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

Earlier this week, EPA announced its long-awaited revised proposal for a cooling water intake structure rule for existing facilities. Praise is much less interesting than criticism, and thus less conducive to entertaining blog posts, but I’m afraid EPA has left me no choice. Within the confines of what the Clean Water Act requires, EPA seems to have gotten this one pretty much right.

EPA has a useful summary of the rule here. I could certainly quarrel with aspects of the rule, but the basic structure makes sense. It applies to facilities that take at least 25% of their water from an adjacent waterbody and use more than 2MGD/day. Limits are imposed on total fish impingement, though facilities can meet an alternative standard by limiting approach velocity to 0.5 feet per second. EPA has gotten out of the command and control business, at least for existing units. Facilities that withdraw at least 125 MGD would have to perform studies leading to site-specific standards to address entrainment concerns.  Finally, new units that increase generating capacity would be have to used close-cycle cooling (or something equivalent).

One measure of EPA’s success here may be that environmental NGOs are already criticizing the proposal because, instead of setting immovable national standards, the rule would give too much discretion to state permitting authorities. 

It really is worth noting that the 316(b) proposal is only one of several in which EPA has listened to the concerns of industry and revised rules or proposed rules in response to those concerns. First, EPA revised its proposed Tailoring Rule to raise the jurisdictional thresholds to exclude additional smaller sources. Then, it revised the boiler rule in response to concerns that its original proposal really wasn’t feasible. Now, it has avoided a one size fits all rule for CWIS, allowing site-specific factors to come into play. 

Just so I don’t lose all my credibility with my clients, I must note that there remain areas in which EPA seems completely tone-deaf regarding reasonable regulatory reforms. The last bastion of soviet-style command and control known as the Superfund program certainly springs to mind. However, while I doubt EPA will get much credit for it, it is only fair to acknowledge that there does seem to be at least something of a pattern unfolding here. Whether this is really a change in EPA’s DNA or whether it is simply a response to current political realities, only time will tell. Whatever the cause, it’s certainly welcome.

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I’ve spent a lot time in this space arguing for increased use of cost-benefit analysis and cost-effectiveness analysis before environmental regulations are promulgated. As difficult as it can be, there’s simply no avoiding it. If we don’t do so explicitly, we do so implicitly – and I vote for explicitness, every time.

The opposition to cost-benefit analysis usually comes from the left, based on concerns that the cost-benefit requirement will hamstring regulators and that the benefits will be understated. The right is normally seen as a fan of cost-benefit analysis.  Now, however, the notion of cost-benefit analysis is being challenged from the right – though I doubt that they would acknowledge it. North Carolina has just passed a law prohibiting until July 1, 2012 promulgation of new regulations that would cost more than $500,000, unless they either result from “a serious and unforeseen threat to the public health, safety, or welfare,” or they are required by federal or state statute or federal regulation. 

Do the North Carolina legislature and Governor Perdue realize that they have just said that cost-benefit analysis doesn’t matter? We don’t want any new regulations if they cost $500,001, even if they have $10 million in benefits? My economist friends must be going nuts, though at least the scorn heaped upon them is now equally balanced on the right and left.

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The issue of guidance v. regulation has been in the news a lot recently. Recently, the anti-guidance side got what some might consider unwelcome assistance from John Graham, who reviewed regulations in the Bush White House. Graham was quoted as saying that:

The whole idea of guidance not being a rule -- there has to be an arrow shot right through the heart of that. [Congress should pass legislation] to make sure that things that look like a duck and quack like a duck are a duck.

Of course, I agree with John Graham about guidance. The only problem is that most observers think that Graham would like to put an arrow through the heart of the real ducks as well. It’s one thing to oppose guidance, because guidance is almost always an effort to impose further regulations without the protections inherent in the regulatory process. It’s another matterif you oppose the regulatory process as well.

Regulations masquerading as guidance? I’m opposed. Regulations imposed that aren’t as cost-effective as they could be? Let’s do better. Throw out the baby with the bathwater? Probably not a good idea.

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In an interesting decision issued earlier this month, Judge Lewis Babcock of the District of Colorado ruled, in County of La Plata v. Brown Group Retail, that detection of contamination at levels exceeding state cleanup standards does not, by itself constitute an imminent and substantial endangerment under RCRA. I think that Judge Babcock is correct, but I can’t help but feel that the decision might be different in the blue state of Massachusetts. I was particularly taken by Judge Babcock’s description of the nature and purpose of state regulatory standards:

Regulatory screening levels, action levels, and standards do not identify real or actual risks to human health. Rather, these regulations are designed to protect the public health by identifying the level of chemical exposure at which there is no threat of harm with a large margin of error. Exceedance of regulatory screening levels, action levels, or standards therefore does not demonstrate a real or actual risk to human health.

Tell it to MassDEP.

