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

As reported in BNA and referenced in Foley & Hoag's blog, EPA is rumored to be moving forward with application of New Source Review requirements to large sources of greenhouse gas emissions.  BNA reported that EPA would likely set a trigger level of 25,000 tons of carbon dioxide or carbon dioxide equivalent emissions (other greenhouse gases converted into CO2 tons).  All sources emitting above this threshold would have to include Best Available Control Technology (BACT) to reduce greenhouse gas emissions.

Congress seems to face stronger head winds on passage of a cap & trade climate legislation.  Organizations like the National Association of Manufacturers (NAM) have started a national advertising campaign targeting vulnerable Senators- such as Sherrod Brown in coal dependent Ohio.  NAM is using their recent study regarding the impact on energy prices of the American Clean Energy and Security Act of 2009 (ACES) legislation to frame the debate as an energy tax increase. 

Missing in the strong opposition to cap & trade is the alternative- regulation of greenhouse gases under the existing authority of the Clean Air Act.  U.S. EPA has been in a holding pattern seemingly holding their collective breath that legislation will pass thereby avoiding a regulatory nightmare. However, with opposition growing perhaps EPA is starting see that it needs to raise the prospects of alternative regulatory schemes.  The timing of the proposal to included greenhouse gases under New Source Review would appear to support that view.

While the article states that EPA would apply NSR only to the largest sources of greenhouse gases (25,000 tons of CO2), EPA has questionable legal authority to limit application in this fashion.  The current statutory language in the Clean Air Act applies NSR to source emitting more than 250 tons of any pollutant.  EPA has said before it has no intention of setting the threshold that low.  However, that is what the Clean Air Act states is the applicable threshold.  Without legislation it certainly seems very questionable as whether EPA has the authority to alter statutory text through regulation.   

There appears no doubt that if cap & trade dies this fall that EPA will move forward with a positive endangerment finding and start to issue climate change regulations under its existing authority.  Yet the debate in Congress right now seems to be cap & trade versus no regulation.  EPA, businesses and environmental groups supporting ACES need to do a better job of framing the debate as- cap & trade versus command and control regulation under the Clean Air Act.   If more organizations engaged in the debate in a realistic manner, including NAM, the merits of cap & trade seem to be much greater.

As an indication we are still in the denial phase by some, the U.S. Chamber of Commerce wants to put climate change on trial.  As reported on Yale 360:

Facing the prospect that the federal government may soon begin regulating greenhouse gas emissions, the U.S. Chamber of Commerce is proposing a public hearing in which the chamber and allied scientists question whether human-caused global warming is real. William Kovacs, the chamber’s senior vice-president for environment, technology, and regulatory affairs, is asking the U.S. Environmental Protection Agency (EPA) to hold the rare public hearing, complete with witnesses, cross-examinations, and a judge who would rule whether man is indeed warming the planet.

This ignores the fact that we already had that trial in front of the U.S. Supreme Court in landmark case of Massachusetts v. EPA.  The Court found climate change to be real and recognized EPA's existing authority to regulated greenhouse gases.  This from the syllabus of the decision:

Based on respected scientific opinion that a well-documented rise in global temperatures and attendant climatological and environmental changes have resulted from a significant increase in the atmospheric concentration of “greenhouse gases,”

I wonder when the debate over cap & trade will start to honestly include a discussion of this legal reality?

(Photo: everystockphoto: cjohnson7)

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The Ohio General Assembly included in the state budget a series of deadlines for issuing decisions in environmental appeals. (See prior post) The deadlines apply to the Environmental Review Appeals Commission (ERAC) which hears administrative appeals for hundreds of Ohio EPA and other state Agency actions.  Here are the deadlines imposed on ERAC:

The commission (ERAC) shall issue a written order affirming, vacating, or modifying an action pursuant to the following schedule:

(1) For an appeal that was filed with the commission before April 15, 2008, the commission shall issue a written order not later than December 15, 2009.

(2) For all other appeals that have been filed with the commission as of October 15, 2009, the commission shall issue a written order not later than July 15, 2010.

(3) For an appeal that is filed with the commission after October 15, 2009, the commission shall issue a written order not later than twelve months after the filing of the appeal with the commission.

ERAC has responded in a forceful way to the imposed deadlines.  It has been issuing orders for numerous pending appeals that restructure the normal hearing process.  Typical hearings included discovery, motions and multi-day hearings followed by briefs.  In response to the imposed deadlines ERAC has cut out all discovery, limited hearings to one hour and will accept only five page briefs.  (Here is an example ERAC order on one of the many appeals facing the deadline)

For many complicated environmental cases heard by ERAC it is impossible to present the issues in a coherent and supported manner under this structure.  Based upon the limited amount of information provided to ERAC under this structure suggests they will mostly play it safe in rendering decisions by perhaps deferring to the Agency.

