Federal Court Overturns EPA's Interpretation of a "Single Source" for Title V Air Permitting

When the Title V permitting program was created it was sold as a way to simplify complex air permitting.  U.S. EPA said that it would allow large facilities to aggregate all their air pollution sources under one permit.  EPA indicated this would make it easier for businesses to track their requirements.

What emerged from this "simplified" permitting process was, in fact, permits that were hundreds of pages along.  In addition, new reporting requirements were added onto businesses.  Also, businesses were required to submit an annual certification of compliance which had to be attested to by a responsible official with the company.

The cumbersome nature of the Tittle V permitting process coupled with the new regulatory requirements created a significant incentive for businesses to avoid Title V permitting.  Under Title V, every "major source" of air pollution is required to obtain a Title V permit.  EPA defines "major source" as any facility that is a source of air pollutants that "directly emits, or has the potential to emit, one hundred tons per year of any pollutant."  See, 42 U.S.C. Section 7602(j).

The most common way to avoid Title V for facilities that have a potential emit above 100 tons per year (tpy) is by placing enforceable restrictions (through permitting) that cap emissions below the trigger threshold of 100 tpy.  These permits are referred to as "synthetic minor" permits.  Facilities that cannot reduce actual emissions below 100 tpy can't use this method to avoid Title V.

What happens when two air sources, owned by the same company, exceed 100 tpy? 

EPA will evaluate whether the sources should be treated as a single source for Title V purposes.  EPA's guidance in this area is not straightforward and has led to creative interpretations aggregating sources together.

What Constitutes a "Single Facility" for Purposes of Title V Permitting

Under EPA rules, multiple pollutant-emitting activities can be aggregated together and considered a single source for purposes of determining whether the 100 tpy threshold for Title V permitting has been exceeded. Under EPA rules, a single stationary source for Title V purposes must satisfy all of the following factors: (1) the sources are under common control; (2) they are located on one or more contiguous or adjacent properties; and (3) belong to the same industrial grouping.  40 C.F.R. Section 71.2.1

In guidance issued by EPA, the Agency stated that single stationary source determinations should be made on a case-by-case basis and that "in some cases, 'proximity' may serve as the overwhelming factor."   See, Memorandum from Gina McCarthy, Assistant Adm'r, to Reg'l Admr's Regions I-X (Sept. 22, 2009). 

EPA Finds Summit's Production Plant and Wells One Facility for Purposes of Title V

While EPA guidance says proximity should be the key factor, EPA appears to not always follow its own guidance.  Such was the case in its determination with regard to Summit Petroleum Company ("Summit"). 

EPA found that Summit's natural gas sweetening plant and the associated production wells were one facility for purposes of Title V. Summit’s plant “sweetens” the “sour” gas from approximately one hundred sour gas production wells by removing hydrogen sulfide so that the gas can be used. Summit owns all of the production wells and the subsurface pipelines that connect each of the wells to the sweetening plant. The wells themselves are located over an area of approximately forty-three square miles at varying distances from the plant—from five hundred feet to eight miles away

EPA said that Summit's plant, wells and flares worked together as a single unit that "together produced a single product."  EPA said Summit could not produce any evidence that the plant and wells were not "truly interdependent."  EPA concluded that given the functional interrelationship, Summit's plant and wells should not be considered separate emissions sources.

Summit challenged the EPA interpretation arguing that EPA's interpretation ignored the plain language in the regulations that calls for sources to be "adjacent."  The Sixth Circuit Court, in a 2-1 decision, agreed with Summit after reviewing the regulatory history and EPA guidance. The Court said EPA may not ignore the term "adjacent' when making determinations as to whether to aggregate related sources.  The Court found that the wells distance from the plant - from five hundred feet to eight miles- meant the source were not "adjacent' for purposes of treating them as a single source under Title V.  See, Summit v. EPA, Nos. 09-4348; 10-4572 (6th Cir. Aug. 7, 2012).

Conclusion

The Sixth Circuit decision goes a long way in reducing the reach of EPA in trying to aggregate separate emission sources for purposes of Title V.  Based upon the ruling, a company with operations in different locations that are related to one another may be able to still avoid Title V permitting so long as there is some geographic separation between the sources.

EPA Will Likely Propose a 70 ppb Ozone Standard

The Obama Administration, after stopping the implementation of the Bush-era ozone standard, has delayed choosing a revised standard three times.  These delays had given hope that EPA may wait to choose a revised standard until after the election. 

In conversations with representatives for industry most impacted by the revised ozone standards, they told me they thought the Administration was positioning itself to delay implementation for an extended period of time.  Now, it appears EPA is completing the final steps toward selection of a revised standard.  On July 26th, EPA released the following statement:

Administrator Jackson is fully committed to finalizing EPA's reconsideration of the Clean Air Act health standard for ground level ozone. That reconsideration is currently going through interagency review led by OMB. Following completion of this final step, EPA will finalize its reconsideration, but will not issue the final rule on July 29th, the date the agency had intended. We look forward to finalizing this standard shortly. A new ozone standard will be based on the best science and meet the obligation established under the Clean Air Act to protect the health of the American people. In implementing this new standard, EPA will use the long-standing flexibility in the Clean Air Act to consider costs, jobs and the economy.

Background on EPA's Selection of a Revised Ozone Standard

The last time the ozone standard was revised was in 1997.  The 1997 standard was 84 parts per billion (ppb).  The Clean Air Act mandates review of federal air quality standards every five years. 

Back in 2006, the Clean Air Science Advisory Committee (CASAC)- EPA's science advisory panel- recommended an ozone standard between 60 and 70 ppb after reviewing the latest studies.  In a very controversial move, Bush's EPA Administrator- Stephen Johnson- chose to set it at 75 ppb instead of a standard in the range recommended by CASAC.

Soon after the election, Obama's EPA Administrator, Lisa Jackson, announced the Agency was delaying implementation of the 75 ppb standard and revisiting the standard itself.  Since its initial announcement, EPA has delay taking action three separate times.

Costs Cannot Be Considered

The ozone standard is seen by many as the most costly regulatory decision EPA implements.  Total  cost of compliance with the Bush-era standard was estimated at roughly $8 billion.  A revised standard between 60 ppb-70 ppb will be much higher.  Its important to remember the the Supreme Court has already ruled that EPA cannot consider cost in selecting a standard (ATA v. Whitman).

Delays Already Have Avoided Implementation During Economic Downturn

 We probably have already forgotten the schedule for implementation of the proposed 2008 ozone standard (75 ppb).  Final designations were supposed to occur in March 2010.

Final designations would have immediately implemented tough new restrictions for growth in areas that didn't meet the standard.

Using EPA's 2008 proposed schedule as a guide, if EPA acts in August 2011 it is likely that final designations won't be effective until August 2013 or perhaps even longer.  Attainment deadlines pushing out to 2018-2035.

All Signs Point to a 70 ppb Ozone Standard

EPA's own statements point to a standard lower than 75 ppb.  Let's look at two of the sentences in EPA's recent announcement. I have bolded the key language:

  1. A new ozone standard will be based on the best science; and
  2. In implementing this new standard, EPA will use the long-standing flexibility in the Clean Air Act to consider costs, jobs and the economy;

First, EPA states it will select a standard based on the "best science."  As soon as EPA stopped the implementation of the Bush-era 75 ppb standard, it blasted the standard as not based on science.  EPA has boxed itself in a corner and must select a standard in the range recommended by CASAC of between 60 ppb - 70 ppb.

