Ohio Environmental Law Blog : Ohio Environmental Lawyer & Attorney : Joseph Koncelik : Frantz Ward Law Firm : Environmental Regulation, Land Use, Compliance : Cleveland, Ohio

Democratic leaders of the US House Energy and Commerce Committee agreed to hold another hearing on climate change legislation on May 1.  As discussed by commentators with the Environmental Markets Association, some Washington Insiders believe this announcement is a clear indication the Waxman-Markey Climate Legislation won't make it.

Republican have hammered home the unknown costs of the proposal and seem to be getting traction during this tough economic time.  As reported in the Oil and Gas Journal, the minority party is still flexing its muscles:

"It is our intention to use the opportunity you are providing us this Friday to carefully examine the one element of the legislation that has so far escaped examination in 38 hearings stretching over 40 days, its cost," the two GOP committee members said.

Republicans have found a sympathetic group among Democrats from states that rely on coal and manufacturing to drive their economies.  As reported in Politico, while Rep. Dingell may have lost his leadership position he is still finding sympathetic fellow Democrats willing to support further concessions to protect industry in their states:

But dethroning Dingell didn’t change the membership of the committee, and there are plenty of Dingell Democrats left on the panel — Rust Belt, coal state and Southern Democrats who want to protect native industries as they negotiate the final terms of a sweeping climate change bill.  And that’s why Waxman has his hands full winning votes in the committee, and it’s one of the reasons he moved Monday to postpone a bill markup scheduled for this week.
 

Meanwhile the "fuse has been lit" by EPA on moving forward with regulation of greenhouse gases under the existing authority in the Clean Air Act.  Many commentators speculate that EPA and the Obama Administration are using this as a tactic to push the climate change legislation through Congress, even if they are correct that may be a tactic that back fires. 

If Congress does not act, I see no way EPA reverses course on its Endangerment Finding or California's Waiver request to set GHGs limits for vehicles.  Furthermore, EPA is reconsidering the Bush Administration decision to not require CO2 controls for coal plants. 

Even if EPA does not move forward with a full blow set of regulations to regulate GHGs, these actions will lay the ground work for Environmental groups to assert no new permits can be issued without CO2 controls. If there are concerns about the costs of climate legislation, everyone should be asking what the implications of these EPA actions will be on permitting and associated economic development. 

(Photo: Flickr Amy Manuel)

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Green marketing claims are running rampant, according to the April 2008 survey by Terrachoice a consulting firm that runs the Canadian government’s eco-labeling program.  Labels on products frequently claim “recycled content”, “biodegradable”, and “safe for the environment.”

The recent survey found that the number of big box store products making green claims grew 79 percent since its last report, in 2007.  In addition, the amount of advertising containing green claims has risen shapely.   Terrachoice reviewed 18,000 ads in recent issues of Time, Fortune, National Geographic, Sports Illustrated and Vanity Fair, TerraChoice found that more than 10 percent of all ads in 2008 made “green” claim, up from 3 percent in 2006. 

Businesses making these claims better pay even more attention to FTC requirements, known as the "Green Guides".  The FTC has recently began to take enforcement actions against businesses who can't substantiate their green claims. I was recently contacted by a business owner who faced signing a consent order with the FTC to resolve allegations of "greenwashing." 

The FTC had taken a long hiatus from enforcement of the Green Guides.  As discussed on the Consumer Advertising Law Blog, one of the FTC Commissioners only as recently as June 2008 indicated the FTC had not brought any cases under the Green Guides since 2000. 

Commissioner Rosch gave two reasons for the fact that the FTC has not brought any cases under the Green Guides since 2000. First, industry has been abiding by the Guides. Second, private enforcement under the Lanham Act and self-regulation have developed into effective alternative enforcement mechanisms over the past 30 years. However, the eight-year enforcement hiatus may be coming to a close. In his speech, Commissioner Rosch noted that FTC “staff is currently investigating a variety of environmental product claims.”

Well, based upon the recent activity it appears the hiatus is over and FTC is actively enforcing the Green Guides.  This enforcement is taking place even though the FTC has yet to update the Green Guides after an extensive public involvement process.  The FTC enforces Section 5 of the FTC Act, which generally prohibits "unfair or deceptive acts or practices," including advertising that is false or misleading. 

