FERC Cannot Avoid the Social Cost of Carbon By Arguing That It is Not Universally Accepted

On August 3, the District of Columbia Court of Appeals held that FERC could not avoid use of the social cost of carbon in assessing the impacts of natural gas projects by arguing that “there is no universally accepted methodology.”  Given the growing recognition of the significant role FERC is going to have in combatting climate change, it’s an important decision. 

FERC acknowledged that construction and operation of the projects under review would “contribute incrementally to future climate change impacts.”  However, because of the perceived absence of a “universally accepted methodology”, FERC took the position that “it is not currently possible to determine localized or regional impacts from [greenhouse gas] emissions from the Project.”

However, in so doing, FERC ignored a key provision of the NEPA regulations, which state that:

 [i]f . . . information relevant to reasonably foreseeable significant adverse impacts cannot be obtained . . . because the means to obtain it are not known, the agency shall include within the environmental impact statement . . . [t]he agency’s evaluation of such impacts based upon theoretical approaches or research methods generally accepted in the scientific community.

FERC explained why it did not utilize the SCC in its NEPA analysis.  However, it completely failed to address the NEPA regulatory requirement to use “theoretical approaches or research methods generally accepted in the scientific community.”  That was pretty much the end of the case.  To the Court, the SCC seemed to fit pretty squarely under the regulatory language.  FERC’s complete failure even to discuss the regulation required remand.

The big question is what happens following remand and in other, similar cases.  FERC – or project proponents or GOP state attorneys general – could certainly argue that the SCC is not “generally accepted in the scientific community.”  However, as I have previously noted, even as much as four years ago, a court rejected challenges to use of the SCC in NEPA environmental assessments, noting that “uncertainty” is not the same as “speculation”, and concluding that the presence of uncertainty makes careful environmental assessment even more necessary.  Uncertainty is not an excuse to avoid doing the best job that an agency can to assess environmental impacts – including those related to climate change.

FERC – or project proponents or GOP state attorneys general – could also try to use the Trump administration’s version of the SCC.  It’s unlikely at FERC, since it will soon have a Democratic majority.  I think in any case, the Trump SCC is unlikely to get any traction in implementation of EISs.  However, we still don’t know what a group of Trump-appointed appellate judges will do with EISs based on a significantly higher SCC.

The GOP attorneys general are undoubtedly right about one issue – the value we set on the social cost of carbon matters.  A lot.

Will More Money Managers Start Voting Shares Based on Climate Issues? Fidelity International Gets in the Game

In the wake of Engine No.1’s successful effort to elect more climate-friendly directors at Exxon and the increasingly aggressive action by BlackRock to take climate into account in its investment management decisions, the whole world is watching for further evidence of capitalism’s efforts to save the world from, well, capitalism.

The latest news is from Fidelity International (not to be confused with Fidelity Management and Research), which this week issued its “Sustainable Investing Voting Principles and Guidelines.”

The Guidelines are a mixed bag and I think that reaction to them will depend upon whether one is a glass half-full or glass half-empty type.  Here’s the meat of the climate provisions:

We believe a minimum standard is for companies to provide:

– A stated policy on climate change.

– Emissions data.

– Confirmation of discussion and oversight of climate change at the board level.

In addition, for companies in the most affected industries, we strongly encourage the following:

– Targets for reducing greenhouse emissions.

– Description of the impacts of climate-related risks and opportunities on their businesses, strategy and financial planning.

– Scenario planning including multiple scenarios.

– Impact scenario referencing 1.5°C limits.

For climate hawks, also known as the glass half-empty types, these minimum standards are indeed pretty minimal; they don’t actually require very much from the companies in which Fidelity International invests.  For glass half-full types, the Guidelines are part of a significant trend indicating that capitalism is starting to police itself.

For my own part, I’ve always felt that a glass that is half full is also half empty.  These Guidelines do appear to be part of an increasing trend of shareholder activism on climate, but it’s a trend that going to have to start accelerating pretty quickly if it’s going to result in meaningful action.  And it’s a trend that has to work in concert with legislation and regulation.  It’s a complement to government action, not a substitute for government action.

