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

When I last posted on the potential impact of the Utility MACT rule on electric system reliability, I swore I was done with the subject. I knew then it was probably a mistake. Yesterday, FERC announced that it has issued a White Paper on how it will respond to requests by generators to EPA for an extension of time to comply under the Utility MACT rule. Since FERC has invited comments on the White Paper, it seemed worthy of note.

As those who have followed the progress of the MACT rule know, EPA has allowed a basic compliance period of three years. EPA has also provided for a one-year extension in some cases. Beyond that, EPA has provided that facilities which cannot comply within 4 years and which are critical to electric system reliability may seek a further extension through an administrative order. EPA also provided that it will take comment from experts, including FERC, on applications for such further extensions.

The White Paper sets forth FERC staff’s views on how FERC should handle such requests for comment. The process would be as follows:

• AO requests would be filed with the Commission Secretary (It is important to note that all AO requests must include a “concurrence with the reliability risk analysis” by the relevant “Planning Authority”, such as an ISO, or an explanation as to why such concurrence cannot be provided.)

• Requests would be treated as informational filings.

• Intervention would not be allowed.

• FERC review “should be whether, based on the circumstances presented, there might be a violation of a Commission-approved Reliability Standard” in the absence of the extension.

• The White Paper reserves the question regarding whether FERC review will be de novo or grant some deference to the analysis provided by the Planning Authority.

The White paper notes that it is specifically seeking comment regarding both the scope of its review of AO requests and the level of deference, if any, to give to the Planning Authority analysis. Comments may be provided by February 29, 2012, at the eFiling link on the FERC web site.

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In a prior rant, I raised the concern that EPA would oppose the use of new cleanup technologies based on nanotechnologies on the basis of the precautionary principle. I may not have been exactly on the mark, but I was pretty close. On Thursday, the NRDC announced that it has filed suit challenging EPA’s decision to issue a conditional registration of a nanosilver-based antimicrobial agent. The NRDC asserts that EPA’s use of the conditional registration process is “illegal,” apparently because EPA does not have sufficient information to justify a conclusion that use of the nanosilver products do not cause “unreasonable adverse effects to human health and the environment.” According to the NRDC, EPA’s decision is

just the most recent example in a long line of decisions that treats [sic] humans and our environmental as guinea pigs for these untested pesticides.

As noted in my prior post, there is a difference between regulating in spite of uncertainty – which can frequently be justified – and regulating because of uncertainty, which is deeply troubling. Nanomaterials hold great promise in a wide number of fields, including many uses – such as antimicrobials – focused on protecting public health and the environment. 

What is the basis for keeping these materials off the market just because we haven’t proved that they don’t pose a risk?

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According to E&E News, Lisa Jackson said Friday that public pressure, not EPA regulation, will clean up fracking. 

Fracking fluids will get greener, water use will get down, all because the industry, quite frankly, will do it, must do it, and will feel the public pressure -- not the EPA pressure -- to do this in a responsible way.

Does she really mean it? Notwithstanding current pronouncements by the GOP Presidential candidates, neoclassical economics has a clear role for government regulation. If economic activity – such as fracking – imposes costs on society that are not internalized to the company doing the fracking, then regulation is appropriate. I think that fracking is of net benefit to society, but it certainly appears to impose at least some externalities that have not to date been internalized to the drilling companies. Thus, government regulation seems to be warranted – and logic tells us that those externalities will not be accounted for in the absence of regulation.

If Lisa Jackson believes that fracking’s externalities will be eliminated by public pressure, that would truly represent a sea change in the government’s view of how environmental problems should be solved. If public pressure is enough to clean fracking, then why wouldn’t public pressure be enough to clean toxics from utility air emissions?  What distinguishes fracking from all of EPA's regulatory programs? Why do we need EPA at all?

Perhaps the GOP candidates have it right.

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As readers of this blog know, the impact of EPA air rules, including in particular the Utility MACT rule, on the reliability of the nation’s electric grid has been the subject of much speculation. Last week, the Congressional Research Service weighed in, with the exciting headline: EPA’s Utility MACT: Will the Lights Go Out?” Of course, notwithstanding the sexy title, the CRS conclusion can be summarized pretty simply: the MACT rule will not cause the lights to go out. Money quote:

although the rule may lead to the retirement or derating of some facilities, almost all of the capacity reductions will occur in areas that have substantial reserve margins. Two areas that may have difficulty meeting reserve margins, Texas and New England, will experience few plant retirements and deratings, according to industry data. Furthermore, to address the reliability concerns expressed by industry, the final rule includes provisions aimed at providing additional time for compliance if it is needed to install pollution controls or add new capacity to ensure reliability in specific areas. As a result, it is unlikely that electric reliability will be harmed by the rule.

Absent some surprises, I’m done with the subject. Let me know if the lights go out.

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Just in case you are not sated with coverage about the Supreme Court argument in Sackett and the potential implications if EPA loses, I thought I would note that I did a brief (8 minutes) interview with LexBlog Network about the issues it presents. You can see it here. 

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I am generally loath to speculate about what the Supreme Court will do based on oral argument, but the overwhelming reaction to the oral argument in Sackett v. EPA was that EPA is going to lose. What would a loss mean? In simplest terms, EPA would no longer be able to issue enforcement orders under the Clean Water Act without those orders being subject to judicial review. Such a decision would undeniably be significant. Everyone practicing in this area knows how coercive EPA enforcement orders can be. A person who thinks that he is not liable or that the order is inappropriate, and faced with having to violate the order and wait for EPA to bring an enforcement action to obtain judicial review, is truly between a rock and a hard place – or perhaps Scylla and Charybdis (I’m not sure which, but it’s not good, either way). The opportunity for preenforcement review would eliminate much of EPA’s coercive power.

The big question is whether a decision against EPA would be so broad as to make it clear that EPA’s order authority under other statutes, such as CERCLA, would be similarly affected. Here, speculation really is difficult, because the Supreme Court could invalidate EPA’s CWA authority several different ways, with differing impacts on other statutes. Readers who want to explore the issue in more depth than a blog post can review an article I did in the ABA Superfund and Natural Resource Damages Litigation Committee Newsletter.

As long as I am speculating, I’m going to go out on limb and predict that the Court’s decision will not be easily limited to the CWA. I think EPA’s order authority is in trouble across the board.

The next big question is when lower courts are going to actually start paying attention to what the Supreme Court says about environmental cases. I’m tired of this pattern. A series of cases are decided by lower courts, almost universally in EPA’s favor. Indeed, one of the striking things about Sackett is that the Supreme Court took the case without a circuit court split – EPA had won before every circuit court that had reached the question. The Supreme Court applies principles that are broadly accepted outside the environmental arena, but which for reasons unknown to everyone but the lower court judges have been thought inapplicable to environmental cases, and EPA loses. The next several years are spent with EPA, DOJ, and the lower courts merrily constructing some new edifice which allows EPA to continue to win – until the Supreme Court takes another case and says “No, we really meant it.”

There is a lesson here for lower courts, if they would but listen. Environmental cases are not sui generis. EPA does not necessarily win just because it is protecting the environment. General principles of corporate, administrative, and constitutional law apply. Under this framework, EPA will still win most of the time. That’s the nature of administrative law. Expert agencies receive a lot of deference from the courts in interpreting their organic statutes and applying their expertise. But they don’t win all the time, and they don’t win just because they are EPA.

Rant over. Let’s see what the Supremes actually do.

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The decision yesterday in United States v. Minnkota Power Cooperative serves as a useful reminder regarding how important the burden of proof is in review of agency decisions. The case started in 2006, as part of DOJ’s NSR enforcement initiative, when the United States and North Dakota brought suit against Minnkota’s Milton R. Young Station. The parties settled and a consent decree was entered. Apparently, the parties knew at the time of the settlement that there would be a dispute regarding what would constitute BACT for NO_x control and they thus agreed to defer the issue; the consent decree simply provided that the North Dakota Department of Health would determine BACT.

It took the DOH four years to do so, but, in November 2010, the DOH concluded that selective non-catalytic reduction, or SNCR, constitutes BACT for the MRY facility, which has unusual technology involving cyclone-fired boilers combusting North Dakota lignite, rather than bituminous or sub-bituminous coal. EPA wanted SCR identified as BACT and pursued dispute resolution under the consent decree to get it. 

Unfortunately for EPA, the decree provided that the determination by North Dakota would be binding unless EPA “demonstrates that it is not supported by the state administrative record and not reasonable in light of applicable statutory and regulatory provisions.” As the court noted, the consent decree language was not unique; it “mirrors the standard of review” for challenges to state BACT determinations even outside the consent decree context.

The crux of the case was whether cyclone fired boilers combusting North Dakota lignite were sufficiently like other coal-fired boilers that determinations for such boilers that SCRs constitute BACT should essentially be binding here. The North Dakota DOH compiled an extensive record demonstrating that such other coal-fired facilities are not sufficiently like the MRY facility, and the court deferred to DOH’s judgment, based on the record.

Perhaps the most telling evidence was that DOJ engaged an expert consultant, which issued an request for proposals to install SCR at the MRY facility. DOJ in fact obtained two proposals with performance guarantees. The availability of such guarantees is extremely probative of whether a technology constitutes BACT. However, DOJ’s consultant failed to provide in its RFP sufficient detail regarding the specific characteristics of the MRY facility – and when the companies responding to the RFP learned the details, they withdrew the guarantees, almost certainly leaving EPA and DOJ in a worse position than if they had never gone through the RFP process. One might also infer that the court thought that DOJ was trying to pull a fast one, which certainly did not help.

Yesterday’s Cape Wind decision, together with this case, even though involving totally different statutory and regulatory regimes, provide a useful joint reminder of the importance of building the record in administrative cases.

As to this case, would the outcome have been different if EPA had made the BACT decision? Would a decision to impose SCR as BACT have been upheld if the burden were on the person challenging that decision? We’ll never know, but I could see it happening. Burdens do matter.

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On Wednesday, EPA promulgated the final Utility MACT rule. I doubt that anyone reading this blog isn’t already aware of the big news.

As seems frequently to be the case with EPA rules, this one, weighing in at 2.4MB and 1,117 pages, cannot easily be summarized here. In fact, the rule is so complicated – and controversial – that EPA had to generate four separate fact sheets to summarize the rule and its impacts: (1) Costs and Benefits (or, as EPA carefully puts it, “Benefits and Costs”); (2) Summary of the Rule; (3) Clean Air and Reliable Electricity (I wonder why EPA thought this one necessary?); and (4) Adjustments from Proposal to Final.

We live in a complex world, so there is not much use in complaining about how overwhelming this rule is, and about the problems inherent in a system in which rules with costs of approximately $10B annually and benefits ranging from $37B to $90B annually are this complicated and are probably truly understood by a very small number of people. As I tell my Libertarian friends, even Jefferson wouldn’t be a Jeffersonian today. Nonetheless, it is troubling.

The issues worth noting in a blog post are probably the changes from the proposal. Significant changes include:

·         Use of filterable PM for the particulate emissions limit, rather than total PM (which would include condensables).

·         Use of work practice standards, rather than emission limits, during start-up and shut-down. This is an important change, which will make life much easier for regulated units.

·         Greater flexibility in facility-wide averaging.

Reliability has obviously been the big issue for EPA. Units will generally have three years to comply. Permitting authorities may grant a 4^th year, if necessary, and EPA has said that they expect the extra year to be “broadly available.” EPA has also provided a mechanism for “units that are shown to be critical for reliability to obtain” a 5^th year to comply – though EPA has said that it does not expect many units to require or qualify for the 5^th year.

My predictions on the rule’s fate and impact?

·         I’ll be stunned if the rule does not survive judicial review. Of course, in an 1,117 page rule, there may be some obscure provision that is struck down, but the basic provisions will be upheld.

·         The sky will not fall. Significant numbers of jobs will not be lost, and the increase in electricity prices will be smaller than predicted. Since I whack EPA often enough, I’ll defend it here – to a limited extent. I don’t think that there has been a single big rule ever promulgated by EPA where the implementation costs haven’t been less than expected. That’s been true for one simple reason. When industry has clear rules to follow (even if they are not the cost-effective rules I would prefer), industrial innovation works to bring down compliance costs in ways that were not imagined, either by EPA or industry, when the rule was promulgated.

·         Of course, if there is a Republican President and a Republican Congress, all bets are off. Of course, when Mitt Romney was Governor of Massachusetts, he supported regulations by MassDEP that were essentially a state version of the Utility MACT rule, notwithstanding his criticism today of EPA for wanting to promulgate job-killing regulations. Of course, Mitt Romney has been known to change his mind. Of course,… oh, never mind. 

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Last week, I noted that the D.C. Court of Appeals had found that the National Association of Home Builders did not have standing to challenge a determination by EPA and the Army Corps of Engineers that two reaches of the Santa Cruz River are traditional navigable waters. On Friday, in National Association of Home Builders v. United States Army Corps of Engineers, the NAHB lost yet another standing battle.

This time, the NAHB was challenging the Corps’ nationwide permit, NWP-46, allowing discharges of dredge and fill material into certain upland ditches. The District Court had found that the NAHB did have standing, but ruled against NAHB on the merits. The Court of Appeals didn’t even let them get that far, once more barring the courthouse doors.

Aside from the NAHB’s bad luck in losing in the court of appeals twice in one week, what’s news here? 

The news is that, once again, the Court has provided useful guidance regarding what regulated entities – or their trade groups – must allege to establish standing in these types of cases. The NAHB had asserted that NWP-46 imposes costs on its members because it is ambiguous and leaves members uncertain when they are in fact subject to CWA jurisdiction for filling ditches. Unfortunately for the NAHB, the Court concluded that the Corps has been asserting jurisdiction over upland ditches for years. Moreover, the Court pointed to an acknowledgement by the NAHB VP for Legal Affairs that the Corps had “consistently suggested that at least some upland ditches were subject to CWA jurisdiction.”

In short, the Court concluded that the NAHB’s injury was not traceable to the permit, but was instead traceable to the Corps’ underlying assertion of jurisdiction, which was not asserted for the first time in NWP-46. Indeed, as the Court noted, because the Corps had previously asserted jurisdiction over upland ditches, NWP-46 benefited NAHB members, by providing them a way to comply with the CWA that is less costly than the individual permit process.

As the two NAHB decisions make clear, a trade group asserting standing on behalf of its members – or those members suing on their own behalf – must address the traceability and redressability prongs of the standing requirement with particularity, and must establish both that the specific regulatory action being challenged is the direct cause of their injury and that vacating the agency action will redress that injury.

I’m sure that the third time will be a charm for the NAHB. 

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Those following stormwater issues know that EPA is overdue to promulgate a proposed rule for stormwater controls at post-construction sites. The rule has been extremely controversial, with groups such as the Associated General Contractors arguing that EPA has no authority to promulgate post-construction rules. EPA was originally scheduled to issue the proposed rule by September 30. When EPA couldn’t meet that deadline, it negotiated an extension until December 2 (while stating that the deadline for the final rule, November 19, 2012, would still be met). Well, it’s December 15, and no proposal has been issued.

E&E Daily has now reported that, in recent Congressional testimony, EPA Acting Assistant Administrator for Water Nancy Stoner (a law school classmate, I might add) has acknowledged the obvious and admitted that EPA is “behind schedule.” Stoner did not provide a new target for when the rule would be proposed. If I were a betting person, I’d be skeptical that there are any circumstances under which EPA could actually meet the November 19, 2012 deadline for promulgation of a final rule. 

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Market-watchers thinking that having friends in Congress means that coal can flourish despite EPA regulation on many fronts may have a different view to ponder. Goldman Sachs predicted last week that generators will continue to switch from coal to natural gas and downgraded the prospects of the coal industry from “attractive” to “neutral.” Specifically, Goldman predicted that 51 GW of coal electric generating capacity are on their way out and that EPA Cross State Air Pollution Rule, or CSAPR, and utility MACT rule would together eliminate 160 million tons of coal production through 2018. Political winds may shift direction periodically, but cold-blooded economic analysis says that the outlook for coal is not great in the long run.

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Developers have cheered in recent years as the Supreme Court has tightened its standing rules. In a decision issued on Friday in National Association of Home Builders v. EPA, the Court of Appeals for the District of Columbia may have hoist the developers on their own petard. 

After EPA and the Army Corps of Engineers issued a determination that two reaches of the Santa Cruz River constitute “traditional navigable waters” under the Clean Water Act, the National Association of Home Builders sued. The complaint appears to have attached declarations referring to individuals who own property along tributaries of the two reaches, and who asserted that they are have applied for permits under the CWA. None of this was enough for the Court, which made four important points:

·         The NAHB itself did not have organizational standing. The Court made clear that an organization does not have standing unless it has credibly asserted that the challenged action “’perceptibly impaired’ a non-abstract interest.”

·         NAHB’s effort to assert representational standing for its members generally failed, because it contained no assertions linking this site-specific TNW determination to any broader impacts that would affect developers away from the Santa Cruz River.

·         NAHB’s effort to assert standing on behalf of owners in the vicinity of the Santa Cruz River failed because none of the declarations filed with the complaint alleged any harm specifically tied to the issuance of the TNW determination.

·         NAHB did not have “procedural standing” to challenge the agencies’ failure to provide notice and an opportunity to comment before issuing the TNW determination. Quoting from the Supreme Court decision in Summers v. Earth Island Institute, the Appeals Court stated that “deprivation of a procedural right without some concrete interest that is affected by the deprivation – a procedural right in vacuo – is insufficient to create Article III standing.” As the Court further noted, allegations of procedural violations may be relevant in assessing the redressability issue, but they cannot loosen the requirement that plaintiffs demonstrate that they have suffered a substantive injury traceable to the procedural violation.

The NABH decision appears plainly correct in light of Supreme Court standing jurisprudence. Moreover, it does not substantially narrow access to the courts. In fact, I think it provides a useful roadmap regarding the types of declarations that will be required to establish standing for developers. What it does make clear is that the courts are not simply discouraging environmental plaintiffs in their standing jurisprudence. Instead, the courts are discouraging each side equally – or at least requiring the same demonstrations from developers as well as environmentalists.

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On Friday, EPA proposed certain revisions to its rule on air emissions from boilers and commercial and industrial solid waste incinerators (CISWI). As with other major rules under development in the past few years, EPA has taken fairly substantial steps to limit the reach of the rule to those boilers and CISWI that are of greatest concern. Without engaging in formal cost-effectiveness analysis, EPA has sought to make the rule as cost-effective as possible.

As with most of EPA’s big rules, it is too complex to be summarized in a blog post. EPA’s summary fact sheet is here. Very briefly, the rule exempts 86% of industrial boilers and subjects most other boilers to work practice standards rather than emission limits. For those boilers subject to the emission limits, the new rules relaxed limits for CO, PM, and most metals, but increased the stringency for mercury and acid gases.

EPA also made one important change sought by the biomass industry. The rule will allow biomass to be combusted in boilers and CISWI, by defining it as “non-hazardous secondary material,” which can now “be considered a legitimate, non-waste fuel.”

As I have noted with other EPA rules, I expect that this rule will survive judicial challenge. Although no cost-effectiveness analysis was provided, EPA estimates that the benefits of the rules exceed the costs by a factor of more than 10. More to the point, as with other rules, much of what EPA has done is dictated by the CAA.

The real question is whether anyone will appreciate EPA’s efforts to – if I may use the term – tailor the rule as finely as possible. As Greenwire noted, there remain efforts in Congress to pass legislation both delaying and softening the rules. My sense is that we should at least give EPA credit for drafting better rules, because the agency is certainly not getting any political credit. The environmentalists criticize EPA for not having enough gumption, while EPA’s critics still call EPA “the scariest agency in federal government.” 

On this score, I’ll just note one final perspective. In today’s New York Times, David Brooks described Obama – or least Cass Sunstein, director the Office of Information and Regulatory Affairs – as a “wonky liberal.” What was the context for this comment? A discussion of the administration’s handling of costly environmental regulations. Brooks conceded that “most people in government are trying to find a balance between difficult trade-offs.” The problem for the administration is that neither the right nor the left today wants balance.

I enjoy criticizing EPA, but I would want to be trying to juggle the issues that EPA is currently statutorily mandated to address.

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Yesterday, the North American Electric Reliability Corporation, or NERC, released its 2011 Long-Term Reliability Assessment. The NERC report identified environmental regulations as one “of the greatest risks” to reliability. Much of the focus of the concern was on EPA’s MACT rule for hazardous air pollutants and its 316(b) rule for cooling water intake structures. While expressing uncertainty about these not-yet finalized rules, the NERC report took an extremely cautious approach, largely assuming the worst in terms of the stringency and inflexibility of these rules.

Appropriate caution? Not according to EPA.

In a letter to NERC, EPA Deputy Administrator Bob Persciasepe accused NERC of simply ignoring what EPA has said regarding the provisions of those rules and how they will be implemented. For example, with respect to the 316(b) rule, NERC assumes that the rule will require closed cycle cooling, even though EPA has explicitly said it will not require closed cycle cooling on all units and the rule will allow the cost of controls and potential impacts on reliability to be considered in determining appropriate technology. 

As Persciasepe summarized:

NERC’s draft report describes an extreme outcome that arises from a scenario where the most stringent and costly rules imaginable took effect, and no one at the federal, state, or local level took any steps to ensure the continued reliability of the grid.

Fortunately, the EPA’s analysis and several external analyses show that, where the EPA’s actual rules are accurately characterized, there is no adverse impact on capacity reserves in any region of the country. If isolated, local reliability challenges were to emerge due to individual plant retirements, the Clean Air Act and Clean Water Act provide flexibility mechanisms to ensure that sources can be brought into compliance over time while maintaining reliability.

In my most recent post on this subject, I noted that a comprehensive look at the reliability issue by FERC would be helpful. While I understand NERC’s approach to err on the side of caution, I agree with EPA that NERC overdid it here. Most of the old plants at risk of retirement are not going to have to install closed cycle cooling. I wouldn’t quite describe the NERC report as Chicken Little, but I don’t think the sky is falling. I’m still waiting for a more balanced and comprehensive review – and still skeptical that such a report would attain universal credibility, even if were to deserve it.

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There has already been significant attention devoted to whether EPA’s “train wreck” of rules affecting coal-fired power plants would affect electric system reliability. The Congressional Research Service analysis looked at the coming rules more broadly, but did touch on reliability, noting that most of the coal plants likely to be retired as a result of EPA regulations are small and inefficient, and already run infrequently. As we noted last June, the Bipartisan Research Center did focus on reliability, concluding “that scenarios in which electric system reliability is broadly affected are unlikely to occur.”

However, this work has not been enough to satisfy FERC Commissioner Philip Moeller, who recently issued a “Request for Evidence” concerning the impact of EPA’s coming rules. The request is both deep and wide-ranging. It includes 22 separate questions, not including sub-parts. The questions range from the broad -- “What evidence supports the assertion of a reliability problem?” -- to the very specific  -- "Will the loss of the system inertia that is supplied by coal plants impact the power grid in unforeseen ways? Does the topic of inertia require further study?”

In today’s polarized political climate, I’m not sure that there can be an answer to these questions that would satisfy everyone. At least inside the Beltway, decision-makers increasingly seem to know what they know, evidence be damned. Nonetheless, it can only help to have a more comprehensive analysis of the reliability issue by the government agency that has responsibility for ensuring electric system reliability.  A careful assessment by FERC seems even more necessary in light of Wednesday's story in the Daily Environment Report to the effect that EPA's draft MACT rule contained an acknowledgement of reliability concerns when it was sent to the White House for review in February, but that the reliability discussion was edited out before EPA signed and issued the proposed rule in March.

For my part, assuming that the reliability issue can be addressed, I’d rather have the train wreck than Chinese water torture. Precisely because small coal plants might shut as a result of the cumulative weight of the EPA regulations, isn’t it better for everyone that the owners of those plants know about all of the regulations at the same time, rather than have them promulgated seriatim over a number of years? Wouldn’t the owners feel foolish -- and justifiably annoyed -- having spent a bunch of money complying with the first rule to be promulgated, only to decide that the second, or third, or fourth is the straw that breaks the camel’s back? As a matter of both public and private sector planning, it has to be better for EPA to be promulgating these rules in at least the same general time frame.

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In response to yesterday’s post, I received an email from someone at GreenWire notifying me that Lisa Jackson had not called her opponents “jack-booted thugs.” Instead, she was actually complaining that her opponents were describing EPA employees as jack-booted thugs. Definitely a different level of rhetoric, though it was certainly a much more interesting story in its original version. Oh, well.

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Two seemingly unrelated stories from last week suggest that EPA may have its limits in how far it is going to go to make nice with those who are opposing its regulatory agenda. The first story, reported by Greenwire, is pretty much all in the headline: “EPA official accuses Kan. department of lying over proposed plant.” The second story, also from GreenWire, reported that EPA Administrator Lisa Jackson referred to opponents of EPA’s greenhouse gas tailoring rule as “jack-booted thugs.”  She has also described Republican efforts to limit EPA regulatory authority as a “too dirty to fail” policy.

It’s difficult to interpret at least Administrator Jackson’s remarks as anything other than part of the 2012 Presidential campaign. I realize that I may be hopelessly optimistic in asking that even campaign rhetoric make sense, but these comments don’t make sense. How is it that opponents of the tailoring rule – and I actually support the rule, though I’m not sure about EPA’s authority to promulgate it – are “jack-booted thugs”? They may have misrepresented the scope of the rule, but that hardly makes them thugs, let alone jack-booted ones.

And too dirty to fail? I don’t even know where to begin. Let’s start and end with the simple point that it is not precisely because these plants are dirty that we refuse to regulate them – which is the only way the analogy to “too big to fail” could possibly make sense. This is nothing more than trying to make polluters look bad by comparing them to banks. I do feel compelled to observe that we are in a funny place when banks have a worse reputation than polluters and we have to stir up populist anger at the polluters by comparing them to the big, bad, banks.

In any case, calling your opponents liars and thugs, and describing their political strategy as supporting polluters because they are "too dirty to fail” is not going to engender a spirit of compromise. I understand EPA’s frustration with its congressional opponents. Again, I must emphasize that I support not just the tailoring rule, but may of EPA’s regulatory initiatives. I also note that EPA has taken steps – rarely noted or appreciated – to respond to the concerns of opponents. Nonetheless, aside from providing red meat to the base, this is hardly constructive. After all, it’s not as though anyone expects the Democrats to win such overwhelming majorities in the House and Senate that Lisa Jackson won’t have to deal with congressional Republicans after January 2013. Good luck with those jack-booted thugs.

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Yesterday, EPA announced that it was granting the petition submitted by New Jersey under § 126 of the Clean Air Act, requiring the Portland Generating Station in Upper Mount Bethel Township, Pennsylvania, to reduce emissions of SO₂, in order to avoid causing exceedances of the NAAQS for SO₂ downwind in New Jersey. The requirements are fairly straightforward. Within three years, the plant must limit emissions as follows:

Unit 1 emissions may not exceed 1,105 lb/hr

Unit 2 emissions may not exceed 1,691 lb/hr.

The facility must attain a heat input limit of 0.67 lb/mmBtu, regardless of operating load

The facility will also be subject to a short-term limit, to be attained within 12 months, of 6,253 lb/hour. This limit is expressed as a total for both units to provide the owner with more flexibility. EPA states in its fact sheet that this interim limit can be attained by switching to low sulfur coal.

At a certain level, the rule granting the petition is not that big a deal. Section 110(a)(2)(D) of the CAA, the “good neighbor” provision, prohibits emissions in one state that interfere with attainment of NAAQS in another state. Petitions under § 126 to enforce this requirement are not new. Nonetheless, the rule is noteworthy.  As EPA stated, this is the first sole-source petition under § 126. EPA spokesman Lawrence Ragonese described the rule as “precedent-setting” and said that it opened the door for other such petitions. 

