California’s Agreement With Quebec Is Not Preempted — At Least For Now

Last week, Judge William Shubb of the U.S. District Court for the Eastern District of California ruled that the Agreement between California and Quebec to jointly operate a GHG cap-and-trade market did not violate either the Foreign Affairs Doctrine.  Judge Shubb had previously ruled that the Agreement did not violate either the Treaty Clause or the Compact Clause.

As before, I think Judge Shubb got it right, but I wouldn’t bet that the Supreme Court will agree, if it gets that far.  This one does seem to be on firmer ground, though.

The most interesting part of the decision was the Court’s discussion of field preemption.  In order to establish field preemption, case law requires that the United States demonstrate that California:

(1) has no serious claim to be addressing a traditional state responsibility and (2) intrudes on the federal government’s foreign affairs power.

The Court actually sided with the Trump Administration on the first part of the test, concluding that the Agreement with Quebec “extends beyond the area of traditional state responsibility.”  The Administration lost because it failed to demonstrate that the Agreement “intrudes on the foreign affairs power.”  It had argued that the Agreement diminishes the President’s power to “engage in international deal making on behalf of the United States,” claiming that the Agreement would make it difficult for the President to negotiate a “better deal” than the Paris Accord.  The Court pointed to case law supporting its conclusion that “hypothetical or speculative fears cannot support a finding that this state program has more than an incidental effect on foreign affairs.” 

One almost has to admire this administration.  It takes a certain amount of chutzpah to challenge the Agreement between California and Quebec on the ground that it interferes with the Administration’s ability to get a better deal than Paris, when there’s not even a hint of a scintilla of evidence that the Administration has any interest in doing so.

And for a pretty good non sequitur, check out this Atlantic article that’s the source of the accompanying graph.

The New NEPA Rules Are Final: Still Giving Regulatory Reform a Bad Name

CEQ has finalized revisions to the NEPA regulations.  I don’t have too much to add to my post on the proposed rule back in January.  NEPA needs reform.  These regulations, however, are not the reform NEPA needs.

The rule largely tracks the proposed rule.  It is worth noting, however, that, contrary to this administration’s frequently cavalier attitude toward judicial review, they have made a few tweaks to increase the likelihood that the rule will survive review.  I have two favorites.  First, the word “generally” in the sentence below did not appear in the proposed rule:

Effects should generally not be considered if they are remote in time, geographically remote, or the product of a lengthy causal chain.

CEQ’s explanation is that “there may occasionally be a circumstance where there is an effect that is remote in time, geographically remote, or the product of a lengthy causal chain is reasonably foreseeable.”

Can you say “climate change”?

Which brings me to CEQ’s second effort to survive judicial review.  As CEQ notes in the preamble, “commenters stated that agencies would no longer consider the impacts of a proposed action on climate change.”

I’m shocked, shocked, to think that anyone could see climate change denial as motivating any part of this rule.  In response to all of the misguided comments, CEQ clarified that:

The rule does not preclude consideration of the impacts of a proposed action on any particular aspect of the human environment. The analysis of the impacts on climate change will depend on the specific circumstances of the proposed action.

Only time will tell whether this “wink, wink, nudge, nudge” approach to elimination of climate concerns from NEPA will survive judicial review.

What is the Burden on States Petitioning EPA Under the Good Neighbor Provisions of the Clean Air Act?

Yesterday, the D.C.. Circuit Court of Appeals granted New York’s petition appealing EPA’s rejection of New York’s request under Section 126 of the Clean Air Act to require emissions reductions from upwind states alleged to be contributing to New York’s noncompliance with the ozone NAAQS.  The Court found that:

The EPA offered insufficient reasoning for the convoluted and seemingly unworkable showing it demanded of New York’s petition.

The critical issued is identified, if only in a negative way, by Judge Griffith’s concurrence, which is more of a roadmap for EPA in denying future Section 126 petitions than it is a concurrence.  Section 126 authorizes states to petition EPA to make a:

finding that any major source or group of stationary sources emits or would emit any air pollutant in violation of the prohibition of [the Good Neighbor Provision.]

Judge Griffith believes that Section 126 imposes a heavy burden on petitioner states to identify specific sources that “share a common attribute.”  He does not believe that New York’s petition met that burden.

The only feature shared by the sources in New York’s petition is that each emits more than 400 tons of nitrogen oxides per year. That arbitrary threshold captures both an Indiana power plant emitting more than 10,000 tons annually and a Virginia bottle factory emitting just 412 tons. If that’s enough to establish a “group,” the term is all but meaningless.

