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

As I noted earlier this month, the Supreme Court denied GE’s certiorari petition seeking to challenge the constitutionality of EPA’s use of unilateral administrative orders issued under section 106 of CERCLA. It thus comes as something of a surprise that the Court today accepted a certiorari petition in Sackett v. EPA. The Sackets are appealing a decision by the 9^th Circuit Court of Appeals holding that pre-enforcement review is not available to challenge unilateral administrative orders issued by EPA pursuant to section 319 of the Clean Water Act. Lest anyone think that this is simply the Court reining in that liberal 9^th Circuit, the 9^th Circuit decision followed the lead of all four other circuit courts that have already addressed the question.

So, not only did the Supreme Court grant cert. in a CWA case even though it denied cert. challenging a very similar provision under CERCLA, it did so without a circuit split to resolve.

CERCLA’s order provision does differ slightly from that of the CWA. CERCLA explicitly prohibits pre-enforcement review; the CWA does not. It seemed to me that, while I am firmly on the side of the challengers as to the practical import of unilateral orders, EPA’s legal authority remains fairly solid. As the Court of Appeals noted, even in the absence of a specific statutory prohibition, judicial review is prohibited as long as preclusion “is fairly discernible in the statutory scheme.” Given the distinction between orders and civil enforcement, which is separately provided for in the CWA, and that the CWA does provide for judicial review of civil penalties imposed by EPA, a fair reading of the statute would seem to preclude pre-enforcement review of orders. This conclusion is buttressed by the purpose of the order provision, which is allow EPA to move quickly in particular cases, and the legislative history, which also seems to support preclusion.

The Court’s order granting cert. identified two questions – both the statutory interpretation question and the assertion that a ban on pre-enforcement review violates the due process clause. However, the constitutional claim is precisely what the Court refused to hear in the GE case. Obviously, that is not binding precedent, but why would the Court deny cert. to GE only to grant it three weeks later to the Sacketts?

Whatever the answer, there is a lot riding on this case. Notwithstanding the denial of cert. in the GE case, if the Supreme Court allows pre-enforcement review of orders under the CWA, it will have repercussions beyond the CWA. The CAA order provision would certainly be on shaky ground and, if the Court’s opinion were predicated on constitutional concerns rather than statutory interpretation, CERCLA’s order authority would seem to fail as well.

I should be telling my clients not to get their hopes up, but it's hard not to get one's hopes up.

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Yesterday, the Supreme Court announced its decision in American Electric Power v. Connecticut, holding that EPA’s authority to regulate greenhouse gases under the Clean Air Act displaced federal common law nuisance claims. I have always thought that the displacement argument was correct, so the decision is not really a surprise (and the 8-0 decision and crisp opinion only confirm that view). The decision is nonetheless important and, notwithstanding a few limitations, rather sweeping.

The Court’s analysis was straightforward. The creation of federal common law by courts is “unusual” and

[W]hen Congress addresses a question previously governed by a decision rested on federal common law,” the “need for such an unusual exercise of law-making by federal courts disappears.”

Next, displacement of federal common law is not the same as preemption of state law, because there are no federalism issues. Thus, the test for displacement is “simply whether the statute ‘speak[s] directly to [the] question’ at issue.” Therefore, what EPA does in response to the congressional mandate is irrelevant to displacement. It is the CAA that matters. As the court noted, if EPA does not set emission limits, the CAA allows the plaintiffs to petition EPA to do so and EPA’s response to that petition is subject to judicial review. In short,

the relevant question for purposes of displacement is “whether the field has been occupied, not whether it has been occupied in a particular manner.”

The Court also provided a forceful argument for judicial restraint in these kinds of cases:

            It is altogether fitting that Congress designated an expert agency, here, EPA, as best suited to serve as primary regulator of greenhouse gas emissions. The expert agency is surely better equipped to do the job than individual district judges issuing ad hoc, case-by-case injunctions. Federal judges lack the scientific, economic, and technological resources an agency can utilize in coping with issues of this order.

The decision did not address whether these or other plaintiffs could bring actions under state nuisance law, but I would not put a lot of money on those cases succeeding. The decision also does not address cases such as Kivilina v. ExxonMobil, in which the plaintiffs do not seek regulation, but only damages. However, I’m skeptical about the survival of those cases as well.

The real question following yesterday’s decision is whether Republicans in Congress will read it carefully. Will they continue to press to eliminate EPA’s authority to regulate greenhouse gases? Doing so would revive public nuisance suits, unless the legislation also barred federal courts from hearing such cases.

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This week, in Webster v. USDA, Judge John Bailey of the Northern District of West Virginia rejected a challenge to the Environmental Impact Statement filed for a USDA flood control project. The decision is not particularly startling and does not break new ground, but it does serve as a reminder just how limited judicial review under NEPA is supposed to be – and just how often that limitation is honored only in the breach, by judges who don’t like particular projects or don’t want to be known as the judge who approved a particular project if something later goes wrong.