Second, EPA comments show it is already bracing for the backlash that will ensue by selecting a lower standard.  EPA will certainly take heat for imposing a very costly new regulation during a tough economy.  Therefore, it already sending a signal that will will try to ease the pain by "considering costs" when "implementing this new standard."  This could mean a longer implementation or extended compliance deadlines.

On July 13th, Administrator Jackson sent a letter to Senator Carper regarding the 2008 Bush era ozone standard.  This letter is yet another indication EPA will select a standard between 60 ppb to 70 ppb.  In her letter the Administrator basically states the 75 ppb standard was not legally defensible because of CASAC's recommendation. 

Based on its actions stopping the implementation of the 2008 proposed ozone standard, EPA has no choice but to select a standard within the rage recommended by CASAC.  Given the state of the economy, EPA also has no choice but to select a standard within that range that will have least economic impact- 70 ppb.   

 

Phasing in Greenhouse Gas Permitting- EPA's "Tailoring Rule"

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

Federal Judge Strikes Down Three Year Old Air Pollution Reform

On February 3rd Magistrate Judge Mark Able of the U.S. District Court in Columbus ruled that Ohio EPA (and really the Ohio General Assembly) violated that federal Clean Air Act by exempting small air pollution sources from stringent air pollution requirements.  At issue was one major overhaul of Ohio's air regulation included in state legislation (Senate Bill 265)  back in 2006.  The law was designed to reduce the regulatory burden on small businesses. 

The provision exempted small air pollution sources, those that emit less than 10 tons per year, from the requirement to install Best Available Control Technology (BAT).  These sources would still be required to install air pollution control equipment.  However, these small sources could avoid the more time consuming BAT permitting process.

I was Director of Ohio EPA when Senate Bill 265 was passed.  The complaint regarding BAT was that it resulted in uncertain regulatory requirements for business.  Upon receipt of an air permit for a small air pollution source, Ohio EPA would have to decide on a individual case-by-case basis which pollution controls were the most stringent for that particular source. 

Businesses complained that the determinations as to what constituted BAT were inconsistent among Ohio EPA's five district offices.  They also complained that businesses would not be able to plan ahead of time for the types of controls to install.  Rather, business would be forced to wait until Ohio EPA concluded its evaluation.

To reduce the regulatory burden, Ohio businesses sought two major reforms regarding BAT in Senate Bill 265.  The General Assembly passed the bill which included the following.

  1. Exempt all sources smaller than 10 tons from having to install BAT.
  2. After August 2009, Ohio EPA could only require BAT on larger sources (greater than 10 tons) through specific rulemaking for those types of sources.

The goal of reducing the regulatory burden was understandable.  However, there is a long standing tenant in the federal Clean Air Act that restricts the ability of State's to change pollution control strategies to achieve federal clean air standards.  This is referred to as "anti-backsliding."

  • "Anti-Backsliding"- If you drop an air pollution requirement, you must make up for those lost reductions through alternative control strategies. 

The best example of this perhaps is E-check, the automobile tail pipe test that used to be required in Cleveland, Dayton and Cincinnati.  E-check was dropped in Dayton and Cincinnati after the 10 year contract expired.  In order to drop the program, Ohio EPA was forced to make up the lost reductions through new air pollution control requirements.  One new requirement used to replace E-check was the requirement to use less polluting gasoline (RVP gas) in the summer months in Dayton and Cincinnati. 

Ohio EPA failed to adopt replacement strategies after the General Assembly dropped BAT on sources less than 10 tons.  It is my understanding, that Ohio EPA never actually even quantified the lost reductions attributable to dropping the BAT requirement.  U.S. EPA put Ohio EPA on notice this past summer that it failed to address the "anti-backsliding" issue.

Ohio EPA's failure to adopt new controls to replace BAT- a violation of the "anti-backsliding" principal- was one of the reasons Magistrate Abel struck down the provision as a violation of the Federal Clean Air Act.  According to a recent newspaper article, Ohio EPA has decided to stop issuing permits for small sources while it figures out how to address the decision. 

The agency said Wednesday it won't authorize any new or expanded emissions from small sources until the ramifications of the decision are understood. Spokeswoman Heidi Griesmer said the agency has temporarily suspended issuing permits.

"These are small sources of pollution," she said. "We will be complying with the judge's orders but we're right now looking through the decision and figuring out how to do that..."

Griesmer said it was impossible to determine immediately on Wednesday how many exemptions the state has granted to small source polluters. The agency estimates it will take two weeks to mine through its permit database and count them all, she said.

 

What a mess...

  • The Agency will be forced to decide what to do with hundreds of permits it issued in the last three years in which BAT was not required.  Does Ohio EPA go back and revoke those permits requiring businesses to install different air pollution controls? 
  • Does the Agency still try and comply with Legislative mandate to eliminate BAT for small sources?  If so, what new air pollution control requirements will it adopt to replace BAT for sources less than 10 tons.  
  • What about permits already in the system that were about to be issued?  No doubt the Agency will be forced to go back and determine BAT delaying these permits by many months.  

This is just a sample of the issues facing EPA after S.B. 265.  Next up-  The second major reform in S.B. 265 that prevents Ohio EPA from requiring BAT on sources larger than 10 tons per year unless done through rulemaking.   

 

Footnote 29 of EPA's Endangerment Finding

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)

Deniers:  Here was reaction from the Congressional denier of climate change, Sen. James Inhofe:

This move by EPA will unleash a torrent of regulations that will destroy jobs, harm consumers, and extend the agency’s reach into every corner of American life. While such regulations will create another massive burden on the economy, there will be no positive effect on global climate change as a result.

The Senator goes on to also blast the alternative to regulation of GHGs under the Clean Air Act- Cap and Trade.  He seriously argues that Congress should pass a bill blocking EPA from enacting any regulation of GHGs. 

Obama's Climate Czar-Carol Browner:  The Washington Times reported that White House climate czar Carol Browner told a gathering in Boston earlier this month that it would be unlikely that the so-called "endangerment finding" would actually be used to regulate carbon dioxide.

She can only make this statement assuming a cap and trade bill passes.  What if it doesn't? Or its significantly delayed?  EPA cannot stop the train it has boarded.  Without legislation the endangerment finding and ensuing regulations of GHGs under the Clean Air Act will be the regulatory mechanism.

Environmental Groups:  All see this move as a game of chicken with Congress.  As detailed in the blog, Solve Climate, environmental groups see the endangerment finding as pressuring Congress to Act.  Still, given Washington, someone should be asking...what if the fail to?

Go it Slow Approach:  As detailed in the Wall Street Journal, "on a conference call Friday with environmentalists, EPA officials stressed they would take a go-slow approach, holding two public hearings next month before the findings are official. After that, any new regulations would go through a public comment period, more hearings and a long review. New regulations driven by the finding could be years away."

This "go it slow" position assumes that the additional rules are need to trigger regulation of GHGs under the Clean Air Act.  As detailed in my post, new new regulations could be needed.  Regulation would start soon after the endangerment finding is finalized. 


 

Climate Update: Latest Developments on the Politics of Climate Legislation

 

Here are some snapshots of some of the latest developments regarding the Congressional debate over cap and trade legislation.  For the first time serious consideration of legislation is underway.  As a result, groups are beginning to develop their public positions.  Meanwhile, businesses continue to feel increasing pressure to address the risks associated with climate change.

Congressional Battle Lines Are Forming-  In my last post I apparently underestimated the aggressiveness of the Conservative attack on the Cap and Trade Proposal.  The legislative battle is beginning to take shape. RNC Chairman Steele said the following on a call in talk show

We are cooling. We are not warming. The warming you see out there, the supposed warming, and I am using my finger quotation marks here, is part of the cooling process. Greenland, which is now covered in ice, it was once called Greenland for a reason, right? Iceland, which is now green.