Second, I think that the rule has to be seen in the context of the current debate in Congress over EPA’s CAA authority. The fact sheet specifically notes that the rule requires the same type of controls as would the Cross-State Air Pollution Rule and the Mercury and Air Toxics Standard, both of which are under attack at the moment. By essentially inviting other § 126 petitions, EPA seems to be signaling to Congress that attacking the CSAPR and MATS rules won’t make the problem go away. Presumably, too, the message is that the comprehensive approach in the CSAPR, which permits as much trading as the CAA allows, might be a better option than forcing EPA to respond to – and generators to comply with – individual petitions under § 126.

Finally, and on a related note, issuance of the rule seems consistent with Administrator Jackson’s remarks late last week, described by E&E Daily as a “vow” to “crack down on coal.” If EPA’s recent retreat on the revised NAAQS for NO_x and its delays in issuance of other rules might have led some observers to conclude that EPA was backing down, Jackson’s remarks seem explicitly designed to announce that EPA will not be backing down. In that context, the grant of the petition would seem to be a tangible demonstration that she really means it.

The battle is clearly not over, but the petition does illustrate one important factor – much of what EPA does is not really discretionary. Rather, it is mandated by some existing provision of the CAA. If Congress is not happy with EPA, it really has only itself to blame. If it wants less regulation; it is going to have to vote to amend the CAA in significant ways – and, presumably, survive a presidential veto.

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E&E Daily reported this week that Congressional Democrats are opposing the Regulatory Accountability Act of 2011. H.R. 3010 would codify a requirement for cost-benefit analysis of major regulations in the Administrative Procedures Act. According to the report, John Conyers, ranking member on the House Judiciary Committee stated that the RAA

would amend the Administrative Procedure Act in ways that would effectively halt agency rulemaking and undermine public health and safety rules.

Excuse me?

The guts of the RAA would be to:

·         Require cost-benefit analysis for all rules expected to cost more than $100,000,000

·         Require cost-effectiveness for rules going beyond statutory minimum requirements – If EPA wants to impose rules that would cost more than the minimum requirements necessary to implement a statutory requirement, it must demonstrate that the marginal cost of the increased stringency is outweighed by the marginal benefit.

·         Set some limits on agency promulgation of guidance. I am particularly taken with the provision that would authorize the Administrator of the Office of Information and Regulatory Affairs to “issue guidelines for use by the agencies in the issuance of major guidance and other guidance.” My Massachusetts readers will recall the effort by NAIOP to require that our MassDEP issue “Guidance on Guidance”, setting ground rules on the use of guidance. The NAIOP ground rules are fairly similar to those in the RAA.

I’m sorry. I am not a political consultant, but I still don’t get the Democrats’ opposition to this. There is definitely stuff in the RAA that is easy not to like. That’s fine, but when Democrats oppose cost-benefit analysis, it just sounds dumb. It plays into the anti-regulatory crowd’s hands. It suggests that there isn’t a regulation out there that Democrats don’t like and that Democrats don’t care whether regulations actually benefit society.

My advice, for what it’s worth? The Democrats should take up the mantle of cost-benefit analysis. Challenge the GOP to demonstrate that they are not simply using cost-benefit analysis as a cudgel to stop all regulations, by making clear that the Democrats regard cost-benefit analysis, not as a way to end regulation, but as a valuable tool to make sure the regulatory process works as it should.

I remain an optimist.

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Does anyone remember cost benefit analysis? As I recall, it was an economic tool that many in the academic and business communities wanted to use to discipline EPA’s more grandiose regulatory efforts. EPA has now used it for years; it routinely provides analyses showing that the benefits of its rules far exceed the costs that they impose.

As I have previously pointed out, that really shouldn’t be the end of the story, because unless EPA goes farther, and performs rigorous cost-effectiveness analysis, we could still be wasting big bucks. Even if a regulation provides $100B in benefits for only $90B in costs, wouldn’t we want to know if a different regulatory structure could obtain $90B in benefits for only $10B in costs? While that might be a hypothetical, it’s not a totally unreasonable one. Nonetheless, at least EPA is doing some C-B analysis and I think it likely that most, if not all, of EPA’s rules do result in greater benefits than costs.

These musings were triggered by the announcement by EPA yesterday that it would not be revising the coarse particulate matter, or PM₁₀, standard, the result of which will apparently be to allow dust emissions from farming operations to escape federal regulation. I don’t have a view on the merits of tougher PM₁₀ regulation. Based on a quick review of EPA’s technical analysis, it appears to be a close question. Either way, though, I’m confident that Congressional opposition to a more stringent PM10 standard stems from a new development – opposition to cost-benefit analysis from those opposed to environmental regulation. 

The new approach, seen in the North Carolina legislation on which I commented earlier this year, opposes costly regulation, regardless of its benefits. The rhetoric is that this is not the time to impose new regulations, because the economy cannot afford it – as though there is a time when people can afford to get cancer or heart disease. 

So, where are we today? Environmentalists support environmental regulation, looking only at the benefits it provides. Others oppose environmental regulation, looking only at the costs it imposes. Altogether, a sad state of affairs.

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As part of its efforts to control the impact of mountaintop removal mining, EPA has implemented a number of changes – both procedural and substantive – into how § 404 permit applications for such activities will be reviewed. None of these changes have gone through notice and comment rulemaking. As we previously noted, Judge Reggie Walton already expressed skepticism about EPA’s mountaintop removal guidance. Last week, in the latest decision in National Mining Association v. Jackson, Judge Walton shot down EPA’s “Enhanced Coordination Process”, or ECP, for reviews of section 404 permit applications.

Although EPA described the modifications as the types of procedural changes that are within agencies’ inherent authority, Judge Walton was having none of it. He concluded that EPA’s authority under the CWA is subject to certain unambiguous limitations. 

The statutory language explicitly establishes the Secretary of the Army, acting through the Corps, as the permitting authority, which strike the Court as an express limitation. … The statute is therefore not ambiguous…. Thus, if a responsibility involving the permitting process has not been delegated to the EPA by Congress, that function is vested in the Corps as the permitting authority.

Under the Multi—Criteria Resource Assessment, or MCIR [don’t ask me why it’s “MCIR” and not “MCRA”], EPA, not the Corps, initially applies § 404(b) guidelines, and EPA directs the Corps how to process mountaintop removal § 404 permit applications.  To Judge Walton, these changes exceed EPA’s statutory authority under the CWA.

Judge Walton also concluded that the ECP, including the MCIR violated EPA’s obligation to provide notice and an opportunity to comment on the change in rules that the ECP represents. For those of you who are not APA geeks, the APA exempts from the obligation to provide notice and comment “rules of agency organization, procedure, or practice.” While the ECP sounds procedural – after all, the word “process” is in the label – Judge Walton concluded that the rules were substantive and required notice and comment under the APA. To Judge Walton,

The fact that the creation of the MCIR Assessment removed the task of applying the 404(b)(1) guidelines to pending permits from the Corps and bestowed it upon the EPA signifies a substantive, rather than a procedural, change to the permitting framework. … [I]t is apparent that the MCIR Assessment and the EC Process “effectively amend” the Section 404 permitting process by conferring additional reviewing authority on the EPA – authority that the statute reserves for the Corps. American Mining therefore compels a finding that the MCIR Assessment and the EC Process are legislative rules. 

Another day, another defeat for EPA. The APA lives.

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EPA may have had problems in court in recent years defending its regulations, but it has generally fared much better in its enforcement cases. Earlier this week, however, EPA suffered what will be, if it is affirmed, a devastating defeat in its PSD/NSR enforcement initiative. In United States v. EME Homer City Generation, Judge Terrence McVerry concluded that the government could get no relief against either the former owners of the facility or the current owners or operator. No penalties. No injunctive relief. No relief under state law. Nothing. Nada.

The facts here were typical of NSR enforcement cases. The facility, in Homer City, Pennsylvania, had implemented a number of projects from 1991 through 1996 which, EPA alleged, required PSD permits. No permits were sought. The owners at the time of the changes sold the plant in 1999. It was sold again in 2001 and is currently operated by one entity and owned by a group of LLCs. 

The court’s analysis was thorough, yet straightforward. According to the court, PSD requirements are one-time, pre-construction requirements. With respect to civil penalties, the United States acknowledged that the five-year statute of limitations precluded claims against the former owners. The court gave the claim against the current owners and operator short shrift. The court concluded that

The alleged PSD violations constitute singular, separate failures by the Former Owners to obtain pre-construction permits, rather than ongoing failures to comply with whatever hyupothetical conditions might have been imposed during the PSD permittingprocess. Thus, the United States was required to file suit to recover civil penalties for an alleged PSD program violation within five years of the construction project.

The big news from the decision is the court’s refusal to grant injunctive relief. While Judge McVerry described the statute as complex and ambiguous, he did not find the decision before him difficult. With respect to the current owners/operator, injunctive relief could not be imposed on them, because no remedy can be imposed without a liability finding. Because the failure to obtain PSD permits was solely attributable to the former owners, the current owners/operator are not liable for the violation. No liability; no injunction. 

The court found the question somewhat more difficult with respect to former owners. They would be liable for the original violation, if proved, and the five-year statute of limitations does not apply to injunctive relief. The court punted on whether it had authority to issue an injunction against former owners, resting its decision instead on the court’s broad discretion to grant or deny equitable relief. Describing injunctive relief as “a rare and extraordinary remedy,” the court concluded that it would be inappropriate to grant relief against former owners where, since they no longer own the facility, injunctive relief against the former owners is not necessary to prevent future violations by the former owners. 

Finally, the court concluded that the current owners/operator did not violate their Title V permit, because the permit does not include any requirement to meet BACT. The court flat-out rejected the idea that the Title V permit could somehow be found to “incorporate” BACT requirements that should have been included in the Title V permit because they should have been included in PSD permits, because the former owners should have applied for them. 

In short, the government was too late to bring claims against the former owners, and could not establish liability against the current owners. Thus, it could get no relief against anyone.

It is difficult to square this opinion with the general rule interpreting police power statutes broadly to effectuate their purposes, because this decision means that there will be some circumstances in which there is a violation with no remedy, even where the impacts of that violation are still being felt, or seen, or inhaled, today. However, the decision is careful and thoughtful and I wouldn’t automatically assume that it will be reversed on appeal. Not a good day for EPA.

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As some of our clients know all too well, I am spending much time these days defending citizen suits. As federal and state agency budgets get slashed, we’re only going to see more such suits, unless a Tea Party-controlled Congress amends the relevant statutes to cut back on citizen suit provisions. 

In a move that will facilitate citizen enforcement, EPA announced last week that it has yet again upgraded its Enforcement and Compliance History Online, or ECHO, data base. As Cynthia Giles, EPA’s Assistant Administrator for Enforcement said:

EPA is committed to providing the public with easy to use tools that display facility compliance information and the actions EPA and the states are taking to address pollution problems in communities across the nation. EPA is proud to announce our latest effort under the President’s White House Regulatory Compliance Transparency Initiative and we will continue to take steps to make meaningful enforcement and compliance data available as part of an open, transparent government.

In other words, if we don’t have the resources to sue the polluters, we’ll at least try to make sure that NGOs do. 

It’s difficult to be against increased transparency – and I’m not. I will note, though, that ECHO is not perfect. I frequently see mistakes when I review information about our clients. I certainly would advise clients to review ECHO periodically to ensure that they know what information EPA is providing to the public about their compliance status.

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As Greenwire reported, the Inspector General of the EPA recently released a report criticizing how the agency followed (and deviated from) procedures in publishing the Technical Support Document that underpinned its December 2009 Endangerment Finding.  The IG was instructed to conduct this review at the order of Senator Inhofe (R-OK), the ranking Republican on the Senate Committee on Environment and Public Works.  The review, which cost nearly $300,000, examined only whether EPA followed its own procedures and those of the Office of Management and Budget (OMB), and did not analyze the validity of the scientific or technical information used to support the endangerment finding.  Although news of the report is likely to reinvigorate GOP criticism of the endangerment finding and the climate change regulations that followed, the IG repeats throughout the report that it is an evaluation of data quality procedures, not the quality of the data itself or the conclusions that EPA reached.  Plus, as EPA highlighted in its response to the IG's report, the peer-reviewed studies conducted since the endangerment finding only serve to strengthen the validity of the science that EPA relied upon.

The key conclusion the IG reached is that the Technical Support Document (TSD), in which EPA summarized the results of the leading scientific assessments on climate change, did not meet the OMB’s peer-review requirements. The problem turns on whether the TSD was a “highly influential scientific assessment” -- defined in the OMB regulations as an assessment that could have an impact on the public or private sector of more than $500 million in one year or is novel, controversial or precedent setting.   Such assessments require more attention to peer review, and agencies have to follow specific peer review procedures laid out by the OMB and certify that they have done so. 

The IG concluded the TSD was a "highly influential scientific assessment" because EPA weighed the strength of the available science and chose what information to include.  In summarizing the world of data down to a manageable document, the IG argues, EPA made choices that qualify as science. EPA officials, on the other hand, argue that the TSD does not meet this threshold, since it does not contain any new science or conclusions.  Instead, it's more of an annotated bibliography, summarizing findings from prior studies, all of which had been extensively peer-reviewed. 

The EPA’s Peer Review Handbook allows use of already-peer-reviewed studies to support EPA decisions, so long as the EPA checks to see whether the earlier peer review meets its standards. The IG criticizes that EPA didn’t certify to this double-checking in any of its publicly released documents.  Additionally, although the EPA did have the TSD reviewed by a panel of 12 climate change scientists before publishing it, the IG concludes that this did not meet the OMB requirements for a “peer review” because the review results and EPA response were not publicly reported, and one of the twelve panelists was an EPA employee.   

The story that EPA failed to follow its own procedures in analyzing the science behind this critical decision certainly reads well, and could be very potent fuel to add to anti-EPA rhetoric.  But my conclusion is that this dispute seems manufactured, or at the very least, far too focused on form over function and style over substance. Although the quality of data in science is a real issue, the primary issue here seems to be that EPA could have been better at showing its work, rather than a question of whether it, or the world's climate scientists, did the work to begin with.  

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Last year, I compared EPA’s Interim Guidance on Considering Environmental Justice During the Development of an Action to Rube Goldberg – and that was only EJ Guidance on Rulemaking. Now EPA has issued its comprehensive Plan EJ 2014. I still find the resources devoted to this subject by EPA and the convolutions it is going through to analyze the issue to be stunning.

I also still think that my simple analysis from last year is not too simplistic. Here’s the way EPA’s job is supposed to work:

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.

There are two significant theoretical issues which could give rise to legitimate concerns about disparate environmental impacts. One is if, as a result of political disenfranchisement, what are known as EJ communities cannot adequately participate in the environmental regulatory process. I don’t doubt that this happens, though I’m skeptical about how often and statistics about the number of solid waste transfer stations in poor or minority communities doesn’t make the case for me. In any case, the broad issue is beyond the capability of EPA to solve and it shouldn’t try. That’s what the Civil Rights Act is for. Moreover, a significant piece of the problem is addressed just by increased disclosure and transparency that is happening anyway, through developments in the electronic, i.e., web-based, dissemination of information.

The other concern frequently raised is the one of cumulative impacts, and it receives a lot of attention in Plan EJ 2014. That one, I really don’t buy. Cumulative impacts are already addressed as appropriate in the EPA organic statutes. That’s what nonattainment with NAAQS and resulting state implementation plans are all about. If an area is in compliance with the NAAQS, that should be the answer. If they are not, everyone contributing to that exceedance gets ratcheted down. If the NAAQS is not sufficiently protective (ozone, anyone?), lower it. The same is true for the Clean Water Act. That’s what water quality criteria and the TMDL process are for. If a water body complies with WQCs, it should be considered safe. If not, dischargers into that water body get ratcheted down. 

I could continue, but I won’t. 

My final pet peeve about EJ is the continuing discussion regarding what Plan EJ 2014 calls “equitable development and place-based initiatives.” As I noted in another post on the EJ issue, EPA is, to put it lightly, somewhat optimistic when it thinks that its EJ efforts can help spur economic development in EJ communities. EJ can be used to say no to economic development in poor or minority communities, but it cannot say yes. EPA cannot make capital go where it does not want to go. 

Prudent developers work with communities. They don’t need EJ rules to tell them that local support is better than local opposition. However, ask those developers most known for working with local communities and I doubt you’d find one who thinks that EPA or state or local EJ rules or guidance help facilitate development in any way, shape, or form.

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Following EPA’s decision last week to scrap its reconsideration of the 2008 ozone National Ambient Air Quality Standard, the parties to the litigation challenging the 2008 standard are back in court. This week, EPA submitted a brief to the Court of Appeals, which was pretty much a six-page version of Roseanne Roseannadanna’s “Never mind.” After telling the Court for years that it should defer to EPA’s reconsideration process – a decision on which was always just around the corner, until EPA decided it wasn’t – EPA has now told the Court that it is time to brief the merits of the challenges to the 2008 standard of 0.075 ppm.

As I noted last week, EPA has already made the argument that the Court of Appeals does not have jurisdiction in this case. If that argument fails, I cannot wait to see what argument EPA will make on the merits. The Clean Air Science Advisory Committee said that 0.075 ppm was not sufficiently stringent, the Court of Appeals has said that EPA cannot willy-nilly ignore CASAC, and EPA itself pretty much said in 2010 that the standard cannot be any higher than 0.070 ppm. I don’t envy the DOJ lawyers who will be writing that brief.

The problem for the environmental group challengers is whether there is any practical remedy at this point. The Court cannot promulgate its own NAAQS. All it can really do is impose a schedule on EPA to correct the 2008 standard. It doesn’t take much analysis to conclude that there is likely no reasonable deadline the Court could impose that would result in a new ozone standard any earlier than the 2013 date towards which EPA is already pointing. I foresee some awkward moments for the DOJ lawyers and some very firm finger-wagging by the Court, to the effect of “We really, really expect you to issue a new standard in 2013.”

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Yesterday, in commenting on the court battle over EPA’s reconsideration of the ozone NAAQS, I said that I would be surprised if EPA doesn’t issue the new standard within six months. Oops. My bad. Today, President Obama directed EPA to give up on the reconsideration effort. It’s difficult not to be cynical about the White House decision. As much as I admire Cass Sunstein, his letter to EPA providing the basis for the White House decision is not persuasive. Basically, it makes two points. 

First, EPA has to review the NAAQS every five years. Since this cycle began in 2008, EPA would have to review any new standard in 2013. Therefore, why bother? Why not just wait until 2013? The problem with that argument is that the review of the NAAQS is extremely complicated and cumbersome. It’s always going to take much of the five-year cycle. Sunstein’s argument, pushed to its logical conclusion, could result in the NAAQS never being updated, because, by the time EPA is ready to act, it will be so near the time for the next review that the decision would always be deferred to the next round.

The second argument is that the Administration has implemented a number of major initiatives to improve air quality, many of which will reduce ozone in the atmosphere. That’s certainly true, but the real answer to that is, so what? Setting the NAAQS is not a regulatory action; it is merely EPA’s statement as to how high ozone concentrations can get before ozone poses a risk. Regulatory actions may follow from that, but they’re distinguishable. If some of the other actions EPA has taken will reduce ozone levels, that’s not a reason to stop the reconsideration process. In fact, that only suggests that additional regulatory actions necessary to comply with the standard won’t be as expensive as they might otherwise have been, because prior regulatory efforts will have already achieved part of the necessary reductions.

I may have been wrong about EPA’s issuance of a new ozone standard, but I’ll nonetheless go out on a limb and make another prediction – it won’t be long before the environmental petitioners return to the Court of Appeals and request that the Court order EPA not only to continue with the reconsideration process, but to issue a new standard asap. Alternatively, they can go back and simply revive their challenge to the Bush administration standard of 0.075 ppm. If they can get the court to conclude that a standard above 0.070 ppm (or even lower) is arbitrary and capricious, we may still see a lower standard. 

If I were really cynical, I might conclude that that is in fact the Administration’s hoped-for outcome. That way, they get the lower standard, but without the political heat, because they can blame it on the court.

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This week, EPA filed a brief with the D.C. Circuit Court of Appeals, arguing that, notwithstanding its fourth delay in issuing a decision on its reconsideration of the NAAQS for ozone, the court cannot and should not order EPA to issue a decision. Industry shouldn’t get too excited, however. In the same brief, EPA telegraphed pretty clearly, consistent with its 2010 proposed rule, that it remains on track to significantly decrease the ozone standard from the 0.075 ppm standard promulgated by the Bush administration in 2008.

As most readers know, the Bush standard was higher than that suggested by EPA’s own Clean Air Science Advisory Committee, or CASAC. In a parallel case, the D.C. Circuit found EPA’s fine particulate standard arbitrary and capricious, largely because it had ignored CASAC’s recommendations. Given the decision in the fine particulate case, and, presumably, the Obama administration’s own views on the appropriate standard, it is not surprising that EPA embarked on a reconsideration effort, rather than trying to defend the Bush standard.

In January 2010, EPA proposed that the standard should be in a range from 0.060 ppm to 0.070 ppm. However, notwithstanding CASAC’s views, the new standard remains hugely controversial and EPA has had difficulty in finalizing the rule. EPA missed an August 2010 deadline to publish a final rule, and then an October 2010 target, and then a December 31, 2010 target, and then a July 29, 2011 target. When EPA, after missing the most recent target, would not even give a date, but instead only informed the court and the parties that a final rule would be issued "shortly", the environmental petitioners, including the American Lung Association, asked the court to order EPA to issue the final rule.

EPA’s opposition is straightforward. First, it argues that the Court of Appeals has no jurisdiction over citizen claims that EPA is late in issuing such rules. Second, EPA claims that it has been “diligent” in its reconsideration effort and that the final rule will indeed be issued “shortly.” 

It’s difficult to avoid the conclusion that EPA was, to put it mildly, overoptimistic in its reports to the court regarding how long the reconsideration process would take. They should have known better. That being said, I wouldn’t be surprised if the Court continues to give EPA at least some more time to reach a decision. After all, the court cannot issue a standard itself. What would surprise me would be if EPA does not manage to issue the new standard sometime in the next six months or so. They’ve been boxed in by CASAC and any standard above 0.070 ppm would probably be found to be arbitrary and capricious. 

The ever-reliable internet attributes the “wheels of justice” quote to Sun Tzu. No matter how slowly it grinds, EPA is going to have to issue a rule at some point. It would be best to get it out as far in advance of the election as possible. Moving from Sun Tzu to Shakespeare, “if it were done when 'tis done, then 'twere well It were done quickly.” 

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When EPA issued its preliminary plan in May for review of its regulations, I said that the proof would be in the pudding. Well, EPA has now issued its final plan. My review? The pudding tastes ok, but it doesn’t taste as good and it’s not as filling as it could be.

My major complaint with the preliminary plan was its failure to target the single biggest area for reform – those areas where EPA still relies on command and control regulation. Obviously, statutes dictate EPA’s approach in many cases, but not all. There is much more friendly generic language on this score in the final plan. For example, EPA now states that:

To supplement traditional compliance approaches, EPA plans to routinely structure federal regulations and permits as effectively as possible to achieve compliance, through adequate monitoring requirements, public disclosure, information and reporting mechanisms, and other structural flexibilities, including self-certification, and third-party verification.

Unfortunately, specific example of proposed changes to rely on self-certification and third-party verification are few and far between in either EPA’s “early action” or “longer term” lists of potential reforms. Why couldn’t EPA have included one simple bullet? Why couldn’t EPA simply have directed each program to review its statutory authority to shift from technology-based or other command and control approaches to performance standards and market based approaches?

It is telling that only 1 of 35 specific proposals relates to Superfund, which remains purely a command and control program – and even that item concerns only National Priorities List rules, not how cleanups are selected and overseen. I don’t see any provisions in CERCLA that would prevent EPA from revising the NCP to identify risk-based standards for different media and allow PRPs to meet those standards in whatever cost-efficient manner they can identify.

True regulatory reform is clearly not going to happen overnight. EPA’s current plan probably qualifies as a step in the right direction, but it’s not much more than a baby step.

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Late last week, Greenwire reported that EPA is delaying its proposed construction general permit, or CGP, for stormwater. The delay is certainly a victory for the real estate industry, which has been fighting hard to delay the rule and, in particular, its numeric turbidity limit. The industry had complained about the data on which the standard was based, calculation errors by EPA, and what it views as a 10-fold underestimate of the compliance costs.

EPA denies that the delay was a political decision by the White House or OMB and stated that it needs to gather more information about existing stormwater treatment technologies before issuing the rule. 

We’ll see whether EPA gets any credit from the business community for the delay. They certainly won’t get any from environmental groups. It’s important to remember that the rule is actually the result of litigation brought by the NRDC, so EPA cannot continue to delay indefinitely or it will just find itself back in court. As is often the case, EPA is going to have a difficult time avoiding being caught between a rock and a hard place at some point on this rule.

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As the deadline passed last week for submitting comments on EPA’s Utility MACT rule, it’s worth taking a big picture look at how the commenters line up. Big utility groups, such as the Edison Electric Institute and the American Public Power Association are looking for EPA to delay the rules. The basic argument is that it is going to take a long time to comply. EEI states that so many facilities will require extensions that the number of requests will create a backlog that will itself essentially create compliance problems.

However, it is not just environmental and public health groups that filed comments in support of the MACT rule. Exelon, which has a large nuclear fleet, submitted comments in support of the rule. In fact, Exelon referred to the “overblown critique” of the Utility MACT proposal, stating that the “lack of a national standard for toxic emissions continues to be a barrier to investment in new, cleaner generation capacity.” Industry supporters are not limited to Exelon. The Clean Energy Group, which includes PG&E, Calpine, and other generators with large gas fleets, also focused on the “business certainty the electric sector needs to move forward with capital investment decisions.” 

In looking at these comments, it is worth keeping in mind that the Utility MACT rule is only one of nine rules under development by EPA that would impose costs on coal-fired power plants. This confluence of rules is has been referred to as the “train wreck” for coal-fired power plants. While the Utility MACT rule may impose the greatest costs – and achieve the greatest benefits, according to EPA – many are concerned about the cumulative impact on coal-fired capacity. Earlier this week, the Congressional Research Service attempted to debunk the train wreck perspective:

The primary impacts of many of the rules will largely be on coal-fired plants more than 40 years old that have not, until now, installed state-of-the-art pollution controls. Many of these plants are inefficient and are being replaced by more efficient combined cycle natural gas plants, a development likely to be encouraged if the price of competing fuel – natural gas – continues to be low, almost regardless of EPA rules.

In any case, what’s the argument against promulgation of these rules on the same time frame? Isn’t that a good thing? There may be coal-fired plants which could sustain the capital investment required to comply with Utility MACT, but not the added cost of cooling water intake improvements to comply with new Clean Water Act requirements or the added cost of new disposal requirements if coal ash is regulated as a hazardous waste. Isn’t it better to know about all of these rules up front, so that facilities can plan for the total cost of all the rules? Wouldn’t a facility have legitimate cause to complain if the rules were instead issued seriatim, so that the facilities did not know about the full range of regulatory compliance costs when they make the decision whether to invest to comply with the first rule or instead to shut down?

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The Environmental Protection Agency proposed a rule yesterday that would exempt carbon dioxide injected into underground carbon capture & storage (CCS) wells from regulation as hazardous waste, so long as the CO₂ is held in wells designated for that purpose under the Safe Drinking Water Act.  In its press release announcing the program, EPA noted that the purpose of the regulation -- as well as its prior rulemakings under the Clean Air Act to require emissions reporting by CCS facilities, and the Safe Drinking Water Act to require appropriate siting, construction and monitoring of CCS wells -- was to reduce barriers to the use of CCS and promote the technology, which has yet to be proven at a commercial scale.  If the EPA is behind it, what more could CCS need? 

The interagency task force charged with evaluating barriers to CCS concluded in a report released last year that the chief obstacle for CCS was regulatory uncertainty, since most of our environmental laws do not contemplate such a technology.  The task force recommended that EPA implement regulatory changes such as this hazardous waste clarification. 

