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

Those who operate industrial facilities or do development in Massachusetts often know far more than they would like about Chapter 214, § 7A, the environmental citizens’ suit provision of the Massachusetts General Laws. Chapter 214, § 7A, eliminates plaintiffs’ usual obligation to demonstrate standing and simply gives 10 citizens the right to sue to prevent or eliminate “damage to the environment.” The damage does have to constitute a violation of a statute, regulation, ordinance, or by-law, the major purpose of which is to prevent damage to the environment.

Chapter 214, § 7A, does not contain any statute of limitations. Does this mean that ten persons can sue any time, even if the conduct complained of is allowed under a permit and the permit was issued long ago, as long as the plaintiff alleges that the permit should not have been issued and the conduct in fact violates a statute or regulation? Thankfully, Judge Locke of the Superior Court recently answered that question, posed in EarthSource v. Burt, with an emphatic “No.”

Full disclosure time – this firm (including yours truly) represents Covanta, the private defendant, in EarthSource v. Burt.

Earthsource v. Burt deals with efforts by Covanta, which operates four municipal waste combustors in Massachusetts, to initiate a process at its SEMASS combustor in which it would take what are known as fats, oils, and grease (or FOGs) from restaurants, separate the FOGs from the associated wastewater, recycle the wastewater, and combust the FOGs at the SEMASS facility. EarthSource is a competitor of Covanta in the FOGs processing business. It and some citizens (many, if not all, of them affiliated with EarthSource or related entities) brought suit against MassDEP and Covanta, not just to stop the FOG project at SEMASS, but alleging wholesale violations by Covanta at all of its Massachusetts facilities. Routinely, the complaint alleged that DEP misinterpreted its own regulations, should not have issued the permits, and that the permits were void “ab initio.” 

Covanta and DEP both moved to dismiss those counts that involved claims related to permits issued outside the appeal period provided in either the applicable substantive statute or in the Massachusetts Administrative Procedure Act, ch. 30A, § 14. EarthSource argued that the APA does not limit the time in which suits can be brought under Chapter 214, § 7A. Judge Locke concluded otherwise, noting that:

a contrary rule would be disruptive to the permitting agencies and that G.L. c. 214, § 7A should not become a means to disturb otherwise settled permits whenever a group of plaintiffs chooses to file suit sometime in the future.

Truer words were never spoken. Going forward, the rule for persons who don’t like permits is going to be “speak now or forever hold your peace.”

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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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The BNA reported today that the Massachusetts Office of Technical Assistance and Technology has developed a guidance document identifying considerations for the safe development of engineered nanoparticles, or ENPs. As many of my readers know, I am deeply suspicious of regulatory agency guidance documents. Guidance is often used as a short-cut so that the agency can avoid notice and comment rule-making. Moreover, it’s generally one-sided; agencies refuse to be bound by guidance, because “it’s only guidance,” but street level bureaucrats effectively treat the guidance as regulations, so that the regulated community is effectively deprived of the flexibility that guidance is supposed to provide.

I’m pleased to say, however, that the OTA guidance appears to be a thoughtful, measured approach to safe handling of ENPs. My view is apparently corroborated by the NanoBusiness Alliance, which, according to the BNA, supports the guidance.

In this case, the guidance clearly is not a trick to avoid notice and comment rule-making. It will be issued by the OTA, which has no regulatory authority. Instead, the guidance appears to advance two goals. First, offers a simple compendium of generally reasonable steps to take to minimize the risks associated with the manufacture, handling, use, and disposal of ENPs. Second, it is intended to be a confidence builder. As the OTA notes, “increasing confidence and trust can enhance commercial prospects” for ENPs.

I certainly expect some kind of robust regulatory regime focused on ENPs down the road. However, it’s important, in this nascent state of the technology, that advocates of the precautionary principle not be in a position impose regulations that could stifle the development of a set of technologies that have so much promise in so many fields – including environmental protection. In this context, guidance such as that set forth by the OTA seems an appropriate effort at facilitating appropriate management practices without unduly burdening nanotechnology business.

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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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As many of you know, the Commonwealth's tidelands licensing statute, Chapter 91, is one of my favorites, for no other reason than that it gives me the opportunity to talk about where the "waters ebbeth and floweth."  Deriving from the Colonial Ordinances of 1641 and 1647, Chapter 91 is about as arcane as it gets – which, of course, lawyers are supposed to like. 

The short version is that the Commonwealth holds the fee interest in “Commonwealth Tidelands” – those below the low water line. While the Commonwealth can license private use of Commonwealth Tidelands, only the legislature, acting explicitly, can give up those rights. Private Tidelands, the land between high and low water, are owned by the upland owner, but are subject to public rights in “fishing, fowling, and navigation” – another reason why I love Chapter 91.

In a decision handed down today, the Massachusetts SJC made crystal-clear that nothing short of an explicit legislative act is sufficient to eliminate the public’s ownership rights in tidelands. In Arno v. Commonwealth, the “owner” of land in Nantucket that was filled in the 19^th Century sued the Commonwealth, essentially seeking a declaration that he was the fee owner of the land. His argument was that a prior owner had registered the land in 1922, and the Attorney General, in commenting at the time, did not object to registration or assert that the Commonwealth still owned the land. To the SJC, what the AG did – or intended to do – in 1922 was irrelevant. 

Neither the Land Court nor the Attorney General had the authority to divest the public of its rights in Arno’s parcel…. Only an act of or an express delegation by the Legislature could extinguish the public’s rights.

The decision is probably not a surprise following the SJC’s original Moot decision, but is nonetheless a lesson to those who would claim ownership in tidelands. If the waters ebbeth and floweth – or if they ever did – only the legislature can give them away.

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

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

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

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

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

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

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

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

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

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

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

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

Thank you Judge Wilkinson.

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

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

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

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

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

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

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

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

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

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

Just askin’.

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

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

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

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

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

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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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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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Yesterday, the Supreme Court issued its decision in Monsanto v. Geertson Seed Farms, the big NEPA case before the Court this term. The District Court had struck down the decision by the Animal and Plant Health Inspection Service to completely deregulate roundup ready alfalfa (RRA). That decision was not actually under appeal. The appeal concerned only the scope of the injunction issued by the District Court, which precluded APHIS from issuing any kind of deregulation decision without completing an Environmental Impact Report (EIS) and similarly issued a nationwide injunction against planting of RRA alfalfa prior to completion of an EIS. The District Court decision had been upheld by the Ninth Circuit Court of Appeals.

The Supreme Court reversed, and vacated the injunction. I’ve got to say, Supreme Court decisions in environmental cases have often puzzled me in recent years, but it is difficult to read this one and not feel its inevitability and obviousness. This case really shouldn’t be news. The Court decided in Winter v. Natural Resources Defense Council (the Navy sonar training case) that the standard for injunctions in NEPA cases is not any different from that in any other case. In other words, injunctions are not automatic – or even presumed – in NEPA cases. Instead, the party seeking the injunction must satisfy the traditional four-factor test in order to obtain relief.

In Monsanto, the Court simply put the final nail in the coffin of the idea NEPA is somehow different. Citing to cases suggesting that the standard may be more lenient under NEPA, the Court yesterday said that:

The statements quoted above appear to presume that an injunction is the proper remedy for a NEPA violation except in unusual circumstances. No such thumb on the scales is warranted. … It is not enough for a court considering a request for injunctive relief to ask whether there is a good reason why an injunction should not issue; rather, a court must determine that an injunction should issue under the traditional four-factor test….

Here, the Court concluded that an injunction prohibiting even partial deregulation of RRA was overbroad. Moreover, because no one challenged the District Court decision striking down APHIS’s original deregulation decision, those opposing use of RRA will have another opportunity to go to court and seek an injunction in the future, should APHIS again try to deregulate RRA without having first complied with NEPA.

The lesson? If you want an injunction for a NEPA violation, you better be able to demonstrate that the balance of equities and the public interest are on your side.

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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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Yesterday, the Supreme Court decided, 8-0, in Stop the Beach Renourishment v. Florida Department of Environmental Protection, that a Florida law which allows the State DEP to fill in submerged land (owned, under Florida law, by the State), and then to cut off the littoral owners’ rights to accretion of the beach front without paying compensation, was not a taking requiring compensation under the 5^th Amendment. The decision was fairly easy, even for the property rights wing of the court, because it concluded that Florida law had always provided for such a result, so that the action by the DEP did not change the private owners’ preexisting rights.

However, the decision masks both continuing deep divisions on the Court concerning Takings Clause issues and confusion, if not incoherence, in the Justices' thinking.  As I noted when the Court took the case, the Court in Lucas distinguished state regulatory action limiting owners’ use of the property from “restrictions that background principles of the State’s law of property and nuisance already place upon land ownership.” I think it's a specious distinction. We used to regulate by common law of nuisance. Now we regulate by statute and regulation. Why should the common law be treated differently by the Supreme Court for Takings Clause purposes than statutes or regulations? 

In yesterday’s decision, four members of the Court answered this question. It turns out, according to Justices Scalia, Alioto, Roberts, and Thomas, that judicial changes to the common law may also subject the government to a regulatory takings claim. The reason? It is that, according to Justice Scalia, “the Constitution was adopted in an era when courts had no power to ‘change’ the common law.” News to me. I hadn’t realized that there was a halcyon day when the common law was fixed and perfect. Thus, it turns out, common law restrictions on property avoid the taking label only if they existed as of the time of the Constitution.

Justices Kennedy, Sotomayor, Breyer, and Ginsburg concurred in the judgment (Stevens did not participate), but stated that it was premature to try to determine when judicial decisions might provide grounds for a takings claim. Justice Kennedy did emphasize that the plain language of the Takings Clause does not address what are now known as regulatory takings: 

The Framers most likely viewed this Clause as applying only to physical appropriation pursuant to the power of eminent domain.

Of course, Justice Kennedy is right on this score – a point somehow ignored by Justice Scalia in his originalist approach to constitutional interpretation. 

I normally represent private property owners and there are certainly times when, it appears to me, the government tries to achieve what might be noble objectives on the backs of private owners, simply because it doesn’t want to bear the cost.  Nonetheless, I think that this issue isn’t that complicated and the proper resolution would eliminate most takings claims. If a private use of land unreasonably imposes costs on neighbors or the public, then that use can be restricted, either by courts or by regulatory agencies, without payment of compensation. That type of regulation simply isn’t a taking. And, yes, the definition of “unreasonable” may change over time. That’s life in the big city – or the beachfront. Get over it.

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It may be time to learn a new acronym.  The 10 RGGI states, plus Pennsylvania and Washington DC have banded together to create the Transportation and Climate Initiative (TCI) -- a group that has pledged to create a plan to address the estimated 30% of greenhouse gas emissions on the eastern seaboard caused by the transportation sector. 

In a Declaration of Intent released Wednesday, the leaders of the environmental, transportation and energy agencies of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont and Washington DC, pledged to develop and implement a three-year work plan that outlines how the region can cut greenhouse gases from vehicles and improve efficiency of regional transportation systems.   The TCI builds on RGGI (which does not itself regulate fuels or transportation, but began the states' collaborative efforts on the issue of greenhouse gas emissions) and the 11-states' low carbon fuel memorandum of understanding signed in December.

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Product stewardship is definitely in vogue. The Daily Environment Report has just noted that the United State Conference of Mayors has adopted a resolution calling for “Extended Producer Responsibility For Products.” I understand the arguments in favor of product stewardship. From an economic point of view, the disposal costs associated with products and product packaging can be seen as an externality. Internalizing those costs would give manufacturers and distributors incentives to minimize those costs, through reduced packaging or changes in design/manufacturing that would reduce the costs associated with product disposal.

Nonetheless, I’m skeptical of the USCM resolution and wonder about how “producer responsibility” will actually get implemented on the ground. The USCM resolution describes the “costs paid by local governments to manage products,” traditionally seen as a core governmental function, to be “in effect, subsidies to the producers of hazardous products and of products designed for disposal.” Language like this might reasonably lead one to conclude that the Mayors’ concern isn’t product stewardship, but just reducing local DPW budgets.

Taxes on the cost of disposal might cause manufacturers to change their processes to reduce the amount of waste associated with the end of their products’ life, but what if the most efficient way to handle such waste is still through centralized collection and disposal by municipalities? Perhaps one of my more informed readers will tell me how product stewardship can be operationalized to provide the appropriate incentives on manufacturers to reduce the life-cycle cost of their products while still leaving the handling and disposal of waste products where they can still be performed most efficiently. 

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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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In the Regional Greenhouse Gas Initiative's (RGGI) eighth auction of CO₂ credits on June 9th, the clearing prices were the lowest yet – $1.88 for 2009-2011 credits and the auction floor of $1.86 for 2012-2014 allowances.  Despite these low prices, the auctions still brought in some $80 million.  In total, cumulative RGGI proceeds to be used by the 10 participating states for renewable energy, energy efficiency and low-income energy assistance programs now total $662.8 million.

RGGI's announcement of the auction results highlights some of the specific programs in which the states have invested, and the returns we are already seeing from these investments.  For example, in Connecticut, electric and gas energy efficiency programs, funded in part by RGGI proceeds, are producing more than $4 for every $1 invested.  New York reports a return greater than 8 to 1 for its investments in renewable energy systems.  And the predictions are even larger:  Massachusetts reports that energy efficiency programs, funded in part by RGGI, will generate roughly $6 billion in consumer energy savings in Massachusetts over the next 3 years. 

On the whole, the RGGI states are investing around 60% of the proceeds from the auctions in energy efficiency.  Energy efficiency measures such as building retrofits, heating system replacements and appliance upgrades are predicted to shave 20 to 30% off consumers' utility bills over the next few years. States are also investing in large-scale renewable energy development as well as programs to deploy distributed generation, such as solar energy and hot water systems on  homes, schools, and businesses.

Although participation and prices were both down for this second auction of 2010, all 2010 vintage and 2013 vintage allowances available for purchase were sold – a change from the previous two auctions, in which supply for allowances to be used in the 2012-2014 compliance period outpaced demand.   Perhaps due to the drop in the number of entities participating, electric generators subject to RGGI purchased 92% of the 2010 vintage allowances – up from 85% in March's auction – and 100% of the 2013 vintage allowances.

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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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By now we are all familiar with the criteria for robust carbon offsets:real, additional, verifiable, enforceable, permanent.  But what exactly do those criteria mean?  And how should a cap-and-trade program be designed to ensure that they are met?  

Earlier this month the three regional U.S. greenhouse gas programs released a white paper which sets out their answers. In Ensuring Offset Quality: Design and Implementation Criteria for a High-Quality Offset Program, representatives of the Regional Greenhouse Gas Initiative, the Western Climate Initiative, and the Midwestern Greenhouse Gas Reduction Accord provided their consensus view on key offset policy design and implementation components.  They concluded that offsets provide an important compliance flexibility that reduces the cost of cap-and-trade programs, allows for more varied emissions reduction opportunities, and ultimately enables the pursuit of more aggressive emissions reduction targets. This all comes with a stern warning: if offset projects do not achieve the five tenets listed above, the one-to-one relationship between substituting emissions reductions outside the cap for those under the cap is destroyed, and environmental benefits of the cap-and-trade program are undermined. The paper emphasizes additionality as the most important criterion ¾ offset programs must guarantee that the project “would not have happened anyway in the absence of the economic incentive created by the compliance obligation created by the cap-and-trade program.

The paper favors an approach where the validity of offsets is determined through standardized requirements rather than project-by-project determinations of which offsets can be used for compliance. Both the Kyoto Protocol’s Clean Development Mechanism and the European Union’s original offset program relied on a project-by-project system, while the climate change bill recently released by Senators Kerry and Lieberman and the ACES bill passed by the House last year are more reliant on standardized requirements.

The principles advanced in the white paper are useful, but they are still theoretical.The challenge remains to develop standardized guidelines that will address tricky issues such as guaranteeing the permanence of an afforestation offset, where there is always the chance of a forest fire, or ensuring the additionality of a landfill methane capture project, when regulations or the market may have demanded it anyway. Perhaps that is why we have the states as laboratories ¾ including the very states that drafted this paper ¾ as we wait for federal climate legislation to become a reality. The consensus announced in the white paper could certainly form the basis for a federal offsets scheme, but the regional programs don’t seem to be holding their breath.

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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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It now appears that Senator Murkowski’s resolution disapproving EPA’s endangerment finding will come to a vote in the Senate sometime in June. The complexity of the political dynamic is highlighted by the speculation regarding what such a vote will mean.  On the one hand, there are those who argue that a significant number of votes for the resolution will mean that climate change legislation is dead. On the other hand, Senator Graham has now predicted that the resolution will pass precisely because most Senators do want to pass a climate bill.

As a logical matter, Senator Graham is right. Being against EPA regulation of GHG under existing authority doesn’t necessarily mean that one is opposed to climate change legislation. Indeed, my guess at this point is that at least a plurality and probably a majority of the regulated community supports climate change legislation, but thinks that regulation of stationary sources under existing authority would be a bad idea. 

In terms of practical politics, however, it seems likely that there may be very little correlation between Senators’ views on climate change legislation and their vote on the Murkowski resolution. Some senators may vote for it because on the merits they think that GHG should be regulated pursuant to specific legislation enacted by Congress. However, many will just be taking a stand against any government regulation of climate change. On the other side, there may be many Senators who would prefer that climate change be addressed through legislation, but since legislation is not guaranteed, want to be certain that some kind of regulatory program is in place. 

Of course, it’s also important to remember that the Murkowski resolution would not just preclude regulation of stationary sources. Because it would disapprove the endangerment finding, it would also jeopardize the carefully negotiated agreement on mobile sources. They aren’t very many people who want to reopen that agreement, I assume.

The world’s greatest deliberative body? We’ll see about that.

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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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Yesterday, the Massachusetts Executive Office of Energy and Environmental Affairs released its Revised MEPA Greenhouse Gas Emissions Policy and Protocol. For those who cannot get enough of this stuff, they also released a summary of revisions to the policy and a response to comments. On the whole, EEA took an appropriately moderate, incremental approach to revising the GHG policy. Indeed, it’s telling that the very first “change” identified by EEA in its summary is not a change at all – it’s EEA’s decision to retain the current case-by-case approach to determining appropriate performance standards and mitigation requirements. EEA decided not to establish numerical GHG emissions limits or emissions reductions targets.

Some of the other noteworthy aspects of the revised policy include:

Establishment of the state building code in effect at the time the ENF is filed to determine the project baseline

Elimination of the requirement to include a formal analysis of a separate “better” alternative. Although EEA said it was in some circumstances unrealistic to propose something “better” than the preferred alternative, to me it was simply that the MEPA process for the analysis of mitigation is the appropriate avenue for determining GHG improvements. That mitigation process was already in place, is always what MEPA has been about, and works well. Thus, the separate alternative was inappropriate.