I think it’s wonderful that a federal judge has said that “regulatory … standards do not identify real or actual risks to human health.” He’s right, of course, and we often forget that when conservative assumption is piled on top of conservative assumption in the establishment of a standard, the standard may end up having only the most tenuous connection to any actual concern about human health.

I wish I could make equally kind statements about Judge Babcock’s handling of the CERCLA claims in the same case. Like many judges implementing the Supreme Court’s decision in Burlington Northern, Judge Babcock shrugged off the defendant’s divisibility arguments, notwithstanding that the arguments the defendant made were well within the ambit of the types of considerations the Supreme Court said were relevant in Burlington Northern. I feel we are destined to continue the cycle of lower court decisions which simple-mindedly whack the defendant, followed every few years by a Supreme Court decision that says fairly simply: No, that’s not the way it’s supposed to be.

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If anyone had any doubts about the significance of the conventional pollutant regulations that EPA would be rolling out, even in the absence of a full cap-and-trade program for GHG, Wednesday’s release of EPA’s revised power plant MACT proposal should go a long way towards eliminating those doubts. As most readers know, the rule replaces the Bush-era MACT rule that would have created a trading program.

The rule poses a problem for critics of EPA. While arguments can be made about the feasibility of some of the standards and the cost to comply, they cannot credibly allege that it is a back-door effort to regulate coal out of existence. The rule is required by statute and the courts already rejected EPA’s attempt to implement a trading program for mercury.

Apparently, EPA acknowledges that this rule will result in the shut-down of approximately 10 GW of coal-fired capacity, though EPA is taking the position that most of that capacity would shut down for other reasons.

As to substance, the rule is too long – the currently available version weighs in at 946 pages – to describe here. EPA has a reasonably helpful summary, though it doesn’t describe the actual standards. Suffice it to say that, given the absence of a trading program, and the imposition of very low emission standards for mercury and PM (or non-mercury metals), control technology will be necessary to comply with the standards. I don’t think that there’s any such thing as low mercury or low PM coal. The days of uncontrolled coal units are coming to an end.

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Last month, in discussing the Administration’s brief in the American Electric Power case, I praised the nuanced and persuasive approach that the Administration took in seeking reversal of the 2^nd Circuit opinion allowing the states' public nuisance climate litigation to go forward. The states seeking to prosecute the law suit have now filed their brief and it turns out that they also do nuance. I still think that the Supreme Court will reverse, however.

I’m not going to get into the standing issue. I don't believe that the states should have standing, but it’s not obvious, given the result in Massachusetts v. EPA, that the Supreme Court will agree.

I find the displacement issue more interesting. The 2^nd Circuit held that the Clean Air Act had not displaced federal common law, because EPA wasn’t actually regulating GHG. Of course, EPA has reversed course and, at least until the GOP in the House has its way, it does now regulate GHG under the CAA. As a result, as the Administration put it in its brief:

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.

The plaintiff states disagree. In what is probably a shrewd concession, the states acknowledge that, were EPA to issue new source performance standards for GHG, such standards would displace federal common law, because, while they would not directly subject existing facilities to controls, they would lead to follow-on regulation by EPA requiring states to impose GHG standards on existing plants. Until existing plants are regulated, according to the states, common law has not been displaced. Thus, the states argue, the Supreme Court should either affirm the 2^nd Circuit or simply dismiss the appeal – the states further acknowledge that, on remand, the District Court could reasonably stay the nuisance case to see if EPA in fact issues NSPS for GHG.

Shrewd and nuanced, but I’m still not buying it. I think that once EPA’s GHG regulatory program came into effect, federal common law was displaced. Of course, I don’t get a vote, so we’ll have to wait for the Supreme Court to decide the case.

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In late 2009, Judge Griesbach ruled, in Appleton Papers v. George A. Whiting Paper, that parties who were significantly more “blameworthy” than others were not entitled to contribution from the less blameworthy parties. Last week, Judge Griesbach ruled on the cross-contribution motions from the defendants. 

The defendants took a simple view. If the plaintiffs are not entitled to contribution from the defendants, because the plaintiffs were almost entirely at fault, then the defendants should be able to receive 100% of their own response costs in contribution from the plaintiffs. Plaintiffs, not surprisingly, took a contrary view. Plaintiffs' position was that the court still needed to assess the defendants’ contribution claims in light of the full panoply of equitable factors and that, because the plaintiffs had cooperated with the government and the defendants had caused some releases themselves, the plaintiffs should not have to pay 100% of defendants’ costs.

Judge Griesbach was having nothing of the plaintiffs’ arguments. To him, it remains really a simple analysis:

[C]ases reject the idea that a district court has to follow some sort of mechanical laundry-list approach to assessing contribution liability, and I am satisfied that basing contribution on fault, under the totality of the circumstances of this case, is a sound approach to resolving the liability for the river cleanup.

