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

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

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

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

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

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

Oh, well.

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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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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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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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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 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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Following briefing from the parties, the D.C. Circuit Court of Appeals today withdrew its vacatur of EPA’s Clean Air Interstate Rule. While the decision striking down the rule stands, the Court determined that keeping CAIR in effect while EPA prepares a replacement rule “would at least temporarily preserve the environmental values covered by CAIR.”

EPA rejected a request by the industry plaintiffs to impose a deadline on EPA for issuing the replacement rule, but emphasized to EPA that it “did not intend to grant an indefinite stay of the effectiveness of this court’s decision.”

The decision to keep CAIR in place for now will provide a measure of certainty and should be particularly well received by state environmental agencies which had been trying to determine whether they needed to reinstate their NO_x SIP Call rules.

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Has the D.C. Circuit had second thoughts about its decision to vacate EPA’s Clean Air Interstate Rule? As we noted last month, after Congress pretty much threw up its hands at efforts to salvage some part of CAIR, EPA, states and private stakeholder were left wondering how to proceed. Now, the Court may have provided a life-line to CAIR. In surprise Order issued last week, the Court requested additional briefing on the scope of its decision to vacate the rule.

The order does not suggest any retreat by the Court from its decision that the regulations have several serious flaws. However, on the remedy side, the Court appears to have realized that no one was really expecting CAIR to be vacated in its entirety – and that no one knows what to do if the vacatur stands. Thus, the Order requests briefing on two subjects: (1) whether indeed any party seeks vacatur and (2) whether the court should stay its mandate until EPA promulgates a revised rule.

Of course, the Court is not bound to any specific approach just because it has asked for briefing. However, it seems unlikely that the Court would request the briefing if it did not at the least have serious concerns regarding the impact its vacatur of CAIR would have on the stability and predictability of regulations in this area. Once more, we can only say: stay tuned.

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Since the Court of Appeals for the District of Columbia vacated EPA’s Clean Air Interstate Rule in its entirety, EPA and Congress have been working on a variety of fixes. As we recently noted, Congressional Democrats recently put together a plan to enact CAIR’s Phase I SO2 and NOx limits. Enacting those limits would result in emissions reductions of approximately 45% of SO2 and 50% for NOx.

However, to enact the limits during the 110^th Congress, the bill would require 2/3 support in the House and unanimous consent in the Senate. The word is now out on Republican reaction to the planned fix, and the word is not good. Key House Republican Joe Barton rejected a request from Democrats that he support the quick CAIR fix. While Representative Barton stated that he was willing to make a thorough review of the Clean Air Act, including CAIR, a priority for the next Congress, he is not willing to expedite a CAIR fix in this Congress.

Without support from key Republicans such as Representative Barton, it is difficult to see how Congress can enact a CAIR fix in the 110^th Congress. Nonetheless, pressure is certainly going to continue to build to fix or replace CAIR, if not in this Congress, then in the next.

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In the days following the decision by the Court of Appeals for the District of Columbia to vacate EPA’s Clean Air Interstate Rule – CAIR – regulators, industry, and environmentalists have been attempting to answer one fairly basic – and quite critical – question. What now? Although a variety of parties had challenged various aspects of CAIR, it seems that no one was quite prepared for the decision by the Court of appeals that the entire rule had to be vacated, due to “several fatal flaws” in the rule. CAIR required 28 states and the District of Columbia to require additional reductions in NO_x and SO₂. Elimination of CAIR leaves a gaping hole in the regulatory landscape for these important criteria pollutants.

Recent development provide at least some idea what the post-CAIR landscape may look like. First, on September 2, 2008, EPA sent letters to states subject to CAIR asking them to revive their NO_x Budget Trading Programs (“NBPs”)which had been promulgated pursuant to EPA’s NO_x SIP Call. A number of states subject to CAIR had eliminated to scheduled to sunset their NBPs, because CAIR made them unnecessary. Repromulgation or maintenance of NBPs would at least provide a backstop for NO_x regulation in CAIR states.

The other venue for post-CAIR planning is Congress. The Bush administration has requested that Congress simply enact CAIR into legislation. Congressional Democrats have opposed this approach, fearing that enacting CAIR would make it more difficult to enact more stringent limitations down the road. Recently, Senator Tom Carper and Representative Rick Boucher apparently have reached agreement on CAIR legislation. Their approach would limit the legislation to SO₂ and NO_x. The proposed legislation would implement the first phase of CAIR for these pollutants, requiring a 45% reduction in SO₂ and a 50% reduction in NO_x.

However, in order to get the legislation enacted during the 110^th Congress, Carper and Boucher are looking to utilize expedited rules that would require the approval of 2/3 of the House and unanimous consent in the Senate. Time will tell whether unanimous agreement that something has to be done will translate into unanimous agreement in the Senate on a particular piece of legislation. Stay tuned.

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