Businesses should be careful to read the Green Guides and seek advice before making any green claims on their products.  Otherwise, they may face signing a FTC consent order that carries with it severe restrictions on the ability to market green attributes of its products. A few things to keep in mind:

• FTC has enforcement authority to issue a cease and desist order for up to 20 years. 
• The prohibition against unsupported or deceptive claims can extend to officers, subsidiaries and other divisions of the company.
• Cease and Desist authority includes what is called "fencing in relief."  The relief is designed to prevent similar conduct.  As a result the prohibit against additional "deceptive" claims may cover all the company's products.  The relief may also include more draconian terms that require notification if senior management responsible for marketing departs for a new company.  In other words, the terms of the consent order can follow significant decisions makers to other jobs.

While penalties will typically not become an issues until a cease and desist order is violated, the order itself will still carry very onerous terms and conditions.  For these reasons, company's should really proactively review any green claims and ensure they meeting FTC requirements.

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I am a bit behind in writing a post about EPA's release of its endangerment finding.  Earth Day seems like the perfect day to catch up and take advantage of the last few days to look at the reaction and likely consequences of EPA's significant new action.

Background: In Massachusetts v. EPA decided in April of 2007, the Supreme Court held that greenhouse gases (GHGs) are pollutants that may be regulated under the Clean Air Act. But the Court did not go far enough to say EPA must regulate GHGs. At issue was Section 202 of the Clean Air Act which covers regulation of greenhouse gases from motor vehicles.

Under Section 202: The Administrator shall by regulation prescribe standards applicable to the emission of any air pollutant(s) from motor vehicles, “which in his judgment cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare.”

The Court said EPA must conclude GHGs from motor vehicles endanger public health (i.e. "endangerment finding") before any regulation of emissions (tail pipe or fuel standards) from motor vehicles can occur. The Court remanded the Section 202 determination to EPA to make a legally defensible finding as to whether motor vehicle GHG emissions endanger public health. 

Key Legal Issues Discussed in EPA's Proposed Action:  On April 17th, Administrator Jackson issued a proposed finding that vehicle emissions of GHGs do endanger public health.  There is now a 60 day public comment period on the proposed action.

A key legal issue analyzed in the proposed action is whether Section 202 requires "actual harm" from a pollutant before it can be regulated.  EPA's proposed rule discusses the legislative history behind the language in Section 202 and concludes no finding of actual harm is necessary:

As the Committee further explained, the phrase “may reasonably be anticipated” points the Administrator in the direction of assessing current and future risks rather than waiting for proof of actual harm.

Also, EPA's proposed action rejects the notion a demonstration is needed that controlling GHG emissions from U.S. autos would actually make a difference in addressing climate change.  The EPA cited to language in the Supreme Court's Massachusetts v. EPA :

Moreover, as the Supreme Court recognized, “[a]gencies, like legislatures, do not generally resolve massive problems in one fell regulatory swoop.”

Science and Findings in EPA's Proposed Action:  There is no new science behind the endangerment finding.  Administrator Jackson relies on reports and conclusions from the U.S. Climate Change Science Program, the National Research Council, and the Intergovernmental Panel on Climate Change.  She found these reports to provide more than sufficient support that GHG pose a "risk" to public health that should be addressed. 

Here is how EPA has described its action on its web page and in supporting documentation:

The Administrator signed a proposal with two distinct findings regarding greenhouse gases under section 202(a) of the Clean Air Act:

1) The Administrator is proposing to find that the current and projected concentrations of the mix of six key greenhouse gases—carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6)—in the atmosphere threaten the public health and welfare of current and future generations. This is referred to as the endangerment finding.

2) The Administrator is further proposing to find that the combined emissions of CO2, CH4, N2O, and HFCs from new motor vehicles and motor vehicle engines contribute to the atmospheric concentrations of these key greenhouse gases and hence to the threat of climate change. This is referred to as the cause or contribute finding.

This proposed action, as well as any final action in the future, would not itself impose any requirements on industry or other entities. An endangerment finding under one provision of the Clean Air Act would not by itself automatically trigger regulation under the entire Act

This last statement is very interesting. 

Does "Endangerment" = "Regulation":  Obviously the positive endangerment finding itself has major consequences.  There is no doubt it sets EPA on a path to regulate GHGs under the Clean Air Act unless Congress passes a cap and trade bill as substitute regulation.  While the path is set, the timing is in question.  Does this proposed action by itself mean all other sources that emit GHGs (beyond just motor vehicles) are subject to regulation under the Clean Air Act?

