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

In what comes as a major shock (I almost titled this post “Dog Bites Man”), EPA’s Office of the Inspector General has issued a report concluding that EPA needs better control over its staff resources. The summary conclusion pretty much tells it all: (my emphasis)

EPA does not enforce a coherent program of position management to assure the efficient and effective use of its workforce. While some organizational elements have independently established programs to control their resources, there is no Agency-wide effort to ensure that personnel are put to the best use. Prior to April 2010, EPA had the Position Management and Control Manual, which required an Agency-wide program. However this manual was not enforced and in April 2010 it was cancelled without replacement. According to the cancellation memorandum, the manual was eliminated because Office of Administration and Resources Management (OARM) officials believed EPA had other mechanisms in place to appropriately manage and control its positions. However, the other mechanisms do not provide similar effects, controls, or documentation. Without an Agency-wide position management program, EPA leadership lacks reasonable assurance that it is using personnel in an effective and efficient manner to achieve mission results.

In all seriousness, does this surprise anyone who deals with EPA on a regular basis? Sometimes, EPA is its own worst enemy. Greenwire has already reported that the OIG report will be the topic of a House Appropriations subcommittee hearing this week. This is not going to help EPA in Congressional budget debates.

Frankly, while I’m sure that there are some measures EPA can take to improve its deployment of personnel, these are difficult issues, as long as civil service is still around. It’s a little off-topic, but if the GOP really wants to rein in government personnel costs, instead of attacking public employee unions, how about eliminating civil service at both the state and federal levels?

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As almost everyone knows by now, EPA finally issued its long-awaited final rule on Boilers, Commercial and Industrial Solid Waste Incinerators (CISWI), and Sewage Sludge Incinerators (SSI) yesterday. The rule is too complicated even to summarize here. EPA has a useful fact sheet for that purpose.

I’d like to focus on a few broader issues. The rule has widely been seen as the Obama administration’s first formal acknowledgment of the anti-regulation political climate currently sweeping Washington. Indeed, the Times began its story as follows:

Responding to a changed political climate and a court-ordered deadline, the Obama administration issued significantly revised new air pollution rules on Wednesday that will make it easier for operators of thousands of industrial boilers and incinerators to meet federal air quality standards.

It’s not obvious to me that the instant punditry analysis is correct. EPA had received an enormous number of comments on the rule prior to the November elections. The regulated community had made a fairly strong case that the proposed standards simply couldn’t be met. EPA faced a real possibility of losing in court if it went forward with the proposed rule. Only time will tell if EPA has truly developed a new-found concern for the economic impacts of its rules.

Regardless of the reason for EPA’s change of heart, I think it is fair to say that the rule represents a triumph of the rule-making process. EPA issued a proposed rule, took thousands of comments, and – whatever its motivation – changed the rule in response to the comments, making compliance significantly less costly, while still achieving most of the benefits of the original proposal. 

The boiler rule was never one that could have been issued as guidance – it was statutorily mandated, for one thing – but I think that the boiler rule still provides a stark contrast with agency development of guidance. Guidance is not subject to the formal notice and comment process. Moreover, even where agencies do take comment on guidance documents, the very flexibility guidance supposedly provides makes agencies less responsive to comments. They can always say that the guidance will be interpreted flexibly in light of adverse comments.

Finally, to the extent that the economic concerns were part of EPA’s motivation, I can only say, hurray! Not simply because EPA considered the cost of the rule, but because EPA considered the cost-effectiveness of the rule. EPA can almost always generate an analysis demonstrating that the benefits of a rule exceed its costs, but that’s not really the proper criterion. If EPA could obtain 90% of the benefits of a rule with an alternative rule that would impose only 10% of the costs, I would vote for the alternative rule. If the boiler rule represents one small step towards increased use of cost-effectiveness analysis by EPA, then it will be worth its costs, even aside from the substantial health benefits EPA projects to result from its implementation.

