The Biden Administration’s Undoing Project Continues — A Flawed Interior Interpretation is Jettisoned

On Friday, the Principal Deputy Solicitor at the Department of Interior issued a memorandum on how DOI should balance the criteria in the Outer Continental Shelf Lands Act in issuing leases for offshore wind.  The new memorandum replaces one issued by the Trump Administration following the November election.

The Trump Administration memorandum, which could have simply been titled the “We Hate Offshore Wind Memorandum,” basically treated each of the criteria in the statute as vetoes, requiring the DOE Secretary not to grant leases if any one of the criteria in isolation was not met.  The new memorandum rightly makes clear that it is the Secretary’s right and obligation to balance the various statutory criteria.

This is not a bold new interpretation.  Indeed, I would venture to say that any 2nd-year law student who has taken administrative law would have understood that the Trump Administration interpretation was plainly wrong.  Going farther, I would say that this story is most notable only as yet one more piece of evidence that Trump Administration regulatory moves were – I think literally – never driven by honest legal interpretation, but were instead purely outcome-dependent.  I don’t even think it can be explained by Trump’s desire to support the fossil fuel industry; instead, it feels to me more like the Trump Administration just liked to stick needles in the eyes of its opponents.  Democrats liked offshore wind – reason enough to oppose it.

This isn’t to say that the new interpretation isn’t meaningful.  It was arguably necessary to withdraw the Trump Administration memorandum before the DOI Secretary could issue the approvals needed for new offshore wind projects.  With that obstacle removed, I think that the floodgates may finally be opening for the massive scale of offshore wind development that we need to meet our goals for decarbonizing the electric grid.

Carbon Pricing — Is It the Zombie Climate Policy?

At a press briefing in India yesterday, John Kerry, President Biden’s Special Presidential Envoy for Climate was asked by an Indian journalist about carbon pricing.  Here’s part of his response:

President Biden believes that at some point in time we need to find out a way to have a price on carbon that’s effective.  He hasn’t decided or made an announcement about it, but we all know that one of the most effective ways to reduce emissions is putting a price on carbon.

And the trade press latched onto the story, with Bloomberg (subscription required) noting, in part, that “Kerry’s remarks come amid a surge in interest in carbon pricing from business groups.”  And soon, I expect my friends at the Climate Leadership Council will remind us that their “Climate Dividends Plan” is the most costs-effective approach to reducing GHG emissions and has the most public support.

And then?

Well, to date, the answer has been … nothing.  And today I had the depressing thought that carbon pricing may be our national zombie climate policy.  It’s never quite dead, but then again, it’s not exactly alive, either.

I sure hope that this rather strained metaphor is wrong-headed, but I truly don’t know.  Given the skepticism of many in the environmental justice community about carbon prices, even the huge climate moves that this administration has already made aren’t enough to convince me of the political viability of a carbon tax.

And yet, and yet, it’s so obviously an important part of the solution.  Someone tell me whether we’re ready for a breakthrough and a full-court press will get carbon pricing in place or whether it’s just another great idea whose time has come – and gone.

Federal Offshore Wind Plan Boosts State Efforts in Massachusetts

As President Biden announces his blueprint for expanding the use of offshore wind (OSW) power, Massachusetts hopes to become an industry hub. Those plans will certainly be facilitated by the new federal OSW policies.

On March 29, the Biden administration published a major plan to mobilize offshore wind development, particularly along the East Coast. The plan aims to construct 30,000 megawatts of OSW generation by 2030,… More

Is a New Electricity Grid in Our Future? President Biden Thinks So.

The White House this morning released a fact sheet on “The American Jobs Plan,” also known as President Biden’s infrastructure plan.  There’s a lot in here (as there should be for a couple of trillion dollars!), so today I’ll focus on energy infrastructure.  Here are the highlights: 

  • $100B to “build a more resilient electric transmission system.”  This includes “the creation of a targeted investment tax credit that incentivizes the buildout of at least 200 gigawatts of high-voltage capacity power lines.”
  • Creation of a “Grid Deployment Authority” within DOE to facilitate transmission line siting.
  • A “ten-year extension and phase down of an expanded direct-pay investment tax credit and production tax credit for clean energy generation and storage.”
  • Implementation of an “Energy Efficiency and Clean Electricity Standard.”  (If I knew what this really meant, I would tell you, but the fact sheet contains no details.  Presumably it is a version of a federal renewable portfolio standard.)
  • An unspecified amount of money for “15 decarbonized hydrogen demonstration projects in distressed communities.”
  • $10B for a “Civilian Climate Corps.”

