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

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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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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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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