As Judge Bailey pointed out:

NEPA does not … impose any substantive environmental obligations upon agencies; it “merely prohibits uninformed – rather than unwise – agency action.”

Just to be clear, Judge Bailey was not off on a frolic and detour here; the quoted language is from the Supreme Court decision in Robertson v. Methow Valley Citizens Council. Moreover, in determining whether the agency committed a reversible “clear error of judgment,” the court

must take a holistic view of the agency’s assessment; “[c]ourts may not ‘flyspeck’ an agency’s environmental analysis, looking for any deficiency, no matter how minor.”

How many federal judges have the restraint to reject a challenge to an EIS, where he/she finds the EIS thorough, but is convinced that the project is “unwise”? And how many practitioners have the experience of judges “flyspecking” a holistically sound EIS, looking for some kind of reversible error, because they had some underlying concern about the substance of the project?

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After a relatively quiet period, there were a number of items of interest on the air/climate front this week. First, AEP announced that upcoming pollution controls would result in shutting down 6,000 megawatts of coal-fired capacity, or 25% of its coal fleet. AEP also announced that it would spend $6 billion to $8 billion in bringing the rest of its fleet into compliance.

On the flip side of this issue, the Bipartisan Policy Center issued a report concluding that compliance with the various EPA rules in the works (Clean Air Transport Rule, Utility MACT Rule, coal combustion ash rule, Clean Water Act intake structure rule, and NSPS for GHG) would not have a significant impact on electric system reliability. The quick summary is that most of the plants that will close are uncontrolled, older, smaller, plants that already don’t run much, particularly with natural gas prices low. The report acknowledges that some of these small plants are important in addressing peak loads in some areas, but concludes that concerns in those areas can be addressed with appropriate planning.

Next came news that EPA has reached agreement to delay its second round GHG NSPS proposal from July 26, 2011 to September 30, 2011 – though the final rule is still targeted for May 26, 2012. EPA has received extensive comment on this issue and my take is that there is no hidden agenda here; EPA is just trying to take those comments into account and be responsive, where possible.

Finally, former Representative Bob Inglis, whose support for action on climate change was sufficient to get him defeated by a Tea Party Candidate in the GOP primary in 2010, has announced formation of what is described as a “conservative coalition” to address climate change. Money quote:

Conservatives typically are people who try to be cognizant of risk and move to minimize risk. To be told of risk and to consciously decide to disregard it seems to be the opposite of conservative…. What I hope to do is be part of an effort that calls conservatives to return to conservatism and to turn away from the populist rejection of science.

All I can say is that I wish former Representative Inglis the best of luck in that endeavor.

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Demand for allowances in the nation's only cap-and-trade program for carbon dioxide emissions fell sharply last week.  At the 12th Quarterly Auction of the Regional Greenhouse Gas Initiative (RGGI), held on June 8th,  70% of the current compliance period allowances went unsold.  As the RGGI Market Monitor Report highlights, with only 25 bidders participating in the auction of the 2009-2011 compliance period allowances, only 30% of the 42 million allowances offered for sale by the 10-state group (including New Jersey) were actually purchased at the floor price of $1.89.  Demand for future allowances, good for the 2012-2014 compliance period, fared only slightly better, with the 5 participants in that auction buying just over 50% of the 1.86 million allowances offered by the still-participating states (minus New Jersey, which supplied allowances for the 2009-2011 auction, but not the 2012-2014 auction) also at the floor price of $1.89.  

This sharp drop in the sale of allowances at auction is surprising, particularly given that the last auction, held in March, sold out of allowances for the first time since Auction #8.  The number of participants who qualified to bid at the March and June auctions did not differ much -- 49 and 47, respectively -- but the number of participants who actually submitted bids fell sharply, from 36 to 25.  An even more significant difference is the number of allowances that each of these bidders bought.  For instance, while the top two bidders in March bought over 10 million allowances each, the top bidders in June bought just 2.6 million and 1.9 million respectively. 

As yesterday's ClimateWire highlighted, theories about the causes of this surprising drop abound.  My favorite is that companies regulated by RGGI already have most of the allowances they will need to cover their emissions in the compliance period ending in December, and these unsold allowances are primarily due to the excess supply under the RGGI cap.  Other theories cite to New Jersey's recent announcement that it would withdraw from the program by the end of the year as a sign to would-be-buyers that the program is threatened.  But New Jersey's break with RGGI will not be as quick as initially reported.  The official letter from New Jersey's Commissioner of the Department of Environmental Protection outlines that the state will continue to participate in the allowance auctions for calendar year 2011, as it did in the June auction last week, and that regulated power plants in New Jersey are not being relieved of their obligation to hold sufficient allowances to cover their emissions in the initial compliance period, which ends on December 31, 2011. 