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Last week, I discussed EPA’s efforts to “muddle through” on climate change in the absence of comprehensive legislation. This week, I think it’s the Clean Water Act’s turn. If there were any regulatory situation which required some serious muddling through at the moment, interpretation of the Supreme Court’s Rapanos decision almost is a match for the current climate mess. As most of my readers know, Rapanos was a 4-1-4 decision which left EPA, the Corps, developers and environmentalists fairly equally perplexed

Most stakeholders have assumed that Kennedy’s concurring opinion, requiring a “significant nexus” between wetlands and traditional navigable waters before those wetlands are subject to jurisdiction under the CWA, is the law of the land at this point. That is the approach adopted in the Rapanos Guidance issued by EPA and the Corps in 2007. 

A recent decision by the 4^th Circuit Court of Appeals, in Precon Development Corporation v. Army Corps of Engineers, illustrates just how muddled post-Rapanos interpretation has become. The decision in Precon – reversing the District Court – found that the Corps had not built a record sufficient to establish that the wetlands which Precon sought to develop were jurisdictional under the CWA. 

There were two technical issues in Precon. Precon lost what one might have thought would be the more significant issue – the Corps’ finding that, although only 4.8 acres were really at issue in this case, and Precon’s entire development includes 166 acres of wetlands, 448 acres of “similarly situated” wetlands would be examined for a substantial nexus to navigable waters. Precon ultimately won, however, because the Court concluded that the Corps’ record did not contain enough physical evidence to support its determination that a significant nexus exists between the 448 wetland acres and the downstream navigable water. 

The Court’s conclusion raised two issues of broad concern to stakeholders. First, the Court granted little deference to EPA’s conclusion on the significant nexus issue. The Corps argued that its conclusion that there was a significant nexus between the site wetlands and the downstream navigable waters was a factual conclusion. However, the Court concluded that the significant nexus determination was not factual. The Court stated that:

The question is instead whether the Corps’ findings were adequate to support the ultimate conclusion that a significant nexus exists. This legal determination is essentially now a matter of statutory construction, as Justice Kennedy established that a “significant nexus” is a statutory requirement for bringing wetlands adjacent to non-navigable tributaries within the CWA’s definition of “navigable waters.”

Well, this is certainly a nice question of administrative law. The significant nexus issue may now be the ultimate legal question. Nonetheless, I would guess that most wetlands scientists and hydrologists would say that this is largely a factual question. Even if the agency is applying its judgment to answer that question, it’s the type of judgment that requires technical expertise – expertise to which courts have traditionally deferred.

The second of the Court’s important pronouncements was that it would not give the EPA/Corps Rapanos Guidance deference under Chevron. Why not?

Because – although it could – the Corps has not adopted an interpretation of “navigable waters” that incorporates this concept through notice-and-comment rulemaking, but instead has interpreted the term only in a non-binding guidance document.”

Isn’t it timely, then, that EPA and the Corps sent a draft new Rapanos guidance to OMB in December, and GOP leadership in the House is proposing language in a continuing resolution that would preclude EPA from using any funds “to implement, administer, or enforce a change to a rule or guidance document pertaining to the definition of waters under the jurisdiction of the Federal Water Pollution Control Act (33 U.S.C. 1251).” Perhaps EPA and the Corps should take half a loaf. Why not agree to shelve the guidance and instead proceed with notice-and-comment rulemaking to clarify Rapanos? At least then the Courts might grant EPA and the Corps more deference in implementation.  It’s already been almost five years since Rapanos was issued. EPA and the Corps can hardly argue that it’s necessary to go the guidance route because they don’t have the time to proceed through the full regulatory process.

Enough muddling through. Take the time to do it right and issue regulations. Then, maybe the muddle will abate. (Can one abate a muddle?)

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As readers of this blog know, the question of guidance v. regulation is one near and dear to my heart. I generally disfavor guidance, because I think it offers none of the protections of the regulatory process and almost none of the flexibility that guidance is supposed to provide. Two issues are of particular concern. First, guidance is not supposed to announce new rules – only clarifying interpretation of existing rules. However, we all know what a slippery slope that can be. Second, notwithstanding the purported flexibility of guidance, how often do regulators on the street – those actually using the guidance, rather than those writing it – treat guidance exactly like regulations and expect the regulated community to follow it to the letter?