The status of GHGs under the Clean Air Act is uncertain as it stands.  EPA is currently taking comment on a separate action regarding regulation of GHGs under the Clean Air Act- Reconsideration of Former Administrator Johnson's memo declaring GHG unregulated without further action.

Deseret Power was an appeal of a coal permit in which Sierra Club argued the permit was invalid because it didn't include controls for GHGs.  The Environmental Board of Review said it was an open question as to whether GHG are considered "regulated pollutants" under the Clean Air Act. Sierra Club pointed to existing requirements to monitor CO2 emissions as evidence of regulation.  The EAB said EPA had discretion to decide whether monitoring was enough to amount to regulation.

In response to the EAB, Johnson, in one of his last acts before leaving office, tried to fill the void by issuing an interpretive memo determining CO2 was not a regulated pollutant due to the monitoring provisions.  Administrator Jackson is currently reviewing the Johnson memo following the Sierra Club petition.

THIS IS A HUGE ISSUE...If GHGs are regulated pollutants, then no additional legislation, rulemaking or action is necessary.  EPA could not issue permits to sources of GHGs without considering controls for those emissions.

Footnote 29 of the Endangerment Finding:  So does EPA's proposed endangerment finding amount to "regulation" of GHGs under the Clean Air Act?  Buried in footnote 29 on page 106 of the Proposed Rule is to me one of the most significant consequences flowing from a positive endangerment finding- does the finding amount to regulation.  Here is what footnote 29 says:

At this time, a final positive endangerment finding would not make the air pollutant found to cause or contribute to air pollution that endangers a regulated pollutant under the CAA’s Prevention of Significant Deterioration (PSD) program. See memorandum entitled “EPA’s Interpretation of Regulations that Determine Pollutants Covered By Federal Prevention of Significant Deterioration (PSD) Permit Program” (Dec. 18, 2008). EPA is reconsidering this memorandum and
will be seeking public comment on the issues raised in it. That proceeding, not this rulemaking, would be the appropriate venue for submitting comments on the issue of whether a final, positive endangerment finding under section 202(a) of the Act should trigger the PSD program, and the implications of the definition of air pollutant in that endangerment finding on the PSD program.

EPA's footnote is confusing.  The issue in the reconsideration on the Johnson memo really should be limited to whether monitoring is sufficient to constitute "regulation" under the Act.  An endangerment finding would be a new action by EPA that will take place after Deseret Power was issued, after the Johnson Memo was written and after EPA granted the reconsideration of the Sierra Club petition. 

Perhaps the final action on the review of the Johnson memo will make this debate moot.  It certainly will if that action is to say GHG's are a regulated pollutant based upon monitoring requirements alone.  However, anything other than that outcome will allow the endangerment finding to be new grounds to argue GHGs are regulated under the Act.  In a prior post I discussed what a horrible outcome that would be as a regulatory approach. 

Final Comment:  Once again, to those questioning the merits of a Cap and Trade market mechanism for controlling GHGs- consider the alternative.  Like it or not EPA is on a path to regulate GHGs.  Due to the Supreme Court's holding in Massachusetts v EPA, there is no getting off that path or turning around.

 (see the extended entry for discussion of the reaction to EPA's action)

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On April 15, 2009 the Public Utilities Commission of Ohio finally adopted the long awaited rules that will govern Ohio's energy efficiency requirements and its Alternative Energy Portfolio Standard (AEPS).  Ohio was one of the last states to have adopted a Renewable Portfolio Standard (RPS)- more broadly defined as a AEPS in Ohio.  However, as one of the largest energy intensive states in the Country the finalization of the rules will surely spur growth of "green energy" related business in Ohio.

As a former regulator, a frequent mantra in describing the decision making process was- "if both sides are unhappy then you know you did your job well."   Well the Commission appears to have followed that mantra in responding to the vast amount of comments that were filed on the rules.  It sided with the Utilities on many issues and it sided with consumer and green groups on many issues.  It rejected many suggestions and complaints by Utilities and it rejected many suggestions and complaints by consumer and green groups.

The rules cover three major aspects of S.B. 221 passed by the Ohio Legislature in the summer of 2008:

1. Energy Efficiency and Demand Reduction Programs
2. Alternative and Renewable Energy Portfolio Standards
3. Greenhouse Gas Reporting and Carbon Dioxide Control Planning

Here is a brief recap of the changes made in response to comments.