There’s much more to come.  Even aside from more details on the energy infrastructure piece, there are important other sections of the Plan, including those on transportation infrastructure and drinking water infrastructure.

Stay tuned.  We’ll see how much this administration can get done before the next election cycle begins, but there’s no doubt that President Biden has ambitious plans.

States Really, Really, Must Act on Water Quality Certification Applications Within One Year

The saga of judicial efforts to enforce the one-year limit on state review of applications for water quality certifications under Section 401 of the Clean Water Act shows no sign of reaching a conclusion.

First, in Hoopa Valley Tribe v. FERC, the D.C. Circuit held that an agreement between the applicant and the state pursuant to which the applicant repeatedly withdrew and resubmitted its 401 application could not escape the statutory time limit on state review. Then, in NYDEC v. FERC, the 2nd Circuit held that DEC could not escape the one-year limit by asking the applicant to supplement the application, arguing that the one-year period was not triggered until DEC determined that the application was complete.  Now, in a case involving the same parties as NYDEC v. FERC, the 2nd Circuit held last week that DEC could not escape the one-year limit by reaching an agreement with the applicant to redefine the date on which DEC had received the application.

Notably, DEC argued that the time limit was intended to protect the applicant’s right to a prompt review and that the applicant should thus be able “to waive or modify this right by agreeing to a different receipt date.”  Not so, said the Court.

The legislative history shows that Congress was not primarily concerned with protecting the rights of individual applicants. Rather, it shows that Section 401’s time limit was meant to protect the regulatory structure, particularly in situations involving multiple states: in other words, to “guard[] against” one state “sit[ting] on its hands and do[ing] nothing” at the expense of other states that are also involved in a multi-state project.  Thus, consistent with our approach in New York I, the legislative background of Section 401 confirms that Congress could not have intended to permit the arrangement advocated by the DEC and Sierra Club, which introduces the uncertainty the one-year limitation period was intended to eliminate.

I’m pretty sure that this does not mark the end of litigation over the one-year limit.  There are still going to be situations when states believe that they have legitimate reasons for taking more than one year to review an application for a 401 certification.  In some of those cases, the applicant may not object.  Human ingenuity being what it is, states are going to continue to look for ways around the one-year limit.  I do think, though, that the cumulative impact of these cases is that the states are going to have to be fairly ingenious if they are going to make their next end-run stick.

Massachusetts Climate Legislation Becomes Law — The Future of Everything

It’s not always the case, but my speculation about the Massachusetts climate bill was correct.  On Friday, Governor Baker signed it into law.  If I haven’t succeeded in making this clear previously, I want to emphasize that this is a really far-reaching piece of legislation.  It commits Massachusetts to a very aggressive timetable for reducing GHG emissions.  It species a number of specific policies, including a massive increase in the procurement of offshore wind (just to highlight one example) to get there, and it truly integrates environmental justice into the fabric of the Commonwealth’s climate efforts – and its environmental protection programs more generally.

If you did not think that it was possible to combine the mundane and the inspirational in the same event, you can watch the signing ceremony here.  I really recommend it only for true climate policy wonks and those with serious insomnia.

The Massachusetts Climate Bill is Very Much “Not Dead”

In January, when Governor Baker vetoed the Legislature’s effort to go big on climate, my colleague Zach Gerson made clear that the bill was not even “mostly dead.”  I am pleased to say that Zach’s diagnosis was correct.  The climate bill is very much alive.

Last week, the Legislature passed a new version of the bill, which adopted most of the Governor’s technical suggestions and almost none of his substantive changes.  As a result, my summary of the important elements of the bill in January remains largely accurate.

To me, there are only two even arguably significant substantive changes from what the Legislature passed in January:

  • The Legislature gave the Governor perhaps a slice – definitely not even half of loaf – of what he asked for with respect to the development of a net-zero stretch energy code that municipalities could adopt as a local option.  The new bill still requires development of the net-zero stretch code.  However, it now allows 18 months, rather than 12, for development of the code.  It also provides that the Department of Energy Resources may phase in the requirements of the net-zero code.
  • In a move to further enshrine environmental justice principles in MassDEP permitting decisions, the bill would require MassDEP “to propose regulations to include cumulative impact analyses for defined categories of air quality permits.”

It’s not totally clear at this point whether the Governor will sign the bill.  If you were to ask me to speculate, I’d predict yes.  More importantly, the Governor’s signature is irrelevant (which is part of my reasoning for predicting that he will sign it).  If the Governor were to veto the bill, the likelihood of an override would be approximately 100%.

And since Zach admitted to using the “mostly dead” reference in part to justify use of a Princess Bride reference, I leave you with this – one of my favorites, if not quite as heartwarming as the Princess Bride.

