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

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.

• Email This
• Print
• Comments
• Trackbacks

Boiler MACT Rules-  On December 7th, EPA filed a motion with the Court requesting more time in order to re-propose the Boiler MACT rules and allow for public comment.  In EPA's motion to the Court, EPA sets forth following timetable if its motion is granted to move impending January deadline is moved to April: it will publish revised proposals no later than June 1, 2011, and promulgate the final emission standards no later than April 13, 2002. 

EPA states that more time is needed because significant issues with the proposed standards were raised in the public comment period and it needs more time to evaluate the technical merits of those comments.  This from EPA's motion:

As evidenced by the number of comments, which include a substantial amount of
additional new data, the major source boilers, area source boilers, and CISWI rules will have far reaching effects. Estimates of the monetized value of the public health benefits for all three rules combined range from $18 billion and $44 billion. The economic impacts of implementation of these standards will also be significant and vary by rule. For example, the nation-wide capital cost for the proposed major source boilers rule was estimated to be $9.5 billion in the year 2013, with a total national annual cost of $2.9 billion in the year 2013. The major source and area source boilers rules are expected to apply at almost 200,000 boilers at over 90,000 facilities. On balance, given the broad impact these rules will have, EPA believes that the overall public interest is best served by allowing EPA to re-propose the rules so that the Agency will be able to issue emission standards that are based upon a thorough consideration of all available data and reduce potential litigation risks.

Many are very relieved that EPA has decided to take a second look at its proposed standards.  The rules have wide ranging applicability and huge costs associated with them.

U.S. Supreme Court to Hear Climate Change Nuisance Case-  The Supreme Court has agreed to hear an appeal of Second Circuit's decision in American Electric Power v. Connecticut.  The lower court allowed several states, municipalities, and environmental groups to pursue a federal public nuisance action against a group of electric power producers for their emissions of greenhouse gases (GHGs). 

The issue of GHG emission contributing to climate change is global issue with millions of sources contributing.  The Court will examine how much a single subset of sources should be exposed to liability for their contribution to the issue.  

The lower court found the Plaintiffs showed the requisite grounds to bring the suit.  The Court found plaintiffs properly identified an injury, presented causation and redressability that should allow the suit to go forward.   The Supreme Court granted the petition to hear the appeal to review this determination.

Also at issue is whether federal nuisance actions have been displaced by U.S. EPA's recent promulgation of climate change regulations (monitoring, Endangerment Finding, Light-Duty Vehicle Rule, Tailoring Rule).  Federal nuisance actions are no longer available if it is determined that their is sufficient federal action to address the issue. 

If the Court finds federal nuisance action has been displaced by EPA's regulations, this may prove to by a phyrric victory for some.  Presumably, federal nuisance is only displaced so long as those regulation remain in place.  What should happen if congressional action delays implementation or litigation successfully overturns the Endangerment Finding?

Regardless, this will be a fascinating case to follow next year.

• Email This
• Print
• Comments
• Trackbacks

With prospects dead for federal cap and trade climate change legislation, the focus for market mechanisms to reduce greenhouse gas (GHG) emissions shifts to the states.  Meanwhile, as discussed in my last post,  EPA is left moving forward with its command and control regulations to reduce GHGs under the Clean Air Act.

After the defeat of Proposition 23, California's climate change programs are moving forward including cap and trade which is planned to start in 2012. California is in talks to link their carbon trading market with New Mexico, British Columbia, Ontario and Quebec.  There is even a possibility of linking the market to the 10 Northeast states already operating a trading program for power plants- RGGI. 

Now an interesting concept is being proposed that would allow states using market mechanisms to reduce GHGs to be exempt from EPA's command and control regulations. The following appeared in article in Reuters,

U.S. states with cap-and-trade laws want the Obama administration to add their carbon markets into new federal greenhouse-gas regulations, a California environmental official said.

State-run carbon-trading programs should be "treated as equivalents or substitutes" for Environmental Protection Agency regulations for emissions tied to global warming from power plants, oil refineries and factories, Mary Nichols, Chairman of the California Air Resources Board, said yesterday in a telephone interview.

This is an interesting proposition.  Would EPA allow state cap and trade programs to replace regulations under the Clean Air Act such as New Source Review (NSR) or New Source Performance Standards (NSPS)?

It may set up an interesting dynamic where states that have adopted market mechanisms for reducing GHG emissions are put at an advantage to states subject to the myriad of EPA command and control regulations.  While cap and trade has recently received a very bad name, putting these two regulatory approaches side-by-side may breathe new life into cap and trade as a more business friendly means of reducing GHG emissions.

• Email This
• Print
• Comments
• Trackbacks

As Congress failed to pass climate change legislation, U.S. EPA will begin regulating greenhouse gases (GHGs) using its existing authority under the Clean Air Act.  Beginning 2011, major sources of GHGs will be required to analyze methods for reducing emissions when seeking federal permits for expansion or construction of new sources. 

When is a federal review of GHGs triggered?

Under the Tailoring Rule, U.S. EPA established thresholds for triggering federal permit review of GHGs from new and modified sources.  Initially, only the largest sources will be covered.  The newly released guidance document contains these useful tables:

If you trigger a review of GHGs under the federal air permit program (PSD permit), then the permitting agency must determine what the Best Available Control Technology (BACT) is to reduce emission of GHGs for that source. 

Complex Case-By-Case Process Will Prove Very Difficult

Selecting BACT is no easy process. BACT reviews can become the black box of permitting.  It includes a highly complex review of all existing technologies to reduce emissions and their potential application to the source.  A business may propose what they think BACT should be, however, they have no assurance the permitting agency will concur with their choice. 

US EPA's PSD GHG guidance states all available emission reduction options for GHGs should be reviewed.  Once the options are identified, they should be evaluated based upon the following elements:

• technical feasibility;
• cost and other economic considerations;
• environmental and energy considerations.  

The permitting agency performing the review should narrow the options and select the most appropriate technology or combination of technologies from the list.  This case-by-case determination provides no certainty to industry.  This is especially true for the first permits that will trigger the review. 

No Benchmarks for First Permits

With other pollutants (SO2, NOx, CO, etc.) that have long been subject to BACT review, U.S. EPA has assembled a database of permitting actions that identify technology as well as emission limits.  This database is referred to at the BACT/RACT/LAER Clearinghouse.  U.S. EPA directs permit reviewers to consult the Clearinghouse as a first step. 

With GHGs, the Clearinghouse will provide little assistance.  There will simply be no other permits issued for similar sources that will allow permit reviewers to compare determinations.  With no benchmarks, permit reviewers will be guessing at BACT. 

U.S. EPA has released white papers on available and emerging technologies for specific industry sectors.  However, these are simply laundry lists of technologies.  Until the Clearinghouse is populated, permit reviewers will have no ability to benchmark their determinations. 

• Email This
• Print
• Comments
• Trackbacks

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.

• Email This
• Print
• Comments (1)
• Trackbacks

On August 12th, the U.S .EPA released two proposed rules to address the potential gap that exists while States adopt rules to regulate greenhouse gases (GHGs) from large stationary sources. What U.S. EPA is really doing is making sure all fifty states will be regulating GHGs beginning January 2011.

On May 12, 2010, U.S. EPA finalized its controversial Tailoring Rule, which raised the trigger level for federal permitting associated with GHG emissions.  Unless the U.S. EPA raised the trigger levels from 100/250 tons per year, very small sources would have required federal permits. The Tailoring Rule is U.S. EPA's attempt to phase in GHG, beginning with only very large sources.

Beginning 2011, very large stationary sources of GHGs (like power plants and oil refineries) will need to address GHGs emissions when seeking permits for expansion or new facilities. For the first time, these sources will need to meet Best Available Control Technology (BACT) standards under the Agency's New Source Review Program to control or reduce GHG emissions.

Thirty-Seven (37) states, including Ohio, operate U.S. EPA approved air permitting programs.  State approved programs cannot be "less stringent" than U.S. EPA regulations.  Therefore, when U.S. EPA adopts new standards, States are required to incorporate those standards into their programs. 

However, each State has its own rulemaking process.  U.S. EPA recognized that some states may not be able to complete the rulemaking process to incorporate GHG regulations prior to 2011. Therefore, the August 12th proposal is EPA's attempt to create a backstop rule should states fail to complete their rulemaking process.  The backstop is referred to as a "federal implementation plan" or FIP.  It really means U.S. EPA would temporarily take over permitting functions for sources above the GHG trigger levels in the Tailoring Rule. 