But the biggest barrier remains -- without comprehensive climate legislation and a price on carbon, there is no stable framework to encourage investment.  And this barrier is taking its toll.  This uncertainty is why AEP recently shelved plans to build a $668 million CCS retrofit on its Mountaineer coal-fired electric plant in West Virginia.

Although the outlook for CCS projects within the U.S. is thus uncertain, the United Nations' support of the technology could prompt some CCS projects in developing nations.  E&E reports today that a decision to allow CCS projects to be eligible for credits under the Clean Development Mechanism may soon be forthcoming, if technical issues such as monitoring and verifying reductions, and environmental safety and insurance coverage can be resolved.  

Other international organizations are also jumping on the CCS bandwagon.  A recent report by the International Energy Agency's Greenhouse Gas R&D Program touts the potential benefits of combining CCS with biomass facilities, particularly in Asia and Latin America.  The IEA theorizes that because the plant life used to make biomass fuels absorbs CO₂ from the atmosphere, subsequent storage of the CO₂ released from highly efficient biomass processes could actually reduce global atmospheric concentrations of carbon.  It's like how celery has negative calories.

The report asserts that we technically have the potential to annually remove from the atmosphere up to 10 gigatons of CO₂ -- or about 1/3 of annual global emissions -- through the use of biomass integrated gasification combined cycle plants and CCS.  A more economically-feasible implementation of these nascent technologies would still lead to reductions of 3.5 metric gigatons of CO₂ annually.  Notably, even this "feasible" scenario assumes that CO₂ will be priced at 50 euros ($71) per ton, worldwide.  Even in dreams of what could be, the development of CCS still has to face the obstacle of the price on carbon.

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After the death of Waxman-Markey, and given the current political climate, cap and trade is the Legislation Which Shall Not Be Named. Instead, there is discussion of either a renewable electricity standard (RES) or clean electricity standard (CES), and the talking points for supporters concern energy security and the growth of a clean energy economy, not climate change (also known as the Reality Which Shall Not Be Named). 

Either an RES or an CES would spur use of alternatives to fossil fuels in electricity generation and would lead to decreases in CO₂ emissions. However, as a report issued yesterday by the Congressional Budget Office highlighted, neither an RES nor a CES could reduce carbon emissions in as cost-effective a manner as could a cap and trade system. Moreover, a cap and trade program would ensure a certain level of GHG reductions, while the GHG impact of any particular RES or CES program would be uncertain.

I still don't understand how a market-based regulatory approach that originally had to be sold to skeptical environmentalists because it was seen as a "license to pollute" has become the poster child for government overreaching. 

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The fight about guidance and rules is in the news again. Yesterday, EPA finalized its guidance on Clean Water Act permitting with respect to mountaintop mining. As most of our readers know, EPA issued Interim Guidance in April 2010. In January 2011, in National Mining Association v. Jackson, Judge Reggie Walton, while denying plaintiff’s preliminary injunction, signaled that he thought that EPA’s Interim Guidance probably was a legislative rule that should have gone through notice and comment rule-making.

Judge Walton’s decision did not deter EPA, which finalized the guidance without significant changes. As the Legal Planet blog – a supporter of the guidance – noted, “the only differences between the interim guidance and this final one are cosmetic.” What are the nature of those cosmetic changes? They emphasize the flexible, non-binding nature of the guidance, hoping to fare better in the next round of judicial review than the agency did in defending the Interim Guidance. 

EPA reiterates that this guidance is guidance and not a rule. The CWA provisions and supporting regulations described in this document contain the legally and practically binding requirements. This guidance does not substitute for those provisions or regulations and is not itself a regulation. It does not impose legally or practically binding requirements on EPA, the Corps, or the regulated community, and may not apply to a particular situation depending on the circumstances. Any decisions regarding a particular permit will be based on the facts relevant to that permit and will be evaluated in accordance with the applicable statutes, regulations, and case law. Interested persons are always free to raise questions regarding the recommendations in this guidance in a particular situation. EPA will consider whether or not the recommendations or interpretations in this guidance are appropriate in each situation based on the statutes, regulations, and case law. The use of language such as “recommend,” “may,” “should,” and “can” is intended to describe agency policies and recommendations, while the use of mandatory terminology such as “must” and “required” refers to existing requirements under the CWA, its implementing regulations, and relevant case law.

The real trick about guidance is that it is not what EPA says in the document that matters; it is how EPA actually utilizes the guidance in practice. It is in some respects similar to the distinction between a facial constitutional challenge to a regulation and an “as applied” challenge. If EPA actually implements this document as a guide to its decision-making, then it is guidance. If EPA line staff implement it by rote, then it’s a rule. In other words, if it walks like a duck, it’s a duck, even if it does not talk like one.

Time will tell whether the courts believe EPA’s protestations that this really is just guidance. Time will also tell whether EPA implements this as guidance or implements it as a rule.

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Last week, in Center for Biological Diversity v. EPA, Judge Henry Kennedy reminded us that, in thinking about whether the existing Clean Air Act requires EPA to address climate change, the actual words of the statute matter. The scope of the climate problem does not obviate the need to parse individual provisions of the CAA and Massachusetts v. EPA did not resolve all issues. 

CBD petitioned EPA to regulate GHG emissions from nonroad engines and vehicles, under § 213 of the CAA, and from aircraft engines, under § 231 of the CAA. EPA did issue advanced notices of proposed rulemakings in response to the petitions, but CBD sued, arguing that EPA has not gone far enough. 

The court rejected CBD’s claims regarding nonroad engines, because § 213 provides only that

If the Administrator determines that any emissions not referred to in [a prior paragraph] from new nonroad engines or vehicles significantly contribute to air pollution which may reasonably be anticipated to endanger public health or welfare, the Administrator may promulgate (and from time to time revise) such regulations as the Administrator deems appropriate . . . .

To the court, the “if” and “may” language, combined with the overall structure of § 213, mandates a conclusion that EPA does not have an obligation to make an endangerment finding with regard to nonroad engines. Even so, as the court noted, EPA does have an obligation to respond fully to CBD’s petition, and EPA’s ultimate action on the petition will itself be subject to judicial review.

With respect to the petition under § 231 regarding airplane engines, the different language of that section compelled a different conclusion.  

The Administrator shall, from time to time, issue proposed emission standards applicable to the emission of any air pollutant from any class or classes of aircraft engines which in his judgment causes, or contributes to, air pollution which may reasonably be anticipated to endanger public health or welfare.

Again looking at the specific language of the statute, including the use of the mandatory “shall,” the court concluded that EPA cannot refuse to make endangerment findings.

The simple lesson from the case? The specific language of the statute matters. The bigger lesson? Unless Congress acts, the courts are going to be requiring EPA to take action with respect to GHG emissions under existing CAA authority. 

We’re thus left in the same bind we’ve been in since Waxman-Markey collapsed. EPA does not have the authority that it and the environmental community want and it cannot regulate GHG efficiently. At the same time, EPA does have authority that conservatives wish it did not have. True climate skeptics may never be convinced, but it still seems that a deal should be possible among environmentalists and conservatives who acknowledge the reality of climate change.

Hope springs eternal.

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Yesterday, EPA finalized the Cross-State Air Pollution Rule, or CSAPR, which was the Transport Rule, which had been the Clean Air Interstate Rule. (EPA must have decided that CSAPR results in a more mellifluous acronym.)

The rule is almost too big to describe, except in its broadest terms. EPA has provided a summary of costs and benefits, but even EPA’s summary does not really explain how the rule will be implemented.

The rough numbers at least give some idea of the scope of the rule and the problem it is addressing. EPA estimates that the rule will reduce SO₂ emissions by 73% from 2005 levels starting in 2012 and will reduce NO_x emissions by 54%. These reductions will eliminate more than 10,000 premature deaths annually, according to EPA’s analysis. Total monetized economic benefits are up to $280 billion annually. EPA estimates annual compliance costs to be only $800 million, though that does not include $1.6 billion in annual costs already being incurred to comply with CAIR. Nonetheless, EPA is going to be able to show any court reviewing this rule an extremely favorable cost-benefit analysis.

I’d be shocked if this rule doesn’t survive judicial review, assuming it is challenged. The D.C. Circuit opinion striking down CAIR pretty much told EPA what to do – it has to implement a rule that ensures that each state meets its own emissions limit. EPA has done that, allowing basically free trading within states, and allowing interstate trading – so long as each state lives within its cap. Given the requirements of the Clean Air Act, it’s hard to see how EPA isn’t required – let alone permitted – to issue at least something very like this rule.

The irony is that the Republicans in Congress who oppose all of EPA’s rules – Representative Mike Simpson (R. ID.) called EPA the “scariest agency in the federal government” – had it in their power to allow EPA to regulate in a more cost-effective manner. Three pollutant legislation that would have allowed interstate trading was on the table in 2009 and 2010. It even had some Republican support. However, now the approach seems to be that it’s better to oppose all environmental legislation, even if that includes legislation that would be unambiguously better than what’s on the books today. 

Oh, well.

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For those of you who left early for the holiday weekend (You know who you are – and more power to you!), I thought I would note that EPA issued a final rule on Friday, deferring application of the Tailoring rule to biomass facilities for three years. The deferral responds to a petition from the National Alliance of Forest Owners. NAFO asserted that

there is near-universal recognition that CO2 emitted from combustion of fuels derived from biomass should be excluded from GHG regulations because production and combustion of such fuels do not increase atmospheric CO2 levels. 

Of course, EPA received comment suggesting that this may not uniformly be the case and that “the use of certain types of biomass as fuel could increase atmospheric CO₂ levels.” EPA’s bottom line? 

The net atmospheric impact of biogenic CO₂ emissions is complex enough that further consideration of this important issue is warranted.

EPA did not specifically mention what is known as the Manomet Report, which served as the basis for the decision by Massachusetts not to grant renewable energy credits, or RECs, for many biomass projects. Nonetheless, it remains notable that EPA made the deferral decision in order to avoid putting a major roadblock in the industry’s way, while Massachusetts refuses to call most biomass renewable – thus putting a major roadblock in the industry’s way. 

I understand federalism (I think). I don’t see RGGI and other state or regional GHG regulatory efforts as inconsistent with federal policy and they can provide some useful lessons. However, I don’t see any federalism advantage here. These policies are simply working at cross-purposes in an area where uniformity should certainly be the goal.

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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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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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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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When President Obama issued Executive Order 13,563, on Improving Regulation and Regulatory Review, it was not obvious whether the Order was simply an attempt to protect the President’s right flank or whether the agencies would respond substantively. Yesterday, EPA released its Preliminary Plan for Periodic Retrospective Reviews of Existing Regulations. Initial review of the Plan suggests that EPA has taken the task seriously and has made some constructive suggestions. To me, however, they missed the elephant in the room and therefore cannot be given better than a B grade at this point.

There is a lot of good stuff in the plan, which is certainly too long to summarize here. The highlights from where I sit include the following:

• Increased use of electronic reporting. This falls in the category of “now why didn’t I think of that?” Telling point? EPA has put use of e-manifests under RCRA in the long-term action, rather than early action, category, while acknowledging that this was proposed in 2004. How hard is some of this stuff?

• Improved transparency, i.e., increased public disclosure of compliance and other regulatory information. Cynical translation? If we can provide more information to the public, citizen suits will be easier and we can do less government enforcement. Still, hard to argue with.

• Coordination of emission reduction regulations across multiple pollutants. Interestingly, EPA has put this in the early action category. Although EPA identified the pulp and paper industry specifically, this has to be thought of mainly as a longer-term project. Well worth it, however long it takes.

• Encouraging innovative technology. Who could be against it? This is probably the most important issue, precisely because it is here that the Plan is the weakest. I think that EPA has largely missed the point, because it has not correctly defined the problem. The single action EPA could take that would have the most impact on encouraging innovative technology would be to get out of the command and control business once and for all. The highest priority of this regulatory review should be for EPA to identify areas where it can move from command and control regulation to performance-based standards. A fruitful initial target? CERCLA and the NCP. EPA does not have to privatize Superfund cleanups as several states have done; that would require legislation. Even without privatization, it could simply set standards for what constitutes a significant risk and require PRPs to eliminate such risks. I promise, innovation will follow. Not only that, but EPA could eliminate a significant percentage of its existing CERCLA staff, or redirect that staff to more productive uses. 

EPA is taking comment on the proposed plan, at least through June 27, 2011. Get your comments in here. I am the eternal optimist, though the 7-year delay in implementing an e-manifest program should probably give me some pause as to how quickly EPA can really reform.

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Late last week, the Massachusetts Department of Energy Resources (DOER) filed with the Joint Committee on Telecommunications, Utilities, and Energy of the state legislature proposed final amendments to the Renewable Portfolio Standard (RPS) regulations governing the eligibility of woody biomass facilities and fuels to qualify to earn renewable energy credits (RECs).  DOER originally issued a draft of these regulations in September 2010, and made revisions after receiving written comments and holding 2 public hearings.  In addition to the revised regulations, DOER issued a regulatory package containing two sets of guidance in the forms of Excel spreadsheets, the Guideline for the Calculation of Overall Efficiency and Lifecycle GHG Analysis and the Guideline for the Determination of Forest Derived Eligible Biomass Woody Fuel. The Joint Committee has 30 days to review the rules and submit its comments to DOER for additional review. DOER hopes to promulgate the final rules early this summer.

At a time when the EPA appears to be favoring biomass a fuel (with actions like exempting it from the tailoring rule for 3 years), Massachusetts is making it very difficult to qualify “electricity only” biomass as renewable and eligible for RECs, as the rules strongly favor combined heat and power uses.   While the proposed changes to the regulation do not ban the development of biomass facilities in Massachusetts, they do set a very high bar to qualify for renewable energy credits under the RPS – so high that many believe that large scale biomass units may not be viable absent significant technological advances. Under the regulation, the term Eligible Biomass Fuel will include things like woody pellets, agricultural waste and by-products, food or vegetative material, algae and biogases, but officially excludes Construction and Demolition Waste.

Eligible Biomass Woody Fuel, the largest subset of eligible fuels, is now limited to forest-derived residues from timber operations, limited thinnings and invasive growth; forest salvage from storms or pest infestations; non-forest derived residues from lumber mills and woodworking shops, trees removed in converting forests to agricultural, residential or commercial uses (so long as all other permits have been obtained), yard wastes, and maintenance of parks and rights of way. The final category of Eligible Biomass Woody Fuel is “dedicated energy crops” which includes wood (but not cellulosic fuel) that has been purposefully grown to produce fuel, but contains a remarkably broad restriction that the trees may not have been grown in a place that “sequestered significant amounts of carbon” such as a forest, or on land that has the potential to support crops grown for human consumption as food. 

Biomass units are required to provide to DOER in their applications a lifecycle analysis of greenhouse gas emissions (GHG) and demonstrate emission reductions of at least 50% over 20 years compared to a new, combined-cycle natural gas generator using the most efficient commercially available technology. DOER will provide a standard analytical methodology in another set of guidance to accompany the Statement of Qualification Application. Under both the proposed regulations and Guidance #1 on GHG lifecycle analysis, facilities must account for direct emissions from production of the fuel stock and delivery to the biomass facility, as well as indirect emissions from land use changes, and temporal changes in forest carbon sequestration and emissions resulting from biomass harvests, regrowth, and avoided decomposition.

One new provision added since the September draft requires that the amount of forest-derived biomass material eligible to be removed be limited based on soil types and as set forth in Guidance #2 on Forest-Derived Fuel.  The regulation and guidance set a cap by percentage of weight of the total amount of material harvested from the site, ranging from zero (for very poor quality soils) to 40% (for highly productive soils) – the rest of the biomass harvested must be left in the forest for soil nutrient retention. To effectuate this requirement, foresters will have to develop a soil map for each harvest area and determine the maximum eligible biomass tonnage that can be removed. The September draft had set this cap at 15% across the board.

Both the September draft and this week’s proposed final rules require that biomass units meet a minimum overall efficiency rate of 40%, determined based on the biomass input heat content of the fuel, and accounting for GHG emissions associated with fuel refining and processing.  If operating at that level of efficiency, the unit will receive one-half REC for each MWh of generation. Units operating at an overall efficiency of 60% and above would receive a whole REC credit for each MWh they generate, and units between 40 and 60% would receive a proportional fraction of a REC.

Under the revised regulations, electricity generated by a unit that is used on-site (“behind-the-meter”) is included in the calculations of the unit’s overall efficiency. “Merchantable bio-products” (chemicals like additives and lubricants) created from the woody fuels at an on-site bio-refinery will also be netted out in calculating overall efficiency.  Finally, and perhaps most significantly, productive use of the large quantities of heat generated by the biomass facilities, so long as it falls within the defined term “useful thermal energy” under the regulation, will also be included in the overall efficiency calculation.  However, the revised regulation clarifies that any thermal energy used to dry or refine green woody biomass for use as a fuel will not count towards overall efficiency.  

Biomass generating units that have already secured their Statement of Qualifications will also have to demonstrate compliance with the new regulation. They must prove use of Eligible Biomass Woody Fuel by 2013, and comply with all provisions, including the requirement for overall efficiency, by 2015.

 

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E&E Daily reported today that Senate Republicans are preparing legislation to combine EPA and the Department of Energy. The list of Senators identified as supporting the proposal is a virtual who’s who of conservatives, including Jim DeMint, a favorite of the Tea Party. Accordingly to Richard Burr (R. N.C.), the measure would reduce waste by eliminating duplicative programs in EPA and DOE.

Why is this even a story? Perhaps because Democratic Governor Deval Patrick did the same thing in Massachusetts in 2007, forming what has been considered a very successful Executive Office of Energy and Environment. Perhaps because newly elected Democratic Governor Dannell Malloy recently did the same thing, creating the Department of Energy and Environmental Protection in Connecticut (and naming my friend and law school classmate Dan Esty to be first Commissioner of the combined agency).

So, is this a progressive idea to ensure that energy development, which is a very big part of our economy, is considered together with environmental protection, or is this a regressive idea, intended to eliminate spending? 

Perhaps, just perhaps, it’s simply a good idea.

Politics would determine whether the combined agency leadership would pursue an aggressive environmental protection and clean energy agenda or whether it would instead avoid new regulatory programs in order to facilitate an aggressive program of developing traditional energy resources. Either way, it makes sense to house these two functions under one roof.

For those of us who follow politics as the blood sport it’s become, it will be interesting to see if this idea gets any traction and, if so, where Congressional Democrats line up. Are they going to try to tar this as a simple-minded conservative idea? If so, will the President’s friend Governor Patrick be caught in a Mitt Romney-like dance, trying to argue that it was a good idea for Massachusetts but would not be a good idea nationally? 

Serious kudos to the first liberal Democrat who unambiguously supports this proposal.

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As I have previously mentioned, EPA is considering including criteria related to vapor intrusion (VI) in the hazard ranking system scoring used to determine which sites should be added to the National Priorities List. As I noted when this first became news, it’s pretty much an obvious step for EPA to take. These are precisely the types of sites on which EPA should be focusing. At a certain level, I’d be happy – relatively – if EPA limited CERCLA to sites imposing threats to public water supplies and sites posing VI problems, and jettisoned everything else. 

The National Association of Manufacturers and the Aerospace Industries Association have now sent EPA a letter opposing inclusion of VI as a criterion for HRS scoring. The basis for their opposition is curious. It’s not that VI sites aren’t a problem. It’s that VI sites are a problem – but that CERCLA is not the right vehicle to address VI, because CERCLA cleanups take too long. 

NAM and AIA are right, of course. CERCLA decisions take forever. While NAM and AIA don’t point out the irony, it’s got to be uncomfortable for EPA that the principal federal program to clean up contaminated properties is not well-suited to address what is arguably the most significant health risk from the existence of contaminated properties.

Why should this be so? Could it be because CERCLA is the last bastion of almost totally pure command and control regulation? Might CERCLA remedy decisions take less time if EPA did not have to select remedies, but instead only identified appropriate cleanup standards and let PRPs select the remedy? Might cleanups get implemented faster if the PRPs’ obligation was simply to meet cleanup standards and provide sufficient information to EPA or 3^rd party auditors to demonstrate that the cleanup standards have in fact been met? 

Oh, and, by the way, in these troubled budget times, might EPA be able to oversee the CERCLA program with about ¼ of its current staff if it set cleanup standards and got out of the way, rather than micromanaging every element of every cleanup?

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For those of you who thought that the sky was about to fall in EPA as part of the budget battle, I’m able to report that EPA survived sufficiently intact to continue to issue new rules. Today, EPA proposed a draft revised construction general permit, or CGP, for stormwater discharges from construction sites disturbing at least one acre (or less, if the project is part of a common development plan that is greater than one acre). The revised CGP would replace the current CGP which is set to expire on June 30. EPA has proposed to extend the current CGP through January 31, 2012, in order to give it time to promulgate the new CGP in final form. 

The revised CGP does make some changes. The most notable changes, summarized in EPA's Q&A on the proposal, are intended to incorporate into the CGP the provisions of EPA’s February 2010 effluent limitations guidelines rule, known as the C&D rule. These changes include new requirements concerning:

Sediment and erosion controls

Soil stabilization

Pollution prevention

Inspections

Stormwater pollution prevention plans (SWPPPs)

Buffer zones

The buffer zone requirement was included in the C&D rule, but EPA is now proposing to add significant flesh to the bones. Specifically, the rule would require a minimum fifty-foot buffer between the construction site and any waters of the United States which are located either on or immediately adjacent to the site. The rule would provide flexibility to allow the permittee to substitute additional sediment and erosion controls for some or all of the buffer, so long as the controls “achieve the equivalent sediment load reduction as an undisturbed naturally vegetated, 50-foot buffer.”

For my Massachusetts readers, the 50-foot buffer will seem very similar to the buffer zone already required under the MA Wetlands Protection Act regulations. The jurisdictional scope of the CGP will not be identical to Wetlands Act jurisdiction, but they should be fairly similar.

Comments on the proposed rule will be due 60 days following Federal Register publication.

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Thursday afternoon, EPA and the Tennessee Valley Authority announced one of the largest pollution reduction consent decrees in US history – resulting in between $3 to $5 billion of investment in air pollution controls, and retirement of almost one-third of TVA’s coal-fired generating units within the next few years.  Over the next decade, it will reduce TVA's total emissions of nitrogen oxides by 69% and sulfur dioxide by 67%.  Although the agreement provides a timely victory for EPA amid the current backlash against it in Congress, the settlement actually relates to a New Source Review (NSR) suit commenced by EPA during the Clinton Administration in 1999.  The consent decree resolves all alleged past preconstruction violations, as well as alleged violations of the New Source Performance Standards and Title V regulations.

The TVA operates 59 coal-fired boilers at 11 plants in Alabama, Kentucky and Tennessee, and supplies power to around 9 million people in its service area that spans most of the southeastern US. The settlement involves all 11 plants, and includes an obligation to address 92% of TVA’s coal-fired system between 2011 and 2018 by either installing state of the art pollution controls like SCRs and FGD or repowering with renewable biomass. Another 18 coal-fired units, about 16% of TVA’s coal-fired generating system, totaling 2,700 MW of capacity, will be permanently retired – the largest retirement commitment seen under EPA’s Coal-Fired Power Plan initiative, which has settled 22 such NSR cases so far.  However, Greenwire reports that, even before today's announcement, TVA was already planning to retire about 1,000 MW of coal-fired capacity.

I found the option to repower the units with renewable biomass to be particularly interesting, especially given EPA’s current proposal to continue studying biomass emissions for three years before requiring Clean Air Act permits for greenhouse gas emissions from biomass sources.  In the agreement, “Renewable Biomass” is defined very broadly, with no time-frames or extensive restrictions. Instead, it includes, in part, organic matter that comes from forests or grasslands, as well as residues and byproducts from agriculture, forestry and paper industry. Under the agreement, the repowered units would be deemed “new” emission units, themselves subject to New Source Review and other permitting requirements.

The settlement also includes $10 million in penalties -- $8 million paid to EPA, $1 million paid to Tennessee and $500,000 each paid to Alabama and Kentucky -- as well as $350 million in environmental mitigation projects, including $240 million to be spent on TVA-run energy efficiency projects and $60 million to be divided among Alabama, Kentucky, North Carolina and Tennessee for the states to implement projects of their choosing, so long as they're within the categories specified in the consent decree.

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I’m beginning to feel like a broken record, but the drumbeat of the anti-guidance crowd is not letting up. Earlier this week, the Waters Advocacy Coalition, which is a group of farm and industry trade groups, sent a letter to EPA and the Army Corps of Engineers, requesting that EPA and the Corps withdraw their plan to issue further guidance on the interpretation of “navigable waters” post-Rapanos. It’s not surprising that this group would oppose the guidance. What is most interesting – and persuasive – about the letter, though, is this quote from the draft guidance itself:

the agencies expect that the number of waters found to be subject to the CWA jurisdiction will increase significantly compared to practices under the 2003 SWANCC guidance and the 2008 Rapanos guidance.

To me, it would seem a defining characteristic of guidance that it not alter the jurisdictional scope of laws and regulations. That’s what laws and regulations are for. Guidance, on the other hand, to the extent is does have a role, is to guide those affected by regulation, to assist them in their understanding of legal requirements – not to change the scope of those requirements. I think that, by inclusion of this sentence in the draft guidance, EPA and the Corps have made the strongest possible argument against issuing the guidance. 

Perhaps even more notable was the resolution passed last week by the Environmental Council of the States objecting to EPA’s use of interim guidance and rules. Specifically, the resolution states that

EPA should minimize the use of interim guidance, interim rules, draft policy and reinterpretation policy and eliminate the practice of directing its regional or national program managers to require compliance by states with the same in implementation of delegated programs.

EPA should not use its objection authority when based entirely or in part on interim guidance, interim rules, draft policy or reinterpretation policy.

ECOS, of course, is generally on EPA’s side of the fence. The resolution is powerful evidence that EPA’s use of guidance is not simply to facilitate understanding of applicable laws and regulations, but as a substitute for the regulatory process itself – as a way to impose new binding rules.

Taken together, the ECOS resolution and the text of the proposed revision to the post-Rapanos guidance make a compelling case that EPA’s use of guidance has strayed far from true guidance and is in fact often an end-run around the regulatory process.

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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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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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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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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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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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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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Last month, I noted that, in the absence of comprehensive climate legislation, U.S. carbon policy would be a mish-mash of several elements – including more NSR enforcement. In fact, Phillip Brooks, director of EPA’s Air Enforcement Division, had just told an ALI/ABA forum that EPA’s NSR enforcement initiative is alive and well and he predicted more closures of old coal plants as a result of EPA’s NSR enforcement. Earlier this month, proving that Brooks meant what he said, the United States sued Ameren Corporation, alleging NSR violations at Ameren’s Rush Island facility in Festus, Missouri. 

Apparently, I am not the only person who has noticed the connection between NSR enforcement and efforts to make life generally more difficult for coal plants. (Perhaps Mr. Brooks should not have been so explicit in his ALI/ABA remarks.) This week, Missouri Republican Senator Roy Blunt wrote to Lisa Jackson, criticizing the Ameren enforcement action and describing it as “another backdoor method used by the EPA to broadly penalize the use of coal in the United States.”

Blunt also criticized the “tsunami” of regulations by EPA that will increase the cost of coal-fired electricity generation. We had previously noted the Credit Suisse report which predicted the closure of more than 50 gigawatts of coal-fired capacity. Blunt referred to a study by the North Electric Reliability Corporation which made a similar prediction.

As my readers know, I dislike the NSR program and the enforcement initiative. I do think that many of these projects, often 15, 20, or 25  or more years ago, truly were thought routine, even if EPA may be able to persuade a court that they were not “Routine Maintenance” within the meaning of the regulations. The NSR program is certainly not a cost-effective way to regulate. However, NSR is part of the statute, EPA believes in it, and the case law is, from EPA’s perspective, at worst ambiguous and at best favorable. I expect that EPA would be pursuing many of these cases, even if climate change were not an issue and CO₂ not considered a problem. 