Skepticism among "Blue Dog" Democrats:  As serious consideration of a cap and trade bill is now underway, conservative Democrats are questioning the timing and implementation of a cap and trade proposal.  In a Wall Street Journal interview with U.S. Climate Action Partnership member, Fred Krupp, he minimized the concern a divide is occurring within the Democratic Party:

Recently I met with 27 House Blue Dog Democrats, alongside other members of USCAP including [GE boss] Jeffrey Immelt, [Shell’s] Marvin Odum, and [Duke Energy’s] James Rogers. What I heard is that they want to be involved in getting a climate bill right, and making it fair for consumers; I didn’t see a lack of engagement. Until now, there’d been no prospect of legislation. Now, the sorts of concerns are raised that naturally get raised when things could actually happen. This is part of the legislative dance, and that just began in earnest when President Obama called on Congress to deliver a climate bill.

Size of the Climate Bill May 2 or 3 Times Projected in the President's Budget- Jason Furman, deputy director of the National Economic Council, told Senate staffers in late February that the plan could raise two to three times as much as the official budget figures, or between $1.3 trillion and $1.9 trillion, the WSJ reports.

[In order to get projections that high] That leaves carbon-emissions permits that are simply more expensive than the lowish prices that have been bandied about so far. To make the White House math work, the government would have to sell the same number of permits at prices ranging from $20 to more than $40 a ton [compared to $10 to $14 per ton originally projected.  For comparison the most recent RGGI auction, carbon was around $3 per ton]

Cap and Trade Means Jobs-  Understanding the link between a struggling economy and the viability of cap and trade legislation, the Environmental Defense Fund has launched a new web site showing regulating carbon can translate into green jobs.  The site contains maps of select states with push pins representing various companies that EDF argues would benefit from cap and trade legislation. It is no coincidence that EDF uses mainly coal states to highlight the potential for green job growth.  www. lesscarbonmorejobs.org

Insurers Must Disclose Climate Change Risks-  Another indication came last week that climate change is having real world impacts on the business community even before a vote occurs on cap and trade legislation.  The National Association of Insurance Commissioners (NAIC) voted last week to require the annual filing of Insurer Climate Risk Disclosure Surveys for insurance companies with annual premiums topping $500 million. The new rule, set to begin May 1, 2010, is the world's first climate risk disclosure requirement,

Market Solutions Versus Top Down Regulation-  The freight train that is greenhouse gas (GHG) regulation is on track and moving full steam ahead.  I cannot repeat enough to those debating climate change legislation, if you are focusing only on whether to enact cap and trade legislation you are missing the 800 lbs gorilla in the room.  GHG regulation is coming.  The Supreme Court set the train in motion with Massachusetts v. EPA.  No real debate should occur without examining the alternative of allowing Clean Air Act regulation of GHGs instead of a market based solution like cap and trade.

 

Carbon Cap Legislation Will Be A Struggle, But Success Is Essential

If you are like me you have noticed a lot more people talking about climate change in the last month.  President Obama's cap and trade proposal has certainly garnered more attention on the subject.  Many opponents tend to ask why we should be pursuing such a massive program in the middle of an economic crisis.  Unfortunately, I have also had more conversations with individuals asserting global warming is a hoax or overblown.

Recent polling data supports that lack of firm public support that will be necessary to pass cap and trade legislation. A recent Gallup poll shows more Americans are beginning to question global warming now that a serious legislative proposal has been offered.

Eroding public support for cap and trade is having its effect on the debate in Congress. A recent Detroit News article cites eroding support even among Democrats:

Citing the burden the standards would put on manufacturing, particularly automobile-related manufacturing, Michigan Democratic senators Carl Levin and Debbie Stabenow are signaling their opposition.

Levin, six other Democrats and 26 Republicans are objecting to a Senate procedural budget reconciliation process that would limit debate and amendments to Obama’s proposed debate cap-and-trade legislation, according to the Detroit News.
 

As many have observed, the political debate in Congress may shape up to be less about political party and more about geography.  Senators, whether Democrat or Republican, from coal states or manufacturing states will find it very difficult to support cap and trade legislation.

What is even more threatening to a cap and trade proposal is that the Republicans have yet to fully seize on their attack message- with the economy in shambles now is not the time to be enacting climate change legislation.  Right now, Republicans are soft peddling opposition to cap and trade, as articulated in Reuters recently by Sen. Murkowski:

Congress will not be able to pass legislation capping carbon emissions in 2009 if the economy continues its downward slide, a key Republican senator said on Monday.

"If the economy is still where we are right now, I would suggest to you it's not happening this year," Senator Lisa Murkowski told reporters at a Platts Energy Podium.

Once the polling numbers show they can win the debate, you know they will ratchet up the heat...so to speak. 

What does the challenge of passing carbon legislation mean? As discussed in prior posts, it means that regulation of greenhouse gases (GHGs) through the Clean Air Act will happen first and in a dramatic fashion.  Many of those opposing carbon cap and trade legislation seem to ignore this reality. 

EPA has already drafted final emission reporting rules for GHGs.  Next month, EPA is likely to issue their draft endangerment finding.  In addition, EPA will take additional action to regulate GHGs under the Clean Air Act.  Massive litigation will follow all of these rulemaking efforts.  More suits will be filed by environmental groups looking to use existing authority under the Clean Air Act to block new plants or reduce emissions. 

Unfortunately, the command and control approach that will result from regulation under the Clean Air Act will be far more costly and will create great uncertainties.  Cap and trade has consistently been shown to be more effective and a cheaper way of reducing emissions. 

The clash between cap & trade and regulation under the Clean Air Act, was recently highlighted by a project titled "Breaking the logjam."  This project involved N.Y. University School of Law and New York Law School and enlisted 40 environmental law experts across the ideological spectrum.  The conclusion of the report was cap and trade is a far more effective means of addressing climate change:

Experience has shown the cap and trade approach to criteria pollutants can achieve cuts at lower cost than are achievable under the highly prescriptive and cumbersome regulatory method at the heart of the current statute [Clean Air Act]

In my mind, the debate cannot be framed in terms of either regulation or no regulation.  There is no such option. There is certainly enough Congressional support for addressing climate change that any legislative proposal to amend the Clean Air Act to prevent regulation of GHGs will be unsuccessful. 

Rather, the debate must be viewed as which method of regulation is the better option.  When viewed in this manner, we should be debating the elements of the cap and trade legislation- offsets and auction v. allocation-not whether to pass such legislation. 

Improving Air Quality Good News to Cleveland Area Businesses

There is good news for area businesses.  Additional compliance costs and restrictions on economic growth will be avoided that were deemed all but certain a few years ago.  The compliance costs were associated with new air pollution controls needed to achieve  U.S. EPA's 1997 8-hour ozone standard (0.85 ppm). The deadline to meet this standard is 2009.

When I was Director of Ohio EPA,  all the modeling and projections showed there was no way Cleveland would meet the standard by the deadline. I remember giving speeches around the State with the basic theme- "we would have to de-populate Cleveland to meet the Ozone deadline."   I remember briefing the Governor that it appeared likely the Cleveland-Akron-Lorain Nonattainment Area would have to "bump up" to the next category of nonattainment-"serious."  By bumping up Cleveland would buy time to reach the standard, but the cost was a list on new federally mandated controls and restrictions.  Bump up would have had devastating impacts on the local economy.

