Why the Latest Supreme Court Climate Change Ruling is a Big Deal

On Monday, the U.S. Supreme Court issued the next major climate change decision in Utility Air Regulatory Group v. EPA (UARG).  In reading commentary across the web it appears most think the Court's decision isn't really a big deal.  After all, the Court upheld EPA's permitting authority to regulate greenhouse gases (GHGs) from stationary sources.  This from the Guardian:

"The US Supreme Court largely upheld Barack Obama's plans to cut carbon pollution from power plants on Monday, delivering critical support for his climate action plan."

The Court's ruling did limit EPA authority, but most commentators note that the difference in covered emissions is only 83% of the sources instead of 86% of the sources.  So, really what is the big deal?

The Court's ruling is, in fact, a very big deal for two principle reasons:

  1. The Court held EPA has discretionary authority to regulate GHGs under major source permitting authority, not a mandate as EPA claimed; and
  2. The Court took EPA off its frightening path of ever increasing regulation of smaller and smaller sources of GHGs.

The news media have largely focused on the 83% versus 86% figure in concluding EPA got most of what it wanted.  However, the impact of the decision is more complicated then this simple figure. A review of how EPA got before the Supreme Court is important in order to understand the significance of its ruling. 

Massachusetts v. EPA

The Supreme Court already determined that EPA had authority under the existing terms of the Clean Air Act to regulate GHGs.  At issue in the Court's landmark decision in Massachusetts v. EPA
was the language in Section 202(a)(1) of the Clean Air Act (CAA) which requires the Administrator of EPA to set emission standards for "any air pollutant" from motor vehicles "which in his judgment cause(s), or contribute(s) to, air pollution which may reasonably be anticipated to endanger public health and welfare."

Back in 2003, the Bush Administration was trying to delay or avoid regulating GHGs under the Clean Air Act.  One action it took was to deny a petition from twelve states and several cities to regulate GHGs under Section 202(a)(1).  EPA took the position that it did not have the authority to regulate GHGs under the CAA and EPA should be more deliberate before embarking on such a massive regulatory expansion.

In a 5-4 climate decision, the Court ruled against the Bush Administration in Massachusetts v. EPA. The Court pointed to the extremely broad definition of "air pollutant" under the CAA and held that EPA was required to evaluate whether GHGs endanger public health and welfare (i.e the so called "Endangerment Finding")

Following the ruling, the Obama Administration attempted to pass comprehensive climate change legislation (cap and trade).  One argument the Administration used to support the proposed legislation was  the threat that without such legislation it would have no choice but to move forward with promulgating rules under the existing CAA.  Even then the Obama Administration commented that the CAA was ill-suited to regulate GHGs.

While legislation was close to passing, health care was the priority, and cap-and-trade died in the Senate.  The Administration soon moved forward with its Endangerment Finding and regulation of GHGs from motor vehicles.

Point of No Return?

EPA has asserted that once the rulemaking process under the Clean Air Act was initiated, there was no turning back.  EPA argued that once it issued its Endangerment Finding and GHGs became a "regulated pollutant" under the CAA, other regulatory provisions under the Act pertaining to stationary sources were automatically triggered.  

Of grave concern was the stationary major source permitting provisions (PSD and Title V programs) which were triggered anytime a source emitted 250 tons or, in case of Title V, 100 tons of a pollutant.  While these thresholds only captured truly large sources when applied to emissions of traditional pollutants, this would not be the case with GHGs.

EPA warned that applying the 100/250 ton threshold to GHGs would result in an unprecedented expansion of regulatory authority over even small sources.  In fact, thousands of previously unregulated sources would be captured and EPA would be overwhelmed with the new permits.  

When EPA was questioned as to why it would embark on regulating GHGs under the PSD and Title V programs when it would cause such dramatic results, EPA said it had no choice.  The Agency claimed the plain language of the Act as well as the decision in Massachusetts v. EPA, legally compelled the Agency to regulate GHGs under the PSD and Title V programs.

In an effort to mitigate the impact of such regulations, EPA published the Tailoring Rule.  EPA said the rule was necessary due to the fact application of the 100/250 tons threshold to GHGs would produce "absurd results."  Therefore, due to these absurd results, EPA claimed it had authority to tailor the thresholds to more practical thresholds.  

EPA's Tailoring Rule set the GHG trigger at 100,000 tons per year of GHGs and 75,000 tons for existing sources making major modifications.  However, EPA clearly stated that its authority to rewrite the CAA in this manner was only temporary and over time it would be forced to apply the 100/250 tons threshold to GHGs.  In other words, EPA would eventually regulate thousands of new small sources of carbon emissions.

Supreme Court Finds EPA has Discretion But Cannot Rewrite the Clean Air Act

On June 23, 2014, in another 5-4 climate change ruling, the Supreme Court found EPA (as well as the D.C. Circuit Court) were incorrect when it asserted regulation of GHGs from motor vehicles mandated regulation of GHG emissions from major sources under the PSD and Title V programs. The Court held EPA had a choice whether to regulate GHGs under the PSD and Title V program.

The Court also ruled that EPA could not rewrite the CAA through its Tailoring Rule raising the 100/250 trigger thresholds to 100,000 tons.  The Court ruled that the absurd results that would come from application of the 100/250 ton threshold to GHGs really meant the PSD and Title V requirements were not meant to apply to sources solely on basis of their GHG emissions.  Rather, new pollution controls to address GHGs would only be required if the source emitted a previously regulated pollutant over the 100/250 ton threshold (so called "Anyway Sources").

Why the Ruling is So Significant

First, the Court has invalidated EPA's Tailoring Rule.  The Court said the history behind the 100/250 ton threshold established by Congress showed the legislature's intent that they not apply to pollutants such as GHGs.  As a result, regulations will not be slowly ratcheted down to cover thousands of previously unregulated sources.  

Second, the Court clearly held that EPA has discretion whether to include regulation of GHGs under the PSD and Title V programs.  It is much easier to justify a large regulatory expansion when you can argue it is mandated under the law.  The Court's decision eliminates that justification.  This means the Agency actions to regulate GHGs under the PSD and Title V programs could be undone by a future Administration.  

 

Supreme Court Hears Arguments Regarding "Absurd Results" and Permitting for Greenhouse Gases

On February 24th, the Supreme Court heard oral arguments in Utility Air Regulatory Group v. EPA- the case which challenges EPA's attempt to phase in permitting requirements for sources of greenhouse gases (GHGs).  In the end, the case may be much to do about nothing...except another example of how congressional gridlock prevents logical resolutions to complex issues.

 

 

Challenge to EPA's Tailoring Rule

In Massachusetts v. EPA, the Supreme Court upheld the ability of EPA to regulate GHGs from motor vehicles (the so called "Tailpipe Rule").  In that decision the Court determined that the term "any air pollutant" included GHGs so long as EPA determined GHGs were a threat to public health and environment.

EPA determined GHGs were a threat to public health and the environment in its "Endangerment Finding."  The Supreme Court declined to hear the case challenging EPA's finding. Following EPA's determination, GHGs officially became a regulated air pollutant under the Clean Air Act.

Following EPA's Endangerment Finding, EPA concluded that complex federal permitting requirements (PSD and Title V) would also be triggered for sources of GHG because the term "any air pollutant" was used in that portion of the Clean Air Act as well.  Pursuant to that section of the Act, any facility that emits more the 100/250 tons per year of a pollutant regulated under the Act must go through EPA's New Source Review (NSR) program. As part of NSR, new sources or existing sources that are modified must demonstrate they have installed Best Available Control Technology (BACT) to reduce emissions of each regulated air permit.

Because GHGs are emitted in much greater quantities than typical Clean Air Act pollutants, EPA was concerned that application of the 100/250 ton per year threshold to GHGs would trigger thousands of permits. EPA indicated the Agency and States did not have the capacity to process that number of permits.

