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

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

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

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

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

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

"Horsefeathers!"

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Uh-oh. 

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

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According to an article by BNA published this morning, EPA may soon act to apply the prevention of significant deterioration (PSD) provisions of the Clean Air Act to facilities that emit more than 25,000 tons of carbon dioxide annually.  Presumably, EPA's action is either an effort to exert leverage on Congress to pass pending climate change legislation or to ensure that GHG are regulated in the event that legislation doesn't pass -- or both.  

Under the Clean Air Act, PSD applies to major new sources, which are defined by their emissions level -- for pollutants in identified industrial sources categories, the threshold is 100 tons per year, while for others it is 250 tons per year.  Assuming that EPA moves forward with its its proposed endangerment finding, the default assumption (and the doomsday scenario presented by the Chamber of Commerce) would be that all GHG sources greater than 250 tons or 100 tons, depending on the source, would be subject to PSD regulations.

As an example, per the General Reporting Protocol's conversion factors, burning only 265.3 tons of coal or 1,173 barrels of fuel oil would produce 250 tons of CO₂.  However, the 25,000 ton threshold is the same used by the EPA in the endangerment finding and its proposed mandatory reporting regulations, so seems likely to be applied here as well.

As we previously noted, the EPA's official current position on this point is still the memorandum issued December 18th by former EPA Administrator Stephen Johnson, which said that since CO₂ is not a regulated pollutant under the Clean Air Act, PSD does not apply.  However, current EPA Administrator Lisa Jackson issued a letter on February 17 stating that the agency will reconsider this position. 

As noted in the BNA article, there is reason to question EPA's authority to exempt small GHG sources from PSD requirements once GHG are found to be pollutants which endanger public health and the environment.  Moreover, EPA's record in defending creative interpretations of the Clean Air Act -- even where they are generally supported, such as in the CAIR regulations -- has not been sterling.  

The entire debate is likely to get messier before it is resolved. 

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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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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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As the sun sets on the Bush administration, it is at least maintaining its seemingly unmatched record for turning the notion of judicial deference to administrative action on its head, as the D.C. Circuit has rejected yet one more EPA Clean Air Act rule. This time, the Court struck down EPA’s rule exempting startups, shutdowns, and malfunctions (SSM) from emissions standards under § 112 of the CAA.

As with some of EPA’s other judicial defeats, this one was based largely on the Court’s reading of the plain language of the CAA. The Court concluded that “EPA’s decision to exempt major sources from compliance with section 112 emission standards during SSM events is contrary to the plain text of the statute and arbitrary and capricious in any event.” The Court noted that § 302(k) of the CAA defines an “emission standard” as a requirement to “assure continuous emission reduction.” Thus, the Court concluded, Congress required continuous standards under § 112.

Anyone who operates facilities subject to the CAA knows that SSM events pose special challenges. In this context, it is noteworthy that the Court emphasized that EPA had not purported to act under § 112(h) of the CAA, which provides that a standard may be relaxed “if it is not feasible in the judgment of the Administrator to prescribe or enforce an emission standard for control of a [HAP] (hazardous air pollutant).” 

It would be surprising if industry groups did not seek relief under § 112(h) at this point, though whether the Obama EPA will be interested is another matter.

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Opening yet another front in the effort to force EPA to take more aggressive action to combat global warming, the Environmental Defense Fund recently announced its intent to sue EPA for its failure to update emissions standards with respect to emissions of methane from landfills. As EDF has alleged, Section 111 of the Clean Air Act requires that EPA update its New Source Performance Standards every eight years. EPA last updated the landfill NSPS in 1996.

Of course, at the time EPA last promulgated landfill NSPS, climate change was not part of the equation. Now, it is. Methane is a potent greenhouse gas, 21 times more potent than CO₂. Although landfills have increasingly made efforts to capture methane for waste-to-energy projects, these efforts are apparently not fast enough or comprehensive enough for EDF.

Specifically, in its 1996 promulgation, EPA determined that energy recovery from landfill methane was not available. EDF, in its Notice, cites sources indicating that energy recovery is now feasible, even at smaller landfills. 