FERC Considers GHG Emissions in a Gas Pipeline Review — Everyone Is Unhappy

According to E&E News (subscription required), FERC yesterday, for the first time, assessed the impacts of a gas pipeline’s downstream GHG emissions.  (As of this writing, the decision is not yet available on FERC’s web site.)

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Former chair James Danly was unhappy, calling the decision “legally infirm.”  I question Commissioner’s judgment on this one.

Neil Chatterjee provided the Republican vote in favor, saying that he made a pragmatic decision, because the alternative might be a FERC that approves no new natural gas projects.

And why is everyone unhappy?  Well, as a representative of the GOP and industry position, I think Commissioner Danly’s position speaks for itself.  And why might greens be unhappy?  Because the Commission still voted to approve the project.  Indeed, Chairman Glick specifically noted that:

Analyzing the impacts of the project’s greenhouse gas emissions doesn’t automatically doom the project.

We’ll see how long that position holds – and if it holds at all for large new projects.

The Transportation Climate Initiative Marches Forward; It’s Not Going to Be Easy.

On March 1, the Transportation Climate Initiative jurisdictions released a draft “model rule” that would provide a template for individual state rules governing the operation of the TCI Program.  Although only three states and the District of Columbia committed in December 2020 to implement TCI-P, the announcement on Monday indicated that the model rule “was developed by twelve” TCI jurisdictions.”  I guess that eight states like the model rule – just not enough at this point to commit to implementing it.

All of which emphasizes that getting TCI-P off the ground is not going to be easy.  Here’s just one piece of evidence.  The model rule contains two separate reserve prices.  The cost containment reserve price, or CCR, is intended to prevent price increases that are “too high.”  The reserve price for the initial year, 2023, is set at $12.00/ton in the model rule.  If you have followed recent debates over the social cost of carbon, you’ll be aware that $12.00/ton is a pretty low number when compared to the costs imposed by carbon emissions.

The second reserve price is the emissions containment reserve, or ECR.  The ECR pulls emissions out of the auction if the demand is too low.  The ECR trigger price in the initial year of 2023 is $6.50.

What these two numbers tell me is that state officials are much more worried about the political fallout from implementing TCI-P than about the program not being sufficiently stringent to get the transportation carbon emissions reductions that we need.  I totally get that approach.  Let’s get TCI-P up and running, show that it works, and then tighten down as necessary.  Of course, if that’s the approach, then TCI may want to avoid setting the CCR and ECR prices now for the out years.  It will be difficult to ratchet those prices up once they are written into regulation.

TCI has requested comments on the model rule by April 1.

Cost-Benefit Analysis Is Very Complicated — And Very Important

It’s only a slight rhetorical exaggeration to say that the limited bandwidth left to environmental issues other than climate change in recent years has been largely occupied by concerns about PFAS – Per-and polyfluoroalkyl substances, also known as “Forever chemicals.”  A fascinating story in Bloomberg Environment & Energy (subscription required) this week suggests that we may need a little more bandwidth for PFAS.

The Bloomberg story explained that fluoropolymers are integral to the rollout of 5G networks and are also critical to a number of advanced technologies, some of which may matter much more to society than just the ability to download movies very quickly.  For example, fluoropolymers are used in automatic crash prevention technologies in automobiles.  They are also critical in implantable medical devices. 

And thus we arrive at one of my favorite subjects, cost-benefit analysis.  At a certain level, the question of what to do about fluoropolymers seems tailor-made for cost-benefit analysis.  After all, the fundamental question is whether the benefits of fluoropolymers are worth the environmental risks.  And whether we acknowledge it or not, we are making implicit judgments about costs and benefits, even if we don’t explicitly recognize them as such.  If we ban fluoropolymers, we are making the judgment that the costs are greater than the benefits.  If we allow unfettered use, we are making the judgment that the benefits exceed the costs.  We might as well make these judgments explicitly, so we can be intentional about it and make certain that the cost-benefit analysis at least approximates something on which we can rely.

We all know that once the cat is out of the bag and the horse has left the barn, it’s difficult to put Humpty-Dumpty together again.  In short, once we start high-volume production of fluoropolymers, if it turns out that their production is associated with significant toxicity and environmental impacts, it’s going to be very difficult to avoid those impacts.  And yet, at this point, we don’t know the extent of those potential adverse impacts.  On the other side, we also don’t know the extent of their benefits, because we probably don’t know more than a tenth of their potential uses – they haven’t even been invented yet.

The only thing I do know is that these difficulties are no excuse for giving up.  As noted earlier, we don’t get to avoid making cost-benefit judgments just by pretending that we’re not doing so.