Energy Efficiency and Demand Reduction Programs- The Commission completely restructured the rules governing energy efficiency and peak demand reductions.  The Commission revisions where designed to "reflect a focus on the program planning and review process."

• Cost Effectiveness- added new definitions of "cost effective" and "total resource cost test" that are applied to energy efficiency programs.
• Procedures for Review of Compliance Plans-  New hearing requirements were added on the planned portfolio of programs offered by an electric utility to meet energy efficiency benchmarks.  The hearing requirement was added in response to criticism that the benchmark review process be opened up and follow traditional Commission rate case procedures.
• Independent Auditors- Commission requires use of independent program evaluators (hired by the Utility but work at the direction of Commission Staff) to review and verify claimed energy savings and peak-demand reductions
• Calculating the Baseline for  Measuring Efficiency Improvements- the baseline will be measured by a "rolling average" of the last three years of kilowatt hours purchased instead of a fixed average of 2006 through 2008.  The Commission basically rejected claims by Utilities that using a rolling average keeps raising the bar because it incorporates the energy efficiency improvements each year.  As a result, the Utilities argued the energy saving requirement is closer to 39% than the 22.2% required in S.B. 221
• Banking "Overcompliance"- Commission will allow Utilities to "bank" over compliance with the energy efficiency benchmark and apply the overcompliance to future years
• Adjusting for Economic Growth- Baseline can be adjusted to account for either growth or reductions in economic growth.  The idea is to remove the influence of a changing economy on achieving energy efficiency improvements
• Mandated Efficiency Improvements- Utilities cannot count energy savings that result from customer installed appliances or equipment that are mandated by law including the Energy Independence and Security Act of 2007

Alternative Energy Portfolio Standard- S.B. 221 splits the 25% of electricity energy by 2025 standard into two separate benchmarks- one for "alternative energy" sources and another for "renewable energy sources."  The rules put a lot more teeth into the renewable energy benchmark, including specific interim benchmarks. 

Overall, the Commission did not address significant concern with some of the loose aspects of the Alternative Energy benchmarks.  These include the definition of what constitutes "Clean Coal" as well as what can be counted toward meeting the Alternative Energy Benchmark.  However, as detailed below, the Commission did put teeth into the "cost cap" provisions associated with compliance with either benchmark.

• RFP- Rejected a suggestion that renewable and alternative energy be procured through a Commission sponsored RFP process to ensure transparency
• Biomass- with regard to wood resources, the Commission allows use of wood and paper manufacturing waste, urban wood and tree residues, forestry residues, forest management or other land clearing.  However, forest resources must be from "sustainable forest management operations."
• Clean Coal- the Commission rejected criticism that the current rule would provide credit to technology that is "designed" to reduce CO2 irregardless of whether the reductions are actually achieved.
• Co-firing- will qualify as a renewable energy resource as determined by the proportion of energy input from the renewable energy resource.
• "Delivered into this State"- Commission will still require a power flow study and/or deliverability study to show power in the PJM or MISO transmission systems are deliverable into the state.
• Distributed Generation- renewable energy credits (RECs) generated from distributed energy sources belong to the owner of the equipment
• "Double Counting"- cannot use one project to meet both the energy efficiency benchmarks and the AEPS
• "Unbundling"-  Cannot unbundle other positive environmental attributes associated with creation of a REC and sell those attributes separately.  The classic example is you cannot sell the climate change CO2 reductions as well as RECs from one project.  You will have to choose with credits are more valuable
• Energy Storage- by itself cannot be considered a renewable energy resource
• Cost Cap- rejected utilities argument that the advanced energy and renewable energy cost caps be aggregated as one 3% cap. Also, rejected claim that the 3% increase is measured by isolating cost of generating the renewable or alternative energy.  Rather, the cost cap is triggered only if overall cost of supplying all forms of electricity rises more than 3% in order to meet the alternative energy or renewable energy benchmarks.  This ruling makes it far more difficult for Utilities to trigger the cost cap provisions.
• "Catch-up Provision- Commission effectively drops the requirement that future year benchmark compliance requirements be increased by the amount of undercompliance of the previous year due to the 3% cost cap

Greenhouse Gas Reporting Requirements

The Commission rejected concerns raised by Utilities regarding the mandate in the rules to become participating members in the Climate Registry.  The Commission noted that  S.B. 221 requires reporting and tracking of CO2 emissions must be performed.

