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

On February 19th, eight Democrat Senator's wrote a letter to EPA regarding its plans for issuance of greenhouse gas regulations for vehicles, factories and power plants.  This from the Wall Street Journal:

The lawmakers, including prominent Senators Max Baucus, (D., Mont.), Carl Levin, (D., Mich.) and John Rockefeller, (D., W.V), warned EPA chief Lisa Jackson in a letter that "ill-timed or imprudent regulation of [greenhouse gases] may squander critical opportunities for our nation, impeding the investment necessary to create jobs."

The letter could boost a Republican effort led by Sen. Lisa Murkowski, (R., Alaska), to prevent the EPA from regulating stationary greenhouse gas emitters such as power plants, refineries, steel mills, chemical plants and cement kilns.

The Senators letter also showed there is still a basic misunderstanding of how regulation of GHGs emissions from vehicles are tied to stationary source regulation. 

The Senators suggest EPA move forward only with the Light Duty Vehicle rule setting GHG standards for vehicles so that there can be one national standard.  However, based on this comment, it appears the Senators did not understand that issuance of the Light Duty Vehicle rule will automatically trigger regulation of stationary sources without any additional EPA rulemaking.

EPA Responds

In perhaps the quickest response in history, EPA Administrator Jackson has already released her written response.  The response is notable not only for its timeliness, but the key insights it provides into EPA's greenhouse gas (GHG) rulemaking strategy.

The fact the letter provides so much valuable information about EPA's strategy only days after the Senator's letter was sent can only mean EPA's has decided on its path.  Now EPA is floating a trial balloon of its strategy in its response letter.  There are several key developments in the letter:

1. No final GHG standards in 2010.  EPA will finalize the Light Duty Vehicle GHG rule in late March. However, the first vehicle GHG standard will be effective in 2011 (Model Year 2012).   EPA explains that its legal view is that GHG do not become a "regulated" pollutant under the Clean Air Act until the Model Year 2012 standards are effective in 2011.  By adopting this legal interpretation, EPA is effectively buying itself a year before GHG emissions from large stationary sources will be regulated.  Of course, its an open legal question as to whether future vehicle standards amount to "regulation" sufficient to trigger stationary source regulation of GHGs immediately. 
2. EPA is planning major changes to its proposed Tailoring Rule. In the draft Tailoring Rule, EPA proposed federal permit triggers for GHGs of 10,000 or 25,000 metric tons of CO2. Based upon this letter, EPA is proposing to go higher, thereby bringing in even fewer large stationary sources of GHGs in the short term. For example, in 2011 only sources that already trigger federal permitting for non-GHG emissions will have to evaluate their GHG emissions for controls. After 2011, the letter suggests much higher triggers than 25,000 metric tons from 2012-2016.
3. EPA is buying time on BACT.  Major sources triggering federal permits must install Best Available Control Technology (BACT) to reduce emissions.   A major issue has been EPA's determination of what will constitute BACT for GHGs.  Especially concerning was the fact some possible controls, like carbon sequestration for power plants is not yet ready for implementation.   By tying the date for regulation of GHGs from stationary sources to the 2012 model year vehicle regulations, EPA has bought itself a year to work through these issues. 

A couple of final points. EPA discusses the implications of Sen. Lisa Murkowski's proposed amendment to disapprove of EPA's "endangerment finding." EPA states the immediate result will be revival of the California Waiver for regulation GHGs from vehicles. EPA warns there will be no national standard for motor vehicle emissions.

Also noteworthy is the fact the letter simply waives off claims that EPA may not have the legal authority to set higher trigger thresholds for stationary sources that the 100/250 tons triggers in the Clean Air Act.  Administrator Jackson simply claims EPA has the authority and criticizes business groups for suggesting they would appeal the Tailoring Rule.

Finally, EPA Administrator concludes the letter by making the rather harsh statement that passage of the proposed Senator Murkowski resolution would put the U.S. behind China and more like Saudi Arabia its treatment of the issue of Climate Change. No doubt, that type of rhetoric is designed to discourage Democratic support for the resolution.

Very interesting response from EPA.  It is written in such a way to suggest..."no need for immediate legislative action, nothing it really going to happen for at least a year if not longer."  However, this assumes EPA has the legal authority to implement the strategy suggested in its response letter.