I remain of the view that, while the outcome of the case is permissible, it is a surprise that the judge was so willing to make these decisions on summary judgment; they seem more the stuff of trial to me. However, the judge’s willingness to decide this case on summary judgment only emphasizes the important lessons of this case. Fault matters, and the parties who succeed in tarring other parties with the label of “fault” are going to be the big winners in contribution cases – Gore Factors be damned.

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While EPA remains under attack by the GOP-majority House, that doesn’t mean that coal is off the hook. To the contrary, coal remains under attack itself. A number of recent stories demonstrate the multi-pronged effort by those who want to reduce or eliminate use of coal. For example, the Environmental Integrity Project and two Texas-based NGOs just filed suit against the Lower Colorado River Authority's Fayette Power Project, alleging violations of NSR/PSD requirements and exceedances of particulate limits in the plant’s permit. There is no doubt that there is a concerted effort by NGOs to make life difficult for coal. Thus, even if Congress succeeds in muzzling EPA to some extent, citizen suits will only proliferate, unless Congress also amends the CAA and other environmental statutes to eliminate citizen suit provisions.

Next up? A report that TransAlta Corp. has reached an agreement with the State of Washington to shut down Washington’s last coal-fired power plant. The agreement gives TransAlta until 2020 and 2025, respectively, to shut the two boilers at the plant. The story serves as a reminder that, even aside from NGOs, some states are looking to phase out coal-fired generation.

Let’s not forget that coal mining is under attack as well. Here too, notwithstanding Congressional efforts to protect coal mining, NGOs remain active. Daily Environment just reported that a federal judge issued a temporary restraining order against Highland Mining Co., ordering it to stop work on its 635-acre Reylas Surface Mine in Logan County, West Virginia. The suit alleges violations of NEPA and § 404 of the CWA.

Finally, we have the economic side of the issue. One factor coal has always had on its side – until recently – was its cost advantage over natural gas. With that cost difference eroded, simple economics may do what years of environmental enforcement couldn’t. Thus we have John Rowe of Excelon, which, of course, has almost no coal assets, asserting that EPA regulation will not kill coal, but only drive out old, inefficient plants. Heck, we even have the Wall Street Journal asking whether coal is “The Energy of the Past.”

Time will tell, but it is at least plain that the current GOP ascendancy has not solved all of coal’s problems.

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With cap and trade legislation dead in Congress, and the EPA's greenhouse gas regulations under siege in both the legislature and the courts, the Obama Administration is doing just about the only thing left to address climate change: adapt.

Actually, the science indicates that adaptation will be necessary regardless of how aggressively we are able to reduce greenhouse gas emissions. It’s only a matter of how much adaptation. A recent report by the U.S. Global Change Research Program found that the average air temperature in the continental U.S. has already risen by more than 2ºF over the last 50 years, a trend that is expected to continue. Impacts will include more frequent heat waves and high-intensity precipitation events, more prolonged droughts, and sea level rise, among other changes. Many sectors of the U.S. economy – and many aspects of the federal government – will be affected. To take just a couple of the most obvious examples, the U.S. Department of Interior owns one-fifth of the land in the country and 35,000 miles of coastline, making adaptation a critical aspect of its long-term management strategies. The Department of Health and Human Services must prepare for new health threats related to heat waves, changes in disease vectors etc.

In order to guide federal agencies in addressing these adaptation needs, the White House Council on Environmental Quality released Implementing Instructions for Federal Agency Climate Change Adaptation Planning on Friday. In short, these instructions require agencies to analyze their vulnerabilities to climate change and to develop an adaptation plan by mid-2012 which address impacts on “Federal services, operations, programs and assets.”  

A key question for many readers of this blog is whether these agency adaptation plans will translate into new federal regulation. While it is too early to tell exactly what form the plans will take, federal adaptation activities already underway mostly involve research, efforts to protect government property (e.g. National Parks), infrastructure (e.g. federal highways, levees), and services (e.g. hydropower generation, disaster relief) or outreach to support local adaptation efforts. A good summary of these ongoing activities is provided in a recent Pew Center report. 

On the other hand, it’s hard to imagine that this planning won’t ultimately result in some regulatory changes. For example, research on changing species distributions (see, for example, the Forest Service “Climate Change Bird Atlas”) is likely to have implications for regulation under the Endangered Species Act. Air and water standards intended to protect human health and ecological criteria can also be expected to shift to take climate change into account. For example, EPA’s water program has already developed a climate change response strategy which includes a mandate to evaluate effluent guidelines “to determine NPDES permitting needs and assess the need for new or revised technology-based performance standards.” Thus, the more adaptation that is required, the more the burden of compliance with this new type of “climate regulation” will fall to property owners, operators of industrial facilities, and others. Especially if the Obama Administration’s efforts to mandate reductions of greenhouse gas emissions at their source continue to be thwarted, it should get interesting when the voices of this new regulated community begin to be heard in Washington.