To address the situation, EPA promulgated the Tailoring Rule to temporarily raise the permitting thresholds. Under the first stage of the Tailoring Rule, new facilities that emit 100,000 tons per year of carbon dioxide-equivalent and existing facilities that increase their emissions by 75,000 tons per year of carbon dioxide-equivalent will trigger NSR,

Petitioners challenged EPA's Tailoring Rule by arguing EPA did not have the authority to simply re-write the statute.  They also pointed to language in the PSD portion of the Clean Air Act which suggests PSD was meant to apply to pollutants with local impacts, not global impacts.  Industry challengers were concerned that allowing 90 different state and local permitting authorities to decide what constituted BACT for GHGs would be chaos.

Justices Highlight the "Absurdity" of EPA's Proposal

EPA justified its Tailoring Rule based on the legal theory that it would temporarily adjust the 250/100 trigger thresholds because applying those thresholds immediately to GHGs would lead to "absurd results."  

Justice Kagan noted that the purpose of the 250/100 trigger thresholds were to differentiate between large and small sources.  Justices Breyer and Alito followed that point by noting EPA's position was illogical in that EPA said the trigger thresholds led to absurd results, yet EPA would eventually work toward utilizing those thresholds for GHGs.

Clearly, the Justices were highlighting a core issue with EPA's Tailoring Rule.  Perhaps it would have been better to simply pick a more logical threshold for GHGs that would have differentiated between large and small sources of GHGs.  

EPA's attorney basically acknowledged that may have been a better approach, but EPA was concerned simply coming up with an entirely new threshold went beyond its authority.  EPA argued, rather than totally eliminating the 250/100 thresholds for GHGs, EPA would re-interpret other policy positions to try capture only larger sources.  For example, EPA could look at a source's actual emissions versus their potential-to-emit (assumed operation 24/7) when determining if the 250/100 ton threshold was exceeded for GHGs.

EPA's argument seems pretty weak.  It is not simply the administrative burden of regulating thousands and thousands of sources of GHGs.  Rather, it is the fact such approach clearly goes against the intent of the Clean Air Act PSD regulations to regulate only large sources.  The Court seemed troubled by EPA's attempt to temporarily raise permitting thresholds.

Challenge to EPA's Tailoring Rule Becomes "Much to do About Nothing"

While the Court seemed troubled by EPA's approach, even if it vacates the Tailoring Rule, the Court's decision will likely have very little impact on EPA's overall effort to regulate GHGs.

Challengers conceded in their briefs that EPA has the authority to regulate GHGs from sources of other pollutants subject to National Ambient Air Quality Standards (NAAQS) for which geographic area is in attainment (referred to as "anyway sources").  As noted by Chief Justice Roberts, this construction would allow EPA to regulate 83% of GHG stationary source emissions versus 86% under EPA's more expansive reading.

When Justices pressed why they should care about a fight over 3% of the emissions, EPA's attorney argued such an interpretation would be inconsistent with EPA's prior interpretations. However, Justice Breyer noted that such an interpretation "does less violence" to the Clean Air Act than EPA's proposed ratcheting up of the 250/100 trigger thresholds.  

Based on questioning from the Justices, the most likely outcome of the case is that only 3% of emissions will be impacted either way.  

Supreme Court Argument Highlights the Problem with an Ineffectual Congress

Virtually everyone, including EPA, concedes the 250/100 tons thresholds don't make sense when applied to GHGs.  EPA has previously admitted that the Clean Air Act, as currently constructed, is ill suited for regulation of GHGs.  However, with Congress unable to compromise, the country is left with the false choice of doing nothing to combat climate change or utilize an Act that was last amended nearly 25 years ago.

The stakes on climate change are simply too high to be left with this result.  The "do nothing" approach on climate change is a non-starter.  However, the uncertainty and "absurdity" that results from using the current Clean Air Act construct to regulate GHGs has unreasonable implications for industry.  

Climate change regulation has greater implications for the county than, perhaps, even the original issues that shaped the Clean Air Act.  Yet, the inability of Congress to reach middle ground will result in the institution of imperfect and impractical climate change regulations. 

[Photo courtesy www.TheEnvironmentalBlog.org]

Reality Check: Impact of President Obama's Climate Change Initiative on Coal Fired Power Plants

 On September 30th, the Congressional Research Service released a very interesting report titled "EPA Standards for Greenhouse Gas Emissions from Power Plants: Many Questions, Some Answers."  The report was prepared as a review of the effect of recent new Clean Air Act regulations on existing and future coal fired power plants.

How New Source Performance Standards (NSPS) Were Triggered for Coal Plants

Since the Supreme Court's decision in Massachusetts v. EPA, greenhouse gases have been considered a pollutant under the Clean Air Act.  As a pollutant, EPA has regulatory authority to reduce emissions under the existing authority provided under the Act if it determined regulation was necessary.

In December 2009, EPA followed the Supreme Court decision with its "endangerment finding" with regard to emissions of GHGs. The finding was that GHGs "may reasonably be anticipated to endanger public health and welfare" as a result of climate change.  This key finding triggered the requirement to regulated GHGs under the Clean Air Act.

According to EPA, coal fired power plants roughly account for one third of all man made GHGs emissions in the United States.  Under Section 111 of the Clean Air Act, EPA must set air emission standards for categories of sources that cause or contribute significantly to air pollution.  As the largest source of GHGs, EPA was legally required to move forward with establishing regulations under Section 111.

Once EPA establishes NSPS standards for new sources, under Section 111(d) it must then promulgate NSPS standards for existing sources.

EPA Establishes NSPS Regulations for New Coal Fired Powered Plants 

In 2012, EPA initially proposed NSPS standards for new coal fired power plants.  The EPA received a large number of comments and decided to re-propose NSPS standards in September 2013.  

The re-proposed standard would set a limit of 1,100 pounds of carbon dioxide (CO2) per megawatt-hour (MWh) of electricity generated for coal fired electric generating units (EGUs).  The EPA also set a standard of 1,000 or 1,100 lbs/MWh for new natural gas fired boilers.  The effect of the rule is that new coal fired power plants would have to basically have equivalent emissions to a natural gas plant.

EPA stated in its proposal that a new coal fired power plant produces roughly 1,800 lbs. CO2/MWh. Therefore, new plants would need to achieve a 40% reduction in emissions to be equivalent to natural gas plants.

The only technology that could possibly achieve a 40% reduction is carbon capture and storage (CCS).  However, CCS poses a number of unique challenges.  First, it roughly uses 30% of the energy a plant would generate to transport and store the CO2 below ground.  Second, industry argues that it is still not a proven technology.

The "War on Coal"

Industry believes the EPA's NSPS proposal for new coal fired power plants effectively ensures no new plants will be constructed.  Between the lost efficiency in having to transport and store C02 and the lack of reliability of CCS as a control technology, coal will no longer be competitive with natural gas for future electric generating units.  For these reasons, the industry has argued that EPA is engaged in a "war on coal."

EPA argues that the technology has been proven and the rule is necessary in order to motivate industry to improve CCS technology.  EPA cites to prior examples where the Clean Air Act spurred technological development at much less cost than anticipated.

While the fight over the NSPS standard for new plants is intense, the real issue is EPA's future promulgation of an NSPS standard applicable to existing sources.  The average coal-fired power plant is approximately 40 years old.  Requiring CCS on plants that are close to retirement seems highly unlikely.

EPA seems to be suggesting that the NSPS for existing sources will push for efficiency improvements in order to reduce emissions rather than CCS.  Even if the NSPS for existing sources is more flexible than for new plants, it will still increase compliance costs for existing coal plants.  

Key Observations in the CSR Report 

The Congressional Report regarding EPA's NSPS standards concludes that the argument over the "war on coal" is largely symbolic.  The report notes that the cheap cost of natural gas is really causing the shift away from coal power, not EPA regulations.  The report notes:

"The debate over EPA's proposed carbon pollution standard for new power plants is largely symbolic, and is characterized by exaggeration on both sides.

  • It is symbolic because this rule by itself will have little impact.  Its real significance is that without the promulgation of a rule for new sources, EPA cannot, under the Clean Air Act, proceed to regulate existing sources.  It sis the standards for those existing plants that may actually reduce the nations' GHG emissions, and in the process, could have significant impacts on coal-fired electricity.
  • It is exaggerated because both EPA and the affected industries describe the rule itself as having far more impact than it will.