No requirement to analyze life-cycle emissions. EEA was pushed to require full life-cycle analysis, including such components as emissions associated with construction, waste generation, water use, and wastewater generation. However, EEA concluded that such analyses would not be cost-effective: “the effort and cost associated with making these calculations may outweigh their usefulness….”

Retention of the self-certification process for verifying mitigation efforts. The policy does require that agencies include the self-certification requirement in Section 61 findings for permits.

An updated list of mitigation measures.

As EEA noted, the MEPA program has never been about standards; it is about project-specific analysis of impacts and potential mitigation measures to address those impacts. Particularly inthe GHG arena, where both technology and science are changing so rapidly, it makes even more sense to maintain the case-by-case approach, rather than adopt overly prescriptive standards. The devil is in the details regarding how MEPA implements the policy, but given the legislative mandate in the Global Warming Solutions Act, the policy continues to provide an appropriate framework for integrating GHG analysis into MEPA.

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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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There has been a fair bit of evidence in recent weeks that getting a climate bill through Congress remains a difficult task. It is a sign of just how perfectly aligned the stars will need to be that the two recent problems for the bill were either completing unrelated to climate change or at best tangential.

First, as everyone knows, Senator Graham got annoyed that Senator Reid (locked in a tough reelection battle and needing Hispanic votes) suggested that he might move an immigration bill before the climate/energy bill. Senator Graham, as about the only Republican willing to work with Democrats, and knowing the leverage that he possesses, actually used that leverage. Senator Reid appears to have backed off at this point and my sense is that Kerry, Lieberman, and Graham were so close that it’s difficult to believe that they wouldn’t have been able to get a bill trhough in the next couple of months.

Then, of course, BP”s Deepwater Horizon drill rig sank. The resulting oil spill and potentially catastrophic damage to the Gulf Coast has quieted, for now, the Drill, Baby, Drill, crowd, and emboldened opponents of off-shore drilling. Notwithstanding the obvious reaction to the spill, expanded off-shore drilling was a likely part of the compromise necessary to get a climate bill over the finish line. Moderate and conservative senators are still going to require something that will allow them to vote for the bill as an economic development measure.

More coal? Oops. Forgot about the Upper Big Branch Mine explosion.

I still think that a bill will happen. Partly because I’m an optimist. Partly because it just seemed that Kerry, Lieberman, and Graham were to close to fail, as it were.

Which brings up the second part of this post. If I’m right, we’re going to get a bill. Will it be a good bill? Last week, the Rasmussen Reports announced the results of a poll showing that most Americans favor passage of a climate bill. However, at the same time, most American’s don’t want to pay anything for it. Now, that’s not really a surprise. Nonetheless, since most environmentalists, most economists, and even Senator Graham believe that we have to put a price on carbon, it does make it politically difficult for Congress to do what it has to do (and, yes, I do know that we can put a price on carbon and still provide rebates that will leave consumers both facing carbon prices and in the same net economic position).

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Yesterday, Senator Lieberman (I -CT) confirmed that the climate bill that he, Senator Kerry (D-MA) and Senator Graham (R-SC) plan to announce next week will include preemption of state and federal initiatives, including EPA's Clean Air Act authority.  Leaving aside the potential in his statement for the bill to also preempt state renewable energy and efficiency programs, the goal of predictability and one nationwide cap-and-trade system is an approach that we endorsed a few weeks ago, and one that H.R. 2454 also contained, albeit with a 5 year moratorium, rather than a complete preemptive ban.

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The Western Climate Initiative is scheduled to begin its cap-and-trade program in 2012.  But as ClimateWire highlighted today, the number of states who will be ready and willing to participate in the program is quickly dwindling.  Utah is the latest member of the seven-state, four-Canadian-province agreement to announce that it will not have the state authority needed to actually implement a cap-and-trade program in 2012.  Montana, Washington and Oregon will also probably miss the 2012 start date, and Arizona's governor withdrew from the cap-and-trade program entirely in February.   Meanwhile, New Mexico's implementation of regulations may be derailed by a lawsuit from utility and oil and gas companies which contends that the state Environmental Improvement Board cannot regulate greenhouse gases without setting ambient air quality standards.

This leaves only California, British Columbia, Manitoba, Ontario and Quebec as the original members of the agreement who may be on track to take part as planned.   But even California's ability to participate in 2012 might face challenges -- as ClimateWire noted on Monday, a ballot initiative set for November would cancel the state's authorizing statute, A.B. 32, until the unemployment rate falls.

Although California and the Canadian provinces account for 70% of the region's emissions, and WCI is working on a plan to allow other states to join the cap-and-trade program in subsequent years, these defections may cause significant issues for the Initiative.  One important issue to iron out for California's participation is which jurisdiction controls the allowances that cover electricity imports.  Under the WCI framework, electricity imports from outside of the region are counted as part of the cap in the jurisdiction where they are used, but generation originating inside the region is assigned to the generating facility.  This could create a large problem for California, which imports nearly half of its electricity from neighboring states.

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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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Yesterday’s New York Times had a very interesting article regarding the use of advanced municipal waste combustor technology in Europe. As the article notes, such plants are relatively commonplace in Europe, whereas literally no new waste-to-energy plants are being built in the United States. Ian Bowles, our own Secretary of Energy and Environmental Affairs – and someone who has generally been a very successful promoter of renewable energy technology – acknowledged that “Europe has gotten out ahead with this newest technology.” 

This shouldn’t be surprising given that states such as Massachusetts have moratoria on new municipal waste combustors. It’s difficult to keep up with Europe when you order people not to try. In fairness to Secretary Bowles, the article pretty much makes clear why it is that Massachusetts has a moratorium in place and why we’ve fallen behind Europe. Laura Haight, at New York PIRG said that

Incinerators really are the devil.

Glad that there’s no rhetorical excess at NY PIRG. In any case, it’s difficult for regulators to move forward when one of their prime constituencies thinks that the technology is the devil.

Is it possible that the U.S. environmental community is letting the perfect be the enemy of the good on this issue? NY PIRG wants to get to a “zero waste” economy. I think we’ll get to a zero carbon economy before we get to a zero waste economy.

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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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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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Just over a year ago, we noted the surprising, unanimous decision by the National Association of Insurance Commissioners (NAIC) to adopt rules requiring insurers to publicly disclose the impacts of climate change on their business decisions, to begin May 1, 2010.  Well, not so fast.   As Climate Wire reported, at Sunday's NAIC meeting, a the commissioners voted 27-22 to make the disclosure rules optional for states to adopt, submissions to be voluntary, and insurers' survey answers to be kept confidential.

The revised questionnaire adopted by NAIC includes the same 8 questions that were endorsed at last year's meeting, but notes that submission of the survey is at each state's discretion and that insurers' responses will be considered confidential.  Instead of publishing all responses, as originally envisioned, participating states will work with NAIC to develop a public report which will give information about insurers' responses in the aggregate. 

Now that the states may have different requirements, NAIC set out rules for what happens when an insurer serves multiple states with different disclosure rules -- the surveys are intended to be submitted to the regulator of the insurer group's lead state (i.e. the one with the largest direct written premium).  Such a rule could make disclosure particularly interesting if California goes ahead with its own set of proposed rules and mandatory disclosures, as California controls a large segment of the insurance industry.

NAIC's seemingly abrupt policy change comes on the heels of the SEC's interpretive release requiring companies to disclose climate change risks when appropriate, which might have created some overlap with mandatory insurer disclosures.  Per the NAIC Task Force's January minutes, it seems like the commissioners may have decided to let the SEC regulate instead.   

Another interesting update is the revised questionnaire's disclaimer denying that the survey expresses an opinion on the existence or absence of climate change.  Was the disclaimer motivated in part by the National Association of Mutual Insurance Companies' comments to NAIC about the "questionable integrity" of contemporary climate science in the wake of the release of emails from the University of East Anglia's Climate Research Unit?

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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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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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Despite the relatively low clearing prices in the Regional Greenhouse Gas Initiative’s (RGGI) seventh auction of CO₂ credits on March 10^th -- $2.07 for 2009-2011 allowances, and the auction floor price of $1.86 for 2012-2014 allowances – cumulative RGGI proceeds to be used by the 10 participating states for renewable energy, energy efficiency and low-income energy assistance programs now total $582.3 million.

As reported in today’s announcement of the auction results, this half billion dollars is being funneled into state-run programs that make investments in energy efficiency, accelerate the deployment of renewable energy, and, at the bottom line, create thousands of jobs. In the report, RGGI highlights success stories from regional companies in sectors such as energy audits and weatherization, and the US Department of Energy’s statistic that every million dollars invested in building weatherization creates more than 50 jobs in installation and another 10 to 20 jobs in the production of energy efficient building materials.  Also notable for Massachusetts is DOER Commissioner Phil Guidice’s statement that energy efficiency programs funded in part by RGGI are expected to create or maintain nearly 4,000 jobs in Massachusetts in the coming three years.

This auction was RGGI’s first in 2010, and the first to offer new years’ allowances for sale. Participation increased in both auctions, perhaps as a result of the green shoots of the new economic recovery. 

Participation in the auction of 2010 vintage allowances, which may be used to cover CO₂ emissions from power plants in the first compliance period of 2009-2011, was robust, with 51 entities submitting bids to purchase 2.3 times the available supply of 40.6 million allowances. The clearing price of $2.07 is up from December’s low of $2.05, even though this auction offered 40.6 million allowances for sale, a significant increase from the prior two auctions offerings of roughly 28.5 million each. Eighty-five percent of the 2010 vintage allowances were purchased by entities regulated under RGGI or their affiliates.

Participation also increased in the auction of allowances to be used in RGGI’s second control period (2012-2014). Although Wednesday’s auction marked the second time that supply outpaced demand for these allowances, the quantity of allowances for which bids were submitted increased 31% from December’s Auction 6 of 2012 vintage allowances. Ninety-eight percent of the 2.1 million 2013 vintage allowances offered for sale sold to nine generators regulated under RGGI at the $1.86 mandated auction floor price. As with the unsold allowances from December, the additional allowances may be sold at future auctions, or a state may choose to retire them. 

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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’ve been waiting to write this headline ever since the SJC took this case. Today, the SJC issued its long-awaited decision in Moot v. Department of Environmental Protection. For those of you who pay attention to where the waters ebbeth and floweth – or at least where they ebbed and flowed in 1641 – you know that this is the second time that Moot has been before the SJC.

After the SJC struck down MassDEP regulations which provided that landlocked tidelands did not need a license under Chapter 91, as the Commonwealth’s waterways statute is now known, the Legislature took a shot at fixing what would have been a major problem by passing new legislation specifically excluding landlocked tidelands from the need to obtain a license. 

Moot challenged the legislation, arguing that it completely relinquished all of the Commonwealth’s rights in private tidelands, without making the findings necessary to justify such a relinquishment. The SJC did not agree. The Court concluded that the Commonwealth has preserved its rights in landlocked tidelands, and noted that projects subject to MEPA must address project impacts on the Commonwealth’s tideland rights. In essence, the Court concluded that the oversight provided by MEPA was sufficient to demonstrate that the Commonwealth could and would still enforce its rights in landlocked tidelands. Since those rights are still protected, the Court concluded, the Legislature had authority to exclude landlocked tidelands from the need to obtain a license under Chapter 91. 

This is clearly the right result. The only question in my mind is the gymnastics that the Court had to go through to get there. The Court may have concluded that the Commonwealth has not relinquished all of its rights in landlocked tidelands, but does anyone think that the MEPA process will ever result in developers being required to make changes to their projects to protect those rights? I sure hope not. Certainly, the first developer forced to do anything different as a result of that process is not going to be a happy camper. It would have been cleaner for the SJC to acknowledge that the Legislature was effectively relinquishing the public’s rights in landlocked tidelands and to affirm that act. Nonetheless, this decision pretty much did what was needed and a large number of landowners – not just the developers defending this case – are breathing a lot easier this afternoon.

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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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Massachusetts has an “anti-SLAPP” statute (as do 26 other states at this point, apparently). The law protects “petitioning”, by precluding litigation targeting petitioning, providing an early motion to dismiss, and awarding attorneys’ fees to defendants where a court finds that the defendants were indeed engaged in petitioning activity.

Yesterday, the Massachusetts Appeals Court struck a blow for reason when it determined, in Brice Estates v. Smith, that a trespass is not protected petitioning activity. Those of you outside Massachusetts may be wondering why we needed a court case to tell us this. Those of you inside Massachusetts, particularly in the development community, know where this is headed.

Brice Estates involved a real estate developer, looking to build a large residential subdivision. Low and behold an abutter observed a four-toed salamander – a species protected under the Massachusetts Endangered Species Act. Of course, the developer shouldn’t have been surprised, because developers of projects with significant opposition often learn of mysterious discoveries of endangered species at the project location.

The only aspect of this case that was different was that a specifically identified person was known to have gone onto the developer’s property – thus providing the basis for a trespass claim. The Court of Appeals made clear that, while notifying the authorities of the presence of the salamander was protected petitioning activity, the trespass itself was not. Moreover, the court also made clear that, even if the reason why the owner filed suit was the protected petitioning activity, the owner may still bring the action with respect to the non-protected activity.

Time will tell whether the lesson to NIMBY types is “no shenanigans” or “don’t get caught.”

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A few weeks ago, I queried whether three pollutant legislation might be back in play, particularly given the current rough sledding for broad climate change legislation. Now, it certainly appears that way. The bill has been formally introduced. In addition to Alexander, there are now three other GOP co-sponsors (Gregg, Graham, and Snowe), not including Senator Lieberman, who is also a sponsor. There will be a hearing on March 4.

The basic provisions are as follows:

Reduction in SO₂ emissions of 80% by 2018

Statutory authorization of the CAIR rule through 2011

Reduction in NO_x emissions of 53% by 2015

Reduction in mercury emissions from coal-fired power plants of 90% by 2015. 

I still don’t have a crystal ball on the likelihood that this bill will move, but there are certainly a number of reasons why it might. Uncertainty about the CAIR rule motivates a number of sources to prefer a legislative solution. The difficulties in moving the climate change legislation make a bipartisan agreement on three pollutant legislation attractive to both sides of the aisle. We’ll know more after the hearing, but the Ozone Transport Commission has already criticized the NO_x provisions as insufficiently stringent, which I take as a good sign for the bill’s prospects.

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Since I did a post earlier today indicating the cap-and-trade legislation is unlikely to become law in the near term, it’s only fair that I also do a post on efforts by Senators Kerry, Graham, and Lieberman to resuscitate the legislation. The bill's prospects are too uncertain to spend too much time on the details. In short, it would include a phased-in approach to regulation, starting with the biggest emitters, such as utilities, combined with a carbon tax on transportation fuels that has been supported by several major oil companies.

To me, the most notable statements come from Senator Graham, the only Republican in the gang of three. Senator Graham has turned out to be one of the more intriguing and less predictable members of Congress in recent years. This may have its pluses and minuses and I have no idea whether he can bring any GOP support along, but you have to sit up and take notice when a Republican says

Cap and trade as we know it is dead, but the issue of cleaning up the air and energy independence should not die -- and you will never have energy independence without pricing carbon.

Of course, he’s right. The sad thing is that the rest of his party has so demonized any and all taxes that no Democrat could possibly say something like this – and many of the distortions in the various bills we’ve seen to date have resulted from strenuous efforts to avoid having consumers see any price signals about the cost of carbon emissions.

Keep sayin’ it, Brother Graham.

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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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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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Late last week, the CEQ issued its long-awaited draft Guidance on how to factor climate change into NEPA reviews. CEQ explicitly stated the draft is not effective at this time. CEQ will take comment for 90 days and “intends to expeditiously issue this Guidance in final form” after close of the comment period. Assuming CEQ does so, it will join several states, including California, New York, and Massachusetts, which already require that climate change be addressed in their state NEPA analogues.

The draft is very limited in scope at this point; CEQ may have decided that what is most important is simply the statement that climate change is real, it matters, and it therefore must be taken into account under NEPA. For example, CEQ proposes a threshold a 25,000 tpy of direct emissions CO₂e for NEPA applicability. The Guidance does not propose to apply this threshold to indirect emissions, “the analysis of which must be bounded by limits of feasibility.” Shocking recognition of what’s actually possible.

There are some tidbits that will nonetheless give pause to those who expect to be subject to this Guidance. First, the Guidance does discuss the need to consider the cumulative effects of GHG emissions. This is not surprising, given that NEPA already requires consideration of cumulative impacts outside the GHG context, but since all GHG impacts are cumulative, it is of particular importance here. Second, the Guidance also notes that project planners must consider the impact of climate change on projects, as well as the impact of projects on climate change. The example given in the Guidance is a plan for transportation infrastructure on a barrier island. The Guidance also suggests a longer-term time horizon than may have been used in the past. The example here is that of an industrial process drawing water from a source that relies on snow pack that is expected to decrease as a result of climate change.

As noted above, CEQ spends a lot of effort making the case that the Guidance is not a radical document. The phrase “rule of reason” is used no less than four times in the draft Guidance – and it feels like more. Nonetheless, I doubt opponents will be satisfied. I suspect that they – like the CEQ itself – believe that the fact of the document is more important than its immediate requirements.

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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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For those of you who missed it, the SEC finally issued an interpretive release last week clarifying public company disclosure obligations concerning climate change. Rather than rehash it here, I am instead linking to the client alert that we did on the topic.

It is worth noting that, as mentioned in the alert, the release has engendered significant political controversy. Indeed, ranking member Spencer Bachus sent a letter to the SEC questioning the appropriateness of the release. My favorite question in the letter:

Do you believe the Commission’s role is to promote a social policy agenda through the securities laws and regulations?

I wonder how the SEC will answer that one?

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While Congress may be fiddling on climate legislation, Senators Carper and Alexander are attempting to put three pollutant legislation back on the congressional agenda. Yesterday, they introduced an aggressive three pollutant bill. Here are the highlights. The bill would:

Codify the CAIR program through 2011

Gradually reduce the cap on SO₂ emission allowances to 1.5 million tons by 2018 – substantially more stringent than the CAIR would have imposed. 

Reduce NO_x caps to 1.6 million tons by 2015. 

Create two NO_x trading zones. Zone 1 includes 32 Eastern states and the District of Columbia. Zone 2 includes the remaining 16 contiguous states.

Coal- and oil-fired power plants would have to reduce mercury emissions by 90%. There would be no trading program for mercury.

I still find it remarkable that Senator Alexander, a coal-state Republican, is a co-sponsor of the bill. Nor does he seem to be half-hearted about it. Money quote:

We have a number of different things to work out on carbon.…  But there's no excuse for waiting a minute on SOx, NOx and mercury because we have the technology, we know what to do, and we shouldn't be operating coal plants without pollution control equipment. (My emphasis.)

