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

The good news is that EPA is relying on good science. The bad news is that the science says things will keep getting worse.

After several months of review, on July 29, EPA denied 10 petitions to reconsider its 2009 Endangerment Finding for Greenhouse Gases under Section 202(a) of the Clean Air Act. The petitions, which were filed by, among others, the attorneys general of Texas and Virginia and the US Chamber of Commerce, pointed to errors in the 2007 report by the Intergovernmental Panel on Climate Change and the University of East Anglia “Climategate” email scandal as examples of how the science underpinning EPA’s ruling may have been flawed or skewed.  A number of petitioners have vowed to appeal the ruling.

In rejecting the petitions, the EPA confirmed, in a 217-page denial and 360-page response to each charge, that there are no scientific or other bases to change its finding that climate change caused by emissions of greenhouse gases threatens public health and the environment. As the denial concluded, the evidence proving climate change is a human-caused problem remains “robust, voluminous and compelling.”   

The science supporting the Finding has also been reinforced by recent additional major science assessments. One of these is this week’s report by NOAA on the State of the Climate, which, though it is a rigorous and solid report, is one depressing read.  The report draws on the work of more than 300 scientists from 160 research groups in 48 countries, taking observations from the top of the atmosphere to the depths of the ocean, all of which reach the same conclusion – our climate is unmistakably changing. The report looks at 10 measurable planet-wide indicators -- all of which are moving quickly in the direction they should not.  Among the notable conclusions and statistics are that the decade of the 2000s was the warmest yet and the average temperature on Earth has grown a full degree Fahrenheit over just the past 50 years.

People may be unhappy about the conclusions and may disagree about appropriate policies to address climate change, but the probability that a court will overturn the Endangerment Finding seems approximately zero.

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EPA has just released its Interim Guidance on Considering Environmental Justice During the Development of an Action. I can’t say I’m excited. The broad issue is probably too complex for a blog post, but the simple version is as follows:

1.                   Congress passes environmental protection laws for EPA to implement.

2.                   Those statutes generally provide for EPA to set standards with something like “an adequate margin of safety.”

3.                   EPA does its job.

Contrast the simplified model process shown above with this diagram from the Interim Guidance.

Trust me; it wouldn't help if it were legible (though you can find the legible version in Appendix B to the Interim Guidance if you want).  Now contrast this model process with Rube Goldberg’s design for a Self-Operating Napkin. 

Might there be a reason why people are leery of large federal bureaucracies?

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Now that the Senate has put an end to speculation about a federal cap-and-trade program, the laboratory of the states and patchwork of regional regulation seem even more important.   The Western Climate Initiative (WCI) will likely involve a little of both.

Yesterday, the WCI Partner Jurisdictions (seven US states and four Canadian provinces) unveiled their comprehensive strategy for a cap-and-trade program with the goal of reducing regional greenhouse gas emissions by 15% below 2005 levels before 2020. The program is planned to begin in 2012, although apparently only California, New Mexico, Quebec, Ontario, and British Columbia are on track to have trading systems operational by that date. Even so, these two states and three provinces account for 70 percent of the greenhouse gas emissions the WCI partners produce.

The report recommends standards for regulations governing allowances, creation and use of offsets, credits for early action reductions since 2007, and other design features of a cap-and-trade program, but does not itself dictate specific regulations. Instead, the regional goal will be reached through individual states’ and provinces’ implementation of separate programs that supply allowances for quarterly regional auctions. While this individualized approach makes sense given the wide diversity of settings and the fact that WCI crosses not only state but national boundaries, it does leave a large number of factors up to the individual jurisdictions.  

Among the details that are undecided is how many allowances will be at play (a critical issue and lesson learned from the implementation of RGGI). Each state or province will adopt its own budget and determine how allowances within that budget will be distributed to emitters – through allocations, direct sales or auctions. In yesterday's report and a more detailed one from early July, WCI recommends that each jurisdiction’s 2012 allowance budget be the expected 2012 actual emissions, rather than starting with an initial cut, but then begin to decrease (at a rate to be set by each jurisdiction), with another increase in 2015 when the cap expands to cover transportation fuels and residential and commercial fuels as well.  