"Gas is projected by most experts to be cheap and abundant for the foreseeable future.  Since the early 1990's, new coal-fired plants have accounted for less than 10% of new power-generating capacity.  In these conditions, the electric power industry is likely to continue what it has already been doing for two decades:  building gas-fired plants (or relying on renewable sources) when it needs new capacity."

"The coal industry is unhappy with this, and has tended to place the blame for its current difficulties on EPA; but, actually, the market is the key factor in coal's recent decline...The net result is that coal is simply not competitive with natural gas in most areas."

With so much intensity surrounding the debate regarding EPA's NSPS standard for new coal fired power plants, the report serves as reality check.

Is the Hot Summer Breathing New Life into Addressing Climate Change?

It is an issue that just won't go away...Our incredibly hot summer seems to have re-focused attention on doing something regarding climate change. 

James E. Hansen, director of NASA's Goddard Institute for Space Studies, in Friday's Washington Post, announced the release of a new study.  The title of Mr. Hansen's op-ed piece shows what the new study concludes- Climate Change is Here---and Worse than
We Thought:

In a new analysis of the past six decades of global temperatures, which will be published Monday, my colleagues and I have revealed a stunning increase in the frequency of extremely hot summers, with deeply troubling ramifications for not only our future but also for our present.

This is not a climate model or a prediction but actual observations of weather events and temperatures that have happened. Our analysis shows that it is no longer enough to say that global warming will increase the likelihood of extreme weather and to repeat the caveat that no individual weather event can be directly linked to climate change. To the contrary, our analysis shows that, for the extreme hot weather of the recent past, there is virtually no explanation other than climate change.
 

Media reports from this summer are painting a dramatic picture of the impact from the summer's heat wave.  Take today's AP news article - Thousands of Fish Die as Midwest Streams Heat Up:

Thousands of fish are dying in the Midwest as the hot, dry summer dries up rivers and causes water temperatures to climb in some spots to nearly 100 degrees.

About 40,000 shovelnose sturgeon were killed in Iowa last week as water temperatures reached 97 degrees.....The fish are victims of one of the driest and warmest summers in history. The federal U.S. Drought Monitor shows nearly two-thirds of the lower 48 states are experiencing some form of drought, and the Department of Agriculture has declared more than half of the nation's counties — nearly 1,600 in 32 states — as natural disaster areas. More than 3,000 heat records were broken over the last month.

With new media reports of the impact of the heat wave and new studies emerging confirming the impact of climate change conservatives have started to see its an issue that they need to get ahead of rather than simply resist.

Conservative groups have held meetings this summer to talk about pushing for a carbon tax to replace other taxes while addressing climate change.  A recent CNN article discusses how the proposal to put a tax on certain fossil fuels in gaining support amount some Republicans-  Carbon Tax Gets Unusual Support:

We have to have a system where all forms of energy bear their full costs," President Reagan's former Secretary of State George Shultz said in a recent interview with Stanford University News. Shultz now heads a task force at Stanford that is currently studying the feasibility of a carbon tax.

For Shultz there are many reasons to support such a tax. One is making fossil fuel energy sources absorb costs that are currently borne out by society at large, such as through higher health insurance premiums or Medicare bills caused by pollution-induced diseases.

He also cites energy independence, as well as global warming, "which is not a matter of opinion, but a matter of fact," he said. "The arctic is melting. A lot of people seem to be scoffing at the idea of global warming, but reality will catch up with them."

The old saying is that elections go the way of the economy.  Perhaps the debate over climate change regulation goes the way of the weather.  

Political ads still try and cast support for cap and trade as a negative for those politicians that supported the proposal in Congress.  However, as long as media headlines are filed with the dramatic impacts of this years hot summer, it will become much more difficult for politicians to cast support for doing something on climate change as a negative. Perhaps that is why conservative groups are trying to get ahead of the curve by exploring policy options that they see as more palatable. 

Let's say Romney wins the election.  Do you see President Romney, with the current "hot weather" news cycle, repealing all of the EPA climate change regulations without some sort of new policy initiative like a carbon tax?  That just seems far less likely. 

For an interesting discussion as to whether climate change regulation is back on the table, see the National Journal's Energy Expert's Blog- Is Momentum Building to Act on Climate Change.

Court Validates EPA's Approach to Regulating Greenhouse Gases....What is next?

In perhaps the biggest environmental decision in decades, the D.C. Circuit Court of Appeals upheld all aspects of EPA's complex regulation of greenhouse gases under the Clean Air Act.  Each piece of EPA regulation was controversial, yet the Court validated the overall approach paving the way for future action by EPA. 

Flashback several years ago, when the Obama Administration stated its preference was to enact cap-and-trade legislation to address climate change.  The Administration it preferred Congressional action rather than using the authority under the Clean Air Act which it saw as ill-suited for regulation of GHGs.  In an attempt to encourage a reluctant Congress to act on the controversial legislation, EPA threatened that it would proceed with enacting regulations under its existing Clean Air Act authority.   

Congressional efforts to pass cap-and-trade failed, while EPA continued to march forward with regulations.  Like a series of dominoes, once the initial regulations were promulgated successive regulation followed capturing more sources.  Here is a brief re-cap of EPA's actions:

  • Endangerment Finding- before regulating greenhouse gases (GHGs) from motor vehicles, the Supreme Court told EPA in Massachusetts v. EPA that the Agency must first determine whether GHG emissions "endanger public health;"
  • Tailpipe Rule-  After making the determination GHG motor vehicle emissions did endanger public health, EPA enacted standards for emissions from motor vehicles under the Tailpipe rule;
  • "Regulated Pollutant"-  Under the CAA's structure, once a pollutant becomes "regulated" from any source, stationary sources must comply with New Source Review (NSR) requirements.  The CAA establishes a permitting threshold of 100/250 tons per year for any "regulated pollutant."  EPA issued the "timing rule" to clarify that GHGs from factories and other so called "stationary sources" would be covered by NSR once the Tailpipe standards were effective.
  • Tailoring Rule-  EPA determined that automatic application of the 100/250 ton threshold for stationary sources would overwhelm regulatory agencies,  The Agency estimated federal permit applications would jump from 280 per year to 81,000 per year. To soften the blow of inclusion of GHG emissions in NSR permitting, EPA enacted the Tailoring Rule.  Through the rule, EPA temporarily raised the permitting trigger thresholds from the CAA 100/250 tons up to 75,000 tons per year.

Industry and some States filed challenges to each of the rules discussed above.  The Court consolidated those challenges and on June 26th, the D.C. Circuit issued its opinion in Coalition for Responsible Regulation, Inc. v. EPA, No. 09-1322 (D.C. Cir. June 26, 2012).   The Court rejected all of the Coalition's challenges to each of the EPA rules. 

While an appeal to the Supreme Court is likely, the D.C. Circuit often cited to the Supreme Court's decision in Massachusetts v. EPA to support upholding the EPA rules.  Therefore, it is quite possible the Supreme Court will reject a petition to hear an appeal.

Notable Findings of the D.C. Circuit

The importance of Court's decision cannot be overstated.  The most fundamental finding was the Court upheld every aspect of EPA's overall regulatory strategy for GHGs.  Here are some other key findings of the Court:

  1. Science v. Policy-  The Court said that EPA's was directed by the CAA to make its Endangerment finding based purely on science, not policy.  Petitioners wanted EPA to consider other factors, such as: implications on the economy; whether GHG regulation would be effective in mitigating climate change; and whether society would simply adapt to climate change. The Court held EPA was limited to making a determination as to whether GHGs from motor vehicles endanger public health and welfare based  purely upon science.  The Court noted that EPA relied upon reviews of some 18,000 peer reviewed scientific studies in concluding GHG emissions do endanger public health.
  2. Precautionary Principle-  The Petitioners challenged EPA's Endangerment Finding because it did not specifically determine the level of atmospheric concentration of GHGs that endanger public health (i.e. the safe levels of GHGs).  The Court found the CAA is "precautionary and preventive" in nature.  In other words, EPA need not establish with certainty that climate change is occurring and will cause specific harms.  EPA only needed to find that the scientific evidence show its reasonable to anticipate dangers to public health if GHGs are not controlled.
  3. Those Who Benefit from Reduced Regulation Don't Have Standing to Challenge the Reduction-  Of all the EPA climate change rule-making, the Tailoring Rule seemed to be the most susceptible to legal challenge.  EPA, in essence, re-wrote a statue through rule-making.  This is typically not a power granted the executive over the legislative branch of government.  Perhaps to avoid confronting the issue, the Court held the petitioners had no standing to challenge the relaxation of the 100/250 ton per year permitting threshold in the Tailoring Rule because petitioners only benefit from the rule.  The Court questioned why Petitioners would want the rule struck down triggering thousands of federal permits.
  4. Court Says Congressional Action Unlikely-  In commentary, the Court said it hat "serious doubts" that Congress will ever enact legislation addressing Climate Change. 