Perhaps this is an example of unintended consequences, but it seems almost certain that this will not be the end of the story.  Additional legislative action to tweak or change the budget language almost seems a certainty.

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Ohio faces a two headed hydra when it comes to the impact of the proposed cap-and-trade bill in Congress- the American Clean Energy and Security Act of 2009 (ACES):

1. Ohio generates almost 90% of its energy from coal;
2. Manufacturing represents one the largest employment sectors in Ohio (ranking 3rd nationally with 1.1 million workers as of 2006)

These two factors combine to raise the stakes significantly if a price is placed on carbon as a result of the cap-and-trade ACES proposal.  Coal-fired power plants are the largest source of greenhouse gases (GHGs).  Any regulatory approach that puts a price on GHGs will result in higher energy prices. 

Most manufacturers are not even covered under ACES because only the largest industrial sources are capped (25,000 metric tons or more).  However, the secondary effect of ACES- rising energy prices-could mean significant job losses in the manufacturing sector which is heavy user of power 

Potential Job Loses from Cap-and-Trade

A report released last week by the National Association of Manufacturers (NAM) projected that Ohio could lose from 80,000 to 108,000 jobs by 2030 if ACES passes. The job losses are directly attributable to rising energy prices. The NAM cap-and-trade report projects the following increases in commodities or electricity:

• 26% increase in gasoline prices
• 60% increase in electricity prices
• 79% increase in natural gas prices

The 60% increase is actually conservative when compared to other studies.  Some have said total increases could be as high as 112% by 2030.  Such large price increases raise operating costs for many small and medium manufacturers.  Those cost increases will make many business unprofitable forcing them to close their doors, so the argument goes.

Is this really a complete analysis? Also, is opposition to ACES really the correct strategy?

A Call to Action- Diversity in Generation Key for Coal Dependent States

Based on my last two posts you may be expecting me argue that growth in green jobs attributable renewable energy development will significantly offset the manufacturing job loses.  For example, in 2008 there was a 70% increase in wind turbine related jobs nationally. 

While green jobs are important, a more fundamental issue presents itself- When it comes to preserving manufacturing jobs, reliance on coal power is unsustainable. 

The cost of energy produced from coal is going to dramatically increase regardless of whether climate change legislation passes.  A complex web of regulatory forces are at work driving coal energy prices higher over the next decade and into the future.  A honest assessment of these factors should serve as call to action- diversification.

An honest assessment of the forces at play demonstrates that coal reliant states are fighting a losing battle against energy price increases.  States must diversify their generation portfolios in order to become less sensitive to these forthcoming price shocks.  This means development of biomass, nuclear, wind, solar and other forms of electric generation.   

Analysis of Five Factors Driving Future Coal Power Energy Prices Higher

1. New Source Review Enforcement Cases
2. The fix for the Clean Air Interstate Rule or Multi-Pollutant Legislation 
3. Mercury controls
4. Ever tightening ozone and fine particle federal air standards (NAAQS)
5. Massachusetts v. U.S. = regulation of greenhouse gases in some fashion

New Source Review (NSR) Enforcement Cases

Manufacturers and other businesses in the Ohio and throughout the Midwest have yet to see the full impact of the NSR enforcement cases on the price of energy.  The settlement with American Electric Power impacts sixteen (16) coal plants and is estimated to cost $4.6 billion.  Ohio Edison, subsidiary of FirstEnergy Corp., settled its NSR case in 2005.   The settlement is projected to cost $1.1 billion to retrofit the Sammis Station.  The litigation has yet to fully conclude in the Duke Energy case and while the verdict was mixed, the case will still result in significant compliance costs. 

Also, a New Source Review regulatory fix seems unrealistic in the near term.  Therefore, future projects that could improve plant efficiency may be avoided out of fear of triggering NSR.

Bottom line:  Billions in new compliance costs for coal fired power plants over the next several years and an uncertain regulatory structure.

CAIR or Multi-Pollutant Legislation

The Clean Air Interstate Rule (CAIR) was a cap-and-trade regulation directed at coal-fired power plant emission of SO2 and NOx.  On July 11, 2008, a federal court found CAIR to be inconsistent with the Clean Air Act.  While the rule remains in place while U.S. EPA develops a fix, U.S. EPA has put a CAIR-fix on the fast track.   It is uncertain what the "new-CAIR" program will look like, but there is little doubt it will result in a more expensive regulation. 