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 A year has passed since the SEC issued an interpretive release describing the kinds of climate change related disclosures that the Commission believes should be reported by all publicly traded companies, but many questions still remain regarding how to comply.  With annual 10-K filings due at the end of this month, concrete examples of best practices in disclosures could be very helpful.  Potentially useful is a new report by Ceres that examines the state of disclosures in FY 2009 SEC filings to identify specific examples of how well companies are disclosing information that is important to investors. 

The report identifies five categories of climate risks and opportunities: regulatory risk and opportunity; indirect consequences or business trends; physical impacts; greenhouse gas emissions; and strategic analysis of climate risk and emissions management. Using a system to rank various disclosures within these categories as poor, fair, and good – no company’s practices qualified as “excellent” – the report provides specific examples of what works and what does not.  

The report also includes an 11-point checklist with recommendations for improving disclosures. The recommendations include integrating consideration of climate risk and opportunity throughout the firm, creating a board-level committee with specific responsibility for climate change risks, and using specific numbers and dollar figures in disclosures to quantify emissions, risks and opportunities whenever possible. 

Of course, the report is not legal advice on what any company should disclose to the SEC, and Ceres has no authority to require companies to follow its suggestions.  Ceres is a network of investors, environmental organizations and other public interest groups with a mission to integrate sustainability into capital markets.  Not surprisingly, the report promotes that agenda, ranking the more specific disclosures higher, and encouraging increased transparency in companies' reports.

Other reports and resources also provide guidance in this area: both general statements of investor expectations such as the Global Framework for Climate Risk Disclosure and the ASTM Standard on Financial Disclosures Attributed to Climate Change; as well as sector-specific rules and guidance like the National Association of Insurance Commissioners’ Insurer Climate Risk Disclosure Survey, and the Global Climate Disclosure Frameworks for the oil and gas, automotive, and electric utility sectors.

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Vapor intrusion is the issue de jour at federal and state Superfund sites. On the federal side, EPA announced in January that it was considering adding vapor intrusion criteria to its calculation of hazard ranking scores. Frankly, as a concept, it’s hard to dispute. In fact, aside from when actual public water supplies are contaminated, indoor air is probably about the only risk associated with Superfund sites that we should care about. Every analysis EPA has ever done has shown that risks associated with Superfund sites are otherwise overestimated and it is not a cost-effective place to be putting environmental protection dollars. The question of course is how to go about regulating indoor air.

MassDEP is attempting to answer this question at the state level as we speak. In December, MassDEP released its draft vapor intrusion guidance document. The Guidance, including appendices, totals 142 pages and 2.2 MB of pdf files. You probably know where I’m headed with this. How can any set of documents that long be appropriate for guidance, you may ask. Like Tevye in Fiddler on the Roof, I’ll tell you. I don’t know.

Today, NAIOP provided MassDEP with 54 single-spaced pages of comments on the draft guidance. Kudos to NAIOP’s 21E Committee, and particularly Ned Abelson, for truly herculean efforts in putting together these comments. The problems I identify below are all described in detail in the NAIOP comments.

There are many substantive issues with the Guidance. Here are two high-level ones:

It would be another step away from the risk-based program that Massachusetts pioneered almost 20 years ago. Whatever MassDEP officials may say, there’s a lot of evidence that those actually running the program simply don’t trust the privatized risk-based system that has been such a success.

The Guidance will make it very difficult for sites with even potential VI issues to achieve regulatory closure. The difficulty in obtaining closure will, in turn, discourage brownfields redevelopers from pursuing VI sites. The disincentive will, in turn, mean that fewer sites will actually be cleaned up. How will that achieve MassDEP’s goals?

In any case, how can this possibly be implemented as guidance? Simply put, anyone who thinks that the Guidance will not be rigidly implemented by MassDEP is delusional. My favorite discussion of this issue is contained in the 2000 Appalachian Power decision. In dismissing EPA’s contention that the guidance document at issue in that case was not binding, the Court said this in response to EPA’s reference to its boilerplate statement that the guidance created no rights: 

“[R]ights” may not be created but “obligations” certainly are…. The entire Guidance, from beginning to end – except the last paragraph – reads like a ukase.

Here’s just one example, to wrap up an already overly-long post. In determining whether basements should be evaluated for VI purposes as living spaces, the Guidance provides that “any basement with at least seven feet of head room in an occupied residential dwelling should be considered a living space.” What’s the likelihood that any street-level bureaucrat at MassDEP will ever allow any basement with at least seven feet of headspace to be considered as anything other than a living space? 

Sounds like a rule to me. Sounds like regulation – not guidance. 

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