[This is a slide taken from one of the speeches on reaching the ozone standard.  The numbers show various ozone levels at each monitor in the nonattainment area after imposing various control options.  The black number was a series of draconian measures that would have devastated the local economy.  Even after imposing those controls the models predicted continued nonattainment.]

 

 

Perhaps this is a lesson about not putting too much faith in modeling, but  based upon recent air quality monitoring Cleveland has indeed attained the 1997 8-hour ozone standard.   Area businesses may never be fully aware of the crisis that was averted.  But this is certainly good news for an area that has struggled to meet federal air quality standards.

Below is additional background on the recent Ohio EPA submittals.

In 2008, Ohio EPA submitted an State Implementation Plan (SIP) for the Cleveland-Akron-Lorain nonattainment area that requested redesignation to attainment status.  This was based on monitoring data from 2005,2006 and 2007 that showed Cleveland close to attainment [0.0853 compared to 0.0853]. 

This month, February 2009 Ohio EPA has prepared an updated attainment demonstration for the Cleveland that incorporates the most recent air monitoring data from the summer of 2008.  Due to ever improving air quality, the updated monitoring data shows Cleveland complies with the Standard [0.084 compared to 0.085 standard]. 

Here is additional detail regarding the two submissions:

2008 Ohio EPA Redesignation Request to U.S. EPA
In the February 2008, Ohio EPA submitted its request to U.S. EPA to have the Cleveland-Akron-Lorain nonattainment area redesignated to attainment. The document included two key conclusions:

1) Monitoring data for 2005-2007 showed the area just above the standard. The data showed 0.853 ppm compared to the 0.85 ppm standard.

2) Ohio EPA was requesting redesignation of the Cleveland-Akron-Lorain area based upon modeling that showed it expected the area to attain the standard by 2009. This was known as the "weight of evidence" approach (WOE). Under the WOE policy, U.S. EPA can redesignate an area attainment even though monitoring data shows it has not met the standard.  However, Ohio EPA must provide the federal EPA convincing evidence the area will reach the standard by the 2009 deadline.

Ohio EPA included the following language in the January 2008 submittal to U.S. EPA:

"The (air) modeling results as well as the previously submitted weight of evidence information supports the conclusion that Cleveland-Akron-Lorain OH area should attain the eight-hour ozone standard on time.

In spite of this evidence, Ohio EPA is developing additional emission reduction options. Ohio EPA recognizes that the ozone standard is currently under review and a final revision to the standard will most likely result in a revised standard that will require additional emission reductions above those necessary to achieve the existing standards. Ohio EPA is currently in discussions with U.S. EPA and local stakeholders assessing the options available to meet the future standard, including the use of lower Reid-Vapor Pressure gasoline. "

Bottom line: Ohio EPA left open the possibility it would impose additional control measures to support its WOE demonstration to U.S. EPA.

2009 Revised Ohio EPA Redesignation Request to U.S. EPA: Ozone levels improved significantly in the summer of 2008. The average of the 2006, 2007 and 2008 ozone seasons shows an overall average of 0.84 ppm which is below the 0.85 ppm standard.

This is very good news for the Cleveland-Akron-Lorain area. This means Ohio EPA no longer has to propose a WOE approach to U.S. EPA. Rather, Ohio EPA can rely on the real monitoring data which already shows attainment with the standard. As a result, all of the language I quoted above regarding evaluating additional control options has been dropped. In the 2009 submittal Ohio EPA states:

"The Cleveland-Akron-Lorain ozone nonattainment area has attained the 1997 NAAQS for ozone and complied with the applicable provisions of the 1990 Amendments to the Clean Air Act regarding redesignations of ozone nonattainment areas...Based on this presentation, the Cleveland-Akron-Lorain ozone nonattainment area meets the requirements for redesignation under the CAA and U.S. EPA guidance....Furthermore, because the area is subject to significant transport of pollutants, significant regional NOx reductions will ensure continued compliance (maintenance) with the standard with an increasing margin of safety."

Bottom line: It appears Ohio EPA is no longer evaluating additional controls to comply with the 1997 ozone standard. In addition, the language referring to "subject to significant transport of pollutants" is a reference to the fact our ozone levels are heavily influenced by emissions from elsewhere in Ohio and the Midwest. This means continued strengthening of programs like CAIR (power plant reductions) will continue to result in improved air quality.

Of course the story does not end here... U.S. EPA is in the process of imposing the new 2008 ozone standard (0.75 ppm). Current monitoring shows Cleveland is a long way from achieving the new standard. Unfortunately, this means Cleveland-Akron-Lorain will not get out from under its nonattainment status anytime in the near future.  But at least we are no longer discussing draconian measures to meet the old ozone standard.

President Obama Orders Review of California CO2 Waiver

In remarks titled "from peril to progress", the President set forth bold action yesterday that will inevitably lead to full regulation of CO2 and greenhouse gas emissions.  The President ordered a "vigorous review" of California's request to regulate greenhouse gas emissions which had been previously denied by the Bush Administration. [President Obama's memo ordering a review of the California Waiver]   While much of the media focus has been on the effect of the other aspects of the President's actions, such as raising mileage standards, in reality the California waiver request has far more reaching repercussions. 

California has been seeking EPA’s approval to waive federal preemption of state vehicle emission standards for several years.  California wants to enforce a state law that would require automakers to reduce carbon dioxide emissions from new vehicles by 30 percent by 2016. Under the Clean Air Act, U.S. EPA must concur that California has demonstrated a need reduce greenhouse gases in order  “to meet compelling and extraordinary conditions.” 42 U.S.C. § 7543(b)(1)(B). Former EPA Administrator Johnson denied California's "waiver" request last year.

The signs that President Obama would proceed in a radically different direction than the Bush Administration on controlling greenhouse gases have been building for some time. First, he mentioned climate change in his speech in Chicago the night he won the election.  Second, he appointed members to the cabinet and senior staff positions that are strong believers in aggressively tackling climate change.  Third, he made mention of climate change in his 20 minute inaugural speech clearly indicating it will be a major priority of his Administration. 

Yesterday, the President took bold action only a week into his Presidency with his issuance of an order to review the denial of the California waiver request.  After announcing his action, President Obama made a speech that contains a clear message- it the President's intention for the United States to lead on addressing climate change no matter how difficult the task may be.  His speech included some pretty bold statements.  Here is an excerpt from his speech: 

Third, the federal government must work with, not against, states to reduce greenhouse gas emissions. California has shown bold and bipartisan leadership through its effort to forge 21st century standards, and over a dozen states have followed its lead. But instead of serving as a partner, Washington stood in their way. This refusal to lead risks the creation of a confusing and patchwork set of standards that hurts the environment and the auto industry.

The days of Washington dragging its heels are over. My administration will not deny facts, we will be guided by them. We cannot afford to pass the buck or push the burden onto the states. And that's why I'm directing the Environmental Protection Agency to immediately review the denial of the California waiver request and determine the best way forward. This will help us create incentives to develop new energy that will make us less dependent on oil that endangers our security, our economy, and our planet....

Finally, we will make it clear to the world that America is ready to lead. To protect our climate and our collective security, we must call together a truly global coalition. I've made it clear that we will act, but so too must the world. That's how we will deny leverage to dictators and dollars to terrorists. And that's how we will ensure that nations like China and India are doing their part, just as we are now willing to do ours.

It's time for America to lead, because this moment of peril must be turned into one of progress. If we take action, we can create new industries and revive old ones; we can open new factories and power new farms; we can lower costs and revive our economy. We can do that, and we must do that. There's much work to be done. There is much further for us to go.