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The twists and turns in the saga of regulation greenhouse gases (GHGs) continue.  After the State of the Union and release of the President's budget, there is speculation that President Obama has abandoned Cap & Trade legislation. 

Meanwhile, businesses face greater risk as a result of new and impending regulatory action.  The Securities and Exchange Commission (SEC) has issued guidance telling companies they must disclosure risks to investors related to the company's exposure to effects of climate change and potential regulations. Finally, EPA is moving ahead with its plans to regulate GHGs using existing authority under the Clean Air Act.

Is Cap & Trade Dead or Alive?

The President only made vague references in the State of the Union to a "comprehensive energy legislation" that will include measures to address climate change.  Speculation was that the Obama Administration had made the decision to drop its plans for Cap & Trade.  The speculation increased with the release of the proposed federal budget, which dropped $646 billion in anticipated revenue from Cap & Trade.  The President only included a "placeholder" for that revenue.

Carol Browner, the President's Climate Adviser, pushed back on the notion Cap & Trade is dead.  This from Politico:

The top White House climate adviser pushed back against reports that a climate bill would be scaled back — but shied away from giving an exact time frame for when the Senate should take up the legislation.

“I think predictions about when something is going to happen in the legislative process are very, very hard to make you have to just continue working at it,” Carol Browner told an audience assembled for a climate and energy forum. “We’re encouraged by what we are seeing, and we’re going to continue working at it.”

In hopes of keeping a bi-partisan compromise alive in the Senate, the President put more nuclear power on the table in State of the Union.  There is also discussion of a scaled back Cap & Trade proposal that would be limited only to utilities. 

Even with a scaled back proposal or other compromises, I see it very hard to get to 60 votes in the Senate.  Which makes the next update the critical issue.

EPA Rulemaking

While some businesses think the reduced prospects of a Cap & Trade bill means they have escaped potential climate change regulation, they may have a major wake up call this March.  EPA is planning on moving forward with a series of regulations that will have dramatic impacts on businesses that emit CO2 and other greenhouse gases.

EPA has finalized its "Endangerment Finding."  This paves the way for the Agency's release of the Light Duty Vehicle Rule which will establish GHG emission standards for vehicles.  As previously discussed in prior posts, finalization of mandatory emission limits for vehicles raises GHGs to "regulated pollutant" status under the Clean Air Act.  

Once GHGs are considered "regulated pollutants", other provisions of the Clean Air Act are automatically triggered, most notably Title V permitting and New Source Review (NSR).  EPA is proposing to finalize its "tailoring rule" simultaneously with the Light Duty Vehicle Rule in order to substantially raise the thresholds for triggering Title V permits or NSR.

The likelihood of regulations was further evidenced by the President's proposed budget, which includes significant increase funding to pay for new EPA regulatory initiatives on climate change. (Summary of EPA proposed budget)

• $47 million more the EPA in the 2011  budget to pay for greenhouse gas regulation
• $4 million would go to the EPA's mandatory greenhouse gas reporting rule.  Major emitters of greenhouse gases must start tracking their emissions this year under EPA's reporting rule.
• $25 million to States to aid in processing new permits that will be required as a result of greenhouse gases becoming a regulated pollutant under the Clean Air Act.
• $7 million is allocated to development of new performance standards including determining what constitutes Best Available Control Technology (BACT) for greenhouse gases.

SEC Interpretative Guidance

On January 27th, the SEC voted to issuance guidance requiring companies to disclose certain risks associated with climate change. The 3-2 vote was highly controversial. 

While some saw the SEC action as an political endorsement of climate change regulation, others believe its the job of the SEC to require disclosure of business risks.  The NY Times, in an editorial, supported increased information on corporate risk associated with climate change-"The S.E.C. action is simply one more incentive for investors and managers to better understand the risks — and the opportunities — out there for publicly traded businesses. "

 From the press release, here is a description of the requirements in the forthcoming guidance:

• Impact of Legislation and Regulation: When assessing potential disclosure obligations, a company should consider whether the impact of certain existing laws and regulations regarding climate change is material. In certain circumstances, a company should also evaluate the potential impact of pending legislation and regulation related to this topic.