New York Utility Company Seeks Proposals to Electrify Buildings Instead of Building More Gas Pipelines

On July 12, 2021, in a landmark utility effort to electrify New York City’s building stock, Consolidated Edison (Con Ed) issued a request for proposals (RFP) for non-pipeline solutions (NPS). NPSs avoid the need for investment in pipelines and traditional distribution system infrastructure by meeting on-system natural gas demand with alternative solutions like energy efficiency and heat pumps. Con Ed’s RFP seeks customer-sited load relief solutions that enable the abandonment of leak-prone pipes through full building electrification while maintaining system reliability.… More

Maine, Massachusetts, and Maryland Expand Utility Regulators’ Mandate to Include Climate Considerations, Marking an Emerging Trend by State Legislatures

Maine, Massachusetts, and Maryland all passed legislation this summer that expands the raison d’etre of state utility regulatory bodies to include addressing the impacts of climate change. These efforts mark an emerging trend of legislative bodies directing utility regulators to help advance climate policies. This enhanced vision of utility regulation gives me hope in the fight against climate change.

Despite the fact that utility regulators play a huge role in our energy sector–the sector primarily responsible for historical U.S.… More

Maui Needs a NPDES Permit; What’s Next for WOTUS?

Last week, District Judge Susan Mollway ruled that the County of Maui must obtain a NPDES permit for discharges to groundwater by the Lahaina Wastewater Reclamation Facility.  It is the first trial court decision applying the factors identified by Justice Breyer in the SCOTUS Maui decision. 

Judge Mollway found the most important factors to be what she considered to be the relative short distance from the discharge to the surface water (½ mile) and the relatively short time between the groundwater discharge and the surface water discharge (as little as 84 days and, overall, roughly a year).  Judge Mollway also thought that the sheer volume of the discharge ultimately reaching the surface water is important.

Obviously, ½ mile and one year are still significantly different than the time or distance involved in a discharge direct to surface water.  However, Judge Mollway, effectively put these numbers in context:

Because the Supreme Court knew it was dealing with movement through groundwater, it makes sense to assume that the Court expected the parties to be dealing with transport time measured in months. Notably, the Supreme Court set its extreme at “many years,” not at “many months,” and not even at one year or two years.

I’m confident that Judge Mollway’s analysis comports with the expectation of the SCOTUS majority.  The discharge from the POTW, even though not immediately abutting the shore, was the type of discharge that SCOTUS believed is intended to be encompassed by the NPDES program.

The real question is where do we go from here?  It at least sets a benchmark for other courts to utilize if they so choose.  If you’re less than ½ mile or so from surface water, and it takes less than a year or so for the discharge to reach the surface water – at least if the volume is significant – then it’s plausible to think an NPDES permit may be required.  However, the decision still largely leaves the jurisdictional determination on a case-by-case basis.

More importantly, the decision provides no guidance on the remedy.  What standards should apply?  What effluent limits should be imposed?  I can imagine a facility owner persuasively arguing that its discharge does not cause the exceedance of any water quality criteria, and thus that no effluent limits need be imposed.

In the meantime, what does this mean for legislative efforts to reform the Clean Water Act and efforts by EPA and the Army Corps to develop a workable regulatory definition of WOTUS?

My quick answer is that it will probably have no effect.  I know that experts from both sides of the aisle love to hate Breyer’s opinion.  I may be the only environmental lawyer around who thinks that it was a creative and appropriate effort to solve what has been an insoluble problem.  And I still think that judicial implementation of the SCOTUS opinion may be our best practical hope to get to a workable definition – even if no one’s happy in the meantime.  It’s not as though anyone was happy before the SCOTUS decision.

Three cheers for Judge Mollway.  Let’s see how this plays out.

Will Increased Enforcement Speed Cleanup of Superfund Sites in EJ Communities?