But I want to be clear from the beginning of this administration that we have made our choice. America will not be held hostage to dwindling resources, hostile regimes, and a warming planet. We will not be put off from action because action is hard. Now is the time to make the tough choices. Now is the time to meet the challenge at this crossroad of history by choosing a future that is safer for our country, prosperous for our planet, and sustainable.
 

California's waiver will almost certainly be granted.  Such action will tip the regulatory dominoes leading to full blow regulation of greenhouse gases from more than just tailpipes in California. As discussed on this blog before, the Supreme Court has already determined CO2 is a pollutant under the Clean Air Act.  Since the Court's decision the debate has centered on whether CO2 is a "regulated pollutant."  Once it is considered "regulated", then numerous provisions in the Act will be deemed to apply to control CO2 and other greenhouse gases.  

One way to make CO2 a regulated pollutant is for EPA to issue new regulations requiring control.  EPA started down that road slowly with the issuance of its Advanced Notice of Public Rulemaking for regulation of greenhouse gases this summer.  However, environmental groups argued new regulations were not needed.  They argued the act already "regulates" CO2.  Specifically, the Clean Act includes monitoring requirements for CO2 from coal plants.

In waning months of the Bush Administration, the Environmental Board of Review issued a major decision in Deseret Power, finding that EPA had discretion to decide whether monitoring was enough to constitute regulation.  In the final days of his tenure, former Administrator Johnson issued an interpretative memo responding to the Deseret Power decision declaring monitoring was not enough. 

Since issuance of the memo, environmental groups have legally challenged the Johnson memo and pressured the Obama Administration to retract it.  However, granting California's waiver request would likely render the memo meaningless.  A grant of the waiver would not by itself be considered regulation of CO2, thereby providing the trigger for regulation of CO2 under other provision of the Clean Air Act.   And with that the dominoes will begin to fall...

 

Nuisance Finding Gives Downwind States New Ammo in the Long Cross-Border Pollution War

On January 13, 2009, Judge Lacy Thornburg of the District Court for the Western District of North Carolina issued a major decision in case of North Carolina v. TVA.  When filed, this case was seen as another chapter in the on-going battle between downwind and upwind states over cross-border pollution. 

However, the decision and implications are somewhat surprising.  The Court declared that emissions from four of eleven TVA power plants in upwind states created a public nuisance in the State of North Carolina.  Even though these sources apparently comply with environmental permits and regulations, the Court ordered hundreds of millions of dollars in new pollution control equipment on those plants.

Downwind states suing upwind states over coal power plant pollution is nothing new.  The Northeastern and Mid-Atlantic States have sued Midwestern and Southern States over pollution under a number of theories. 

  • They successfully participated in New Source Review enforcement cases with U.S. EPA. 
  • They filed Section 126 petitions under the Clean Air Act. Those petitions were later resolved by U.S. EPA by creating the Clean Air Interstate Rule (CAIR)- a cap and trade pollution control program. 
  • They have sought new federal legislation tightening emission standards on coal-fired power plants

What makes this suit so different is that the State of North Carolina went outside the typical Clean Air Act tool box in asserting its claims.  Instead the State relied upon common law theories.  The decision will certainly bring a waive of new rounds of litigation.  Especially with the remand of CAIR after the successful challenge by North Carolina. 

Here are some of the significant implications of this decision. 

1. The Court found that significant health effects occur as a result of exposure to pollution at levels even below the National Ambient Air Quality Standards (NAAQS) for PM 2.5 and Ozone. The Courts said:


"After reviewing the totality of evidence, the Court is convinced that exposure to PM 2.5-even at or below the NAAQS of 15 ug/m3- results in adverse cardiopulmonary effects, including increased or exacerbated asthma and chronic bronchitis...these negative but non-fatal health effects result in numerous social and economic harms to North Carolinians, including lost school and work days..."


2. The Court found that sources in upwind states can still have significant impacts on a downwind state’s air quality. However, in this case, the Court drew the line at distance of 100 miles. TVA plants within 100 miles (4 plants) were deemed a nuisance and plants outside 100 miles (7 plants) were not.

3. The Court created a new definition of “significant contribution.” TVA plants that were contributing 3% of the emission responsible for PM 2.5 pollution in North Carolina and roughly 5% of the ozone problem were deemed to significantly contributing. On that basis, these plants (ones roughly within 100 miles) were deemed a nuisance.  Sources that contributed less than 1% were deemed not a nuisance. 

4. The Court required installation of SCRs and scrubbers on a number of units because those units were contributing to the nuisance.

5.  Even though these plants were apparently in compliance with all federal and state environmental permits and regulations, they will be putting on additional controls.

6. The Court included emission rates for each plant in a spreadsheet in the opinion. However, the decision is somewhat vague as to whether these are simply expected emissions post controls or in fact legally enforceable limits.

7. From a legal perspective, I found it interesting that a federal judge in North Carolina found sources in other states to be causing a nuisance by applying the State nuisance law from Alabama, Kentucky and Tennessee where the sources are located.

 

Rhode Island CO2 Regulation of Autos Updheld

A federal district court in Rhode Island has dismissed all the claims filed by the Auto companies seeking to strike down Rhode Island's greenhouse gas regulations for new cars. The decision did not reach the merits of regulating greenhouse gases from automobiles.  The Federal Court ruled that the Auto companies were prevented from challenging the adoption of  the CARB like standards based upon prior federal court decisions.

The importance of the decision is that other states can now move forward with regulations adopting standards to control greenhouse gases from cars.  Auto companies had been challenging state efforts to establish regulations on the basis both the Energy Policy Act and Clean Air Act pre-empt state efforts to establish regulations.  This implication of this decision is that the Auto Companies can no longer challenge such regulations on that basis.

If you are interested in the legal background, here is a link to the decision

Regulation of Greenhouse Gases Under the Clean Air Act "Absurd"

ABSURD

–adjective 1.utterly or obviously senseless, illogical, or untrue; contrary to all reason or common sense; laughably foolish or false: an absurd explanation. –noun 2.the quality or condition of existing in a meaningless and irrational world.
 

It is hard to believe but there are those who think regulating greenhouse gases under the current framework of the Clean Air Act (CAA) is the right thing to do. (see post "Politics Won't Decide Whether CO2 is Regulated Under the Clean Air Act").  Some of these same individuals assert that the Bush Administration was directly responsible for U.S. EPA's Administrator Steve Johnson's description of the Clean Air Act as "ill-suited" for regulating greenhouse gases (GHGs). 

However, an unbiased assessment of the structure of the Clean Air Act shows a regulatory mess would ensue if current CAA language was used to control GHGs.  In fact, I have heard senior staff at U.S. EPA express grave concern as what may follow if regulation of GHGs was required without amendment to the Clean Air Act. 

Take the most significant problem with using the CAA to regulate GHGs-permitting thresholds.  Under U.S. EPA's New Source Review (NSR) program a federal air pollution control permit is required anytime you have a source exceed "major thresholds."  40 CFR section 52.21(b)(1)(i).  The CAA sets the major threshold at any source that has the potential to emit 250 tons of a regulated pollutant.  The limit is 100 tons for specific types of sources or sources in nonattainment areas. U.S. EPA's Title V program requires a Title V air permit for source over 100 tons. 

The 250/100 ton thresholds work for pollutants like fine particles or ozone precursors because they capture large sources.   The thresholds trigger around 200-300 NSR permits per year.  The Title V threshold has led to issuance of around 18,000 Title V air permits in the country. 