Is BlackRock Starting to Walk the Walk?

Climate risk is investment risk.

So says BlackRock.  And when you manage $8.7 trillion, people tend to listen to what you say.  I’ve been noting for some time that BlackRock’s statements seemed to presage increasing shareholder activism with respect to climate.  And yet there have been skeptics.  As noted in ClimateWire last week, BlackRock’s actions have not always seemed to match its rhetoric.

That’s why BlackRock’s recent release, “Climate risk and the transition to a low-carbon economy” is potentially so significant.  It starts with the proposition that:

There is no company whose business model won’t be profoundly affected by the transition to a net zero economy.

It then enumerates steps companies must take to prepare for the impacts of the transition.

Finally, it lists factors that BlackRock will consider in assessing how well companies are prepared for the investment risks posed by climate change and the transition to a net zero economy.  These include:

  • How the board and management are considering the physical and transition risks of climate change on the company, alongside opportunities for energy efficiencies and use of renewable resources
  • How the company is adjusting its strategy and/ or capital allocation plans to address the risks and opportunities identified
  • How the company is assessing the potential for changes in demand for goods or services due to climate change (including consumer preferences)
  • How the company has assessed its current emissions baseline, set rigorous targets, and evaluated whether it is aligned with net zero GHG emissions by 2050
  • Whether the company is stress-testing its assets and assessing the resilience of its strategy under a less than 2° C scenario; including the impacts of policies, such as a carbon tax, fuel selections, and/ or efficiency standards, on profitability
  • How the company may be harnessing sustainable solutions to take advantage of new investment opportunities, business lines, or products and access to capital
  • How the company is monitoring the regulatory landscape and whether it is participating in relevant policy discussions, including international, national, and local requirements and trends

What’s important, of course, is what BlackRock actually does with these assessments.  This is where the rubber meets the road and where corporate board members are wondering if BlackRock really means it.  In the last substantive section, headed “Holding Boards Accountable,” BlackRock states that:

Where corporate disclosures are insufficient to make a thorough assessment, or a company has not provided a credible plan to transition its business model to a low-carbon economy, including short- medium- and long-term targets, we may vote against the directors we consider responsible for climate risk oversight. We may also support shareholder proposals that we believe address gaps in a company’s approach to climate risk and the energy transition. We view this as the appropriate escalation where we see a lack of urgency and progress in a company’s actions around climate risk.

The whole (investment) world is watching.

More on the Social Cost of Carbon — Are We Doing It All Wrong?

Last month, I posted about the Biden administration’s effort to develop a new estimate of the social cost of carbon.  The EO requires a new interim SCC within 30 days and a new longer-term SCC by January 2022.  Earlier this week, Joseph Stiglitz and Nicholas Stern – it doesn’t get more impressive than a Nobel prize winner and an actual Lord – released a National Bureau of Economic Research Working Paper (non-academics can download up to three papers free per year) in which they argue that, not just is the value we’ve place on the SCC too low, but that the methods we have used to develop the SCC are fundamentally flawed.

Stiglitz and Stern identify a number of flaws in the “Integrated Assessment Models” currently used to set the SCC.  One key flaw I had not really considered previously is that:

It is a fundamental mistake to begin the analysis of climate change under the premise that, but for the mispricing of emissions, the economy is efficient. And there are limits on the ability of government to “correct” these market failures.

It’s a gross oversimplification, but the quick summary of their recommendation is that, rather than determining the marginal damage caused by climate change and setting the SCC based on that, we should instead determine what increase in global temperatures humanity and the planet can actually tolerate and set a carbon price that will get us there.  As they fairly point out, we have already done the first part; it’s called the Paris Agreement.  Similarly, many governments have now established goals of net carbon neutrality by 2050. So what should be the price of carbon that will ensure a temperature raise of no more than 2 degrees Celsius (and, we hope, closer to 1.5 degrees Celsius)?

The Working Paper is more about methodology than implementation, but it’s clear that we’re talking about a price above $100/ton, and fairly soon.  If I had to guess, I’d predict that the Biden administration will get to this result.  However, it is likely to do so, not by adopting the approach recommended by Stiglitz and Stern, but just by lowering the discount rate sufficiently to result in an SCC > $100/ton.

Either way, carbon is about to get much more expensive.

Have I Mentioned that PM2.5 Is Bad For You?

The evidence of the harm resulting from PM2.5 exposures keeps rolling in.  Earlier this month, Environmental Research published an article titled “Global mortality from outdoor fine particle pollution generated by fossil fuel combustion: Results from GEOS-Chem” (abstract available; full article requires purchase), which concluded that global annual mortality from PM2.5 exposure is roughly twice as high as previously estimated. 