The problem was brought to the forefront again recently by the decision in National Mining Association v. Jackson, in which Judge Reggie Walton in the District Court for the District of Columbia stated that EPA’s mountaintop mining guidance likely exceeded EPA’s authority. Although Judge Walton denied plaintiffs’ request for an injunction because they had not demonstrated irreparable harm, he made clear that the plaintiffs are likely to prevail on the merits. Addressing the core issues I noted above, he stated that the EPA mountaintop mining guidance

Qualified as final agency action because, despite the representation that it is an interim document, it is nonetheless being applied in a binding manner and has been implemented in its current version even though the EPA continues to receive comments about it. Therefore,… it appears that the EPA is treating the Guidance as binding.

Judge Walton went on to conclude that the various documents at issue constitute “legislative rules because they seemingly have altered the permitting procedures under the Clean Water Act by changing the codified administrative review process.” He also found that the documents exceeded EPA’s authority, because they ignored “EPA’s limited role in the issuance of Section 404 permits.”

Relatively hard on the heels of the National Mining Association decision, Daily Environment Report this week covered efforts by industry groups to prevent EPA from issuing guidance interpreting the Supreme Court’s Rapanos decision regarding the scope of Clean Water Act jurisdiction over “waters of the United States.” I’m sorry, but does anyone think that such “guidance” would not be treated in practice as having the finality of regulation? If, under such guidance, certain types of situations are considered to be “waters of the United States,” does anyone doubt that such situations will be subject to CWA permitting requirements 100% of the time? 

Agencies officials generally make two arguments in favor of guidance. One is simply to ask for recognition of the practical reality that getting formal notice and comment rulemaking accomplished is very difficult and often impractical in the modern world. The second is that guidance provides flexibility. However, if the regulators want the rest of us to recognize the practical realities involved in promulgating regulations, then they must recognize the practical reality that guidance almost always immediately ossifies and that those implementing it treat it as gospel. There is often little in it for the regulated community.

Until Rand Paul succeeds in dismantling the modern administrative state, the debate will continue.

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Back in my public policy days, there was much discussion of “muddling through.” When I look at recent developments on the climate and air regulation front, I just see a muddle. First, we have Gina McCarthy, saying that EPA wants to walk before it runs, and assuring utility executives that New Source Performance Standards for GHG emissions will not have a “dramatic effect.” McCarthy further said that EPA will take a “common sense approach,” comparing it to EPA’s approach to the GHG BACT guidance, which she described as “not overly ambitious.”

At the same time, the first PSD permit for GHG has been issued, to Nucor Corporation's direct reduced iron manufacturing facility in Louisiana. While praising Nucor for utilizing DRI technology, which apparently generates lower GHG emissions than plants utilizing coke, and while acknowledging that this was one of the first GHG PSD applications, EPA raised two concerns that may be troubling to permittees. First, the permit would require a package of good combustion practices, but did not include a numerical limit for GHG emissions. EPA commented that the permit had not justified why a numerical limit would not be feasible. 

Second, EPA noted that the permit did not provide a basis for the conclusion that carbon capture and sequestration, or CCS, would not be feasible for this project. EPA’s comments referred to EPA’s December 2010 GHG BACT guidance as noting that CCS is generally available for iron and steel manufacturing facilities.

To EPA, the BACT guidance may be common sense. However, to the regulated community, it creates uncertainty. Uncertainty means risk. Risk means costs. Will EPA insist on numerical standards? What are those standards going to be? Based on the EPA's comments regarding CCS, it appears that EPA may be intending to treat the GHG BACT guidance as having the force of regulation. If so, we are stuck with the worst of both worlds – the absence of the protection provided by notice and comment rulemaking and the absence of the flexibility in utilizing guidance, rather than regulation. 