Earlier this month, EPA circulated a memorandum on “Strengthening Environmental Justice Through Cleanup Enforcement Actions.”  It could significantly increase the volume of CERCLA enforcement actions.  More importantly, if implemented appropriately, it could help reduce the risks posed by Superfund sites in overburdened EJ communities. 

The trick of course will indeed be how it’s implemented.  If this becomes just another in a long line of screeds on the subject that all Superfund cleanups take too long, it will accomplish nothing for cleanups in general or EJ communities in particular.  That why, to me, two sentences in the memo are key:

EPA uses mapping and screening tools, including EJSCREEN, in combination with local knowledge to help identify overburdened communities that may be disproportionally impacted by adverse health and environmental effects.

[EPA will] review PRP-lead sites designated as “human exposure not under control” (HENUC) to determine if enforcement actions can effectively reduce human exposure.

In other words, the key to the success of this initiative is EPA’s wise use of data.  Historically, there has been almost no connection (very minor rhetorical exaggeration) between the risk posed by a superfund site and the amount of time and money spent to remediate it.  EPA should be using data to identify the sites that really pose immediate – not just “imminent” – hazards to human health, particularly in overburdened EJ communities.  When it does so, it can focus time and resources on the sites that meet those two criteria and, where necessary, take enforcement action against PRPs who are slow in addressing such significant risks to EJ communities.

If that happens, then EPA can take a bow and I’ll applaud.  However, if in the next six months I hear from an EPA attorney that the Assistant Administrator has told staff that cleanups are just taking too long, then I’ll know that it’s just Superfund business as usual – and that would not be a good result.

NESCOE Report Advances Governors’ Demands for Climate Leadership at ISO-NE

The managers of the New England States Committee on Electricity (“NESCOE”) recently released a report (“Report”) to New England’s governors to advance its shared vision for a clean, affordable, and reliable 21st-century electric grid. The Report is the latest development that highlights the growing tension between the states’ decarbonization policies on the one hand, and ISO-NE’s wholesale market rules, on the other. The Report calls for critical changes to three elements of New England’s regional energy system: wholesale market design,… More

At What Level of Government Are We Going to Regulate Climate Change? (Hint — It Is a Global Problem.)

Last week, Judge Yvonne Gonzalez Rogers ruled that the Berkeley ordinance essentially banning use of natural gas in new construction was not preempted by the Energy Policy and Conservation Act.  I’m not here to opine on the legal merits of the decision.  I will note note that the Judge’s reliance on textual analysis and the asserted federalist bent of SCOTUS’s conservative wing might give this opinion more life than one would otherwise expect – though I’ll also note that the conservative wing’s federalist proclivities often seem to turn on whether they agree with the underlying policy at issue. 

My concern here is the extent to which we in the United States are making policy intended to address climate change – which is not even a national problem, but a global problem – at a broad range of levels of government.  Berkeley, with a population of barely 100,000 people, is trying move public policy towards an end of new natural uses of natural gas.  South Portland Maine, with a population of around 25,000, is trying prevent shipments of tar sands oil from South Portland.  (Full disclosure – Foley Hoag represents South Portland in litigation over its ordinance)  Washington State, with a population of somewhat more than 7 million, is trying to avoid facilitation of coal exports.

I’m sympathetic to all of these policy innovations, or at least the motives behind them.  I still think that natural gas is an important bridge fuel, but I also recognize that we have to get to the end of that bridge as quickly as possible.  Limiting markets for tar sands oil and coal exports?  Check and check.

Moreover, all of these moves were based on the exercise of traditional police powers by local governments.  The courts reviewing the Berkeley ordinance and the South Portland ordinance both rightly cited to local police powers in ruling that those ordinances are not preempted.

Finally, I also have sympathy for the argument that, in Judaism, as expressed as:

It is not your responsibility to finish the work of perfecting the world, but you are not free to desist from it either.