What's Next?

If the decision stands, it paves the way for EPA to proceed with stricter regulation using its existing CAA authority. EPA could proceed without any Congressional action.

Even though EPA's Tailoring Rule was upheld, the Agency will be forced to slowly ratchet down over time the permitting threshold.  Unless Congress acts, EPA will be forced to require permits from more and more sources, including smaller commercial buildings.

EPA is also likely to follow with additional GHG regulations.  EPA will likely adopt new GHG emission threshold standards for major source categories.  It is even possible that EPA will implement National Ambient Air Quality Standards (NAAQS) for regulation of GHGs.  Use of the NAAQS could force each of the states to adopt there own GHG regulations on sources.

While EPA marches forward with complex GHG regulations, as things stand, it appears the Court is right in its prediction that Congress will not take action.    Any sort of  cap and trade bill appears dead. With the division between Republicans and Democrats over the issue, it appears Congressional reform of the CAA to better fit GHG regulation is highly unlikely.

Cheap Gas Fosters EPA Carbon Cap on Future Coal Plants

On March 28th, U.S. EPA released its highly controversial rulemaking which establishes a carbon dioxide (CO2) emission limit on new coal-fired power plants.  All future coal-fired power plants will have to utilize an unproven technology, carbon capture and sequestration (CCS), to meet the emission limits.  CCS involves capturing CO2 and injecting it deep beneath the earth's surface for permanent storage.

EPA's proposed rule would exempt from the CO2 emission limit new coal plants that begin construction in the next twelve (12) months.  Some analysts have commented that the fifteen coal-fired power plants currently slated for construction may be the last coal plants constructed in the United States.  This from Businessweek:

“This is the tail end of coal generation build-out,” said Teri Viswanath, the director of commodity markets strategy at BNP Paribas SA (BNP) in New York. “The ones we are getting today -- that is going to be the last hurrah for coal-fired generation.”

Certainly that statement would appear to be true unless some of the current plants slated to utilize CCS can demonstrate its a workable technology.  However, with the risk associated with CCS and the costs of new coal power plants, cheap natural gas does seem to be the fuel of choice for new electricity generation in the United States.

Basics of the EPA Rule

EPA's proposed Carbon Pollution Standard for New Power Plants would apply to all fossil-fuel-fired electric utility generating units (EGUs) that are larger than 25 megawatts.  These new EGUs would have to meet an output-based standard of 1,000 pounds of CO2 per megawatt-hour (lb CO2/MWh gross). 

Studies show that 95% of all newly constructed natural gas combined cycle power plant units meet the proposed standard without any add-on controls.  New coal plants without CCS currently generate around 1,800 lbs CO2/MWh gross.  Based on existing technology, the only way new coal plants could meet the 1,000 lbs standard would be through CCS.

Other key points:

  • Existing plants that begin construction in the next 12 months would be grandfathered (won't have to meet the standard);
  • Coal plants could be built without CCS if they add it later and the average CO2 emissions over a 30 year period equal the standard.; and
  • The rule does not cover existing coal-fired power plants

Cheap Natural Gas Behind EPA's Proposed Rule

In releasing the proposed rule, EPA provided a Regulatory Impact Analysis which projected that the rule would be very little negative effect on the cost of electricity or jobs due to low natural gas prices. The chart below shows EPA's analysis of future natural as prices even accounting for the increased use for electric generation.

 

EPA states in its analysis that market forces have already shifted toward construction of natural gas electricity generating units, in part, due to recent technology used to access deposits of natural gas in the Marcellus and Utica shale formations. 

Under current and foreseeable future market conditions affecting new capacity
additions, gas-fired generating technologies can produce electricity at a lower levelized cost than coal-fired generating technologies, and therefore utilities are expected to rely heavily on combustion turbines and combined cycle plants using natural gas when they do need to expand capacity during the time horizon considered for this analysis. Current and projected natural gas prices are considerably lower than the prices observed over the past decade, largely due to advances in hydraulic fracturing and horizontal drilling techniques that have opened up new shale gas resources and substantially increased the supply of economically recoverable natural gas.

Because the large shale deposits have kept natural gas prices low, EPA finds no real impact from its proposed rule mandating CCS on new coal plants.

One has to ask the question of what happens if the dynamics on natural gas turn out differently.  What if demand increases dramatically or anticipated capacity is much lower?  Will EPA reconsider its carbon standard on new coal plants? 

The rule presents somewhat of a risky proposition by relying on an unproven technology- CCS.  So long as cheap natural gas remains, utilities will have very little incentive to really invest in CCS.

Court Hears Two Days of Oral Argument over the Future of Climate Change Regulation

The future direction of climate change regulation in the United States will turn on the decision of the U.S. Court of Appeals for the District Court of Columbia (D.C. Circuit) following two days of oral argument.  A decision is expected as soon as this June..  There is no doubt that this may be the most significant environmental decision since the Supreme Court's ruling in Massachusetts v. EPA in which the Court determined CO2 and other greenhouse gases (GHGs) were a "pollutant" under the Clean Air Act.

EPA Climate Change Strategy

Following the Supreme Court's decision, EPA launched a major regulatory effort pertaining to control and reduction of greenhouse gases. Those regulations include:

  • Endangerment Finding-  EPA's determination that GHGs are a threat to public health and welfare and, therefore, should be regulated under the Clean Air Act
  • Tailpipe Rule- establishes GHG emission standards for light-duty vehicles
  • Application of GHG to federal permitting requirements- inclusion of GHGs as a pollutant to be considered in federal permitting such as New Source Review (NSR)
  • "Tailoring Rule"-  EPA's attempt to reduce the number of sources covered under the federal permitting requirements for GHGs by raising the trigger thresholds

All of the industry challenges to U.S. EPA's major rulemaking efforts were consolidated into a single appeal- Coalition for Responsible Regulation Inc. v. EPA.  The coalition includes oil & gas, manufacturing, construction, chemical industry, other industry and select states. 

The two most significant challenges relate to the Endangerment Finding and EPA's Tailoring Rule.

Argument Involving the Endangerment Finding

In order for EPA to regulate GHGs through tailpipe emission standards, the Agency first had to make the determination that GHGs threaten public health and welfare. (i.e. the "Endangerment Finding").  The Coalition challenged EPA finding which goes to the core of whether EPA should be regulating GHGs under the Clean Air Act.

Comments from the Judges during the argument would suggest that industry has an uphill battle in successfully challenging EPA's decision. 

The attorney representing the Chamber argued that EPA should have considered the fact that people will simply adapt by migrating to cooler climates.  He argued that if people migrate there may be no danger to public health. 

Judge Tatel responded "How can the they [EPA] predict that migration patterns would be sufficient to overcome danger."  He also suggested that under the theory offered, EPA shouldn't regulate pollutants as a carcinogen because some day there may be a cure for cancer.

 It seems unlikely the Court is going to second guess the Agency's evaluation of the science behind the endangerment finding.

Arguments over Tailoring Rule

 If the challenge to the Endangerment finding goes at the science behind EPA's regulations, the challenge to EPA's tailoring rule goes to how the Agency proposes to implement its regulations.  As discussed on this blog before, while the challenge to EPA Tailoring Rule may be strong, it is a high-stakes gamble due to the uncertainty if the Coalition wins.