Offsets would be more tightly defined by the regional structure: an offset certificate issued by a WCI partner jurisdiction must meet all recommended offset criteria and result from a project located in Canada, the US or Mexico. It is recommended that each jurisdiction restrict the use of offset certificates to 49% of aggregate emissions reductions – such a limit will be expressed as a portion of each emitter’s emissions that may be covered by offset certificates or allowances from other programs.  

The WCI partner jurisdictions seem to have adopted a number of RGGI’s features, including a quarterly regional, single-round, sealed-bid auction structure, 3-year compliance periods, unlimited banking of allowances, and an auction floor price.  But as the report notes, the partner jurisdictions expect auctions to be only one component of allowance distribution – different from RGGI, where nearly 100% of allowances are auctioned.  The portion of allowances that each jurisdiction submits to the quarterly regional auctions may vary across jurisdictions and may also change over time.  Such flexibility could allow each jurisdiction to address competitiveness and leakage issues more directly than a regional plan. 

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My apologies if this post is a mash note to Judge Wilkinson. Sometimes a decision is written with such clarity and simplicity that you have to sit up and take notice. Such is the case with yesterday’s decision in North Carolina v. TVA, reversing the District Court decision imposing an injunction against four TVA plants that would have required installation of additional controls for NO_x and SO₂ , notwithstanding the absence of any allegation that the plants were violating their permits under the Clean Air Act. My apologies also to my friends in the environmental community and the Massachusetts AG’s office, who supported the District Court decision, but I have a hard time seeing this decision as anything other than the death knell for this kind of public nuisance litigation.

My only complaint with the opinion is that second paragraph of the decision is such a cogent summary that it’s not obvious to me that the decision needed to go on for another 30 pages. That paragraph states:

This ruling was flawed for several reasons. If allowed to stand, the injunction would encourage courts to use vague public nuisance standards to scuttle the nation’s carefully created system for accommodating the need for energy production and the need for clean air. The result would be a balkanization of clean air regulations and a confused patchwork of standards, to the detriment of industry and the environment alike. Moreover, the injunction improperly applied home state law extraterritorially, in direct contradiction to the Supreme Court’s decision in International Paper Co. v. Ouellette, 479 U.S. 481 (1987). Finally, even if it could be assumed that the North Carolina district court did apply Alabama and Tennessee law, it is difficult to understand how an activity expressly permitted and extensively regulated by both federal and state government could somehow constitute a public nuisance. For these reasons, the judgment must be reversed.

While I will thus leave the bulk of the opinion to readers particularly interested in the subject, one other paragraph stands out for me. After discussing the contours of public nuisance litigation, Judge Wilkinson noted that:

while public nuisance law doubtless encompasses environmental concerns, it does so at such a level of generality as to provide almost no standard of application. If we are to regulate smokestack emissions by the same principles we use to regulate prostitution, obstacles in highways, and bullfights, see Keeton, supra, at 643-45, we will be hard pressed to derive any manageable criteria. As Justice Blackmun commented, "one searches in vain . . . for anything resembling a principle in the common law of nuisance."

There’s no question in my mind that this decision is the end of public nuisance litigation as a viable cause of action for traditional pollutants, where those pollutants are comprehensively regulated under a federal statute. Moreover, it certainly provides a roadmap for dismissal of public nuisance claims concerning GHG emissions. As I noted last year in discussion Connecticut v. AEP, even though the 2^nd Circuit allowed GHG nuisance claims to proceed, part of its argument was that there is no comprehensive federal regulatory scheme with respect to GHG. Its argument clearly suggested that, once such regulations are in place, public nuisance defendants might have better luck. The promulgation of the Tailoring Rule now means that public nuisance defendants can point to North Carolina v. EPA and say that the federal rules have displaced the common law of nuisance. I think that they will probably win that argument. They certainly should.