Ohio doesn't like the prospect of U.S. EPA imposing the FIP.  If the FIP is imposed U.S. EPA would temporarily issue PSD permits in Ohio until the State finalizes its rules.  Ohio has released its proposed modifications to incorporate the Tailoring Rule into Ohio EPA's regulations to try and avoid U.S. EPA direct involvement in its permitting program.
 

• Email This
• Print
• Comments
• Trackbacks

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

EPA Regulation Under the Clean Air Act

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

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

Cap and Trade- A Market Mechanism for Reducing Emissions

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

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

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

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

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

Embarking on the "Well Traveled Road"

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

Last week, Senator Voinovich drew attention and criticism for proposing a significant expansion of the preemption language in the forthcoming bi-partisan climate bill to be introduced by Senators Kerry, Lieberman and Graham.  Failure to carefully consider the preemption language and possible additional limits on other regulatory authority would be short-sighted. 

One of the main reasons for Congress to pass climate legislation would be to remove the morass of uncertainty and mounting litigation in relation to climate change regulation.  If the bill has narrowly drawn preemption language, the certainty the businesses need will simply be non-existent.

The whole point of climate legislation should be to develop a national strategy to address the issue.  A narrow preemption would mean creation of new regulatory authority that just adds to the current chaos surrounding climate regulation. 

Here is a quick summary of what Senator Voinovich is proposing as reported in the New York Times :

Voinovich is circulating a proposal (pdf) that would go beyond Clean Air Act pre-emptions to block the federal government from regulating greenhouse gas emissions under laws including the Endangered Species Act, the Clean Water Act and the National Environmental Policy Act. The amendment would fully prohibit states from regulating greenhouse gases based on their effects on climate change and would prohibit public nuisance litigation related to climate change.

Notably, Voinovich's measure would also prevent EPA from moving forward with its part of a joint rulemaking finalized this month with the Transportation Department. The rules seek to raise the fuel economy of the nation's passenger fleet while imposing the first-ever greenhouse gas standards on cars and trucks.

The bi-partisan bill was supposed to be released today.  However, political issues over immigration have "temporarily" delayed introduction of the new measure.  Without viewing the new legislation, its difficult to make a comparison between the Voinovich proposal and the bi-partisan legislative proposal.  From what is anticipated, here is the break down of pre-emption language:
 

EPA's Clean Air Act and New Source Review Regulations

EPA's Tailoring Rule is perhaps the best example of vague climate change regulatory authority.  EPA admits that regulation of CO2 like any other pollutant would lead to absurd results.  The Tailoring Rule is meant to phase in regulation of CO2.  However, no one knows whether EPA has the authority to phase-in those regulations.  Is that something we really want to leave to chance?

Public Nuisance Lawsuits

The pre-emption language must include public nuisance claims.  Courts across the country have had a influx of suits filed against large greenhouse gas emitters seeking redress for their contribution to climate change.  Right now the Courts are split over whether the suits "raise a political question" which is outside the review of the judiciary.  Also, if Congress acts in passage it may pre-empt some of the federal nuisance authority Plaintiffs rely upon. However, it is very difficult to see how that legal question shakes out if the Kerry Bill initially only covers utilities. 

Even if Senator Kerry's bill uses a phased in approach, the bill should explicitly pre-empt nuisance lawsuits.  Expensive litigation that often leads to inconsistent Court rulings is no way to develop a common sense regulatory policy. 

Regional and State Regulations

If the bi-partisan bill fails to pre-empt State and regional climate change regulations we will be left with a patchwork regulatory scheme across the country.  Avoiding such a patchwork regulatory scheme was one of the major reasons the Obama Administration decided to push the compromise on vehicle emission standards.  Otherwise, California and other states would have established separate vehicle standards only applicable in their states.

Conclusion

With the bills anticipated narrower focus, expansive preemption may be much more difficult.  It is anticipated that the bi-partisan bill will start with limits on the utility sector and possibly phase in other sectors of the economy over time.   If a bill passes, what remains as legal authority becomes even more important if the bill has a narrow focus. 

Environmental groups will be looking to press for action in all areas where authority would remain. The logical argument for Congressional action is to remove the uncertainty and develop a national regulatory approach to addressing climate change.  This can only be accomplished if the focus is on the bill as THE approach, not just one new regulation to add to the existing patchwork of regulations.

• Email This
• Print
• Comments
• Trackbacks

On October 30, 2009 U.S. EPA finalized the first mandatory rule related to climate change- Greenhouse Gas (GHG) Mandatory Reporting Rule.  Beginning this year 31 industries must track and report their emissions.  Overall, the original GHG mandatory reporting rule required reporting for an estimated 85 percent of the total GHG emissions in the U.S. 

Only a few months later, U.S. EPA has already decided to expand the scope of their GHG mandatory reporting rule.  Under the proposal, new source categories will have to begin collecting data January 1, 2011. New source covered would include:

• Expansion of Oil & Gas Production/Storage/Transmission- Vented, flared and fugitive emissions from petroleum and natural gas facilities that emit equal to or greater than 25,000 metric tons of CO2 equivalent per year .  This sector was in the original rule but has been expanded to include the following facilities:  offshore & onshore production facilities and LNG import and export facilities and natural gas distribution facilities owned or operated by local distribution facilities
• Carbon Sequestration- Facilities that inject carbon dioxide (CO2) underground for the purpose of long-term geologic sequestration (GS) or to enhance oil and gas recovery
• Large sources of fluorinated greenhouse gases (F-GHGs) - GHG covered include: hydrofluorocarbons (HFCs), nitrogen trifluoride (NF3), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6).  Source include: electronic manufacturers (semiconductors, phot voltaic, liquid crystal display and micro-electo-mechanical systems), flurinated gas production, manufacture and use of electric transmissiona and distribution equipment

Focus on Natural Gas and Petroleum Industry

Why does EPA say it is focusing on the natural gas and petroleum industry?  The primary GHG emitted in methane which is 20 time as potent as CO2 at warming the atmosphere.  The potency of methane makes this sector the fifth largest source category covered by the mandatory reporting rule.  Also, the vast infrastructure associated with the industry.  This from EPA's preamble:

The U.S. petroleum and natural gas industry encompasses hundreds of thousands of wells, hundreds of processing facilities, and over a million miles of
transmission and distribution pipelines.

While the scope of emissions may argue for inclusion in the rule, the difficulty always has been making accurate calculations of fugitive methane emissions from the oil & gas sector.  Through this rulemaking EPA wants to change some of the methodologies for measuring fugitive and vented emissions.  This from EPA:

Whereas the initial proposal focused on comprehensive leak detection and direct measurement, this proposal includes direct measurement of emissions for only the most significant emissions sources, and the use of engineering estimates, emission modeling software, and emission factors, as appropriate, for other sources.

These fugitive emissions from leaks in valves in hundreds of miles of pipes has always made this a difficult area to measure accurately.  No doubt this will be the most complex area to measure. 

Over the last several years, interest in addressing fugitive emissions of methane from natural gas storage and piping were strong carbon offset projects.  The question now arises whether EPA is contemplating mandatory standards for this sector versus placing incentives for voluntary projects. 

Is the reporting rule an indication EPA may enact mandatory rules that include specifications for the design of valves on piping to reduce GHG emission?  Can you imagine the complexities involved in writing such a rule?  Further evidence that command and control regulation is not the right approach to reducing GHG emissions.

• Email This
• Print
• Comments
• Trackbacks

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.

• Email This
• Print
• Comments
• Trackbacks

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.   
 

• Email This
• Print
• Comments
• Trackbacks

U.S. EPA has initiated the process for determining what controls it will require should it finalize its proposal to regulate large industrial sources of greenhouse gases (GHGs).  As discussed in a prior post, the first phase of the program would cover sources emitting more than 25,000 tons of CO2 or equivalent emissions.  In subsequent phases of the program smaller sources would likely be covered.

Under EPA's proposal GHGs would become a pollutant covered under its New Source Review (NSR) program.  NSR requires new or modified sources that emit over established thresholds to install Best Available Control Technology (BACT).  The question is...what are the "best available" controls for reducing GHG emissions? 

I was interviewed for a story appearing in Climatewire that discussed the complexities involving in determining BACT for GHGs.  Unlike many mainstream media newspaper articles, the Climatewire article does an excellent job of providing an analysis of the issues related to implementation of this complex regulatory program. 

Two major issues:

1. What is BACT going to be for non-utility pollution sources? 
2. How on earth will EPA determine BACT for a wide variety of sources by its stated deadline of March 2010?