The argument is strong because the Clean Air Act itself contains the trigger for when a emissions of a pollutant are high enough to fall under federal air permitting regulations such as NSR.  The standard is 250 tons per year.

If 250 tons per year were to be applied to GHGs, thousands of sources would be regulated.  Even office buildings could require a federal air permit due to their energy use. 

EPA recognizing the "absurd" results of using the 250 ton per year threshold for GHGs, tailored the trigger level through rulemaking.  EPA said it will only initially regulate sources that emit between 75,000 to 100,000 tons per year of GHGs.  EPA said overtime it would slowly ratchet down the trigger level through rulemaking until it is in sync with the 250 tons per year standard appearing in the Clean Air Act.

The Coalition lawyers argued that EPA's attempt to re-write the Clean Air Act was clear evidence the Act was not suited to regulate GHGs.  The Coalition argued the EPA re-write was illegal and should be thrown out.

Judge Sentelle said in response " The harm you allege is regulatory burden.  The remedy you seek is a heavier regulatory burden.  That doesn't even make good nonsense."

High Stakes Gamble

The Coalition may be on the right side of the law when it says EPA does not have the power to rewrite the Clean Air Act.  However, they are gambling that this will force Congress to Act to address the Supreme Court's decision in Massachusetts v. EPA.  The Coalition wants Congress to remove GHGs as a pollutant under the Clean Air Act.

With gridlock in Washington it just seems very unlikely that this will happen.  What could be left if the challenge to EPA's Tailoring Rule is successful, is a 250 ton per year standard that applies to GHGs.  This is something even the EPA was desperately trying to avoid.

 

Next Round of EPA Rules and Litigation Involving Regulation of CO2

In early November, the EPA sent to OMB the next significant regulation governing greenhouse gas emissions.  Under the latest rule, EPA would establish CO2 emission standards for new and modified coal-fired power plants. 

The new rule is titled the Greenhouse Gas New Source Performance Standard (NSPS) for Electric Utility Steam Generating Units.  The NSPS standards are based on the best demonstrated technology (BDT) that has been demonstrated to work in a given industry, considering economic costs and other factors. The standard can vary from source to source. It could be a numerical emission limit, a design standard, an equipment standard, or a work practice standard.

The proposal will clearly be the next in an ongoing debate regarding EPA regulations and jobs. 

EPA States:

“EPA will work with OMB throughout the interagency review process and will issue the proposal when this review is complete,” said EPA spokeswoman Betsaida Alcantara. “EPA has engaged in an extensive and open public process to gather the latest and best information.”

In a story in the LA Times, the Heritage Foundation attacked the latest EPA proposal:

"We don’t believe that unelected bureaucrats should be doing what Congress was elected to do," said Nicolas Loris, policy analyst at the Heritage Foundation, which has battled the EPA regulation of carbon from the outset. “The economic costs of regulation by the EPA or by a cap-and-trade system far outweighs any environmental benefit we would get from these measures."

Asked how the Heritage Foundation would like to see this problem addressed, he added: "First we need to step back and look at what the real problem is: CO2 isn’t black smoke that is emitted from factories; it’s a colorless, odorless gas. Does it contribute to global warming and climate change? Sure. But it’s the role of Congress to figure out the best way to address those effects in a way that protects our economy."

Inability of Congress to Act Leave Void EPA Has Authority to Fill

In Congress, there appears to be no pragmatists anymore, especially when it comes to EPA regulatory authority.  The approach from either side tends to be all or nothing..

With Congress deadlocked the policy vacuum will be filled.  In this case, EPA has the authority under the Clean Air Act to regulate greenhouse gases (GHGs).  The Supreme Court in Massachusetts v. EPA already declared CO2 and the other GHGs a "pollutant" under the Clean Air Act that can be regulated.

In fact, EPA has been sued multiple times to exercise this authority.  As long as the Clean Air Act remains unchanged, the Court cases are generally going to support EPA's authority.  While the Heritage Foundation is correct that CO2 is much different than the other "pollutants" regulated under the Clean Air Act, unless Congress acts to change the law to treat it differently EPA will and is legally obligated to implement new regulations. 

D.C. Circuit Panel Selected to Hear Challenges to EPA's Existing GHG Rules

While EPA is poised to issue its NSPS to control CO2 from power plants, its earlier GHG regulations have been challenged.  There are two main GHGs rules being challenged:

  1. EPA's "endangerment finding"- a prerequisite to regulating GHGs from motor vehicles.  In making the finding, EPA was required to review the latest science and determine whether GHGs endanger human health and the environment. 
  2. EPA's "Tailoring Rule"- EPA recognizes that CO2 is emitted in orders of magnitude greater quantities compared to other Clean Air Act pollutants.  In an effort to make the existing structure of the Clean Air Act fit GHGs, EPA issued the tailoring rule which raised the trigger thresholds for certain federal permitting requirements (i.e. New Source Review) even though the triggers appear in the Clean Air Act itself.

The panel in the D.C. Circuit that will be hearing these challenges was recently announced.  An excellent article on Greenwire discusses the three judges on the D.C. Circuit panel.  The judges are Chief Judge David Sentelle, a conservative appointed by President Reagan, and two Clinton appointees: Judge Judith Rogers and Judge David Tatel. From the article:

All three had some involvement when the court tackled Massachusetts v. EPA, the case that -- once it went up to the Supreme Court -- ultimately gave EPA the authority to regulate carbon emissions.

Lawyers familiar with the litigation over the rules say the panel probably favors EPA based on each judge's record in environmental cases and regulatory cases in general.

Overall, the panel "will examine the arguments fairly but rigorously," said Jonathan Adler, who heads the Center for Business Law and Regulation at Case Western Reserve University School of Law.
"This may appear to be a panel predisposed to support the EPA, but it is also a panel that is not likely to let the EPA get away with slipshod arguments," he added.

The "tailoring" rule, which interprets the Clean Air Act in such a way that only major polluters are required to obtain permits for greenhouse gas emissions, is the one that is viewed to be most vulnerable. Critics say it essentially rewrites the Clean Air Act.

Given the scientific foundation that supports the conclusions climate change is real and humans are contributing to the problem, it is unlikely that the Court will overturn EPA's Endangerment Finding.  However, as discussed in the article and in prior posts, EPA "Tailoring Rule" is based on a house of cards.  A fundamental axiom of the law is you cannot rewrite a statute through rulemaking.

 

Supreme Court Bars Federal Nuisance Climate Change Suit

Today, the U.S. Supreme Court released their opinion in AEP v. Connecticut  in which the Court held that the Clean Air Act ("CAA") and the EPA actions on regulating greenhouse gas emissions displaced any federal common-law right to seek greenhouse gas emission reductions.  The suit was filed by Eastern States and non-profit land groups against coal-fired power plants in an attempt to have court order emission reductions. Businesses were deeply concerned that if the Court allowed the nuisance case to proceed, the courts would be flooded with climate change litigation.

Legal Ruling

The States had argued their nuisance claims were not displaced because EPA had not yet established final emission standards.  The Court stated the displacement test is simply "whether the statute speaks directly to the question at issue." In other words, if the statute give authority to act that is enough to displace federal common law.

The Court noted that in  Massachusetts v. EPA it had previously held:

  • Emissions of carbon dioxide qualify as air pollution subject to the CAA. 
  • CAA Section 111 gives authority to EPA to list categories of stationary sources that cause or contribute significantly to air pollution that "endangers public health and welfare"  (categories would include coal-fired power plants)
  • Once a category is listed under Section 111, EPA must establish performance standards for new or modified sources within that category
  • CAA also will require regulation of existing sources in the category
  • If EPA fails to act in setting standards, States and private parties may petition for a rulemaking on the matter, and EPA’s response will be reviewable in federal court.

For these reasons, the Court held it was clear the CAA "speaks directly" to the emission of carbon dioxide from the defendant's coal-fired power plants.