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The American Reinvestment and Recovery Act (ARRA) contains the highest federal funding yet for the 5 r's of diesel- retrofits, replacements, repowers, replace and refuel.  The competitive announcements for the ARRA Funding for National Diesel Emissions Reduction Program became available on March 20, 2009. Better get your act together if you still want an application in- the deadline is April 28th to submit a request for funding.  If you can't make the deadline there will be normal funding available ($60 million) in the fall. 

Who can file the application?

1. Regional, state, local, tribal or port agency with jurisdiction over transportation or air quality; and
2. Nonprofit organization or institution which:

a) Represents or provides pollution reduction or educational services to persons or organizations that operate diesel fleets; or

b)Has, as its principle purpose, the promotion of transportation or air quality

What will it pay for?

• 75% for engine repowers
• 25% for all replacements except
• 50% for school buses that meet 2010 standards
• 100% for retrofit technologies
• 100% for idle reduction technologies
• 100% for engine upgrades (kits only)
• 100% for incremental cost of cleaner fuels

Much more information is available on U.S. EPA's Region 5's web page.  Just page down to the section on ARRA. 

Helpful information and tips are available from the Diesel Technology Forum.  For example, here is some very helpful advice on addressing one of the more perplexing components of filing a DERA application- calculating jobs retained or created.

How to Calculate Job Creation - Follow the Flow. Finally, the issue which appears to be causing the most apprehension among applicants is the need to demonstrate how a project will preserve or create new jobs. The sheer range of retrofit options (remember the 5 Rs of retrofit: retrofit, rebuild, repower, replace and refuel?) as well as the varying locations and productivity of individual equipment manufacturing facilities make it very challenging to offer solid figures of new jobs added. But don’t despair. Everyone is in the same situation, so applicants are advised to focus on writing a credible, well-reasoned narrative which highlights the general labor/job impacts along every step of the project flow.

For example: project manager oversees grant award, progress, reporting; device manufacturers produce XXX new devices for the grant (incremental increases in manufacturing, packaging, processing, shipping jobs affected); equipment dealer schedules service to install devices (estimated XXX man-hours for mechanics, helpers and administrative); and so on, specific to your project. If you are not installing equipment yourself, you can ask the equipment manufacturer who has helped assess the fleet to provide an estimate of time necessary to conduct the type of installation you’re seeking. A formula which seeks to quantify jobs through use of a multiplier building on study by Keybridge Research is also available at www.meca.org.
 

UPDATE ON OHIO'S DIESEL EMISSION REDUCTION GRANT PROGRAM (DERG)

At $20 million over two years, Ohio had the largest dedicated diesel fund in the entire Midwest.  Ohio received awards for the DERG program.  Round 2 of funding was just completed and the State will be passing out nearly $11 million in funding.  Seemed like a program well worth continuing...

The Diesel Coalition sought to renew the DERG program for another two years at the same level of funding.  Ultimately. H.B. 2 included only $5 million in funding for DERG over the next two fiscal years.  This is a $15 million dollar reduction from the past two years.  While the Legislature included the full $20 million in funding, the Governor issued a line item veto of the funding (see below).

The Ohio Diesel Coalition still intends to request $20 million in funding for DERG in the regular budget bill.  The Coalition, of which I am a member, will be asking that the $15 million designated for the Public Transportation Green Fleets Program in H.B. 2 to be consolidated with DERG. 

Green Fleets are eligible for funding under DERG.  The Coalition believes it would be better to create a single competitive grant program and allow the best and most effective projects to get funding.  Hopefully we can restore funding for this very successful and worthwhile program.

Governor's Veto message in H.B. 2:

SECTION 512.43.

This provision establishes a diesel emission reduction grant program using federal Congestion Mitigation and Air Quality funds from the Federal Highway Administration.

This provision would have a negative impact on the Department of Transportation’s operations because it diverts a large portion of available flexible funding to specific purposes.

I have directed the Department to dedicate $5 million toward a diesel emissions reduction program for purposes consistent with the intent of the legislation. This funding will provide assistance to small businesses and disadvantaged business enterprises. Therefore, this veto is in the public interest.
 

(Photo: terinea/everystockphoto.com) 

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So you are about to deploy the first commercial version of your new technology.  Or you are about to select your site for a new renewable or advanced energy project. In ramping up your cleantech project, everything has looked great in small scale trial tests.  You have had great result and are excited to bring this to market as the "next big thing." 