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Only this week did I catch up to a letter to HHS Secretary Sebelius by more than 60 members of Congress asking that HHS perform further review of the National Toxicology Program’s 12^th Report on Carcinogens before it is formally released. The specific concern is the conclusion in the draft RoC that styrene is “reasonably anticipated to be a carcinogen.” I readily confess that I don’t know enough about styrene to have a view whether the draft’s conclusion is appropriate. 

According to the Congressional letter, styrene has many important uses, including a number that contribute to environmental protection. I’ll plead ignorance on the benefits of styrene, as well as the risks. 

What I do know is that the structure of environmental regulation in the United States causes these debates to be fought out in the wrong arena, over the wrong questions. The problem is that we have basically an all or nothing approach to chemical regulation in the United States. If something is toxic or carcinogenic, it gets lumped in with all other compounds that are toxic or carcinogenic, and regulated without regard to its benefits. One result is that those who want to use the substance are forced to make gatekeeping arguments to keep the compounds out of the system altogether.

Wouldn’t it make more sense to have a regulatory system that took into account the benefits of substances in determining how they are regulated? I want to be clear that I am not suggesting that economically valuable compounds should be given a regulatory pass, but a system that is not capable of incorporating the value of substances being regulated is inherently flawed. In fact, a system which considered the benefits of compounds in their regulation could in some cases result in more stringent regulation – even if a compound is of only marginal risk, if it provides no benefit as compared to safer alternatives, I would be perfectly happy to see such compounds regulated out of existence.

Regulatory agencies have no choice; they have to regulate under uncertainty. On many compounds, we are not going to be certain how significant the risk may be. Let’s remember that the lead industry fought the phase-out of leaded gasoline, arguing that the risks had not been clearly established. That being the case, the agencies are going to have to make judgments, such as whether styrene is “reasonably anticipated to be a carcinogen.” Moreover, I think it is appropriate that the agencies’ scientific judgments be given some level of deference by courts. 

Let’s have the debate where it belongs. If styrene is reasonably anticipated to cause cancer, what are its benefits and, given those benefits, what level of regulation is appropriate?

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As much as I’ve always found EPA’s use of unilateral administrative orders under Section 106 of CERCLA to be offensive, I still expected EPA’s authority to withstand challenge. As I noted previously, not every law that is unfair is unconstitutional. At least for now, the issue has probably been laid to rest. Yesterday, the Supreme Court denied GE’s petition for certiorari seeking to appeal the D.C. Circuit’s rejection of its claim that EPA’s exercise of its unilateral order authority is unconstitutional. 

CERCLA has been constitutional for almost as long as Francisco Franco has been dead – and they’re both likely to remain that way.

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The uncertain and often lengthy time to get permitting decisions is always near the top of the list of industry complaints. Section 165 of the Clean Air Act provides some relief by requiring certain permit decisions to be made within one year. Last week, in Avenal Power Center v. EPA, District Judge Richard Leon, in what may comfortably be described as a strongly-worded opinion, held that EPA may not circumvent the one-year limit on permit decisions by carving out from the one-year period the time spent by the Environmental Appeals Board reviewing EPA’s permit decision. 

In March 2008, Avenal Power filed an application for a PSD permit necessary to construct a new gas-fired power plant in the San Joaquin Valley in California. When EPA had not issued a decision within two years, Avenal sued. In February 2011, Gina McCarthy, head of EPA’s air office, announced that EPA would issue a permit decision by May 27, 2011. However, Judge Leon found EPA’s commitment to be “disingenuous,” because EPA's permit decision would be subject to EAB review, and EPA acknowledged that EAB review could take 6-18 months.

Judge Leon’s analysis was, in keeping with the statutory language, quite simple. Section 165 requires permit decisions within one year. EPA’s decision to provide appeals of permits to the EAB is a creature of regulation, not statute. The notion that EPA’s regulatory process could trump the statutory requirements is, to Judge Leon, “absurd.”

It is axiomatic that an act of Congress that is patently clear and unambiguous - such as this requirement in the CAA - cannot be overridden by a regulatory process created for the convenience of an Administrator, no matter how much notice and comment preceded its creation. "The rulemaking power granted to an administrative agency charged with the administration of a federal statute is not the power to make law. Rather it is the power to adopt regulations to carry into effect the will of Congress as expressed by the statute."

EPA apparently tried to persuade the court that section 165 is sufficiently ambiguous to give EPA discretion regarding whether it must squeeze the EAB process into the one-year time frame. Judge Leon’s response to what he called EPA’s “self-serving misinterpretation of Congress’s mandate”?

"Horsefeathers!"

One parochial note for my Massachusetts readers: Massachusetts DEP has recently announced that its permits – although labeled as “Final” – are not final until DEP's own internal adjudicatory hearing process has been completed. Massachusetts law has nothing comparable to Section 165 of the CAA, so MassDEP’s interpretation adds the insult of delay inherent in adjudicatory proceedings to the injury caused by the length of the normal permit process..

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