related to reductions in traditional criteria pollutants.

First, with respect to GHG emissions, the ACE Rule Fact Sheet states that it will reduce CO2 emissions by up to 30 million short tons in 2025, yielding $1.6 billion “in monetized domestic climate benefits.”  This statement is interesting for at least two reasons.  First, it acknowledges that reducing CO2 emissions results in “monetized domestic climate benefits.”  I guess climate change isn’t a hoax, after all.  Second, ACE will yield less than 1/10 the CO2 reductions that the CPP would have done, making that $1.6 billion seem fairly paltry.

Second, the Regulatory Impact Analysis prepared for the proposed rule makes clear that lost indirect benefits resulting from replacing the CPP with ACE are quite substantial.  Substantial, as in hundreds of additional premature deaths each year due to higher particulate emissions rates in the ACE.

I’ve always been sympathetic to the argument that the CPP was legally vulnerable in attempting to regulate outside the fence line.  However, shouldn’t that be a moot point?  If the Clean Power Plan would deliver significantly more “monetized domestic climate benefits” than ACE and if it would deliver substantial indirect public health benefits – and there seems little doubt it would do both – then shouldn’t EPA be figuring out a way to get the authority it needs to implement it?

If EPA were an agency that actually cared about it mission to protect the public health from environmental risks, then the debate would be over how to give it the authority it needs to do its job; EPA would not be trumpeting that is doing less to protect the public health.

Another Day, Another Reversal of an EPA Regulatory Delay

On Friday, the D.C. Circuit Court of Appeals vacated EPA’s “Delay Rule”, which postponed compliance with EPA regulations governing preparation of Risk Management Plans under the Clean Air Act.  The decision comes only one day after another court decision vacating the “Suspension Rule” which postponed the Waters of the United States Rule.

Memo to EPA General Counsel’s office.  If something labeled “Delay Rule” or “Suspension Rule” comes across your desk, you might want to give it a careful read.

This case in particular makes clear the sad irony in this Administration’s approach to statutory implementation.  For years, the GOP has complained that a runaway EPA has ignored the plain text of the statutes it is charged with implementing.  In this case, the statute could not be clearer that, presented with a petition to reconsider a rule under this section of the Clean Air Act, EPA may stay implementation of the rule for up to 90 days.

Here, EPA first stayed the rule for 90 days, but then stayed the rule for 20 months.  In doing so, EPA pointed to its general rulemaking authority under the Act, ignoring the plain language of the provisions directly governing the regulations at issue.  The Court was having none of it:

But regardless whether EPA “believe[s] that three months [is] insufficient to complete the necessary steps in the reconsideration process,” that is not EPA’s call. Congress saw fit to place a three-month statutory limit on “such reconsideration,” and this court “must give effect to the unambiguously expressed intent of Congress.”

Sounds like a court reining in an out-of-control agency in order to ensure that the agency actually follows the law.

Can you say “hoist on its own petard?”

How Much Does Trump Even Care About Deregulation?

On Thursday, the Trump Administration’s “Suspension Rule,” which delayed implementation of the Obama Waters of the United States Rule for two years was struck down.  Judge David Norton of the District of South Carolina issued a nationwide injunction against the rule.

It’s important to note that the case was not about the merits of the WOTUS rule.  It was simply about the Trump administration’s failure to comply with the Administrative Procedure Act in promulgating the Suspension Rule.

Which brings me to the point of this post.

The Administration’s failure to comply seems so obvious that one has to wonder whether the Administration even cared whether the Suspension Rule could survive judicial review.  Indeed, this case seems part of a clear pattern.  The Court noted as much in quoting a summary of such cases from the plaintiffs’ brief:

Clean Air Council v. Pruitt (vacating the EPA’s attempt to temporarily stay a Clean Air Act regulation without “comply[ing] with the … APA”); Open Communities All. v. Carson, (enjoining the defendant agency’s attempt, “without notice and comment or particularized evidentiary findings, … [to] delay[] almost entirely by two years implementation of a rule” adopted by the previous administration); Pennsylvania v. Trump (enjoining two new “Interim Final Rules” based on the defendant agencies’ attempt to “bypass notice and comment rule making”); Nat’l Venture Capital Ass’n v. Duke (vacating the defendant agency’s “decision to delay the implementation of an Obama-era immigration rule … without providing notice or soliciting comment from the public”); California v. U.S. Bureau of Land Mgmt. (holding that the defendant agency’s attempt to postpone a regulation’s compliance dates “after the rule’s effective date had already passed … violated the APA’s notice and comment requirements by effectively repealing the [r]ule without engaging in the process for obtaining comment from the public”); Becerra v. U.S. Dep’t of the Interior, (holding that the defendant agency violated the APA in “fail[ing] to give the public an opportunity to weigh in with comments” before attempting to postpone a rule that had already taken effect).