I have, until recently, assumed that climate change legislation would happen this year. Now that that seems less likely, and with Senator Alexander as a sponsor, it will be interesting to see if the Senate is able to move this legislation, as an alternative. It is worth noting that climate change legislation necessarily would also have resulted in reductions in SO₂, NO_x, and mercury. Unfortunately, the converse is not also true. In the absence of GHG controls, three pollutant legislation would actually increase GHG emissions, because the traditional means of reducing emissions of SO₂, NO_x, and mercury are energy hogs. Oh, well.

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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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I have never been a fan of specialized courts, but I have to admit that the Massachusetts Supreme Judicial Court’s MEPA jurisprudence is strong evidence for the other side. It’s almost hard to describe how badly the SJC has mangled MEPA. The most recent example is yesterday’s decision in Town of Canton v. Commissioner of the Massachusetts Highway Department. (Requisite disclaimer – this firm represented the Town of Canton in the case.)

In Canton, the SJC ruled that a party bringing suit to challenge the adequacy of the Certificate issued by the Secretary of Energy and Environmental Affairs an on EIR must do so within 30 days following issuance of the first permit issued to the project under review – even if the plaintiff doesn’t care about that permit. For example, in Canton, the case was dismissed because suit was not brought within 30 days of issuance of a sewer connection permit, even though Canton’s complaint was that the EIR did not adequately address traffic issues and the Highway Department had not yet acted on the necessary traffic approvals.

The basis for the decision is a plain language reading of the statute – 30 days of the first permit means 30 days. However, the Court’s policy logic is exactly backward. The SJC stated that it is necessary to adhere to the strict 30 day rule in order to make challenges to projects efficient and not unduly delay them. I fear that the development community will not be happy with the results of this case, however. The purpose of MEPA is consultative. Get all the information out there and make sure that the agency considers it before issuing approvals. The import of Canton, however, is to short-circuit the review process. The next time this fact pattern appears, plaintiffs will be forced to bring suit, without even giving the Highway Department a chance to get it right. How does encouraging litigation before it is known even to be necessary help citizen plaintiffs, developers, or agencies?

In fairness to this Court, while I think that they got the decision wrong, it is at least understandable given prior SJC MEPA jurisprudence. The problem is that the SJC began getting MEPA wrong in the Cummings and Enos cases, and they haven’t stopped since. The notion that parties challenging the adequacy of an EIR cannot sue the EEA Secretary – the person that approved the EIR – is just nuts. Put Enos and Cummings together with Canton and here’s the result, taking the agencies in play in the Canton case. 

1.         EEA approves an EIR

2.         DEP issues sewer connection permit

3.         Highway Department issues traffic approvals.

Where has the SJC left us? The citizen plaintiffs care about 1 and 3, and not 2, but suit is triggered when 2 happens, even though the plaintiffs don’t yet know whether the Highway Department will do the right thing or not.

Here’s another scenario likely to happen with some frequency. EEA secretary approves EIR. Citizen plaintiff believes that endangered species analysis was deficient. As is often the case, however, the Division of Fisheries and Wildlife takes some time to issue the needed permit. DEP, however, issues an unrelated permit. Once more, action by DEP triggers a need to sue, even though the plaintiff cares about the Secretary’s approval of the EIR and the DFW take permit, which hasn’t yet been issued – and may never be issued.

Which is going to come first, a legislative fix, the SJC revising the whole structure of MEPA jurisprudence, or hell freezing over?

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Those of us who advise clients regarding compliance with environmental regulations have often been in the awkward position of agreeing with clients that the agency position is, shall we say, misguided, yet at the same time advising against legal challenge, because the judicial review deck is stacked so heavily in favor of the agency. (In another time or place, one might ask why this is so.)

Nevertheless, occasionally, the agency loses and, when it does, that loss can be instructive. Yesterday, the Massachusetts Supreme Judicial Court ruled that MassDEP may not impose conditions on registrations under the Water Management Act without first promulgating regulations to guide its discretion in imposing such conditions.

Under the WMA, withdrawals existing as of the date of Act were grandfathered and persons with such withdrawals are allowed to maintain them by registering the withdrawal with MassDEP. Such registrations must be renewed periodically, but MassDEP may not reduce the size of the withdrawal. (New or increased withdrawals, on the other hand, require a permit and are subject to more stringent regulation.)

In the last round of registration renewals, MassDEP began imposing conditions on the registrations in order to increase water conservation. However, while the statute authorizes MassDEP to impose conditions on permits, similar language does not exist with respect to registrations. 

The SJC spent some time discussing MassDEP’s authority to promulgate regulations that would impose conservation requirements on registrants, but made clear that the plain language of the statute did not seem to authorize MassDEP to impose conditions on registrants absent regulations.

What’s the lesson here? With respect to the WMA, it’s “no shortcuts.” If MassDEP wants to impose conservation requirements on registrants, it must do so pursuant to validly promulgated regulations. What’s the broader lesson? Challenging the agency may be an uphill battle, but legislative language does matter and, where the language is clear, the courts will – at least sometimes – enforce it.

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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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Earlier this week, Energy & Environmental Affairs Secretary Ian Bowles announced the release of the nation’s first ocean management plan. The plan is similar, but not identical to, the draft plan issued last July. Here are the highlights

A Prohibited Area off the coast of the Cape Cod National Seashore, where most uses will be – you guessed it – prohibited

Multi-Use Areas, constituting approximately two-thirds of the planning area, where uses will be permitted if they comply with stringent standards for protecting marine resources

Renewable Energy Areas, where commercial- and community-scale wind projects have been found to be appropriate.

One significant element of the final plan, and one highlighted in Secretary Bowles’s press release, is that, where projects are proposed in areas including sensitive marine resources, it will be presumed that an alternative project outside the resource area would be less environmentally damaging. Project proponents would have to meet a balancing test, demonstrating that the project has public benefits which outweigh the detriment to the resource.

It’s going to take some time to digest the entire plan. However, most of the nation outside Houston has accepted the concept of zoning on land for almost 100 years – and land-based zoning affects private property. It’s difficult to argue with the concept that the Commonwealth should plan for resources – state waters – that it does own. In addition, having a defined framework for reviewing proposals to utilize state waters should help remove some of the uncertainty associated with the current ad hoc review that necessarily occurs in the absence of a plan. 

Deerin Babb-Brott – time to take a well-earned vacation!

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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 most of my Massachusetts readers know, on Friday, Secretary of Energy and Environmental Affairs Ian Bowles and DEP Commissioner Laurie Burt announced that Massachusetts would retain its moratorium on new construction or expansion of municipal waste combustors. Although the overall outcome is not really a surprise from this administration, a few points are worth noting.

The announcement says nothing about new technologies, such as plasma arc gasification. Arguably, such a technology is not “incineration” or “combustion,” so we’ll have to see whether the administration remains open to such alternatives to traditional incineration.

The administration emphasized that it is committed to decreasing the volume of the waste stream and noted some specific initiatives that it intends to pursue:

Comprehensive producer responsibility legislation for discarded electronics – The announcement did not refer to any specific legislation (see here for a helpful table summarizing the current state of e-waste legislation nationwide, including in MA), but the administration is clearly going to be pushing for some kind of E-waste bill.

Expansion of the bottle bill to cover water and sports drinks. Since I have joined those who consider bottled water use a pet peeve, I can’t complain about this one.

Finally, the Secretary stated that he had directed DEP to cease permitting any use of construction and demolition, or C&D, waste as fuel in any energy facility until a comprehensive review can be completed.  The announcement specifically called out the Palmer Renewable Energy facility as being affected by the halt.

It is clear that the current economy is not discouraging the Patrick administration from its aggressive environmental agenda.

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Yesterday, Senators Kerry, Graham, and Lieberman sent to President Obama a “framework” for Senate climate change legislation. The framework is short on details and does not contain many surprises. For example, it proposes “near term” – near team is undefined – reductions of 17% from 2005 levels and “long-term” – also undefined – reductions of 80%. 

The framework is nonetheless noteworthy, particularly for its inclusion of strong support for both the coal and nuclear industries. Senator Kerry was must have loved writing “Additional nuclear power is an essential component of our strategy to reduce greenhouse gas emissions.” And this: “We will commit significant resources to the rapid development and deployment of clean coal technology.”

It is clear from the public statements that the Senators have made what this language really means. The translation is fairly easy, but for those not in the know, here goes:

“Nuclear power is essential” means “We need some Republican votes.”

“We will commit substantial resources to … clean coal” means “We need some coal-state Democratic votes.

If this weren’t so important to the environment and our economy, I might enjoy watching this.

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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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The states participating in the Regional Greenhouse Gas Initiative (RGGI) announced the results of their 6^th quarterly auction, held on December 2^nd, which brought in the lowest prices for carbon dioxide (CO₂) allowances yet. Wednesday’s auction also marks the first time that RGGI allowances offered for sale outnumbered demand. Only 1.6 million of the roughly 2.1 million allowances for the 2012 vintage sold at RGGI’s required price floor of $1.86. Depending on each state’s regulations, these unsold allowances may be sold in future auctions, or a state may choose to retire them.  Although retirement this early in the game is a somewhat remote possibility, it will be interesting to see whether this will have an impact in RGGI's second compliance period, 2012-2015. 

Prices for the nearly 28.6 million 2009 vintage allowances sold fell from the September auction’s clearing price of $2.19 to $2.05, down significantly from June’s clearing price of $3.23. Despite these low prices, the number of participants in the 2009 vintage auction actually increased significantly: 62 entities, compared to 46 who participated in September’s auction. 

In the 2012 vintage offering, however, the quantity of allowances for which bids were submitted decreased 32% from September, resulting in bids for only 74% of the supply of 2012 allowances offered for sale. As in September’s auction, no non-compliance entities (businesses or persons not regulated under RGGI) participated in the 2012 vintage auction.  In comparison, non-compliance entities submitted 38% of the bids for 2012 allowances in the 4^th RGGI auction, back in June. 

The range of bid prices in the 6^th auction, not surprisingly, was also the lowest that RGGI, Inc. has reported. Bid prices for the 2009 vintage allowances ranged from the minimum clearing price of $1.86 to just $5.00, down from a high of $12.00 in the June and September auctions,  while bid prices for the 2012 vintage allowances topped out at $2.41, down significantly from March’s high bid price of $4.40.

As we said after prices fell in September’s auctions, the national (and international) efforts toward developing carbon regulation that would preempt RGGI are likely having an impact on bidders’ perceptions of RGGI’s future. Combined with additional reports that the RGGI allowance pool is over-funded, these low prices are not too surprising, and will likely continue. 

Nonetheless, RGGI is still bringing in a lot of money. The report highlights that the RGGI program has brought in more than $494.4 million over the last 15 months of auctions for investment in a state-specific programs that are targeted to reducing emissions, building the clean energy economy, and saving consumers money. If you’re interested in where the funds are going in your state, check out RGGI’s convenient summary.

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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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As I discussed last week, in response to the current dire state fiscal outlook, Massachusetts Secretary of Energy & Environmental Affairs Ian Bowles announced, pursuant to a request from Governor Patrick, a search for “options for departmental reorganization and consolidation, streamlined operations and procedures, and new models for doing the public's business.” Given that Secretary Bowles has invited public assistance, it should not be too surprising that some folks have stepped up to the plate, so I thought I would share submittals that I have seen. 

Recently, both NAIOP and the Environmental League of Massachusetts have made suggestions to Secretary Bowles. Before going further, I should note that I need to be a little more circumspect here that I might normally be, because I do advise NAIOP on regulatory reform issues and I’m on the board of ELM. Since that is the case, you’re going to get more summary and less commentary than you otherwise might. That being said, here goes.

The NAIOP letter was much more detailed. I think that the regulated community sees this as an opportunity to push for regulatory reform efforts that it truly believes benefit both the regulated community and EEA. The benefits to EEA are precisely those that were the subject of the Governor’s request to his cabinet – by increasing use of general permits, privatizing more audit-type functions, and reducing the number of unnecessary, i.e., not statutorily-mandated regulations and guidance documents, EEA and MassDEP can operate more leanly and conserve precious resources. These types of changes may have a sympathetic audience at EEA, but they are very difficult to implement, because the environmental community is so skeptical of these types of programs. The current budget problems may provide a rare opportunity to advance this part of the regulated community’s agenda.

ELM’s letter was much more limited in its scope. It largely provides the rationale for limiting cuts to EEA departments. I think that this largely reflects a “where you stand depends on where you sit” phenomenon. NAIOP sees the budget problem and the Secretary’s invitation as an opportunity; ELM and other environmental NGOs see it as an exercise in damage control. ELM’s position is understandable and defensible. It is true that DEP, at least, took what many see as disproportionate cuts during the last budget crisis.

If I may mix my metaphors, I’m an optimist, so I sit in the half-full glass, and I thus stand squarely in favor of seizing this opportunity for thoughtful regulatory reform. The budget crisis is obviously a major headache for EEA and its departments. However, many of the suggestions NAIOP has made are good public policy that would maintain – or increase – environmental protection, while allowing the agencies to accomplish this important goal with fewer resources.

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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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Following my post yesterday about the E.U. construction standards directive, I received the following two emails from my friend and client Lydia Duff.

Given what people until very recently were paying for in their home purchase decisions, and builders were providing -- e. g. Cathedral ceilings, minimal insulation, no double paned windows, huge foot prints and cheap construction -- it seems that rulemaking to impose more energy efficient building prototypes is just what we deserve. Zero will be hard to get to but I think we're a long ways from technical impracticability at this point. 

Why can't they make as much, or more, money selling equally expensive houses, smaller with more meaningful features? Building disposable houses (and hence communities) is obscenely wasteful. Our time horizons for modern construction are so short. We're beginning to turn people from disposable coffee cups; perhaps we'll shift to enduring buildings, rather than architectural and moral hideosities we merely endure.  (Bias note: my house was built in c. 1860)

Will any of my friends in the development community pick up the gauntlet that Lydia has thrown down? (Oh, and my house was built in 1862, and we love it, but I wish it were more energy-efficient.)

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Boston Celtics’ fans know the phrase “fiddlin’ and diddlin.” Well, the Senate continues to fiddle and diddle over climate change legislation. Those who have worked with Gina McCarthy, current EPA air chief, know that she has probably never fiddled or diddled in her life, and I certainly don’t expect her to do so with respect to GHG regulation under existing Clean Air Act authority in the absence of comprehensive legislation. As a result, it now seems likely that EPA will be issuing climate change regulations before any legislation is enacted.

What’s the basis for this conclusion? First, the Senate side:

E&E Daily reported today that Senate leaders are not planning to bring the cap-and-trade bill to the floor until after work on health care and financial regulation bills has been completed.

Senator Webb today “blasted” cap-and-trade legislation as “enormously complex.” (Even with a tailoring rule, good luck eliminating the complexity from EPA regulation under current authority)

So, things aren’t exactly cooking with gas on the legislation front. What’s up at EPA?

Last week, EPA sent the endangerment rule to OMB for final review

EPA’s stakeholder group on the tailoring rule has been hard at work at work and expects to have a preliminary report out by the end of the year. The Daily Environment Report gives a good flavor of the complexities faced by this project, but there is no question that the group and EPA are moving forward.

The bottom line is that unless a health care bill passes soon, and unless passage relieves a bottleneck in the legislative pipeline, we will all be participating in the experiment to see if EPA can make climate change regulation work under existing CAA authority. 

May you live in interesting times.

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On the be careful what you wish for front, Massachusetts Energy and Environment Secretary Ian Bowles announced yesterday an effort to examine “options for changes in administrative structures and programs to meet environmental goals in light of budget challenges.” The announcement identifies three separate areas of investigation:

Public-Private Partnerships – This makes a lot of sense, but, based on the announcement, seems to be too narrowly focused. The announcement indicates that the review will focus on management of properties owned by the Department of Conservation and Recreation. However, we shouldn’t just be looking at whether to let Disney sponsor the Freedom Trail. For example, I am on the board of the Corporate Wetlands Restoration Partnership, a public-private partnership that leverages private money to assist publicly funded wetlands restoration projects. Surely, there are other, similar opportunities to enlist the private sector in in financing EEA programs.

New Regulatory Models – Here is where the rubber meets the road for most of us attorneys and our clients. The announcement mentions MassDEP’s very successful privatization of our state Superfund program, Chapter 21E, and asks whether there are other opportunities for similar innovations. Some thoughts:

Greater use of general permits.

Other opportunities to privatize, such as inspections and audit functions. Naysayers will raise concerns about the independence of third-party inspections, but it’s a false dichotomy to contrast a world of perfect inspections by DEP with a system of private inspections. Audits and inspections would occur with much greater regularity if regulated facilities were required to pay a third party to audit their facilities every year.  Wouldn't that be a good thing?

Greater consistency in agency decision-making. I don’t think that EEA or DEP realize the costs imposed by their failed efforts to rein in street level bureaucrats who have their own ideas as to what good policy is.

Spend less time writing new guidance and let qualified professionals exercise their professional judgment without wasting precious agency time questioning whether a regulated entity used the proper font in its latest submittal (sorry, rhetorical excess alert).

Reorganization/Consolidation of State Agencies

Secretary Bowles, Commissioner Burt, and others involved should be commended for undertaking this effort. It would be great if the current budget crisis could be turned into a real opportunity for reform. As I’ve said on other occasions, this should be a Nixon-in-China moment for regulatory reform. 

Carpe diem.

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Last week, the City of Portland, Oregon (together with Multnomah County) released an updated Climate Action Plan. The Plan presents a number of aggressive goals and targets, with ultimate goals of GHG reductions of 40% by 2030 and 80% by 2050.

The details of the Plan are obviously only relevant to those in the Portland area, but for those anticipating what regulation might look like in California, Massachusetts, and other states that have enacted or will soon enacted some version of a Global Warming Solutions Act, the Plan provides a helpful catalogue of the types of changes that might be sought. Therefore, a quick summary of some of the 2030 goals seems warranted

Reduce energy use from existing buildings by 20%-25%

All new buildings – and homes -- should have zero net GHG emissions. 

Reduce VMT by 30% from 2008 levels

Recover 90% of all waste generated

Reduce consumption of carbon-intensive foods

Expand “urban forest canopy” to cover one-third of Portland

Reduce emissions from City and County operations by 50% from 1990 levels

What’s my take? I have two immediate reactions. First, if any further evidence were needed that attaining significant GHG emission reductions is going to involve major social and economic changes, this is certainly it. 