Is EPA sad that its NSR enforcement has the collateral impact of making coal less economic so that small coal-fired plants retire early, thus reducing GHG emissions? I doubt it. Does the climate change issue increase EPA’s enthusiasm? Perhaps so. The question is whether this added motivation is relevant. EPA’s intent may not be relevant to the courts, but it certainly looks as though it is relevant to Congress.

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In Cool Hand Luke, Paul Newman is sentenced to two years on a chain gang for cutting the heads off of municipal parking meters.  The Mingo Logan Coal Company wants to cut the top off of 3.5 square miles of West Virginia mountaintop. This week, EPA gave the company's Spruce No. 1 Mine proposal the death penalty, using its authority under § 404(c) of the Clean Water Act to veto a permit issued by the Army Corps of Engineers in 2007. As EPA noted in its press release, this is only the 13^th time in 38 years that EPA has utilized § 404(c) to veto a permit.

EPA’s decision resulted in howls of protest, not just from the mine’s owner, but also from the two Senators from West Virginia. Joe Manchin, who famously campaigned with an advertisement in which he shot a purported copy of cap-and-trade legislation, described EPA’s decision as a “shocking display of overreach.” 

EPA’s characterization was slightly different. The agency summarized the mine’s impacts as follows:

Burying more than 35,000 feet (more than 6 miles) of high-quality streams under mining waste, which will eliminate all fish, invertebrates, salamanders, and other wildlife that live in them;

Polluting downstream waters as a result of burying these streams, which will lead to unhealthy levels of salinity and toxic levels of selenium;

Causing downstream watershed degradation that will kill aquatic wildlife, impact birdlife, reduce habitat value, and increase susceptibility to toxic algal blooms;

Inadequately mitigating for the mine’s environmental impacts to high-quality streams , by using mining ditches, for example, to offset the functions provided by these natural streams; and

Failure to consider cumulative watershed degradation resulting from past, present, and future mining in the area.

While I’m sure that the owner will dispute some of EPA’s characterization, my money’s on EPA, overreach or not. The impacts of mountaintop mining are substantial and I don’t see a court rejecting EPA’s conclusion that they are, in this case, “unacceptable.”

To bring the situation back to Cool Hand Luke, what EPA and the mining companies have here is a failure to communicate, and EPA is the one in the Strother Martin role, wielding a very painful veto hammer.

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Justice Brandeis famously suggested that states may “serve as a laboratory” for the rest of the country. If this is so, I think it is fair to say that U.S. EPA has not accepted the results of the biomass experiment conducted in Massachusetts. Last year, following receipt of a study regarding the GHG emission implications of various types of biomass fuels, Massachusetts decided to severely restrict the circumstances in which biomass would be considered a renewable fuel.

Earlier this week, EPA decided not to go along with the restrictive approach taken by Massachusetts, and granted a petition to stay application of GHG permitting to biomass facilities, while EPA further studies the issue. Specifically, EPA promised to amend the tailoring rule to exempt biomass facilities for three years. In a letter EPA Administrator Lisa Jackson sent to Senator Stabenow as part of the announcement, Jackson stated that:

biomass can be part of a national strategy to reduce dependence on fossil fuels, and efforts are underway to foster the expansion of renewable resources and promote biomass as ways of addressing climate change and enhancing forest management.

It’s one thing for a state to differ from the federal government or other states on matters of policy. However, my guess is that the federal EPA and the great Commonwealth of Massachusetts have pretty much the same policy goal – reduction of greenhouse gas emissions. This is really a question of science. Does use of biomass help reduce GHG emissions? Shouldn’t the answer be the same everywhere?

I’m not a scientist and cannot comment on the reliability of the Massachusetts biomass study. (And I should disclose that our firm has represented the proponent of one of the biomass plants in Massachusetts.) However, it does seem to me that this is one area in which a uniform national policy is the right approach. Let’s give EPA the three years that it apparently needs to sort out the issue, and then have one policy applicable nationwide.

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With everyone in agreement that cap-and-trade legislation is dead in Congress for the near term, attention is now turning to whether Congress might be able to pass some kind of renewable or clean energy standard. In fact, even Thomas Donahue, President of the U.S. Chamber of Commerce, sworn foe of cap-and-trade legislation, is saying that the Chamber could support some kind of climate change legislation – presumably a CES including nuclear power – as long as the legislation precludes EPA regulation of GHG under existing authority. 

For those who are taking the half a loaf approach to climate legislation, I recommend this post by Rob Stavins at Harvard and Dick Schmalensee at MIT, which compares cap-and-trade legislation with CES legislation. The piece is a remarkably cogent short analysis of the issue, so I hate to excerpt something which can be read in a few minutes. Nonetheless, for the lazy among my readers, the bottom line is that:

Carbon cap-and-trade has been killed in the Senate, presumably because of its costs. Renewable electricity standards or clean energy standards would accomplish considerably less and would impose much higher costs per ton of emissions reduction than cap-and-trade would. This does not sound like a step forward.

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Earlier this week, the United States brought another NSR/PSD enforcement action, this time concerning the Homer City Plant, in Pennsylvania. The suit itself isn’t big news, though it’s helpful to have periodical reminders that the NSR enforcement initiative remains active at EPA and DOJ; it is a significant part of the government’s arsenal against traditional pollutants.

It’s also important to remember that, in the absence of comprehensive climate legislation, the NSR enforcement initiative has become part of the government’s climate strategy. The plant spokesman stated that the plant is “positioned quite well to succeed in whatever environment we might be looking at in the future." However, Randy Francisco, Pennsylvania representative for the Sierra Club's "Beyond Coal" campaign (and doesn’t the name say it all), had a different view: 

I don't think it's worth it to put the money into it to clean it up. This is one of the dirtiest plants in the country, and it really just needs to be put to bed.

Why do I describe this as a fine mess and how did we get here? To mix my comedic metaphors, we have met the enemy and he is us. It’s a mess, because the PSD/NSR program is a clunky, awkward, and vague program and, whatever the merits of the specific legal questions in the various suits, EPA can’t really deny that its interpretation of the program has not been a model of consistency. It’s a mess because it’s difficult to achieve programmatic results through enforcement. It’s a mess because using PSD enforcement to make coal more expensive so that coal plants will shut down and stop emitting GHGs is hardly an efficient way to regulate GHGs. 

Why are we the enemy? Simple. Because the environment would be cleaner and the economy stronger with comprehensive climate legislation combined with significant changes to the NSR/PSD program and we haven’t figured out a way to get there.

The result? No one’s happy (except, perhaps, some busy environmental lawyers and some politicians who can find opportunities for grandstanding). EPA and environmentalists aren’t happy, because we don’t have comprehensive climate legislation. Large emitters aren’t happy, because they are left with the collateral damage of PSD/NSR, a program that should be allowed to die a quiet death.

For those of us who live in the trenches of these battles, at least one detail in the complaint is worth noting.  The United States brought suit, not only against the current owner and operator of the Homer City plant, but also against New York State Electric and Gas Corporation and Pennsylvania Electric Co., both of which owned the plant prior to 1998. Why the emphasis? Because it’s more than six years ago and therefore outside the statute of limitations for the government’s penalty claims. Indeed, the government seeks penalties only from the current owner/operators. Nonetheless, it seeks injunctive relief against NYSEG and PENELEC, even though they’ve had no connection to the plant in more than 12 years. The complaint states that:

They can be ordered to fund and implement contracts with third-party vendors who design, fabricate, and install the air pollution control equipment at issue. They can also take various actions to mitigate their past illegal pollution such as purchasing air pollution credits known as “allowances.”

A fine mess we’ve gotten ourselves into.

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It may be an apocryphal story, but my understanding as to why so many small municipal landfills in New Hampshire ended up on the NPL is that some bright light in the Granite State thought that Superfund was a public works program and that the fund would pay for the landfill closures. The result? Small towns became PRPs, responsible for Superfund response costs which, in some cases, approximated their annual municipal budget.

I recall going to a public meeting concerning EPA’s preferred alternative at one site. At most sites, the public pleads for EPA to require more cleanup – because someone else will be paying, of course. Here, the public was begging for less cleanup, because they thought that they had better ways to spend the money. Even if the money had to be devoted to public health and safety, they were confident that spending money on traffic lights and police and fire departments would yield a greater return.

I was reminded of this episode by EPA’s announcement last week of the release of guidance recommending the removal of PCB-containing light ballasts from schools. According to a report in the Wall Street Journal, New York City estimates that the cost to remove the ballasts will be $1 billion. Anyone think that NYC might have a better use for $1 billion in school spending?

There are really two points to this story. The first is that legislation in response to panics is not a good idea. The notion that there are special legislative provisions for PCBs, unlike the myriad of other toxic chemicals which are handled under provisions of general application is, to use a technical term, nuts. It has led to a separate PCB program within EPA which, in the bureaucratic nature of things, has to justify its existence, leading to costly recommendations such as those made last week.

Second, what if it really would be better to spend money on fire trucks, or traffic lights, or anti-drug programs in schools? To be fair to EPA, this is not a question the agency is tasked with answering. However, shouldn’t somebody be asking and answering such questions before regulations with such potential consequences are promulgated? 

This is not about cost-benefit analysis, which simply asks whether the benefit of the requirement is worth its costs. It’s not even cost-effectiveness analysis, at least as EPA normally thinks about it. Such analysis would normally only try to determine the most cost-effective way to eliminate PCBs. I’m after something deeper. Even after we’ve determined the most cost-effective way to eliminate PCBs from light ballasts, I want to know how much that would cost, how much risk reduction it would achieve, and whether more risk reduction could be obtained by spending the money elsewhere. 

I can dream, can’t I?

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Today, EPA announced settlements of litigation with states and environmental groups which will require EPA to promulgate New Source Performance Standards for greenhouse gas emissions from electric generating units and refineries. EPA will thus give those of us who practice in this area an opportunity to decide which program we find more cumbersome and ill-suited to regulate GHGs, the PSD/NSR program or the NSPS program.

As with the PSD/NSR regulations, I remain sympathetic to EPA in that, once you take Massachusetts v. EPA as a given, and if you accept the logic of the Endangerment Finding, then it is difficult to see how EPA can avoid these regulations. Moreover, EPA has described its expected set of performance standards as “modest” – though modesty, of course, is in the eyes of the beholder. 

Nonetheless, it’s not surprising that opponents of GHG regulation see this as another stick in the eye. Here is what Senator Murkowski’s spokesman, Robert Dillon, had to say:

The administration used the threat of EPA regulations as a cudgel to force Congress to pass cap and trade. It was a strategy that failed.  You've opened Pandora's box now. You've let the agency loose with these new regulations when they're interpreting the law.

Of course, it’s EPA’s job to interpret the law. That doesn’t make me happy about it.

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It says something about where our politics are today when Republican Senator Lindsey Graham has to ask that question. Of course, there’s reason to wonder what the answer is. It was certainly not intentional irony when, shortly after this story appeared about Senator Graham, Senator Rockefeller announced that he has given up on legislation that would delay implementation of EPA GHG rules because the bill has lost Republican support. The reason? It’s not that the Republicans are opposed to the delay; it’s just that it’s more important to the Republicans that they be able to make political hay out of the issue when they are in the majority next term. Then there’s Texas Representative Joe Barton, who has made it his mission to save the incandescent light bulb. I wonder what he would say if he had a horse shoe factory in his district?

Political prognostication is neither my strong point nor the purpose of this blog. I note only that, while the Democrats are in retreat now, it was only two years ago that many were predicting a lengthy time in the minority for the Republicans. Senator Graham seems to be one of the few taking the long view:

I'm concerned that if the Republican Party doesn't embrace the idea [that] it's OK to clean up the air, we're gonna lose young people forever, Graham told ClimateWire. Whether you like it or not, young people are environmentally sensitive. I happen to like it.

At a practical level, Senator Graham’s concerns seem focused in the short run on legislation that would enact some kind of clean energy standard, or CES – like an RES, but including nuclear energy and clean coal. In many ways, imposing a CES or RES seems like more of an interference in the market than simply putting a price on carbon, which is what free market economists would say is necessary to internalize an externality. However, with climate legislation dead for the near term, and with a focus on jobs, CES legislation might have some chance of moving forward. 

Will it pass? I’ll leave the prognostication to others.

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As a follow-up to last week’s post, if you want a handy-dandy rundown of what U.S. carbon policy looks like in the absence of comprehensive federal legislation, take a look at the presentation I gave last week to the Harvard Electricity Policy Group, which summarizes federal, regional, and state regulatory efforts – many of which are not explicitly directed at CO₂ – that are likely to have significant impacts on U.S. CO₂ emissions. Thanks to Amy Boyd, who did the lion’s share of the work on this one.

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Bill Hogan at the Kennedy School (shameless plug for alma mater) kindly asked me to speak at a meeting this week of the Harvard Electricity Policy Group. I’ve titled my talk “Carbon Policy When There Is No Carbon Policy.” Several items that came across the wires in the past few days buttress the theory behind my presentation, which is that our current carbon policy really is “A little bit of this, a little bit of that.” 

First, Phillip Brooks, director of EPA’s Air Enforcement Division, told an ALI/ABA forum that EPA’s NSR enforcement initiative is alive and well and that it expects to continue to send out information requests to potential enforcement targets concerning those targets operation and maintenance activities. Brooks predicted more closures of old coal plants as a result of EPA’s NSR enforcement.

Second, a report just released on the economic impact of air emissions supports EPA’s Transport Rule, asserting that each dollar spent on upwind emissions reductions results in $50 to $100 dollars in avoided environmental costs in downwind states. Greenwire subtly noted that the research was funded by Excelon, which owns the largest fleet of nuclear power plants in the nation.

Third, the Ninth Circuit Court of Appeals just affirmed a decision by the San Joaquin Valley Air Pollution Control District to require construction companies to assess the indirect air emissions resulting from construction projects and potentially to reduce such such emissions or pay a mitigation fee. The decision in National Association Of Home Builders v. The San Joaquin Valley Unified Air Pollution Control District is likely to provide additional momentum to state and local efforts to regulate land use decisions as a way to reduce sprawl and, as a result, GHG emissions.

So, what’s our carbon policy today? A little bit of enforcement of existing regulations, a little bit of new federal regulations of traditional pollutants, and a potentially increasing dose of state and local land use regulation.

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Bismarck is supposed to have said that:  "Laws are like sausages, it is better not to see them being made.” EPA apparently disagrees, and has launched a new web site, known as Reg Stat, in order “to increase the transparency of regulatory activity.”

It’s a potentially helpful website. It has some useful data on the types of regulations EPA is pursuing (mostly air during the past five years; what a shock!) and how long it takes to promulgate them (too long; the average regulation takes almost three years to get out the door). I think that the “Regulatory Gateway,” containing information about regulations still in progress, may be the most helpful part of the site. For those not intimately familiar with every step EPA takes, the Regulatory Gateway will be a handy one-stop shopping location to find out where pending rules stand.

Personally, I think I’d rather see sausage being made, but since I do get paid to know what EPA is doing, it’s nice to see EPA trying to make information more available.

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When EPA creates a web page solely addressing one stormwater settlement, you can safely assume that EPA thinks it is important and is trying to send a message. Thus, EPA’s announcement earlier this week of a settlement with Beazer Homes to resolve allegations that Beazer Homes violated federal stormwater requirements at construction sites in 21 – count ‘em, 21 – states should make everyone in the construction industry sit up and take notice.

The settlement requires Beazer Homes to pay a penalty of $925,000 (mostly to EPA, but some to each of the states). EPA estimated a price tag for the injunctive relief of almost $9,487,384. Basically, the consent decree simply requires Beazer Homes to comply with stormwater regulations, but EPA has imposed certain management requirements on Beazer Homes to ensure that compliance really will happen. Beazer Homes must develop an overall stormwater compliance program, designate a nationwide stormwater compliance manager, and also identify division-level compliance managers who must inspect every construction site within their jurisdiction at least quarterly to ensure that individual sites are in compliance. 

Stormwater is clearly one of EPA’s top priorities. The press release for the Beazer Homes settlement states so explicitly:

Keeping contaminated stormwater out of America’s waters is one of EPA’s national enforcement initiatives.

As concerns about nutrients increase, and EPA faces pressure from citizen groups regarding TMDLs for nutrients, we should only expect more such announcements. An ounce of prevention might be worth $9,487,384 of cure (not including a penalty).

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One thing supporters of coal will be thankful for tomorrow is this week's announcement by the Environmental Protection Agency (EPA) that it has finalized two rules governing the underground sequestration of carbon dioxide.  Both rules are designed to support and facilitate the commercial development of safe, large-scale carbon capture and storage (CCS) technologies, perceived by many to be the best hope for the future use of coal.

The first rule creates a new "Class VI" injection well under EPA's Underground Injection Control Program through the the Safe Drinking Water Act.  Elements of the rule are based on the existing regulatory framework, but tailored to address the unique issues carbon dioxide can create, such as the fact that it floats and moves within subsurface formations, and corrodes its surroundings when combined with water.   Although CCS has been used on a smaller scale for years, such as to facilitate enhanced recovery of oil, the large volumes that are anticipated to be injected as part of a full-scale deployment of the technology present different issues entirely.

The rule provides guidance on some, but not all, of the areas highlighted as in need of further support in the August report of the Interagency Task Force on CCS.  For instance, the rule outlines characteristics for siting CCS wells, requirements for construction and operations, automatic shutoff systems.  It also provides a recommended 50-year monitoring program post-injection as well as clarifying financial responsibility requirements for emergencies, site closure and cleanup.  The rule also provides considerations for transitioning Class II permits for existing enhanced recovery wells to Class VI, based primarily on whether the primary purpose is assisting with the recovery of oil or long-term storage of the CO₂ itself.

The second rule finalizes the requirements for CCS ventures under the mandatory greenhouse gas reporting rule (Subparts RR and UU of 40 CFR Part 98).  The rule requires permit holders to create a plan to monitor, report and verify the amount of CO₂ sequestered, using a mass-balance approach, and could lay the groundwork for those captured tons to become valuable offsets under future policies.  The reporting requirement begins in 2011.

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As the holiday approaches, I am particularly thankful that I am not counsel to the Washington State DOT in United States v. Washington State DOT, a case that continues to make me want to take EPA, DOJ, and United States District Judge Robert Bryan by the neck and ask them what the heck are they thinking. 

In July, I posted about Judge Bryan’s decision holding that the Washington DOT “arranged” for the disposal of hazardous substances by designing and operating a highway drainage system that deposited highway runoff containing hazardous substances into what became the Commencement Bay Superfund Site. As I noted then, the logic of that decision is that every Clean Water Act stormwater problem is now potentially a Superfund claim and every highway department – and every private developer with a parking lot – potentially faces not just stormwater enforcement, but a Superfund cost recovery suit. 

Last week, Judge Bryan issued another decision regarding the DOT’s potential arranger liability. Although his earlier decision held that Washington DOT had arranged for the disposal of hazardous substances through the design of its highway drainage systems, the court had not actually found the DOT liable under § 107(a)(3) of CERCLA. The DOT argued that, even if it arranged for the disposal of hazardous substances, the United States hasn’t “established a connection between the hazardous substances found at the [DOT] Property and the response costs incurred at the [Superfund site].” 

Judge Bryan wasn’t buying it. Instead, Judge Bryan concluded that, where plaintiff can establish contamination at defendant’s property that is at least similar to contamination at the Superfund site, and can establish a “plausible migration pathway by which the contaminant could have traveled from the defendant’s facility to the plaintiff’s site,” plaintiff has met its burden. The burden then shifts to the defendant to create a genuine issue of fact regarding causation.

Judge Bryan further concluded that it is up to the trial court to determine when to consider divisibility and apportionment defenses, and noted that “it would be consistent with the purposes of CERCLA to first fix liability and then determine any divisibility/apportionment defense based on causation.”

In other words, design a stormwater drainage system that directs contamination towards an area that needs a cleanup, and you are in Superfund litigation up to your neck until the final verdict is rendered.

Thanks, but no thanks.

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Daily Environmental Report noted earlier this week that Bob Perciasepe, EPA Depute Administrator, has told the National Environmental Justice Advisory Council that environmental justice is the “largest remaining challenge” that EPA must address systematically. This is not particularly surprising, since Lisa Jackson has made EJ a priority.

However, I was left nearly speechless by the statement in Daily Environment Report that Perciasepe indicated that

Polluted communities are also not likely to be targeted for business investment, meaning those communities have limited economic opportunities in addition to disproportionate pollution burdens.”

Once again, I’m left wondering what planet EPA is from. Those in the private sector would be stunned by linking the need for EJ with the need for more economic development in poor communities. EJ can be a real issue. Where racial minorities suffer disproportionate burdens because of their race, everyone should be concerned.

At the same time, however, EPA has to realize that EJ requirements are far more likely to retard economic development than encourage it. Where EJ concerns prevent economic development because organized groups label them as LULUs, or Locally Unwanted Land Uses, that may be an EJ success, but it doesn’t contribute to economic development. We can’t wave a magic wand and make the private sector want to site a nice clean office park in a distressed area, just because the residents would prefer that to some slightly messier use.

Even where properties are already contaminated, my experience is that EJ concerns are more likely to discourage redevelopment than encourage it. Brownfields properties are challenging enough without an additional layer of EJ review. One would think that anyone cleaning up contaminated property for almost any kind of economic development would be welcomed by the communities surrounding such properties. However, EJ requirements too often scare aware Brownfields developers. Again, this may be an EJ victory and it may be what the communities want, but to suggest that systematic integration of EJ issues into EPA’s programs will increase economic development in poor communities is, to put it gently, wishful thinking.

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EPA has finally released it long-awaited PSD and Title V Permitting Guidance for Greenhouse Gases, also known as the GHG BACT Guidance. E&E News quoted Gina McCarthy as saying that GHG permitting would be “business as usual” and that the transition to issuing PSD permits for GHGs would be relatively smooth. 

Not.

It’s certainly true that the GHG BACT Guidance says nothing particularly new about how permitting agencies should perform BACT reviews. Giving credit where credit is due, I’ll complement EPA for using plain English and describing the basic BACT process about as cogently and concisely as I’ve seen. The BACT Guidance also heavily emphasizes the use of energy efficiency measures in attaining BACT for GHGs, as has been expected. That should provide at least some comfort to the regulated community.

Having praised the BACT Guidance, I’ll now do my best to bury it. I just don’t think anyone can truly say that it actually provides any guidance to either state permitting agencies or the regulated community regarding what in fact will constitute BACT. In fairness to EPA, I think that’s because they don’t know, but that’s hardly a comforting thought. It’s got to be worrisome to regulated facilities that they are now subject to a requirement to demonstrate BACT for GHG when they make a major modification at their facility and they simply don’t know what it will take to comply with the GHG requirements.

Take, for example, EPA’s discussion of when an agency requirement to evaluate a particular control option might be considered to “redefine the source.” The BACT Guidance discusses this issue for six pages, but provides what seems to me to be no guidance at all. The Guidance repeats the bromide that

EPA has recognized that a Step 1 list of options need not necessarily include inherently lower polluting processes that would fundamentally redefine the nature of the source proposed by the permit applicant. BACT should generally not be applied to regulate the applicant’s purpose or objective for the proposed facility.

However, the Guidance then ominously states that permitting agencies must

take a ‘hard look’ at the applicant’s proposed design in order to discern which design elements are inherent for the applicant’s purpose and which design elements may be changed to achieve pollutant emissions reductions without disrupting the applicant’s basic business purpose.

If that doesn't send chills down the spines of engineers everywhere, I don’t know what will.  Similarly, the guidance says that "EPA continues to believe that permitting authorities can show in most cases (my emphasis) that the option of using natural gas as a primary fuel would fundamentally redefine a coal-fired electric generating unit."  Unfortunately, the guidance then notes that where a power plant already combusts another fuel, such as for start-up purposes, it would be appropriate to evaluate whether use of that fuel might be BACT.

The Guidance is too long to summarize fully in a blog post, but I do want to leave you with one image, courtesy of EPA. In discussing the requirement to identify energy efficiency options, the Guidance helpfully states that not “every conceivable improvement that could marginally improve the energy efficiency of the new facility” need be listed. In making this concession, EPA cited to Sierra Club v. EPA, which “recognized the undesirability of making the BACT analysis into a ‘Sisyphean labor where there was always one more option to consider.’”

We can only hope that EPA and state permitting agencies really take those words to heart as this process unfolds. I’m not optimistic.

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Almost all – 46 – states have delegated programs under the Clean Water Act. One criterion that EPA must determine has been satisfied before approving delegation is that the state has the ability to "abate violations of the permit … including civil and criminal penalties and other ways and means of enforcement."

EPA’s regulations provide that this criterion will be met if :

State law allows an opportunity for judicial review that is the same as that available to obtain judicial review in federal court of a federally-issued NPDES permit. A State will not meet this standard if it narrowly restricts the class of persons who may challenge the approval or denial of permits….

With respect to citizen suits, this language seems fairly clear. As long as the state does not impose heightened standing requirements, the same opportunity for judicial review exists.

When EPA approved delegation of the NPDES program to Alaska, notwithstanding that Alaska has a version of the so-called “English Rule,” which requires that losing parties pay fees to the winners, various citizen groups challenged the delegation, on the ground that the Alaska fee shifting provision means that, as a practical matter, Alaska restricts access to the courts in ways not permitted under the CWA. Last week, in Akiak Native Community v. United States Environmental Protection Agency, the 9^th Circuit Court of Appeals upheld the delegation. 

I actually wish that the Court had gone further than it did. As noted above, I think that, in the absence of different standing requirements, there is a comparable “opportunity” for judicial review. Instead, the Court’s decision was more limited, holding only that, as a result of certain limits on Alaska’s application of the fee-shifting rule, the plaintiffs had not met their burden to establish that EPA’s decision was arbitrary and capricious. Indeed, the Court noted that EPA could potentially reverse the delegation if it later finds in practice that Alaska courts are applying the fee-shifting provisions in ways that discourage citizen plaintiffs.

I just want to know – what’s so bad about fee-shifting?

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I’ve always thought that implementation of EPA’s GHG rules for stationary sources was inevitable in the absence of climate change legislation. The Supreme Court told EPA that GHGs are a pollutant under the Clean Air Act. Given the decision in Massachusetts v. EPA, EPA’s subsequent regulatory moves have been pretty much unavoidable. 

Since the statute seems to mandate GHG regulation, only Congressional action could block the rules. While a House majority seemed plausible, even before the election, getting 60 votes in the Senate always seemed a much stiffer proposition. Moreover, one could always expect an Obama veto, if legislation precluding EPA’s rules somehow were to get through Congress. Now, I’m not so sure.

If it turns out that there are enough coal state Democrats to move the legislation through the Senate, and if the supporters keep attaching the legislation as a rider to bills that the Administration does want, it may become difficult at some point for Obama to continue to veto it. A more tantalizing possibility is that the GOP might use such legislation as a bargaining chip with Obama over energy legislation, agreeing to support energy legislation, but only if Obama agrees to a prohibition on EPA GHG rules for stationary sources. In that situation, would Obama throw the GHG rules under the bus? Now that’s an interesting scenario.

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Stop the presses: According to the Daily Environment Report, EPA’s director of the Office of Federal Activities, Susan Bromm, has acknowledged that concerns about climate change and environmental justice are “contributing to the size, cost, and time-consuming nature of environmental impact statements….” Nonetheless, Ms. Bromm apparently asserted that these "analyses do not have to be overwhelming,” and she blamed, at least in part, agencies which “overreact to the fear of litigation.”

Not surprisingly, a speaker on the same panel from DOT felt otherwise. According to Helen Serassio, an attorney at DOT:

We’ve gotten to the point where they’re kind of out of control.

Ya’ think?