Moreover, EPA does not appear to understand the scope of the uncertainty created by such actions. EPA may allow the Nucor facility to proceed without CCS, once the permit application is amended to include an explanation of the infeasibility of CCS. However, there is no point in requiring such an analysis unless there is some possibility that CCS may be required. The regulated community – and state regulators – are left wondering under what circumstances CCS would be considered feasible. The same is true with the analysis of coal and natural gas. It’s difficult to read the BACT guidance without concluding that, under some circumstances, BACT for coal might be gas. However, we don’t know yet what those circumstance would be. 

On the other side of the aisle, as it were, we have the muddle that is Congressional opposition to EPA GHG regulation. Fred Upton, Chair of the House Energy and Commerce Committee, has described the NSPS standards as a “backdoor attempt to implement their failed job-killing cap-and-trade scheme.” Sadly, I only wish it were so. He seems to think that describing NSPS standards as a “cap-and-trade” scheme is the worst kind of insult. However, he’s got it backwards. First, unlike the cap-and-trade plan, the NSPS regulations are required under the existing Clean Air Act as interpreted by the Supreme Court in Massachusetts v. EPA. Second, cap-and-trade was proposed precisely because it has been demonstrated to be an economically efficient way to attain pollution reductions. It’s really only fair to describe it as job-killing if you don’t believe in anthropogenic climate change. (I’m too tired to go there today.) If Congress doesn’t want EPA to kill jobs, then give it the tools to regulate as efficiently as possible. 

Moreover, as noted in the Daily Environment Report, while Congress is up in arms about EPA climate rules, Congress is extremely unlikely to limit EPA’s authority to issue the Clean Air Mercury Rule and Clean Air Transport Rule, both of which are going to have more significant impact on power generators and electricity prices than GHG NSPS.

Occupying the middle ground – if not the muddle ground – is Senator Rockefeller, attempting the most delicate of balancing acts. While still complaining about EPA’s veto of the mountaintop removal permit for the Spruce No. 1 mine and backing legislation which would delay EPA’s GHG rules for two years, Rockefeller criticized “EPA-bashing.” Rockefeller’s view is apparently just that coal is important, coal cannot survive serious GHG regulation without CCS, and CCS requires more time. We’ll see how his dance plays back home and with the Chamber of Commerce. I thought that we are now against backing particular technological solutions and I certainly believe that sooner or later, we're just going to have to bite the bullet and put a price on carbon.

For now, though, I guess we’re just muddling through.

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I don’t normally blog about cases in which I’m involved, but since this one made the front page of the Boston Globe, I suppose it’s sufficiently newsworthy. Yesterday, EPA announced that a settlement had been reached among EPA, MassDEP, our client GenOn Kendall, and the Charles River Watershed Association and the Conservation Law Foundation concerning the NPDES permit for Kendall Station. As a result of the settlement, when all the equipment needed to implement it has been installed, both the water intake and discharge and the thermal load will be reduced by over 95%.

How will this be accomplished? Installation of certain new equipment at Kendall Station and a new steam pipe across the Charles River will allow facility to sell more steam to Boston and avoid putting excess heat into the River. As a result, not only will the impacts on the River be reduced, there will be collateral air emissions benefits, as Kendall’s clean gas displaces fuel oil as a source of steam in Boston.

Credit in the first instance has to go to our client, GenOn, for thinking creatively about how to respond to the problem posed by the very restrictive conditions imposed in its 2006 NPDES renewal. GenOn firmly believed that it had strong technical arguments with which to dispute the permit terms. Rather than focusing on those arguments, however, GenOn instead worked to figure out a solution that will allow the plant to remain economic, while addressing the concerns of the regulators.

Credit also goes to EPA Region I and MassDEP, both of which responded enthusiastically and constructively to GenOn’s proposal. Notwithstanding the win-win nature of the solution, the negotiations were complicated and the permit is extremely complex. However, the agencies kept their eyes on the prize.