Second, and perhaps more importantly, this Plan, and others like it, have to constitute a heavy thumb on the side of the scale arguing for comprehensive federal legislation. In the past, I’ve argued that federal legislation would be preferable to a patchwork made up of EPA regulation under existing Clean Air Act authority, public nuisance litigation, and state and regional initiatives. To that list, we can now add comprehensive local regulation. I don’t mean to be too sanguine about the ability of federal legislation to harmonize this entire process; the existing bills would not preempt most state, regional, and local regulations (other than cap-and-trade programs). Nonetheless, delays in federal enactment can only contribute to the proliferation of state, regional, and local programs, some of which may be beneficial, but many of which will be inefficient, contradictory, or both.

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The US Securities and Exchange Commission released a staff bulletin yesterday that reverses a Bush administration policy that excluded shareholder resolutions which asked companies to disclose their climate-related financial exposure. While not the rule-making we discussed last week, this could be a significant change for the boards of large companies who may now be forced to respond to shareholder concerns about the risks that greenhouse gases and climate change can create.

The Bulletin states that going forward, the Corporation Finance Division will no longer automatically allow the exclusion of proposals that deal with the evaluation of risk, but will look at the subject matter giving rise to the risk.  The Division will generally not permit a company to exclude a shareholder proposal that deals with significant policy issues relating to the evaluation of risk.  The Division noted in its decision that risk management and risk oversight can have major impacts not only on the shareholders, but on the company itself, and that application of the Bush administration framework in SLB No. 14C led to unwarranted exclusions.

CERES, which had long lobbied for such a change in the SEC's policies, applauded yesterday’s announcement, concluding that “the guidance strikes the right balance of ensuring that resolutions about critical matters reach company share owners, without opening the floodgates to proposals of more questionable significance.”

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Public and private developers spend a lot of time talking about NIMBY, or Not In My Backyard. With the increasing number of coastal development projects, ranging from wind farms to LNG facilities to plans for casinos, we should perhaps be talking about another acronym: NIMO, or Not In My Ocean. Yesterday, a decision from the First Circuit Court of Appeals in Weaver's Cove LNG v. Rhode Island Coastal Resources Management Council gave some hope that NIMO will not mean that states can simply squelch development of ocean resources.

Weaver’s Cove, as originally proposed in 2003, was to be an LNG terminal  located up the Taunton River, in Fall River, Massachusetts. To address safety and related concerns, the proposal has been moved off-shore.

The only element of the project that is subject to the jurisdiction of Rhode Island authorities is dredging that would be necessary in Rhode Island waters. That dredging requires a federal consistency determination by the Rhode Island Coastal Resources Management Council, or CRMC. In addition, Rhode Island state law requires that the CRMC provide a license to the project, known as an Assent. Here, the CRMC refused to provide either the federal consistency determination or the state law Assent. Weaver’s Cove LNG sued, won in the District Court, and won again yesterday at the Court of Appeals.

The facts of the case are complicated and the Court limited the decision as far as it could to the case-specific facts. Nonetheless, there are two points to be gleaned from the decision that may be of broader import

The Coastal Zone Management Act contains a provision, specifically intended to prevent states from frustrating the purposes of the CZMA, which provides that, if a state fails to act on a consistency request within six months, the state’s concurrence is “conclusively presumed.” Here, Rhode Island argued that the clock hadn’t begun to run, because Weavers’ Cove hadn’t provided all of the information necessary for CRMC to make a consistency finding. The Court didn’t buy it. Again, the facts here won’t translate to other cases, but what will transfer is the Court’s refusal simply to accept Rhode Island’s request that the Court defer to a state agency’s interpretation of its own law. Calling the CRMC’s interpretation of Rhode Island law “untenable” and “clearly erroneous,” the Court rejected it and held that, because of the CRMC’s failure to act, consistency would indeed be “conclusively presumed.”

Perhaps even more significantly, the Court concluded that the Rhode Island law which would require that the CRMC issue an Assent before the project could move forward is preempted by the Natural Gas Act (NGA). While the Court did not find that the NGA explicitly preempted Rhode Island law or that it occupied the field, it did conclude that, in this case, state law conflicted with the NGA. 

Notwithstanding the Court’s efforts to limit its preemption holding, I think it will provide grist for preemption arguments in other cases, as will its reluctance to defer to state agency interpretation of state law, where such deference might create obstacles to the accomplishment of federal objectives.

It’s too much to say that this decision represents the end of NIMO. However, it’s also difficult to see this as totally abstracted from an awareness by the Court of the delays experienced by the Cape Wind project. We’ve got to figure out a way to get to an answer more quickly. The answer my be “no” to some projects, but it shouldn’t take six years to get an answer.

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A few weeks ago, we noted EPA’s release of its long-awaited “Tailoring Rule,” specifying how EPA would apply its PSD program under existing Clean Air Act authority to greenhouse gases, once they definitively become a regulated pollutant under the CAA some time next spring. Today, the proposed rule was published in the Federal Register. Comments are due December 28.

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Waxman-Markey. Boxer-Kerry. Public nuisance litigation. EPA regulation under existing authority. What’s next in the arsenal of weapons against climate change? How about including climate change impacts in reviews under NEPA?

In February 2008, the International Center for Technology Assessment, the Natural Resources Defense Council, and the Sierra Club petitioned the CEQ to “clarify” its regulations to require the assessment of potential climate change impacts in environmental reviews performed under NEPA. CEQ has not yet formally responded to the petition, but that hasn’t stopped noted environmentalist Senator James Inhofe (R. Okla.) from weighing in preemptively. Calling NEPA a “bedrock environmental statute,” Senator Inhofe has informed Nancy Sutley, CEQ Chairwoman, that NEPA “is not an appropriate tool to set global climate change policy.” It’s not obvious to me why a bedrock environmental statute shouldn’t be used to address the impacts of climate change.

In any case, whether Senator Inhofe is correct or not, it seems likely that CEQ will eventually take some action, whether by guidance or regulation, to require inclusion of climate change assessments into NEPA reviews. Moreover, this is yet another area of climate change policy in which the federal government will be following the laboratories of democracy, the states, rather than leading. As we have previously reported, a number of states, including California, Massachusetts, and New York, already require GHG assessments in reviews under their state NEPA analogues.

Going forward, those planning large projects, whether the projects are public or private and whether they are state or federal, should expect to have to assess the climate change impacts, including whether alternatives to the project are available that would have reduced climate change impacts.

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The U.S. Securities and Exchange Commission is re-examining its rules regarding whether companies should or must disclose climate change related risks. According to an article in ClimateWire, revisions could be issued by the end of October. On Friday, SEC Commissioner Elisse Walter said that SEC staff are working on preparing recommendations, and two options are still on the table. One option is a rule-making that would set specific rules for disclosing climate risks. The other would be a re-interpretation of Form 10-K disclosure rules to require companies to disclose and comment on operations tied in with mitigating climate-change risks.

These changes likely result from frequent criticism by shareholder groups that companies are ducking requirements under the current SEC rules to disclose the climate-related liabilities they face from greenhouse gas emissions, including emerging regulations, rising commodity prices, potential for property damage and long-term costs associated with replacing equipment and infrastructure after climate-related risks take their toll. Spurred on by shareholder initiatives and corporate social responsibility programs, a number of businesses have already started to voluntarily report their climate risks and disclose information on potential financial impacts. But, as stated in the Investor Network on Climate Risk's most recent letter to the SEC on this issue, climate risk disclosures in SEC filings still remain relatively rare. A June 2009 survey by INCR and CERES found that only two of 100 companies in the oil and gas, electric power, coal, insurance and transportation sectors disclosed more than half of the climate-related information sought by investors in their Q1 2008 reports. Changes to the SEC rules could make such reporting a requirement.

Even with forthcoming changes to the rules, the SEC's Walter urged companies not to wait for the SEC to act. As ClimateWire reported, "People should be looking at their own particular facts and circumstances," Walter said. "For example, if you're operating a plant in an area where there's drought, and there are serious water needs, and you don't know if you can satisfy them, costs will triple. That would be one example."
 

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Late last week, Elliott Gilberg, Acting Director of EPA’s Office of Site Remediation Enforcement (OSRE) issued an Interim Policy on Managing the Duration of Remedial Design/Remedial Action Negotiations. Members of the regulated community may not be surprised by the contents of the memo, but they certainly will not be pleased. In brief, the memorandum fundamentally makes two points:

EPA wants to shorten the duration of RD/RA negotiation

EPA is going to use the heavy hammer of unilateral administrative orders, or UAOs, to keep PRPs’ feet to the fire and ensure that negotiations move quickly.

PRPs will likely agree that shortening the duration of negotiations would be a good outcome in the abstract – but achieving it by greater use of UAOs? I don’t think so.

I can only wonder if EPA has even considered the impact of the Burlington Northern decision here. Is this a perverse reaction from EPA? A metaphorical throwing down the gauntlet to PRPs? It certainly feels that way.

I have a different suggestion, if EPA truly wants to shorten negotiations. First, acknowledge Burlington Northern and compromise on the merits in those great majority of cases where there are legitimate divisibility arguments. Second, stop acting like the last bastion of command and control regulation. Set cleanup standards and then, to the maximum extent permitted by existing law, let PRPs clean up to those standards, without micromanaging every detail of the cleanup process.

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On Thursday, EPA issued its long-awaited proposed rule describing how thresholds would be set for regulation of GHG sources under the existing Clean Air Act PSD authority. Having waded through the 416-page proposal, I’m torn between the appropriate Shakespeare quotes to describe it: “Much ado about nothing” or “Methinks thou dost protest too much.”

First, notwithstanding its length, the proposal is quite limited in scope. In essence, it has three parts:

Establishment of an applicability threshold for PSD and Title V purposes of 25,000 tons per year of CO₂e.

Establishment of a PSD significance level of from 10,000 tpy CO₂e and 25,000 CO₂e.

Development over the next five years of means to streamline GHG regulation of sources greater than the current statutory levels of 100-250 tpy.

Basically, EPA’s position is that, once it begins to regulate GHGs as a pollutant by promulgating its mobile source rule – expected next spring – stationary source regulation under the PSD and Title V programs follow automatically. Thus, the issue for EPA at this point is not whether to regulate stationary sources, but how to do so without the entire program grinding to a halt.

Here’s where the protestation comes in. Most of the proposal is devoted to explaining EPA’s reliance of the doctrines of “absurd results” and “administrative necessity” to justify exclusion of sources that would seem to be categorically included by the explicit language of the statute. Members of the regulated community will understand the irony in EPA’s extensive discussion regarding how the purpose of the PSD program is to achieve environmental protection and economic development – and that this latter purpose would be jeopardized by regulation of sources at the 100/250 tpy threshold. I don’t think we will ever again see EPA devote this many pages to a description of its concern about economic growth.

I’m not going to predict here whether EPA will win any challenge to the higher thresholds. Certainly, the absurd results doctrine argument is the stronger of the two. It is noteworthy that the four leading environmental cases EPA cites in support of its administrative necessity argument, while acknowledging the existence of the doctrine, all went against EPA.

More relevant still is the question of who would in fact challenge this regulation and what would be the result even if the challenge succeeded. Following the debacle that resulted from vacation of the CAIR rule, what is the likelihood that a successful challenge would result in vacation of the rule in its entirety? Isn’t it more likely that the rule would stay in effect as to the large sources, with the court remanding the case to EPA to promulgate rules governing smaller sources? In fact, that’s what EPA is already doing, which is probably EPA’s strongest practical argument in support of the rule.

Public comments will be due 60 days from Federal Register promulgation and there are some issues that the regulated community should consider. These include the significance threshold, and suggestions regarding how to streamline the program for smaller sources. EPA has proposed some interesting ideas, including presumptive BACT determinations and general permits. 

Bottom line? Large sources better get ready to comply. Smaller sources, take a deep breath and count your blessings – for now. 

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After a number of stories indicating that the prospects for climate change legislation were dimming for 2009, the convergence of a number of factors suggests that legislation may still be possible.

Yesterday, Senator Boxer and Senator Kerry released a draft of climate change legislation. This doesn’t mean that Senate passage is imminent. The bill has not been formally introduced and, like the early drafts of the Waxman-Markey bill, leaves some sections blank. Senator Boxer apparently intends to issue a mark-up of the bill sometime in October. One note for the politically-minded readers of this blog – just don’t call the bill “cap-and-trade” legislation. Senator Kerry stated that he does not know what “cap-and-trade” means and denied that this is “cap-and-trade” legislation – notwithstanding that it would cap emissions of CO₂ and allow regulated entities the right to trade allowances to emit CO₂.

Meanwhile, EPA continues to work on climate change regulations. Last week, OMB apparently completed its review of EPA’s proposal to apply PSD rules to sources of CO₂ greater than 25,000 tons per year. EPA apparently intends to issue the rules some time this week. 

Opposition to climate change legislation among the regulated community appears to be splintering. In the past week, three members of the U.S. Chamber of Commerce left the Chamber due to its intransigence on climate change. Perhaps even more tellingly, the Chamber yesterday issued a statement that it supports “strong federal” climate change legislation – though it still appears to oppose significant parts of the Waxman-Markey bill. The Chamber also stated that it prefers legislation to regulation by EPA. Finally, it is worth noting that the Chamber’s statement accused environmentalists of distorting its position, without addressing the withdrawal of three utility members.

The decision in Connecticut v. EPA allowing the public nuisance litigation against six generators to continue. If the threat of EPA regulation hasn’t been enough to tip the balance in favor of legislation, the threat of regulation by injunction may be enough to do so.

Whether these developments will be enough to push climate change legislation over the threshold remains to be seen. Certainly, they improve its prospects.

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EPA released its final version of the Mandatory Greenhouse Gas Reporting Rule today.  The Rule (which we blogged about in its draft form here) will require large emitters of greenhouse gases to begin collecting emissions data on January 1, 2010 and file their first self-certified reports in March 2011.  The EPA will then verify the data, as in other Clean Air Act programs. The new program will cover approximately 85% of the nation's greenhouse gas emissions and apply to roughly 10,000 facilities, down from the 13,000 that EPA had predicted in its draft rule in March. 

The rule has changed somewhat since it was proposed, through two public hearings and over 17,000 written public comments.   Some of the more significant changes include reducing the number of source categories that are automatically required to report (excluding, interestingly, food processing, waste water treatment, and suppliers of coal) and allowing facilities that reduce their emissions below the annual threshold of 25,000 metric tons of carbon dioxide equivalent ( CO_2e) to cease reporting after 5 years.  The rule also adds a provision to allow the use of best available data in lieu of required monitoring methods for the first few months of the reporting period (through March 2010). 

As in the draft rule, the threshold for reporting is generally 25,000 metric tons or more of CO_2e per year, although some source categories are automatically included.  Reporting is conducted at the facility level, except for suppliers of fossil fuels and engine and vehicle manufacturers, who will report at the corporate level.  With this rule, the EPA will be counting emissions from cars, too.  Vehicle manufacturers begin their reporting with CO₂-only for model year 2011, and phase in other greenhouse gases in subsequent model years.

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On Monday, the Court of Appeals for the 2^nd Circuit finally issued a decision in Connecticut v. American Electric Power Company, reversing the District Court decision which had dismissed this public nuisance law suit against six large generating companies. The decision is notable in a number of different respects and may have far-reaching implications

·  Standing. Following Massachusetts v. EPA, it is not really surprising that the plaintiffs were able to establish that they have suffered injuries sufficient to provide standing. The more questionable point is redressability. The Court acknowledged that it must be “likely” that the injury will be redressed by a favorable decision. The Court’s response to this issue was that the plaintiffs need not demonstrate that a favorable decision will eliminate the injury, only that it will provide some measure of relief. Even so, could plaintiffs really prove that even elimination of all CO₂ emissions by the defendants would have any impact on climate change? I’m extremely skeptical. The Court did note that there is a “lowered bar for standing” at the pleading stage, so we may see more of this issue as the case proceeds.

·  Displacement. Connecticut v. American Electric Power, unlike the North Carolina v. TVA case decided in January, is basically premised on federal common law of public nuisance. However, federal common law only exists in the absence of legislation addressing the same issues and is subject to “displacement” by such legislation. Following Massachusetts v. EPA, there is no doubt that the CAA provides authority to regulate GHG. What, therefore, is the role of federal public nuisance claims at this point? The Court’s ruling here left defendants alive to argue this issue another day. The Court noted that EPA has not yet issued a final endangerment finding and certainly has not issued regulations limiting GHG emissions from stationary sources. Thus, the problem complained of by plaintiffs “has not been thoroughly addressed by the CAA.” In other words, if either Waxman-Markey passes or EPA moves forward with regulations on its own, defendants may have another crack at dismissing Connecticut v. American Electric Power. 

·  Nuisance Claims in Other Contexts. In tandem with North Carolina v. TVA, this case certainly puts new life into nuisance as a potentially important arrow in the quiver for environmental plaintiffs. As we noted in January, the TVA decision left room for nuisance claims even where National Ambient Air Quality Standards have been attained. This leaves substantial room for nuisance claims in a variety of contexts, as long as underlying legislation hasn’t specifically preempted such claims

·  Prospects for Federal Climate Change Legislation. We have already discussed the choice between regulation by EPA and comprehensive federal cap-and-trade legislation. Now it appears that this dilemma has three horns, not just two. Which would generators prefer? Waxman-Markey or judicial injunctions following nuisance litigation?

It’s a lot to consider.

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On Tuesday, EPA announced its intention to issue new effluent guidelines for the Steam Electric Power Generating industry by sometime in 2012. The announcement follows an EPA study in 2008 which indicated that toxic metals, particularly those collected as part of flue gas desulfurization processes, can pose a problem in facility effluent. EPA’s announcement is not particularly surprising, given the ongoing study and given that EPA has not revised the guidelines since 1982. Indeed, notwithstanding EPA’s announcement, Environmental Integrity Project, Defenders of Wildlife and Sierra Club announced that they would still sue EPA over its failure to timely update the guidelines.

There are two reasons why this announcement is significant beyond just its implications for effluent discharges from these facilities. First, it’s hard to see EPA’s announcement – and the threat of NGO litigation – as anything other than another bullet aimed squarely at the coal industry. From climate change, to attacks on mountaintop removal, to the reaction to the TVA spill, to this effort to make the effluent guidelines more stringent, there is no doubt that coal is in the cross-hairs at the moment. If there are any doubters concerning this point, Duke Energy CEO Jim Rogers isn’t among them. He was quoted in this morning’s Energy & Environment Daily as saying that it is at least possible to envision a world in 2050 “where coal is not in the equation.”

The other reason why this announcement is significant is that it raises fairly squarely the question regarding the very structure of our current regulatory system.  It’s not really any more than happenstance and political convenience that we regulate different environmental media differently. In this context, it is noteworthy that EPA’s Science Advisory Board just recommended that EPA consider setting multi-pollutant standards under the Clean Air Act, rather than regulating each pollutant separately. Theoretically, that’s good as far as it goes, but it doesn’t really solve the problem of the balkanization of EPA’s different regulatory programs.  In the long run, EPA’s regulatory efforts would be much more cost-effective – and would probably garner much more public support – if they were rationally based on an overall assessment of risk, across pollutants and across media.