• Impact of International Accords: A company should consider, and disclose when material, the risks or effects on its business of international accords and treaties relating to climate change.

• Indirect Consequences of Regulation or Business Trends: Legal, technological, political and scientific developments regarding climate change may create new opportunities or risks for companies. For instance, a company may face decreased demand for goods that produce significant greenhouse gas emissions or increased demand for goods that result in lower emissions than competing products. As such, a company should consider, for disclosure purposes, the actual or potential indirect consequences it may face due to climate change related regulatory or business trends.

• Physical Impacts of Climate Change: Companies should also evaluate for disclosure purposes the actual and potential material impacts of environmental matters on their business.

While the prospects for Cap &Trade legislation have dimmed dramatically over the last few months, this is by no means the end of the story.  Significant new mandatory regulations will be finalized as early as March. 

While there are issues with the House version of the Cap & Trade bill, it would at least create a market mechanism for reducing emissions.  Business opposing Cap & Trade may soon learn that the alternative- regulation under the Clean Air Act- is a far worse proposition.

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I was giving a speech to a trade association last night regarding Cap and Trade legislation in Congress.  The sentiment of most participants in this manufacturing group was that they had dodged a major bullet because passage of a bill looks very unlikely.  While that is true, I told the audience don't lose sight of the fact regulations are coming even without a bill in Congress.  This took many of the members by surprise. 

Here is how the battle over climate change regulation is currently unfolding...

While the Senate continues to try and reach a compromise over Cap and Trade legislation that could garner 60 votes, most observers are now saying passage is very unlikely.   A range of reasons are cited for the diminishing chances for a Senate bill:

• Loss of the "super" majority with the Massachusetts Senate race- although 60 Democrats were not going to vote for this bill, it is one less vote.  This from Reuters:

• From a purely numerical perspective, the Massachusetts election makes only a marginal difference. With the real division running through the centre of the Democratic Party, rather than between the parties, cap-and-trade was never going to pass on a 60-40 party-line vote. It was always going to need at least some Republican votes. So the loss of one Democrat makes only a small difference.

• Hard fought legislative battles over health care reform diminishes any potential compromise between Republicans and Democrats
• Failure in Copenhagen to reach a global consensus on climate action
• Health care, financial reform and jobs being much higher legislative priorities
• "Climategate"- the uncovering of unflattering e-mails by climatologists

Pick any combination of the items above and a strong case can be made that cap and trade will not emerge in 2010 or in the near future.   A recent New York Times Article  does a great job describing how the battle has shifted from Congress to the halls of U.S. EPA.

EPA in March is expected to roll out the first-ever federal standards affecting greenhouse gas emissions from automobile tailpipes. This follows the agency's move in December declaring greenhouse gases a danger to public health. The tailpipe standards would automatically trigger requirements that stationary sources -- such as power plants -- install "best available control technology," or BACT, according to EPA. The agency has proposed a separate rule to shield smaller facilities from those requirements, the "tailoring rule," which is also expected to be in place by March.

As set forth above, the dominoes are falling leading to full blown regulation of greenhouse gases using EPA's existing authority under the Clean Air Act.  The regulations have progressed as follows:

1. Mandatory Greenhouse Gas Reporting Rule- EPA has already finalized mandatory reporting for large source (25,000 metric tons).  Sources must start tracking emissions this year.
2. Endagerment Finding-  EPA finalized its finding that greenhouse gas emissions from vehicles endanger human health and the environment.  This was a pre-requisite to issuance of its Light Duty Vehicle greenhouse gas standards.
3. Light Duty Vehicle GHG Standards-  EPA has stated in prior rule packages that it expects to finalize this rule this March.  This will be the first rule establishing actual emission limits for greenhouse gases.  Once mandatory emission limits are established for vehicles, the Clean Air Act automatically requires certain provisions will apply to all other sources.   New Source Review (NSR) will be triggered by emissions of greenhouse gases.
4. GHG Tailoring Rule-  This is EPA's effort to change the triggers for NSR to fit GHG emissions.  Without this rule very small sources would trigger federal air permitting requirements.