In other worlds, local action may not solve the problem of climate change, but it represents – one hopes – the collective will of local governments to do what they can, rather than just throwing up their hands in despair.

And yet, we still have to recognize that it’s going to be difficult, if not impossible, to cobble together an effective policy to mitigate climate change by the accumulation of a bunch of local policies.  My real hope here is that the combination of the right local policies somehow, and sometime soon, helps break the logjam preventing the development of comprehensive federal policy.

Can you say “carbon pricing”?

Local Communities and Environmental Groups Bring Challenge to the New York State Office of Renewable Energy Siting’s Regulations for Siting and Permitting Major Renewable Energy Facilities

On June 29, 2021, a cohort of New York local governments (including many where large-scale solar projects are currently proposed), community organizations, and avian interest groups filed a lawsuit in the New York State Supreme Court (the State’s trial-level court) against the Office of Renewable Energy Siting (“ORES”).  ORES is required to respond to the allegations no later than 30 days from receipt.

The ORES was created under the Accelerated Renewable Energy Growth and Community Benefit Act,… More

Congress A Step Closer to Making Corporate ESG Disclosure Mandatory

On June 16, 2021, the U.S. House of Representatives passed legislation that would impose new ESG due diligence and disclosure requirements on publicly traded companies.  H.R. 1187 – the ESG Disclosure Simplification Act of 2021 – would require publicly traded companies to disclose their commitments to ensuring that environmental, social (human rights), and good governance standards (ESG) are reflected in their operations, activities, and supply chains.

The Legislation’s Impact on ESG Due Diligence and Disclosure

Specifically,… More

EPA Withdrawal of Its Proposed Veto of a 404 Permit Is Reviewable — This Should Not Be Earth-shattering News

Last week, the 9th Circuit Court of Appeals ruled that EPA’s decision to withdraw its proposed veto of the Army Corps’ Section 404 permit for the Pebble Mine project in Bristol Bay, Alaska, was subject to judicial review.  Although there was a dissent and the majority opinion was 39 pages, I don’t think that the case should have been so hard.

The Court noted the “strong presumption” that final agency action is subject to judicial review.  It noted that the relevant exception here is whether “agency action is committed to agency discretion by law.”  There’s nothing in the Clean Water Act that commits EPA decisions under 404 to its discretion.  For reasons that remain a mystery to me, the question whether an issue has been committed to agency discretion has morphed into a rule that agency action is unreviewable only:

if no judicially manageable standards are available for judging how and when an agency should exercise its discretion.

Silly me, but I thought that that’s what courts do – they determine the standards to apply in judging whether a challenged agency action was lawful.

I recognize that federal courts are of limited jurisdiction, but the “strong presumption” of the reviewability of agency action is not supposed to be mere words, subject to the almost unlimited creativity of judges who would rather not hear a case.  Agency action should pretty much always be reviewable, if it’s final and if it has legal consequences.

And I’ll note that this is not a left/right ideological issue.  In another recent case, Judge Terry Doughty enjoined the Biden Administration’s pause on the issuance of new fossil fuel leases on public lands and in offshore waters.  I may disagree with Judge Doughty on the merits, but I absolutely agree with his conclusion that the pause was not committed to agency discretion by law.  Liberals and conservatives alike can challenge agency action with which they disagree.

Agencies don’t always get it right.  To me, judicial review of final agency action is a cornerstone of public faith in the administrative state.  If we want people to trust government, then they have to believe that there is a meaningful check on agency action that is arbitrary and capricious.

Massachusetts Claims Against ExxonMobil Survive — Wave of the Future or Litigation Sideshow?

This week, Judge Karen Green denied Exxon Mobil’s motion to dismiss claims brought by Massachusetts under its Consumer Protection Act. The complaint alleges that Exxon Mobil both mislead Massachusetts investors in its marketing to them of Exxon Mobil securities and mislead Massachusetts consumers in its marketing of its products to those consumers.  Judge Green rejected Exxon Mobil’s arguments that it was not subject to jurisdiction in Massachusetts with respect to these claims.  She also rejected Exxon Mobil’s arguments that the complaint failed to state a claim.