Efficiency improvements co-firing biomass are the two most likely candidates for utility sources.  But less analysis is known regarding potential methods to reduce GHGs emissions from other potentially covered sources like cement and steel production facilities. 

The preamble to U.S. EPA's proposed NSR GHG regulations makes clear the Agency believe the rules must be finalized by March 2010 because they must coincide with the rule regulating GHGs from light duty vehicles.  It seems like an impossible task to determine BACT for the range of sources that will be potentially covered in less than six (6) months.   Without established BACT standards, there is likely to be massive uncertainty and delays in permitting. 

[A complete re-printing of the Climatewire article is available in the extended entry with their permission]

photo: everystockphoto- cjohnson7

• Email This
• Print
• Comments
• Trackbacks

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. 

• Email This
• Print
• Comments
• Trackbacks

The first step to establishment of a comprehensive climate change regulatory program has been completed by U.S. EPA .  On September 22nd, the Agency finalized its rule on mandatory reporting of greenhouse gas emissions (GHGs).  The rule give the initial glimpses into what the potential overall control program will look.  The most important insight- which industries are likely to be required to control emissions.  

Who is required to report? 

To be covered by the rule, you must first fall within the source categories specified by U.S. EPA.  You must also emit more that a specified threshold.  EPA estimates 10,000 facilities will be covered representing 85% of all domestic GHG emissions.

COVERED INDUSTRIES- coal fired power plans, aluminum production, ammonia production, cement, electronics production, lime, petrochemical, petroleum refining, certain underground coal mines and municipal landfills.  Also covered are importers and exporters of coal, natural gas and petroleum products.

IMPORTANT "NON-COVERED" INDUSTRIES- reporting is not currently required for the following: electronics manufacturers, ethanol production, industrial landfills, wastewater treatment, suppliers of coal.

THRESHOLD- Only the largest facilities emitting GHGs- those that emit 25,000 metric tons or more of CO2 equivalent emissions per year- are required to report annually to U.S. EPA. 

If you are having trouble figuring out whether your facility may be covered, U.S. EPA has developed an "applicability tool" which walks you through the process of determining coverage.

What pollutants are considered GHGs?

There was some open debate as to some of the more "fringe" GHGs.  For now, U.S. EPA covers the following pollutants under the mandatory reporting rule:  carbon dioxide (CO2), methane (CH4), nitrous oxide (N20), hydofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF6) and other fluorinated compounds.

Non-CO2 pollutants must be converted to CO2 equivalent emission under the rule.  This is so emissions of various pollutants can be measured in a common currency.  The equivalency is based upon the global warming potential of the gas.  For example, one ton of methane is equal to 21 metric tons of CO2.

When does reporting start?

Recordkeeping obligation will begin January 1, 2010 for covered facilities.  The first mandatory report must be submitted to U.S. EPA by March 31, 2011 (reporting 2010 emissions). 

When do I have to install monitors?

U.S. EPA allowed some flexibility on use of required monitoring.  It allows the use of "best available monitoring methods" in the first quarter of 2010.  You can ask for an extension for up to December 31, 2010.  You can also use calculations specified by U.S. EPA in place of some monitoring.   However, if your facility already has a continuous emission monitor (CEM) you are expected to add GHG capability.

Do I have to hire a consultant to assess my emissions?

No, but...  U.S. EPA elected not to require third party verification of reported emissions.  However, companies must certify the accuracy of their records.  If you do not have staff on-hand who understand the protocols and methods for determining emissions, companies should strongly consider outsourcing this work.

Can I ever get out of the reporting obligation?

U.S. EPA decided to show limited flexibility on its "once in always in" policy.  You can exit the mandatory reporting program if you do either of the following:  a)  decrease emissions below 25,000 metric tons for five years in a row; or b) reduce below 15,000 tons per year for three years in a row.

• Email This
• Print
• Comments
• Trackbacks

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.

• Email This
• Print
• Comments
• Trackbacks

As reported in BNA and referenced in Foley & Hoag's blog, EPA is rumored to be moving forward with application of New Source Review requirements to large sources of greenhouse gas emissions.  BNA reported that EPA would likely set a trigger level of 25,000 tons of carbon dioxide or carbon dioxide equivalent emissions (other greenhouse gases converted into CO2 tons).  All sources emitting above this threshold would have to include Best Available Control Technology (BACT) to reduce greenhouse gas emissions.

Congress seems to face stronger head winds on passage of a cap & trade climate legislation.  Organizations like the National Association of Manufacturers (NAM) have started a national advertising campaign targeting vulnerable Senators- such as Sherrod Brown in coal dependent Ohio.  NAM is using their recent study regarding the impact on energy prices of the American Clean Energy and Security Act of 2009 (ACES) legislation to frame the debate as an energy tax increase. 

Missing in the strong opposition to cap & trade is the alternative- regulation of greenhouse gases under the existing authority of the Clean Air Act.  U.S. EPA has been in a holding pattern seemingly holding their collective breath that legislation will pass thereby avoiding a regulatory nightmare. However, with opposition growing perhaps EPA is starting see that it needs to raise the prospects of alternative regulatory schemes.  The timing of the proposal to included greenhouse gases under New Source Review would appear to support that view.

While the article states that EPA would apply NSR only to the largest sources of greenhouse gases (25,000 tons of CO2), EPA has questionable legal authority to limit application in this fashion.  The current statutory language in the Clean Air Act applies NSR to source emitting more than 250 tons of any pollutant.  EPA has said before it has no intention of setting the threshold that low.  However, that is what the Clean Air Act states is the applicable threshold.  Without legislation it certainly seems very questionable as whether EPA has the authority to alter statutory text through regulation.   

There appears no doubt that if cap & trade dies this fall that EPA will move forward with a positive endangerment finding and start to issue climate change regulations under its existing authority.  Yet the debate in Congress right now seems to be cap & trade versus no regulation.  EPA, businesses and environmental groups supporting ACES need to do a better job of framing the debate as- cap & trade versus command and control regulation under the Clean Air Act.   If more organizations engaged in the debate in a realistic manner, including NAM, the merits of cap & trade seem to be much greater.

As an indication we are still in the denial phase by some, the U.S. Chamber of Commerce wants to put climate change on trial.  As reported on Yale 360:

Facing the prospect that the federal government may soon begin regulating greenhouse gas emissions, the U.S. Chamber of Commerce is proposing a public hearing in which the chamber and allied scientists question whether human-caused global warming is real. William Kovacs, the chamber’s senior vice-president for environment, technology, and regulatory affairs, is asking the U.S. Environmental Protection Agency (EPA) to hold the rare public hearing, complete with witnesses, cross-examinations, and a judge who would rule whether man is indeed warming the planet.

This ignores the fact that we already had that trial in front of the U.S. Supreme Court in landmark case of Massachusetts v. EPA.  The Court found climate change to be real and recognized EPA's existing authority to regulated greenhouse gases.  This from the syllabus of the decision:

Based on respected scientific opinion that a well-documented rise in global temperatures and attendant climatological and environmental changes have resulted from a significant increase in the atmospheric concentration of “greenhouse gases,”

I wonder when the debate over cap & trade will start to honestly include a discussion of this legal reality?

(Photo: everystockphoto: cjohnson7)

• Email This
• Print
• Comments (2)
• Trackbacks

Democratic leaders of the US House Energy and Commerce Committee agreed to hold another hearing on climate change legislation on May 1.  As discussed by commentators with the Environmental Markets Association, some Washington Insiders believe this announcement is a clear indication the Waxman-Markey Climate Legislation won't make it.

Republican have hammered home the unknown costs of the proposal and seem to be getting traction during this tough economic time.  As reported in the Oil and Gas Journal, the minority party is still flexing its muscles:

"It is our intention to use the opportunity you are providing us this Friday to carefully examine the one element of the legislation that has so far escaped examination in 38 hearings stretching over 40 days, its cost," the two GOP committee members said.

Republicans have found a sympathetic group among Democrats from states that rely on coal and manufacturing to drive their economies.  As reported in Politico, while Rep. Dingell may have lost his leadership position he is still finding sympathetic fellow Democrats willing to support further concessions to protect industry in their states:

But dethroning Dingell didn’t change the membership of the committee, and there are plenty of Dingell Democrats left on the panel — Rust Belt, coal state and Southern Democrats who want to protect native industries as they negotiate the final terms of a sweeping climate change bill.  And that’s why Waxman has his hands full winning votes in the committee, and it’s one of the reasons he moved Monday to postpone a bill markup scheduled for this week.
 