However, greenhouse gas emissions, in particular CO2, are emitted in much higher quantities. Staff at EPA working on GHG regulation say they typically start paying attention to sources that emit 10,000 tons of CO2 per year.  For comparison, California's climate change law (AB32) establishes a mandatory reporting threshold of 25,000 metric tons.

If the 250/100 tons thresholds were applied to GHGs, U.S. EPA and state EPA's would be flooded with new permits.  U.S. EPA predicts there may be some 2,000-3,000 federal NSR permit per year and perhaps as many as 500,000 Title V sources in the Country.  Included in these numbers are small sources that have never been regulated by the Clean Air Act, such as large churches, retail stores and farms with as little as 25 cows. 

The numbers I cited above were provided by U.S. EPA as estimates.  The U.S. Chamber has put out a detailed report on the number of sources that would regulated based on GHG emissions thresholds in the CAA.  While some may say the U.S. Chamber's numbers are biased, I have not seen or heard anyone refute their analysis.  Also, the Chamber's numbers are generally consistent with EPA's own projections.  In U.S. EPA's Advanced Notice of Public Rulemaking on regulation of GHGs, EPA says "application of the existing PSD (NSR) permitting program to these new smaller sources would be a very inefficient way to address the challenges of climate change." (see page 488 of the ANPR)

Those who support use of the Clean Air Act argue that U.S. EPA could adjust the permitting thresholds to capture fewer sources- an option offered by EPA in its ANPR.  The problem with this argument is that the thresholds are in the text of the CAA.  Basic legal principles say the plain text of a statute is entitled to significant deference.  

EPA's ANPR sets forth two legal arguments to adjust the thresholds- absurd results and administrative necessity.  The "absurd results" argument is that literal application of the thresholds would lead to absurd results (i.e. regulating very small sources of CO2).  The administrative necessity argument is that the burden that would ensue from application of the 250/100 ton thresholds would "prevent the agency form carrying out the mission assigned to it by Congress." (see ANPR page 497).  In other words, EPA would be overwhelmed and couldn't do its job if the thresholds are kept in tact.

I certainly can see using some of the broad concepts contained in the Clean Air Act to regulate GHGs.  However, Congressional action is needed to amend those provisions and make them fit for dealing with climate change.  Congress should not wait to act.  It is very possible a court could decide the CAA applies to GHGs without further action, thereby triggering the "absurd" results noted by EPA.

 

 

 

 

 

 

Politics Won't Decide Whether CO2 Is Regulated Under the Clean Air Act

Recently, there has been quite a buzz around the issue of using the existing authority in the Clean Air Act to regulate greenhouse gas emissions.  In July, U.S. EPA issued its Advanced Notice of Proposed Rulemaking (ANPR) responding to the Supreme Court's decision in Massachusetts v. EPA and soliciting comment on use of the Clean Air Act to regulate greenhouse gases.

Notwithstanding EPA's solicitation of public comments, the buzz really kicked in following a recent statement by Jason Grumet in a Bloomberg interview that an Obama Administration would regulate greenhouse gases under existing authority in the Clean Air Act if Congress fails to act within 18 months.

The Wall Street Journal printed a scathing editorial of the notion an Obama Administration would move forward and regulate greenhouse gases without Congressional action:

In an interview last week with Bloomberg, Mr. Grumet said that come January the Environmental Protection Agency "would initiate those rulemakings" that classify carbon as a dangerous pollutant under current clean air laws. That move would impose new regulation and taxes across the entire economy, something that is usually the purview of Congress. Mr. Grumet warned that "in the absence of Congressional action" 18 months after Mr. Obama's inauguration, the EPA would move ahead with its own unilateral carbon crackdown anyway.
 

Left leaning blogs like Gristmill have come out in support of the idea:

I've talked to a few people behind the scenes who are big fans of this approach. One of its primary virtues is that it allows the EPA to build on all the great work that states have done, knitting together and rationalizing their various efforts. Another is that it can be done quickly, without a Congressional battle, enabling the U.S. to go into the 2009 Copenhagen climate talks with a good-faith effort in hand.
 

Others in academia and in the green movement have come out in support.  In an article appearing in Environmental Finance, Michael Northrop and David Sassoon argue the Clean Air Act can be an effective tool for combating climate change. citing various legal experts from around the Country.  They conclude their article by saying:

The Clean Air Act is already a mature, flexible and successful law designed to integrate the work of all economic sectors and all levels of government. Honed in three stages of effort – the original lawmaking, and two major rounds of amendments – it is a functioning national regulatory structure that spans decades of deliberation, compromise and practice.

By applying the Clean Air Act, the next president can stand on the shoulders of legal and regulatory precedent. He can adopt an executive branch strategy to complement the next round of legislative efforts, now also in preparation. He can lead climate policy development through existing authority, and ensure that the US has a strong position going in to the next round of international climate negotiations. Action in the first hundred days can set the stage for genuine US re-engagement in the international climate effort in
Copenhagen in 2009.

Meanwhile, the U.S. Chamber has already initiated a advocacy campaign urging against use of the Clean Air Act to regulate greenhouse gas emissions

The Chamber’s report concludes that over one million mid-sized to large commercial buildings in the industrial, commercial and agricultural sectors could potentially become subject to a costly and bureaucratic permitting process if EPA moves forward with its proposed rulemaking. These include:
o 260,000 office buildings;
o 150,000 warehouse and storage;
o 140,000 mercantile;
o 100,000 schools and other educational facilities;
o 92,000 health care facilities;
o 71,000 hotels, motels and other lodging facilities;
o 58,000 food service industry buildings;
o 37,000 houses of religious worship;
o 26,000 public assembly facilities; and
o 23,000 restaurants and food sales facilities.

The debate over the statements by Obama's adviser and the Chamber's effort to block an endangerment finding are overblown. If EPA does not act, the Court's will force them to.  In fact, the Deseret Power case, could very likely trigger such regulation without further action by EPA or before a new Administration takes the oath of office.

Massachusetts v. EPA ,which said greenhouse gases are a "pollutant" under the Clean Air Act, sets in motion inevitable regulation under the Clean Air Act.  U.S. EPA's position is that the Clean Air Act is not applicable to GHGs until it moves forward with actual regulatory standards for their control or reduction.  But that is only a matter of time.  Even if EPA continues to delay action, suits challenging that delay will be successful, probably way before the 18 month time frame established by Mr. Grumet. 

While other branches of the federal government (Transpiration, Energy, Agriculture and Commerce) have commented that regulation is not inevitable, such argument find little support in the findings of the Supreme Court.  In my mind, due to inevitable Court action, those who worry about regulation of greenhouse gases under the current structure of the Clean Air Act would be wise to pursue Legislation.

As discussed in my next post, there is reason to worry about using the current structure of the Clean Air Act to regulate greenhouse gases. 

 

 

Decision on CO2 Won't Wait for EPA

Lets get everyone up to speed with events on regulation of greenhouse gases (GHGs) including CO2:

1.  Supreme Court says CO2 is a pollutant under the Clean Air Act.  In Massachusetts v. EPA decided in April of 2007, the Supreme Court held that 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 in this case was Section 202 of the Clean Air Act which covers regulation of greenhouse gases from motor vehicles. For a pollutant to be regulated under Section 202 it must be “reasonably be anticipated” to “endanger public health or welfare.”   Therefore, EPA must conclude GHGs from motor vehicles endager public health before regulation commences The Court remanded the Section 202 determination to EPA to make the necessary "endangerment finding." 