As EPA marches toward full blown regulation, attention shifts back to the Senate where a major battle over an amendment to block EPA's efforts is about to take place.  This from Environmental Leader:

U.S. Sen. Lisa Murkowski (R-Alaska) is expected to introduce an amendment that would prevent the Environmental Protection Agency (EPA) from regulating greenhouse gas emissions (GHG) under the Clean Air Act, reports the Los Angeles Times.

Murkowski will either try to block the EPA by seeking an amendment to an unrelated debt bill due to go to vote on Jan. 20 or she will seek a resolution of disapproval, which would not be subject to filibuster and only need 51 votes to pass, reports the Guardian. She has the support of 34 Republicans and is reaching out to Democrats, according to the article.

Its going to be very difficult to find another seventeen votes to support the measure in the Senate.  Therefore, businesses must be prepared for the major EPA's greenhouse regulations in March.  Its a good time to be assessing your businesses exposure and risks using the proposed thresholds.   
 

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Today, a day that will likely live in environmental law infamy....the EPA Administrator Lisa Jackson finalized the "endangerment finding" in response to the U.S. Supreme Court's ruling in EPA v. Massachusetts which was issued way back in April 2, 2007.  While the Supreme Court found that greenhouse gases were air pollutants covered by the Clean Air Act, it did not say the Act mandated regulation.  Rather, the Court said EPA was required to make additional findings regarding the danger presented by greenhouse gases before regulations would kick in. 

The magic language for emission standards from motor vehicles appears in Section 202(a) of the Clean Air Act.  Under Section 202(a), EPA is required to determine whether or not emissions of greenhouse gases from new motor vehicles cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare (so called "endangerment finding").   If EPA makes a positive finding- meaning emissions endanger public health and welfare- it then promulgate greenhouse gas emission standards for motor vehicles.  Today, the Administrator made an positive determination.

Today's major announcement is the necessary precursor to mandatory emission standards for vehicles.  More importantly, it sets in motion regulation of greenhouse gases from all sources, not just motor vehicles.   Here are the steps that lead to that result:

1. Positive "endangerment finding"
2. Finalize regulations setting emission standards from motor vehicles- March 2010?
3. Greenhouse gases (GHGs) become a "regulated pollutant" under the Clean Air Act- once a "regulated pollutant" other regulations in the Clean Air Act are automatically triggered.
4. Most notably, on the same day vehicle standards are finalized, New Source Review (NSR) standards would include review of emissions of GHGs from new or expanding sources.  No new regulatory action is required for NSR to apply to GHGs, it will automatically happen.

EPA realizes the process that has been set in motion for much broader regulations which is why it proposed the Greenhouse Gas Tailoring Rule in the Fall. (see prior post, EPA Risky Climate Change Regulatory Approach) The Tailoring Rule attempts to temporarily reduce the scope of the NSR program to only larger emission sources of GHGs. 

Now that a positive endangerment finding has been finalized, broad GHG regulation is absolutely inevitable.  Short of Congressional action, the existing Clean Air Act will be used to regulate GHG emissions.  An outcome, even the EPA itself has said it does not prefer.  Note the press release from EPA:

President Obama and Administrator Jackson have publicly stated that they support a legislative solution to the problem of climate change and Congress’ efforts to pass comprehensive climate legislation. However, climate change is threatening public health and welfare, and it is critical that EPA fulfill its obligation to respond to the 2007 U.S. Supreme Court ruling that determined that greenhouse gases fit within the Clean Air Act definition of air pollutants. 
 

Congressional refusal to act swiftly on climate change legislation is putting us dangerously close to a chaotic regulatory scheme under existing Clean Air Act authority.  In fact, as noted above, Congress has to act to take us off the path.  Refusing to act, in order to blame President Obama is too large a price to pay to score a few political points. 

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On September 30th, U.S. EPA announced the release of its proposed rule regulating emissions of greenhouse gases (GHGs) from large industrial sources. The proposal represents a risky move by U.S. EPA in the event climate change legislative efforts fail and U.S. EPA is forced to move forward with the rules.  The risk is two fold: 1) U.S. EPA's action is grounded in questionable legal authority; and 2) the action starts a process that eventually leads to regulation of small sources and issuance of millions of federal air permits.