On a motion to dismiss, Judge Green’s careful opinion is almost certainly right.  However, that doesn’t really answer the question whether this case – and the type of claims asserted by Massachusetts – are a significant new front in the climate litigation wars or whether they will ultimately be a sideshow.

On the plus side for Massachusetts, cases focused on state consumer protection law avoid most of the risks faced by litigation going to the heart of individual defendants’ responsibility for causing climate change – and they are clearly creatures of state law that belong in state court.

I won’t go into the details here, but the Commonwealth’s allegations supporting its count alleging that Exxon Mobil misled Massachusetts investors has some moderately juicy stuff regarding what Exxon Mobil representatives said in meetings with specific institutional investors in Massachusetts.  Those allegations, if proven, could certainly support a jury finding of an intent to mislead investors.  I will note that, if I were Exxon Mobil’s counsel, I’d focus on the argument that, whether it was misleading investors regarding whether its fossil assets will ultimately be “stranded,” depend, not on whether climate change is real, but on whether governments are going to stringently regulate fossil fuels.  Based on evidence to date, Exxon Mobil – unfortunately – can make a reasonable argument that the evidence still supports a conclusion that they will not.

Moreover, the question remains whether such statements involved “trade or commerce,” which includes “the advertising, the offering for sale, … the sale, … or distribution of … any security.”  That doesn’t seem like a slam dunk to me.

The allegations concerning misleading statements to consumers raises a different set of issues, including whether Exxon Mobil’s statements were mere “puffery” (with the Court persuasively noting that this determination can almost never be made on a motion to dismiss), and whether there’s any reason to believe that any of the statements “directly influence[d] a consumer’s decision to purchase Exxon products.”

Is this the next wave of climate litigation?  Will it move the needle?  At this point, I’m firmly in the “don’t know” camp.  The costs of litigation aren’t going to be big enough to affect Exxon Mobil, even if replicated in every blue state in the country.  Someone’s going to have to win one of these cases and obtain a significant award to make a difference.  That’s where I return to my prior discussion concerning whether tobacco litigation is a relevant analogy for these cases.  As I noted, those cases seemed completely unwinnable – until they weren’t.  And then, before we knew it, they were a tsunami.

I still think that these cases are an uphill battle – but they could also be that tsunami.

The Electric Vehicle Future: Major Climate Opportunity Faces Three Critical Challenges

Amid renewed national ambitions to tackle climate change, electric vehicles (EVs) have emerged as a promising way to reduce emissions in the transportation sector, which accounts for nearly a third of greenhouse gas emissions. This approach has garnered support even from private industry, as evidenced by the flurry of car manufacturers who recently committed to all-EV fleets in the coming decades.… More

TCI Update: Final Model Rule Addresses EJ, but Political Will May Be Lacking

On June 10, 2021, the Transportation Climate Initiative Program (TCI-P) states released a final model rule creating a regional cap-and-trade-program to reduce carbon emissions from the transportation sector. We wrote about the draft model rule and its implementation challenges when it was released at the beginning of March. Now, after a two-month stakeholder engagement process, the jurisdictions working to implement the program ask stakeholders to weigh in on the guidance documents,… More

New York State Office of Renewable Energy Siting Sets Precedent in Section 94-c Permit Proceedings: When Major Renewable Energy Projects Need Not Comply with Local Laws

In its first such determination, on June 4, 2021, the newly formed New York State Office of Renewable Energy Siting (“ORES”) determined that several provisions of the Town of Barre’s (Orleans County) local law are “unreasonably burdensome” in light of the State’s Climate Leadership and Community Protection Act (CLCPA) goals and the environmental benefits of the proposed 185 megawatt Heritage Wind Project, and therefore declined to apply them. This determination sets a precedent under the State’s Executive Law Section 94-c permitting regime for major renewable energy facilities,… More