2.  U.S. EPA says Clean Air Act is "ill suited" to regulated GHGs-  in July 2008, the EPA released its Advance Notice of Proposed Rulemaking on GHG regulation.  Along with its release, EPA Administrator Johnson made statements that the Clean Air Act is an ill-suited vehicle for regulation of GHGs. The ANPR represents EPA's response to both the Supreme Court's decision in Massachusetts v. EPA and a number of pending petitions to regulate greenhouse gas emissions from most mobile and stationary air pollution sources. The ANPR includes extensive analysis of the science related to climate change, technologies available for reducing greenhouse gas emissions, and the various statutory provisions that may be implicated by an endangerment finding under section 202 of the Clean Air Act. It solicits public comment on a variety of important issues.

3.  Environmental Groups Argue Regulation of GHGs is Not Discretionary by EPA-   Many environmental groups have argued that the finding that GHGs are a "pollutant" under the Clean Air Act is enough to trigger immediate regulation under permitting provisions of the Act.  They argue the endangerment finding necessary for regulation under Section 202 is not necessary to begin regulating GHGs under other provisions of the Act.

4.  Litigation Ensues Over Whether Regulation of GHGs is Discretionary-  As discussed in previous posts, a number of legal challenges have been filed to the issuance of permits for construction of new coal fired power plants.  Environmental and Citizen Groups have challenged the permits on the basis the failed to control CO2 as a pollutant.  U.S. EPA and State EPA's have argued that C02 and the other GHGs are not "regulated" pollutants under the Act.  They distinguish the Massachusetts decision by saying the Court only found GHGs to be a pollutant.  Therefore, U.S. EPA must complete its rulemaking process before GHGs are regulated.  At least one State Court has already disagreed with EPA's interpretation.  A Georgia Court has already ruled the GHG are a regulated pollutant that must be considered as part of EPA's New Source Review (NSR) permitting program.

And now the latest....

While U.S. EPA methodically proceeds down its rulemaking path, it is more than likely the Courts will not wait for EPA before deciding whether CO2 is a regulated pollutant.  In fact, I believe the landmark case to decide whether regulation of GHGs must occur immediately is about to be decided.  In the case, the Sierra Club is challenging EPA’s issuance of a permit for a waste-coal-fired generating unit at a power plant in Utah that did not establish Best Available Control Technology (BACT) emissions limits for CO2

On September 12, 2008, reply briefs were filed in the case of in the Deseret Power Electric Cooperative (Bonanza) case which is before U.S. EPA's Environmental Appeals Board.   A decision in the case could be expected in the next couple of months.  To give you an idea of the level of attention this case is attracting, the following business groups filed briefs in the litigation:  U.S. Chamber of Commerce, National Association of Manufacturers, American Petroleum Institute, American Chemistry Council, etc.   

Sierra Club argues that because the Supreme Court has already determined that CO2 is an “air pollutant” under the Clean Air Act (CAA), that finding triggers EPA's obligation to establish BACT for CO2 emissions in the permit.  EPA and the business groups counter that the Supreme Court only EPA found CO2 to be a “pollutant” under the CAA, it is not yet a pollutant “subject to regulation” for which BACT is required until EPA concludes is rulemaking process. 

The Sierra Club together with New York, California and other Northeast States have put forward a novel argument that may tip the scales in their favor based upon comments I have heard from EPA officials.  The Sierra Club cites to Section 821 of the Clean Air Act which establishes monitoring requirements for CO2.  The following excerpt is from a Sierra Club brief filed in the litigation:

In § 821 Congress ordered EPA “to promulgate regulations” requiring that hundreds of facilities covered by Title IV monitor and report their CO2 emissions, and in §165, Congress required a BACT limit for “any pollutant subject to regulation” under the Act. The only possible reading of these two statutory mandates is that Congress intended that EPA apply BACT limits to CO2 pursuant to §165.

The ultimate issue boils down to whether monitoring requirements rise to the level of "regulation" of CO2 or does EPA have to establish actual air quality standards or emission limits for CO2 and other GHGs.    

The decision in this case will have massive repercussions.  If EAB decides in EPA's favor, regulation of GHG will likely be delayed for at least a couple of years.  If the EAB agrees with the Sierra Club, EPA will need to immediately begin regulating GHG in permitting actions.  As I will discuss in an upcoming post, such a decision could overwhelm EPA and the States in new permits for hundreds of thousands of new sources. 

 

 

Lawsuit Challenges State's Right to Modify its Air Pollution Control Plan

A lawsuit filed this week  raises an important question about the relationship between the federal government and states pertaining to environmental regulations.  At issue is how much flexibility state's have to modify their air pollution control plans used to comply with federal air quality standards.  As reported in the Columbus Dispatch, the Sierra Club has challenged Ohio's ability to increase the threshold for triggering the requirement to install best available technology (BAT) on smaller sources of air pollution

The specific exemption was included in Sentate Bill 265 which increased the BAT exemption from 1.8 tons per year to 10 tons per year.  These sources will still have to include air pollution controls, typically what is called "reasonably available control technology" (RACT).  However, they will no longer have to meet the more stringent BAT standard.

The Sierra Club goal is to prevent small pollution sources from being allowed to increase emissions.  However, they are missing the critical issue.  As long as overall pollution levels remain the same, shouldn't states be allowed to choose what methods they will employ to meet federal air quality standards?  Also, shouldn't states be allowed to change methods if they find one to be ineffective or inefficient?  

The increase in the BAT trigger threshold was adopted because there was a strong belief Ohio was over regulating small sources of air pollution.  As an example, Ohio regulates over 70,000 air sources while its neighbor, Michigan, only regulates 7,000.  Obviously the disparity is not attirubated to Michigan having far less industry or manufacturing, its attiributable to the fact Michigan has a higher threshold for triggering the need for a permit. The Legislation was an attempt to address this disparity.  [A prior post discussed the policy motivations behind the legislation and U.S. EPA's concerns with the changes]

The Sierra Club argues the change violates the Clean Air Act's "anti-backsliding" prohibition.  Under the Clean Air Act, state's are not allowed to undermine the progress made in improving air quality by reducing air pollution control requirements.  However, state's have some discretion to substitute old requirements with equally effective new requirements.

Ohio wants to amend its state air pollution control plan (SIP) to substitute the requirement to install BAT on small sources with other requirements targetting other sources that are currently being implemented.  The new requirements will more than make up for any pollution increase attributable to dropping BAT for small sources.

Shouldn't the State's be allowed to substitute less effective or inefficient pollution control requirements with new requirements that will produce equal or greater reductions?  Hopefully, the Courts and U.S. EPA will say yes.  Otherwise, less effective requirements remain on the books forever. 

The Wild West of Carbon Footprint Accounting

Have you measured your company's carbon footprint yet?  Don't worry if you haven't,  in the wild west that is climate change sometimes it pays to wait and see how things shake out.  For instance, who would have thought just picking an accounting method for measuring greenhouse gas (GHG) emissions would be so complicated. 

There is no doubt that quantifying emissions is gaining in popularity.  A recent survey of North American supply chain executives determined that 60% decided to measure their emissions.  Their motivations may be fear of impending greenhouse regulations, compliance with existing requirements, customer demands or sustainability initiatives within their company.

While many executives have decided to measure emissions, not all executives are going about it in the same way.  A recent study of greenhouse reporting and verification methods found that more than 34 different protocols and guidelines for reporting emissions have been used.  Variation occurs even among companies located in countries or states with mandatory greenhouse gas regulations. 

Such variation leads to a great deal of inconsistency and therefore, a lack in comparability between corporations' reports.  There is ever-growing controversy as to whether within various industrial sectors an apples to apples comparison can be made of company footprints or emission reduction targets.