Thank you Judge Wilkinson.

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Climate change legislation is dead for now. I won’t pretend it’s not depressing, even though I avoid the political channels and ignore the rhetoric. For those of us who haven’t refudiated climate change science, it’s a victory for the pessimists and evidence that Congress has a hard time addressing long-range problems, even if consequential.

With respect to regulation of GHG, it’s the worst of both worlds and no one should be happy (which is why I held out hope until the end that cooler heads would prevail). We’re still going to have regulation of GHG, the mechanism being EPA’s recently promulgated Tailoring Rule for GHG. One word. Ugh. Does this really make climate skeptics happy? Do they really think that they will somehow succeed in rolling back the Tailoring Rule? I don’t think so. On the other hand, we don’t have an economy-wide cap-and-trade or carbon tax regime. Are environmentalists happy? I still don’t think so. 

I’m left feeling a little like Rodney King. Certainly, the issue isn’t going to go away before the next Congress is sworn in.

As I have noted before, however, problems with climate change legislation don’t mean that Congress can’t enact legislation further regulating traditional pollutants. The three-pollutant bill now before the Senate already has a Republic co-sponsor, Lamar Alexander. Now, according to a report in E&E Daily, even Senator Inhofe is stating that he’s interested in working with Democrats to move three-pollutant legislation. Given the failure to move GHG legislation, hell is likely to get hotter before freezing over, but if Inhofe can really be brought on board, there’s no reason why legislation couldn’t pass.

Three-pollutant legislation shares one significant feature with the GHG issue. Like GHG regulation, efficient regulation is hampered by limitations in existing law, as we saw with the D.C. Circuit’s rejection of the trading regime in the CAIR regulations, and EPA’s much more limited trading program in the Transport Rule. Senator Voinovich, another Republican that three-pollutant legislation supporters would like to have with them, noted as much, saying that the transport rule would be a "stringent and inflexible regime." New legislation could provide for a more robust trading regime. We’ll see if that’s enough to bring Republicans on board.

I sure hope so. Right now, all we’ve got is a GHG regulatory program that won’t do much for climate change, but will cause my clients endless headaches, and a Transport Rule that’s probably the best EPA can do on traditional interstate pollution, but not nearly as cost-effective as it might be with new legislative authority. I remain an optimist, but sometimes it’s difficult.

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Last week, in City of Pittsfield v. EPA, the First Circuit Court of Appeals affirmed denial of a petition by the City of Pittsfield seeking review of an NPDES permit issued by EPA. The case makes no new law and, by itself, is not particularly remarkable.  Cases on NPDES permit appeals have held for some time that a permittee appealing an NPDES permit must set forth in detail in its petition basically every conceivable claim or argument that they might want to assert. Pretty much no detail is too small. The City of Pittsfield failed to do this, instead relying on their prior comments on the draft permit. Not good enough, said the Court. 

For some reason, reading the decision brought to mind another recent appellate decision, General Electric v. Jackson, in which the D.C. Circuit laid to rest arguments that EPA’s unilateral order authority under § 106 of CERCLA is unconstitutional. As I noted in commenting on that decision, it too was unremarkable by itself and fully consistent with prior case law on the subject.

What do these two cases have in common? To me, they are evidence that, while the government can over-reach and does lose some cases, the deck remains stacked overwhelmingly in the government’s favor. The power of the government as regulator is awesome to behold. Looking at the GE case first, does anyone really deny that EPA’s § 106 order authority is extremely coercive? Looking at the Pittsfield case, doesn’t it seem odd that a party appealing a permit has to identify with particularity every single nit that they might want to pick with the permit? Even after the Supreme Court’s recent decisions tightening pleading standards, the pleading burden on a permit appellant remains much more substantial than on any other type of litigant.

Why should this be so? Why is it that the government doesn’t lose when it’s wrong, but only when it’s crazy wrong? 

Just askin’.