Under the proposal, at least initially, only large industrial facilities that emit at least 25,000 tons of GHGs a year will be required to obtain construction and operating permits covering their emissions.  The construction permits will come under U.S. EPA's New Source Review Program (NSR) and the operating permits will come under its Title V Program (Title V). 

What does triggering NSR mean for these sources?

Once a source triggers NSR, it must go through a lengthy and complicated permitting review process.  The review is designed to identify the best available control technology (BACT) which will reduce emission of the pollutant, in this case greenhouse gases (GHGs). 

Unlike the proposed cap and trade legislation, each and every source triggering NSR will be required to go through this case by case review process and install controls. Under cap and trade, sources can either install controls or cover their emission by purchasing pollution permits (allowances).  Therefore, cap and trades results in more cost effective reduction in emissions than a simple mandate on all sources.

What does coverage under Title V mean for these sources?

The Title V permit is meant to cover large sources that typically have multiple air permits or are subject to a variety of air pollution regulations.  The purpose of Title V is to consolidate all these requirements into a single permit.  Some Title V permits can be as large as 500 pages or more. Under the proposed rule, sources that emit more than 25,000 tons per year of CO2 or CO2 equivalent emissions (CO2e) will be required to obtain Title V permits. 

What doesn't make sense is that some sources may only be covered by Title V permits because of their GHG emissions.  This could result in the strange outcome of Title V permits that are virtually blank because those sources have very little other applicable air pollution regulations. The effectiveness of such an approach has to be questioned.

Key Issue: Established Thresholds Triggering NSR or Title V 

Why is the EPA's action risky?  The agency is proposing the "tailoring" thresholds applicable to GHG emissions that trigger regulation:

• 25,0000 tons of CO2e for new sources triggers NSR
• an emission increase of between 10,000 and 25,000 tons of CO2e from existing sources following a modification to the facility will trigger NSR
• Sources with 25,000 tons of CO2e will be required to obtain Title V permits after five years

Only problem is the Clean Air Act specifies the following thresholds:

• 100 tons from 28 specified industries trigger NSR for new sources
• 250 tons from all other types of sources trigger NSR for new sources
• 100 tons from any source triggers Title V

EPA notes that without modification of the thresholds 40,000 NSR permits would be triggered each year, where currently only 300 are triggered.  Also, 6,000,000 sources would fall under the Title V program whereas the program only currently covers 15,000 sources.

Its a pretty basic tenant of law that Agencies must follow statutory law and cannot re-write them using regulations.  Former Air Administrator Jeff Holmstead commented on this issue in the New York Times

"Normally, it takes an act of Congress to change the words of a statute enacted by Congress, and many of us are very curious to see EPA's legal justification for today's proposal,"

Major Risk #1-  EPA could lose its legal argument that it has authority to raise the thresholds

How does the EPA claim it has the legal authority to raise the thresholds?  Under the doctrines of "absurd results" and "administrative necessity."  Both legal doctrines are similar in that Courts have recognized the ability of agencies to depart from the plain meaning of a statute if application would result in "absurd results" or there is an "administrative necessity." 

EPA explains why these doctrines should apply in the preamble to the rule:

[T]o apply the statutory PSD (NSR) and title V applicability thresholds to sources of GHG emissions would bring tens of thousands of small sources and modifications into the PSD program each year, and millions of small sources into the title V program.  This extraordinary increase in the scope of the permitting programs, coupled with the resulting burdens on the small sources and on the permitting authorities, were not contemplated by Congress in enacting the PSD and title V programs.  Moreover, the administrative strains would lead to multi-year backlogs in the issuance of PSD and title V permits, which would undermine the purposes of those programs.  Sources of all types- whether they emit GHGs or no- would face long delays in receiving PSD permits, which Congress intended to allow construction or expansion.  Similarly, sources would face long delays in receiving Title V permits, which Congress intended to promote enforceability.  (preamble pg. 20)

EPA goes on to state in the preamble that courts are "reluctant" to invoke the "absurd results" doctrine "precisely because it entails departing from the literal application of statutory provisions."  However, EPA asserts this is "one of the rare cases" where it should apply. (preamble pg. 63)

If the Court disagrees with EPA's legal rationale, the rule would be rendered illegal and sent back to U.S. EPA.  However, even without the "tailoring rule" NSR and title V would apply to GHG emissions. 