The notion that agencies are overdoing environmental reviews under NEPA because they are unreasonably concerned with potential litigation would strike many as absurd. It’s so easy for a judge, who doesn’t want to be the one who approved a nuclear plant that later has some kind of disaster, to say that the EIS wasn’t sufficiently thorough. For any worst case analysis, there’s always something worse, and for any nervous judge, it’s just too easy to ask for that additional analysis.

What’s lost from the discussion is any perspective, any sense that compliance with NEPA costs money and that delay of important projects imposes its own set of costs. I’m a supporter of NEPA. The requirement to assess environmental consequences of federal decisions certainly improves those decisions. However, those reviews do come with costs attached and, from where I sit, the judicial thumb is firmly on the side of more review at this point, without regard to any kind of cost-benefit analysis. As Ms. Serassio said:

We’ve gotten to the point where they’re kind of out of control.

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Is mercury a local problem or not? For years, power plant operators have claimed that mercury deposition is really a global problem. Environmentalists have pointed to studies arguing that hot spots affected by local emissions do exist. This week, according to the Cape Cod Times, John Colman, a USGS researcher – hardly likely to be a shill for the power industry – is going to report results of a study showing that mercury accumulation in both soil samples and fish tissue are comparable in Cape Cod and the Olympic Peninsula in Washington. Given prevailing wind directions, it’s hard to find a local source for mercury on the Olympic Peninsula.

According to the Cape Cod Times, Mr. Colman said that "the idea that burning coal is screwing up fish all over the Northern Hemisphere is kind of terrifying.” And I’ll bet that the United States power generation industry finds it terrifying that it may have to make very substantial – and costly – reductions in mercury emissions even though US emissions are about 5% of the world total and may not have a significant impact on the US environment.

I’m not discounting the need for regulation in the United States. Mercury is a real toxin. However, it would also be wrong to ignore the global aspect. To regulate the US power generation industry because doing so will solve a significant public health and environmental problem is one matter. To regulate the US power generation industry because we have to send a signal to the world that we are willing to regulate ourselves in order to persuade China to control mercury from its own coal-fired power plants is another. When the state of our nation is such that businesses are looking to put “China-Free” labels on their products, it will not be easy to persuade a significant segment of the population to support costly mercury controls when there is evidence that a substantial part of the problem stems from cheap coal-fired energy in China that delivers a twofer – allowing China to make goods more cheaply, while exporting its mercury pollution downwind to the United States.

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As Superfund practitioners know, federal NPL sites are generally settled on the basis that the PRPs will first attain interim cleanup levels, though final cleanup levels are not determined until EPA is actually ready to issue its certification of completion of the remedy. Moreover, EPA insists that, should any ARARs change during the course of the cleanup, whatever standards are in effect at the time of site closure will be applied.

We saw the impact of this on the ground in 2001, when EPA revised the Safe Drinking Water Act maximum contaminant level, or MCL, for arsenic from 50 ppb to 10 ppb. The new MCL became an ARAR for Superfund, and the expected date to attain cleanup standards suddenly got pushed back at a number of Superfund sites.

Even at the time, it was not clear that 10 ppb was the last word. EPA’s proposed rule had provided for a 5 ppb standard, but EPA eased off in response to public comment; small water suppliers can have great difficulty in attaining a 5 ppb standard. 

Earlier this year, EPA announced the availability of a new toxicological review of arsenic. That review suggested greater cancer risks from arsenic. Yesterday, EPA’s Science Advisory Board issued a report generally supportive of the new toxicological review. If the result is a further tightening of the MCL, more stringent cleanups, through the ARARs process, will follow ineluctably. 

I don’t normally post about developments this far from concrete regulatory changes. However, given the way the Superfund cleanup process works, PRPs negotiating cleanups of sites with arsenic groundwater contamination have to begin to factor this issue into their strategy now, because it’s not too early to starting thinking about cleanup cost estimates for alternative - meaning lower - arsenic MCLs.

Having put you on notice, I now have to tell one war story; if you don’t feel the need for a war story, you can stop reading here. In 1991, I was involved in negotiating the settlement for the cleanup of the Coakley Landfill Site, in southern New Hampshire. The federal government was a PRP. In Coakley, the government made a substantial (seven figure) contribution to the settlement. However, because the private PRPs had argued in negotiations with EPA that there was no need to treat groundwater – notwithstanding that the ROD remedy selected by EPA required groundwater treatment – the federal government as PRP insisted on getting a refund of the share of its payment attributable to the groundwater remedy, should EPA finally certify completion of the remedy without there ever having been an active groundwater treatment system in operation.

A few years later, the PRPs indeed persuaded EPA to eliminate active groundwater treatment. At the time, the expected date for certification of completion was 2007. In 2001, EPA changed the arsenic MCL from 50 ppb to 10 ppb. I don’t need to tell you that there is an arsenic issue at the Coakley Site. Now, the expected date for certification of completion is 2021. If, before then, EPA were to further lower the arsenic MCL, who knows what will happen to the expected date for certification of completion? The private PRPs may never have to reimburse the federal government!

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Last March, I noted that Gina McCarthy’s belief that, in the near term, the biggest impact on GHG emissions would come from EPA’s traditional regulatory programs, rather than through GHG regulation. A report recently released by Credit Suisse indicates that she might be right. Looking at EPA’s upcoming promulgation of the Clean Air Transport Rule and the mercury MACT rule, Credit Suisse predicts that between 50 and 69 gigawatts of old coal plants will be retired between 2013 and 2017 as a result of implementation of the two rules. Credit Suisse also predicts that approximately 100 gigawatts of capacity will require significant additional investment to comply with the rules.

For those with money to invest, Credit Suisse recommends clean plants in dirty markets – a not surprising conclusion. 

For those more interested in the regulatory side of things, it is worth noting that the Credit Suisse analysis is admittedly fairly simplistic. They pretty much just looked at small plants lacking scrubbers as candidates for closure. As the report puts it:

environmental control costs are non-linear (they’re more expensive on a unit of capacity basis at a small coal plant) and because these plants are generally older and less efficient in energy conversion.

Without details about individual plants, the Credit Suisse approach is certainly reasonable. I note only that, where plants are not closed, installation of scrubbers for SO₂ or SCRs for NO_x actually increases GHG emissions, because scrubbers and SCR require additional station service, making the plants less efficient to operate than previously. Overall, I don’t doubt that the closure of coal plants will outweigh the decrease in efficiency in the coal plants that remain operational, but both effects should be included in any analysis of the impact of the Transport Rule and the MACT rule on GHG emissions.

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As EPA begins to regulate nanomaterials more aggressively, but as concerns remain regarding EPA regulatory efforts, private efforts to regulate nanomaterials continue. ASTM recently announced that it is forming a new subcommittee on Nano-Enabled Consumer Products. The focus of the subcommittee will be on uses of nanomaterials containing silver. In particular, ASTM noted that it would be considering the following possibilities:

Standards for measurement of silver in textiles and liquids (including atomic spectroscopy to  assess mass)

Standards for evaluating the form of silver in textiles and liquids (including: electron microscopy to evaluate size, shape and chemical composition; ultraviolet-visible spectrophotometry to evaluate size using surface plasmon resonance absorbance)

Standards for assessment of nanosilver exposure potential from use of textile and liquid consumer products (including: release from consumer products in biological fluids [skin surface, lung, gastrointestinal tract]; release from consumer products in environmental matrices [air, water, soil] throughout a product lifecycle).

There is little doubt that nanomaterials are a brave new world – one which indeed scares some people, notwithstanding nanotechnology’s promise. We are also entering into a brave new world of nanotechnology regulation – one which scares me a bit, notwithstanding my recognition that some careful regulation of nanomaterials may be appropriate.

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In a crisply written opinion by Judge Posner, the 7^th Circuit Court of Appeals just reversed a district court judgment against Cinergy in the NSR case involving Cinergy’s power plant in Wabash, Indiana, and directed that judgment enter for Cinergy. It is not obvious that the case will have wide applicability, but it is certainly worth noting.

The first key issue in Cinergy was whether proposed new projects would be subject to NSR review if they were expected to result in an increase in annual emissions or only if they would result in an increase in the hourly emissions rate. In an earlier ruling, the 7^th Circuit decided that annual emissions, rather than the hourly rate, was the appropriate test provided for in the statute and regulations.

However, when the case came to trial, a twist occurred. The jury only found violations with respect to four projects. All of those projects occurred between 1989 and 1992 – and during that time, Indiana’s SIP stated that the applicable test was whether a project would result in an hourly emissions rate increase. Even more complicated, EPA had approved the SIP, even though it also told Indiana that the SIP had to be changed. Indiana had apparently changed its rules prior to 1989, but failed to submit a SIP modification until 1994. The Court ruled that EPA must be held to the SIP that it approved and that was in effect at the time of the projects.

The Clean Air Act does not authorize the imposition of sanctions for conduct that complies with a State Implementation Plan that EPA has approved. The EPA approved Indiana’s plan with exceptions that did not include [the improper test.]

Calling EPA’s approval of the SIP a “blunder,” the Court said that EPA must live with it.

It’s not obvious that this decision will have much relevance outside cases in Indiana involving projects implemented during the time Indiana’s SIP contained the wrong test. However, it is a lesson that the details do matter – in particular, the details of the relevant SIP.

The second aspect of the case is also a lesson in the nitty-gritty of litigation – and may have broader applicability. With respect to NOx emissions [it is not clear why the NOx allegations were not controlled by the prior part of the decision], EPA relied on two experts to testify that the projects would result in increases in annual emissions. However, both experts relied on a formula used for baseload power plants. Unfortunately for EPA, the Wabash facility is a cycling plant, not a baseload plant. The model used by EPA's experts assumes that an increase in capacity would result in a proportionate increase in output. However, that assumption is not valid for a cycling plant. The Court thus ruled that the experts’ opinions should not have been admitted; without them, EPA had no evidence of increased emissions and judgment had to enter for Cinergy.

This aspect of the case provides a cautionary lesson for the government (though I wouldn’t start dancing in the street if I were defending one of these cases). I think that there has been a sense that, if the government wins the legal battle on the issue of annual emissions v. hourly emissions rate and wins the routine maintenance argument, then the defendants are sunk. This case is a reminder that the facts still matter and that the government has to prove its case based on evidence regarding the specific projects being challenged.

What a notion.

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Earlier this week, I posted about the dire prospects for climate change legislation following the fall elections. The alternative to legislation has always been regulation under existing Clean Air Act authority, so it’s appropriate as a follow-up to briefly examine the pressures on EPA as it moves forward with its stationary source GHG regulations. Two headlines from the trade press today brought home just what a tightrope EPA is walking.

The first headline, from the Daily Environment Report, was to the effect that a “Ban on New Source Construction [Is] Possible In States Without Greenhouse Gas Permitting.” Specifically, Raj Rao, of EPA's Office of Air Quality Planning and Standards, said states that have not taken steps to implement permitting requirements by Jan. 2 could face the construction ban.

The second headline might be described as a corollary of the first. Today’s GreenWire notes that “New rules spark bipartisan fury in midterm elections.” Well, duh. Is it any surprise that in the face of continuing unemployment near 10%, regulations that even EPA acknowledges might result in construction bans in some states would be a topic of debate in congressional elections? In fact, the GreenWire piece was not even primarily about the GHG regulations and made no mention of the potential construction ban. It was largely about other EPA rules, such as the boiler MACT rule.

I have a certain amount of sympathy for EPA on this one. As I’ve noted previously, to a certain extent, EPA is just doing its job. On GHGs, it really has no choice but to regulate. While I have doubts about the legality of the Tailoring Rule, the alternative is only more onerous. The boiler MACT rule is another matter – and is complicated enough to warrant several posts of its own. However, EPA’s options are limited given the stringent provisions Congress itself wrote – and a Republican President signed into law. On conventional pollutants, the science is driving EPA towards lower and lower NAAQS, and more stringent rules on emitters follow like night follows the day.

Just so my friends in the regulated community don’t think I’ve gone soft, I will point out that it is at the least disingenuous for Administrator Lisa Jackson to say, as she was quoted in GreenWire, that:

The Clean Air Act does not place our need to increase employment in conflict with our needs to protect public health.

Somehow, that message has never gotten to the EPA and DOJ lawyers briefing appeals of EPA regulations, where those opposing the regulations say that they are uneconomic, while EPA's invariable rejoinder is that the Clean Air Act doesn't allow for the consideration of the cost of regulations in deciding how stringently to regulate.

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If environmental lawyers have been wondering when they’re going to get their share of economic stimulus, it’s time to stop wondering. Last week, Cynthia Giles, EPA’s Assistant Administrator for Enforcement and Compliance Assurance, announced that her office would be focusing on higher impact cases.  Giles also noted that, by the end of this month, EPA would have more than 200 criminal investigators.

If it weren’t for one statement by Giles, I don’t think that this would be news. Enforcement numbers always fluctuate. Environmental and watchdog groups always criticize EPA and state agencies when the numbers go down, and EPA and state agencies always respond to that criticism.

What caught my eye, however, was this. According to the Daily Environment Report, Giles said that the best measure of the effectiveness of EPA’s enforcement efforts is

how many people are charged and how many people are convicted, and on those scores I think we're doing pretty well.

Sorry. I don’t buy it. If everyone’s complying, then no one gets charged and no one gets convicted. I’m not naïve. Not everyone does comply and vigorous enforcement is necessary to ensure that compliance does happen. In fact, most of my clients are large corporations who comply with environmental laws and they often appreciate vigorous enforcement, because it helps ensure a level playing field. 

At the same time, however, it’s important to recognize that enforcement numbers don’t particularly correlate with the level of compliance. Nor are they a good measure of whether environmental agencies are doing their job well. Instead, enforcement numbers are mostly just red meat to advocacy groups who either want scalps, want to pressure agencies to do more, or both.

Giles’s remarks may be good news for environmental lawyers, but that doesn’t mean that more enforcement is the best use of government resources to increase environmental protection.

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My partner Robby Sanoff blogged last week about the “Illusion of Finality in CERCLA.” His post addressed City of Emeryville v. Sherwin-Williams, in which the 9^th Circuit Court of Appeals held that a person who was not a party to a prior settlement could bring a contribution claim against such a settling party, at least where the new claim involved contamination at a downgradient property, rather than the property that was the subject of the first settlement.

City of Emeryville seems to have been rightly decided. The only real lesson it teaches is that a PRP who wants to settle and achieve finality must do everything possible to ensure that all potentially liable parties are brought to the table and that the site is properly defined.

However, a case from earlier this summer just came to my attention. Its lesson is different. Its lesson is that CERCLA is just plain nuts, and judges’ efforts to harmonize its decisions can do more harm than good. Ashland v. Gar Electroplating teaches that there is no finality under CERCLA and that parties who step up to the plate to settle with the government and perform cleanups can be subject to joint and several cost recovery claims brought by recalcitrants. Alice in Wonderland, here we come.

Although Ashland seems wrong, Judge Lisi’s decision is a not surprising consequence of the simplistic CERCLA jurisprudence announced by Justice Thomas in Aviall and Atlantic Research. In holding that contribution claims are limited to those who have been the subject of litigation or certain kinds of settlements with the United States or a state, and that PRPs not subject to suits or administrative orders can bring cost recovery actions under § 107 of CERCLA, the Supreme Court has opened a Pandora’s Box.

What evil genie was loosed in Ashland? The facts are too complicated for a complete recital, but some history is required. Here goes:

1.                   The government sued a number of parties, including United Technologies, under CERCLA. The claims related to the Davis Liquid Waste Site, in Smithfield, Rhode Island.

2.                   The defendants brought third-party claims against a number of other PRPs, including Ashland.

3.                   Some original defendants (including this firm’s client, Ciba-Geigy) settled.

4.                   The United States went to trial against UT and obtained a finding of liability. UTC then settled with the government and agreed to perform a portion of the remedy. It also agreed to allocate sums recovered from the third-party defendants with the government.

5.                   A number of third-party defendants, not including Ashland, settled with UTC – and the government. 

6.                   The case against Ashland (and some other non-settlors) went to trial. Ashland was found liable. The judge allocated liability and imposed a percentage share on Ashland. 

7.                   At some point, EPA directly notified Ashland that it was a PRP and sent Ashland an administrative order on consent, requiring it to perform certain groundwater cleanup.

8.                   It is not clear if Ashland signed the AOC, but, according to an EPA affidavit, Ashland agreed to perform certain cleanup work.

9.                   Ashland spent approximately $2 million performing the work.

10.               It then brought claims under § 107 of CERCLA.  It had no contribution claim, because nothing had happened to bring Ashland under the ambit of § 113.

11.               The United States and the State of Rhode Island both filed amicus briefs on behalf of those sued by Ashland, arguing that their respective settlements with UTC barred Ashland’s claims.

Faced with these facts, what did Judge Lisi do? First, she found that Ashland does have a right to bring claims under § 107. Because it was not sued by the United States or Rhode Island, Ashland was not limited to contribution claims.

Second, Judge Lisi found that the allocation previously reached in the private action was not applicable to this case, precisely because the private case was for contribution and this case is a claim under § 107, which is assumedly one for joint and several liability. While Judge Lisi noted that the defendants in this action can bring counterclaims for contribution, the burden is on them to prove that the harm is divisible. 

As someone might say, OMG. Here’s what Justice Thomas has done to us. The recalcitrant party has a joint and several claim against those who settled with the government, and the burden is on the good guys to prove that liability should not be joint and several. 

If I may be permitted to gloat, I raised this specter following Aviall and Atlantic Research, and was generally told not to worry; the district courts would find ways to reach practical results. Plan B would seem to be the 1^st Circuit Court of Appeals. Plan C? I can’t wait to see what Justice Thomas would make of this fine mess.

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A recent amendment to the EPA’s Mandatory Reporting of Greenhouse Gases Rule (40 CFR part 98) requires companies that report their emissions to also provide information on corporate ownership,  North American Industry Classification System (NAICS) codes, and whether any of the emissions come from a cogeneration unit. The goal behind collecting this information is to gain a better understanding of the aggregate greenhouse gas (GHG) emissions from corporations and specific industry sectors, and identify potential differences in emissions between otherwise similar facilities due to cogeneration. Such information can be used to guide future GHG regulations and mitigation strategies. The rule was signed by Administrator Jackson last week and is to be published the Federal Register shortly. 

The final rule requires facilities and suppliers reporting GHG emissions (large industrial facilities that emit 25,000 metric tons or more per year, plus suppliers of fossil fuels and industrial gases, and a few others) to include, in their first annual GHG emission report due on March 31, 2011,  the name and address of each US parent company and a breakdown of the percentage share that each parent owns. It also requires the facilities to report any NAICS codes that apply to the facility – both the primary code as well as any others that are appropriate.

The third requirement takes the form of a checkbox indicating whether the report includes emissions from a cogeneration unit, defined by EPA as “a unit that produces electrical energy and useful thermal energy for industrial, commercial, or heating or cooling purposes, through the sequential or simultaneous use of the original fuel energy.”  In the final rule, EPA notes that there are no current programs that require facilities to identify whether they have cogeneration units – EPA’s Combined Heat and Power Partnership is only a voluntary program, and while the Energy Information Administration collects information on cogeneration from power generators greater than 1 megawatt, this program likely does not cover all of the facilities and suppliers subject to 40 CFR part 98.

The information collected on cogeneration through this rule is just a start, and useful primarily to merely identify the facilities using cogeneration. As EPA correctly notes, the information likely will not be sufficient to determine the quantity of GHG emissions occurring from particular NAICS sectors or cogeneration units within an individual reporting facility, or the degree to which cogeneration emissions at the applicable facilities displace onsite use of fossil fuel or other emissions from centralized electric generation. Nonetheless, information on the types and characteristics of facilities that use cogeneration could be important to the future development of GHG mitigation strategies.

 

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Technology geeks such as myself love nanotechnology. I think it’s the future of everything – including the solution to environmental problems ranging from climate change to Superfund cleanups. However, there are concerns about the toxicity of nanomaterials.

Last Friday, EPA took a significant step in the regulation of nanomaterials by publishing significant new use rules – SNURs – for both single- and multi-walled carbon nanotubes. Any person manufacturing, importing, processing, or using SWCNT or MWCNT (and you’ve got to love nanotechnology, if only for the proliferation of new acronyms), will be subject to the SNURs. The SNURs are based on consent agreements EPA had previously entered into with the original manufacturer of the nanotubes. Redacted copies of the consent agreements can be found at EPA's regulation page.  

In terms of substance, the rules include both a worker protection component, requiring impervious clothing and use of full-face respirators in certain contexts, and a requirement to prevent releases of the nanotubes to water.  Uses in which the nanotubes have been fully reacted or enclosed in a polymer matrix are exempt from the rules.

If nanomaterials really hold the promise that we hope, we’re going to start seeing many more of these rules in the next few years. It must say something that we can track the progress of a new technology by the number of regulations issued by EPA, but I don’t think I’ll go there today.

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When clients are threatened with citizen suits – and particularly when the threatened litigation involves a matter where EPA or a state regulatory agency is heavily involved, the clients always want to know why they can’t somehow get rid of the citizen suit, given that EPA is on the case. The answer is that they can – but only in limited circumstances.

The recent decision in Little Hocking Water Association v. DuPont confirmed this answer in the context of RCRA. The Little Hocking Water Association provides public water to certain communities in Ohio, directly across the Ohio River from a DuPont plant which uses , also known as PFOA or C8 – also known as the contaminant du jour. According to the complaint, the Little Hocking wells have among the highest concentrations of C8 of water supply wells anywhere and its customers have among the highest C8 blood levels anywhere. Little Hocking Water Association thus sued DuPont under RCRA’s citizen suit provision, claiming that DuPont’s release of C8 had created an “imminent and substantial endangerment."

Section 7002 of RCRA contains provisions precluding such citizen suits if either EPA or a state “has commenced and is diligently prosecuting” an action under RCRA to abate the endangerment. In the DuPont case, releases of C8 from the DuPont facility had been the subject of at least two administrative orders on consent entered into by DuPont and EPA. However, consent orders aren’t the same as “an action” under § 7002 or § 7003 of RCRA – and they thus do not preclude a citizen suit.

DuPont tried the next best argument – that EPA had primary jurisdiction over the regulation of C8 – and that the existence of EPA’s regulatory authority and the issuance of the consent orders meant that the courts should defer to EPA. DuPont’s argument was that a court could not fashion a remedy in the case without essentially establishing a new cleanup standard for C8 and that doing so is the job of EPA, not the courts.

The Court gave the primary jurisdiction argument short shrift. As the Court noted, using the doctrine of primary jurisdiction in citizen suits would dramatically reduce the scope of such suits. Since Congress provided a citizen suit mechanism – and provided very specific, discrete, circumstances in which citizen suits are precluded – it doesn’t make sense to use primary jurisdiction to establish another defense, particularly where the defense would almost eliminate the remedy. 

The bottom line? If you don’t want to face a citizen suit (and you’re not in compliance), get yourself sued by EPA or your state regulatory agency. The mere existence of EPA or state regulation, even if requirements are embodied in a consent order, is not enough.

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On a day when ClimateWire reported that thousands of walruses are stuck on land because their usual summer home – sea ice – has disappeared, I’m beginning to wonder whether EPA’s stationary source GHG rules are similarly at risk. It may not be difficult for EPA to brush off a fairly over the top letter from Texas which basically asked EPA “What part of ‘hell no” don’t you understand?”

However, today Greenwire reports that Governor Freudenthal of Wyoming – a Democrat – is asking EPA to defer enforcement of GHG stationary source regulation. So is Ben Grumbles, head of the Arizona Department of Environmental Quality. Grumbles may be a Republican, but he was head of the water office under the Bush EPA, so he has to have some idea of the legal pressure for EPA to regulate GHGs following Massachusetts v. EPA. 

In addition to these latest requests from the states, ClimateWire had a separate story today which noted that Senate efforts to bar EPA from regulating GHG may still be alive and that Democrat Senators Nelson and Dorgan may support attaching the legislation to the EPA appropriations bill. Readers of this blog know that I am a fan of Senator Graham’s willingness to consider climate legislation, but EPA has to be worried if it is counting on Senator Graham’s prediction that the amendment will fail.

I have long said that EPA’s regulations are here to stay, because they are not only defensible, they are - in some form, at least - pretty much mandated by Massachusetts v. EPA. However, where the prevailing metaphor for the November elections is that of a GOP tsunami, one has to wonder whether there is a realistic possibility that, one way or another, EPA regulation of GHG under existing authority could be subject to significant delay.

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Sometimes, the headline writes the story. EPA’s TMDL program under the Clean Water Act has been the subject of so much litigation since its inception that EPA has a web page devoted to the status of litigation on the establishment of TMDLs.

Bringing things close to home, the Conservation Law Foundation and the Coalition for Buzzards Bay filed suit late last month, challenging implementation by MassDEP and EPA of the TMDL program for certain embayments on Cape Cod and Nantucket. (Full disclosure time – this firm represents the CBB on unrelated matters.)

The law suit claims that MassDEP erred in determining the waste load allocation, or WLA, in establishing the TMDLs for the embayments, because it failed to identify septic systems, stormwater systems, and wastewater treatment systems as point sources. (Since we also represent wastewater treatment system operators – though none that are the subject of these TMDLs – I think that, like Joe Friday, this is going to be a “Just the facts, ma’am,” post.)

With respect to stormwater systems, MassDEP determined that systems located less than 200 feet from the embayments were point sources, but that those farther away were not. The basis for this determination, according to the complaint, was that the more proximate systems in fact discharge to surface waters, whereas the more distant ones discharge to groundwater, so that there is no point source discharge to surface water. 

The complaint does not identify the basis for MassDEP’s conclusion that septic systems are not point sources, but presumably it is also based on a conclusion that the systems discharge to groundwater and thus are not point sources of surface water pollution.  

Without commenting on the merits – just the facts, ma’am – I will note that a determination that septic systems and stormwater drainage systems that discharge initially to groundwater are point sources under the CWA would have dramatic consequences for the regulation of nutrient pollution under the CWA. In situations where there are industrial sources of these pollutants, those industrial sources might be quite pleased to have someone else bear share of the burden of reductions necessary to meet the TMDL. Given the brouhaha over how state agencies would cope with permitting hundreds or thousands of new stationary sources under EPA’s Clean Air Act PSD program for GHGs, however, I cannot imagine that MassDEP – or other state environmental agencies – would eagerly assume the responsibility for permitting septic systems.

Why do I foresee more litigation in the TMDL program’s future?

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I have previously expressed my distaste for public nuisance litigation to require reductions in GHG emissions. It cannot be more than a tactic in a war to the plaintiffs, because the chaos resulting from regulation of a global problem through a series of individual law suits has to be obvious to everyone. Now, apparently, that chaos is also obvious to the Obama administration, because it has filed a brief with the Supreme Court, asking the Court to accept a certiorari petition filed by the defendants in American Electric Power v. Connecticut, the 2^nd Circuit case in which the Court of Appeals held that the nuisance claims could proceed. 

The United States cited two reasons why the government should take the case and vacate the appellate decision. First, the brief states that the petitioners failed to demonstrate “prudential standing.” In other words, while they may have Article III standing, federal courts should “refrain from adjudicating ‘generalized grievances more appropriately addressed in the representative branches.’” As the brief notes:

The problem is not simply that many plaintiffs could bring such claims and that many defendants could be sued. Rather, it is that essentially any potential plaintiff could claim to have been injured by any (or all) of the potential defendants. The medium that transmits injury to potential plaintiffs is literally the Earth’s entire atmosphere – making it impossible to consider the sort of focused and more geographically limited effects characteristic of traditional nuisance suits….

Second, and perhaps more importantly, the administration has argued that EPA’s recent regulatory efforts with respect to GHG, including the mobile source rule and the PSD / Title V rules for stationary sources – which occurred after the 2^nd Circuit decision – have “displaced” federal nuisance law. Since the Second Circuit specifically addressed the displacement argument and found for the plaintiffs in part precisely because EPA had not yet regulated GHG, EPA’s intervening regulatory actions certainly would seem to provide a basis for remanding the 2^nd Circuit decision. I think that’s an easy call for the Supreme Court to make.