Implications of Today's Ruling

  1. Prevents "Flood" of Federal Nuisance Claims- Obviously today's ruling is very good news for those who feared the courts could be flooded with climate change litigation under federal common law. 
  2. Possible State Nuisance Claims-  The Court notes that the issue before them was limited to actions under federal nuisance, it does not address nuisance claims based upon state law.  The Supreme Court sent the case back to the Second Circuit to determine if state nuisance claims are pre-empted by the CAA.  This leaves open a huge issue that could likely result in yet another Supreme Court ruling.
  3. EPA v. Courts-  In its opinion the Supreme Court stated its preference for EPA to decide appropriate emission reductions, not the courts.   The Court said EPA, with all its expertise, is in a better position to balance competing interests and establish standards. 
  4. Tacit Endorsement of EPA Regulatory Authority- The key battle right now are EPA's regulatory actions to move forward with emission standards for greenhouse gases.  Some have asserted EPA's actions demonstrate the Agency is "out of control."  The Supreme Court's decision makes clear, once again, EPA has the authority to regulate greenhouse gases.  Also, the Court notes repeatedly, if EPA fails to act in establishing those standards it can be compelled to act by private parties. 

 

Congressional Dance on Greenhouse Gas Regs Appears Pointless Without Compromise

The AP is reporting that the Republican controlled House is expected to introduce legislation shortly that will strip all authority from U.S. EPA to regulate greenhouse gases (GHGs) under its existing authority in the Clean Air Act.  This would specifically target the EPA's endangerment finding and could possibly go as far as saying GHGs are not a "pollutant" under the Clean Air Act.

The soon introduced legislation will be very aggressive according to a recent AP article:

Officials said the House bill, which was to be offered Wednesday, would nullify all of the steps the EPA has taken to date on the issue, including a finding that greenhouse gases endanger public health.

In addition, it seeks to strip the agency of its authority to use the law in any future attempts to crack down on the emissions from factories, utilities and other stationary sources.

The House bill joins similar efforts in the Senate:

Republicans are attempting similar restrictions in the Senate, where the political situation is more complicated. Sen. John Barrasso of Wyoming has introduced a more sweeping measure than the one House Republicans are drafting. At the same time, Sen. Jay Rockefeller, D-W.Va., has proposed a two-year moratorium on EPA attempts to regulate greenhouse gases, a plan that already has attracted a handful of Democratic supporters.

It will be very difficult to pass through the Senate the aggressive measures that will likely be included in the House bill.  Only the proposed 2 year delay of implementation is likely to pass the Senate.  Even if something does pass, the legislative efforts appear futile based on comments in an article appearing in Politico from Lisa Jackson, U.S. EPA Administrator:

“What has been said from the White House is that the president’s advisers would advise him to veto any legislation that passed that would take away EPA’s greenhouse gas authority,” Jackson told reporters on Capitol Hill. “Nothing has changed.”

Any Room for Real Compromise?

During the State of the Union, President Obama announced a plan to mandate 80% of the nation's electricity from renewable sources by 2035.  The President signaled a willingness to consider an expansive definition of "renewable energy" that would include nuclear, clean coal and natural gas.  The President suggested financing energy projects by slashing $4 billion annually in government subsidies to oil and gas companies.

Many see the President's proposal of a national renewable energy standard as a switch in strategy now that cap and trade is dead.  While there was no mention of climate change in the President's speech, the renewable standard is seen as, perhaps, less distasteful means of reducing GHGs.  More importantly, it has some possibility of getting a few Republicans on board.

Republicans and the U.S. Chamber seem cool to the President's plan.  However, reality is that U.S. EPA has moved forward and will continue to implement new GHG regulations under its existing authority.  The convoluted and complex rules need to prevented. (See, prior post Regulation under CAA "Absurd")

Perhaps a bill implementing a renewable energy standard offers a mechanism in which the Administration would find palatable a reduction or prohibition on EPA's GHG regulatory authority.  Before dismissing the President's plan, similar to the tax deal, Republicans should see what they could get as part of a broader compromise.  Because without compromise, EPA will continue to issue GHG regulations through 2012.

Federal Court Rejects Industry Plea to Delay EPA Greenhouse Gas Rules

The D.C. Circuit Court of Appeals has rejected an industry request to delay implementation of U.S. EPA's greenhouse gas permitting requirements.  Industry had requested a stay on the effectiveness of the rules while it proceeds with its full legal challenge to the Agency's Endangerment Finding. 

(Prior Post Discussing Lawsuit and Industry Arguments for Blocking the Effectiveness of the EPA GHG Rules)

Beginning in a matter of weeks, large new and modified sources of greenhouse gases will be required to analyze available methods for reducing emissions of GHGs as part of the federal permitting process- New Source Review Program.

Attention will now most assuredly turn to Congress which will debate legislative proposals to place either a temporary or permanent hold on implementation of the EPA rules.  However, there is no doubt such legislation is not going to happen quickly.  Therefore, implementation of the EPA requirements will commence in January.

Best coverage of the story appeared in the Washington Post.  The article offered these two perspectives on the Court's decision:

Scott Segal, a lobbyist at Bracewell Giuliani, a firm that represents utilities, refiners, cement companies and manufacturers, said that if companies can't meet requirements, then "the court may have ensured an effective construction moratorium for industrial and power projects. Given the state of the economy, the decision is certainly not a welcome holiday present."

But Nilles said that companies were exaggerating the difficulty of meeting EPA standards. He said that years ago when regulations about acid rain were imposed, "industry promised that the sky would fall, and it didn't."

 

Business Groups Seek Stay of EPA Climate Change Rules for Stationary Sources

A coalition of business groups, including the National Association of Manufacturers, have filed a request to block the effectiveness of EPA's climate change rulemaking.  The business groups have filed a motion seeking a stay of the effectiveness of EPA regulations that will soon require stationary sources (factories, utilities and boilers) to reduce greenhouse gas (GHGs) emissions from those sources beginning in 2011.

There are two interesting strategic decisions that emerge from the brief filed seeking a stay of EPA's GHG rules:

  • Business groups are not trying to block the mandatory GHG rules pertaining to motor vehicles; and
  • The stay would not be of EPA's Tailoring Rule, but would seek to block any legal ability to begin regulating GHGs from stationary sources

The Clean Air Act requires all sources emitting above 100/250 tons per year of a regulated pollutant to go through federal permitting- EPA's New Source Review Program.  EPA adopted the Tailoring Rule to raise those thresholds that EPA asserts would otherwise apply once it finalized its regulation of GHGs from vehicles.

It is the premise that the vehicle rules trigger regulation of stationary sources that the business groups are challenging in this motion.  This from the brief filed seeking a stay:

Movants offer a distinct request for a partial stay that would enable EPA to
realize its goal of imposing GHG emission limits on cars while preserving the status quo for stationary sources. Specifically, Movants request the Court stay the effects of the Tailpipe Rule, Tailoring Rule, and PSD Interpretive Rule on stationary sources, such that GHG emissions are not subject to PSD and Title V pending this appeal.  Movants do not request a stay of the Tailpipe Rule as applied to cars.

Business groups challenge EPA assertion on two separate grounds:

Emissions of a pollutant triggers PSD permitting if, and only if, the pollutant is subject to a NAAQS and the source is located in an attainment area for that pollutant. GHGs are not such a pollutant, so GHG emissions alone cannot trigger PSD permitting.

The very impetus for the Tailoring Rule’s revision of statutory thresholds was EPA’s recognition that requiring sources to obtain PSD permits solely based on GHG emissions is “absurd” and inconsistent with Congress’s vision for the PSD program. Congress did not enact the CAA to bring any part of the American economy to a dead stop, and EPA’s interpretation of the CAA threatening that result is unreasonable, arbitrary, and capricious. In addition, EPA’s view that GHGs are subject to regulation under the PSD program—which is plainly focused on local air quality—is unreasonable. Congress never intended the PSD program to regulate pollutants like GHGs.

Business groups had no alternative but to seek a stay given the ramifications of EPA embarking on this regulatory path.  Typically, you would ask to stay the effectiveness of a specific rule.    However, delaying the legal effectiveness of the Tailoring Rule would arguably subject all businesses to the ridiculously low permitting thresholds 100/250 tons in the Clean Air Act. 

