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

As reported in the New York Times, Senator Murkowski announced that  the Senate will vote June 10th on her resolution to block EPA from implementing climate change regulation under the Clean Air Act.  The proposal was announced this past December and the vote follows finalization of EPA regulations that will initiate regulation of greenhouse gases (GHGs) January 2011.

The legislative activity stems from the Supreme Court ruling in Massachusetts v. EPA which held that EPA had the authority to set standards for motor vehicles under Section 202 of the Clean Air Act to control GHGs.  Prior to establishing standards, Section 202 requires the EPA to make a finding that GHGs "cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare."  (so called "endangerment finding") 

On January 14, 2010, EPA finalized its Endangerment Finding.  The Murkowski resolution would undue the EPA finding, thereby effectively blocking implementation of GHG standards for motor vehicles. Here is the language from the resolution:

Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That Congress disapproves the rule submitted by the Environmental Protection Agency relating to the endangerment finding and the cause or contribute findings for greenhouse gases under section 202(a) of the Clean Air Act (published at 74 Fed. Reg. 66496 (December 15, 4 2009)), and such rule shall have no force or effect.

The resolution is based on the Congressional Review Act which gives Congress authority to disapprove Agency rules.   If utilized the CRA says the rule "may not be reissued in substantially the same form."  This from the New York Times:

Murkowski's resolution would need 51 votes to clear the chamber. She already has 41 co-sponsors, including three Democrats: Sens. Mary Landrieu of Louisiana, Blanche Lincoln of Arkansas and Ben Nelson of Nebraska.

Even if the resolution passes the Senate, it faces an uphill climb in the House, which does not have the same expedited procedures, and it faces a likely veto from President Obama. EPA Administrator Lisa Jackson has warned that nullifying the endangerment finding would upend the administration's joint EPA and Transportation Department fuel economy standards and greenhouse gas emission limits for cars and light-duty trucks.

(You can watch Senator's Murkowski's Floor Statement by clicking here)

While there may be a decent chance the resolution passes the Senate, it almost certainly won't make it past the President's desk. 

What is the true "scope" of the resolution?

While the resolution will never be signed by the President, does the resolution really accomplish what it is intended to accomplish- block EPA from regulating GHGs under the Clean Air Act?  There are a few reasons to believe that this is not the case:

• Endangerment Finding is Limited to Motor Vehicle Rule-  The Endangerment Finding is a prerequisite to regulation of GHGs from motor vehicles.  However, GHGs can become a "regulated pollutant" through other means than the motor vehicle standards.  Any EPA action that is viewed as controlling emissions of GHGs automatically triggers multiple provisions of the Clean Air Act, most notably the New Source Review program.  While the resolution would delay EPA, it does not necessarily block EPA from regulating GHGs under the Clean Air Act.
• CRA Standard has wiggle room-  The CRA states the regulation cannot be issued in "substantially the same form."  Couldn't EPA simply make a new affirmative endangerment finding based upon a wider set of scientific data or more recent data?  Couldn't this be viewed as a finding that is not "substantially" in the same form?

Senator Murkowski's effort is limited by what she can accomplish under the CRA.  Obviously, there must be an EPA regulation adopted for Congress to use its authority block it.  But let's be clear going forward, using the CRA means Congress cannot truly block EPA from regulating GHGs.  That could only be accomplished through Legislation which removed GHGs as a pollutant under the Clean Air Act. 
 

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Greenhouse Gas Regulation Commences January 2, 2011 without Legislation

On May 13, 2010, EPA finalized its regulatory approach for control greenhouse gases (GHGs) from large stationary sources.  As discussed in prior posts, the statutory thresholds for triggering EPA's New Source Review program (NSR) are 100/250 tons per year of a regulated Clean Air Act pollutant. 

As its name implies, EPA's NSR program requires emission reductions from new or modified sources that emit pollutants above the 100/250 TPY threshold in the Clean Air Act.  This trigger level works reasonably well for typical Clean Air Act pollutants, but not for CO2 which is emitted in much larger quantities.  If the 100/250 threshold were applied for GHGs, EPA indicates thousands of sources would be required to obtain federal air permits under NSR. 

To prevent what EPA calls would be an "absurd" result if the statutory thresholds were applied, EPA is proposing to phase the thresholds in over time.  EPA claims they have the authority to temporarily raise the statutory thresholds based on seldom used legal doctrines known as the "absurd results" doctrine and "administrative necessity."  Whether EPA truly has that authority remains to be seen.