Perhaps not surprisingly, the plaintiffs’ attorneys were dismayed by the filing of the brief.  According to GreenWire, Matt Pawa, one of the plaintiffs’ attorneys, said that:

We feel stabbed in the back. This was really a dastardly move by an administration that said it was a friend of the environment. With friends like this, who needs enemies?"

My take is a little different. Why don’t the plaintiffs’ attorneys thank the administration for promulgating the various GHG regulations, admit that the nuisance cases were a tactic to move Congress and the administration, claim a partial victory, because they at least got EPA moving, fold up their tents, and go home.

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In February, President Obama tasked the Interagency Task Force on Carbon Capture and Storage with the ambitious goal of overcoming the barriers to widespread, cost-effective deployment of carbon capture and storage (CCS) within the next 10 years.  As the first bold step, the 14-agency and executive department group released its findings in a report on August 12. 

The report concludes that widespread cost-effective deployment of CCS will only occur if the technology is commercially available (i.e. scale-able and cost-effective) and a supportive national policy framework is in place to both fund and regulate it.  The task force believes that,  in the long run, there are no insurmountable technological, legal, institutional or regulatory barriers that will prevent CCS from playing a role in reducing greenhouse gas emissions.  But that does not mean the early years will be easy.  

CCS is a three-step process that includes the capture and compression of CO2 from power plants and industrial sources (usually coal-fired, since their carbon emissions are the most plentiful); transport of the captured CO2 , usually in pipelines; and storage of that CO2 in geologic formations, such as oil and gas reservoirs and unmineable coal seams.   The report points out that technologies for all three components of CCS already exist, and there are four existing commercial CCS facilities in other parts of the world.

The US government has bought in to CCS in a big way, committing $3.4 billion in stimulus funds,  including $1 billion for FutureGen, and just this week, DOE announced 15 projects receiving $21.3 million over the next three years.  

So what is stopping the technology?  The key barrier identified by the task force is the lack of comprehensive climate change legislation.  Without a price on carbon (and a relatively high one, at that), there is no stable framework for investment in the technology.  Even with significant federal funds pouring in, projects of this scale still need private investment.  But legal and regulatory uncertainty, unsurprisingly, make funding the projects a shaky prospect. 

The report concludes that early CCS projects -- like the 5 to 10 DOE-supported CCS demonstration projects slated to begin operations by 2016 -- can proceed under existing laws, but that the experience gained from those initial projects must be incorporated into a new regulatory framework before we embark on more widespread deployment.  

The report lays out a plan for a federal agency roundtable, championed by DOE and EPA, to oversee and continually review the adequacy of technology, incentives, and safety during this initial period.  The plan includes a lot of work for EPA, such as formulating new regulations under the Safe Drinking Water Act and Resource Conservation and Recovery Act that deal with the novel problems posed by storing commercial-scale amounts of pressurized carbon. 

Of course, one of those problems is that the stored gas might escape.  The Task Force also made recommendations on procedures for long-term liability and stewardship, including creation of an industry-financed trust fund to support long-term stewardship activities and compensate parties for damages after site closure.  The report cautions against having open-ended federal indemnification to address the long-term liabilities.

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EPA shows no signs of slowing down in its efforts to use the Clean Air Act’s PSD/NSR provisions as an enforcement club. The latest target in EPA’s crosshairs is the Detroit Edison Monroe Power Plant. Late last month, DOJ filed a complaint alleging violations of PSD/NSR requirements in connection with a project to replace the high temperature reheater and the economizer at Monroe Unit 2. Aside from the broad sign that EPA remains committed to these cases, the most recent action is notable for at least two reasons:

The suit names both Detroit Edison, which owns the plant, and DTE Energy, Detroit Edison’s parent. The complaint alleges that DTE Energy “employees make decisions involving construction and environmental matters at the plant” and that it “must approve major capital expenditures at” Monroe. Naming the parent is consistent with actions EPA has taken with respect to some of this firm’s clients; Parent companies would be wise to pay attention to this trend.

The project that is the subject of the complaint took place this year; we’re not talking about EPA reaching back to projects completed in the 1980s or 1990s. The complaint alleges that DTE provided one day’s notice before commencing the project. I’m not involved in the case, so I don’t know the details, but it’s hard to imagine that there isn’t some relevant background here. Either Detroit Edison and DTE, relying on some of the more favorable PSD/NSR decisions, decided just to pay their money and take their chances, or someone at EPA or the State of Michigan led the plant astray. Time will tell.

There has been no doubt for some time that EPA is going to continue to seek reductions in conventional pollutant emissions through these types of enforcement actions. This action is also a good reminder, however, of the type of action we have to look forward to, assuming that the Tailoring Rule is upheld. If there is no Congressional action, the PSD/NSR program is going to be EPA’s only leverage to get GHG reductions.

I can’t wait.

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Late July saw some movement on the cooling water intake structure (CWIS) front. 

On Friday, July 23, in ConocoPhillips, et al. v. EPA, the Fifth Circuit granted EPA’s motion for a voluntary remand of the existing-facilities portion of its Phase III regulation. The Phase III rule, promulgated in 2006, addressed CWIS at existing small power plants and other facilities in certain industries, including the pulp and paper, chemical, primary metals and petroleum and coal products industries, as well as new oil and gas extraction facilities. The Phase III rule did not set a “best technology available” (BTA) standard for existing facilities, and instead continued the current practice of “best professional judgment,” case-by-case determinations of BTA. Not surprisingly, the rule was challenged by a number of entities.

 

Last year, following the Supreme Court’s decision in Entergy Corp. v. Riverkeeper, the agency had requested that the portion of the regulation dealing with existing facilities be remanded so that the agency could reevaluate it in conjunction with its proceedings on remand of the 2004 Phase II rule, which addressed CWIS at large, existing, power plants. In Entergy the Supreme Court held that EPA could, but was not required, to employ cost-benefit analysis when determining the BTA and has discretion to consider to what degree costs and benefits should be weighed in making such a determination. The Fifth Circuit’s recent ruling now clears the way for EPA to combine Phase II and Phase III into a single rulemaking covering all existing CWIS facilities. (At the same time that it remanded the Phase III rule as it relates to existing facilities, the court deferred to the agency and upheld the rule as it applies to new offshore oil and gas facilities).

 

This decision dovetails with the agency’s announcement two days earlier that it would be sending to the OMB for approval a proposed survey that would help the agency determine the benefits of the proposed regulatory options for CWIS. Data collected during the survey, which will be of approximately 2000 households, will be used to calculate willingness to pay for the reduction of fish losses at CWIS. Comments on the proposal must be submitted by September 20, 2010.   

 

So, it looks like some progress is being made towards a determination of what constitutes BTA for CWIS at existing facilities, but how long it will take for it to be made is unclear. Obviously, it seems that the agency’s previously announced intentions, as reported in the BNA Daily Environment Report, to issue a proposed rule in the middle of this year were a bit optimistic.

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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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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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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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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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Last year, I analogized PRP efforts to have CERCLA’s unilateral administrative order provisions declared unconstitutional to Chevy Chase’s repeated announcements during the first year of Saturday Night Live that Francisco Franco was still dead. Eventually, that joke wore out. With yesterday’s decision by the D. C. Circuit Court of Appeals, in General Electric v. Jackson, upholding EPA’s UAO authority, these legal challenges may be similarly about to wear out. 

The analysis in GE v. Jackson is pretty straightforward. EPA may not obtain fines or treble damages if a PRP defies a UAO unless the agency goes to court and the court concludes that the PRP is in fact liable under CERCLA and that none of the statutory defenses apply. Because PRPs thus have a “pre-deprivation” remedy, there is no due process violation. At a formal level, that’s hard to dispute. The formal pre-deprivation remedy and the absence of a circuit split make it unlikely that the Supreme Court will have any interest in hearing this case.

GE’s most cogent argument, to me, is that, as a practical matter, the deck is so heavily stacked in EPA’s favor that it really is very difficult for PRPs to take advantage of the due process rights that CERCLA provides. The Court gave this argument short shrift, noting that, out of 1,638 recent UAOs, PRPs had refused to comply with 75, or 4.6%. However, we do not know the details underlying these data. Many of these 75 non-complying PRPs could simply be deadbeats, rather than viable PRPs who considered themselves not liable or had reason to believe that EPA’s remedy was arbitrary and capricious. 

There are limits to the use of anecdotal evidence, but does anyone who has a lot of CERCLA experience really deny that the coercion faced by PRPs is extreme? This is why liberal friends of mine who consider themselves environmentalists, but who aren’t lawyers and don’t know how CERCLA works, are often shocked when I describe some of these cases – in an unbiased way, of course – and ask how CERCLA can be constitutional.

My own sense is that the D.C. Circuit decision is probably right as a matter of constitutional law. Not every law that is unfair is unconstitutional. I certainly think that CERCLA’s UAO provisions are unfair. I also think that they are bad law, masquerading as “polluter pays” provisions. However, to the extent one can really even speak about Congressional intent given the haphazard way CERCLA was drafted, Section 106, as interpreted in GE v. Jackson, is pretty clearly what Congress intended and, for now, it’s the law. 

Francisco Franco is still dead, and so are constitutional challenges to EPA's UAO authority under CERCLA.

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When we blogged about the Mandatory Greenhouse Gas Reporting Program regulations last fall, we noted that the EPA had excluded from the final regulations emission source categories such as wastewater treatment plants and underground coal mines that were initially included in the draft rules.  No longer. Yesterday, EPA finalized regulations requiring an estimated 680 facilities in the four sectors of underground coal mines, industrial wastewater treatment systems, industrial waste landfills and magnesium production facilities to begin collecting emissions data on January 1, 2011, and submit their first annual report in March 2012. Despite being few in number, these facilities, which primarily emit methane, are responsible for about 1% of national greenhouse gas emissions.  As in the existing reporting rules, 40 CFR Part 98, these businesses are required to report their emissions to EPA if they emit 25,000 metric tons CO₂ equivalents or more per year.  

The final rule also clarifies EPA’s decisions on the remaining categories: EPA will exclude ethanol production and food processing from distinct subparts requiring reporting, as well as suppliers of coal (at least for now).  However, these types of facilities are still required to report emissions under other subparts of the rule, if they meet the reporting threshold of 25,000 metric tons CO_2e per year. In addition, now that EPA has made final decisions on "all outstanding source categories and subparts" from last year's draft rule, additional sectors can only be added through new rulemaking.

EPA also released proposed rules reflecting what data submitted by facilities under the greenhouse gas reporting program will be released to the public and what will be withheld as confidential business information. EPA hopes to have these rules in place before the 10,000 facilities that produce about 85% of the nation’s emissions submit their first reports in March 2011. 

As you may recall, the greenhouse gas reporting rules require both direct emitters and suppliers of fuels and industrial gases to report.   For the “direct emitters,” EPA proposes to release information such as the facility name and physical address, emissions, methodology and data used to calculate the emissions, and test and calibration methods, but withhold as confidential business information data on production, throughput, or raw materials that are not inputs to the emissions equations. As the emissions reported by the suppliers of fuels and industrial gases are not emissions from their own facilities, but potential emissions from the eventual use of their products, the individual companies' reports are less important than the overall figures.  As such, EPA proposes a balancing approach – making sector-by-sector determinations and releasing data about emissions only when it would not cause substantial harm to the businesses’ competitive position. (Specifics on how data will be treated are available here.)   Comments are due 60 days after the proposed rules are published in the federal register.

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Two seemingly unrelated reports last week serve as a reminder that coal remains very much under siege. First, Earthjustice, on behalf of a number of environmental organizations, filed a petition with EPA under § 111 of the Clean Air Act requesting that EPA identify coal mines as an emissions source and, consequently, establish new source performance standards for coal mine emissions of methane and several other categories of pollutants. 

Second, as Daily Environment reported, the Army Corps of Engineers suspended use of Nationwide Permit 21 for the six states in the Appalachian region, covering Kentucky, Ohio, Pennsylvania, Tennessee, Virginia, and West Virginia. The decision means that, at least for now, mountaintop removal mining operations in these states will have to apply for and obtain individual Clean Water Act permits, rather than relying on the Nationwide permit.

Other significant regulatory actions affecting the long-term economics of coal include EPA’s decision to tighten regulation of coal combustion residuals, whether through identification of CCR as a hazardous waste or through regulation under RCRA subtitle D – with the current betting being on listing of CCR as a hazardous waste, and EPA’s Tailoring Rule, which will focus initial regulation of GHG emissions on large stationary sources, the most obvious of which are large coal-fired power plants.

All of these actions are nominally independent, but if anyone thinks that at least the NGOs such as the Center for Biological Diversity and Earthjustice don’t see these as related actions the cumulative goal of which is to end use of coal, they’re just not paying attention. Does Lisa Jackson feel the same way? I doubt she’ll ever tell us, but I think I know the answer.

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EPA held a public hearing this week on its proposed MACT standards for industrial boilers. The issue may not be as sexy as climate change, but it’s an important rule and not just for those operating industrial boilers. For example, the cement industry has burned 50 million tires – including steel belts – according to its own data. EPA wants to classify such tires as a solid waste, rather than a fuel, which would subject cement kilns to incinerators standards. This has the Rubber Manufacturers Association up in arms. (Query: Does the Michelin Man have arms?)

Industry representatives say that the standards simply can’t be met, arguing that EPA cherry-picked the best performance for different air contaminants across a range of facilities, but ignored data showing that no facilities can actually meet all of the standards. According to the Daily Environment Report, Matthew Todd of the American Petroleum Institute described the proposal as “Franken-MACT.”

I suspect that EPA is going to be very skeptical of these claims. Rightly or wrongly, EPA’s view is that industry tends to cry wolf regarding the feasibility of complying with new regulatory standards. In any case, EPA also tends to think of technology-forcing as part of its mission. Time will tell on this one, regarding both EPA’s willingness to meet industry at least part way and industry’s ability to comply with the standards.

The tire issue, which is merely one example, also calls to mind EPA’s current debate regarding regulation of coal combustion residuals. How does EPA balance what it regards as fidelity to statutory requirements with the need to encourage beneficial and economic reuse of what would otherwise be waste materials? At this point, EPA’s thumb appears to be on the regulatory side of the scale, rather than the reuse side. Not surprising, but not necessarily encouraging. 

 

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A week after the Senate’s rejection of the Murkowki resolution last week, where does climate change stand in Congress? The defeat of the resolution is not the end for those who don’t want EPA to regulate under existing authority. Senator Rockefeller hopes to get to the floor a bill that would delay EPA regulation of stationary sources for at least two years, but keep in place the mobile source compromise reached last year. Rockefeller has stated that he hopes to get the votes of some Senators who opposed Murkowski’s resolution.

What about cap-and-trade legislation? Notwithstanding the President’s stated commitment to getting it passed, it’s not obvious that the votes are there. Senator Lieberman, one of the sponsors, is now saying that the bill deserves a debate, notwithstanding the absence of 60 votes. Not exactly an encouraging prognosis for those who want legislation to be enacted.

I’ve got to say, it looks as though paralysis remains the word of the day. The Senate may be the world’s greatest deliberative body, but with respect to climate change, it’s difficult to see anything other than sound and fury, signifying nothing, for the near term. 

And that’s two Shakespeare quotes in one month.

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As you might have heard, late yesterday afternoon, the Senate voted 53-47 to reject a procedural motion that would have allowed a vote on Senator Murkowski's disapproval resolution: a long-winded way of saying that, for now, the EPA maintains its authority and scientific finding that greenhouse gases endanger public health and welfare. 

As Seth noted a few weeks ago, the political dynamics of this vote are complex, bringing together strange bedfellows and inviting interesting predictions about what happens next.  On the one hand, environmental groups are claiming victory in the resolution's failure, which breaks down pretty closely along party lines: all 41 Republicans and six Democrats voted in favor.  On the other hand, some moderate Democrats who voted against the resolution are now rallying behind another bill that would restrict EPA's authority.  That bill, which would create a two-year delay for implementation of EPA climate rules for stationary sources was introduced in March by Senator Rockefeller of West Virginia, who himself voted in favor of the Murkowski resolution.

To further add to the strangeness, it's the narrowness of the vote that is being lauded by Senate Majority Leader Reid, who told reporters after the vote, "it's obvious people want some rules and regulations."

But what rules and regulations do they want?  That's the real question of the hour.  Perhaps after next week's full Democratic caucus, we'll have a better idea, at least about what rules and regulations might be likely to come to a floor vote.

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Last week, EPA released its Clean Watersheds Needs Survey 2008 Report to Congress. I have three immediate reactions to the Report. The first is that there are a lot of needs out there. The Report’s bottom line is that there is currently an expected shortfall of $298 billion over the next 20 years for clean water infrastructure. As Congress turns from short-term stimulus spending to long-term concerns about the deficit, it’s difficult to see Congress being eager to hear National Association of Clean Water Agencies Executive Director Ken Kirk say that

the federal government must become a long-term partner in developing a sustainable funding mechanism to address the growing infrastructure funding gap.

My second reaction is that I’m skeptical of these numbers. I don’t doubt the big picture funding gap, but it’s clear in a quick review that different states report these numbers differently. For example, as readers of this blog know, both EPA and Massachusetts DEP are making big pushes to increase stormwater regulation in Massachusetts. However, the Report states that, while Massachusetts has almost an overall $8 billion shortfall, its stormwater needs are only $41 million. The Report further states that Massachusetts needs literally zero money for stormwater conveyance infrastructure and only $22 million for treatment systems. Pennsylvania, on the other hand, apparently needs $6 billion for stormwater infrastructure. 

As much as I love my adopted state, I’m doubtful that Massachusetts is that far ahead of Pennsylvania. I sure hope that, before spending decisions are made, someone takes a closer look at these numbers.

My third reaction is one of fear, particularly on the stormwater front. Nationally, the overall shortfall associated with stormwater is nearly $43 billion. We’ve already seen in Massachusetts efforts to push stormwater compliance costs onto private landowners. With that sort of shortfall, the pressure to do so can only increase, particularly as local governments are starved for revenue. 

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Last week, EPA’s Office of Solid Waste and Emergency Response announced release of its Community Engagement Implementation Plan. Who could be against community engagement? It’s as American as apple pie. It’s environmental justice. It’s community input into decisions that affect the community. It’s transparency and open decision-making.

Call me a curmudgeon, but I’m against it. Study after study shows that, in terms of the actual risks posed by Superfund sites, we devote too many of our environmental protection dollars to Superfund sites, when we should be focusing on air and water. Why do we keep doing this? Because the community demands it. As Peter Sandman has noted, perceptions of risk are driven only partly by the actual hazard posed. To a significant degree, those perceptions are more driven by outrage over the situation. In some circumstances, what Sandman calls outrage management makes sense, but I’m skeptical that EPA’s community engagement initiative is really about outrage management.

In any case, here’s the public policy question of the day. Does it really make sense to spend scarce environmental protection resources, not to reduce risk, but to reduce outrage?

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In 1972, Christopher Stone published his seminal book “Should Trees Have Standing?” That same year, Justice Douglas posed essentially the same question in his dissent in Sierra Club v. Morton, in which he argued that inanimate objects should have standing “to sue for their own preservation.”

I hadn’t thought of this for some time, but was reminded of the issue by an article in GreenWire this week, reporting on a study which has concluded that kudzu, an invasive species which is, one might say rhetorically, taking over the southeastern United States, increases NO_x levels and thus leads to the formation of ground-level ozone. Indeed, the study concluded that if kudzu does in fact take over – to the point where it covers all non-urban, non-agricultural soil – the number of areas exceeding the ozone NAAQS would increase by more than one-third.

Now, what’s the point of this other than the opportunity for a snappy headline? Perhaps nothing. I love a snappy headline. On the other hand, the report does serve as a useful reminder that environmental science and policy are really complicated. I do not use this complexity to suggest that the government should not act in the face of uncertainty, but I do believe that it can serve as a useful reminder of the limits of our knowledge and the appropriateness of a prudent caution before we assume we know all the answers. 

At a practical level, can EPA set up an offset program that would allow new sources of NO_x to move forward if they remove a certain number of acres of kudzu? After all, no one likes kudzu, anyway.

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When the Burlington Northern decision was first announced, I concluded that “never has the Supreme Court done so much by doing so little.” On May 5, Judge John Mendez, of he Eastern District of California, proved me at least half right. In United States v. Iron Mountain Mines, joint and several liability was imposed on the defendants in 2002. The 2002 decision stated that “given the nature of pollution at the site, it would be difficult to identify distinct harms.” The court did not analyze whether there was a reasonable basis for apportionment of liability. 

Following the Burlington Northern decision, the defendants moved for reconsideration, arguing that Burlington Northern constituted an intervening change in the law. Defendants argued that “the Supreme Court clearly meant to send a signal to other courts that they must begin evaluating apportionment in a different way.” I think that the defendants in Iron Mountain were right.  Unfortunately, that’s not the standard for a motion for reconsideration.   If Iron Mountain were being decided for the first time today, the defendants might get a better result, but that doesn't mean that they win their motion for reconsideration.

What the Supreme Court really said in Burlington Northern isn’t that the law was wrong; it is that District Courts weren’t applying the law correctly. District court judges had their collective judicial thumbs firmly on the side of the government. The Supreme Court simply told the lower courts to take those thumbs off the scales. I hope that this decision will not encourage lower courts to keep the thumbs on the scales.

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First Kerry-Lieberman, then the Tailoring Rule – a busy week for climate change. Senator Kerry certainly did not miss the coincidence. He called the release of the Tailoring Rule the “last call” for federal legislation. I’ve noted before the leverage that EPA regulation would provide, but this is the most explicit I’ve seen one of the sponsors on the issue.

As to the substance, there are not really any surprises at this point. EPA is certainly working to soften the blow of GHG regulation under the PSD program. Here are the basics (summarized here):

January 2, 2011 – Facilities obtaining PSD permits for pollutants other than GHGs after that date will need to meet BACT for GHG (whatever that may be) if their GHG emissions will increase by at least 75,000 tpy.

July 1, 2011 – New facilities with emissions of at least 100,000 tpy of GHG will need to obtain a PSD permit and meet BACT (whatever that may be) for GHG, even if they do not need a PSD permit for other pollutants. Modified facilities with increases of at least 75,000 tpy will have to obtain a PSD permit and meet BACT (whatever that may be) for GHG, even if they do not need a PSD permit for other pollutants.

July 1, 2012 – EPA will conclude a further rulemaking to address smaller sources. EPA has already committed to not regulate sources with GHG emissions below 50,000 tpy and further stated that permits would not be required for smaller sources before April 30, 2016.

As I’ve subtly hinted above, we still don’t know what EPA thinks BACT for GHG may be. EPA has at least suggested that, with respect to coal plants, BACT may be Integrated Gasification Combined Cycle, or IGCC, and with respect to IGCC plants, BACT may be natural gas. If so, we’re not going to see many traditional coal plants permitted after this rule takes effect.

What about opposition to the rule? It’s near certain that someone will challenge it. While environmental groups support it and have suggested that opponents may not have standing, I’m skeptical. I think it likely that someone with standing will challenge it. I also think that there is a reasonable chance that the rule is overturned, because it’s not obvious to me that the courts will buy the “administrative necessity” argument. The more fundamental point is that I’m not sure it matters. If the Tailoring Rule is struck down, a court is still unlikely to vacate the rule. Instead, the court is likely to keep the Tailoring Rule in place, while giving EPA time to figure out how to comply with conflicting mandates in a way that doesn’t bring the world as we know it to an end.

At bottom, the problem isn’t the Tailoring Rule. The problem is that Massachusetts v. EPA makes regulation of GHG under the existing Clean Air Act inevitable absent congressional action. In other words, John Kerry is right; the Tailoring Rule is last call for the climate bill. I happen to agree with opponents that regulation of GHG under existing authority will be a nightmare. Even exempting small sources, PSD is just a terrible way to go – one of the last vestiges of command and control regulation and a nearly incomprehensible one, at that.

However, given Massachusetts v. EPA, Congress really only has two ways to fix the problem. The first would be to pass climate legislation. The second would be to pass legislation to preclude EPA regulation of GHG under existing authority. Right now, neither alternative seems likely, but once EPA rules are in effect, they’ll both be more tempting. We’ll see which we Congress moves.

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So, Kerry Lieberman (Graham?), also known as the American Power Act, is here. What does it mean?

My immediate reaction is that, in a big picture sense, they got it just about right. The fundamental issue, which was previously acknowledged by Senator Graham (can we start calling him “he who must not be named?”), is that we’re not going to solve the energy independence or climate change problems unless we put a price on carbon. This bill does that.

Frankly, the rest of the issues really only matter either to particularly constituencies or, as a related concern, to particular members of Congress. What are some of these other issues and how would they be handled in this bill? We’ll be getting a more detailed client alert out shortly, and if you can't wait, you can review the short summary or the section by section analysis, but here’s the very quick version.

Basic cap-and-trade provisions –

Goal is to reduce CO₂e by 4.75 percent of 2005 levels by 2013 and 83% by 2050, with interim targets in 2020 and 2030

EPA administrator will set allowance numbers to reach those targets

Only facilities emitting >25,000 tpy CO₂e will be subject to the program

Generating facilities are subject to the program in 2013; manufacturing facilities will not be subject until 2016.

Initial price floor of $12/ton and price ceiling of $25/ton

Limits on who can participate in the carbon market to avoid market manipulation

Allowances used primarily to cushion consumers from energy price increases, but also to support various industries

Includes a “WTO-consistent border adjustment mechanism.” In the absence of a global agreement, tariffs will be imposed on countries without similar GHG controls

Nuclear power – lots of help for the nuclear industry

Off-shore drilling – Provides substantial revenue sharing to certain coastal states, but allows states to prohibit leasing within 75 miles of their coastline

Coal – significant support for carbon capture and sequestration

Renewable energy – Does not include a national renewable energy standard, or RES, though does provide for federal assistance to encourage development of renewable energy technology

Preemption – preempts state cap-and-trade programs, but not other state regulation of GHG. Precludes EPA regulation:

No listing of GHG as criteria pollutants based on climate change impacts

No listing as hazardous air pollutants based on climate change impacts

Limitation – but not complete preemption – of GHG regulation under existing NSR authority

Don’t yell at me if this list does not include your favorite provision. This is a blog, not a treatise. As to the big political picture, I still think that, if Senator Graham can be brought back on board, there is a reasonable chance that this bill passes. If not, then I’m pretty skeptical. 

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EPA is proceeding with its plan to establish a new program to regulate stormwater discharges from new development and redevelopment, with a target date for a final rule by November 2012. The next step: the reissuance of draft mandatory questionnaires that, once finalized, will be sent to various stakeholders, including approximately 738,000 owners and developers of residential, industrial and commercial sites. According to EPA, the “target population for the Owner/Developer Questionnaires is all development establishments in the United States,” as defined by 8 NAICS codes (see Part A.4 of EPA’s Supporting Statement for further information on whether your business would be covered).

The questionnaires request detailed information about real estate improvements during the last five years as well as the financial characteristics of development companies and their projects. There are two versions of the Owner/Developer questionnaire, but only the longer version -- which will be sent to “selected recipients” -- seems to address the types of stormwater controls actually used, or the cost of those controls, in any detail. Thus, while the longer questionnaire will present an additional burden for its recipients, it will also allow developers to report key information for the regulated community, including the cost-effectiveness and context of stormwater controls (e.g. soil types, urban vs. rural settings). 

Among other stakeholder groups, EPA will also send questionnaires to owners and operators of municipal separate storm sewer systems (MS4s) and to National Pollutant Discharge Elimination System (NPDES) permitting authorities. That means that one party that apparently won’t have to fill out a questionnaire is the Massachusetts DEP, which, along with 4 other states and the District of Columbia, does not have NPDES permitting authority. Particularly in light of MA DEP’s own recent stormwater proposal, EPA might consider asking all state environmental authorities about the scope of their current and planned regulatory efforts with respect to stormwater, so as to better coordinate state and federal programs. 