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There are only two permissible answers to this question:

1.                   Yes

2.                   I don’t know.

I was reminded of this reality in reading the decision issued earlier this month in Solutia v. McWane, in which Chief Magistrate Judge Greene of the Northern District of Alabama held that a party which incurs response costs pursuant to a consent decree or administrative order may not bring an action for cost recovery under § 107 of CERCLA and is instead limited to a contribution action under § 113 of CERCLA. 

For those of our readers who are either masochists or do Superfund law for a living and thus have to keep up with this stuff, the decision is worth reading; it’s a useful summary of the post-Atlantic Research, post-Aviall case law. At bottom, the decision is a reasonable, practical result. Why should the nature of a private party’s right of action depend on whether the party did the cleanup itself or instead reimbursed the government for costs incurred pursuant to a government-led cleanup?

I will say that it’s not obvious to me that the Supreme Court would agree, were it to hear the case, simply because the Supreme Court has appeared to be so fixated on the traditional common law understanding of the nature of contribution as the right of a contribution plaintiff to receive a payment from a third party defendant when the contribution plaintiff has paid to the original plaintiff more than its fair share of a common liability.  Direct response costs don’t fit neatly into that traditional contribution model. However, it's probably a moot point, because it is hard to picture this issue getting to the Supreme Court. I expect the justices to conclude that they’ve heard enough of these cases by now.

We’re still left with my original question. Why is it that 30 years after CERCLA was passed and 24 years after the SARA amendments, the nature of third party claims still isn’t clear? Because CERCLA is incomprehensible, that’s why.

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On July 6, 2010, the United States Environmental Protection Agency (“EPA”) released a proposed rule, dubbed the “Transport Rule”, which would replace the Clean Air Interstate Rule (“CAIR”). As you likely recall, in 2008 the D.C. Circuit Court of Appeals, in North Carolina v. EPA, found that CAIR had a number of fatal flaws and remanded it to the Agency. (Due to its environmental benefits, the Court agreed to leave CAIR in effect while EPA worked on addressing its concerns).  

EPA has clearly attempted to address the problems identified in North Carolina v. EPA. Most significantly, while the Transport Rule still contains a trading component, trading is limited and the Rule ultimately requires that each state provide the reductions required to mitigate that state’s contribution to the interstate air transport problem. At 1,300 pages, the Rule is too long even to summarize here. For a quick summary, take a look at our Client Alert. You might also want to take a look at EPA’s helpful Fact Sheet and presentation summary for slightly more detail.

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Not surprisingly, the secondary market price for Regional Greenhouse Gas Initiative (RGGI) allowances fell for the 4th quarter of 2009, as noted by RGGI Market Monitor Potomac Economics in their recent report.  Trading in RGGI allowances futures declined from 319 million allowances in the third quarter of 2009 to 127 million in the fourth quarter, despite the number of firms participating remaining the same.  Futures prices also declined 8% -- from $2.45 to $2.25.   Even so, futures prices remain notably higher than the clearing prices of the RGGI auctions, which were $2.19 and $2.05, respectively, in the September and December 2009 auctions.

One reason for the continuing decrease in RGGI allowance prices, both through auction and on the secondary market, is the steep decline in CO₂ emissions from the RGGI-subject power plants.   As highlighted in a recent report by Environment Northeast, due to the economic crisis, fuel switching energy efficiency programs, and renewable energy, emissions from those plants have fallen 34% since the start of the program, to just above 120 million tons of CO₂.  This is well below the current RGGI cap of 188 million tons, and even below RGGI's ultimate 2018 goal of 10% reductions from 2005 levels. As such, RGGI allowances will likely remain a surplus commodity well into the future. 

Even given these facts, though, RGGI allowances are far from worthless.  Particularly given that the House-passed ACES bill, as well as all of the front-runner energy and climate bills possibly considered by the Senate have contained provisions for the exchange of federal allowances for RGGI allowances, even the RGGI allowances that might not be needed by RGGI-covered entities could still be worth their weight in federal CO₂ credits sometime in the future.