Finally, credit also goes to the Charles River Watershed Association and the Conservation Law Foundation. Both of them had appealed the original permit, arguing that it was not sufficiently stringent (well, they are environmental NGOs). They could have tried to play bad cop to the agencies’ good cop. After all, it may take until 2016 until all the new equipment is in place and operational. CRWA and CLF could have used this delay to extort more from GenOn. In fact, while GenOn was pleased to contribute $250,000 to a fish restocking effort in the Charles River that CRWA will help implement, CLF and CRWA cooperated fully in the final settlement.

One aspect of the settlement is particularly worth noting. As discussed, the settlement works because Kendall Station is in an urban location and has a market for additional steam. Many commentators have discussed the important role of combined heat and power in helping achieve the nation’s environmental goals. Not everything is going to be solar and wind. Clean gas facilities that can sell steam will be a major contributor over the coming decades. Often, environmental justice concerns are raised with respect to urban power plants. There ain’t no such thing as a free lunch. If we want CHP, then we have to put the power where there’s a market for the steam.

However, that full rant can wait for another day. Right now, as Peter Shelley of CLF said in the Globe, “this solution is the type of thing that makes you feel good.”

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This week, the United States filed its brief in American Electric Power v. Connecticut. The brief is a nicely nuanced and persuasive argument for dismissal of plaintiffs’ public nuisance claims against five large power generators. The brief is nuanced in that it acknowledges that plaintiffs have Article III standing – allowing the Court to avoid reaching a constitutional standing issue – and provides a vehicle for the Court to avoid reaching the political question doctrine issue.

Instead, the brief makes two fairly simply points – and makes them convincingly. First, the brief argues that plaintiffs’ lack “prudential standing,” because their complaint raises “generalized grievances more appropriately addressed in the representative branches.” As the brief notes:

Global climate change will potentially affect the property interests of most landowners. And the effects of climate change will not be limited to landowners; they will also be felt by individuals, corporations, and governmental entities throughout the Nation and around the world. … The problem is not simply that many plaintiffs could bring such claims and that many defendants could be sued. It is also that essentially any potential plaintiff could claim to have been injured by any (or all) of the potential defendants.

A court – when no statute or regulation is in place to provide guidance – is simply not well-suited to balance the various interests of, and the burdens reasonably and fairly to be borne by, the many entities, groups, and sectors of the economy that, although not parties to the litigation, are affected by a phenomenon that spans the globe.

The brief is even more convincing in demonstrating that the common law claims have been displaced by the regulatory actions that EPA has taken under the Clean Air Act since Massachusetts v. EPA.   Specifically, it doesn’t matter that EPA’s regulation doesn’t do what the plaintiffs are seeking in the litigation:

Although EPA has not yet done precisely what plaintiffs demand here…, that is not the relevant test. … The question is whether the field has been occupied, not whether it has been occupied in a particular manner.

Moreover, and this is the crux of the displacement argument, the brief notes that:

Plaintiffs’ attempt to secure court-ordered emissions reductions from emitters of their choosing on their own schedule would be plainly inconsistent with EPA’s systematic, phased approach.

Interestingly, the brief makes the point that:

Displacement also occurs when an agency, whose comprehensive statutory authority to regulate the subject matter has been triggered, decides to postpone or even forgo the imposition of regulatory standards, where the decision is made through the exercise of that authority on the basis of a weighing of relevant considerations under the statutory scheme. [My emphasis.]

This is one issue that could come back to haunt both the government and global warming skeptics in Congress. As you will probably infer from my description of the brief, I expect the United States to win this case. However, while the prudential standing issue is persuasive, I think that the displacement is much the stronger argument – but only because EPA has in fact done something about GHG. What’s notable about the language in the brief is that, even if EPA were to make a formal decision to postpone GHG regulation under the CAA, such an decision would justify continued displacement of public nuisance claims, under the theory of the government’s brief. On the other hand, if Congress were to amend the CAA to preclude EPA regulations – and unless the legislation specifically precluded nuisance claims as well – such action would then revive the potential for nuisance claims, which is probably the last outcome that power generators would want to see.

As I have said before on this issue, be careful what you wish for.

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