I think that Judge Griffiths is wrong and in a way that turns federalism upside down.  New York thinks that upwind sources of NOx are contributing to NAAQS violations in New York.  It identifies a “group” of facilities, those emitting more than 400 tons per year of NOx.  Why is that not enough?  Indeed, doesn’t it make more sense for the downwind state to identify the problem, leaving the upwind states to control their sources as they see fit?  I don’t think we even want the downwind states to “group” the offending upwind sources too finely.

As with many of our environmental statutes, sections 110 and 126 of the CAA are not a model of clarity and the deadlines written into the statute simply don’t work most of the time.  That does not justify putting a burden on downwind states that the statute does not explicitly provide.

Dakota Access Must Shut Down. Is It a Harbinger?

I don’t like to speculate, so I won’t say that July 6, 2020, was the beginning of the end of fossil fuel infrastructure in the United States.  I will say, with apologies to Judith Viorst, that it was a Terrible, Horrible, No Good, Very Bad Day. 

First came the news that even a recent Supreme Court win wasn’t enough to save the Atlantic Coast pipeline.  Delays, cost overruns, and continued litigation risk related to other outstanding challenges, caused Dominion Energy and Duke Energy to pull the plug, as it were, on the Atlantic Coast pipeline.  In fact, the discouragement at Dominion was sufficiently profound that Dominion is selling all of its gas pipeline assets to Berkshire Hathaway.

Then came the sledgehammer that may break the camel’s back – the decision by District Judge James Boasberg to vacate the Army Corps easement that allowed the Dakota Access pipeline to be built under Lake Oahe.  The owners must shut the pipeline down and empty it of oil within 30 days – and keep it that way until a full Environmental Impact Statement is prepared.

Judge Boasberg had already rejected the Corps argument that no EIS was required.  Now, he has rejected arguments from the owner and several states as amici that the economic disruption from a shutdown would be vast, making vacatur inappropriate.  The problem with this argument, as Judge Boasberg noted, is that it encourages project proponents and supportive agencies to make each project an effective fait accompli, thus undermining the utility of NEPA from the get-go.

When it comes to NEPA, it is better to ask for permission than forgiveness: if you can build first and consider environmental consequences later, NEPA’s action-forcing purpose loses its bite.

I can imagine a successful appeal of the vacatur order.  I can imagine other big pipeline projects moving forward, particularly if Trump is reelected.  I can also imagine historians in years to come identifying July 6, 2020, as the beginning of the end.

Will Evidence of Causality Be Enough to Change EPA’s Mind About the PM2.5 Standard?

There have been numerous studies that support a decrease in the current PM2.5 annual standard of 12 ug/m3.  EPA has nonetheless proposed to retain the current standard on the basis that there is too much uncertainty regarding whether those studies provide a basis for concluding that PM2.5 concentrations below the standard cause increased mortality.  As I have previously noted, the statutory provision requires that NAAQS be set with an “adequate margin of safety.”  That would seem to require EPA to resolve such uncertainty in favor of a more stringent standard.

Putting aside EPA’s interpretation of the statutory requirement, evidence continues to roll in.  Last week, Science Advances published a study which uses causal inference approaches to conclude that lowering the PM2.5 standard to 10 ug/m3 would save more than 143,000 lives over ten years.

Will EPA nonetheless still conclude that the current standard provides an adequate margin of safety?  If I were a betting man, I’d certainly put my money on EPA holding firm.  I will only add that the idea that EPA will not lower the standard just blows my mind.

Perhaps, Some Day, There Will Be a Carbon Tax

There are few people left, at least in my orbit, who don’t share the goal of prompt decarbonization of the economy.  The quaintly named $64,000 question ($64 trillion question?) is how we get from here to there.

Today, the New England Power Generators Association released a report prepared by Analysis Group that explains how an economy-wide price on carbon can help New England do just that.  (Full disclosure:  Foley Hoag has done work for NEPGA and my wife works at Analysis Group, though not on this project.)

As a long-time carbon tax supporter, I did not need to be sold, but the report still has some important conclusions.

  • A carbon price of $25-35/ton in 2025 and $55-70/ton in 2030-35 would be sufficient to put us on a path to meet our GHG reduction targets.
  • Electrification will reduce household energy costs such that, even including the price on carbon, such costs will be lower in 2035 than without electrification.
  • The only means to get on a pathway towards attaining region-wide carbon reduction goals is to combine “high electrification” with carbon pricing.
  • Existing fossil fuel generators will still be necessary for “at least the next one to two decades” for load management.

