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

As reported on CNN, the Senate is debating how or whether to legislatively restore the CAIR program that was struck down in Court.  EPA still has a week or so to decide whether to appeal, but all bets are that Congress needs to act in order to save the program.

The game of chicken centers around whether the entire program should be restored, meaning reductions in Phase I set to take effect in 2009/2010 and Phase II which is to take effect 2015.  The White House insists on both Phase I and Phase II.  (proposed CAIR legislation) Senate Democrats, who have long been unhappy with the strength of the CAIR program are talking like they are only willing to put in place Phase I and then work on long term legislation for a stronger program.

President George W. Bush is "pushing for a full codification of CAIR," Carper told reporters. "That just ain't gonna happen. I think they may not be able to get what they want, but they can get what we all need."

But the White House has allies in the U.S. Senate. In a sign of the ongoing standoff, Sen. George Voinovich, R-Ohio, and Sen. James Inhofe, R-Okla., introduced a bill Thursday that would restore the full program instead of just the first phase.

"Options to quickly reinstate Phase I CAIR followed by tighter legislation do not save as many lives as the full CAIR fix until eight to 20 years from now; that means 6,500 to 41,000 more lives will be lost mostly in the next three to six years," according to a statement released by the lawmakers.

With only a few week before Congress is set to adjourn, there does not appear to be much time to resolve the drama.  With so much at stake and the chaos that will ensue if no type of fix is adopted, its hard to believe no action will be taken.  But as long as the White House insists on reinstatement of the whole program it appears likely there will be no resolution.  The Eastern State, Democrats, Environmental Groups and even some of the Utilities believe too strongly CAIR is a weak program.  If this was not the case, Congress would have passed Clear Skies-the legislative precursor to CAIR. 

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The U.S. Senate Environment and Public Works Committee held a timely hearing on the effect of the Court of Appeals decision vacating CAIR.  There was testimony from US EPA, State, Utilities and one Environmental Group. 

The Senators and all who testified agreed on certain items:

• Substantial health benefits will be lost without action to replace CAIR (17,000 fewer premature deaths avoided each year)
• Tremendous uncertainty exists- the market for trading allowances collapsed following the decision (NOx trading stopped, SO2 allowance prices lost 70% of their value in a day)
• States air quality compliance is in disarray- All who relied on CAIR must redo their clean air plans (SIPs) and will find it extremely difficult to make up the reductions attributable to CAIR
• Utilities risk losing billions in investments in new pollution controls and purchases of allowances (one utility declared a $100 million dollar loss due to collapse of the allowance market)

With so much agreement, one would assume that quick legislative action is likely to address the problem.  Not so fast- Don't forget that the CAIR rule came into existence because Congress could not agree on Clear Skies (a cap and trade legislative proposal).  Those same rifts emerged during the Senate hearing.

• How many P's? (which pollutants should a program cover- NOx, SO2, CO2 or Mercury)
• How many States should be in? (28 versus a national program)
• How steep and fast should reductions be? (there is disagreement even for the two pollutants everyone agrees should be covered- NOx and SO2)

This really is going to boil down to a game of chicken.  On the one side (Democrats, downwind-Eastern states and environmental groups) on the other (Republicans, upwind-Midwest states and the utilities). 

Do those advocating for an aggressive four pollutant bill really want to risk achieving no short term benefits in hopes of more aggressive legislation in the future?   Are they willing to withstand the mess that will ensue in their States without at least a stop gap measure?  Is this really the vehicle to adopt climate change legislation?

On the other side....do Utilities want to face this much uncertainty, especially heading into an election cycle?  Are the Midwest states comfortable that CAIR reductions will be sufficient to meet tougher federal air quality standards?  Are they willing to impose even more costly controls on businesses within their State if cap and trade is taken off the table?

It appears this may be the perfect storm that may actually result in something getting done.  Lets hope so.

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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.

• Congressional Action Needed- Remember "Clear Skies"?  This was the precursor to CAIR.  It was the Bush Administration's attempt to get Congressional action on a power plant cap and trade program.  Congressional failure to pass "Clear Skies" has now led to CAIR getting tossed out. The Court declared EPA's rulemaking approach "fundamentally flawed" (page 59). It appears U.S. EPA cannot legally construct a cap and trade program for power plants directed at ozone and soot through administrative rulemaking.  Therefore, the only way this program gets replaced (and as discussed in my two other posts- it should be) is through Congressional action amending the Clean Air Act.

• 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)

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The recent decision issued by the D.C. Circuit Court of Appeal vacating the CAIR rule  has far reaching implications.  It probably justifies at least one more post.  Understandably, reaction has been related to the fact that this major clean air initiative was dismantled with a stroke of a pen.  A fact highlighted by EPA's announcement in 2005 when the CAIR rule was implemented.

“CAIR will result in the largest pollution reductions and health benefits of any air rule in more than a decade. The action we are taking will require all 28 states to be good neighbors, helping states downwind by controlling airborne emissions at their source.”

--Steve Johnson, Acting EPA Adminstrator
3/10/2005

The Court included editorial comments trying to suggest the impact would be minimal.  For instance, the Court points to two power plant pollution control programs (the NOx SIP call and Acid Rain Program) that will still be effective in reducing emissions even after CAIR is gone. The Court also suggests that State's could simply sue one another if more reductions are needed (using its Clean Air Act Section 126 authority).  Litigation is hardly an effective pollution control strategy.

Bottom line, there is simply no way to minimize the impact of its decision or the ramifications for States and US EPA.

The map to the left is a good representation of the breadth of the CAIR program.  Each dot represents advanced pollution controls on a power plant. (Click on the map to enlarge the view)  This map shows US EPA's projections as to controls on power plants by 2010 after CAIR and CAMR (power plant mercury control program), both of which have been vacated by the Court.  While some of the dots may remain due to the NOx SIP Call and Acid Rain Program, many will disappear or be on hold. 

How many dots disappear?  US EPA projected that CAIR would result in 116 more units having advanced air pollution controls in 2010.  By 2020, the number was 287 more units. 

While the decision certainly impacts efforts at cleaner air, it also makes a mess of state air pollution control plans (called State Implementation Plans- SIPs) that have been submitted for approval by US EPA.  Most of the SIPs submitted rely on CAIR as a primary control method to achieve federal air quality standards for ozone and soot.  The ruling brings tremendous uncertainty as to how these state plans will be reviewed.

To support CAIR, US EPA provided modeling to show air quality improvement that would result from reductions brought about by the program.  State's relied upon this modeling as part of their air pollution control plans to achieve federal air quality standards.

What was the magnitude of air quality improvement that US EPA projected? The Agency showed that in 2005, 104 areas didn't meet ozone standards and 43 areas didn't meet pm 2.5 (soot) standards.  By 2010, EPA projected the number of areas not meeting ozone and soot standards would be reduced to 14 and 20 respectively due in part to CAIR.

Now that the State's cannot rely on CAIR as a cornerstone of their air pollution control strategies, those reduction must come from somewhere.  Without these massive reductions State's face missing deadlines to meet federal air quality standards.  Missing the federal deadline can bring sanctions and more rigorous air pollution control requirements on businesses within the state. 

 US EPA has even adopted a tougher ozone standard which is currently being implemented.  The State's face enormous challenges in meeting this new standard if there is no federal air pollution control program applicable to power plants.  From reading the decision, it may be very difficult to craft a legal program using administrative authority.  Congress may have to amend the Clean Air Act to give US EPA the authority, but since 1990 Congress has shown its reluctance to re-open the Clean Air Act.   

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