As an alternative to CAIR,  members of Congress have proposed multi-pollutant cap-and-trade legislation for coal fired power plants.  Regardless of whether CAIR remains as regulatory based or converts to legislation the consensus among Democrats was the Bush Administration rule did not require steep enough cuts from coal-fired power plants. 

Bottom line:  Either the CAIR fix or multi-pollutant legislation will raise compliance costs for coal-fired utilities

Mercury Controls

Based upon cost concerns, the Bush Administration rejected facility specific regulation of mercury emissions from coal-fired power plants.  Instead, the Administration proposed a new cap-and-trade program called the Clean Air Mercury Rule (CAMR).  A federal court ruled that mercury as a pollutant could not be regulated through a cap-and-trade mechanism.  On February 6, 2009, the Department of Justice (on behalf of the Obama Administration) dismissed its appeal to the U.S. Supreme Court.  U.S. EPA is currently developing regulations under Section 112 of the Clean Air Act that will require every coal-fired power plant to control mercury emissions.  

Bottom line:  All facilities may be required to reduce mercury emissions through carbon absorption or implementation of other technologies.  Under CAMR, utilities were hoping to avoid controls on some of the older less efficient plants.  The rejection of CAMR will drive compliance costs higher.

Ozone and Fine Particle Air Quality Standards

Coal-fired power plant contribute roughly one-third (1/3) of ozone causing pollutants and particulate matter pollution.  As U.S. EPA tightens the ozone and fine particle National Ambient Air Quality Standards (NAAQS), coal-fired power plants will remain a major target of tighter regulation. 

Bottom line:  States pass new regulations to meet tighter federal air quality standards.  There is lag time between development of new federal standards and implementation of these new state regulations.  States will be forced to contemplate even stricter regulation of coal-fired power plants as a result of tighter federal standards.

Massachusetts v. EPA-  Greenhouse Regulation is Inevitable

In 2007, the U.S. Supreme Court declared CO2 and other greenhouse gases a "pollutant" under the Clean Air Act.  This landmark decision has set in motion a series of proposed actions by U.S. EPA to regulate greenhouse gases under the existing framework of the Clean Air Act. Regulation under the Act will be much more costly than the proposed cap-and-trade legislation. 

Bottom line:  The debate cannot be framed as pass cap-and-trade or have no climate change regulations.  Regulation is inevitable and most agree cap-and-trade is much more cost effective than regulation under the Clean Air Act.

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The Sustainable Cleveland 2019 summit was unlike any other conference or summit I had attended.  I have been to plenty where the goal was simply to raise awareness-  Typically a parade of talking heads followed up by urgent pleas to do something in the future. 

The Cleveland Summit was much different.  It took some 700 attendees who represented a cross-section of the community and put them to work on development of an strategic plan to build green jobs in Northeast Ohio. 

The process used was called "Appreciative Inquiry" (AI) which was developed by Professor Cooperrider at Case Western Reserve University.  AI has been used by businesses and even the United Nations.  AI's basic concept is that small groups put limits on development of a strategic plans. For that reason it is much better to tap into the knowledge of a large group.   

I have to say I was skeptical of the process going in.  But I was continually amazed at the number of talented people in my working groups that represented a cross-section of the community.  Here are some examples of people who sat at my tables:

• CEOs
• Non-profit representatives
• Small business owners
• Sustainability experts
• Advocates
• Students
• City and County Government Officials
• Attendees from other cities and countries

It was a great mix and cross-section of the community.  I would be lying if I didn't find some of the ideas and opinions offered to be "wild" or out of touch with reality.   There were also times when the Summit got to be a bit too much cheer-leading and not enough specific action.  However, there was no denying the energy and purpose of the group. 