Meanwhile the "fuse has been lit" by EPA on moving forward with regulation of greenhouse gases under the existing authority in the Clean Air Act.  Many commentators speculate that EPA and the Obama Administration are using this as a tactic to push the climate change legislation through Congress, even if they are correct that may be a tactic that back fires. 

If Congress does not act, I see no way EPA reverses course on its Endangerment Finding or California's Waiver request to set GHGs limits for vehicles.  Furthermore, EPA is reconsidering the Bush Administration decision to not require CO2 controls for coal plants. 

Even if EPA does not move forward with a full blow set of regulations to regulate GHGs, these actions will lay the ground work for Environmental groups to assert no new permits can be issued without CO2 controls. If there are concerns about the costs of climate legislation, everyone should be asking what the implications of these EPA actions will be on permitting and associated economic development. 

(Photo: Flickr Amy Manuel)

• Email This
• Print
• Comments
• Trackbacks

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)

• Email This
• Print
• Comments
• Trackbacks

House Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) and Chairman of the Energy and Environment Subcommittee Edward J. Markey (D-Mass.) introduced the “The American Clean Energy and Security Act” as the opening salvo in a contentious and complex debate over a greenhouse cap and trade program.  The bill links two major and independently controversial proposals:  1) a nationwide cap on greenhouse gases (GHGs); and 2) a national renewable standard and energy efficiency. 

The bill would:

• Cut national greenhouse gas emissions 20 percent from 2005 levels by 2020-this is slightly more aggressive than similar measures pushed by the Obama Administration.  Overall the goal is to cut GHG emissions by 85% by 2050 when compared to 2005 levels
• Reduce electricity demand by 15% by 2020
• Nationwide renewable energy standard which requires 25 percent of the Country's energy generation be met through wind, solar and other renewables.

The bill forms a skeletal framework, but leaves major controversial components open to debate.  (See summary of the American Clean Energy and Security Act) For example, the bill does not address whether pollution allowances under the cap and trade program would be 100% auctioned or 100% allocated to industry or somewhere in between.  The fact the bill does not even make a proposal on this component suggest the drafters understand a deal will need to be struck to give a chance for the bill to pass. 

US Climate Action Partnership -- a coalition of businesses and environmental groups -- called the bill a good starting point.  The bill makes several key concessions to Industry:  a)  allowing domestic and international offsets; b)  provides C02 and other GHGs cannot be regulated as criteria pollutants or hazardous air pollutants under the Clean Air Act; c) creates a strategic reserve of allowance in the event allowance prices are too high; and d) allows unlimited banking of allowances.

However, the bill also includes proposals that will raise concerns with Industry beyond the major concern-should the U.S. have a cap and trade system to control GHGs?  While the bill essentially exempts GHGs from traditional regulation under the Clean Air Act (a major advantage of legislation), it directs EPA to set up a new regulatory program to curb GHG emission by sources that are not covered by the Cap.  The bill also does not create any kind of so called "safety valve" which is a limit on the price of allowances.  While the strategic reserve concept allows some cushion, it only provides for release of more allowances into the pool it does not set a ceiling on the price of an allowance.

As reported in the Boston Globe, the House Committee's goal is complete debate on the bill by Memorial Day.  Here is the tentative schedule:

• Week of April 20:  Energy and Environment Subcommittee Hearings
• Week of April 27:  Energy and Environment Subcommittee Markup Period Begins
• Week of May 11: Full Energy and Commerce Committee Markup Period Begins

This appears to be a highly ambitious schedule given the level of controversy and major components of the bill open to debate.  Passage will be still very questionable.  You will have virtually no support among Republicans. You will have Democrats in coal states worried about the cost impacts of cap and trade on utilities.  You will have Democrats and Republicans in Southern states very concerned about the national renewable energy standard. 

For the bill to pass, major components will likely have to be restructured.  I am certain there will be plenty to write about regarding the bill in the coming weeks and months. 

• Email This
• Print
• Comments
• Trackbacks

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

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

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

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

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

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.

• Email This
• Print
• Comments
• Trackbacks

No doubt the President's budget includes a very ambitious proposal cap and trade proposal to address Climate Change.  The President Budget provides an overview of the proposal in the EPA budget:

After enactment of the Budget, the Administration will work expeditiously
with key stakeholders and Congress to develop an economy-wide emissions reduction program to reduce greenhouse gas emissions approximately 14 percent below 2005 levels by 2020, and approximately 83 percent below 2005 levels by 2050. This program will be implemented through a cap-and-trade system, a policy approach that dramatically reduced acid rain at much lower costs than the traditional Government regulations and mandates of the past.
Through a 100 percent auction to ensure that the biggest polluters do not enjoy windfall profits, this program will fund vital investments in a clean energy future totaling $150 billion over 10 years, starting in fiscal year 2012. The balance of the auction revenues will be returned to the people, especially vulnerable families, communities, and businesses to help the transition to a clean energy economy.

The budget blueprint Obama sent to Congress yesterday foresees revenue of $645.7 billion by 2019 from the sale of permits to polluters from 2012. Obama proposes to use the money raised to pay for other priorities, such as tax breaks for the lower and middle class. Another $150 billion will be used to help spur development of renewable energy. 

Early reaction to Obama's plan has been mixed with most recognizing he will have an enormously tough road ahead to pass a Climate bill with the framework he is proposing.

100% Auction... how about 30%?- President Barack Obama may need to give away as much as 70 percent of greenhouse-gas emissions permits to win support for his cap-and-trade program, Merrill Lynch & Co said.

McCain Blasts Obama Proposal- “I don’t think cap and trade should be used for the purposes of generating revenue,” McCain

 Environmental groups were jubilant at Obama's proposals on climate change-"It's a hugely important policy direction and another sign that Obama gets it when it comes to building a clean energy economy," said Gene Karpinski, president of the League of Conservation Voters.

Obama team will be pragmatists on climate change-  "Todd Stern, the Obama administration’s new top climate-change negotiator, wants to tamp down on the expectations. He talks tough and is all for the shift to a low-carbon economy, but he’s not an ideologue. And he may well be reflecting the White House’s pragmatism in the face of numerous challenges."  Its hard to see the pragmatism in a 100% auction, very small offset proposal.

• Email This
• Print
• Comments (1)
• Trackbacks

There has been major developments as a result of litigation, policy, rulemaking and legislation in the last few weeks relating to climate change and coal fired power plants.  Some changes are a result of outstanding litigation.  However, the most significant changes are indicative of the sea change that is occurring at the federal level under the Obama Administration relative to climate change. 

 Here is a review:

1. EPA will not regulate mercury by cap and trade-  EPA Administrator Jackson announced today that the Agency will be moving forward with rulemaking to regulate mercury emissions from coal plants.  "President Obama's EPA does intend to regulate mercury under section 112 of the Clean Air Act," said Jackson. Acting solicitor general Edwin S. Kneedler will drop the prior appeal of the decision in New Jersey v. EPA which struck down the Bush Administration cap and trade proposal for regulating mercury.
2. NEPA reviews of climate change impact required for oversees projects- The Obama Administration has settled an outstanding lawsuit which sought to compel NEPA reviews of climate change impacts for oversees projects financed with federal money.  Western cities and environmental groups alleged that Export-Import Bank of the United States and the Overseas Private Investment Corporation illegally provided more than $32 billion in financing and insurance to fossil fuel projects over 10 years without assessing whether the projects contributed to global warming or impacted the U.S. environment, as they were required to do under the National Environmental Policy Act (NEPA).  The settlement will require NEPA reviews and will also require future reductions of greenhouse gases.
3. BACT for coal plants does not mean IGCC-  A Texas Appeals Court rejected a challenge to a permit for a new 800 mw pulverized coal plant.  Appellants has argued the permit should have required IGCC technology as BACT instead of the proposed pulverized coal technology.  Consistent with other Court decisions looking at BACT, the Court said control technologies under BACT must be applied to the proposed project which in this case was a pulverized coal plant.
4. No Climate Change Legislation This Year-  Senator Boxer released here principles for what must be included in the Senate version of climate change legislation.  Senator Boxer said “Copenhagen is December...That’s why I said we’ll have a bill out of this committee by then.”  However, any bill passing out the committee still must pass the full senate and be reconciled with the House bill.  This schedule renders it impossible that cap and trade legislation will pass Congress in 2009.
5. EPA begins review of California Waiver Decision-  In a press release today, EPA announced they are beginning the review of the California waiver request to regulate greenhouse gas emissions from vehicles.  I think this quote from the EPA press release pretty much tells you what the outcome will be - "EPA believes that there are significant issues regarding the agency’s denial of the waiver. The denial was a substantial departure from EPA’s longstanding interpretation of the Clean Air Act’s waiver provisions. "

 (Photo: CJJohnson7/everystockphoto.com)

• Email This
• Print
• Comments (1)
• Trackbacks

I am attending the 12th annual EUEC (Energy and Environment Conference) in Phoenix for the early part of this week.  I guess they had to move the conference from previous venues to the Phoenix  Convention Center to accommodate the large number of registrants.  There are over 450 different speakers and presentations. 