As result, business group are challenge the very premise the EPA had to enact the Tailoring Rule because otherwise the 100/250 ton thresholds would take effect after enactment of the vehicle tailpipe rule.

The only concern is if the Court agrees, in part, with the business group's arguments.  First, the Court may say a stay can only be granted of a specific rule.  Second, the Court may agree EPA went too far but provide a different result.

Let's remember no one was asking the Court to throw out the Clean Air Interstate Rule (CAIR).  What happens if the Court agrees EPA has no authority to change the statutory thresholds in the Clean Air Act (100/250 tons per year), but agrees the vehicle rule automatically triggers PSD regulation of GHGs?

While litigation is necessary with so much at stake, it is also very unpredictable.  Let's hope the Court gets this one right by looking at the real world implications of its decision.

Midterm Election Fallout for Climate Change

By all accounts, Republicans are set to enjoy major gains in both the House and Senate following midterm elections.  Speculation is that the Republicans could likely regain control of the House and could even get close in the Senate.

What implications could this change in the political landscape have for climate change regulation?

We have already seen the Senate scrap all efforts at a cap and trade bill this summer.  Based upon Senator Reid's comments that a "piecemeal" approach is on tap, its more than likely cap and trade is off the table for the foreseeable future.

With cap and trade's dim future, all eyes have been shifting toward U.S. EPA promulgation of climate change regulations.  EPA has already finalized greenhouse gas standards for vehicles and will require consideration of greenhouse gases from major stationary sources beginning in 2011 (Tailoring Rule). 

Congressional Efforts to Stop EPA

With renewed focus on EPA's efforts, Republicans made lead the charge toward blocking EPA's actions through budget maneuvers or by directly blocking the effectiveness of the EPA regulations. (See Reuter's article)

  • Budget Bill Prohibition-  Republicans could include in an appropriations bill a ban on the use of EPA funds to administer climate change regulations. 
  • Block EPA Authority or Delay it- Earlier this year, the Senate debated legislation that would directly block EPA from implementing its rules by undermining its Endangerment finding.  Another alternative was floated by Senator Rockefeller- delay EPA's implementation for two years which would take us to the next Presidential Election. There were 47 out of 100 votes in the Senate supporting a delay in implementation of EPA's climate change regulations.  Its hard to imagine this issue will not be revisited after the midterm elections.

Effectiveness of an Appropriations Blockage 

The utility of a budgetary blockage of EPA's authority to implement the climate change regulations should be seriously questioned.  As discussed below, a budget provision prohibiting expenditures doesn't remove the requirements from the books.  Industry will still have to comply with the Tailoring Rule even if EPA can't use funds to enforce it.

The strategic limitations on use of the appropriations tool was pointed out in a Congressional Research Service in an extensive report:

The regulatory restrictions in appropriations bills that have been enacted during the last 10 years illustrate that Congress can have a substantial effect on agency rulemaking and regulatory activity... These appropriations provisions can prevent an agency from developing a proposed rule, from making a proposed rule final, or from implementing or enforcing a final rule. However...these appropriations provisions cannot nullify an existing regulation (i.e., remove it from the Code of Federal Regulations) or permanently prevent the agency from issuing the same or similar regulations. Therefore, any final rule that has taken effect and been codified in the Code of Federal Regulations will continue to be binding law — even if language in the relevant regulatory agency’s appropriations act prohibits the use of funds to enforce the rule. Regulated entities are still required to adhere to applicable requirements (e.g., installation of pollution control devices, submission of relevant paperwork), even if violations are unlikely to be detected and enforcement actions cannot be taken by federal agencies.
 

Such an appropriations maneuver could mean businesses must prepare PSD permit applications that address greenhouse gases only to have those permits sit at EPA because it is legally prohibited from paying staff to review them.

Hopefully the real world implications of Congressional efforts to block EPA will be considered.  There is no doubt a strong effort will be made after the midterms to block EPA climate change regulations.  Without passage of legislation that directly addresses the issue, maybe...just maybe litigation is a better alternative than tricky legislative tactics. 

 

Obama Administration Opposes Use of Nuisance Claims to Address Climate Change

A group of eight states and conservation groups ("Plaintiffs") have been pushing a massive federal nuisance claim against utilities. The Plaintiffs claim that major emitters of carbon dioxide in twenty states have created, contributed to, or maintained a common-law public nuisance by contributing to global warming thereby injuring States and landowners feeling the impacts of climate change. (See prior post discussing 2nd Circuit decision to let nuisance action stand) .

The Plaintiffs claims were dismissed by the district court.  Their suit was reinstated when Plaintiffs won their appeal in the Second Circuit Court of Appeals.  The Appeals Court determined the Plaintiffs had a right to seek relief under federal common law nuisance doctrines.  Now the utilities are requesting the Supreme Court reverse the Appeals Court.

Two critical legal questions at issue throughout the litigation have been:

  1. Political Question- Resolution of the issue is best suited for Congress and not the Court because the relief sought would raise complex issues balancing economic, environmental, foreign policy, and national security.
  2. Whether common law has been displaced by Congressional or Executive Branch actions regulating greenhouse gases.

The 2nd Circuit Court of Appeals determined the claims did not raise a "political question" and were not displaced by the mere presence of regulatory authority in the Clean Air Act. ( Federal common law claims are "displaced" whenever Congress establishes a mechanism to address the problem.)   Now the utilities have petitioned the U.S. Supreme Court to hear their appeal of the lower Appeals Court decision. 

In a surprise to environmentalists, the Department of Justice (DOJ) filed a brief in support of the utilities appeal to the Supreme Court.  In its brief, DOJ argues that EPA, since the 2nd Circuit Court of Appeals decision was rendered, has issued a series of regulatory actions thereby displacing the common law claims of the plaintiffs.  These include:

  • Finalization of the "endangerment finding"
  • Regulation of greenhouse gas emissions (GHGs) from motor vehicles- light duty vehicle standards
  • Issuance of the "Tailoring Rue" which will subject new or expanded major emitters of GHGs to federal permitting requirements
  • U.S. EPA is developing New Source Performance Standards for existing major emitters

While EPA regulatory actions is not completed, there actions may be sufficient for the Supreme Court to ultimately determine common law rights have been displaced.  However, industry has also filed challenges to every regulatory action cited above.  Those challenges may give the Court pause in dismissing the Plaintiffs claims.

DOJ's brief in support of the utilities came as a major surprise to some environmental groups.  This from the Mother Jones website:

This is cold comfort to environmentalists, who are anxious that the administration isn't moving fast enough on those regulations. "It reads like a Bush administration brief," Matt Pawa, an environmental lawyer representing the plaintiffs in this case, told Mother Jones. "It felt like being stabbed in the back. The Obama administration claims to care about global warming, so why is it opposing an effort curtail greenhouse gas emissions from coal-fired power plants?"

Why is the Obama Administration opposing this effort?  Because having the Courts establish climate change regulation would be chaotic.  Here are some good quotes from the DOJ brief:

[Plaintiffs] are but a tiny subset of those who could allege they are injured by carbon-dioxide emissions that have contributed or will contribute to global warming...Moreover, global warming's effect will not be limited to landowner; they will also be felt by governments, individuals, corporations, and interest groups throughout the Nation and around the world.

...Any potential plaintiff could claim to have been injured by any (or all) of the potential defendants.  The medium that transmits injury to potential plaintiffs is literally the Earth's entire atmosphere--making it impossible to consider the sort of focused and more geographically limited effect characteristic of traditional nuisance suits targeted at particular nearby sources of water or air pollution.

The practical reality is that Courts are ill-equipped to address climate change.  How could they possibly be in the best position to address issues such as:

  • What percentage of reductions should be required and over what time period?
  • What sources should be required to reduce emissions?
  • What technologies are viable and should be employed?
  • How does forcing reductions by select emitters balance with similar emitters elsewhere in the country or the world?
  • When are the costs of compliance too significant?
  • How will reductions be monitored and enforced?