To which the Court added its own footnote:

To this litany of cases, the court adds two more from the last several months— Nat. Res. Def. Council v. Nat’l Highway Traffic Safety Admin. and Children’s Hosp. of the King’s Daughters, Inc. v. Azar. As these cases make clear, this court is but the latest in a series to recently find that an agency’s delay of a properly promulgated final rule circumvented the APA.  (My emphasis.)

I find it hard to believe that numerous smart lawyers, across a range of agencies, all suddenly forgot what the APA requires.  Isn’t it more likely that the Administration simply doesn’t care about the outcome?  The government of the most powerful nation on earth, that likes to think that it taught the world about democracy, doesn’t care about governing.  All it cares about is having Twitter material, to feed to its adoring fans and, equally importantly, to bait its many critics.

Court Orders EPA to Ban Chlorpyrifos: No Escaping Jurisdiction After 10 Years of Delay

Last week, the 9th Circuit Court of Appeals ordered EPA to revoke all tolerances for chlorpyrifos within 60 days.  It’s another fairly devastating indictment of the Trump administration.

First of all, the merits were pretty clear.  Clear enough that the administration did not attempt to defend the case on the merits!  The statutory language requires EPA to ban pesticides from use on food products unless:

There is a reasonable certainty that no harm will result from aggregate exposure to the pesticide.

After many years of delay in responding to a petition to ban chlorpyrifos (the Bush and Obama administrations were not exactly covered in glory in this case, either), the Obama administration did propose to ban chlorpyrifos.  However, before the proposal was finalized, the Trump administration changed course and denied the petition.  Why?  Because:

The science addressing neurodevelopmental effects remains unresolved.

How the administration thought that it could justify denying the petition on the basis of scientific uncertainty, when the statute requires a ban unless the science shows with “certainty” that the product will not cause harm is just one of those sweet mysteries of how a bureaucracy responds to a force of nature such as Trump or Pruitt.  One might have thought that at least one lawyer at EPA would have pointed out that the rationale for denying the petition was actually an admission that EPA had an obligation to grant the petition!

The outcome turned on whether the Court had jurisdiction to hear the case.  EPA argued that there was an administrative process for appealing the denial of the petition, that petitioners had failed to exhaust that administrative remedy, and thus that the Court was deprived of jurisdiction.

Distinguishing between jurisdictional rules and claim-processing rules, the Court concluded – rightly, I think – that the failure to exhaust administrative remedies did not deprive the Court of jurisdiction.  The Court’s frustration with years of EPA delay certainly played a role in its conclusion:

Over the past decade and more, the EPA has stalled on banning chlorpyrifos, first by largely ignoring a petition properly filed pursuant to law seeking such a ban, then by temporizing in response to repeated orders by this Court to respond to the petition, and, finally, in its latest tactic, by denying outright our jurisdiction to review the ultimate denial of the petition, even while offering no defense on the merits. If Congress’s statutory mandates are to mean anything, the time has come to put a stop to this patent evasion.

Justice delayed is justice denied.

Winston Churchill and Fuel Economy Standards

So the Trump administration has formally proposed to roll back CAFE standards for model years beginning in 2021.  And California has announced its intention to start separately enforcing its own standards if the federal standards are weakened.  Trying to sort it all out, I was somehow reminded of the famous Winston Churchill statement:

Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed it has been said that democracy is the worst form of Government except for all those other forms that have been tried from time to time.…

No one who’s thought seriously about the environmental impacts of emissions from cars can really argue that CAFE standards are a good way to go about it.  They are just a way to tax emissions by subterfuge.  In one of the few statements in the proposed rulemaking with which I agree, NHTSA and EPA state that:

There remains no single technology that the majority of vehicles made by the majority of manufacturers can implement at low cost without affecting other vehicle attributes that consumers value more than fuel economy and CO2 emissions.

Well, sure – but consumers don’t face the actual costs imposed by their driving, because the externalities resulting from motor vehicle fuel consumption aren’t factored into the price.  Of course consumers don’t value reductions in emissions.  If emissions were factored into the price of gasoline, consumers would by definition “value” emissions, because they’d be paying for them.

In the power plant context, I’ve long been a supporter of some kind of grand bargain that would trade elimination of New Source Review for either a cap-and-trade program or a carbon tax.  Why not an even grander bargain.  Let’s call it the grandest bargain – an economy-wide carbon tax at really meaningful levels in return for elimination of both NSR and CAFE standards.

I admit that some details would have to be worked out, but I’m just an ideas man.  I’ll leave implementation to Congress.  After all, isn’t the U.S. Senate the world’s greatest deliberative body?

Dog Bites Man: Scott Pruitt Edition

According to Greenwire (subscription required), EPA has acknowledged that it possesses no records providing a factual basis for claims made by Scott Pruitt that GHG emissions are not a primary contributor to global warming.

As we noted in June, EPA opposed a FOIA request seeking documents supporting Pruitt’s statements, and the Court ordered EPA to provide responsive documents.  Except that, apparently, there aren’t any.

Gosh, I’m surprised.  I guess EPA was just waiting for the Red Team – or perhaps it would have been the Blue Team – to complete its work compiling the evidence against anthropogenic climate change.