My observations from the first day have been as follows:

1)  Despite the terrible economy the interest in environmental, green energy and climate change continues to grow.  It is truly amazing to see the number of companies and organizations in attendance.  There is also a distinct feeling in the air that the change in Administration will mean explosive growth and new opportunities. 

2) The most interesting presentation on the first day was from U.S. EPA's Frank Princiotti. He discussed the prospect of global climate change and the implications for the planet.  But even more interesting was his assessment of the world's ability to meet this challenge.  Despite the many statements that we have the technology right now to address global climate change, his assessment was much more dire.  For example, he said carbon sequestration would not be ready until at least 2020 or 2030 saying his "DOE colleagues would back him on that statement." 

His basic theme was "we need a technology revolution" and even if that happens it will not  be enough to avoid significant impacts from global warming.   We are at best trying to avoid catastrophic impacts from global warming even with very significant mitigation efforts. 

He indicated that efforts to reduce greenhouse gas emissions should be supplemented with other efforts.  Namely man made engineering to reduce the impacts of climate change.  Such as seeding clouds or creating a reflective layer in the earth atmosphere to deflect the suns effects on a warming planet-Now that is a scary proposition.  Man trying to effect the global temperature through quick fix engineering.  But he put up a slide of leading scientists from around the globe that say this must be under serious consideration.

3)  Another interesting presentation was made by Roger Martella, who is no with the law firm of Sidley Austin,  Prior to that he was EPA's general counsel during the Mass v. EPA litigation.  His perspective was that despite the knocks on the Bush Administration the EPA had done a tremendous amount of work on climate change.  In essence, his perspective was the foundation was laid during the Bush Administration EPA for President Obama to move quickly on climate change. He predicted that April 2nd of this year (the 2nd anniversary of Mass. v. EPA) may be the date of a major announcement by the Obama Administration on Climate Change.  Perhaps the endangerment finding will move forward which will trigger regulation under the Clean Air Act of greenhouse gases. 

I look forward to the next couple days.  My first certainly has been enlightening.  My conclusion from the first day is that if President Obama is serious about addressing climate change (and I think he is) most still do not comprehend the magnitude of change that is upon us.

• Email This
• Print
• Comments
• Trackbacks

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

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

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

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

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

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

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

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

Today, EPA Administrator-designate Lisa P. Jackson distributed a memo to all employees of EPA.  The memo outlines her and President Obama's philosophy of environmental protection.  The memo is an interesting demarcation of the major changes that are coming in the realm of environmental protection. 

Some priorities Ms. Jackson is very upfront about, such as addressing Climate Change (which notably was identified as the number 1 priority in her memo).  Other policy perspectives are a little less straightforward, but inferences can be made.  Here are my take aways from the memo.

1. Climate Change is a major priority-  The President made reference to it in his inaugural speech.  It is no mistake that its the first bullet on EPA-designate Jackson's list of priorities.  Notably, she includes the following statement:  "As Congress does its work, we will move ahead to comply with the Supreme Court's decision recognizing Pea's obligation to address climate change under the Clean Air Act"  STAY TUNED ON THIS ONE>>>
2. Science will be at the forefront-  Many environmental groups felt that the Bush Administration put science secondary to their end regulatory goals.  The memo is a clear statement that this will change.  What could be the impact?  For one, look for even stronger federal air quality standards (NAAQS) for ozone and fine particles. 
3. Resurgence in Environmental Justice- A very thorny issue and one difficult to address through regulation.  However, the memo mentions making  "people disproportionately impacted by pollution" a priority.  Perhaps they will try to tackle this more aggressively.
4. CAIR-  I may be out on a limb on this one.  In the "improving air quality" priority, Jackson states "we will plug the gaps in our regulatory system as science and the law demand."  I think this is a vague reference to a much stronger CAIR program.
5. Brownfield Redevelopment-  U.S. EPA may put even more emphasis on brownfield programs as a means to accelerate clean up of contaminated sites.  Jackson was criticized in New Jersey for the slow clean ups.  I think the statement -"turning these blighted properties into productive parcels and reducing threats to human health and the environment means jobs and investment in our land" -can't be anything other than a reference to a strong brownfield program.
6. Money for the Great Lakes?-  In the memo, Jackson says the "Agency will make robust use of our authority to restore threatened treasures such as the Great Lakes and the Chesapeake Bay."  I am intrigued at the term "robust use of our authority" in connection with the Great Lakes.  Is this a reference to enforcement rather than the Great Lakes Restoration Plan?
7. Don't underestimate the amount of change coming-  President Obama's buzz word was change.  I don't think there is any area that is about to see more change than environmental regulation in the next four years.  Fasten your seat belts...

• Email This
• Print
• Comments
• Trackbacks

With recent developments in climate change litigation, including the Deseret Power decision, it appears we are moving ever closer to requiring control of CO2 from coal fired power plants and other major sources of CO2.   Outgoing EPA Administrator Johnson may have delayed things temporarily by issuing his memo in response to Deseret Power. However, incoming EPA Administrator Jackson has pledged to quickly review the California waiver request that would allow the State to set CO2 emission standards for cars. If that happens, the dominoes will soon fall requiring controls for CO2 for all major sources under the Clean Air Act.

A positive "endangerment finding" in response to the California Waiver request will trigger a host of other regulations. Those would include requiring emission controls from new major sources of CO2 and other greenhouse gases under EPA's New Source Review permit program. 

If new or modified sources are required to control CO2, then as part of their permit they will be required to install Best Available Control Technology (BACT) to reduce CO2 emissions if located in an area that meets federal air quality standards.  More stringent limits (Lowest Achievable Emission Rate- LAER) apply in areas that don't meet air quality standards. 

The focus of all the recent litigation has been on whether to require CO2 controls as part of a BACT permit review.  But that begs a very interesting question....What would BACT be for CO2?

I was asked this very question during a recent interview I had with a reporter from Inside EPA.  That sent me to research the issue.   My review shows to things:  1) there is a wide divergence of opinion among experts as to what BACT would likely be;  and 2) EPA has a fair amount of discretion to determine the BACT standard for CO2.  Once it is decided that BACT must be required to control CO2 (and other greenhouse gases), Industry insiders expect EPA would take at a minimum 6 months to decide the issue.

Reading the tea leaves, I think we can begin to decipher an answer as to what BACT may constitute.  We certainly can eliminates some suggestion offered by pundits based upon how EPA has applied the BACT standard in the past.  Here is what we know....

1. There are no current EPA endorsed technologies for controlling CO2.  EPA's current RACT/BACT/LAER clearinghouse doesn't have anything on CO2.  The clearinghouse is used to identify various control technologies that would be deemed to meet the various standards on specific industries or technologies. 
2. BACT is a site-specific, case-by-case decision which means uncertainty.  In testimony  House Government Reform and Oversight Committee, attorneys Peter Glaser and John Cline stated the following: "Since BACT determinations for CO2 have no regulatory history at this time, and can vary by type of facility and from state-to-state, businesses wishing to construct new sources or modify existing ones would have no basis for planning what the regulatory requirements will be."
3. Case law and regulatory decisions of EPA establish parameters for the BACT analysis.  As detailed below, case law in the context of BACT for coal plants can be extrapolated to CO2.  The same general guidelines used to evaluate controls for other pollutants (SO2, CO, mercury, NOx) will be used for CO2. 

Now lets turn to a review of experts who have offered their opinion as to which technologies should be considered BACT for CO2.  Here is one guess from the blog Cleanergy.org:

BACT for CO2 is unlikely to mean carbon capture and storage (yet), since it's not readily available, but it will probably mean some combination of co-generation (making use of waste heat from electricity generation), efficiency improvements, and/or fuel switching/co-firing with biomass. Ultimately, President-elect Obama's EPA gets to decide how BACT is defined for CO2, a process which will take at least a year. 

Joseph Romm, author of the blog Climate Progress, offered his opinion of what BACT for CO2 may look like.