The likelihood that EPA will revisit this issue in the limited time remaining to the current administration seems vanishingly small. However, there is no doubt that this issue will be revisited in the next administration. Given methane’s potency as a greenhouse gas, it seems likely that regulations will target this area, whether as part of a revision to NSPS or as part of a broader strategy aimed directly at climate change. Once cap and trade programs expand beyond the power generation sector, as seems likely, regulators are certainly going to be looking at reductions from landfills, among other non-power sources.

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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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There was a time when EPA was almost uniformly successful in defending its regulations in the courts. EPA would note the deference provided to agency decision-making under Chevron U.S.A. v. NRDC, remind the court of its expertise in interpreting some very complicated statutes, and the case would essentially be over. Not any more.

In recent years, as the Bush administration has embarked on some quite ambitious regulatory reform efforts, EPA’s record has slipped considerably. The most famous case at this point is Massachusetts v. EPA, in which the Supreme Court rejected EPA’s efforts to avoid regulation of greenhouse gases under the Clean Air Act. However, EPA has had a number of other significant failures in court. Of these, the continued rejection of EPA’s efforts to reform the New Source Review, or NSR, rules is perhaps most notable. In decisions in 2005 and 2006, the Court of Appeals for the District of Columbia threw out two critical pieces of EPA’s NSR reform effort.

Now, in the latest setback for EPA, the Court of Appeals for the 11th Circuit has vacated another piece of EPA’s NSR reform agenda. The rule at issue in the latest case would have precluded state and local regulatory authorities from imposing monitoring requirements beyond those required by EPA. While noting that its review was governed by Chevron, the Court concluded that the Clean Air Act “unambiguously precludes EPA’s interpretation.”

Given the change in administration that will occur next year, it is difficult to imagine EPA pursuing its NSR reform agenda for much longer. The more significant question is whether EPA’s efforts at NSR reform have done long-term damage to its ability to defend its regulatory choices in court.

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EPA has publicly taken the position that the current Clean Air Act is ill-suited to regulation of CO₂ as a pollutant.  In an advance notice of proposed rulemaking. EPA stated that regulation of greenhouse gases “could result in an unprecedented expansion of EPA authority that would have a profound effect on virtually every sector of the economy and touch every household in the land.”  (Of course, proponents of regulation of greenhouse gases under the CAA might say that that is precisely what is needed to address the problem of global climate change.)

Given EPA’s stated reluctance to regulate CO₂ and other greenhouse gases under the CAA, it came as something of a surprise this week when it became widely known that EPA recently approved an amendment to Delaware’s state implementation plan, or SIP, incorporating state regulations in which Delaware would in fact regulate emissions of CO₂ from stationary sources in that state. 

While EPA is apparently still taking the position that CO₂ is not a regulated pollutant under the CAA – and is apparently having second thoughts about its approval of the Delaware SIP amendment, environmental groups are taking a different position.  Patrice Simms, with the NRDC recently told the BNA that the Delaware SIP does make CO₂ a regulated pollutant under the CAA.  In the absence of a formal change of heart by EPA, this decision is certain to be cited broadly by those seeking immediate regulation of CO₂ by EPA. 

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Since the Supreme Court issued its decision in Massachusetts v. EPA, Congress, EPA, state regulators, environmentalists, and industry groups have been trying to determine what it would mean to regulate CO₂ under the Clean Air Act. While both presidential candidates are on record as supporting some kind of climate change legislation, the currently proposed legislation is extraordinarily complex and there are certainly no guarantees that legislation will in fact be enacted any time soon.

In the meantime, Massachusetts v. EPA does not seem to leave EPA much wiggle room, notwithstanding the agency’s current unwillingness to move forward on CO₂ regulation. In the absence of new legislation, it seems likely that, at some point, some court is going to order EPA to promulgate regulations governing emissions of CO₂ as a pollutant. 

So, what would be the scope of regulation of CO2 under the Clean Air Act? Based on a recent report by the U.S. Chamber of Commerce, the answer is – really, really, broad. The Chamber assumes that any facility emitting more than 250 tons of CO2 per year would be regulated as a stationary source under the Clean Air Act. The Chamber report estimates that more than 1,000,000 million facilities would be subject to such regulati9ons. 

Making these estimates is quite difficult; EPA’s own estimates were lower than those in the Chamber report. However, whether the estimate is several hundred thousand or more than one million, the picture is not pretty. The bottom line is that everyone has an interest in climate change legislation, because, in the absence of legislation, regulation will come at some point – and when it does, its impacts will be felt everywhere.

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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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