There was an excellent advance briefing paper that was given to participants.  The Sustainable Cleveland briefing paper includes good information as to groups, initiatives and progress to date in Northeat Ohio on sustainability.  There were also notable speakers at the Summit.  Here are a couple thoughts or observations that I found interesting that were offered by some of the speakers:

• Mayor Jackson's opening remarks:  He said Cleveland had made the mistake in the past of waiting to change course until the economy had improved.  He said "Cleveland won't make that mistake again" and that Cleveland will "emerge first in developing a green economy."  My comment:  I like the sentiment of not waiting, but Cleveland is already behind many other cities in moving this direction.  We have to be realistic in our assessment of where we are now to get some place in the future...
• Van Jones of the Obama Administration:  He made the observation that everyone points to China as the example of a dirty or old style industrial economy.  He said China has seen the direction of the future economy and is spending $12 million dollars an hour on development of clean energy.  My comment:  I thought this really was a good observation that we are in a global competition of developing clean energy.
• Dr. Peter Senge, MIT:  He made some interesting observations regarding sustainability principles.  For example, to produce a computer chip you must use 630 times the weight of the chip in materials to construct it.  That is an amazing amount of waste those goes into developing a single small product.  The observation was made to show the opportunity to reduce waste in the process thereby saving money

Overall, I thought the Summit was a testament to the a growing positive attitude in Cleveland about change. Attendees were willing to devote three days in dark hall of the Convention Center to discuss these topics and develop a plan. 

A Dose of Reality

I will conclude by making an observation regarding building success out of the Summit.  I was lucky to participate directly in the Great Lakes Regional Collaboration (GLRC).  The GLRC was a on-going process to develop a plan for protecting and cleaning up the Great Lakes. It was initiated by President Bush by Executive Order.  The idea was to follow the Florida Everglades model and secure significant funding for restoration of the Great Lakes.

The GLRC was on a scale five times the size of the Cleveland Sustainability Summit.  It involved multiple federal agencies, Indian tribes, state representatives, non-profit groups and environmental groups.

Similar to the Cleveland Sustainability Summit there was tremendous energy and optimism from the participants.  However, that optimism also led to the inclusion of some very unrealistic goals and actions in the GLRC plan for the Great Lakes.  I remember continually raising the concern that the plan had to be realistic and build toward the future.

Some of the most unrealistic proposals were included in the final plan.  What happened...after a full year in development, the plan was virtually shelved due to budget concerns at the federal level.  Participants were disheartened and charges were thrown around that the process was purely a political tool. 

I hope the concept of a lasting 10 year strategic plan for attracting green jobs to Cleveland does not follow a similar path.  Significant progress is possible, but it must include a dose of reality.

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Cleveland has is trying to increase momentum toward become a hub of green industry.  As a recent Clevelander I appreciate the efforts to promote sustainability, renewable power, and other green industry as a means of attracting jobs and improving the economy.  (photo:flickr:heidigoseek)

I have had the luxury of working with many of the cities around the State on environmental issues.  I honestly believe Cleveland has more resources and a more developed culture on sustainability then the other major Ohio metropolitan areas.   If you think differently check out the compiled list on Positively Cleveland of 75 Green Thing in Cleveland Plus.

But make no mistake about it, Cleveland is facing tough competition.  Frankly, Michigan and Pennsylvania have been more aggressive in promoting policies that would attract green industry to their states which puts Cleveland at a disadvantage. Those windmill blades you see traveling up I-71, those were not built in Ohio and are more than likely not going to be put up at a site in Ohio.   So, if we want to be serious about a green industry in Cleveland we will have to be prepared to beat the competition.

Mayor Jackson is trying to take the first step toward putting together a strategic plan for attracting green industry.  On August 12-14 he is holding a summit called Sustainable Cleveland 2019.  Here is the description of the summit off of the City's webpage:

From August 12-14, Mayor Frank G. Jackson will host a three-day summit, bringing together a diverse group of people vested in and dedicated to Cleveland to use their vast knowledge and imagination to create an action plan for building a green economy for Cleveland’s future. This summit will be facilitated by Dr. David Cooperrider of the Fowler Center for Sustainable Value at Case Western Reserve University. The goal is to create an action plan for economic sustainability that will support business growth; protect the environment; and, create opportunities for individuals to prosper.

I will be participating and no doubt will offer my opinions on the success of the summit in future blog posts.  But for right now, I am just pleased to see a focus on developing a strategy.  Now lets see if a viable strategy emerges. In a very general way, such a strategy should include:

• Specific action items that focus on building a culture and structure needed to compete for green jobs
• Courage and vision to make difficult choices.
• An on-going commitment by more than just a few to implement the strategy
• Participation by the business community
• Linkage to Cleveland's other major growth industry- Health Care

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Back in 2006, while I was still at Ohio EPA, a major piece of state legislation worked its way through the General Assembly.  Senate Bill 265 was developed by business groups in Ohio to address concerns with the structure and implementation of Ohio air pollution permitting programs.  The main target to be fixed was the requirement for all non-federally regulated air sources to install Best Available technology (BAT).

