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

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

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

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

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

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

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

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

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

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Last Friday, the Court of Appeals for the 5^th Circuit issued an order – boggling the minds of lawyers and non-lawyers alike – dismissing the plaintiffs' appeal in Comer v. Murphy Oil, one of the climate change nuisance cases. As the order and dissents make clear, it’s quite a set of circumstances. The District Court dismissed the case. A panel of the 5^th Circuit reversed. A request to rehear the case en banc was made. Seven out of 16 judges recused themselves. Of the nine remaining judges, six voted to rehear the case en banc. 

Three months later, one of the nine judges who voted on the en banc petition recused herself, leaving only eight – or half – of the judges. After requesting and receiving letter briefs from the parties, five of the remaining eight judges concluded that the last recusal deprived the Court of Appeals of a quorum, which means that the Court cannot hear or decide the appeal. Since the Court had already determined that, pursuant to its rules, the original panel decision was vacated when the decision to hear the case en banc was made, there is now no Court of Appeals decision; nor will there ever be one. The District Court decision dismissing the case, which had been reversed by the panel, is now in effect again, and the plaintiffs’ only remedy is a Supreme Court appeal.

As readers of this blog know, I’m not a believer in climate change nuisance litigation. As a formal matter, I think plaintiffs probably lack standing in these cases. As a practical matter, nuisance litigation is not the right way to regulate GHG emissions. However, I have to admit that I find the order breathtaking. The plaintiffs have a formal statutory right of appeal. As Judge Dennis pointed out in a scathing dissent,

federal courts lack the authority to abstain from the exercise of jurisdiction that has been conferred…. Just as courts have an “absolute duty … to hear and decide cases within their jurisdiction, [] litigants have a corresponding due process right to have their cases decided when they are properly before the federal courts.”

I’ll spare you the details, but Judge Dennis provided several different practical solutions that the Court could have utilized to hear the case.

My initial reaction is that this will slow Supreme Court review of this issue. The 5^th Circuit was likely to affirm the District Court decision, which would have created a split with the Second Circuit. The order issued last week means that there is no circuit split at this point. While the plaintiffs can appeal the order to the Supreme Court. even if the Supreme Court were to reverse the order, it would only be to order the 5^th Circuit to hear the appeal on the merits. If the 5^th Circuit is to hear the case, it’s years away at this point. 

Jarndyce v. Jarndyce, anyone?

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

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

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

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

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

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

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

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

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

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

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

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

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

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Last 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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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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