EPA has stated its intent to move forward with other climate change regulations, such as the light-duty vehicle rule (which EPA says will be finalized no later than March 2010).  After these rules are finalized, GHGs are considered a "regulated pollutant."  If the attempt to raise the thresholds is thrown out, GHG status of a "regulated pollutant" would mandate application of the 100/250 ton NSR and 100 tons thresholds set forth in the Clean Air Act.

For this reason EPA's proposed rule represents a major gamble.  Perhaps that is the leverage they are looking for in the climate change legislative negotiations.  However, if things fall apart EPA may have crossed the point of no return.

Major Risk #2:  The thresholds are temporary in nature resulting in regulation of much smaller sources in the future. 

In U.S. EPA's Press Release Administrator Jackson states

“This is a common sense rule that is carefully tailored to apply to only the largest sources -- those from sectors responsible for nearly 70 percent of U.S. greenhouse gas emissions sources. This rule allows us to do what the Clean Air Act does best – reduce emissions for better health, drive technology innovation for a better economy, and protect the environment for a better future – all without placing an undue burden on the businesses that make up the better part of our economy.”

Jackson made the announcement regarding the proposed rule during a speech to the Governor's Global Climate Summit.  In her remarks she made the following statement:

Defenders of the status quo are going to oppose this with everything they have. Very soon, we will hear about doomsday scenarios – with EPA regulating everything from cows to the local Dunkin’ Donuts. But let’s be clear: that is not going to happen. We have carefully targeted our efforts to exempt the vast majority of small and medium-sized businesses. We know the corner coffee shop is no place to look for meaningful carbon reductions.

While I do not assert EPA is going to regulating the local Dunkin' Donuts, I do think the EPA's description that it will only apply to the largest sources is misleading.  EPA makes clear through out its preamble that the proposed 25,000 CO2e thresholds represents only a "first phase" of the rule.  This is because EPA believes the "absurd results" and "administrative necessity" doctrines, if applicable, only provide temporary relief from the Clean Air Act stated thresholds.  

EPA says that "if  variance from the statutory requirements nevertheless is necessary to allow administrability, the variance must be limited as much as possible." (preamble pg. 20). EPA describes the process in its preamble as follows:

The first phase, which would last 6 years, would establish a temporary level for the PSD and title V applicability thresholds at 25,000 tons per year (tpy), on "carbon dioxide equivalent" (CO2e) basis, and a temporary PSD significance level for GHG emissions of between 10,000 and 25,000 tpy CO2e.  EPA would also take other streamlining actions during this time.  Within 5 years of the final version of this rule, EPA would conduct a study to assess the administrability issues.  The, EPA would conduct another rulemaking, to be completed by the end of the sixth year, that would promulgate, as the second phase, revised applicability and significance level thresholds and other streamlining techniques, as appropriate. (preamble pg.2)

EPA contemplates taking "streamlining activities" vaguely referenced as changing potential to emit calculations as well as creation of general permits.  EPA also states "we expect permitting authorities to ramp up resources for permit issuance."  (preamble pg. 64).  Taking these actions will allow EPA to "bridge the gap between literal language and congressional intent", thereby making it possible to "include more of these sources" in the NSR and Title V program.  (preamble pg. 70).

As a result, EPA is clearly stating its intent that more and more sources fall under the NSR and title V programs by gradually reducing the thresholds over time down to the Clean Air Act statutorily established thresholds.  While EPA may state that their intent is to only gradually phase in smaller source over many years, the argument will be how quickly can "streamlining" techniques be implemented and more permit reviewers hired to bring more and more sources under the program. 

Therefore, EPA's proposed rule fails to set forth a policy statement that regulation of small sources of GHGs is illogical.  Rather, EPA states it needs more time and resources to bring these sources under the program.  By no means am I a defender of the status quo, but it is certainly fair to question whether this is the best approach to addressing climate change. 

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More rumblings that EPA may move forward with regulation of greenhouse gases under its existing authority under the Clean Air Act.  It appears EPA has started to rattle its saber in an effort to re-energize the cap-and-trade proposal currently in the Senate.