I’m not holding my breath.

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As BNA reported this morning, at yesterday's Conference of New England Governors and Eastern Canadian Premiers in New Brunswick, the six New England governors adopted The New England Governors' Renewable Energy Blueprint.  Through this plan, the governors of Maine, Massachusetts, Connecticut, New Hampshire, Rhode Island and Vermont agreed to speed regional development of renewable energy by coordinating state reviews of proposed interstate transmission lines and synchronizing solicitation and decisions on power procurement and long-term energy contracts.  The blueprint calls for states to hold joint hearings and coordinate decisions when appropriate, but even using common applications and timelines could have a significant impact on how long the siting process takes.  

The blueprint is based on conclusions reached in a study conducted by ISO-New England, called the Renewable Scenario Development Analysis, which concluded that there is a large quantity of untapped renewable resources in the New England region, including more than 10,000 MW of on-shore and off-shore wind power potential, but that such resources could not easily be developed without coordination between the states on siting transmission.

The blueprint also discusses the option of New England states tapping into renewable energy sources located in Canada and calls for a state-federal partnership in which the federal government uses regional plans as guidance for interconnection-wide analysis and federally-funded renewable energy infrastructure development.  It will be interesting to see the impact that such regional developments have on the national level.

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The silence from Congress recently concerning climate change legislation has been deafening. The continued health care debate does not bode well for early passage of the Waxman-Markey bill. Meanwhile, EPA is not sitting on its hands.

Daily Environment Report noted last week that EPA has sent to the OMB a proposal to reverse the Agency’s policy that CO₂ is not a pollutant subject to the PSD provisions of the Clean Air Act. Also last week, Greenwire reported that: “As Hill debate flounders, EPA plows ahead on emissions rules.” [And for those of you who can’t get enough of the debate between “founder” and “flounder”, take a look here.] The Greenwire story reports that EPA is moving ahead on rules governing emissions of GHGs from automobiles and large stationary sources.

The biggest debate continues to be whether EPA has legal authority to exempt small sources of CO₂ (probably those emitting less than 25,000 tons per year) from PSD rules. Certainly, the D.C. Circuit’s treatment of EPA’s CAIR rule should give everyone pause that the Court will approve rules that don’t seem to have authority in the CAA, just because everyone thinks that the rules would be good public policy. The strongest argument in support of the exemption – or at least the one mentioned most often – is simply that no one would challenge such a rule, because it would obviously be such a good idea. I’m skeptical. Major sources who want to torpedo the entire rule might easily challenge such an exemption.

I hate to sound like a broken record, but I keep coming back to a slightly different question: Who in their right mind would prefer EPA rules under current CAA authority to comprehensive legislation, however imperfect the legislation might be? Those assessing the merits of legislation can’t compare it to the status quo, because, as these recent moves by EPA demonstrate, the status quo cannot hold for long. The comparison must therefore be between the Waxman-Markey bill and the world as it will be once EPA regulates under existing authority.

It’s looking more and more likely that Congress may not have sufficient momentum to pass legislation until the reality of EPA regulation becomes manifest. I’m not looking forward to that.

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While many people today look to the Daily Show and the Colbert Report for political commentary, the Boston Red Sox leave me with insufficient TV time, so I rely on the Borowitz Report. Whenever the press reports as news something blindingly obvious to normal Americans, Borowitz will refer to the statement as having been authored by D’Oh Magazine.

Last week, in a story that should have been reported in D’Oh Magazine, a Daily Environment Report headline stated that the “Link Between State of Environment, Agency Actions Should be Clear, EPA Told.” The story concerned advice EPA was given by its own Science Advisory Board regarding EPA’s next Report on the Environment, due to be issued in 2012. Among other recommendations, the SAB stated that:

The link between reductions in pollutants and improvements in environmental quality should be made, with the goal of answering the question, “how much reduction in emissions or environmental concentration is needed to produce environmental improvements?” The overarching conceptual model for the ROE needs to include the feedback loop of EPA regulation and policy as an action/response that affects the environment.

I don’t mean to be flip, but isn’t that precisely what EPA and other regulatory agencies are supposed to be doing 100% of the time? I understand that real-world science is messy, but if EPA and other environmental agencies aren’t sure of the link between their regulatory programs and reductions in or prevention of pollution, shouldn’t they be hesitating before they regulate?

Am I missing something?

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The Regional Greenhouse Gas Initiative (RGGI) has released the clearing prices from its 5th quarterly auction of CO₂ allowances, held on September 9, 2009.  Prices for the 28.4 million 2009 vintage allowances sold fell sharply from the June auction's clearing price of $3.23 to $2.19, and the 2.1 million 2012 vintage allowances sold for only $1.87, just one cent above the market floor of $1.86, and well below the $3.05 that they earned at the March 2009 auction, which was the first at which these later vintage allowances were offered for sale. 

Interestingly, while the number of participants in the 2009 vintage auction remained relatively steady, no non-compliance entities (persons not regulated under RGGI) participated in the 2012 vintage auction.  These participants had amounted to 38% of the bids for 2012 allowances in the June auction. 

RGGI, Inc. has also released the range of bid prices in the 5th auction, allowing some insight into how the players value these allowances.  Bid prices for the 2009 vintage allowances ranged from the minimum clearing price of $1.86 to $12.00, the same as in the 4th auction, while bid prices for the 2012 auction ranged from $1.86 to just $3.00, down from June's high bid price of $3.84 and March's high bid price of $4.40.

Wednesday's auction was the first since the passage of ACES by the House in late June.  ACES provides for an even exchange of RGGI allowances for national allowances, something that could increase the value of RGGI allowances going forward, as it removes some uncertainty.  Nonetheless, pundits had predicted lower prices from this auction for a number of reasons, including doubt about the likelihood that the Senate will pass a national cap-and-trade program

The decrease in prices and lack of participation in the 2012 auction is also interesting given a report released on Wednesday by Point Carbon which predicts that actual emissions from the RGGI-regulated northeastern power plants will already be much lower than the RGGI cap, set at 188 million allowances per year.  According to Climate Wire, the report notes that the economic downturn, combined with a cool summer and warm winter reduced the amount of fuel for electricity used in the 10-state region. Falling natural gas prices have also prompted generators to switch away from more carbon-intensive fuels like coal and oil to natural gas.  The report predicts that the CO₂ emissions from the 233 power plants regulated under RGGI will emit 155 million tons this year, well below the cap.

Although the RGGI cap will begin decreasing by 2.5% each year in 2015, the years until then may provide an opportunity for regulated generators and other interested bidders to stockpile  allowances.  Given that RGGI allowances may be banked for future use without restriction, such a large number of allowances being banked could keep prices depressed for some time.

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In another sign that the NSR program is alive and well under the Obama administration, the United States (together with the State of Illinois, filed suit Thursday against Midwest Generation, alleging violations of NSR requirements at six coal-fired power plants. Although the action is not too surprising, given that the Bush EPA had issued a notice of violation to Midwest Generation in 2007, it remains noteworthy. Each new prosecution serves to remind generators that failure to comply with NSR rules can lead to significant costs.

Of course, that in terrorem effect on other generators is precisely what the administration and environmental groups want. Unfortunately, for those of us who believe that the NSR program is an incredibly wasteful way to reduce air pollution, such litigation only detracts from efforts to make air pollution control regulations more cost-effective.

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Although not breaking any new ground, a decision from the Massachusetts Appeals Court last week provides a helpful summary of the discretion typically given to MassDEP in making permitting decisions. In Healer v. Department of Environmental Protection, abutters to a proposed wastewater treatment facility in Falmouth sued MassDEP, claiming that the groundwater discharge from the leach field associated with the facility would damage drinking water supplies and nearby wetlands. The Court affirmed the MassDEP Commissioner’s rejection of the abutters’ challenge.

As the Court noted

the “applicable standard of review is “highly deferential to the agency” and requires the reviewing court to accord “due weight to the experience, technical competence, and specialized knowledge of the agency, as well as to the discretionary authority conferred upon it…. We give deference to the decision of an agency interpreting its own regulations … [and] do not intrude lightly within the agency’s area of expertise, as long as the regulations are interpreted with reference to their purpose and to the purpose and design of the controlling statute.”

As if that were not enough of a nod towards agency deference, the Court also noted, in the context of the plaintiffs’’ challenge to the monitoring requirements imposed in the permit, that

The Legislature “has chosen to put into the hands of an expert administrative agency the decision making regarding complex issues of environmental … science…, and has allowed the agency considerable discretion in determining monitoring of applicable parameters in order to carry out its duty….

Finally, the Court made at least one statement about the plaintiffs’ affirmative case that is sure to be cited by MassDEP and permittees in future citizen suits. In rejecting the plaintiffs’ argument that toxic household chemicals might cause environmental damage, the Court stated that the “regulations do not require the department to establish permit conditions based on the plaintiffs’ speculative concerns.”

So, what’s the upshot of Healer? It certainly confirms that, as a general matter, courts are not going to reverse agency decisions unless they seem really off-the-wall.  On the other hand, it remains true that MassDEP does not always win and my own jaded view is that courts remain willing to reverse MassDEP, even when deference would require that the court affirm the agency, if the agency decision somehow rubs the court the wrong way.

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As we have reported, EPA and MADEP have both been taking steps over the past year to broaden the scope of their stormwater programs beyond existing regulation under the rules concerning stormwater discharges associated with industrial or construction activity. EPA has proposed using residual designation authority in Maine and Massachusetts and the MADEP proposed sweeping rules governing existing private facilities.

In the regulated community, there has been substantial concern that these efforts have focused too narrowly on private properties, with the MADEP proposed rules, for example, potentially requiring costly retrofits on many properties without consideration of whether there might be more cost-effective ways to control stormwater pollution, such as through increased focus on MS4s.

Based on this week’s news, EPA may have heard these complaints.

On Wednesday, EPA Region I announced enforcement actions against municipalities for violations of MS4 requirements. EPA proposed to fine nine communities in Massachusetts and New Hampshire; EPA also issued orders requiring that the municipalities take certain actions to come into compliance with the MS4 requirements.  Given the current economic climate and the erosion in municipal budgets, the willingness to impose penalties demonstrates EPA’s seriousness in enforcing the MS4 requirements.

So why does the private sector need to remain worried? One word in the first sentence of EPA’s press release says it all: “integrated.”  Wednesday’s enforcement announcement was part of “a new integrated effort” to enforce stormwater requirements.  While this notice was focused on illegal connections to storm sewers, is there any doubt that this is also part of a broader “integrated” effort to attack stormwater pollution more generally?  Now, when EPA and MADEP come calling on the private sector, the agencies can respond to complaints about unequal focus by noting that they have already made municipalities take their medicine; now it’s time for the private sector to do so as well.

Spoonful of sugar, anyone?

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Construction and development companies praying for an economic recovery next year have something else to worry about: pending new EPA regulations regarding stormwater discharges from construction activities – and claims from environmental groups that EPA’s proposal isn’t stringent enough.

EPA issued a proposal on November 28, 2008. That proposal is complex, but the aspect of it that has received the most attention is the requirement that certain construction sites greater than 30 acres meet numerical turbidity limits (specifically, 13 nephelometric turbidity units (NTUs), which I had to include in this post just because it sounds so cool). Developers have opposed the numeric limits; the National Association of Home Builders estimates that the cost to comply would be $15,000 to $45,000 per acre.

On the other hand, the NRDC and Waterkeeper Alliance have threatened to sue EPA if EPA does not revise the propose rule to include post-construction controls as part of the rule. EPA has stated that it is not planning to do so. It’s not obvious that NRDC and Waterkeeper Alliance have the better of this specific debate, but the argument regarding post-construction controls is similar to the ongoing discussion in Massachusetts and elsewhere regarding the need for ongoing stormwater controls at properties other than industrial facilities that are already regulated.

The issue is not going to go away.  EPA is under a deadline to issue the rule by December 1, 2009.

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I assume that environmental agencies’ focus on the annual dollar total of enforcement fines and penalties drives my clients as crazy as it does me. After all, the correlation between such figures and any environmental outcomes is pretty limited. Indeed, less enforcement may mean more compliance rather than more undetected violations.

It thus comes as at least limited good news from Inside EPA that EPA is looking at ways to measure the impact of enforcement efforts other than by measuring the amount of fines and penalties. Instead, as indicated by a presentation made last month by EPA’s Office of Compliance, EPA is going to try to measure the environmental benefits of its enforcement efforts.

(Of course, it’s more than a little depressing that the motivation for this change is the expected decrease in the dollar value of settlements in FY 2009 from the Bush administration’s FY 2008 numbers. God forbid that the Obama administration should recover fewer environmental enforcement dollars than the Bush EPA!)

While congratulations will be due to EPA for whatever strides they make in this area, it is only the tip of the iceberg. The problem of identifying the benefits of environmental programs extends far beyond the enforcement arena; it is endemic to the entire gamut of environmental regulatory programs, state and federal. 

EPA occasionally generates very gross overall numbers demonstrating that the benefits of some program outweigh the costs. However, such figures provide no real assistance in determining whether some other approach to regulating a particular air contaminant would have been more cost-effective or, more fundamentally, whether allocating resources to other contaminants or even other media would be a better place to spend environmental protection dollars. As I noted in one of my Superfund rants, a small town in New Hampshire can legitimately ask whether it could save more lives by devoting resources to public safety improvements than to cleaning up a Superfund site.  The fault is not that of EPA alone or that of state environmental agencies.  It’s very easy for Congress, under pressure from some apparent crisis, to create a regulatory program that explicitly or implicitly forbids considerations of cost-effectiveness or cost benefit analysis.

To hark back to a different rant of mine, on the subject of regulatory reform, is it too much to ask of the Obama administration that it make efforts to increase the cost-effectiveness of our regulatory programs?  If Obama is serious about bipartisanship, this might be one way to achieve it. 

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EPA announced this week that it was granting a petition for reconsideration of the final National Ambient Air Quality Standards for lead, specifically the portion requiring monitoring of lead emissions near certain sources. The petition was brought in January by a number of environmental organizations and groups concerned about childhood lead poisoning. 

The existing lead monitoring requirements were finalized in October 2008, at the same time that EPA tightened the national air quality standards for lead for the first time in 30 years. EPA reports that the revised standards are 10 times more stringent than the previous standards and require states to place monitors near sources that emit one or more tons of lead a year. They also require a monitor to be operated in each of the 101 urban areas with populations greater than 500,000 to gather information on the general population’s exposure to lead in air.

As part of the reconsideration, EPA will evaluate whether additional monitoring near industrial sources and in urban areas is warranted. EPA notes in its fact sheet that it is not reconsidering the lead standards, and that implementation of those standards and the existing monitoring requirements will move ahead on schedule.  States are required to make recommendations for areas to be designated attainment, nonattainment, or unclassifiable by October 2009.

If EPA decides to revise the lead monitoring requirements later this summer, it would issue a final rule in the spring of next year, following public review and comment.

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As most readers know, Massachusetts and California have been leading the pack in requiring analysis of greenhouse gas impacts in connection with reviews of new development. Now, New York State is catching up. This week, the Department of Environmental Conservation, or DEC, released its Policy on Assessing Energy Use and Greenhouse Gas Emissions in Environmental Impact Statements. The policy is certainly similar to the Massachusetts Greenhouse Gas Emissions Policy and Protocol. Nonetheless, the DEC Policy has a few items worth noting.

DEC has provided that, with respect to indirect GHG emissions from: (1) off-site energy generation and (2) vehicle trips, a project proponent may avoid the need to provide a quantitative analysis of these issues if he/she can demonstrate to DEC that the project already “has minimized emissions to the maximum extent practicable.” This opt-out is similar to one provided in the Massachusetts GHG policy, except that the MA policy requires that the developer commit in advance to GHG reductions that are variously described as “exceptional” and “extraordinary.”

The DEC Policy includes specific provisions governing assessment of methane emissions from landfills. It requires use of site specific information, together with EPA’s Climate Leaders Greenhouse Gas Inventory Protocol, Direct Emissions from Municipal Solid Waste Landfilling module (October 2004).

Even aside from the provisions addressing landfill emissions, the Policy requires an assessment of emissions from waste generation and management. This is not required by the MA policy.

Like Massachusetts, the DEC Policy requires that “priority and preference” be given to on-site mitigation measures. Off-site mitigation can be considered, but only after DEC staff have considered the “completeness” of on-site mitigation.

There is no doubt that requiring an assessment of the GHG impacts of new development is a trend at this point – and one that is only going to accelerate. As federal legislation or regulation under existing CAA authority becomes a reality, and as more states start to pass their own version of a Global Warming Solutions Act, as California and Massachusetts have already done, squeezing the maximum GHG reductions out of new development is going to become an imperative. At some point, GHG review may become similar to offset programs in non-attainment areas. New developments are going to have to be as efficient as possible – and may also have to purchase offsets to make such new developments climate neutral.  

Time will tell, but it’s often much easier to go after new development than to try to squeeze emissions reductions out of existing facilities. The result is that increasingly stringent mitigation requirements seem inevitable.

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Last Friday, in NRDC v. EPA, the Court of Appeals for the D.C. Circuit struck down parts of EPA’s Phase 2 rule for achieving compliance with the ozone NAAQS. The most important part of the ruling was the Court’s conclusion that EPA could not rely on compliance with the NO_x SIP Call to satisfy the requirement that sources in an ozone nonattainment area demonstrate achievement of reasonably available control technology, or RACT. The basis for the decision was the Court’s conclusion that the plain language of the relevant portions of the CAA did not allow use of a cap-and-trade program to substitute for the source-specific compliance requirements imposed by the statute.

In this case, § 172(c)(1) of the CAA “requires that nonattainment areas achieve ‘such reductions in emissions from existing sources in the area’ as can be achieved by the adoption of RACT.” For the Court, this was simple and dispositive.

Thus, the RACT requirement calls for reductions in emissions from sources in the area; reductions from sources outside the nonattainment area do not satisfy the requirement.

In other words, a cap and trade program won’t do, if it allows sources to avoid explicit statutory requirements. There is nothing in the Act that precludes layering a cap-and-trade program on top of RACT requirements – but that would defeat the purpose of the cap-and-trade program, which is to allow emissions reductions to be made wherever they can be achieved most cost-effectively. To require minimum reductions at all facilities precludes such cost-effective decisions.

Frankly, while I’m a fan of cap-and-trade programs, the decision is neither unreasonable nor surprising, after the decision in North Carolina v. EPA striking down the parallel provision in the Clean Air Interstate Rule. As courts like to say (especially when Supreme Court confirmation hearings are under way), their job is not to make good policy; it is to interpret and enforce the law. If Congress wants to expand the role of cap-and-trade programs, it knows how to do so.