However, the so called "Tailoring Rule" finalized on May 13th is the mechanism that raises the statutory thresholds thereby bringing in only the largest sources of GHGs.  Here is how EPA is phasing in NSR requirements for sources of GHGs:

Phase 1:  January 2, 2011 to June 30, 2011

New Sources (Construction Permits)-  Only sources that trigger NSR due to their non-GHG emissions would be required to address GHG emissions in their permits if GHG emissions exceed 75,000 tons per year.  If GHG's exceed that threshold they must meet the Best Available Control Technology (BACT) standard to minimize GHG emissions.

Existing Sources-Must incorporate GHG related requirements into their operating permits (Title V).  Right now those requirements are limited to the GHG reporting rules previously established by EPA (40 CFR Part 98- reporting rule fact sheet)

Phase 2:  July 1, 2011 to June 30, 2013

New Sources (Construction Permits)-  Expands beyond just those sources trigger NSR for other pollutants and with 75,000 tons per year of GHG emission.  Any source that emits 100,000 tons per year of GHGs would trigger NSR permitting, even if they don't require an NSR permit due to other pollutant emissions. 

Existing Sources-  Any modification to a source that would increase GHG emission by more than 75,000 tons per year triggers NSR.  Also, existing sources with emission of 100,000 tons per year, even they have not modified their facility in any way, will be required to obtain an operating permit (Title V) based solely on their GHG emissions.  (EPA estimates the universe of source covered is about 550- mostly landfills and industrial manufacturers.)

Phase 3  Second Rulemaking by July 1, 2012

EPA has stated it will complete a second phase of rulemaking by July 1, 2012 that will further reduce the trigger thresholds below those established in Phase 2.  EPA states it will evaluate a possible threshold of 50,000 tons per year.   Smaller sources would not be covered until April 30, 2016.

Continual Duty to Reduce the Thresholds

Legally, EPA is under a duty to reduce the trigger thresholds as soon as practicable to be in line with the statutory triggers of 100/250 tons per year.  The key question is- How long will the courts allow them to delay implementing what is expressly stated in the Clean Air Act?

(Photo: everystockphoto- cjohnson7) 

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Last week, two distinct paths clearly emerged for addressing climate change.  The first, legislation that would put in place a market mechanism to reduce emission over time- the Kerry-Lieberman Bill.  The second, EPA's use of its existing regulatory authority under the Clean Air Act to reduce greenhouse (GHGs) emissions (EPA Tailoring Rule)

EPA Regulation Under the Clean Air Act

One road-regulation under the Clean Air Act-we know very well.  We may not be able to see how it exactly will fit with reducing GHGs, but we know all the familiar mechanisms-

• New Source Review- slow permitting process for new facilities.  An ever evolving mandated technology standard.  Poorly designed rules that lack clarity for when NSR is triggered.  Lots of litigation.
• Title V permits-  a program originally designed to make air permitting more easily understood, has led to permits that are hundreds of pages long.
• NAAQs and SIPs- It is totally unclear how these mechanisms would fit with climate change. Its issues maybe, by themselves, prompted former Administrator Johnson to comment the Clean Air Act is "ill suited" to regulated GHGs.  What we do know about the NAAQS process in relation to climate change is it will require State to utilize complex planning processes to reduce GHG emissions.  An inefficient mechanism to achieve your goal of reducing GHGs.
• NSPS- ill-defined command and control technology standards for GHG reductions. 

Cap and Trade- A Market Mechanism for Reducing Emissions

Kerry-Lieberman (otherwise known as the American Power Act) sets up a sector based cap and trade mechanism.  Each sector (power, manufacturing and transportation) has its own cap.

The concept is to set an overall cap for total emission from the sector that is gradually reduced over time.   Each regulated unit must have an allowance for each ton of emissions. 

The big difference from the command and control approach of EPA regulation is that the market will help drive innovation and reduce emissions.  Each allowance will have a price associated with it. If projects that reduce emission can generate reductions cheaper than that price, project developers will make money by selling the credits to the regulated entities who need the allowances. 

Right now there is a tremendous amount of hesitancy to move forward with the cap and trade approach.  A myriad of issues are used as reasons for not supporting the proposal:

• The financial metldown- has led to disdain for Wall Street, many are unwilling to support a "trading" proposal that will allow big banks and investment companies to participate in the process. 
• Europe's cap-and-trade has experience major issues.  Fraud with credit generation.  A verification system that is seen as cumbersome and ineffective.  A cap that is accused of "leaking."
• BP Oil Spill-  the President tried a horse trade- he would support off-shore drilling in exchange for passage of an energy bill.  After the spill, this horse trade no longer works.  What compromises are left that could move the legislation forward.

Embarking on the "Well Traveled Road"

Most give the Kerry-Lieberman Bill almost zero chance of passing this year.  Many are calling it a "discussion draft" that will be used as a starting point next year when the legislation is revisited.