Perhaps things are beginning to take shape, the States have seemed to coalesce around a greenhouse gas accounting method- The Climate Registry(The adjacent map shows those states and Canadian provinces who have endorsed the use of the Climate Registry)  However, until US EPA weighs in, you are still risking having to make adjustments to your calculation of GHG emissions.  Fortunately, the sheriff is about to ride into town.

Recently, Congress directed US EPA to publish a mandatory GHG reporting rule, using the Agency's existing authority under the Clean Air Act. (H.R. 2764, Public Law 110-161).  Congress has required EPA to publish a draft rule by September 2008 and a final rule no later than June 2009.  The long gap between draft and final rule will allow for a rigorous public comment period. 

 

Congress has directed the Rule must address certain key elements, such as:

  • Reporting on emissions from upstream (fossil fuel and chemical producers and importers) and downstream sources (large industrial direct emitters)
  • Mandatory reporting thresholds
  • Frequency of reporting

The EPA is provided discretion to utilize methods already in use and can build upon existing mandatory and voluntary reporting systems, such as:

  • Existing reporting for electric generating units under Section 821 of the Clean Air Act
  • Federal reporting program (Title IV, Climate Leaders, 1605(b))
  • State programs (California, The Climate Registry, RGGI, other State programs)
  • Corporate programs (WRI/WBCSD)
  • Industry protocols (API Compedium, CSI Protocol, or International Protocols)

If you're not familiar with all of the references to various protocols that's okay.  It may be prudent to wait until EPA at least releases its draft reporting rule to get an idea of how this shakes out. 

Perhaps EPA will say that use of the Climate Registry method is acceptable for purposes of its rule, in essence endorsing the standard. Due to the number of states and provinces already backing the Registry, that may be very likely.  However, what if EPA decides to build upon or modify requirements?

Keep in mind that even if you wait until September you still risk EPA will make changes during the public comment period.   Companies and organizations that have invested in a certain protocol are going to fight hard to see the EPA rule endorse it.  But in my opinion it would be a grave mistake for EPA to try and avoid controversy by not picking any winners.  Standardization is a must, without it there will always remain issues of inconsistency.

 

 

 

 

 

 

 

 

 

CAIR III: Creating Key Legal Precedent on Cap and Trade

In my prior posts on CAIR, I analyzed the real world impacts of the Court's decision to vacate the program.  In my final post on CAIR, I highlight some of the legal implications from the Court's decision on business and policy makers.  This is not meant to be a legal brief for lawyers, but rather a quick summary of what matters most from the CAIR decision.

 

 

 

  • Deadlines and Dates-  I had the pleasure of testifying in the U.S. Senate on the issue of ozone/soot deadlines and implementation of federal control programs.  The Court made an astute conclusion in finding that U.S. EPA should have coordinated attainment deadlines for ozone and soot that are applicable to the States with the reductions required under the CAIR program.  The Court held "EPA ignored its statutory mandate to promulgate CAIR consistent with provisions in Title I (of the Clean Air Act) mandating compliance deadlines in downwind state's."  (page 25) 

 

  • Coordination with State Pollution Control Plans- It is illogical to create federal air pollution reduction programs for power plants and vehicles that take 10-25 years to fully implement while requiring States meet federal air quality standards in 3-5 years. Depending on the State, power plants and vehicles make up roughly 30-50% of the ozone problem.  You are handcuffing the State's by designing federal programs that won't assist their efforts to meet federal air quality standards until after applicable deadlines have past.  Especially when much of the ozone and soot problem is regional in nature, not local. (see CAIR II:  Short Term/Long Term Implications)

 

  • Cap and Trade "on the ropes"-  For pollutants with both regional and local consequences it may be enormously challenging to create a valid trading program using the current authority in the Clean Air Act. Both CAIR and CAMR have been vacated by the Courts.  Both represent the newest  cap and trade pollution trading programs developed by U.S. EPA.  Is this the end of cap and trade?    Examine the following quotes from the Court's decision attacking the very foundations of a regional cap and trade program:
    • "Theoretically, sources in Alabama could purchase enough NOx and SO2 allowances to cover all their current emissions, resulting in no change in Alabama's contribution to Davidson County, North Carolina's non-attainment." (page 16)
    • "In Michigan we never passed on the lawfulness of the NOx SIP Call's trading program."  (page 17)  Seems like a less then subtle suggestion the Court may have thrown out the NOx SIP Call if similar challenges were made.
    • "EPA's approach-regionwide caps with no state-specific quantitative contribution determinations or emissions requirements-is fundamentally flawed." (page 59)

 

  • Economics of Compliance, Costs Cannot be the Driver-The Courts have rebuked EPA efforts to increase the relevance of the economic cost of pollution controls.  The CAIR decision once again declares costs secondary to environmental consequence. 
    • "EPA can't just pick a cost for a Region, and deem significant any emissions that sources can eliminate more cheaply." (pg. 37)
    • "EPA's interpretation cannot extend so far as to make one State's significant contribution depend on another state's cost of eliminating emissions." (page 39)
    • The Court strongly criticized EPA's fuel adjustment method of granting more allowances to states with coal burning power plants versus gas or oil.  "The net result will be that states with mainly oil- and gas-fired EGUs (electric generating units) will subsidize reductions in states with mainly coal-fired EGUs...EPA's appraoch contravenes [the Clean Air Act]." (page 41)

 

First Court Revokes Air Permit Over CO2 and Clean Air Act

For the first time a court has revoked a permit due to concerns over C02 emissions and climate change.  While there have been previous instances where states have denied permits due to concerns with C02 emissions, this is the first time a court has revoked a previously issued permit.  Notably, the Court did not base its decision on state law, rather it ruled the Clean Air Act (CAA) requires analysis and control of C02 emissions. 

Other courts are currently hearing similar challenges.  If this decision is a trend it will have major implications for any new facilities seeking an air permit.  In a future blog post I will discuss the implications of using the Clean Air Act, specifically the New Source Review provisions, to regulate CO2.  Much speculation has been made as to whether CO2 will be regulated even without action by Congress on comprehensive climate change legislation.

The CO2 decision was issued on June 20, 2008 in Georgia's Fulton County Superior Court.  The Georgia Environmental Protection Division had approved a permit for the construction of a proposed 1200-megawatt coal-fired power plant.   Environmental groups, including the Sierra Club, challenged the permit saying the plant's emission of 8-9 million tons of CO2 had to be considered. Siding with the Sierra Club, the Court overturned the State's issuance and sent the permit back to perform the analysis it said was required under the CAA. 

Note: According to Sourcewatch, between 2007 and 2008, plans for 69 coal plants have been canceled.

The Clean Air Act requires major new sources of air pollution to install the best available pollution control technology (BACT) to reduce pollutants regulated by the Act.  The parties agreed that CO2 was not evaluated as a pollutant under the BACT analysis performed by the Georgia Environmental Protection Division.  Longleaf Energy defended its permit by arguing that CO2 was not a pollutant "controlled or limited" by the Clean Air Act.  The Company also argued the U.S. Supreme Court's decision in Massachusetts v. EPA was not controlling because the Court only found CO2 to be a pollutant, it did not determine it was a "regulated pollutant" under the Act.

The Court rejected the arguments raised by Longleaf stating the BACT provisions of the Clean Air Act were broader "encompassing all pollutants that are subject to regulation under the Act, whether or not they are independently subject to NAAQS [federal air quality standards] or other general limits."  The Court found that the Supreme Court in Massachusetts v EPA did determine CO2 was a "pollutant subject to regulation."