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

Two seemingly unrelated stories from last week suggest that EPA may have its limits in how far it is going to go to make nice with those who are opposing its regulatory agenda. The first story, reported by Greenwire, is pretty much all in the headline: “EPA official accuses Kan. department of lying over proposed plant.” The second story, also from GreenWire, reported that EPA Administrator Lisa Jackson referred to opponents of EPA’s greenhouse gas tailoring rule as “jack-booted thugs.”  She has also described Republican efforts to limit EPA regulatory authority as a “too dirty to fail” policy.

It’s difficult to interpret at least Administrator Jackson’s remarks as anything other than part of the 2012 Presidential campaign. I realize that I may be hopelessly optimistic in asking that even campaign rhetoric make sense, but these comments don’t make sense. How is it that opponents of the tailoring rule – and I actually support the rule, though I’m not sure about EPA’s authority to promulgate it – are “jack-booted thugs”? They may have misrepresented the scope of the rule, but that hardly makes them thugs, let alone jack-booted ones.

And too dirty to fail? I don’t even know where to begin. Let’s start and end with the simple point that it is not precisely because these plants are dirty that we refuse to regulate them – which is the only way the analogy to “too big to fail” could possibly make sense. This is nothing more than trying to make polluters look bad by comparing them to banks. I do feel compelled to observe that we are in a funny place when banks have a worse reputation than polluters and we have to stir up populist anger at the polluters by comparing them to the big, bad, banks.

In any case, calling your opponents liars and thugs, and describing their political strategy as supporting polluters because they are "too dirty to fail” is not going to engender a spirit of compromise. I understand EPA’s frustration with its congressional opponents. Again, I must emphasize that I support not just the tailoring rule, but may of EPA’s regulatory initiatives. I also note that EPA has taken steps – rarely noted or appreciated – to respond to the concerns of opponents. Nonetheless, aside from providing red meat to the base, this is hardly constructive. After all, it’s not as though anyone expects the Democrats to win such overwhelming majorities in the House and Senate that Lisa Jackson won’t have to deal with congressional Republicans after January 2013. Good luck with those jack-booted thugs.

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Justice Brandeis famously suggested that states may “serve as a laboratory” for the rest of the country. If this is so, I think it is fair to say that U.S. EPA has not accepted the results of the biomass experiment conducted in Massachusetts. Last year, following receipt of a study regarding the GHG emission implications of various types of biomass fuels, Massachusetts decided to severely restrict the circumstances in which biomass would be considered a renewable fuel.

Earlier this week, EPA decided not to go along with the restrictive approach taken by Massachusetts, and granted a petition to stay application of GHG permitting to biomass facilities, while EPA further studies the issue. Specifically, EPA promised to amend the tailoring rule to exempt biomass facilities for three years. In a letter EPA Administrator Lisa Jackson sent to Senator Stabenow as part of the announcement, Jackson stated that:

biomass can be part of a national strategy to reduce dependence on fossil fuels, and efforts are underway to foster the expansion of renewable resources and promote biomass as ways of addressing climate change and enhancing forest management.

It’s one thing for a state to differ from the federal government or other states on matters of policy. However, my guess is that the federal EPA and the great Commonwealth of Massachusetts have pretty much the same policy goal – reduction of greenhouse gas emissions. This is really a question of science. Does use of biomass help reduce GHG emissions? Shouldn’t the answer be the same everywhere?

I’m not a scientist and cannot comment on the reliability of the Massachusetts biomass study. (And I should disclose that our firm has represented the proponent of one of the biomass plants in Massachusetts.) However, it does seem to me that this is one area in which a uniform national policy is the right approach. Let’s give EPA the three years that it apparently needs to sort out the issue, and then have one policy applicable nationwide.

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EPA has finally released it long-awaited PSD and Title V Permitting Guidance for Greenhouse Gases, also known as the GHG BACT Guidance. E&E News quoted Gina McCarthy as saying that GHG permitting would be “business as usual” and that the transition to issuing PSD permits for GHGs would be relatively smooth. 