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It has long been understood that Massachusetts that the Commonwealth cannot meet its renewable energy goals with solar power alone. Solar is great, but really ratcheting up the percentage of energy supplied by renewable sources is going to take a big commitment to wind. In fact, Governor Patrick announced a goal of 2,000 MW of wind on- and off-shore in Massachusetts by 2020. There are currently 17 MW of wind power in Massachusetts.

Everyone knows the permitting travails – now, hopefully, over – that Cape Wind has faced. It is less known that on-shore wind has not been any easier to develop in Massachusetts. Yesterday, in Ten Local Citizen Group v. New England Wind, the Supreme Judicial Court released a major on-shore wind project from permitting appeal purgatory. The New England Wind project (perhaps still better known as Hoosac Wind) in Florida and Monroe, Massachusetts, was proposed in 2003. Not uncommonly for projects of this sort, the appeal that delayed project implementation had nothing to do with the merits of on-shore wind. It was an appeal over wetlands approvals needed for a gravel access road. By the time MassDEP issued a Superseding Order of Conditions, the opponents requested an adjudicatory hearing, the hearing was held, the ALJ issued a 78-page recommended decision rejecting the permit, the Commissioner issued a 31-page final decision affirming the permit and rejecting the ALJ’s recommended decision, the Superior Court affirmed the Commissioner, and the SJC affirmed the Superior Court, it was July 6, 2010.

I don’t know about you, but I’m out of breath just typing this history. There has to be a better way. It’s certainly safe to say that if wind projects – wherever located – take 7 or 8 years to permit, it’s going to be 2120, not 2020, before we have 2,000 MW of wind in Massachusetts. As some readers will be aware, the Administration has been supporting legislation to facilitate siting of wind power facilities in Massachusetts, but it hasn’t been enacted yet and the forces that make it difficult to obtain final permits in Massachusetts go far beyond the issues that would be addressed by the wind siting legislation. 

For the lawyers among my readers, the decision breaks little ground. Yes, the Commissioner of DEP has considerable discretion in interpreting her own regulations. No, the ALJs who hear adjudicatory appeals and make recommended decisions are not entitled to any deference. 

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Sometimes, the practice of environmental law just takes my breath away. A decision issued earlier last month in United States v. Washington DOT was about as stunning as it gets. Ruling on cross-motions for summary judgment, Judge Robert Bryan held that the Washington State Department of Transportation had “arranged” for the disposal of hazardous substances within the meaning of CERCLA by designing state highways with stormwater collection and drainage structures, where those drainage structures ultimately deposited stormwater containing hazardous substances into Commencement Bay -- now, a Superfund site -- in Tacoma, Washington.  

I’m sorry, but if that doesn’t make you sit up and take notice, then you’re just too jaded. Under this logic, isn’t everyone who constructs a parking lot potentially liable for the hazardous substances that run off in stormwater sheet flow? 

For those who aren’t aware, phosphorus, the stormwater contaminant du jour, is a listed hazardous substance under Superfund. Maybe EPA doesn’t need to bother with new stormwater regulatory programs. Instead, it can just issue notices of responsibility to everyone whose discharge of phosphorus has contributed to contamination of a river or lake.

The Court denied both parties’ motions for summary judgment regarding whether the discharges of contaminated stormwater were federally permitted releases. Since the Washington DOT had an NPDES permit, it argued that it was not liable under § 107(j) of CERCLA. However, as the Court noted, even if the DOT might otherwise have a defense, if any of the releases occurred before the permit issued – almost certain, except in the case of newer roads – or if any discharges violated the permit, then the Washington DOT would still be liable and would have the burden of establishing a divisibility defense. 

If one were a conspiracy theorist, one might wonder if EPA were using this case to gently encourage the regulated community to support its recent efforts to expand its stormwater regulatory program. Certainly, few members of the regulated community would rather defend Superfund litigation than comply with a stormwater permit.

You can’t make this stuff up. 

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