Of course, the elephant in the room is climate change legislation. If Congress does not enact a bill, North Carolina v. EPA and NRDC v. EPA circumscribe EPA’s discretion in implementing a cap-and-trade program for greenhouse gases under existing law.  I take the point made by Administrator Jackson and environmentalists that, if no one wants to regulate churches and schools, then EPA can probably figure out a way to do so.  However, exercise of such discretion is not the same as promulgating rules that will ensure that those facilities which are the subject of regulation have the flexibility to reduce greenhouse gas emissions in the most cost-effective manner possible.  

Is anyone in Congress listening?

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Earlier this week, the Georgia Court of Appeals reversed a decision of the Superior Court in Georgia that would have required Longleaf Energy Associates, developer of a coal-fired power plant, to perform a BACT analysis of CO₂ emissions control technologies in order to obtain an air quality permit for construction of the plant. The case is a reprise of the Deseret Power case regarding a coal-fired plant in Utah.

The court in Longleaf Energy concluded that CO₂ is not yet a regulated pollutant under the CAA, and thus that no BACT analysis is required. There were several bases for this conclusion:

The “Johnson Memo,” issued in response to Deseret Power, has not been withdrawn by EPA, though it is under reconsideration. Even EPA’s proposed endangerment finding for CO₂ noted that such a finding would not make CO₂ a regulated pollutant under the CAA.

As discussed in the Johnson Memo, neither the CAA nor any existing EPA regulations impose emissions limitations on CO₂.

Such a finding would “preempt” Congressional and EPA decision-making on the issue and impose standards in Georgia to which facilities outside of Georgia would not be subject.

The Longleaf Energy decision is a perfectly reasonable interpretation of the CAA – but it’s not the only plausible interpretation. I mention this in order to highlight a point I have made previously. As members of Congress and stakeholders consider the costs and benefits of federal climate change legislation, they have to consider the alternative. Most people, including me, have framed the question as a comparison of the legislative option with regulation by EPA under existing authority. This is largely correct, but misses two points. First, it’s going to take EPA some time to promulgate regulations. In the meantime, there will be more Deseret Power and Longleaf Energy decisions and there is no reason to be confident that such decisions will be consistent or even reconcilable. Second, even after EPA issues regulations, the Longleaf case gives me pause as to whether such regulations would be effective in creating any kind of uniform national interpretation of these issues.

There is just no question that, in the absence of federal legislation, the resulting patchwork of regulations and federal and state decisions concerning the regulation of CO₂ and other GHGs is going to be a big mess.

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Congress moved one step closer to adopting a federal renewable electricity standard ("RES") with the narrow passage of the American Clean Energy and Security Act by the House.  Twenty-nine states already have adopted some form of renewable energy portfolio standard, but a federal RES is widely thought to be important for creating a national renewable energy and energy efficiency market.  The House RES establishes a national compliance obligation overseen by the Federal Energy Regulatory Commission (“FERC”) under which large retail electricity suppliers (“Suppliers”) are required to invest in renewable energy and energy efficiency. For each compliance year, a Supplier must calculate its total volume of electricity sales during that year and then submit to FERC a sufficient number of federal renewable electricity credits (“Federal RECs”) and demonstrated annual electricity savings to meet the RES goal for that compliance year. Up to 25 percent (or 40 percent, upon a state’s request) of a Supplier’s RES obligation may be met through electricity savings rather than Federal RECs. The trade-off, however, is that the incentive to develop and deploy new renewable energy capacity may be diluted by allowing efficiency measures to count toward the RES goal.

The RES passed by the House would not preempt state programs with stricter compliance targets, meaning that the federal program would preserve to some extent the patchwork of state standards. If Congress does pass a federal RES, leveraging the resulting business opportunities will thus require an intimate understanding of how both federal and state programs work and, perhaps more importantly, how they interact.

For more details on the RES, please take a look at our recent client alert.

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The Massachusetts Department of Environmental Protection (DEP) yesterday published a final amendment to the first set of Global Warming Solutions Act regulations, 310 CMR 7.71.  These regulations set a baseline for Massachusetts' 1990 emissions and create a reporting system that will track emissions going forward, providing a framework for economy-wide reductions of 10% to 25% by 2020 and 80% by 2050.  The regulations are the first phase of implementation of the Global Warming Solutions Act, passed last August, which, at the time, called for the largest cuts in greenhouse gas reductions seen in the nation.

In short, the reporting regulations require any facility that emitted more than 5,000 short tons of CO₂ equivalents from stationary sources (whether from fossil fuel combustion or biofuels), and any facility that is required to have an air permit under Title V of the Clean Air Act to report annually its greenhouse gas emissions.  The regulations begin with reporting 2009 emissions of CO₂ from the combustion of fuels, and ramp up in 2010 to require reporting of emissions for all six greenhouse gasses (CO₂, methane, nitrous oxide, chlorofluorocarbons, per fluorocarbons, and sulfur hexafluoride), whether or not they were produced by the combustion of fuels. Most reporting entities will also have to report emissions from vehicles (both off-road and on) that are owned or leased by the company and used in support of a facility.  As DEP provided in its response to comments, this could include cars given to executives for commuting.  

The final regulations make substantial changes from the emergency regulations, issued in December, 2008.   Among them, reporters must certify their emissions and have independent third-party verification of emissions every three years.  Also notable is the provision that requires every retail seller of electricity in Massachusetts to report the megawatt hours it sold the previous year and the greenhouse gas emissions that are associated with that power.  To calculate the emissions, DEP will create four emissions factors every year -- one based on fossil fuel-powered generators in Massachusetts, one based on biofuel-powered generators in Massachusetts, and two that are based on New England-wide emissions.

Now that the 1990 baseline has been officially set at 94 million metric tons, DEP must next establish a firm target for reductions of between 10% and 25% below that baseline to be reached by 2020, and issue an economy-wide plan to achieve that target by January 2011.   DEP estimates that 300 facilities in Massachusetts will report their emissions under 310 CMR 7.71.  It will be interesting to see the percentage of the reduction the Commonwealth will call upon those 300 entities to achieve.  If the Commonwealth looks solely to those entities to achieve the reductions, then there will surely be complaints about both fairness and efficiency.  If the Commonwealth looks beyond the 300, then there will be questions as to how compliance will ultimately be monitored. 

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 The House of Representatives narrowly passed H.R. 2454, the American Clean Energy and Security Act of 2009 by a vote of 219-212 on Friday, June 26.  The bill, the first piece of major legislation on global warming that has passed either house of Congress, is 1,428 pages long, and includes 5 titles covering everything from renewable energy and efficiency to adaptation and transitioning to a clean energy economy.  While it retains many key concepts from the draft introduced by Representatives Henry Waxman and Edward Markey, some of revisions and additions that ensured its passage were significant and have generated controversy as the sponsors made certain compromises in order to reach a majority. 

Attention now turns to the Senate, which, according to statements by key committee members and Obama Administration officials, will likely not reach a vote on global warming legislation until this fall, at the earliest.  Should the Bill fail to pass in the Senate, greenhouse gas emissions may still be regulated through other methods, such as state and regional climate change initiatives and possibly direct regulation by the EPA through the Clean Air Act, under its endangerment finding.

For more details on the bill and an in depth analysis of the Cap-and-Trade title, please take a look at our recent client alert. 

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This week, the Massachusetts Executive Office of Environmental Affairs announced release of the draft Ocean Management Plan, developed pursuant to the Oceans Act of 2008. The draft Plan has gotten most press for its identification of specific areas for off-shore wind energy development – as well as its prohibition of wind farms in other areas, including the area of the proposed Buzzards Bay wind farm. EOEEA Secretary Ian Bowles was quoted as saying that Buzzards Bay is too crowded and sensitive for the development of large-scale wind farms.

The Plan is about much more than wind farms, however. It really is zoning brought off-shore. There are areas where certain uses are prohibited, areas in which uses are encouraged, and other areas that will be subject to performance standards to determine whether specific uses should be allowed. Where uses are at least conceptually allowed, there will be provisions to protect sensitive areas, including a provision that requires proponents of uses in such areas to “avoid, or demonstrate that there is no less damaging practicable alternative, or demonstrate that data does not accurately characterize the resource or use.”

The Plan is important for several reasons:

The breadth of its application

The effort to integrate ocean planning with the Commonwealth’s climate change agenda

Its potential precedential effect on other states and nascent federal ocean zoning efforts

Public hearings on the Plan will be held in September, though they have not yet been scheduled. Even in advance of the hearings, comments on the Plan can be submitted here. The schedule calls for the final Plan to be issued by December 31, 2009.

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At the fourth auction of CO₂ allowances under the Regional Greenhouse Gas Initiative (RGGI) on June 17, participation was certified as robust by market monitor Potomac Economics, but auction prices decreased. Last week’s clearing price for 2009 vintage CO₂ allowances was $3.23 per allowance, only slightly above the clearing price of $3.07 at RGGI's initial auction in September 2008, and below March’s clearing price of $3.51.  The 2.1 million 2012 vintage allowances offered for sale in last week’s action sold for $2.06, almost one-third below the $3.05 price that they earned at the March auction, which was the first at which these later vintage allowances were offered for sale.  

RGGI, Inc. has released the range of bid prices from the fourth auction, allowing some insight into how CO₂ is valued by the players in these auctions.  Bid prices for the 2009 vintage allowances ranged from $1.86 (the minimum clearing price) to $12.00, up $2 from the maximum bid in the March auction, while bids for the 2012 vintage allowances ranged from $1.86 to $3.84, down from March’s high bid price of $4.40. Participation in the 2009 vintage offering remained high at 54 entities, while participation in the 2012 vintage auction was down from March’s 20 entities to only 13.

Interestingly, the share of non-compliance entities (persons not regulated under RGGI) who participated in the 2012 vintage auction rose this time, with only 62% of the bids submitted in that auction coming from compliance entities (power plants regulated under RGGI).  Even so, regulated generators and their affiliates continued the trend from previous auctions of winning the vast majority of the allowances – 85% of 2009 allowances and 81% of 2012.

The difference in the clearing price for the 2009 vintage and the 2012 vintage is not surprising. RGGI allowances may be banked without limitation and used in future years, making the 2009 allowances more valuable than later vintages.  What is notable is the drop in both participation in the 2012 vintage allowance and the clearing price (nearly 33% less than it was only 3 months ago). It seems that many market participants are uncertain about the value of the 2012 allowances, given the possibility that RGGI may be replaced by a national cap-and-trade program whose provisions are not yet known. 

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In 1992, in South Carolina Coastal Council v. Lucas, the Supreme Court held that a state statute or regulation that denies a property owner all economic use of her property requires payment of just compensation under the Takings Clause. The Court distinguished statutes and regulations from restrictions inherent in background principles of the common law of nuisance – the latter types of restrictions do not require just compensation.

The Supreme Court announced earlier this week that in the fall 2009 term it will hear another, similar, property rights case. The Court will hear an appeal of a decision by the Florida Supreme Court holding that a beach erosion control statute did not unconstitutionally deprive landowners of their property rights without just compensation. 

The facts in Stop the Beach Replenishment v. Florida Department of Environmental Protection are somewhat obscure and relate specifically to the consequences of beach replenishment in Florida. However, it again does raise the question of how the Supreme Court treats statutes. Prior to the 1960s, governments pretty much regulated nuisances pursuant to common law police power. Apparently, exercise of such power has the constitutional blessing of the Supreme Court.

On the other hand – to note the obvious – since the 1960s, across the gamut of environmental police power issues, use of statute and regulation has overtaken reliance on the common law. For some reason, however, constitutional jurisprudence has not caught up with reality on the ground. The whole idea of the common law is that it is flexible and changes over time. Is there any doubt that, had there not been an explosion of environmental statutes and regulations, there would have been an explosion in the development of the common law of nuisance? It seems near certain that courts would have identified numerous additional uses of property over the past 40 years that would now be considered nuisances.

Why should the same regulatory outcome require compensation if taken pursuant to statute or regulations, but not if it occurs as a result of judge-made common law?   

(In the interests of full disclosure, the broad question of how courts treat statutes, as opposed to the otherwise developing common law, was raised by my then-Professor Guido Calabresi in his 1982 book, A Common Law for the Age of Statutes.  Judge Calabresi, your student has not forgotten.)

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Thinking about how to take advantage of funding for energy efficiency retrofits from the federal stimulus package, state-level programs like Massachusetts’ Green Communities Act, or even utility-funded programs?  You should also think about whether your actions will create another income stream – offsets under the Regional Greenhouse Gas Initiative (RGGI) – and whether taking funds will prohibit the creation of offsets when the project is finished.

RGGI, Inc. this week released model applications for offset projects which could create interesting incentives if implemented by each of the RGGI states. Unlike some of the offset provisions proposed under ACES, all of the RGGI offset categories are outside of the electric generation sector that RGGI regulates. The 5 categories of emission reductions that are eligible for offsets in RGGI include landfill methane capture and destruction; reductions in sulfur hexafluoride in the electricity transmission and distribution sector; sequestration of carbon due to afforestation; avoided methane emissions from agricultural manure management, and, most interestingly, reductions or avoidance in CO₂ emissions from natural gas, oil or propane in residential or commercial facilities due to energy efficiency in the building sector. 

RGGI has a notoriously strict stance on additionality which certainly shows in the application for energy efficiency offsets. To qualify, the applicant must certify that the project did not receive any funding or incentives from any state run programs or programs funded with RGGI auction proceeds. Given that a large portion of the money from RGGI auctions is being directed by the states toward energy efficiency improvements, being able to provide this certification may be difficult. The application also notes that any renewable portfolio standard (RPS) attributes generated by the offset project must be transferred to the state regulatory agency, rather than sold separately. 

Energy efficiency projects that can qualify for offsets are not necessarily complex. The types of energy efficiency projects that can qualify for offsets include:

• Improvements in the energy efficiency of combustion equipment that provides space heating and hot water, including a reduction in fossil fuel consumption through the use of solar and geothermal energy
• Improvements in the efficiency of heating distribution systems, including proper sizing
• Installation or improvement of energy management systems
• Improvement in the efficiency of hot water distribution systems, including reduction in demand for hot water
• Measures that improve the thermal performance of the building and reduce the building envelope air leakage
• Measures that improve the passive solar performance of buildings or utilize active heating systems using renewable energy
• Fuel switching to a less carbon-intensive fuel in combustion systems, including the use of liquid or gaseous eligible biomass (but not conversions to electricity).
  

On the other hand, the projects must achieve very high efficiency gains to qualify. Whole-building energy projects must be 30% above ASHRAE 90.1-2004 standards, and retrofit projects that commenced after January 1, 2009 must show that the energy conservation method they employ has a market penetration rate of less than 5%, although the market or class of buildings can be defined by the applicant. In addition, the baseline from which reductions in CO₂ are measured is based on a combination of the current building code and the actual equipment to be replaced, so not all of the gains from retrofits can be certified as offsets. 

If your summer home improvement efforts this year include upgrading to a state-of-the-art boiler, you didn’t take RGGI funds from the state to do so, and you are persistent enough to endure certification and verification of the reductions, you could qualify for up to 10 years of offset credits to sell to electric generators in the 10-state region. It is certainly something to think about.

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For those who missed it, just a quick note that EPA has once more extended the date by which subject facilities need to prepare or amend SPCC plans to comply with the latest revisions to the applicable regulations. The original compliance date was February 3, 2009; this marks the third time EPA has extended the date.

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According to a quote from House Energy and Commerce Chairman Henry Waxman in an E&E article this morning, the Waxman-Markey bill could reach a floor vote inside of 3 weeks.  Speaker Pelosi had set a deadline of next Friday, June 19, for the 8 House Committees still evaluating HR 2454 to conclude their review, but has not indicated when Democrats will bring the legislation to the House floor.  Waxman said yesterday that he wants debate to begin on June 22 and the bill to go to a vote before the July Fourth recess -- "I think the speaker and the majority leader and the administration agree with that timing, and we're going to do all we can to stick to it because after we come back from the July Fourth recess, it is health care for the rest of the month."

The tension in scheduling the Administration's dual priorities of energy and health care seems to be an issue.  Ways & Means Chairman Charles Rangel reported that in the Democratic committee members' meeting with the President this week , the President did not give lawmakers a specific deadline for sending him a climate bill -- a marked contrast with the firm deadline for health care legislation.  Rangel told reporters that in order to concentrate on both climate and health care, the Ways & Means Committee might skip markup of the climate bill and instead work out their concerns with Chairman Waxman before a floor vote or during floor vote, via amendments.

What the bill will look like when when it reaches the floor is still under discussion.  One committee expected to offer substantial amendments on hot-button issues like biofuels and offsets is the House Agriculture Committee.   While the offsets debate may be even more heated than that for the allocation of credits, biofuels may be the first amendment offered.  As Climate Wire reported Wednesday, House Agriculture Committee members are considering a legislative fix for EPA's proposed regulation of biofuels.  At EPA's public hearing on the recent proposal, which involves the requirement of a 100-year long lifecycle analysis for biofuels international impact, testimony from both biofuel advocates and environmentalists urged changes.  Particularly since the lifecycle emissions of petroleum production are not evaluated in the same way, calculation of biofuels' carbon footprints will have a huge impact on whether the Congressional mandate to ramp up biofuel use to 36 billion gallons a year by 2022 can be met. 

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I know it’s hard to believe, but some of you may not have realized that today is World Oceans Day. In connection with World Oceans Day, Senator Jay Rockefeller has written a letter to the White House in support of the concept of “ocean zoning.” Senator Rockefeller will also be holding hearings on the issue tomorrow. Among those testifying will be Deerin Babb-Brott, who is the Assistant Secretary in the Massachusetts Executive Office of Environmental Affairs and is in charge of Massachusetts’ first in the nation ocean zoning effort.

The Massachusetts effort is based on the Oceans Act of 2008, which called for development of a comprehensive ocean management plan. In other words, ocean zoning. Since enactment of the Act, EOEEA has been working on developing the required plan, with assistance from the Ocean Advisory Commission, which was created by the Act to help guide EOEEA’s development of the plan. The plan has yet to issue and, based on recent documents from EOEEA, it may be some time before the final plan sees the light of day.

Notwithstanding the complexities of the issue – or perhaps because of them – Senator Rockefeller apparently believes that federal ocean zoning would be appropriate. He may be right. Issues such as renewable energy and deepwater aquaculture may be of local concern, but do we really want a patchwork of local laws and regulations dictating policy on issues of broad national concern?  If we go that route, it won’t be very long before there is a yet more complicated set of exemptions and preemptions.