So, the way to get to a decarbonized economy in New England is to price carbon.  We still have to answer one more question:  how do we build sufficient support for pricing carbon that it becomes a political reality?

Woe Is WOTUS, Redux

Sometimes, history repeats itself.  Sometimes, that is not a good thing.

After the Obama WOTUS rule was promulgated in 2015, the challenges came fast and furious, and in multiple forums.  The Supreme Court, as I put it, adopted the “give me a break” theory over the “just plain nuts” theory, and ruled that challenges to the rule had to be heard in district courts. … More

Particulate Matter Experts Still Think that the PM2.5 NAAQS Should Be Lowered. Will The Courts Defer to Them Or to EPA?

Last week, the New England Journal of Medicine published The Need for a Tighter Particulate-Matter Air-Quality Standard, written by the Independent Particulate Matter Review Panel.  For those who don’t remember, the Review Panel used to be a sub-committee of EPA’s Clean Air Science Advisory Committee, until EPA Administrator Wheeler decided that CASAC did not need the specific advice that the Review Panel had to offer.

The review panel was not deterred.  The NEJM article largely mirrors the report they issued last October, which concluded that the current PM2.5 annual standard is not sufficiently protective.  The authors state that:

The estimated all-cause mortality from long-term exposure to PM2.5, calculated on the basis of the 2015 air quality adjusted to just meet the existing standards, ranges from 13,500 to 52,100 deaths annually.

Their recommendation remains that EPA should lower the standard to between 8 and 10 ug/m3, although they note that risks remain even at the low end of that range.

As I’ve noted previously, the relevant statutory provision is that the NAAQS must be requisite to protect public health “with an adequate margin of safety.”  I still don’t understand how EPA can conclude that the current PM2.5 NAAQS complies with the statute, even if there is uncertainty surrounding these mainstream conclusions.  What does “adequate margin of safety” mean other than that EPA must resolve uncertainties in favor of protection of public health?

The article poses this question about judicial review of EPA’s decision to leave the PM2.5 standard unchanged:

Federal courts have in the past given considerable deference to the Clean Air Scientific Advisory Committee regarding its scientific advice. Will the courts defer to a committee that has been arbitrarily and capriciously deprived of a particulate matter–specific expert panel? Or will the courts look elsewhere, such as to public comments from experts and input from the dismissed panel?

I asked the nearly identical question last April, when EPA’s proposal was released.  It remains the question of the day.  How much deference does EPA get when it ignores the recommendation of the overwhelming weight of mainstream science?

Massachusetts AG Petitions DPU to Investigate Gas Industry Future in Light of Commonwealth’s GHG Emissions Goals

On June 4, 2020, the Massachusetts Office of the Attorney General (AGO) filed a petition with the Department of Public Utilities (DPU) requesting that the DPU open an investigation “to assess the future of local gas distribution company (LDC) operations and planning in light of the Commonwealth’s legally binding statewide limit of net-zero greenhouse gas (GHG) emissions by 2050.” Citing Massachusetts’ Global Warming Solutions Act, and the Executive Office of Energy and Environmental Affairs’ Determination of Statewide Emissions Limit for 2020,… More

EPA’s New Cost-Benefit Rule — Are Both Sides Misrepresenting What It Says?

Last week, EPA released its proposed rule regarding Increasing Consistency and Transparency in Considering Benefits and Costs in the Clean Air Act Rulemaking ProcessAs much as I hate to give aid and comfort to this Administration, I have to say that the rule does not herald the end of western civilization.  The biggest controversy surrounding the rule is its impact on consideration of “co-benefits”.  Supporters of the rule are trumpeting its elimination of the consideration of co-benefits.  Opponents are pointing to that very same conclusion as evidence of how wrongheaded the rule is.

There’s only one problem with all the commentary.  I’ve read the rule three times and, as far as I can tell, it does not preclude consideration of co-benefits.  In fact, here’s what the proposed rule does say:

The key elements of a rigorous regulatory BCA include: 1) a statement of need; 2) an examination of regulatory options; and 3) to the extent feasible, an assessment of all benefits and costs of these regulatory options relative to the baseline (no action) scenario. (My emphasis.)

EPA proposes that, to the extent supported by the scientific criteria, as discussed above, as well as practicable in a given rulemaking, (1) BCAs will quantify all benefits; (2) BCAs will monetize all the benefits by following well-defined economic principles using well-established economic methods; and (3) BCAs will qualitatively characterize benefits that cannot be quantified or monetized. (My emphasis.)