Certainly it is going to slow down the permitting of any new coal plant dramatically, until the EPA figures out the answer to the $64 billion question: What is BACT for CO2 for a coal plant? That will probably take the Obama EPA at least 12 months to decide in a rule-making process. But from my perspective it could/should/must include one or more of:

a) Co-firing with biomass — up to 25% cofiring has been demonstrated
b) Highest efficiency plants
c) Cogeneration (i.e. recycled energy)
d) (possibly even) Gasification with, yes, carbon capture and storage (CCS)

Here are some other opinions as to possible technologies that would qualify as BACT for coal-fired power plants:

1. Solar Thermal at a Coal Power Plant- mix the steam from solar thermal with steam from the boiler to reduce emissions. 
2. Highly Efficient Boilers-  Jeff Holmstead, former Chief Air Official for U.S. EPA, has said he  BACT would be for CO2 right now given costs and development of other control technology.

But let's look at the legal guidance associated with BACT.  In doing so, some of the technologies suggested seem "not ready for prime time" or would not be considered a control technology but rather a different type of generation. 

BACT is determined through a case-by-case evaluation of control technology alternatives and involves a complicated weighing of economic, environmental, energy and other factors. BACT can even be no control measure if that weighing process fails to identify a technically and economically feasible technology for controlling the pollutant in question.

A detailed discussion of the permitting process and legal aspects of a BACT analysis is provided below.  The single biggest consideration is that BACT takes the project as proposed and establishes the lowest achievable emission rate for the various pollutants.

This means BACT cannot fundamentally change the design of the proposed project.  This is why EPA has rejected establishing IGCC as BACT.  If the permit applicant is proposing a traditional pulverized coal boiler, then limits must be established based upon what is achievable for that type of boiler.

This eliminates many of the control technologies suggested by pundits:

1. IGCC- would force a redesign and would be rejected
2. Solar Thermal Combined with a Coal Boiler- would be rejected as forcing a redesign
3. Carbon Capture and Storage- This one is interesting.  Under BACT you must take the geographical location of the project into consideration.  If the geologic considerations would make CCS infeasible for the project it could not be required.  In addition, CCS is certainly not ready for prime time and could not be required as part of BACT for any site right now.

Some other technologies are more likely to be considered BACT:

1. High Efficiency Boilers- this would likely be required to reduce emissions
2. Co-firing with biomass-  depending on the project, this could be required.  Co-firing reduces CO2 emissions.  BACT does involve consideration of "clean fuels", however co-firing biomass would likely be rejected if it caused a major redesign of the facility.
3. Coal Drying- By removing moisture from the coal you can reduce CO2 emissions.  Similar to co-firing biomass this could be required if it doesn't force a major redesign of the project.

• Email This
• Print
• Comments
• Trackbacks

On January 15, 2009 the Sierra Club filed a petition in the D.C. Circuit Court of Appeals challenging EPA Administrator Johnson's memo in response to Deseret Power.  The petition seeks the Court to throw out the Johnson memo.  The memo would allow current permits to proceed without considering controls for CO2 or other greenhouse gases.

If the memo is revoked or thrown out it would clear the way for the soon-to-be Administrator Jackson to issue her own interpretation.  But would she likely take such an action?  I doubt it.

The petition filed in the Court is procedural in nature and does not contain any insight into the Sierra Club's arguments.  However, you can review the petition the Sierra Club filed with EPA Administrator Johnson first which contains twenty pages of argument as to why the memo is illegal.  The group summarizes their attack on the memo in the following fashion:

As discussed below, this final agency action was impermissible as a matter of
law, because it was issued in violation of the procedural requirements of the
Administrative Procedures Act (“APA”), 5 U.S.C. § 101 et seq., and the Clean Air Act
(“CAA”), 42 U.S.C. § 7607, it directly conflicts with prior agency actions and
interpretations, and it purports to establish an interpretation of the Act that conflicts with  the plain language of the statute.

Many environmental groups are expecting that the future EPA Administrator will simply revoke the memo.  In the alternative, if their legal challenge is successful they expect future Administrator Jackson to issue her own interpretation which says CO2 is a regulated pollutant. 

I think they may be disappointed.  If such a memo were issued it would trigger an array of Clean Air Act regulations of CO2 emissions.  Many of these regulations are ill-suited for controlling CO2.  I would expect the future Administrator will get strong advice from her staff at EPA to proceed with caution in adopting new interpretations that could result in instantaneous regulation.  At a minimum, I believe they will advise that EPA construct a regulatory scheme in a deliberate fashion through a formal rulemaking process which could take at least a year. 

• Email This
• Print
• Comments
• Trackbacks

(Image: CO2 Emissions in the U.S.)

Perhaps its obvious that the window of opportunity to obtain an air permit without CO2 controls is closing quickly.   Don't delude yourself that controls will wait for Congressional action on climate change.

The battle over requiring CO2 controls without additional rulemaking or legislation is being waged right now. The saga is being played out in the aftermath of the Deseret Power decision and the ensuing memo issued by EPA Administrator Johnson.  Here is a quick synopsis of what has transpired to date:

1. Deseret Power rejected EPA's basis for approving permits without CO2 controls.  However, the Environmental Review Board left the window open.  It said EPA could come out with a new position on the issue as to whether CO2 is a "regulated permit."
2. EPA Administrator Johnson quickly took advantage of the opening issuing a new interpretative memo saying the Clean Air Act's requirement to monitor CO2 was not tantamount to regulation of CO2.  Therefore, new permits did not need to include controls for CO2. 
3. In the latest round of the Deseret saga, the Sierra Club has filed a petition challenging the legality of the Johnson memo.  Citing Section 307(d) of the Clean Air Act, the group argues EPA's memo amounts to a new substantive rulemaking that must go through the notice and comment process.  If EPA denies the petition, the Sierra Club can appeal directly to the D.C. Circuit Court of Appeals.  The hope is that if the memo is declared illegal an Obama Administration would issue a much different memo- one saying controls for CO2 are required.

To me the saga over the Deseret Power decision is a simply good theater.  The fact is CO2 will be a regulated pollutant and soon.  In my mind, if you are seeking an air permit for a source with significant CO2 emissions you may have less than a year or so to get your permit before the whole playing field changes.   We should look to clues from President-elect Obama's pick to head the EPA as to what may happen in the near future.

President-elect Obama named Lisa Jackson to head U.S. EPA.  Ms. Jackson was the former Commissioner of the New Jersey Department of Environmental Protection.  According to some national news organization she brings a mixed record.  U.S. News and World Report stated the following:

She is credited with helping put New Jersey in a leadership role on the issue of climate change and with encouraging the state to adopt a moratorium on building new coal plants. Yet she also has made choices that have been applauded by industry, including an effort earlier this year to use private companies to clean up thousands of contaminated sites around the state.

In recent days, when Jackson's name emerged as Obama's likely pick, some of these issues resurfaced. A few New Jersey-based environmental groups have put out press releases criticizing Jackson's record, and their comments have gotten national attention. But many observers say the criticism is overblown and that Jackson, though having at times taken stands the groups didn't fully agree with, has largely been an ally.
 

Jackson's background shows EPA is likely to take some form of quick action on CO2 shortly after January 20th with Obama is sworn into office.  New Jersey participates in RGGI which is the cap and trade program for CO2 emissions from power plants in the Northeast.  Is no surprise Jackson and the rest of the Obama team strongly supports a national greenhouse gas cap and trade program.  However, such legislation is likely a year away at a minimum. 

What may happen in the interim?  There are several issues pending before U.S. EPA that could result in regulation of CO2 in the near term.  

1. The "endangerment finding" on CO2- EPA still needs to take action in response to the Supreme Court's decision in Massachusetts v. EPA.  This is the case regarding California's request for a waiver to set standards for CO2 from vehicles.  While the Court said CO2 is a pollutant, under Section 202(a)(1) of the Clean Air Act vehicle emission of greenhouse gases are not regulated until the EPA determines CO2 from cars would "endanger  public health and welfare."
2. Deseret Power interpretive memo-   An Obama Administration could also try and retract the memo issued by EPA Administrator Johnson in response to Deseret Power. 
3. Comprehensive Rulemaking on GHG Regulation-  EPA has issued its Advanced Notice of Public Rulemaking seeking comments as to whether to comprehensively regulate CO2 and other GHGs under the Clean Air Act.  An Obama Administration could accelerate action on this rulemaking effort. 

One of these three course of action will happen.  The question is just how soon.  New Jersey declared CO2 an air contaminant back in 2005.  In order to make such a declaration, New Jersey had to go through a formal rulemaking process declaring CO2 "injurious to human health and welfare."  Take a look at the conclusions in the NJ rulemaking, don't they appear to be exactly what would be need for an endangerment finding?