The San Francisco Chronicle reported that Administrator Lisa Jackson said the "endangerment finding" would be issued in the next few  months.  Here are a few of her key comments:

"Legislation is so important, because it will combine the most efficient, most economy-wide, least costly (and) least disruptive way to deal with carbon dioxide pollution," Jackson said. "We get further faster without top-down regulation."

But Jackson insisted the EPA would continue on a path that began when the Supreme Court ruled in 2007 that greenhouse gases qualified as pollutants and could be regulated if the government determined they threatened the public.

"Two years is a long time for this country to wait for us to respond to the Supreme Court's ruling," Jackson said.

An "Endangerment Finding" is a prerequisite to regulation of greenhouse gases under the Clean Air Act.  In Massachusetts v. EPA, the Supreme Court held that the Administrator must determine whether or not emissions of greenhouse gases from new motor vehicles cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare, or whether the science is too uncertain to make a reasoned decision.

On April 17, 2009, the EPA issued its proposed positive "Endangerment Finding" and now the public comment period has closed.  This means the EPA could move forward with a final rulemaking at any time.

As Administrator Jackson's comments make clear, the Obama Administration's preferred course of action is passage of cap-and-trade legislation- the American Clean Energy and Security Act of 2009 (ACES).  However, it appears momentum behind the legislation has waned in the Senate. 

Some business groups and politicians may see EPA's comments as only bluffing.  That would be a grave mistake.  There is no doubt from the comments made by the Obama Administration the Agency will proceed with regulation under the Clean Air Act very soon if the prospects on legislation dim.  Key members of the Obama Administration not only believe action must be taken regarding climate change, they also believe the Supreme Court made it legally required. 

Furthermore, those who believe EPA regulations pertaining to climate change can simply be overturned, should read the Supreme Court's decision in Massachusetts v. EPA.  The highest court in the land has left little room for a legal determination that climate change is a hoax or not worthy of regulation.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This last statement is very interesting. 

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

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

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

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

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

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

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

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

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

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

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

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Greenwire obtained a leaked copy of a U.S. EPA powerpoint presentation that discussed the likely elements of the "endangerment finding" and a timeline for action.  The presentation includes a slide showing a timeline for action.  According to the slide, the Agency will miss the April 2nd anniversary of the Massachusetts v. EPA Supreme Court decision, but is projected to sign the rule on April 16.   

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 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 endanger public health before regulation commences The Court remanded the Section 202 determination to EPA to make the necessary "endangerment finding."

As expected and detailed in the EPA powerpoint, the Agency is poised to make a positive endangerment finding.  The presentation also contains additional insights as to what to expect in the April 16the finding:

• EPA will expand the definition of "pollutants" to include the six GHGs traditionally regulated (CO2, CH4, N2O, HFCs, PFCs, SF6).  It will leave out other possible pollutants such as black carbon
• EPA will make a positive finding that GHGs impact both "public welfare" and "public health."  An earlier proposed finding did not make a finding that "public health" was impacted.  EPA will cite to rising temperatures, worse air quality and extreme storm events as impacts on public health
• EPA notes that the Administrator has discretion to determine some sources of GHGs are de minimis or insignificant.  I assume this is meant to address the concern expressed by the U.S. Chamber that everything down to churches and retail stores will be regulated as source of GHG emissions
• EPA will propose two options for listing GHGs as "air pollutants."  Option 1: group the six GHGs together as CO2e (C02 equivalents).  Option 2:  list each GHG individually.  EPA prefers the first option as CO2e have developed into the common currency in other regulatory and trading mechanisms
• EPA discusses the impact of the two options discussed above on different regulatory sections of the Clean Air Act.  Notably, PSD and NSPS are included on the list.  This seems to recognize that the endangerment finding could have an immediate effect of requiring permits for new sources of GHGs.

The "endangerment finding" is the first major domino to fall leading to comprehensive regulation of GHGs.  While President Obama's Cap and Trade proposal is drawing more scrutiny, it presents a much better option than regulation under the Clean Air Act.  Let's hope that legislation can pass before too many of the dominoes fall.

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