We’re pleased that EPA is making an effort to base its regulatory proposal on good information. Nevertheless, developers should watch the rulemaking process carefully between now and 2012. The 30 day public comment period on the draft questionnaires ends June 9, 2010.

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Environmentalists have been pushing for years to overturn the Bevill Amendment and get coal combustion residuals (CCR) regulated as a hazardous waste. The failure of an impoundment at the TVA facility in Kingston, Tennessee, in 2008 almost guaranteed that EPA would do something to regulate CCR. Like Hamlet, however, EPA seems to be having trouble making up its mind. Earlier this week, EPA announced two different potential regulatory approaches, one regulating CCR as a hazardous waste under RCRA Subtitle C and one regulating CCR as non-hazardous waste under Subtitle D of RCRA.

Entities with coal generating assets have two problems, broadly speaking, with regulating CCR as a hazardous waste. The first is just the sheer magnitude of the costs required to address existing surface impoundments and find alternatives to impoundments going forward. I realize that there are significant scientific questions regarding whether migration of contamination from existing impoundments in fact poses any significant risk. However, this question was answered at a political level once the Kingston impoundment failed. It’s difficult to see any regulatory regime going forward that doesn’t strictly regulate impoundments.

The second significant issue is beneficial reuse. A very substantial amount of CCR is safely and economically reused. Strict regulation of CCR as a hazardous waste would, to put it mildly, put a crimp in the CCR recycling market. EPA, at least based on its public pronouncements to date, appears to get it, though time will tell whether the program the agency ultimately implements will nonetheless create needless obstacles to recycling CCR.

Thus, if I had to guess – and to paraphrase the Bard – recycling of CCR is to be, disposal of CCR in surface impoundments is not to be.

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Last year, I noted that EPA had made its ECHO data base more user-friendly, creating a web-based map of enforcement actions. Last week, EPA took the effort a step further, at least with respect to Clean Water Act enforcement action. EPA’s Clean Water Act Annual Noncompliance Report, or ANCR, is available on the web in an interactive format that allows interested citizens to see where the noncompliance and enforcement action is taking place. 

As some of my clients are unfortunately aware, I’ve been seeing a lot of enforcement action recently, at both the federal and state level. It’s not clear long the agencies can maintain a vigorous enforcement posture in the face of repeated budget cuts. I still think that efforts such as providing interactive access to EPA’s ANCR is going to facilitate citizen suits, ensuring the private enforcement is available even if the agencies ease up.

Whether that's a good result is of course a separate question.

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As Senators Kerry, Lieberman, and Graham get ready to release their version of a climate bill, negotiations with moderate Democrats are heating up. Ten Democrats, apparently let by Sherrod Brown and Debbie Stabenow released a letter outlining what they call “key provisions for a manufacturing” package as part of an overall bill. Here are some highlights the Senators' wish list:

Investments in clean energy manufacturing and low carbon industrial technologies.

Ensuring law energy costs for manufacturers, including a “firm price collar”

A phase-in for regulation of GHG emissions from manufacturing

Allowance rebates for energy-intensive, trade-exposed industries

Tariffs on imports from countries without comparable GHG regulatory regimes

Preemption of state GHG regulation

If Kerry, Lieberman, and Graham can actually bring these Senators along, they will have come a long way towards getting a bill passed. However, there are still a number of moderate to conservative Democrats who have not signed this letter and whose support is by no means a sure thing. 

Similarly, one wonders what kind of Republican support there will be, if any. One thing is clear, if a bill is enacted, President Obama and the Congressional leadership are going to owe a big debt to Senator Graham. If he stays on board, it’s hard to see how Senators such as Collins and Snowe don’t sign on as well. 

Environmentalists are the ones who may have to be dragged across the finish line, assuming that final legislation includes preemption, support for nuclear energy and clean coal, a phase-in for manufacturing compliance and, perhaps, off-shore drilling.

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EPA Region 1 continues to roll out new programs on the stormwater front, and this week’s development is particularly important for private property owners in the Charles River watershed. The agency released proposed amendments to the Residual Designation for the Charles River (“RDA”) and a Draft General Permit for Residually Designated Discharges. While the proposed permit only affects the Massachusetts communities of Milford, Bellingham, and Franklin, EPA has stated that it may expand the General Permit to include other Charles River communities in the future, so property owners along the entire length of the Charles River should be paying attention.

The full set of materials can be found on the EPA’s website, but here are a few highlights: 

2-acre threshold: “Designated Discharges” covered by the permit consist of two or more acres of privately-owned impervious surfaces. (Many publicly-owned properties located in the Charles River basin will be subject to the Massachusetts North Coastal Small MS4 General Permit, released in draft by EPA Region 1 earlier this year.)

Aggregation: As those of you following stormwater issues in Massachusetts are aware, the first draft of the RDA was linked to the proposed state stormwater regulations, which included an “aggregation rule” with a number of onerous consequences. The amended RDA and the draft General permit are no longer connected to the stalled state regulations, but they still include the concept of requiring a single permit for contiguous but separately owned properties that share stormwater controls. Fortunately, unlike the state proposal, each co-permittee will only be responsible for ensuring compliance for “all terms and conditions of this permit applicable to the activities that it controls or has the right to control.”

Permit requirements: The draft permit includes a series of stormwater control requirements including a 65% phosphorus load reduction target (derived from the Lower Charles River TMDL) that permittees can implement on-site through structural or non-structural controls or through a “Certified Municipal Phosphorus Program.”

Comments are due June 30. We expect EPA to take a lot less time to finalize these documents than MassDEP has taken to finalize its own stormwater program.  

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As I have previously noted, Cass Sunstein, now head of the Office of Information and Regulatory Affairs at OMB under Obama, has called the precautionary principle “deeply incoherent.” Why? Because, as Sunstein notes, “costly precautions inevitably create risks.”

I hope that Sunstein is as troubled as I am by the news, reported recently by Inside EPA, that Mathy Stanislaus, head of EPA’s Office of Solid Waste & Emergency Response, has said that implementing the precautionary principle is a key to EPA’s environmental justice efforts.

When Stanislaus says that “we can’t wait until we have all the conclusive interpretive science to make a decision,” I agree with him, but that’s not the precautionary principle, that’s just a willingness to regulate under uncertainty, which has been a bedrock of environmental law.

However, the precautionary principle is something different and much more insidious. It’s not “regulate in spite of uncertainty” – it’s “regulate because of uncertainty.” It seems to stem from an almost Luddite fear of new technology and, as Sunstein points out, a philosophical view that nature is good and man-made is bad.

Stanislaus is head of OSWER. Is he going to oppose use of new cleanup technologies based on nanotechnology, because the precautionary principle says that we don’t know that nanomaterials are safe?

Stanislaus wants to “operationalize the precautionary principle.” Be worried, be very worried.

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What will happen to state and regional energy and carbon-related regulations if (perhaps when) federal climate legislation is enacted?  If the Attorneys General of California and 6 New England and Mid-Atlantic states have anything to say about it, very little.  

As E&E reported last night, the Attorneys General of Massachusetts, Delaware, Maine, Maryland, Rhode Island, Vermont and California sent a letter this week to Senators Kerry, Graham and Lieberman in which they urge the Senators to incorporate provisions in the climate bill expected to be announced later this month, which save existing state initiatives.  Drawing a parallel to California's emissions standards waiver under the Clean Air Act, they urge coexisting federal and State authority to spur energy independence and reduce global warming pollution.

Some suggestions make a lot of sense for both regulators and the regulated community: allowing time for industries participating in regional programs to transition to federal programs, providing for an exchange of RGGI allowances, and maintaining EPA's authority under the Clean Air Act to regulate in the absence of functional federal programs created by new legislation could all allow the transition between programs to flow more smoothly. 

However, their call to keep cap-and-trade initiatives like RGGI viable in the midst of federal cap-and-trade, and at most impose only a temporary moratorium for a fixed period of time, seems more like a land grab than good policy.  The AGs say it would provide a valuable incentive to ensure rigorous implementation and enforcement of the federal program.  No. Overlapping cap-and-trade programs would only create a mess.  A nationwide and comprehensive cap-and-trade program is clearly preferable, for both the economy and achieving reductions in carbon dioxide emissions. 

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Last week, Judge Thomas Varlan handed the power plant sector a major win in the NSR enforcement arena, ruling that economizer and superheater replacement projects in 1988 at the TVA Bull Run plant were routine maintenance not subject to NSR/PSD regulations. Judge Varlan ruled for the TVA notwithstanding that: 

The projects cost millions of dollars (but less than $10M each)

They extended the life of the plant by 20 years

The costs were identified as capital, not maintenance, expenses

The projects were more extensive than other economizer/superheater projects that had previously been implemented at the Bull Run facility

Why did the Court rule for the TVA?

Although expensive, the projects’ costs were consistent with a wide range of maintenance projects conducted at Bull Run during the time frame

These projects were routine in the industry, even if not commonly performed more than once at individual facilities

Life extension, while a result of the projects, was not their primary purpose

If this decision is upheld on appeal, it will significantly weaken EPA and citizen NSR/PSD enforcement efforts in the power plant sector – at least in the Sixth Circuit, where there are a lot of coal-fired power plants.

Whether the decision is right or wrong – and neither reversal nor affirmance by the Sixth Circuit would surprise me – I’d like to take this opportunity to get on my soapbox about the NSR program as a whole. Why are we fighting about whether projects implemented 22 years ago were routine maintenance? Wouldn’t it make more sense to rely on trading programs that are proven to work cost-effectively to reduce emissions than to try to figure out whether replacement of a superheater provides sufficient leverage to require a power plant to install a scrubber or SCR?

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Last week, EPA proposed to veto a permit for the No. 1 Spruce Mine in West Virginia. Yesterday, EPA went much farther, announcing new guidance – effective immediately – which will impose numeric water quality based effluent limits, or WQBELs, on effluent from surface mining projects. EPA has at least tentatively concluded that high conductivity resulting from discharges of mountaintop fill has adversely affected streams downstream of surface mining operations.

The guidance is fairly straightforward – and for those to whom is it not sufficiently simple, EPA has provided a six-page summary version. Basically, EPA has concluded that permits for mountaintop mining must contain WQBELs that will ensure that in-stream conductivity levels do not exceed 500 microsiemens per centimeter (500 uS/cm). If modeling suggests that mining activities will result in any level above 300 uS/cm, “EPA should work with the permitting authority to ensure that the permit includes conditions that protect against conductivity levels exceeding 500 uS/cm.”

If you’re wondering what those levels mean and how big an impact the requirement to impose WQBELs will have, E&E Daily reported that EPA Administrator Jackson stated last evening that there are "no or very few valley fills that are going to meet this standard."

Though the guidance is effective immediately, EPA is characterizing it as a proposal and will take comment until December 1, 2010.

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Last year, EPA delayed implementation of the Bush EPA’s Aggregation Rule; at the time, I said that the rule was on life support. Earlier this week, EPA announced that it was formally proposing to revoke the aggregation rule. It looks as though the rule is now off life support and it’s time for the last rites.

The aggregation rule always seemed to me a piece of simple, common-sense regulatory reform; it was not a case of wild-eyed right wing radicals trying to gut environmental regulations. The basic issue is this. EPA wants to make certain that regulated facilities don’t avoid NSR review by carving big projects up into lots of little ones, each of which might escape review. That’s a perfectly reasonable goal, but I still don’t understand what’s wrong with having a simple test – whether the separate projects are “substantially related” – to determine whether to aggregate them. One way to put it is to ask why EPA would ever want to aggregate projects that are not “substantially related.” 

EPA has stated that the term “substantially related” is “vague.” It may not be perfect, but few things are in this world, particularly the world of NSR regulation. In any case, that very vagueness would give EPA a lot of discretion in determining whether aggregation would be required. EPA also noted that the rule fails “to consider a company’s intent.” Is it really better for EPA to be in the business of determining a company’s subjective intent than to answer the objective question of whether projects are in fact substantially related?

After criticizing the subjective element of EPA’s preferred approach, I should hesitate to speculate about EPA’s motives here, but this is what I think EPA’s proposal is about. EPA believes that the NSR program is its best tool for obtaining emissions reductions and it will craft every piece of the NSR program to provide maximum ability to coerce reductions – regardless of whether such coercion is consistent with the statutory provisions or whether the regulatory approach is cost-effective. Moreover, EPA’s position pretty much explicitly states that it does not trust business – a truer look into EPA’s views on the regulated community than any platitudes EPA may provide about wanting to work with the business community in crafting workable environmental regulations.

My depression is substantially related to the flaws in the NSR program.

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Some stories are just to much fun to ignore. Late last week, the GAO issued a report on the joint EPA/DOE Energy Star program. The sub-head says it all: “Covert Testing Shows the Energy Star Program Certification Process Is Vulnerable to Fraud and Abuse.” GAO found that it was able to obtain Energy Star certifications for 15 out of 20 bogus products for which it had sought certification, including a gasoline-powered alarm clock and a room air cleaner for which GAO submitted a picture of a space heater with a feather duster attached.

What significance, if any, does this story have with respect to broader debates about environmental regulation and the effectiveness of EPA? To be fair, not very much. On the other hand, for those with concerns about bureaucracy, the GAO investigation provides legitimate grist for the mill. If EPA and DOE can’t effectively manage a relatively small program such as Energy Star, how can they be expected to manage the many-headed monster that will be climate change and energy legislation?

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EPA has finally issued its formal reconsideration of the Johnson Memo. As EPA had telegraphed, it confirms that a pollutant is only subject to PSD permitting requirements when that pollutant is subject to “a final nationwide rule [that] requires actual control of emissions of the pollutant.”

As EPA had also already indicated, the reconsideration states that PSD permitting requirements are triggered, not when a rule is signed or even on the effective date of the rule, but instead when the nationwide controls actually take effect under the rule. In other words, assuming that EPA finalizes the mobile source GHG rule as proposed, its effective date would be January 2, 2011, and stationary sources would be subject to PSD permitting requirements for GHG as of that date.

For those who want somewhat more detail, but aren’t up for reading the 114 pages of the reconsideration, EPA has issued a very helpful fact sheet – only 4 pages.

In short, no surprises, but further confirmation, for those who needed it, that EPA continues to march on in its regulation of GHG under existing Clean Air Authority. I believe that the next move belongs to Senator Murkowski. 

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Last week, I noted that Gina McCarthy, EPA’s Assistant Administrator for Air and Radiation, suggested that, in the short run, the most significant pressure on inefficient energy sources would come, not from climate change legislation or from EPA GHG regulations, but instead from all of the conventional pollutant regulations that EPA expects to promulgate that will make use of coal much more expensive. While Gina was referring to a variety of air regulations, such as CAIR, MACT rules, and SIP revisions following a more stringent PM standard, even Gina may have been too narrowly focused. Today, EPA announced that it was proposing to veto a mountaintop mining permit issued to the Spruce No. 1 Surface Mine, in West Virginia.

The proposed veto was based on a number of interrelated concerns, including impacts on water quality and fish and wildlife, an inadequate mitigation plan, and the cumulative impacts of Spruce No. 1 and other mining operations in the aptly named Coal River basin. The cumulative impact issue must, by itself, terrify mine owners.

I’m sure that EPA made this decision (rightly or wrongly) on the merits under the Clean Water Act. Nonetheless, does anyone think that Gina McCarthy - and Administrator Jackson - are not aware of the broader picture? Even if they were not, the environmental organizations that are looking to end use of coal certainly are. When one piles CAIR and mercury and increasingly stringent particular standards on top of limitations on mountaintop mining, the phrase that occurs to me is indeed “cumulative impact.” However, it’s the cumulative impact of all of these regulations and regulatory decisions on those using – or financing – coal plants that set me thinking. Perhaps that’s why a separate story in today’s GreenWire was headlined “Coal: Outlook grim for new power plants”

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Now that health care legislation has passed, the question is whether passage of the health care bill will unleash a cascade of other legislation, including a climate change bill, or whether Congress will be so exhausted and so polarized that nothing else will happen. I lean to the former position, but only time will tell. One positive indication was Senator Graham’s statement that, notwithstanding his views on the health care bill, he will continue to work towards passage of a climate change bill. Another shout out seems in order for Senator Graham.

The second positive indicator is the chorus of concern recently voiced by environmental groups about the direction in which climate legislation seems to be heading. If the Center for Biological Diversity is expressing grave concern, I suspect that negotiations are probably about where they need to be for a bill to pass. The concern expressed most recently by environmental groups is that the Senate negotiations appear to be headed towards inclusion of language preempting both state regulation and EPA regulation under existing Clean Air Act authority – both of which seem to me to be no-brainers. 

I’m sure that the CBD truly is appalled at the idea of preemption; I hope that the more mainstream environmental groups are more practical and will simply use their opposition as a bargaining chip. While I’m not really in the prognostication business, I’d be about willing to guarantee that there won’t be a bill unless there is preemption language.

Another issue that’s jumped up on the radar screen is off-shore drilling, with a number of Senators indicating that it has to be part of a bill, while 10 Democrats have written to Senators Kerry, Graham, and Lieberman indicating that they may not be able to support a climate change bill that provided for increased off-shore drilling.

Finally, E&E Daily reported that Obama staffers, including Carol Browner, met with Senate Democrats yesterday to discuss ways to move Senate legislation in April. The report indicates that Kerry, Graham, and Lieberman hope to draft a bill in the next few weeks. I don’t think we’re going to see the Senate pass a bill any time soon, but it does look as though things are starting to move.

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Last week, Judge John Darrah handed the government a defeat in a PSD/NSR enforcement action, when he ruled that the requirement to obtain permits under the PSD program prior to making major modifications was solely a pre-construction obligation and did not constitute a continuing violation. 

United States v. Midwest Generation was one of the recent wave of government PSD/NSR actions, filed last summer. The problem with the government’s case was that Midwest Generation had purchased the six facilities at issue in the case from Commonwealth Edison in 1999 and all of the alleged changes but one were made prior to the purchase.

Although the court thoroughly reviewed the case law – and found it generally supportive of its conclusion – its major focus was on a plain reading of the statutory language (and we know how much this Supreme Court likes plain readings). The relevant statute provision provides that:

No major emitting facility … may be constructed in any area to which this part applies unless … a Permit has been issued…. 

To Judge Darrah,

the plain meaning of the statute’s introductory language … thus prohibits the construction of a “major emitting facility’ unless [the statutory requirements] are met…. On its face, nothing in § 7475 prohibits the subsequent operation of such a facility without a permit. (Emphasis in original.)

There are other counts in the government’s complaint, including claims of operating permit violations. However, the decision on the NSR/PSD claims is quite significant. The case does not simply dismiss, as some other decisions have done, penalty claims. This is not a statute of limitations decision (though the Judge did also follow most other cases in dismissing, on statute of limitations grounds, the penalty claims with respect to the one alleged modification that occurred after Midwest Generation bought the facilities). As Judge Darrah made clear, the government is not entitled to “any relief on those claims – injunctive or otherwise.” (Emphasis in original.)

Score one of generators – particularly merchant generators who bought facilities after modifications had already been made.

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Last week, I posted about improvements in air quality since 1990. It’s a good thing air quality is improving, because, at the same time, the science keeps suggesting that ever lower pollutant levels pose risks to public health. The latest news was EPA’s draft review of the appropriate level at which to set the National Ambient Air Quality Standard for particulate matter.

EPA most recently revised the PM standard in 2006, setting it at 15 ug/m³, notwithstanding the staff recommendation to set the standard at between 13 ug/m³ and 14 ug/m³. As I have discussed, EPA’s decision was struck down by the D.C. Circuit Court of Appeals, because EPA could not justify its departure from the scientific recommendations it has received.

Now, the draft Policy Assessment has concluded that the 15 ug/m³ is not sufficiently stringent. The draft suggested two ranges for potential revised standards:

Annual standard of between 12 and 13 ug/m³; 24-hour standard of 30 to 35 ug/m³

Annual standard of between 10 and 11 ug/m³; 24-hour standard of 25 to 30 ug/m³

A more stringent PM standard is going to have significant implications. These include:

1.         Strengthening the logic for three pollutant legislation. First, the health effects described in the Policy Assessment suggest the need for such legislation, because the targets of three pollutant legislation are among the big contributors to PM emissions. Second, in order to meet a more stringent standard, reductions of the sort contemplated in three pollutant legislation are going to be necessary.

2.         It may be simply a restatement of the first point, but the pressure on old fossil fuel plants, particularly old coal plants, is only going to increase as a result of the Policy Assessment. In this context, it is noteworthy that, at a seminar on Friday, Gina McCarthy, EPA’s Assistant Administrator for Air and Radiation, in discussing the number of rules EPA is obligated to issue in the next 12-18 months, indicated her sense that the biggest impact on GHG emissions might not result from EPA’s tailoring rule and direct regulation of GHGs, but would instead result from the secondary effect from the full panoply of traditional pollutant regulations on EPA’s docket. In other words, once EPA is done with new CAIR regulations, MACT rules, and SIP revisions following a more stringent PM standard, the economics of old coal plants will be such as to force switching to more climate-friendly energy sources, even aside from direct GHG regulation.

I think that Gina is probably right, and I’m particularly appreciative that she is able to take the long view. In the short run, coal remains cheap. Moreover, traditional control technologies for SO₂ and NO_x require energy, increase station service, and thus actually do not help with GHG reductions. Nonetheless, if one does take the long view, more stringent traditional regulation, including that resulting from more stringent PM standards, will increase the cost of fossil fuels and help drive the economy towards energy sources that are more climate friendly.

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I know that despair is always more fashionable than optimism, but it is sometimes useful to remember that not everything is going to hell in a hand basket. Yesterday, EPA issued a press release announcing publication of its latest report on trends in air quality. The report, titled “Our Nation’s Air: Status and Trends Through 2008”, makes clear that, overall, air quality has gotten significantly better, particularly since 1990.

What I find most notable is that reductions in NO_x largely occurred after 2002, whereas reductions in other pollutants, such as PM and SO₂, have occurred since 1990. Notice anything about these dates? After 1990, the acid rain trading program came into effect. With respect to NO_x, the report itself acknowledges that the improvements resulted from implementation of the NO_x SIP call and EPA’s NO_x Budget Trading Program. 

What do you know? Trading programs work. Anyone in Congress pondering climate legislation paying attention?

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It’s difficult to keep up with the various moves in Congress, attempting either to advance climate change legislation or to preclude EPA climate change regulation. On the advance side, E&E Daily had a very helpful summary earlier this week on the various issues affecting those senators that will need to be brought on board to reach 60 yes votes in the Senate. The identified issues include, not surprisingly: (1) coal, (2) nuclear power, (3) trade-sensitive industries, (4) oil and gas drilling, and (5) sector-specific limits. In what is probably a sidelight to the whole debate, Vernon Ehlers, a Republican, but the first research physicist elected to Congress, has taken climate change skeptics to task, saying that the scientists relied on by the skeptics are not “the experts in the field.”

On the preclusion side, Congress is being deluged with requests, including from some of its own members, to stop EPA from regulating GHG under existing regulatory authority. In the past week:

20 governors (if you include Puerto Rico and Guam) wrote to Congress opposing any EPA regulation of GHG under existing authority. The letter specifically says that they seek not just a delay, but preclusion of any regulation absent specific Congressional authorization.

98 industry groups, including such left-leaning groups as the U.S. Chamber of Commerce and the API, wrote to all senators in support of Senator Murkowski’s resolution to disapprove of EPA’s endangerment finding. The letter specifically asserts that EPA’s tailoring rule “has little legal foundation” – while at the same time criticizing for not going far enough to protect smaller sources of GHG.

Senator Levin wrote a letter to Senator Kerry which, while indicating support for climate change legislation, stated that industrial sources should not be regulated for at least 10 years

I still find it difficult to believe that the resolution disapproving the endangerment finding will be enacted. While Senator Murkowski recently referred to EPA’s efforts as a “backdoor” attempt to regulate GHG, EPA’s is doing pretty much what the Supreme Court ordered it to do, and it seems to be making every effort to minimize the economic impact of those regulations. I still agree that EPA regulation will be a mess, and it’s not obvious to me that the tailoring rule will survive legal challenge, but it’s difficult to see how EPA could be doing anything less than what it is doing in light of Massachusetts v. EPA.

All of which gets back to those fence sitters and the difficulty of getting 60 Senators to agree on enough to move a bill. One aspect is looking more and more certain. If there is a bill, state authority is going to be preempted and EPA authority under prior CAA provisions is going to be superseded.

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Late last week, Senate and House Democrats piled more pressure on EPA’s efforts to regulate greenhouse gases under existing Clean Air Act authority. Senator Rockefeller and Representatives Rahall, Boucher, and Mohollan introduced companion House and Senate bills to preclude EPA regulation of stationary source GHG emissions for two years. Unlike the resolution sponsored by Senator Murkowski, which would simply overturn the endangerment finding and thus preclude all GHG regulation, the new legislation would specifically allow mobile source regulation to proceed.

As long as the White House and important committee chairs oppose the legislation, it still seems unlikely to pass, though there have been enough political surprises in the past few months, and there are enough moderate Democrats supporting some kind of preclusion of EPA regulation, that I would no longer rule it out.

Even if the bills are not enacted, the filing of the legislation remains noteworthy. First, Representative Boucher was one of the early, and perhaps most surprising, supporters of cap-and-trade legislation. At a policy level, support for legislation and opposition to EPA regulation under existing authority is perfectly reasonable. I should hope so, because it’s a view that I share. Nonetheless, it still strikes me as a telling example of how much momentum seems to be building to slow down the more aggressive aspects of EPA’s approach to GHG regulation.

The flip side of this coin is EPA’s announcement that it will not require permits for GHG emissions until 2011 and that the program will initially cover only sources emitting at least 75,000 tpy of GHG. Time will tell whether administration opposition and EPA’s moves to limit the pain of stationary source GHG regulation will be enough to beat back the opponents of any GHG regulation under existing authority.

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Seemingly just in time to lend support to the revived idea of a carbon tax that we noted on Monday, an Obama Administration inter-agency workgroup has released a report that attempts to do the critical math necessary to put a price tag on CO₂ emissions.

The report sets out four dollar figures that represent the “social cost of carbon,” or the potential damages associated with not stopping the emissions of each incremental ton of CO₂. The figures, which differ due to the use of different models and discount rates, designed to capture different views about the impact of climate on future decisions, include such damages as changes in net agricultural productivity, human health, property damages from increased flood risk, and the value of ecosystem services. 

Not surprisingly, the numbers vary widely – spanning, in 2007 dollars, from $5 to $65 per ton for 2010 emissions, up to as high as $136 per ton for 2050 emissions.   The report outlines the potential shortcomings of the figures in detail, for instance, the potential impact of the other 5 greenhouse gases included in the EPA’s endangerment finding which have not yet been quantified, and the possibility of  “tipping point” scenarios in climate systems that could drastically change the marginal impact of each ton of emissions.  

However, even given these limitations, this valuation could be a critically important step towards determining such figures for use in policies like a carbon tax.  After all, internalizing the externality and cost to society is one main purpose of a carbon tax.

The more immediate impact of the report may also be significant.  Federal agencies are required, by Executive Order 12866, to assess the costs and benefits of regulations before deciding to act.  These figures will be used to incorporate the social cost of carbon into this analysis for all agency decisions, even those which might only have a small impact on global emissions.  As most federal agency decisions will have some impact on global emissions, even if only marginal, adding in the cost of CO₂ could have wide-ranging implications.

 

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The uncertainty surrounding EPA regulation of GHG emissions under existing Clean Air Act authority was driven home for me last week when the same conference resulted in two diametrically opposed headlines in the trade press. Regarding a forum held by the International Emissions Trading Association, the Daily Environmental Reporter headline was “Existing Law Too Inflexible to Accommodate Market-Based Emissions Cuts, Executives Say.” Over at ClimateWire, the headline was “Some Companies Want EPA to Establish a CO2 Cap-and-trade System.” 