This interpretation (declaring CO2 an air contaminant)  is consistent with the statutory definition of air pollution at N.J.S.A. 26:2C-2 and the Department’s regulatory definition of “air pollution” at N.J.A.C. 7:27-5.1, which states that “’air pollution’ means the presence in the outdoor atmosphere of one or more air contaminants in such quantities and duration as are, or tend to be, injurious to human health or welfare, animal or plant life or property, or would unreasonably interfere with the enjoyment of life or property throughout the State ….”

The exclusion of CO2 as an air contaminant is no longer valid, given the intent of the Department’s definition of air contaminant throughout N.J.A.C. 7:27 and the definition of air pollution at N.J.A.C. 7:27-5.1, because scientific evidence has evolved to the point that adverse environmental and human health impacts due to increasing concentrations of CO2 in the atmosphere are now clear.

Also, New Jersey passed the New Jersey Global Warming Response Act which committed the state to returning global warming pollution to 1990 levels by 2020 and cutting global warming pollution levels by 80 percent by 2050.  New Jersey is only one of three states to make greenhouse gas reductions state law. 

The pressure on Jackson to take action to block new coal plants and regulate CO2 will be enormous.  She will have a hard time defending a slow and deliberate pace when her State has already taken significant action, including a State-like "endangerment finding."  This means some type of action to regulate CO2 will likely come in the first year of the Obama Administration.  As a result, the window of opportunity to avoid CO2 controls in a permit is closing quickly.   

The most likely course of action could be peeling the endangerment finding away from the ANPR and proceeding with a finding CO2 does endanger public health.  The other option that could have a quick and dramatic impact would be to retract the Johnson memo responding to Deseret Power.  A Jackson EPA could declare the memo was issued illegally and issue a new interpretive memo. 

(Image:  flickr Tom Raftery)

• Email This
• Print
• Comments
• Trackbacks

Senator Barbara Boxer sent a letter to the Department of Justice demanding withdraw of what she calls a "blatantly illegal memo" issued by EPA Administrator Steve Johnson in response to the Deseret Power decision. The memo says that CO2 (and other greenhouse gases-GHGs) are not yet regulated pollutants under the Clean Air Act.  As a result, federal air permits will not require installation of Best Available Control Technology (BACT) to reduce GHG emissions.  Here letter states:

Administrator Johnson issued the document without legal authority under the Clean Air Act, and in spite of the clear opinion of the EPA’s Environmental Appeals Board in In re: Deseret Power Electric Cooperative, PSD Appeal No. 07-03 (EAB November 13, 2008). Johnson’s guidance also flies in the face of the U.S. Supreme Court in Massachusetts v. EPA (2007).

The Johnson document presents as arguments against including carbon dioxide emissions in a Clean Air Act permit the same kind of transparent excuses for inaction on global warming pollution that both the Supreme Court and the Environmental Appeals Board flatly rejected in their respective opinions. In addition, the EPA’s issuance of the Johnson document completely disregards the public’s right to participate in EPA decision making.

Senator Boxer goes too far in calling the memo "blatantly illegal."  In fact, the Environmental Appeals Board recommended that the EPA issue an interpretative memo to decide whether CO2 is considered a regulated pollutant. 

What I take away from the fact the letter was sent is how different things will begin to look come January 20th.  President-Elect Obama has already nominated members of the Cabinet that will have a 180 degree different view point of tackling Climate Change than the Bush Administration.  Most people know action will be taken, but I still don't think people fully grasp the magnitude of the change to move toward a low carbon economy.

My other observation is that many on the Internet who have been commenting on the events surrounding the Desert Power case don't fully grasp the implications of regulating CO2 under the current structure of the Clean Air Act.  (See Joe Romm's Post on his blog Climate Progress).  I have discussed this implications in prior posts.  There is a right way to do things and rushing to regulate CO2 without the proper regulatory framework would be a disaster.

• Email This
• Print
• Comments
• Trackbacks

It didn't take long for the Deseret Power Decision to come back to Ohio.  The debate is over whether a permit for the proposed coal to liquid fuel plant proposed by Baard Energy and AMP Ohio's new coal power plant can move forward in light of the decision.  Here is a sampling of the debate over the Baard project as it appears in the local paper The Vindicator:

The statements came as the state EPA is on the brink of issuing an air permit for the proposed $5.5 billion Baard Energy plant that would turn coal into liquid fuel. Settles said a decision is expected to be made within the next two weeks.

The air permit would be the final permit needed to begin construction that would be a boost to the local economy. Permits regulating the plant’s effects on water and wetlands have already been approved.

In a statement, the Sierra Club said it went before the EPA Appeals Board in May of this year to request that the air permit for Deseret Power Electric Cooperative’s proposed waste coal-fired power plant in Utah be overturned because it failed to require any controls on carbon dioxide pollution.

The Sierra Club’s statement said the decision means that all new and proposed coal plants nationwide must go back and address their carbon dioxide emissions.
 

AMP Ohio's permit is facing an equal challenge.  In today'sDaily Sentinel, AMP Ohio was a bit cautious in its statements:

Carson (AMP Ohio) also pointed out, the decision was not in Ohio, which has a fully approved state permitting program, and that AMP-Ohio has worked for over a year in cooperation with Ohio EPA in meeting all requirements of Ohio law in regards to getting the plant online. Carson also pointed out the permit for the Utah plant was not denied but sent back to a regional office for reevaluation.

In a press release, the Sierra Club stated: “Two of the largest new coal proposals for Ohio, the AMP-Ohio power plant in Meigs County and the Baard liquid coal plant in Columbiana County, are likely to face setbacks from the ruling. Both companies had previously insisted that carbon dioxide should remain unregulated — an argument rejected in today’s ruling — and had resisted attempts to establish carbon limits in their air permits.”

Obviously there is a disagreement between the Sierra Club and Ohio EPA on how the decision will affect the permits at issue.  While Ohio EPA is correct that it is one federal court decision, the two cases that have had final decisions issued on whether C02 must be evaluated as part of federal New Source Review (NSR) have certainly been more in favor of requiring controls.  The Georgia State court held CO2 is a regulated pollutant and the pollution control analysis (BACT) for the new coal plant had to include controls for CO2.

The Sierra Club is a certainly overstating the decision in Deseret (see their Press Release) by claiming that all new coal plants must address CO2.  As discussed in my last post, the Environmental Appeals Board remanded the permit to U.S. EPA.  The Board said U.S. EPA has discretion to go either way- determine CO2 is a regulated pollutant or decide monitoring requirements are not enough to trigger requirements to control CO2. 

The Board did reject U.S.EPA's basis for saying historical precedent tied its hands from determining monitoring was enough to trigger regulation of CO2.  However, the Board did not say U.S. EPA couldn't develop a defensible position.

What is certain, is there is tremendous uncertainty.  From these comments we can anticipate Ohio EPA will issue the permit (known as "The Ohio River Clean Fuels LLC") without requiring analysis of CO2.  The Baard permit will be challenged and it is totally uncertain as to whether the permit will be invalidated by either a State or Federal Court in Ohio. The AMP Ohio Permit faces similar uncertainty.

• Email This
• Print
• Comments
• Trackbacks

Talk about your pro-bowl quality punts...U.S. EPA's Environmental Appeals Board made a major one this week on the issue of climate change.  All eyes were fixated on the Board waiting for their decision on whether the Clean Air Act requires immediate regulation of greenhouse gases  (GHGs-which include CO2).  The Board's answer?  We would rather let the Obama Administration decide.

Others on the web point out this may hold up permits for coal plants while EPA deliberates on what to do next.  There is uncertainty after the decision, but other Courts don't have to follow the EAB ruling.

-See Coal Plant Stop Orders and Power Landscape Changes After Ruling

Background:  For those not keeping up to date on the latest litigation over regulation of GHGs, a major decision was issued yesterday- Deseret Power Electric Cooperative (Bonanza).  At issue in the case was whether the current language of the Clean Air Act requires immediate regulation of GHGs.

The Sierra Club appealed a federal permit that would have allowed construction of a new coal fired power plant.  The Sierra Club argued the permit was illegal because it did not require control of CO2 and the Clean Air Act (CAA) mandates regulation of the pollutant. 

Under the CAA,  EPA would have to require controls for CO2 if it is a pollutant "subject to regulation" under the Act.  The issue turned on the amount of regulation necessary to trigger this provision.  The Clean Air Act does require monitoring and reporting of CO2 for some sources.  But EPA argued monitoring is not enough, claiming that it has interpreted "subject to regulation" as meaning the Agency has set a standard requiring reductions, not just monitoring of emissions.