Deployment of new technologies and choosing sites for your renewable energy project can always present major challenges.  What looks good during small scale tests or on paper may prove to be unworkable or too costly in the field. 

How can you better assess your situation and proceed to a smooth launch of your technology or successfully deploy your project?  Here are some suggestions I have developed either from my years as a regulator or in working with clients.  Hopefully, taking careful consideration of some these issues can better position your company and avoid some "unseen enemies." 

1.  Site Selection-  Study closely the practical aspects of various proposed locations for your new facility.  Often company's select a site based upon expected customer demands or other business considerations.  However, prior to moving forward with the significant investment in terms of lease or purchase agreements, permitting, and zoning/building approvals significant investigation should be performed to evaluate the viability of the proposed site.

• What the local zoning and building requirements?
• Transportation routes should be evaluated
• Any significant history with regards to citizen or environmental groups in the area?- Cleantech companies can naively think they are immune to NIMBY concerns only to find themselves immersed in costly and protracted litigation
• Will your project require significant amounts of water?  If so, is there a readily available source or any issues with tapping into that source?

2.  Environmental Permitting and Regulatory Requirements-  Will your source have air or water emissions?  Will you generate significant solid waste or hazardous waste?  You should have an assessment of how environmental permitting and regulatory requirements could impact either the location or configuration of the facility at the site.  You should also know whether environmental requirements are going to impact the ultimate engineering design of your facility.  I have seen companies forced to completely redesign their process because they did not fully incorporate environmental permitting issues into their designs.

• Will you have air emissions at levels that will require pollution controls?
• Are you co-located at a location with an existing air source where EPA requirements may force you to aggregate emissions with that existing source?
• Will you have a wastewater discharge? If so, can you hook into the wastewater treatment system or need a direct discharge.  If hooking into a pre-existing wastewater treatment system what are the pre-treatment requirements. 
  • What if the local wastewater treatment plant is under investigation or a federal consent decree?  Will that result in stricter standards that could drive up your pre-treatment requirements on-site?

3.  Lease Agreement and Construction Documents-  While you may believe you are headed to a wildly successful deployment or expansion, if anything has been shown in the last six months its that the market place is unpredictable.  You should make sure you understand and negotiate termination provisions in your lease agreements, construction documents or other legal documents governing your relationships with customers or business partners.  While you may be very disappointed you have to cancel the project, you may really be frustrated if you find yourself in a costly legal battle with potential customers, contractors and/or property owners.

4. Feasibility Studies-  Make sure when hiring a consultant to perform a feasibility study that  they have the expertise and knowledge regarding the state and local requirements associated with the project.  Many may be familiar with federal requirements, but you need to take into account local site selection issues as well.

• Local ordinances- many renewable energy projects will be highly impacted by local ordinances that contain siting requirements.  Make sure your consultant takes into account the hurdles involved in deploying your project.
• Include assessment of possible environmental market trading mechanisms-  Will you generate CO2 offsets?  Are you deploying renewable energy that could qualify for renewable energy credits?  Is your consultant or project team considering the current market fluctuations in these markets when evaluating whether carbon credits or RECs add to the viability of your project?

5.  Incentives-  It seems every lawyer and consultant is promoting their knowledge regarding availability of federal stimulus funding.  However, don't forget there are many state and even local programs that can provide grants and tax incentives for green businesses and energy.  Make sure you have someone on your project team that has knowledge of these incentives and understands the process for obtaining funds. 

(Photo:jurvetson/everystockphoto.com)

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On April 1st, the U.S. Supreme Court issued its decision in Entergy v. Riverkeepers which examined whether a cost benefit analysis is appropriate under certain provisions of the Clean Water Act, specifically Section 316(b) of the Act. As detailed below, there has been wide ranging debate over the significance of the decision.

At issue are large power plant cooling water intakes.  In the course of operation of these intakes large amounts of fish are pinned against the screens (called "impingement") or sucked into the plant (called "entrainment").  Due to the harmful effect to aquatic ecosystems, the intakes are subject to EPA regulations.  The CWA requires the location, design, construction, and capacity of cooling water intake structures reflect the best technology available for minimizing adverse environmental impact. 