So, why does everyone think that the rule would preclude assessment of co-benefits?  This is what the preamble does say:

Disaggregating benefits into those targeted and ancillary to the statutory objective of the regulation may cause the EPA to explore whether there may be more efficient, lawful and defensible, or otherwise appropriate ways of obtaining ancillary benefits, as they may be the primary target of an alternative regulation that may more efficiently address such pollutants, through a more flexible regulatory mechanism, better geographic focus, or other factors. This may be relevant when certain benefits are the result of changes in pollutants that the EPA regulates under a different section of the CAA or under another statute.

And from the proposed rule itself:

The Agency must, to the extent supported by scientific literature as well as practicable in a given rulemaking:

(i) Quantify all benefits.

***

(b) The Agency must provide an additional presentation in the preamble of the public health and welfare benefits that pertain to the specific objective (or objectives, as the case may be) of the CAA provision or provisions under which the rule is promulgated.

(1)This presentation must list the benefit categories arising from the environmental improvement that is targeted by the relevant statutory provision and report the monetized value to society of these benefits.

To me, there’s nothing wrong about this.  Where pollutants are regulated or potentially regulated under multiple programs, double counting (of both costs and benefits) is possible.  Disentangling the effects of one program from another is important.

I understand the concern that this administration will misuse the cost-benefit analysis.  However, I think that this EPA has already demonstrated that it does not need this rule to do so.

If I’ve missed something here, please do let me know.  If you just don’t trust cost-benefit analysis, however, then I don’t need to hear it (and your complaint is not really with this rule, but with 50 years of efforts by presidents of both parties to strengthen cost-benefit analysis).

State Climate Suits Really, Really, Belong in State Court When They Allege Misleading Statements To Investors

On Thursday, there was yet another opinion addressing whether state and local climate suits belong in state or federal court.  This time, Judge William Young issued an opinion explaining his March bench decision to remand Massachusetts’ case against ExxonMobil to state court. 

The Massachusetts case for remand was easier than in the cases seeking a remedy for climate change.  The Massachusetts case does not make nuisance claims or seek a substantive remedy for the impacts of climate change.  It is limited to claims that ExxonMobil deceived investors in Massachusetts by knowingly misrepresenting the science of climate change and the impacts of that science on ExxonMobil’s share price.  As Judge Young noted:

the Commonwealth wants “to hold ExxonMobil accountable for misleading the state’s investors and consumers.” No one doubts that this task falls within the core of a state’s responsibility. States routinely enforce consumer protection and securities laws alongside the federal government.

Contrary to ExxonMobil’s caricature of the complaint, the Commonwealth’s allegations do not require any forays into foreign relations or national energy policy. It alleges only corporate fraud.

Whatever one may think of the merits of the Commonwealth’s claims, or even whether the Commonwealth’s suit was motivated by broader issues related to climate change, Judge Young got this one right.  It’s a consumer fraud case brought under state law and is not subject to removal to federal court based on the allegations in the complaint.

It’s Not Looking Good For Nationwide Permit 12

Yesterday, the 9th Circuit Court of Appeals refused the appellants’ request for a partial stay of the injunction recently issued against use of the Army Corps Nationwide Permit 12 for oil and gas pipeline projects.  The upshot is that use of Nationwide Permit 12 is prohibited for oil and gas pipelines until the Court of Appeals hears and decides the appeal.

The order contains more bad news for the Trump administration, the developers of Keystone XL, and the other energy companies that rely on Nationwide Permit 12.  The Court’s Order wasn’t based simply on the balance of harms.  The Court stated that:

Appellants have not demonstrated a sufficient likelihood of success on the merits and probability of irreparable harm to warrant a stay pending appeal.

That doesn’t bode well.

California Climate Nuisance Cases Will Also Be Heard In State Court (I Think)

The 9th Circuit Court of Appeals has issued two rulings that, combined with the recent 4th Circuit ruling in the Baltimore case, makes it more likely that state and local public nuisance climate cases will be heard in state courts, rather than federal courts.  The two California cases got to the 9th Circuit via different routes.

San Mateo v. Chevron is on all fours with the recent 4th Circuit decision.  As in Baltimore, the defendants in San Mateo removed to federal court, but the federal judge remanded to state court.  The defendants appealed the remand, but the removal statute is very clear that, except in limited circumstances pretty obviously not in play here, even plainly wrong remand orders are not reviewable by courts of appeal.  Moreover, since the 9th Circuit and the 4th Circuit agreed, there is no circuit split to tempt SCOTUS.  Although a circuit split is still possible given pending cases in other circuits, it seems likely that, where a federal judge remands a case to state court, the case will be heard in state court.