Somehow, I don’t think that this is going to persuade those who believe that a causal relationship between PM2.5 levels below the current NAAQS and increased mortality has not been established, but I do expect the evidence to continue to pile up – and I don’t have any doubt that a decision by EPA to reduce the PM2.5 NAAQS would easily stand up to judicial review, even before our most conservative judges.

And I continue to have a vision of a really green future, when we’ve attained a pretty much carbon-free electricity grid in order to address climate change.  We’re then going to see how much “co-benefits” really do matter.  Asthma rates will have decreased.  Mortality related to PM2.5 exposure will have decreased.

There is reason to be optimistic.

When the Music’s Over, Turn Off the Dakota Access Pipeline

Last week, the District of Columbia Court of Appeals affirmed vacatur of the easement issued to the Dakota Access Pipeline by the Army Corps of Engineers.  As I noted last month in connection with the Biden Executive Order concerning Keystone XL, no one in the industry is rushing out to plan any new pipelines and no one in the financing business is rushing out to provide the cash to build any new pipelines. 

Although the DAPL decision does not break any new ground, it certainly adds to the sense that siting new pipelines may be an uphill battle at this point.  The Court’s opinion affirms the primacy of NEPA in ensuring that environmental impacts are addressed before major infrastructure projects are constructed.  Specifically, the Court stated that:

[I]f you can build first and consider environmental consequences later, NEPA’s action-forcing purpose loses its bite.

If, when an agency declined to prepare an EIS before approving a project, courts considered only whether the agency was likely to ultimately justify the approval, it would subvert NEPA’s purpose by giving substantial ammunition to agencies seeking to build first and conduct comprehensive reviews later. If an agency were reasonably confident that its EIS would ultimately counsel in favor of approval, there would be little reason to bear the economic consequences of additional delay.

The Court did reverse the District Court’s order to shut down the DAPL, finding that the Court had not made the findings required to support an injunction.  I fully expect that the District Court will make the required findings and issue an injunction requiring a shutdown.  Indeed, the opinion notes that an injunction motion has been fully briefed before the District Court.

I could still see such an injunction being reversed on appeal, though I’m not sure I’d bet on it.  I certainly wouldn’t bet on the successful licensing and financing of any pipelines not yet in the pipeline, as it were.

The music is almost over and it may be about time to turn out the lights on fossil fuel pipelines.

The Trump Administration Suffers Yet One More Judicial Defeat; The “Secret Science” Rule Is Vacated

Last month, I noted that the Trump administration had suffered “one final judicial defeat” – the rejection of its Affordable Clean Energy Rule.  Of course, I spoke too soon.  Last week, Judge Brian Morris rejected EPA’s rule “Strengthening Transparency in Pivotal Science Underlying Significant Regulatory Actions and Influential Scientific Information” – also known as the “Secret Science Rule.” 

The Secret Science Rule was promulgated on January 6, 2021, just before Andrew Wheeler’s exit as EPA administrator, and after more than two years of rulemaking.  EPA stated that the rule was not subject to the APA’s notice provisions, both because it was “housekeeping”, rather than substantive, and because – don’t laugh – the crisis of confidence in EPA rulemaking was so significant that the order couldn’t wait.  Of course, January 20 had nothing to do with it.

Judge Morris rejected both arguments.  And, like many other courts reviewing the Trump administration’s regulations, Judge Morris’s language could serve as a summary of the Trump administration’s deregulatory efforts as a whole.  First, he eviscerated EPA’s claim that the rule was procedural, rather than substantive:

The Final Rule instead makes a substantive determination of how the agency should weigh particular scientific information in future rulemakings. The Final Rule determines outcomes rather than process. The Final Rule’s status becomes particularly clear when one examines what it is missing—any kind of procedure. (My emphasis.)

Then Judge Morris eviscerated (such a good word, I had to use it twice) EPA’s argument that the lack of notice was justified because the rule was promulgated in response to an emergency:

Federal Defendants provide no argument on this justification. EPA failed to demonstrate how delayed implementation would cause real harm to life, property, or public safety. EPA failed to describe the crisis of “confidence” it sought to address. EPA failed to show a need for urgent implementation when it took more than two-and-one-half years to finalize this regulation. (My emphasis.)

Judge Morris initially simply delayed the effective date of the rule for 30 days following promulgation.  However, in response to a motion by the current EPA that the Court vacate the rule, because EPA had no authority to issue it pursuant to its housekeeping authority, Judge Morris agreed and vacated the rule.

And thus the movement to end the use of “secret science” ends, not with a bang, but with a whimper.