EPA adopted regulations applicable to existing plants.  The regulations included the option for plants to obtain a variance from the requirement to install specified technology.  To obtain a variance the plant would need to demonstrate:

1. costs of compliance are “significantly greater than” the costs considered by the agency in setting the standards, 40 CFR §125.94(a)(5)(i), or
2. costs of compliance “would be significantly greater than the benefits of complying with the applicable performance standards,” §125.94(a)(5)(ii).

Where a variance is warranted, the permit-issuing authority must impose remedial measures that yield results “as close as practicable to the applicable performance standards.” 

Environmental groups challenged the ability to obtain a variance after performing a cost-benefit analysis.  The groups challenging EPA's rule argued that Section 316(b) is silent on the use of cost as a factor in setting forth the "best technology available" standard.  Because the statute is silent, the groups challenging the regulation argued the variance provision was illegal. 

Justice Scalia wrote the opinion for the Court which rejected the argument that 316(b)'s  silence means costs cannot be considered.  However, Justice Scalia did point to other language in the statute that the Court believed indicates costs could be considered.

the statute's use of the less ambitious goal of “minimizing adverse environmental impact” suggests, we think, that the agency retains some discretion to determine the extent of reduction that is warranted under the circumstances. That determination could plausibly involve a consideration of the benefits derived from reductions and the costs of achieving them.

There has been significant debate over the importance of the ruling.  (See New York Time- Groups Debate Supreme Court's Power Plant Ruling.  In the NYT's article, some argue the door is now open to increased use of cost-benefit analysis in environmental regulatory decision-making:

"While the Entergy decision rests on close analysis of the statutory language of a particular Clean Water Act provision, it is likely to be highly influential in granting EPA discretion to use cost-benefit analysis more generally when statutory language does not preclude it," said Tim Bishop, a partner in the Supreme Court and appellate practice at Mayer Brown.

The Wall Street Journal comments that the decision will have significant impact on future regulations:

The ruling addresses a huge question in the energy and environment battle raging right now—namely, how to strike the balance between environmental protections and safeguarding the economy. It also brings the field of cost-benefit analysis squarely back into the environmental debate.

The statements appearing in the Wall Street Journal dramatically overstate the impact of the decision.  The decision was based upon a very close analysis of the language in one specific provision of the Clean Water Act.  The Court avoided wide pronouncements regarding the use of cost benefit analysis in environmental decision making.

Even more importantly, silence alone was not enough.  Justice Scalia found other language in the statute- "minimizing"- as suggesting Congress intended costs to be considered. There are plenty of instances where environmental statutes strictly forbid considerations of costs.  In fact, Justice Scalia in his opinion cites to several other Clean Water Act sections that he deems to prohibit cost considerations. 

For cost-benefit analysis to really become a major factor in environmental policy, Congress will have to insert affirmative language into environmental statutes to allow for costs to be considered.  Something that appears unlikely given the current make up of Congress.

 (Photo: flickr mcgervey)

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The Ohio House has introduced H.B. 7 which would require new construction be certified as a green building under the U.S. Green Building Council's LEED program.  Here is the text of the bill: 

Sec. 153.013. Whenever any building or structure is to be
erected or constructed using any state capital moneys, including moneys from the education facilities trust fund, the building or structure shall be certified as meeting at least the silver standard of the leadership in energy and environmental design green building rating system developed by the United States green building council.

What are the pro's and con's of advancing legislation requiring LEED certification? 

Pro's

• Good for the environment-the obvious...It encourages green building which reduces energy demand and is good for the environment. 
• Prepares the State for a carbon constrained and regulated world- Ohio ranks either 3rd or 4th in emission of greenhouse gases.  Commercial buildings, through energy use, constitute a significant portion of GHG emissions.  Ohio definitely needs to show more leadership in preparing for mandatory GHG regulation.
• LEED is a well recognized third party verification system for green building- More than 100 State (including Washington and Connecticut) and local governments have incorporated some form of LEED mandates into legislation or ordinances.

Con's

• It picks a winner- Why pick LEED when there are other well recognized third-party greenbuilding verification systems, such as Green Globes?
• The LEED system is revised frequently, the law is not- In 2009 the LEED system went under a major overhaul.  Ohio legislative principles do not allow incorporation of future changes to referenced standards.  Therefore, to keep up with the latest revisions the Legislature would be forced to revise the legislation.
• LEED system was and is not perfect-  The old version LEED 2.2 for New Construction awarded the same amount of points for putting in bike racks as it did if you redeveloped a contaminated brownfield.  Also, Ohio may want to encourage certain practices more than others set forth in the LEED rating system.