Not.

It’s certainly true that the GHG BACT Guidance says nothing particularly new about how permitting agencies should perform BACT reviews. Giving credit where credit is due, I’ll complement EPA for using plain English and describing the basic BACT process about as cogently and concisely as I’ve seen. The BACT Guidance also heavily emphasizes the use of energy efficiency measures in attaining BACT for GHGs, as has been expected. That should provide at least some comfort to the regulated community.

Having praised the BACT Guidance, I’ll now do my best to bury it. I just don’t think anyone can truly say that it actually provides any guidance to either state permitting agencies or the regulated community regarding what in fact will constitute BACT. In fairness to EPA, I think that’s because they don’t know, but that’s hardly a comforting thought. It’s got to be worrisome to regulated facilities that they are now subject to a requirement to demonstrate BACT for GHG when they make a major modification at their facility and they simply don’t know what it will take to comply with the GHG requirements.

Take, for example, EPA’s discussion of when an agency requirement to evaluate a particular control option might be considered to “redefine the source.” The BACT Guidance discusses this issue for six pages, but provides what seems to me to be no guidance at all. The Guidance repeats the bromide that

EPA has recognized that a Step 1 list of options need not necessarily include inherently lower polluting processes that would fundamentally redefine the nature of the source proposed by the permit applicant. BACT should generally not be applied to regulate the applicant’s purpose or objective for the proposed facility.

However, the Guidance then ominously states that permitting agencies must

take a ‘hard look’ at the applicant’s proposed design in order to discern which design elements are inherent for the applicant’s purpose and which design elements may be changed to achieve pollutant emissions reductions without disrupting the applicant’s basic business purpose.

If that doesn't send chills down the spines of engineers everywhere, I don’t know what will.  Similarly, the guidance says that "EPA continues to believe that permitting authorities can show in most cases (my emphasis) that the option of using natural gas as a primary fuel would fundamentally redefine a coal-fired electric generating unit."  Unfortunately, the guidance then notes that where a power plant already combusts another fuel, such as for start-up purposes, it would be appropriate to evaluate whether use of that fuel might be BACT.

The Guidance is too long to summarize fully in a blog post, but I do want to leave you with one image, courtesy of EPA. In discussing the requirement to identify energy efficiency options, the Guidance helpfully states that not “every conceivable improvement that could marginally improve the energy efficiency of the new facility” need be listed. In making this concession, EPA cited to Sierra Club v. EPA, which “recognized the undesirability of making the BACT analysis into a ‘Sisyphean labor where there was always one more option to consider.’”

We can only hope that EPA and state permitting agencies really take those words to heart as this process unfolds. I’m not optimistic.

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I’ve always thought that implementation of EPA’s GHG rules for stationary sources was inevitable in the absence of climate change legislation. The Supreme Court told EPA that GHGs are a pollutant under the Clean Air Act. Given the decision in Massachusetts v. EPA, EPA’s subsequent regulatory moves have been pretty much unavoidable. 

Since the statute seems to mandate GHG regulation, only Congressional action could block the rules. While a House majority seemed plausible, even before the election, getting 60 votes in the Senate always seemed a much stiffer proposition. Moreover, one could always expect an Obama veto, if legislation precluding EPA’s rules somehow were to get through Congress. Now, I’m not so sure.

If it turns out that there are enough coal state Democrats to move the legislation through the Senate, and if the supporters keep attaching the legislation as a rider to bills that the Administration does want, it may become difficult at some point for Obama to continue to veto it. A more tantalizing possibility is that the GOP might use such legislation as a bargaining chip with Obama over energy legislation, agreeing to support energy legislation, but only if Obama agrees to a prohibition on EPA GHG rules for stationary sources. In that situation, would Obama throw the GHG rules under the bus? Now that’s an interesting scenario.

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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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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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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 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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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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