Business groups believed that the BAT requirement put Ohio at a disadvantage to neighboring states by requiring a higher (and more costly) level of controls.  Even more importantly, Ohio businesses felt that implementation of BAT at Ohio EPA lacked the certainty that businesses look for in regulatory programs.

Issues with BAT

The lack of certainty stemmed from the fact that BAT was determined on a case-by-case basis with each individual permit that was submitted to the Agency.  Concerns were expressed that permit reviewers reached different conclusions as to what constituted BAT, sometimes for similar sources. 

During the debate over BAT I was at the center of the storm working as Director of Ohio EPA.  I had to testify numerous times before the Legislature.  While I did not agree with every argument against BAT, I did agree that Ohio EPA was placing too much time and energy into regulating small sources of air pollution.

• FACT:  Ohio has some 70,000 regulated air sources in the State whereas Michigan has less than 10,000

The huge difference in regulated sources is not attributable to there being less industry in Michigan, rather it was because Ohio regulated much smaller sources.  For these reasons, Ohio EPA took a neutral position on the legislation.

Senate Bill 265 passed the Legislature and included two major components as an overhaul of the BAT requirement:

1. It exempted all sources less than 10 tons per year from having to install BAT. 
2. For sources larger than 10 tpy, Ohio EPA could only require BAT by adopting rules specifying what exactly BAT would be for particular sources.  The legislation gave Ohio EPA a three year window to adopt rules.  The window is up this month (August 3, 2009)

Region 5 U.S. EPA Questions Ohio's Ability to Modify BAT

In the ensuing three years since passage of S.B. 265 the course of change has been anything but certain.  U.S. EPA has issued two letters to Ohio EPA.  A June 2008 letter rejected Ohio EPA's rule which would exempt sources smaller than 10 TPY because U.S. EPA said Ohio EPA failed to prove Ohio's air pollution control strategy would not be weakened.  On May 22, 2009, U.S. EPA sent a second letter expressing concern over the impending deadline of August 3, 2009 when Ohio would no longer be able to require BAT without source specific rules.

In discussing the letters with staff, Ohio EPA is confident it can work out with U.S. EPA the exemption of sources smaller than 10 TPY.  However, it is much more difficult to envision a resolution of the issue pertaining to sources larger than 10 TPY. 

As an indication of the messy situation that may emerge, U.S. EPA Region 5 could start issuing notices of violation (NOVs) to all sources that receive an air permit without BAT after August 3, 2009.  In an attempt to avoid such a situation, Ohio EPA has discussed passing a rule that would require BAT on all sources larger than 10 tpy.  The rule would specify BAT are those general characteristics set forth in S.B. 265. 

1. Work practices;
2. Source design characteristics or design efficiency of applicable air contaminant control devices;
3. Raw material specifications or throughput limitations averaged over a twelve-month rolling period;
4. Monthly allowable emissions averaged over a twelve-month rolling period.

Sierra Club Sues Ohio for Failing to Enforce the Clean Air Act

It was not just Region 5 of U.S. EPA that was attacking changes to BAT. The Sierra Club filed suit against Ohio EPA over its rule exempting sources smaller than 10 tpy.  The Sierra Club challenged Ohio EPA under the Clean Air Act''s citizen suit provisions. 

In a very surprising decision, Magistrate Judge Abel found the citizen's suit provisions of the Clean Air Act did not allow suits against a State for failing to to enforce the Clean Air Act.  This decision will be appealed given its broader implications on the scope of the citizen suit provisions.  Given the prior precedents it is unclear whether Judge Abel's decision will be upheld.

Lessons Learned

We will have to wait and see how these major issues unfold over the next few months.  However, there is no doubt that the situation that has emerged after three years is not at all what was envisions during passage of S.B. 265.

The complexities involved in trying to change a State's air pollution control strategy on any significant scale are immense.  Ohio's BAT experience is a prime example.  With 70,000 regulated sources the ability to determine the impact of the BAT changes is almost impossible.  Making such a demonstration is the first step toward gaining U.S. EPA's approval.

Unfortunately, after three years businesses may be left with less certainty than they had before the overhaul was attempted. 

• Back to case-by-case BAT
• Region 5 scrutiny of Ohio EPA air permits
• Continuing litigation of changes to Ohio's State Implementation Plan (SIP)

This is hardly the specificity that the business community envisioned during passage of S.B. 265.  Business groups envisions rules that would specifically state that type of controls or work practices that must be utilized for different types of sources.  The stop gap rule proposed by Ohio EPA looks more like case specific BAT.

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