• Is Ohio delegating legislative authority?  The LEED rating system is developed by the membership of the U.S. Green Building Coalition, not a State Agency.  Therefore, Ohio would be passing along the authority to establish standards for new construction to a private entity that is not accountable to the public.  When similar Legislation was introduced in California, the Sacramento Bee called it a "two-pronged assault on democratic process that not only bypasses the usual procedure for making new law, but also transfers the regulations authorized by the new law to a private organization that’s completely unaccountable to the public.” (See, Is LEED Legislation-whether Public or Private-Undemocratic)

There is growing controversy regarding legislative mandates for LEED.  A recent study even suggested some LEED buildings are not performing at the level of energy efficiency promised. (See, Northeast Energy Sustainable Agency- "Legislating Greenness")

Henry Gifford has provided statistical proof, from US Green Building Council’s (USGBC) own data, showing that at least to date, Leadership in Energy and Environmental Design (LEED) buildings have on average proven to actually use more energy in their operation than comparable buildings.

I am currently studying for the LEED AP exam, so I have a strong investment and belief in the USGBC rating system.  However, I am not sure an outright mandate of a specific rating system is the way to go. 

Why not just specify in legislation that all government buildings must meet a level of greenbuilding certification specified by the Department of Administrative Services (or some other state Agency)? This would allow a more fluid process where DAS could adjust requirements to meet changes in the third party verification process.

(Photo: Payton Chung/everystockphoto.com)

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House Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) and Chairman of the Energy and Environment Subcommittee Edward J. Markey (D-Mass.) introduced the “The American Clean Energy and Security Act” as the opening salvo in a contentious and complex debate over a greenhouse cap and trade program.  The bill links two major and independently controversial proposals:  1) a nationwide cap on greenhouse gases (GHGs); and 2) a national renewable standard and energy efficiency. 

The bill would:

• Cut national greenhouse gas emissions 20 percent from 2005 levels by 2020-this is slightly more aggressive than similar measures pushed by the Obama Administration.  Overall the goal is to cut GHG emissions by 85% by 2050 when compared to 2005 levels
• Reduce electricity demand by 15% by 2020
• Nationwide renewable energy standard which requires 25 percent of the Country's energy generation be met through wind, solar and other renewables.

The bill forms a skeletal framework, but leaves major controversial components open to debate.  (See summary of the American Clean Energy and Security Act) For example, the bill does not address whether pollution allowances under the cap and trade program would be 100% auctioned or 100% allocated to industry or somewhere in between.  The fact the bill does not even make a proposal on this component suggest the drafters understand a deal will need to be struck to give a chance for the bill to pass. 

US Climate Action Partnership -- a coalition of businesses and environmental groups -- called the bill a good starting point.  The bill makes several key concessions to Industry:  a)  allowing domestic and international offsets; b)  provides C02 and other GHGs cannot be regulated as criteria pollutants or hazardous air pollutants under the Clean Air Act; c) creates a strategic reserve of allowance in the event allowance prices are too high; and d) allows unlimited banking of allowances.

However, the bill also includes proposals that will raise concerns with Industry beyond the major concern-should the U.S. have a cap and trade system to control GHGs?  While the bill essentially exempts GHGs from traditional regulation under the Clean Air Act (a major advantage of legislation), it directs EPA to set up a new regulatory program to curb GHG emission by sources that are not covered by the Cap.  The bill also does not create any kind of so called "safety valve" which is a limit on the price of allowances.  While the strategic reserve concept allows some cushion, it only provides for release of more allowances into the pool it does not set a ceiling on the price of an allowance.

As reported in the Boston Globe, the House Committee's goal is complete debate on the bill by Memorial Day.  Here is the tentative schedule:

• Week of April 20:  Energy and Environment Subcommittee Hearings
• Week of April 27:  Energy and Environment Subcommittee Markup Period Begins
• Week of May 11: Full Energy and Commerce Committee Markup Period Begins

This appears to be a highly ambitious schedule given the level of controversy and major components of the bill open to debate.  Passage will be still very questionable.  You will have virtually no support among Republicans. You will have Democrats in coal states worried about the cost impacts of cap and trade on utilities.  You will have Democrats and Republicans in Southern states very concerned about the national renewable energy standard. 

For the bill to pass, major components will likely have to be restructured.  I am certain there will be plenty to write about regarding the bill in the coming weeks and months. 

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