City of Oakland was different.  There, the federal judge found that there was federal jurisdiction, refused to remand, and then dismissed under Rule 12.  The 9th Circuit disagreed, concluding that the complaint did not create federal question jurisdiction.  It’s a rather deft decision (joined by a Trump appointee, I feel compelled to note).  The 9th Circuit had already concluded, following the SCOTUS decision in AEP, that there is no federal common law of nuisance to be applied to climate change cases.  As a result, the Court basically hoisted the defendants on their own petard.  If there is no federal common law of nuisance, how can state complaints alleging violations of state nuisance law create federal question jurisdiction?  There’s more to the opinion, but that’s the crux.

Defendants still can hold out some hope.  They had raised a variety of federal question arguments that the district court did not address in its original opinion.  Therefore, the 9th Circuit remanded so that the district court could address them.  Stay tuned for round 2.  In the meantime, the San Mateo case should start moving forward.

Sage Grouse Habitat Still Gets Priority in BLM Leasing Decisions

Last week, Chief Judge Brian Morris of the Federal District Court for the District of Montana vacated an “Instruction Memorandum” issued by BLM in 2018 – and also vacated numerous oil and gas leases issued in reliance on the 2018 IM.  The 2018 IM changed the way BLM interpreted land management plans issued by BLM in 2015 in order to preserve sage grouse habitat, and avoid the necessity for listing the sage grouse as endangered under the ESA.

The short version is that the 2015 plans required BLM to prioritize for leasing land that is not sage grouse habitat.  The 2018 IM required BLM to give priority to land that is not sage grouse habitat only when BLM has a backlog of potential leasing sites to review.  BLM provided no explanation for the change in how it addressed prioritization.  The Court was, of course, aware that the BLM changes resulted from President’s Trump’s drive to expand oil and gas leasing on federal lands.  Its response was short and to the point:

“Faster and easier lease sales,” at the expense of potentially imperiling the habitat of a species on the brink of listing under the ESA, falls short.

Interestingly, given the push by conservatives to decrease the deference given to agency interpretation of their own rules, BLM sought deference to its interpretation of the 2015 plan.  Here, too, the Court gave short shrift to BLM:

Courts do not defer to agency interpretations of a management plan that prove inconsistent with the plain language of the plan.

Finally, and perhaps most importantly, the Court vacated both the IM and the leases, notwithstanding BLM’s request that the Court remand without vacatur.

The Court sees no reason to leave the 2018 IM in place. BLM’s errors undercut the very reason that the 2015 Plans created a priority requirement in the first place and prevent BLM from fulfilling that requirement’s goals. As for the lease sales, the errors here occurred at the beginning of the oil and gas lease sale process, infecting everything that followed.

That paragraph could serve as a fitting epitaph for this Administration’s overall effort to undo the entire environmental regulatory structure put in place since 1970.

Has President Trump Just Limited Enforcement To Willful Violations?

On Tuesday, President Trump issued an Executive Order on Regulatory Relief to Support Economic Recovery.  I’ll leave to others a discussion of the provisions telling agencies to look for more regulations to roll back.  I’m in general agreement with commenters who have said that those provisions don’t add much to Trump’s prior deregulatory efforts and are likely to face mostly the same reception in the courts as prior efforts.

Instead, I want to focus on this provision:

The heads of all agencies shall consider whether to formulate, and make public, policies of enforcement discretion that, as permitted by law and as appropriate in the context of particular statutory and regulatory programs and the policy considerations identified in section 1 of this order, decline enforcement against persons and entities that have attempted in reasonable good faith to comply with applicable statutory and regulatory standards, including those persons and entities acting in conformity with a pre-enforcement ruling.

I hate to give the President too much credit, but this may be the most significant deregulatory measure he’s taken.  As far as I can tell, Trump is telling agencies that they should only take enforcement action against persons who willfully violate environmental laws.  It is true that the President only tells agencies to “consider” policies “consistent with law,” but I think we all know what President Trump means when he tells agencies to consider cutting regulated entities a break.

Because this provision involves the exercise of agency enforcement discretion, it will be much harder to challenge in court.  Certainly, written policies saying that an entire agency will always exercise enforcement discretion to prosecute only willful violations, even in the case of statutes that plainly provide for strict liability, might cause raised eyebrows among judges, but if the agencies actually care about the outcome and draft the policies carefully, they might well withstand judicial review.

My advice to my clients, and I mean this in all seriousness, is pretty simple.  Take steps to carefully document your good faith efforts at compliance – and keep a copy of this EO in your back pocket at all times.