While the pace of Congressional action by be slow, turning to the Courts to develop perhaps the most complex, costly and extensive environmental regulatory scheme ever contemplated would not be wise. 

Politics, Litigation and Debate Heats Up Over Climate Change

After this summer's anti-climatic end to federal climate change legislation, some thought that perhaps there would be a temporary end of the discussion of climate change regulation.  However, recent weather events (wildfires in Russia, floods in Pakistan and an ice sheet breaking off Greenland) and extreme heat have reinvigorated the debate. 

Here is some highlights of the recent discussion. 

Is Climate Change Causing Wild Weather? -  I like the National Journal's discussion of controversial topics.  The website features view points from well recognized experts, politicians or interest groups.  The current thread discusses the science (or lack thereof) behind linking climate change to this summer's wild weather. 

GOP Candidates Knock Climate Change-  This article on Politico discusses the number of Republican candidates who are willing to take the stance linking man made emissions to climate change is simply unproven.  With the economy possibly heading to a double dip recession, support for a new "tax" on emissions has become a basis for attack this November.

Chamber Sues EPA Over Endangerment Finding-  In late July, EPA rejected the Chamber's petition for reconsideration of EPA's Endangerment ruling.  The Chamber argued that e-mails released in "climate-gate" justified EPA reconsideration of its finding.  EPA said the e-mails were taken out of context and there is no evidence that undermines its finding. This month, the Chamber pushed its legal finding further by filing suit challenging the basis for EPA's finding that greenhouse gases endanger public health and the environment. 

EPA Marches Forward with Rule Making-  As discussed in my previous post, U.S. EPA is moving forward with regulation of greenhouse gas emission under the Clean Air Act.  Beginning in 2011, without passage of any federal legislation, emissions of GHGs from large sources will trigger new requirements. 

Concluding Comment-  All of this may be a surprise to some of you who thought that the Senate's decision to scuttle federal cap and trade legislative efforts meant the end of the debate.  It is clear that this issue will not go away.  While direct connection to weather events cannot be made, there is no denying the connection between extreme weather events and re-invigoration of our national debate.
 

Last Ditch Effort for a Climate Bill Before the Midterm Election

President Obama is convening a meeting tomorrow to explore all possible alternatives that would lead to passage of a climate bill before the midterm elections.  The most likely alternative that will receive consideration is a much narrower cap that would only be applied to utilities.  Under this approach, the provisions covering large industrial emitters and the transportation sector set forth in Senator Kerry's American Power Act would be cut out.  This from Climatewire:

"I think the chances of a comprehensive bill are abysmal," Eileen Claussen, president of the Pew Center on Global Climate Change, said in an interview last week, referring to legislation offered by Sens. John Kerry (D-Mass.) and Joe Lieberman (I-Conn.).

"Do I think there is a chance of something that is narrower for carbon, like the pricing of utilities? I think that's possible," she added. "If all we can get is utilities, it's not bad."

A handful of crucial senators are planning to attend, including Richard Lugar (Ind.), Judd Gregg (N.H.), Susan Collins (Maine) and Lisa Murkowski (Alaska), all Republicans whose support Obama will seek to eventually secure. Democrat Sherrod Brown (Ohio), another undecided senator, will also be there, according to a survey of offices by E&E.

A deal on just utilities looks unlikely.  However, it has the best chance of any current proposal.  The key will be whether utilities will view this as an opportunity to secure "certainty" with regarding to the greenhouse gas requirements.  The ability to establish the regulatory landscape does have major benefits in making big capital investments associated with large scale facilities.

An interesting bargaining chip will be EPA's authority to regulate all sources of greenhouse gases under the Clean Air Act.  The Senators attending, especially Murkowski, are highly motivated to block EPA regulatory program.  Would the President be willing to foreclose or delay EPA regulations in exchange for a bill?

 

Murkowski Attempt to Block EPA Climate Change Regulations Narrowly Defeated

In a very close vote 53-47, the U.S. Senate defeated a resolution designed to block U.S. EPA's regulation of greenhouse gases utilizing its existing authority under the Clean Air Act.  Six Democrats supported the Republican effort to block EPA.  Republicans needed 51 votes to effectively block or delay EPA's efforts. Now everyone is offering their opinions as to what the vote truly means.

Background on Resolution

Last year, EPA issued its scientific based finding that greenhouse gases endanger public health.  The EPA determined that man made greenhouse gases (GHGs) significantly contribute to rising global temperatures and climate change ("endangerment finding").

Following the Supreme Court's ruling in Massachusetts v. EPA, the so called "endangerment finding" was a required precursor to regulation of GHGs from motor vehicles.  EPA finalized emission standards for trucks and cars earlier this year. 

By establishing mandatory GHG emission limits for motor vehicles, regulations of GHG emissions from factories and power plants was automatically triggered.  Regulations of both vehicles and stationary sources is set to commence next year.  Businesses have warned that higher costs and job losses will result from EPA's regulations.

Test Run for Climate Change Resolution

There had been speculation in the weeks preceding yesterday's vote, that it would serve as a test of the Senate's determination to pass comprehensive climate change legislation.  Some argue a close vote signified a lack of support for taking action this year. 

Senator Kerry took the opportunity to immediately challenge Republicans who during the debate on the resolution stated they supported addressing climate change, but feared EPA regulation was the wrong method. Sen. John Kerry, a co-author of the American Power Act (APA), the cap-and-trade bill introduced in the Senate in May, challenged his Republican colleagues: 

"This is going to be the 'Great Hypocrisy Test' resolution," Kerry said. "We're going to see how many of these folks who are here on the floor saying we need to leave it to Congress ... are actually going to show up and vote ... to restrain greenhouse gases."  (from Solve Climate)

Despite Senator Kerry's comments, the close vote means that Senators are reluctant to adopt comprehensive climate change legislation.

Senator Rockefeller Alternative- Temporary Delay of EPA

Some argue that the close vote signifies support for a water downed version of the resolution.  Senator Rockefeller has proposed a resolution that would simply delay the effectiveness of EPA's regulations for two years. 

In reading the tea leaves of the Senate votes and speeches, some are suggesting that there are enough votes to support the Rockefeller proposal.  There Democrat Senators (Sens. Dorgan, Webb and Conrad) have already indicated support for the Rockefeller proposal.  This from the Wall Street Journal on prospects of the Rockefeller resolution:

Mr. Webb signaled the intensity of his position on the Senate floor, announcing that he would "regretfully" oppose the Murkowski resolution.

It wasn't clear whether Senate Majority Leader Harry Reid (D., Nev.) has agreed to bring such an alternative up for a vote. "I don't know if Harry has made any promises along those lines," Sen. Dick Durbin (D., Ill.), the No. 2 Democrat in the Senate, told a reporter Thursday.
 

"Uncertainty" Will Persist Going Forward

What the close vote really means is that nobody really knows what this means for the prospects of comprehensive climate change legislation.   Some argue the close vote means no bill.  Some argue that defeat of the resolution puts a ticking clock on impending EPA regulation set to commence in 2011.  EPA regulation could put pressure on Congress to act.

Here is my take-  Congress doesn't have the will to push forward Legislation before the mid-term elections.  In addition, EPA regulations will be phased in gradually over time which removes the pressure to act prior to 2011.  By default, we will operate under EPA regulations for the foreseeable future.   

Showdown in the Senate over EPA Climate Change Authority

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

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

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

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

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

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

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

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

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

What is the true "scope" of the resolution?

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

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

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

EPA Provides Quick and Detailed Response to Senators on Climate Regulations

 

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.

Climate Update: SEC Guidance, EPA and Cap & Trade

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.

 

Climate Regulation Update: Cap and Trade Unlikely; Regulation a Certainty

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.   
 

EPA "Endangerment Finding" Sets in Motion Regulation of Greenhouse Gases

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. 

EPA Announces Risky Regulatory Approach on Climate Change

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. 

EPA Gives Possible Timeline for Climate Change "Endangerment Finding"

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.

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. 


 

EPA's Proposed Endagerment Finding for CO2 is Leaked

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.