I’m sure that Deerin will not be advocating federal preemption of local ocean zoning efforts, but there is a part of me that hopes that Deerin’s testimony is so effective that he talks himself out of a job.

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In Congressional testimony last month, EPA Administrator Lisa Jackson apparently told Congress that amendments to the CAA may be necessary in order to ensure that any revised CAIR rule issued by EPA would be safe from legal challenge.  The testimony is not really a surprise. Anyone reading the decision striking down the original CAIR rule would understand that the Court had concluded that the cap-and-trade program promulgated under CAIR was not authorized by the CAA.

Like the situation posed by EPA’s obligation to address climate change endangerment following the Supreme Court decision in Massachusetts v. EPA, the threat of further litigation and court mandates may be the best hope of getting something done.  EPA is expected to issue a new rule in 2010 and if the agency does not have legislative authority for a cap-and-trade program, then we’re going to see a command-and-control rule. The unattractiveness of that possibility may be what’s necessary to get the legislation sought by EPA.  

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As highlighted in yesterday's issue of Greenwire, one of the controversial aspects of the  American Clean Energy and Security Act (ACES) passed by the House Energy & Commerce Committee last night is that 35% of the allocated allowances created in the cap-and-trade program will go for free to the electric power industry.  30% will go to Local Distribution Companies, or LDCs, traditional regulated utilities who sell power directly to consumers, and 5% will be allocated to independent merchant energy generators that sell power to wholesale power markets, primarily in the Northeast, Great Lakes, California and Texas.

Not surprisingly, the allocation between LDCs and merchant generators is the subject of substantial political infighting. Merchant generators own 40% of the nation's generating capacity, but as Greenwire reports, the National Association of Regulatory Utility Commissioners, which represents the LDCs, is campaigning to knock out any share of allowances for merchant generation.  

Following an amendment to ACES that passed Committee yesterday, the emission allowances given to local distribution companies must be used exclusively for the protection of retail ratepayers against rising electricity rates.  In other words, utilities have to pass on the savings from their 30% of allocated allowances to their customers.  Not so for the allowances given to merchant generators, who sell power into the grid, rather than directly to consumers.  Their 5% share could apparently be worth $2.7 billion to $5.5 billion a year, depending on how high the price of carbon allowances are in the program's first years. 

The 5% allocation to merchant generators is seen as necessary to obtain support from House members from Texas and the Midwest who represent a number of coal-fired merchant generators.  Such votes could be critical in a House floor vote, which is the next hurdle for ACES.

Even though ACES was voted out of the Energy and Commerce Committee last night, the allocation debate is not necessarily finished.  Chairman Waxman said he would accommodate Republican requests to have at least one more day of additional hearing testimony over the distribution of emission allowances next month. 

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Apparently in an effort to demonstrate to Congress that coal states also support greenhouse gas regulation, the Midwestern Greenhouse Gas Reduction Accord last week released draft design recommendations for a GHG program. Several facets of this announcement are interesting:

1.                   The Waxman-Markey bill would basically preclude the MGGRA from implementing its program.

2.                   If the point of the effort is to demonstrate to Congress that coal states indeed do support GHG regulation, they might be more successful if they had managed to bring Indiana and Ohio into the fold.

3.                   The program as tentatively proposed would include a cap-and-tax approach, in which, like other cap-and-trade models, GHG emitters would need allowances for each ton of CO_2e that they emit. However, they would also have to pay a fee, suggested to be in the range of $2-$4/ton of CO_2e, for each allowance.

It’s difficult to imagine the MGGRA approach going anywhere at this point, but I don’t want to be too dismissive. Like potential EPA regulation under existing CAA authority, the threat of yet another regional program has to add to the weight of issues pushing fence-sitting members of Congress towards a willingness to support a federal program.

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The competition between the states on who can move more aggressively in regulating greenhouse gases continues. Earlier this week, the Massachusetts Board of Building Regulations and Standards voted to approve a “Stretch” Building Code. The Stretch Code can be adopted locally by municipal option. Where adopted, buildings will have to be 20% more efficient than what would be required under the ASHRAE 2007 standard.

Since there was some ambiguity previously, let me be clear: I’m not a supporter of the stretch code. It’s one thing for states to regulate greenhouse gases in the absence of an active federal program. Even state and interstate programs, such as RGGI, should go away once a federal program is in place. To go the other way, and allow multiple programs within a state, is simply to let too many flowers bloom. Consistency is too important. 

There’s an element of “be careful what you wish for” here, but my view is that if a more stringent code can be cost-effectively achieved, then the Board could adopt that code for the entire state; if the standards in the Stretch Code cannot be cost-effectively achieved statewide, then they should not be allowed by local option.

The Stretch Code is important evidence that Massachusetts continues to pursue an aggressive agenda on climate change, notwithstanding the current economic slowdown. The element of competition among states should also not be underestimated.  Yesterday, New York City Mayor Bloomberg announced an agreement with 13 hospital systems to reduce GHG emissions by 30% over 10 years.  That’s a major commitment – and one that I’m sure will be noticed in Massachusetts and California.  

Any bets on how long it will take Ian Bowles at the Massachusetts Executive Office of Environmental Affairs to call MGH and BIDMC and see if they are willing to up the ante?

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Are Representatives Waxman and Markey near settling on language that will get a majority in Committee for the climate change bill?  The tenor today was significantly more positive than in the past few weeks.  An update seemed worthwhile, given the number of specific provisions on which agreement has apparently been reached.

1.                   The initial CO_2e reduction goal will be 17% over 2005 levels by 2020.  This compares to 14% sought by the President and 20% in the original draft bill.

2.                   35% of allowances would be distributed to local distribution companies and 15% of allowances would be distributed to industries subject to international trade issues, though the percentages would decrease over time.

3.                   The renewable electricity standard, or RES, would be set at 15% by 2020.  The efficiency standard, or EERS, would be set at 5% by 2020.  If s state demonstrates that it cannot meet the 15% RES, the RES could be set as low as 12%, as long as the state makes up the difference by increasing the EERS percentage so that the total of the RES and EERS equals 20%.

It’s still not obvious when a bill will be done or if there is a majority, but House Majority Whip James Clyburn was quoted as indicating he thinks he can deliver the votes on the House floor. 

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Laura Rome of Epsilon has helpfully reminded me that the maturity of a regulatory program is also relevant to whether an agency should proceed by guidance or regulation.  With newer programs that remain in flux, the flexibility inherent in guidance – and the easier amendment process for guidance – counsels in favor of guidance rather than regulation.

Laura’s comment also reminded me that, a few years ago, NAIOP was sufficiently concerned about MassDEP’s use of guidance as an end-run around the formality of the regulatory process that it submitted to MassDEP suggested “Guidance on Guidance.”  The overarching principles contained in the NAIOP proposal are helpful reminders regarding the uses and limitations of guidance documents.

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There are not too many areas of environmental law where practice intersects frequently with academic theory. One such area is whether agencies should use notice and comment rule-making any time they want to set forth policy or whether they should instead be permitted to use flexible guidance documents. The real issue from the practitioner’s point of view is the extent to which use of guidance permits street level bureaucracy a degree of unfettered discretion that is truly scary. Like Judge Roy Bean, these bureaucrats are the law West of the Pecos – or at least outside agency headquarters. The flip side of the debate is the notion that modern environmental law is simply too complicated to specify all rules through notice and comment rule-making. Agencies need, as a practical matter, the flexibility to operate through informal guidance.

The debate is illustrated by two D.C. Circuit Court of Appeals decisions. First, in Appalachian Power v. EPA, issued in 2001, the Court struck down EPA use of a guidance document. The Court nicely summarized the issue:

The phenomenon we see in this case is familiar. Congress passes a broadly worded statute. The agency follows with regulations containing broad language, open-ended phrases, ambiguous standards and the like. Then as years pass, the agency issues circulars or guidance or memoranda, explaining, interpreting, defining and often expanding the commands in the regulations. One guidance document may yield another and then another and so on. Several words in a regulation may spawn hundreds of pages of text as the agency offers more and more detail regarding what its regulations demand of regulated entities. Law is made, without notice and comment, without public participation, and without publication in the Federal Register or the Code of Federal Regulations. … The agency may also think there is another advantage--immunizing its lawmaking from judicial review.

The Court dismissed EPA’s contention that the document was not binding, and 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.

Haven't all our clients felt what it is like to be under agency ukase?

Unfortunately for those who liked the outcome in Appalachian Power, it seems to have been the high-water mark for those wanting to circumscribe agency use of guidance. More recently, the D.C. Circuit refused to review EPA guidance as though it were a rule. In Cement Kiln Recycling Coalition v. EPA, responding to an Appalachian Power-type challenge, the Court concluded that EPA had not treated the guidance at issue as binding and noted that, in response to Appalachian Power, EPA had edited the guidance to make it look less binding. The Cement Kiln plaintiffs thought this was evidence of subterfuge; the Court did not buy it. The Court did acknowledge that an agency assertion that guidance is non-binding “will not make it so where there is evidence —or practice – to the contrary."

The immediate context for this post is efforts by the Massachusetts Environmental Policy Act, or MEPA, office to take a second look at its greenhouse gas (GHG) policy in light of the legislative passage of the Global Warming Solutions Act. The work group (of which I am a member) reviewing this issue has been considering whether it is better to leave aspects of the policy as guidance or whether to put them in regulation.

As you can probably tell from the start of this post, my gut reaction is always to make the agency put its rules into notice and comment regulation. I’ve had too many experiences of street level bureaucrats who take advantage of the “flexibility” of agency guidance documents to become their own version of Roy Bean.

However, my friend Sam Mygatt, whose judgment I trust, has strongly endorsed the approach of leaving many of these issues to guidance. After puzzling over this for some time – How could Sam be right and I be wrong? – I realized what the answer is:

The size of the bureaucracy matters. 

The rules -- or guidance -- at issue here are promulgated by the MEPA office.  This is also the agency Sam deals with most frequently (he did run it at one time, after all). The MEPA office has a handful of reviewers. The consultants, such as Sam, who have large MEPA practices deal with the MEPA reviewers repeatedly. They are able to build relationships of confidence and trust; it is very difficult for these reviewers to see Sam as the devil, merely looking to desecrate the environment to benefit his client. 

Larger bureaucracies are different. Street level bureaucrats have inherently more autonomy in larger bureaucracies. Moreover, while we may all get to know some staffers at DEP or EPA, it is impossible to build the same type of relationships as is possible with the MEPA office.

At a casual empirical level, this distinction seems to have substantial force. For smaller bureaucracies, stick with guidance; with larger bureaucracies, make them issues rules.

Your take?

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It seems that news on the behind-the-scenes dance in the House in an effort to bring major energy and climate change legislation to a floor vote by Memorial Day emerges every few hours, changing pundits' predictions and analysis.  Even so, this morning's article by E&E contained enough interesting tidbits to warrant highlighting it here.  

In short, Energy & Commerce Chairman Henry Waxman has set his goal to produce an amended draft of ACES this week, and intends to stick to his Memorial Day deadline, although it remains unclear whether the markup will begin in the full committee or the Energy & Environment Subcommittee.   

E&E reports that lawmakers are focusing on finding consensus in four critical areas: targets and timetables for domestic cuts in greenhouse gas emissions (latest prediction: 14% cut below 2005 levels by 2020); distribution of allowances (latest prediction: at least some allocation during the first 10 to 15 years of the program); use of offsets to ease industrial compliance costs; and a nationwide renewable electricity standard (Waxman has apparently revised his 2025 target from 25% to 17.5%).

E&E also reports on lawmakers' discussions of alternatives and compromises, most interestingly the idea of coupling cuts in CO2 with increases in drilling.  This controversial idea was floated by an unnamed senior Obama official to a reporter for The New Yorker.  As the New Yorker reports, the idea is a "grand bargain" energy deal which would include a "'serious' and 'short term' increase in domestic production -- perhaps opening up for oil exploration places like the waters off the coast of California—that would appease the “Drill, baby, drill” crowd, while also adopting a cap-and-trade plan that could take effect one or two (or more) years after 2012, which is when Obama’s current plan would start."   The official characterized it as "something like T. Boone Pickens and Al Gore holding hands on a broad compromise."  

While Administration officials have not provided any more details and I have seen no reports that Waxman would include such changes in ACES, the move could come from elsewhere within the House.  E&E quotes House Natural Resources Committee Chairman Nick Rahall as saying that "it's certainly my feeling that this is the time to explore those options of exploring oil and gas drilling under protection of certain sensitive areas." 

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For those of you who aren’t convinced that Senator Specter’s defection to the Democrats will be the savior of cap and trade legislation, and who are concerned by Senator Durbin’s recent pronouncement that, at this point, there are not 60 votes in the Senate, the question as to how EPA might regulate greenhouse gases under existing authority has taken on greater importance.

The traditional assumption, and the basis for the doom and gloom scenarios projected by the U.S. Chamber of Commerce, has been that EPA would regulate greenhouse gases under the NSR program. While there have been arguments concerning whether EPA has sufficient regulatory flexibility to avoid regulating de minimis sources of greenhouse gases, a new study from NYU proposes an end-run around this question.

The study, entitled “The Road Ahead: EPA’s Options and Obligations For Regulating Greenhouse Gases,” suggests that EPA has authority to establish a cap and trade program under the Clean Air Act without any new statutory authority.  Several of their conclusions are open to question. To name just one, the D.C. Circuit decision striking down the CAIR rule seems to pose a real obstacle to a cap and trade program without specific new statutory authority.

In fairness to the authors, however, the study acknowledges the various difficulties.  The study also does an excellent job identifying the problems inherent in attempting to regulate greenhouse gases through command and control regulation, such as the NSR program, rather than a cap and trade program.  For anyone thinking about EPA’s options at this point, it’s a must read.

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We have previously posted about EPA’s efforts to roll back regulatory changes made by the Bush Administration, particularly with respect to the NSR program. There is no question that the roll-back continues. This week, EPA announced it would review three separate NSR rules promulgated by the Bush administration. These include:

The “reasonable possibility” rule, which identified when major sources must keep records even if a contemplated change is not expected to trigger NSR review

The fugitive emissions rule, which limited by source category when fugitive emissions must be taken into account in determining NSR applicability

The PM_2.5 rule, which included provisions regarding submittal of state implementation plans, or SIPs, for PM _2.5 compliance. One particular issue of concern is the provision which deferred until 2011 the date by when states must account for emissions of gases, emitted from coal-fired power plants, which may condense to form PM _2.5.

In a narrow way, EPA’s decision to revisit these rules will likely lead to lower emissions of air pollutants subject to NSR in some cases.  At a broader level, these reviews ignore the fundamental problems with the NSR program and whether the NSR program is a dinosaur of command and control regulation that is not a cost-effective of achieving emissions reductions.

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As I noted a couple of weeks ago, Representative John McHugh (R-NY) has introduced legislation that would require significant reductions in emissions of SO₂ and NO_x, and mercury from power plants. Now, Senators Carper (D-Del.) and Alexander (R-Tenn.) have announced that they will be introducing their own three-pollutant legislation in the Senate. Since they have not yet introduced a bill, we’ll all just have to imagine the specifics for now, but a few interesting nuggets have jumped out of the press releases and news reports.

First, Representative McHugh apparently wants to tie his legislation to the climate bill. However, Senator Alexander, at least, affirmatively wants to keep three-pollutant legislation separate from the climate bill. Senator Alexander seems to be looking to make a name for himself as a Republican willing to advance environmental causes. In addition to this bill, he is also sponsor of legislation that would preclude mountaintop removal. Keeping this bill separate from climate legislation may be a way to walk a fine line, since one can still imagine a scenario in which there is significant pressure from the GOP leadership to have all Republican Senators oppose climate legislation.

Second, Senator Carper specifically referred to using market forces to regulate SO₂ and NO_x, but he did not use similar language for mercury, which suggests that, like the McHugh legislation, the Senate bill will also require facility-specific mercury reductions, rather than allowing a cap-and-trade program for mercury.

EPA is apparently indicating that it may take two years to promulgate new regulations to replace its ill-fated CAIR regulations. In that context, if the movers and shakers in Congress perceive that three-pollutant legislation can pass relatively quickly, it might be seen as an appropriate way to show some environmental progress while climate change proposals get turned into legislative sausage.

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This morning, EPA issued a proposed finding that greenhouse gasses contribute to air pollution and may endanger public health or welfare. The proposed finding comes almost exactly two years after the Supreme Court, in Massachusetts v. EPA, ordered the agency to examine whether emissions linked to climate change should be curbed under the Clean Air Act, and marks a major shift in the federal government's approach to global warming.

The finding, which now moves to a 60-day public comment period, identifies the six greenhouse gases that pose a potential threat as a set, a tactic which we discussed the potential impact of a few weeks ago. 

Overall, the proposed finding is very similar to the language released in March. It concludes that “in both magnitude and probability, climate change is an enormous problem. The greenhouse gases that are responsible for it endanger public health and welfare within the meaning of the Clean Air Act.”

Some interesting highlights of the finding include:

• Environmental justice: As the EPA press release states, “in proposing the finding, Administrator Jackson took into account the disproportionate impact climate change has on the health of certain segments of the population, such as the poor, the very young, the elderly, those already in poor health, the disabled, those living alone and/or indigenous populations dependent on one or a few resources.”
• National Security: As the EPA press release phrased it, “Escalating violence in destabilized regions can be incited and fomented by an increasing scarcity of resources – including water. This lack of resources, driven by climate change patterns, then drives massive migration to more stabilized regions of the world.” 
• Vehicles: By including a "cause or contribute" finding for cars, the proposed finding implies that not only are greenhouse gases dangerous in general, but that such emissions from cars and trucks are reasonably likely to contribute to climate change

The finding does not include any proposed regulations.  However, while release of the finding is a huge development, it still seems likely that the Obama Administration will hold off on regulations in favor of a legislative solution. As the Washington Post reported today, at the Aspen Environment Forum last month, Administrator Jackson emphasized that "the best solution, and I believe this in my heart, is to work with Congress to form and pass comprehensive legislation to deal with climate change.” 

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 As we mentioned yesterday, the discussion draft of the Waxman-Markey “American Clean Energy and Security Act of 2009” which was released on Tuesday is notable both for what it includes and the significant portions it leaves to be decided at a later date. 