Of course, in fairness to the two publications, both headlines are true – and that’s the problem with the current EPA efforts. Notwithstanding current efforts in Congress to preclude EPA regulations, the endangerment finding seems almost certain to withstand legal challenge. Thus, GHGs will be regulated. Almost everyone wants that regulation to be in the form of a cap-and-trade program, but the last time EPA tried that without explicit Congressional authority, it was shot down in the courts. This may be why the Daily Environment Report story indicated that Vickie Patton of EDF had “pleaded” with executives to support cap-and-trade legislation.

At this point, the most likely near-term outcome appears to be no federal cap-and-trade legislation, and a stripped-down EPA regulatory program that would only apply to really large emitters, so that the inefficiencies inherent in the facility-specific BACT approach won’t appear too unreasonable, because the only people complaining about it will be some very unpopular polluters and all of my economist friends.

Or, as the Stones might have said in their more cynical moments:  Not only can’t you get what you want, but you can’t even get what you need.

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Yesterday, EPA Administrator Jackson issued a letter to Senator Jay Rockefeller responding to certain questions regarding EPA regulation of GHGs under existing Clean Air Act authority, including promulgation of the so-called “Tailoring Rule”, describing how stationary source regulation under the existing PSD program would be phased-in once GHGs are subject to regulation. Here are the highlights:

EPA still expects to promulgate the Tailoring Rule by April 2010.

The GHG permitting threshold will be “substantially higher than the 25,000-ton limit that EPA originally proposed.”

No permits will be required until 2011. Initially, only facilities otherwise subject to CAA permitting will be required to obtain permits. The smallest facilities will not be subject to GHG permitting before 2016.

You can talk all you want about global warming, but it seems to me as though it’s EPA that’s feeling the heat. EPA has clearly heard the threats of a Congressional resolution barring EPA regulation of GHGs under existing authority. The reaction from Congress is all the evidence one needs. Both Senators Rockefeller and Murkowski praised the letter. While neither indicated that the letter would be sufficient to stop them from pursuing Congressional action, it might be enough to peel off some fence-sitters who might otherwise have felt compelled to support the legislation.

What does EPA’s statement of intent mean for various law suits swirling around this issue?

I don’t see any impact on litigation against the Endangerment Finding; it will still proceed and it will still lose.

The likelihood of law suits from environmental groups alleging that EPA is shirking its responsibilities under the CAA has certainly increased. Moreover, while EPA has a lot of discretion, I could imagine courts saying to EPA:  “Nice try, but the CAA doesn’t give you the kind of flexibility you have asserted in the Tailoring Rule. Only Congress can provide that flexibility by amending the CAA.” In this respect, the situation is similar to litigation over the CAIR regulations, which pretty much everyone liked, but which were struck down because the approach EPA took in the CAIR rule wasn’t consistent with the CAA.

Finally, any kind of regulation by EPA will provide an additional defense to private nuisance litigation. As I have previously noted, one question raised by the nuisance law suits is whether EPA has regulated GHG in a manner sufficient to “displace” the common law of nuisance. In this respect, the sort of program described yesterday by Administrator Jackson may be the best possible outcome for the regulated community, because it will narrow EPA regulations while providing a ground to preclude nuisance litigation.

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The grand total is 16 separate challenges to EPA’s endangerment finding, according to Greenwire. I’m not one of those lawyers who regularly bash the legal profession. I still recall my law school professor, Henry Hansmann, stating that the role of lawyers is in fact to be transaction-cost minimizers, and I think that that is largely true. That being said, I am certainly wondering what all of this litigation is about.

The endangerment finding is basically a scientific determination. As I have previously noted, EPA discretion in this area is substantial and the likelihood that a court would reverse EPA’s scientific determination seems about as close to zero as possible. Apparently, some of the law suits do not attack the underlying scientific underpinnings of the determination, but instead attack EPA’s procedures for carrying it out or the expected regulatory and thus economic implications of the finding. If possible, these seem even less likely to succeed.

Finally, before we get to the merits of either of these arguments, there are substantial standing questions, given that the endangerment finding itself imposes no regulatory requirements on any of the plaintiffs.

It is more likely that these law suits are tactical in nature, filed as part of the broader battle to stop EPA from using existing Clean Air Act authority to regulate GHGs. I support that battle in that I agree that regulation under existing authority will be a nightmare. However, I think it’s a losing battle and I don’t see the litigation challenging the endangerment finding as likely to help in any case.

Hope springs eternal, I suppose.

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Earlier this week, the Southeastern Legal Foundation filed a petition for review of the EPA Endangerment Finding with the District of Columbia Court of Appeals. It’s not really surprising that someone filed suit, but the list of plaintiffs is interesting – though more for who is not on it than who is. There is not a single Fortune 500 company on the list of plaintiffs. Whether that speaks to the larger corporations doubting the merits of the challenge or simply making a strategic decision that it is not worth it to be associated with the litigation, I leave for them to say.

I will say that the likelihood that this challenge succeeds is vanishingly small. Ever since Ethyl Corporation v. EPA, courts have given EPA extraordinarily broad discretion when regulating on “the frontiers of scientific knowledge.” Whatever concerns dissenters may have about climate change science, I think it is pretty clear that EPA has a stronger record to support the Endangerment Finding than it had in Ethyl Corporation.

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Given the stories this week of continuing efforts in Congress to preclude EPA from regulating GHGs under existing Clean Air Act authority, I couldn’t resist this headline. 

The first story is that three House members, including two Democrats (House Agriculture Committee Chair Collin Peterson and Missouri Rep. Ike Skelton) have followed the lead of the Senate – where there are also Democratic sponsors – and introduced legislation preventing EPA regulation. According to Representative Skelton, the bill would “get the EPA under control.”

In light of the efforts in Congress, it just seemed too perfect not to note that EPA’s Assistant Administrator for Air, Gina McCarthy – never one to mince words – was quoted in GreenWire today as saying that

We are furiously ensuring that we get the light-duty vehicle out and ready in March…. There is no hesitation about that. It will be happening.

I don’t doubt that EPA is working furiously to get the rule done, particularly since President Obama has acknowledged that a cap-and-trade bill might not get passed this year. Whether EPA is actually furious, I don’t know. It does appear that some members of Congress may be furious in March if EPA goes ahead and issues the rule. Stay tuned.

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As we noted a few weeks ago, EPA has proposed lowering the NAAQS to a range of from 0.060 ppm – 0.070 ppm. Earlier this week, EPA’s Clean Air Science Advisory Committee, or CASAC, met and endorsed EPA’s proposed range. Some CASAC members did express concern about EPA’s proposed secondary seasonal standard, intended to protect crops and forests. However, overall, the CASAC seal of approval is pretty much the end of this argument.

It is important to recall how we got here. CASAC already endorsed the 0.060 ppm – 0.070 range several years ago, before EPA’s last ozone standard was issued. It was EPA’s refusal to follow the CASAC recommendations, and instead propose a 0.075 ppm standard, which led to litigation challenging the standard and the current controversy. 

It is difficult to overstate the weight given the CASAC’s views. Indeed, EPA’s fine particulate standard was vacated in significant part because EPA failed to follow CASAC’s recommendations.

Thus, a standard that does not comport with CASAC’s recommendations would likely be rejected by the courts as arbitrary and capricious. However, I suspect that CASAC’s influence also runs the other way. Assuming that EPA does indeed promulgate a revised NAAQS in the 0.060 ppm – 0.070 ppm range, and assuming that industrial interests challenge the new standard, it will be very difficult to establish that the new standard is arbitrary and capricious if it has been endorsed by CASAC. 

As I noted in connection with the fine particulate standard, it’s not obvious to me that this is a good thing. Depending on whose ox is being gored, anyone can get up on a soapbox and say that they want science to be free of politics. However, these are really policy decisions. It’s one thing to acknowledge that these are complicated issues and we thus have to allow Congress to delegate its authority to the EPA administrator. It’s another effectively to delegate the decision further to the CASAC, which is about as obscure an acronym body as we have. Do we really want standards which will result in compliance costs in at least the tens of billions of dollars being made by groups which truly are not accountable in any meaningful way?

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The U.S. Securities and Exchange Commission (SEC) issued interpretive guidance yesterday which requires publicly traded companies to consider the impacts of climate change – both the physical damage it could cause, as well as the economic impacts of domestic and international greenhouse gas emissions-reduction rules – and disclose those risks to investors. As we noted when discussing the potential for this announcement in October, the disclosure requirements are likely to affect companies in a wide range of industries. 

In its press release announcing this decision, the SEC said that this interpretive guidance neither creates new legal requirements nor modifies existing ones; rather, SEC guidance is intended to provide consistency among issuers in their disclosure to shareholders of bottom-line risks and consequences. The guidance will cover:

• Risk Factors
• Description of the Business
• Legal Proceedings
• Management’s Discussion and Analysis

The interpretive release will be published in the Federal Register and posted on the SEC’s website. The press release summarizes the key points as these:

• Impact of Legislation and Regulation: When considering potential disclosure obligations, companies should determine whether the impact of existing laws and regulations regarding climate change is material. In some cases, companies should also evaluate the potential impact of pending legislation and regulation related to environmental issues and climate change.
• Impact of International Accords: Companies should consider, and disclose if material, the risks related to or effects upon their business of international accords and treaties relating to climate change.
• Indirect Consequences of Regulation or Business Trends: Legal, technological, political and scientific developments regarding climate change may create both new opportunities and new risks for companies. For example, a company may face decreased demand for goods that produce significant greenhouse gas emissions, or increased demand for goods that result in lower emissions than competing products. Companies should consider the actual or potential indirect consequences they may face due to climate change-related regulatory or business trends.
• Physical Impacts of Climate Change: Companies should also evaluate for disclosure purposes the actual and potential material impact of environmental matters on their business. It is not entirely clear what the SEC means by this, although one example might be agricultural risks associate with altered climate trends that appear to have reduced or increased annual rainfall in particular locales.

When the interpretive release is available, we will provide you with full information. It is likely that pressure from shareholder groups on this issue will continue (here, for instance, is CERES' statement), given that cap-and-trade legislation appears bogged down in Congress and that the prospects for EPA regulation under the Clean Air Act are unclear.

 

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Last month, I noted with some trepidation that EPA Administrator Jackson had stated that "I don't believe this is an either-or proposition," referring to the possibility that there could be both climate legislation and EPA regulation of GHGs under existing EPA authority. Today, it’s looking more like a neither-nor proposition.

First, with respect to the prospects for climate change legislation, Senator Gregg was quoted in ClimateWire as saying that “the chance of a global warming law passing this year was ‘zero to negative 10 percent.’" Whether Senator Gregg has the odds pegged exactly right, legislation certainly seems less likely than was thought even a month ago, as health care legislation struggles and Scott Brown (R. Mass.) takes office.

At the same time, Senator Murkowski is moving forward with a resolution to disapprove EPA’s endangerment finding, in order to preclude EPA regulation under existing authority. While binding Congressional action to preclude EPA regulation is unlikely, because it would require approval by President Obama, Senate action does not appear out of the question at this point, given that Senator Murkowski has obtained three Democratic co-sponsors of the resolution, Senators Sen. Blanche Lincoln (D-Ark.), Ben Nelson (D-Neb.) and Mary Landrieu (D-La.). A Senate vote in favor might not preclude EPA regulation without House and Presidential concurrence, but it’s hard to see how such a vote wouldn’t be a further black eye for the administration.

The situation certainly seems to warrant ClimateWire’s lede that “Climate chaos reigned on Capitol Hill yesterday.” Unfortunately, as I have noted previously, uncertainty is not really to anyone’s benefit. Does anyone doubt that, in the longer run, there will be some kind of climate regulation in the U.S.? How are regulated entities supposed to do cost-effective planning for such regulation in the face of this kind of uncertainty?

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Last week, I reported on a decision by EPA Administrator Jackson, in an appeal from a permit issued by the Kentucky Division of Air Quality, to the effect that the developer of an Integrated Gasification Combined Cycle (IGCC) plant, which converts coal to gas for combustion, had to consider use of natural gas as BACT, because the plant already had plans to use natural gas as a startup and backup fuel.

This week, Administrator Jackson went one step further – granting an objection to a permit for a traditional coal plant in Arkansas on the ground that it did not consider IGCC as BACT. As with the Kentucky decision, the issue in the Arkansas case was whether requiring IGCC would be to “redefine” the source. Also as with the Kentucky decision, the Administrator ruled that, while requiring consideration of IGCC as BACT might be to redefine the source, neither the permittee nor the Arkansas Department of Environmental Quality had built a record sufficient to make that conclusion.

As David Bookbinder of the Sierra Club succinctly put it in Greenwire: "Control technology for conventional coal is IGCC and control technology for IGCC is natural gas." In short, the way to control emissions from a coal plant is to burn natural gas instead. 

I think that Bookbinder is exactly right concerning the import of the two decisions. I also think that the result is nuts. Can anyone say with a straight face that they really believe that this approach is consistent with the statutory intent? As I noted last week, EPA didn’t think so when they wrote in the New Source Review Workshop Manual that

applicants proposing to construct a coal-fired electric generator, have not been required by EPA as part of a BACT analysis to consider building a natural gas-fired electric turbine although the turbine may be inherently less polluting per unit product (in this case electricity).

I also think that this is what happens when the agency ties itself into knots to reach a certain result based on statutory language written in another time for another purpose. Might there be a lesson in this for EPA’s efforts to regulate GHG utilizing existing CAA authority?

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Last April, I noted that the one certainty associated with EPA regulation of greenhouse gases under existing Clean Air Act authority was that there would be unintended consequences. If anyone doubted that this would be so, they might want to read some of the comments submitted to EPA in connection with EPA’s proposed Tailoring Rule, which would exempt facilities emitting less than 25,000 tons per year of CO_2e from the PSD provisions of the Clean Air Act after CO_2e becomes a regulated pollutant under the CAA.

Greenwire has a helpful collection of some of the more notable comments. What I found most interesting is that the National Association of Clean Air Agencies, or NACAA, has told EPA that the transition to the new rule will not be as simple as EPA had thought – tough to disagree with that one – and that states will need more time to adapt their own regulations to the new regime. NACAA is thus proposing that EPA determine that CO_2e is a “regulated pollutant,” not when the mobile source rule is promulgated (expected in March 2010), but rather when those regulations take effect in 2011 or as late as January 2012. However, David Bookbinder of the Sierra Club, which has been generally supportive of EPA’s approach to the Tailoring Rule, took the position to Greenwire that EPA does not have the discretion to allow states more time.

Meanwhile, the Center For Biological Diversity, which has pretty much staked out the extreme left in this debate, is still saying that EPA is proposing to take too much time to regulate smaller CO_2e emitters. If anyone thought that EPA could propose a Tailoring Rule that would not be subject to litigation, the likelihood seems to be growing smaller daily.

I still think that, if a climate bill doesn’t pass and EPA regulates GHG under existing CAA authority, it will not be long after the program goes into effect that there will be an audible sound as every stakeholder in the nation slaps its actual or metaphorical forehead and says “Did we really do that?!”

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As I noted on Friday, EPA has proposed to revise the NAAQS for ozone to a range of from 0.060-0.070 ppm, a reduction from the 0.075 ppm standard promulgated in 2008 by the Bush administration.  EPA’s analysis of the available date indicates that 650 counties – out of 675 counties which have ozone monitors – would be in violation of a 0.060 ppm standard. For those counting, that’s more than 96% of all counties in nonattainment. Even if the standard were set at 0.070 ppm, 515 counties would be in non-attainment.

In fact, EPA estimates that, even by 2020, 203 counties would remain in nonattainment at 0.060 ppm and 99 counties would be in nonattainment at 0.070 ppm. EPA’s estimate is that the cost to comply with a 0.060 standard would be $52B to $90B per year in 2020. I confess that I have not reviewed the rule closely enough to know exactly what that means, given EPA’s prediction that more than 30% of all counties would not be in compliance at that time. We’re going to spend $52B to $90B per year to comply with the standard – and still not meet the standard?

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On Wednesday, EPA released a proposal to reduce the primary National Ambient Air Quality Standard for ground-level ozone from the 0.075 ppm standard set by the Bush administration in 2008 to a range of from 0.060-0.070 ppm. EPA also proposed to set a secondary standard intended to protect sensitive ecological areas, such as forests and parks.

As almost everyone knows, the 2008 standard was, to put it mildly, controversial from the start. The proposal today was based on recommendations made to EPA by its science advisors prior to the 2008 rulemaking. Following apparent intervention from the White House, then EPA Administrator Stephen Johnson set the primary standard above the scientific recommendation and declined to promulgate a secondary standard. Not surprisingly, a number of environmental organizations and public heath groups sued EPA over the failure to promulgate a new NAAQS consistent with the scientific recommendations.

Given that the Supreme Court already ruled, in Whitman v. American Trucking Associations, that EPA may not consider cost in setting NAAQS (and given the Bush EPA record before appellate courts), the 2008 standards always had “arbitrary and capricious” written all over them, so it’s no surprise that the Obama administration revisited the issue. Nonetheless, it is worth noting that, unlike most of EPA’s rules, the projected benefits of this rule may not even exceed the costs.  According to EPA, the benefits of the rule would range from $13B to $100B, while the costs are projected to range from $19B to $90B.  Not much of a net benefit, it seems to me.  (I'm still waiting for Cass Sunstein to ride to the rescue of cost-benefit analysis in this administration.)

EPA expects to finalize the rule by August 31. Then the rubber really hits the road – when states have to revise SIPs in order to meet the new standards.

 

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Shortly before the holidays, EPA Administrator Jackson issued an Order in response to a challenge to a combined Title V / PSD permit issued by the Kentucky Division for Air Quality to an Integrated Gasification Combined Cycle, or IGCC, plant. The Order upheld the challenge, in part, on the ground that neither the permittee nor KDAQ had adequately justified why the BACT analysis for the facility did not include consideration of full-time use of natural gas notwithstanding that the plant is an IGCC facility. 

The Order may not be shocking in today’s environment – all meanings of that word intended – but the lengths to which the Order goes to avoid its own logical consequences shows just what a departure this decision is from established practice concerning BACT. BACT analyses have traditionally involved the proverbial “top-down” look at technologies that can be used to control emissions from a proposed facility. In other words, EPA takes the proposal as a given, and then asks what the best available control technology is for that facility. 

In EPA’s own words – from its New Source Review Workshop Manual (long the Bible for BACT analysis):

Historically, EPA has not considered the BACT requirement as a means to redefine the design of the source when considering available control alternatives. For example, applicants proposing to construct a coal-fired electric generator, have not been required by EPA as part of a BACT analysis to consider building a natural gas-fired electric turbine although the turbine may be inherently less polluting per unit product (in this case electricity).

Apt example, don’t you think? (In case you are wondering, EPA’s decision does not discuss or refer to this text from the NSR Manual.)

What was the basis for EPA’s decision here? Largely, it is that the IGCC facility will be designed to burn natural gas as well as syngas and the permittee specifically stated that it planned to combust natural gas during a 6-12 month startup period. On these facts, EPA concluded that the permittee and KDAQ had to do a better job explaining why full-time use of natural gas should be considered “to redefine the design of the source.”

As noted above, EPA went to great lengths to minimize the scope of the decision. It states that the Order:

should in no way be interpreted as EPA expressing a policy preference for construction of natural-gas fired facilities over IGCC facilities.

should not be interpreted to establish or imply an EPA position that PSD permitting authorities should conclude … that BACT for a proposed electricity generating unit is … natural gas.

does not conclude that it is not possible or permissible for the permit applicant … to develop a rationale which shows that firing exclusively with natural gas would “redefine the source.”

EPA does not intend to discourage applicants that propose to construct an IGCC facility from seeking to hedge the risk of investing in … IGCC technology by proposing … utilizing natural gas for some period….

Methinks EPA doth protest too much. If I may say so, this is a freakin’ IGCC facility. Isn’t it obvious that one doesn’t plan or build an IGCC facility if one plans to burn natural gas? Don’t you think that EPA could have taken administrative notice of what IGCC technology is?

All of EPA’s protestations about the Order’s limits may be designed to mollify IGCC supporters, but what does its rationale mean for all of the existing facilities – coal and oil – that are already capable of firing on natural gas? Next time they are subject to NSR/PSD review, must they evaluate the possibility of switching completely to natural gas? As I’ve said here before, yikes!

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EPA announced yesterday that it had reached a settlement with Duke Energy to address allegations of New Source Review violations at Duke’s Gallagher coal-fired generating plant in New Albany, Indiana. A jury had already found Duke liable for certain NSR violations at the plant. The settlement obviates the need for a remedy trial, which had been scheduled for early 2010.

The settlement requires Duke Energy to repower Units 1 and 3 at Gallagher with natural gas or shut them down and to install emission controls at Units 2 and 4. Duke will also pay a $1.75 million penalty and spend $6.25 million on various mitigation projects. 

The settlement is not that surprising, particularly given the prior liability findings. It nonetheless serves as a useful reminder that EPA continues to focus on coal plants and that it is going to use all the tools at its disposal to reduce coal plant emissions. Although the press release does not mention global warming, these settlements are another way for EPA to attack the climate change problem under existing authority, even in advance of rules regulating GHGs under the PSD program.

BTW, if it seems as though I am inundating you with posts today, the blog will be on vacation until January 4, so I wanted to get some last posts done. Happy holidays to all.

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EPA has published its annual Compliance and Enforcement Annual Results FY 2009. It always makes interesting reading. This year, EPA has added something new: a web-based map showing the location of all enforcement actions, with links to summaries of the specific actions taken. It’s actually a little tricky to navigate. I had to find an area of interest and zoom in far enough for the dots to be replaced by flags to be able to click on particular sites and obtain the detailed information.

I can see NGOs making a lot of use of this map, and I therefore recommend that regulated entities spend some time with it as well. Forewarned is forearmed. 

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Earlier this month, EPA released its semi-annual regulatory agenda. True policy wonks can review the agenda here. There are always some nuggets buried in the agenda. This agenda includes two proposed rules governing nanotechnology. They are:

A reporting rule under § 8(a) of TSCA. The rule would require persons who manufacture nanoscale materials to notify EPA of information concerning production volume; methods of manufacture and processing; exposure and release information; and available health and safety studies.

A test rule under § 4(a) of TSCA. The proposed rule would apply to “certain multi-wall carbon nanotubes and nanosized clays and alumina.”

Since the entire point of nanomaterials is that they act differently than the same materials as sizes beyond the nanoscale, it is certainly conceivable that such differences could include impacts on human health and the environment. EPA can therefore reasonably propose rules such as described in the regulatory agenda, requiring testing and reporting. My concern is that EPA not leap to conclusions. EPA often has to regulate under uncertainty; I just don’t want the agency to regulate simply because of uncertainty. Nanomaterials hold the promise of contributing to the solution of numerous environmental problems, even aside from their overall economic promise. 

If EPA were to obstruct the development and use of nanomaterials on the basis of the precautionary principle, the environment, as well as the economy, would likely suffer. Since Cass Sunstein, head the Office of Information and Regulatory Affairs at OMB, has called the precautionary principle “deeply incoherent,” let’s hope that EPA will proceed cautiously, gathering information necessary to determine if regulations are necessary, but not rushing willy-nilly to throw roadblocks in the way of such promising technology.

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As anyone not hiding under a rock has by now probably realized, EPA officially announced Monday that it has concluded that GHG from human activity threaten public health and the environment. Since the announcement was not exactly a surprise, the question remains what impact it will have.

In the short run, the timing certainly seems intended to coincide with the Copenhagen talks and help to demonstrate to other nations that the U.S. is taking concrete steps to address climate change. We’ll see shortly how successful the endangerment finding is in that respect.

Since I spend most of my time down in the trenches, I’m more concerned with the impact of the endangerment finding on the domestic front. There are really three fronts here:

Litigation – If there was any suspense regarding whether anyone would challenge the endangerment finding, such suspense was quickly relieved by an announcement from the Competitive Enterprise Institute that it would indeed sue. CEI’s press release stated that the global warming “models are about to sink under the growing weight of evidence that they are fabrications.” Uphill battle barely begins to describe the likelihood that CEI wins that case.

Prospects for Cap-and-Trade Legislation – Notwithstanding Administrator Jackson’s protestations to the contrary, it’s hard not to see the announcement as a further prod to Congress to get moving, particularly since the Administration keeps saying that it would prefer enactment of a cap-and-trade bill. Even so, however, some members of Congress indicated that the announcement would have little impact, because the endangerment finding was expected and thus adds little new.

EPA Development of Regulations – EPA is moving forward with regulatory development, though Administrator Jackson gave no time line for when stationary source regulations would be promulgated. There was an indication that EPA would issue BACT guidance in advance of issuing NSR regulations. Notwithstanding the promise of BACT guidance, it appears that states are not ready for the brave new world of using the NSR program to regulate GHGs. ClimateWire reported that Bill Becker, executive director of the National Association of Clean Air Agencies, believes that states will have hard time getting ready to process stationary source permits by March.

I actually found the biggest take-away from the announcement to be the Administrator’s statement that she wanted EPA regulations that would be complementary to new legislation. "I don't believe this is an either-or proposition," ClimateWire reported her saying. 

Uh-oh. 

I thought that the deal had always been that legislation would substitute for regulation under the existing CAA. Otherwise, what do the administration’s statements that it would prefer legislation to regulation mean?   I’m having difficulty imagining a world with both a cap-and-trade program and NSR regulation of GHGs.

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According to a report released last week by Environment America, power plants were responsible for 42% of the CO₂ emitted in the United States in 2007, substantially more than any other sector, including transportation. What’s the explanation? Largely, it’s the age of the United States power plants. The report, based on EPA data, states that 73% of power plant CO₂ emissions came from plants operating since prior to 1980.

What’s the solution to this problem, in the absence of cap-and-trade legislation enacting? EPA’s already told us, and we shouldn’t be surprised – promulgation of EPA’s “Tailoring Rule,” subjecting existing facilities emitting more than 25,000 tons per year of CO_2e to EPA’s New Source Review program.

And what’s the problem with this solution? To a significant degree, it’s that it is the NSR program that got us in this mess in the first place. As my friend Rob Stavins has noted, regulatory programs – such as NSR – that impose different requirements based on the age of a facility, known in the lingo as “vintage-differentiated regulations” or “VDR”, not surprisingly lead to the perverse result that older, more-polluting, facilities stay in service longer than if regulations were imposed in an even-handed manner on different vintages of facilities.  In other words, we have the NSR program to thank for the situation described in the Environment America report.

Can anyone doubt, therefore, that application of NSR rules to GHGs will cause those who own such facilities to try to operate them as long as possible without implementing any “modifications” that would trigger application of NSR? Moreover, can anyone doubt that application of NSR rules to new facilities would give old facilities a further cost advantage? Sure, EPA can try to tighten the NSR rules and continue to pursue NSR enforcement cases in order to discourage existing facilities from disguising “life-extension” projects as routine maintenance. However, it’s still a jury-rigged system at best. After all, the program is called New Source Review for a reason.

I’m just a poor country lawyer, but I still think that a cap-and-trade program is a better solution for all sides. Add a traditional three-pollutant piece to it, trade that for elimination of the NSR program in its entirety, and you’d really have something. 

Still dreaming, I know.

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Yesterday, EPA released its effluent guidelines for construction sites. The guidelines establish the first national standard containing numeric limitations on stormwater discharges. The final standard imposed is 280 nephelometric turbidity units. It will apply to all construction sites greater than 20 acres in size as of 18 months following the effective date of the regulations (which will be 60 days after Federal Register promulgation) and sites larger than 10 acres 4 years after the effective date.

As expected, EPA did not take NRDC and Waterkeeper Alliance up on their suggestion that EPA impose post-construction controls. However, since EPA has already signaled that its long-term plan is to impose stormwater controls beyond the current universe of industry and construction sites, it seems at this point that broader stormwater regulation by EPA is more a question of when than whether.

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