With little chance of passage in the next year and possibly beyond, we default to the "well traveled road" of EPA regulation.  Those who think its likely Congressional amendments introduced to block EPA from exercising its authority have a chance of passing, are placing their faith in a false hope.  There will never be enough support to pass this type of amendment.

With no Legislative relief, we are left with EPA regulations.  Its really time to start understanding the regulatory approach that has been unveiled and identify the pitfalls.  The largest pitfall is EPA belief it has legal authority to phase in NSR regulation by raising the triggers for federal air permits.  We will watch how this plays out, but a disaster could truly ensue if EPA's Tailoring Rule is struck down.

As we move forward, we hopefully will revisit Legislation because it truly offers the best solution.  Just as Robert Frost wrote, the road less traveled can make all the difference.  

Somewhere ages and ages hence:
Two roads diverged in a wood, and I—
I took the one less traveled by,
And that has made all the difference.       Robert Frost
 

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Liability for pre-existing contamination acts as a strong deterrent to re-use of brownfield properties.  Prospective purchasers simply do not want to expose themselves to potential liability especially when they had nothing to do with the contamination.

At the federal level, there has been an attempt to address liability exposure in order to provide prospective purchasers some level of liability protection.  However, even though tools exist at the federal level, potential exposure to state environmental liabilities can act as its own deterrent. 

While Clean Ohio may be one of the best brownfield grant programs, not every redevelopment or re-use of a brownfield is right for Clean Ohio.  Given the number of vacant and idled brownfield properties in Ohio, perhaps its time Ohio looked to strengthen protections for innocent purchasers to encourage re-use and prevent urban sprawl.

Federal "Innocent Landowner" Defense

CERCLA (otherwise known as the Superfund law) establishes joint and several liability to a variety of parties, including property owners, for releases of hazardous substances.  Liability can attach regardless of whether you generated or brought the contamination to the property.

The 2002 Small Business Liability Relief and Brownfield Revitalization Act (“the Brownfield Amendments”) amended CERCLA to provide for protections for purchasers of property.  Under the Brownfield Amendments a person can receive liability protections when purchasing contaminated property, it the person meets certain requirements. This is commonly referred to as the “innocent landowner defense.”

Under federal law, in order to establish the innocent landowner defense the purchaser must, prior to the date of acquisition of the property, perform “all appropriate inquiries” into prior ownership and uses of a property. In 2005, U.S. EPA finalized a rule which establishes mandatory standards for conducting all appropriate inquiries ("AAI Rule").

If the investigation (a Phase I assessment) spots no issues, then the legal protection attaches if procedures are followed set forth in the AAI rule. If the investigation of the property reveals the likelihood that a release has occurred, the AAI rule requires reasonable steps be taken to address the release or contain it before you receive liability protection.

But what about State environmental liability?

State environmental statutes provides separate authority to bring actions for historical contamination on brownfield properties.  While there are certain limitations on that authority, I have had clients express concern regarding this liability exposure.

The State of Ohio does not have a regulation or even a policy that recognizes the "innocent landowner" defense.  Meeting the AAI rule will not establish a legal defense against state statutory environmental liabilities.  While the State may exercise enforcement discretion, some clients don't have the risk tolerance to live with that potential exposure.

Should Ohio adopt some kind of "innocent landowner" protection to attract re-use of brownfields?

At a minimum, some formal recognition of the AAI rule by the State would at least provide some level of comfort.  However, given the number of brownfield sites in the State, something stronger is warranted. 

One potential model is the Clean Michigan Initiative.  Under this law, the State provides liability protection to innocent purchasers similar to the federal AAI rule.  Here is a quick synopsis of the program:

• Baseline Environmental Assessment (BEA)- A BEA is performed which is a simpler, streamlined alternative to full blown clean up of the site.
• Establish the Baseline- BEA is used to gather information about a contaminated property when the owner or operator changes so existing contamination can be distinguished from any that might occur once a new owner or operator acquires the property.
• Timing- the BEA must be performed prior to or no more than 45 days after the date of purchase, foreclosure, or becoming the operator, whichever occurs first; 
• Disclose -  the results of the BEA must be provided to the Michigan Department of Environmental Quality (MDEQ) and subsequent purchasers and lessee operators.
• Due Care Responsibilities- Purchasers need only take actions sufficient to ensure that their use of the property: 1) does not allow an unacceptable exposure to contamination, 2) does not worsen the contamination, and 3) protects against the reasonably foreseeable actions of third parties such as contractors or trespassers.

Very similar to the Federal AAI rule, Michigan's BEA serves as a good model to address State liabilities at contaminated properties.  Such protection could further encourage re-use of industrial sites that remain idled or vacant.

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