In summary, the bill contains four titles:

1) a “clean energy” title, which promotes renewable energy through a portfolio standard of 6% in 2012 rising to 25% by 2025, additional funding for carbon capture and sequestration, a low-carbon transportation fuel standard, and authorization for federal agencies to enter into long-term contracts with renewable energy providers;

2) an “energy efficiency” title, which calls for a nationwide building efficiency code, and directs EPA to set emission standards for locomotives, marine vessels and non-road sources;

3) a “global warming” title, which specifies that greenhouse gases are not to be treated as criteria pollutants or regulated in new source review under the Clean Air Act (the authorities currently viewed to be EPA’s best tools in regulating greenhouse gases), lays out up to 83% cuts in greenhouse gas emissions from 2005 levels by 2050 and creates the framework for a cap-and-trade auction system to be overseen in part by FERC, but does not specify how allowances would be allocated or auctioned, nor how auction proceeds would be spent, other than giving a portion to preventing international deforestation; and

4) a “transitioning” title which establishes a new council within NOAA to prepare an adaptation plan and fund, but does not provide details on where the funds come from, and lays out various programs creating release valves to be triggered by increasing prices, but again withholds critical details, such as how the programs will provide assistance to consumers.

After the jump, we provide more detail about Title 3, the Global Warming section.

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This week, the practice of mountaintop removal – chopping the tops off mountains in order extract the coal – received two blows: one from EPA and one from Congress. First, EPA offices Region 3 and Region 4 announced that they plans to assess the Central Appalachia Mining's Big Branch project in Pike County, Ky., and the Highland Mining Company's Reylas mine in Logan County, W.Va., before permits are issued for those projects. 

Although the broad brush is important here, so are some of the details. First, both letters raise concerns about the cumulative impacts of multiple mountaintop removal projects. Second, the Region 3 letter raises the possibility that EPA might use its authority under section 404(c) of the Clean Water Act to prohibit issuance of the required permit, noting that the “extensive cumulative and other impacts give this proposed project high potential” for action under § 404(c).  

The second blow was the introduction in Congress of legislation that would prohibit mountaintop removal. Of course, introduction doesn’t guarantee passage, but it does seem notable that one of the two sponsors is Lamar Alexander, both a Republican and a Senator from a coal mining state. Senator Alexander’s support suggests that a tipping point may have been reached on this issue.

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In connection with the nomination of Cass Sunstein to head the Office of Information and Regulatory Affairs at OMB, I noted my hope that the Obama administration would be a Nixon in China moment for regulatory reform. Given the administration’s aggressive early steps to combat global warming and to roll back some of the more extreme moves by the Bush EPA, the new administration could, if it chooses, give regulatory reform back its good name.

So far, the signs are not encouraging. In February, EPA announced that it was deferring until May 18 the effective date of the NSR aggregation amendments that the Bush administration promulgated on their way out the door. Notwithstanding the midnight rulemaking feel to issuance of rules five days before inauguration of a new administration, the aggregation amendments seem to me to be little more than a common sense reform of an often mind-bogglingly complex set of regulations, i.e, the NSR/PSD rules. The aggregation amendments would have clarified EPA’s rules on aggregation of projects for NSR jurisdictional purposes so that only projects that are “substantially related” need be aggregated.

Unfortunately, the NRDC appears to be feeling its collective oats and, not surprisingly, EPA seems to listen the NRDC more than they listen to me. Last week, EPA announced that it was proposing to further defer implementation of the aggregation amendments, until November 18, 2009. 

While EPA has not yet withdrawn the aggregation amendments, this latest move has to mean that they are on life support.  I fear, to mix yet one more metaphor, that the baby of regulatory reform is rapidly going down the drain with the bathwater of the Bush administration.

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An update to a development we noted a few weeks ago --  as reported by Climate Wire today, at the national meeting of the National Association of Insurance Commissioners (NAIC) yesterday, regulatory officials from all 50 states, the District of Columbia and five U.S. territories (American Samoa, Guam, Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands) unanimously voted in favor of rules requiring insurers to disclose the impacts of climate change on their business decisions. 

The mandatory survey's adoption comes shortly after Maplecroft, a British risk management firm, reported that, although third world countries are more likely to experience climate-related fatalities, the US ranks #1 in the study's list of nations facing financial climate risk, and averaged $18 billion annually in economic losses from natural disasters between 1980 and 2008. 

As insurance is regulated by each state independently, the climate risk rules must still be adopted by individual states in order to be enforced.  Nonetheless, given that all members voted in favor of the rules, adoption seems likely.   To ensure that the rules are applied evenly, the NAIC Climate Change Task Force plans to monitor states' actions and collect sample answers from insurers to see how the surveys are completed. 

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Greenwire reported yesterday that EPA plans to issue its endangerment finding on emissions of greenhouses gases, in response to Massachusetts v. EPA, by the end of April. Greenwire also released EPA’s internal presentation regarding its recommendation to the Administrator.

Although EPA’s anticipated decision is not a surprise, it is still noteworthy. Among the highlights:

• The finding will conclude that greenhouse gas emissions endanger public health (the proposed endangerment finding that the Bush administration EPA had prepared, but then withdrew, was limited to public welfare issues.
• The finding will apparently note that there are environmental justice implications associated with climate change. This is particularly interesting, given that there is also concern that there are equity issues associated with the likely responses to climate change – Warren Buffett this week described a cap-and-trade plan has as a “regressive tax.”
• EPA’s preferred option at this point is to base the endangerment finding on identifying the entire group of GHG as the “air pollutants” that cause the endangerment. One specific rationale is that doing so will facilitate flexibility in setting standards for these pollutants. In other words, if GHG are grouped together, EPA will be able to propose a regulatory program that will allow netting and offsets among the different GHGs. 

Other than the nod to regulatory flexibility provided by grouping GHGs, EPA has not tipped its hand regarding the nature of any regulatory regime for GHGs, let alone when it might be able to propose and finalize such regulations. Doing so remains a gargantuan task. 

Moreover, while EPA is clearly committed to addressing this issue, if one believes the statements of Congressional committee chairs to the effect that climate change legislation will get done promptly, there is a certain logic to waiting for such direct legislative authority. On the other hand, fear of what EPA may do remains part of the calculus on Capital Hill, so EPA may decide to move forward aggressively with regulatory development under current Clean Air Act authority simply in order to keep pressure on Congress. 

It’s going to be a busy – and interesting – year.

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The Environmental Protection Agency (EPA) today proposed regulations which create the first nationwide system for reporting emissions of CO₂ and other greenhouse gases emitted by major sources in the US.  The proposed regulations are promulgated pursuant to the FY2008 Consolidated Appropriations Act  which was signed into law in December 2007, and instructs the EPA to require mandatory reporting of greenhouse gas emissions in all sectors of the economy.  Approximately 13,000 facilities will be subject to the rule, accounting for 85% to 90% of greenhouse gases emitted in the U.S.   Despite this large number, EPA believes that most small businesses will not be subject to the rule, as the primary threshold is set at 25,000 metric tons of CO₂ equivalent, an amount equal to the emissions from 2,200 homes, 58,000 barrels of oil, or 131 rail cars of coal.

In addition to facilities that directly emit 25,000 metric tons of CO₂ equivalent per year, the proposed rule also requires suppliers of fossil fuels and industrial greenhouse gases, as well as manufacturers of vehicles and engines, to submit annual reports to EPA, cataloging all 6 greenhouse gases.  The rule does not require control or caps on emissions, but only that the sources monitor and report greenhouse gas emissions. EPA will use the data gathered from this reporting process to formulate and assess the impacts of future policies.

Interestingly, the rule requires reporting of emissions from both upstream production facilities and downstream emission sources, which could result in some double-reporting of emissions – for instance reporting of emissions by both an upstream supplier of fuel oil and the large end-user facility who burns the oil. In guidance that accompanies the proposed regulation, EPA clarifies that such double reporting is consistent with the appropriations language, and will provide information to EPA to craft policies that address both sides, such as cap and trade upstream and end-use emissions standards downstream.

If adopted, the proposed rule would require reporters to submit their first annual greenhouse gas emissions report by March 31, 2011, based on emissions data from 2010.  Facilities who already report emissions data quarterly (such as for the Acid Rain Program) would continue to report quarterly. Requirements for vehicle and engine manufacturers would kick in with the 2011 model year.

For the majority of reporters, EPA will collect data at the facility level. Vehicle and engine manufacturers, fossil fuel importers/exporters and local gas distribution companies will report at the corporate level. Verification of reported data will be verified by EPA, as in other Clean Air Act programs.

For more information on which facilities are subject to the rule and what emissions they will have to report, we recommend this chart, from EPA guidance.

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Although it appeared initially as though Congress might be the first to move towards greater regulation of coal ash following the TVA spill, EPA has seized the initiative. Yesterday, Administrator Jackson announced a two-pronged initiative. First, EPA has issued information requests to facilities maintaining coal ash impoundments in order to gather information necessary to support new regulations. Second, she confirmed that EPA will indeed then promulgate regulations designed to prevent future spills.

In response to the Administrator’s announcement, Nick Rahall, Chairman of the House Natural Resources Committee withdrew his own coal ash regulation bill, H.R. 493, from mark-up.

EPA has not yet tipped its hand regarding the likely nature of such regulations, including whether coal ash would be handled as hazardous waste under RCRA or whether it would instead be handled as a solid waste.  Facilities operating coal-fired power plants have likely resigned themselves to increased regulation of coal ash, but could be expected to fight tooth and nail against efforts to regulate ash as a hazardous waste.  Such regulation would greatly increase management/disposal costs and would preclude many current reuses of coal ash.

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As the New York Times reported on Friday, New York Governor David Paterson may increase the number of carbon allowances that New York gives to power plants for free, creating a significant policy departure from New York's earlier approach to RGGI.   New York, together with seven other RGGI states, had earlier committed to auction nearly 100% of its allowances.  As such, New York gave away only a small portion of its allowances this year (1.5 million out of 62 million) through a program designed to lessen the impact of RGGI on the price of electricity. Paterson's proposed adjustment would increase that number four-fold, giving away 6 million allowances to regulated power plants, at an estimated value of $21.9 million per year.  That money could have otherwise been used by the state to fund energy efficiency programs.  

If New York were to change its allocation structure, the state would have to reopen its regulations, and any change would require notice and public comment.  As a result, any changes would not impact the next auction, scheduled for March 18th, or, apparently, the following two in June and September.  Although New York controls 31% of the allowances in the RGGI program, this potential shift would not affect overall carbon emissions from power plants.  Both the amount of allowances allocated to New York and the total number of allowances in the RGGI program are capped. 

Regardless of the number of allowances now to be allocated, the change is potentially politically significant. The statement from the Governor's office is framed in neutral language -- "we have an obligation to monitor how a program is working and advance any needed changes to make the program more effective."  Nonetheless, one wonders whether the lawsuit filed last month by Indeck against New York, alleging that the state agencies did not have the authority from the New York legislature to implement the program, played any part in the Governor's decision.  That lawsuit and this potential change in New York's allocation structure are both underpinned by the idea that New York's implementation of RGGI adversely affects against electric generators that are bound by long-term fixed-price contracts, and cannot pass the added price of allowances on to consumers. 

New York's shift might also make it more difficult for the other RGGI states to stick with their 100% auction, in face of pressure from industry groups to increase allocation, though, as ClimateWire reports, some state leaders have discounted the potential impact. It also remains to be seen what effect this will have on the national debate.  As we noted last week, the debate over how a cap-and-trade or carbon tax would operate is beginning to heat up.  Since RGGI is the nation's first CO2 cap-and-trade system to be implemented, experiences with RGGI are likely to have a significant impact on national legislation.

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The batting average of the Bush administration EPA in appeals of its regulatory proposals may now have dropped below the proverbial Mendoza line. This week, the Court of Appeals for the District of Columbia remanded a substantial part of EPA’s particulate rule. That the Bush administration could achieve results where the Mendoza line is even a close metaphor is a testament to just how low its stock has fallen in the courts.

The case itself is important for a number of reasons, but is too lengthy for detailed analysis here. Highlights include:

• First, the basic holding: the court remanded EPA’s primary annual standard for PM_2.5, because EPA did not justify that the 15 ug/m³ standard was sufficient to protect public health with an adequate margin of safety. Second, the court also remanded EPA’s determination of the secondary, public welfare, standard for PM_2.5.
• The court gave great weight to the role of the Clean Air Science Advisory Committee (CASAC) and staff recommendations in the regulatory process. After this decision, EPA is going to think twice about choosing a regulatory course difference than that recommended by CASAC and staff. On balance, I think that this is a bad thing and more evidence of the collateral damage from the extreme positions taken by the Bush administration. After all, while the Clean Air Act sets some boundaries, these are ultimately policy decisions that should be made by the President and his or her chosen staff, not by a committee no one’s heard of or low-level staff.
• Unlike the chaos created when the court vacated the CAIR regulations, the court appears to have learned its lesson. This time around, the court remanded the rule, but left the standard in place for now.
• The court’s decision to remand the public welfare standard will have implications for current efforts to implement the its Regional Haze Rule. The extent to which this decision throws Haze Rule implementation back to the drawing board may not be known for some time.

How many more cases can the Bush administration lose after it’s already out of office? At least one. Greenwire reports today about speculation that this decision means that the EPA rules regarding the nitrogen oxide NAAQS may also be in trouble.

The interesting question in all this is the extent to which the abysmal record of the Bush EPA in defending its decisions in the courts will damage EPA’s credibility and thus result in a long-term weakening of the deference given EPA by the courts. At this point, my assumption is that, in the long run, these cases will be seen as an aberration and courts will resume their prior practice of granting EPA substantial deference. Of course, whether that is a good thing or not is a separate question.

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While a lot of attention has been paid to whether EPA would reverse the Bush EPA decision denying California’s petition to regulate greenhouse gas emissions from mobile sources,  it is now clear even outside the climate change arena that life at EPA is going to be substantially different under the current administration.  As if evidence were really needed for that proposition, EPA announced this week that it was putting on hold the NSR aggregation rule that EPA had promulgated on January 15, 2009.

The rule, which had been long sought by industry, would have provided that nominally separate projects would only have to be combined – aggregated for NSR/PSD purposes – if  they are “substantially related.” It also would have created a rebuttable presumption that projects more than three years apart are not substantially related. Responding to a request from NRDC and the OMB memo asking agencies to look closely at rules promulgated before the transition but not yet effective, EPA concluded that the rule raises “substantial questions of law and policy.” Therefore, EPA postponed the effective date of the rule until May 18, 2009 and also announced that it was formally reconsidering the rule in response to the NRDC petition.

To those in industry, the aggregation rule was not a radical anti-environmental roll-back of environmental protection standards.  Rather, it was more of a common-sense approach towards making the NSR program simpler and clearer.  It is one of my pet peeves with the prior administration, however, that it gave regulatory reform a bad name.  

In any case, I feel as though I should open a pool regarding what will be the next Bush-era rule to be tossed overboard.  We surely won’t have to wait long for it to happen.

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I have posted a few times recently about the tension between environmental regulation and economic development, particularly in the context of current efforts at devising a stimulus package in Congress. Yesterday, Congress rejected an amendment to the stimulus bill, offered by Senator John Barrasso (R-Wyo.), which would have required NEPA reviews to be completed within 270 days for projects funded through the stimulus. Projects not reviewed during this time period would have been constructively approved, i.e., the absence of NEPA review during the 270-day period would have resulted in a determination that the project had no significant impact.

Instead, Congress approved a competing amendment offered by Senator Boxer, which simply requires that NEPA reviews be completed as expeditiously as possible. Senator Barrasso went on record thanking Senator Boxer for at least introducing her amendment recognizing the importance of expedited review.  Nonetheless, the proof will be in the pudding when highway projects – or other projects in the stimulus bill that might have significant environmental opposition – attempt to run the NEPA gauntlet.

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Coal has taken its lumps this week. Today, legislation was introduced in Congress to require EPA to promulgate MACT standards for mercury emissions from coal-fired power plants within one year of enactment of the legislation.

There has been some suggestion that the legislation was filed simply to prod EPA to drop its appeal of the decision by the D.C. Circuit Court of Appeals rejecting EPA’s Clean Air Mercury Rule (CAMR), which would have created a cap and trade program for mercury emissions. If so, it worked, if only by telepathy, because, in a separate announcement today, EPA withdrew that appeal.

One way or another, it is clear that EPA will be promulgating, as soon as it reasonably can manage, MACT standards for mercury emissions. What is also clear is that complying with those standards will be more expensive than compliance with the CAMR would have been. What’s not clear is whether EPA will figure out a way to harmonize the mercury rule with other air rules issued and to be issued, so that, while compliance will have to occur on a facility-specific basis, it can at least be achieved as cost-effectively as possible at each facility.

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Among energy efficiency advocates, “decoupling” is the word of the day. Last year, the Massachusetts Department of Public Utilities issued an order decoupling utility rates from sales volume, joining California on the front lines of this issue. The point of decoupling is to eliminate utilities’ rate-based incentive simply to sell more and more power, thus making it easier for utilities to get behind demand management measures.

Congress is now grappling with the decoupling issue as it considers whether to require that states implement decoupling as a quid pro quo for stimulus money related to energy efficiency and conservation. Last week, both the National Association of Regulatory Utility Commissions and the Industrial Energy Consumers of America sent letters to congress opposing decoupling provisions. 

With climate change lingering in the background, and with an increasing chorus saying that we have to act yesterday in order to prevent the worst impacts of global warming, there is going to be a lot of pressure on Congress to get this right, and to do so quickly, in order to maximize incentives for energy efficiency. Decoupling clearly seems right as a theoretical matter, but this is definitely a “devil is in the details” situation par excellence.  The decoupling issue might be better decided as part of comprehensive negotiations over a climate change bill than as part of hurried discussions over the stimulus package.

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President Obama continues to surprise some of his progressive backers. This time, it was his selection of Cass Sunstein to head the Office of Information and Regulatory Affairs at OMB. The Center for Progressive Reform called Sunstein’s views “conservative” and similar to those of the Bush administration.

How did the appointment of a known progressive annoy the progressives? Sunstein’s sin is the support of the use of cost-benefit analysis in regulatory decision-making. Sunstein also rejects the precautionary principle.

I truly hope that this is a Nixon in China moment for cost-benefit analysis. Given that Obama has already appointed an aggressive – and progressive – regulatory team, given that he has already signaled that EPA will reverse the Bush administration’s rejection of California’s waiver request, given that he has also signaled that EPA will probably move quickly to regulate CO₂ as a pollutant, perhaps he will have earned sufficient credibility with most progressives – if not the Center for Progressive Reform – to move to make regulation more efficient and to make better use of science in regulation.  This would include adoption of cost-benefit analysis as a cornerstone of analysis.

As long as Republicans push for cost-benefit analysis, it is easy to say it’s a tool of the devil. Professor Sunstein himself referred to environmentalists’ Manichaean view of the world. If President Obama supports cost-benefit analysis, will the same criticism stick? Let’s hope not. Perhaps this administration can indeed bring industry and environmentalists together, satisfying environmentalists with strong regulation and industry with the assurance that such regulations will be soundly grounded in science, including careful risk analysis and cost benefit analysis.

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