Implications:  A win for the Sierra Club would have had immediate and dramatic impacts on business across the country.  Hundreds of thousands of businesses, even commercial buildings may have needed a federal air permit to control CO2 emissions.  The EPA would have been overwhelmed with a tidal wave of new work. Why?

As discussed in a prior post, the permit thresholds in the CAA are extraordinarily low in the context of greenhouse gases.  Just how low?  The Act requires federal regulation for sources that emit 100 or 250 tons of a pollutant, depending on various factors.  That's fine for traditional pollutants like sulfur dioxide and soot, but ridiculous when viewed in the context of greenhouse gases.  As a comparison, California's Climate Change Program (AB-32) uses a threshold of 25,000 metric tons. 

On the other hand, if the Board sided with U.S. EPA then regulation of GHGs would be delayed until either U.S. EPA completed its lengthy rulemaking process or legislation is enacted by Congress.

Decision:  The Board definitely punted.  It did not agree with the Sierra Club that the plain text of the CAA requires CO2 to be regulated.  However, it rejected the EPA's position that an analysis of its historical interpretations forecloses the possibility that monitoring requirements are sufficient to trigger the need to regulate GHGs as a pollutant. 

The Board returned the permit to the Agency for further deliberation.  The Board said it is within EPA's discretion to begin regulating GHGs because the CAA includes monitoring requirements.  The Board concludes with the following paragraph:

Accordingly, we remand the Permit to for the Region (U.S. EPA) to consider whether or not to impose a CO2 BACT limit in light of the Agency's discretion to interpret, consistent with the CAA, what constitutes a "pollutant subject to regulation under this Act."  In remanding this Permit to the Region for reconsideration of its conclusions regarding application of BACT to limit CO2 emissions, we recognize that this is an issue of nation scope that has implications far beyond this individual permitting proceeding.  The Region should consider whether interested persons, as well as the Agency, would be better served by the Agency addressing the interpretation of the phrase "subject to regulation under this Act" in the context of an action of national scope, rather than through this specific permitting proceeding.  (emphasis added)

In otherwords, we want the Obama Administration to decide this through a regulatory interpretation that will apply universally and not by us requiring it in the context of a single appeal of a permit.

(Photo: Tostie14/everystockphoto.com)

• Email This
• Print
• Comments
• Trackbacks (2)

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

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

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

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

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks (1)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks (2)

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

1.  Supreme Court says CO2 is a pollutant under the Clean Air Act.  In Massachusetts v. EPA decided in April of 2007, the Supreme Court held that GHGs are pollutants that may be regulated under the Clean Air Act.  But the Court did not go far enough to say EPA must regulate GHGs. At issue in this case was Section 202 of the Clean Air Act which covers regulation of greenhouse gases from motor vehicles. For a pollutant to be regulated under Section 202 it must be “reasonably be anticipated” to “endanger public health or welfare.”   Therefore, EPA must conclude GHGs from motor vehicles endager public health before regulation commences The Court remanded the Section 202 determination to EPA to make the necessary "endangerment finding." 

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

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

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

And now the latest....

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

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

Al Gore, speaking at the annual meeting of the Clinton Global Initiative, called for young people to perform acts of civil disobedience to stop construction of new coal plants.  He also has called for State Attorney Generals to review whether utilities are committing stock fraud by discounting the threat of global warming. 

I put this post up after writing yesterday about the Arkansas proposal to pass legislation prohibiting construction of new coal plants.  Preventing construction of new coal plants that do not use carbon sequestration appears to be the number one strategy of green groups and those concerned with global warming. 

Ohio could soon be a major battle ground.  While the AMP Ohio facility has received its permit for construction of its new baseload coal power plant, it should be bracing itself for challenges on all fronts. During the public comment period on the new period concern was expressed that the facility would emit 7.3 million tons of CO2 per year.  Right now AMP Ohio appears to be the rare coal plant project that is still moving forward having received its authorization to construct from Ohio EPA.

• Email This
• Print
• Comments
• Trackbacks

As reported in the Texarkana Gazette, the Arkansas State Commission on Global Warming is likely to recommend a ban on new coal fired power plants.  The Commission is also proposing construction of a new $1.5 billion dollar plant be delayed until carbon sequestration technology can be added to the plant. 

What is the Arkansas Governor's Commission on Global Warming?  Here is a description taken right from its web page:

With the signing of Act 696 of the Arkansas 86Th General Assembly (HB2460), Governor Mike Beebe established the Governor’s Commission on Global Warming. By design the Commission represents a wide diversity of views and perspectives with members coming from business, industry, environmental groups, and academia.

The Commission is charged with setting a “global warming pollution reduction goal” for Arkansas and a “comprehensive strategic plan for implementation of the global warming pollution reduction goal.” The Act sets several study and evaluation requirements and requires a final report be provided to the Governor by November 1, 2008.
 

The developments in Arkansas represent yet another in a series of legal, legislative and political attacks on new coal fired power plants.  The attacks have been successful, between 2007 and 2008 plans for at least 69 coal plants have been canceled.

In the article a utility representative comments that the decision would force continued use of older less efficient coal fired power plants.  His argument that the decision will be bad overall for the environment. 

While I sympathize with the argument we should not be adding to the problem, what alternatives are being suggested to replace old plants or meet ever increasing demands for electricity?  While renewables are a great solution, there is no denying they do not provide the baseload generation of either a coal or nuclear plant. 

• Email This
• Print
• Comments
• Trackbacks

Carbon capture and sequestration (CCS) is a critical strategy proposed for combating climate change.  It involves the injection of CO2, a greenhouse gas, generated by coal-fired power plants and industrial facilities deep beneath the earth's surface for long term storage. 

There are potential significant issues with CCS, including:

1. 1.  Pollutants from the plant mixing with the CO2 that is injected leading to contamination of water supplies;
2. 2.  Potential mobility of CO2 once it is injected; and
3. 3.  Corrositivity of CO2 may result in release of subsurface contaminants into drinking water supplies

The Department of Energy and Coal State's are betting heavily on the success of carbon sequestration.  Federal funds are supporting some 25 projects around the country that will investigate the feasibility of CCS. 

To address the concerns with CCS, U.S. EPA and the States are beginning to develop regulations for CCS projects.  This Summer major developments include release of U.S. EPA's rules and the issuance of an Underground Injection Control (UIC) permit by Ohio EPA for an Ohio test site.

Beginning this month, the Midwest Regional Carbon Sequestration Project (MRCSP) is utilizing FirstEnergy's R.E. Burger Plant as a test site for injection of up to 3,000 tons of CO2. As reported on the MRCSP web page, the period of injection could vary from three to eight weeks, depending on the properties of the injection zones and the time needed for experimental set-up, regulatory oversight and monitoring.

The injection follows Ohio EPA's issuance on September 2, 2008 of a permit to allow the installation and pilot testing of the underground injection well for purposes of carbon sequestration.  This is the first permit issued in Ohio that would allow injection of CO2 subsurface for purposes of carbon sequestration.  Some interesting aspects of the permit include:

1. Injection will occur at three different geologic locations-  the intervals range from 5,923 feet to 8,274 feet below surface.  The intervals are selected to prevent mobility of the injected CO2.
2. Closure financial responsibility-  Total project closeout including closure of the well in accordance with regulatory requirements were estimated at $75,000 to $100,000.  This amount only covers sealing of the well.  No money is set aside in the event any other issues arise. Some may question whether this is sufficient financial assurance if it was anything other than a test site.
3. Monitoring of Injected Fluids-  On a quarterly basis, the injected material will be analyzed for various contaminants including SO2, NOx, particulate matter, and mercury.  The monitoring is an attempt to verify contaminants from the plant are not mixed with the injected CO2.

Issuance of the permit precedes finalization of U.S. EPA proposed rules governing regulation of carbon sequestration projects.   U.S. EPA's proposed rules and Ohio EPA's permit rely on similar legal authority on the Safe Drinking Water Act (SWDA).  The permit together with the proposed rules give insight into how CCS projects could be regulated in the future. Areas covered by both the permit and U.S. EPA's proposed rule include:

• Geologic site characterization to ensure that wells are appropriately sited
• Requirements to construct wells in a manner that prevents fluid movement into unintended zones;
• Periodic re-evaluation of the area around the injection well to verify that the CO2 is moving as predicted within the subsurface;
• Testing of the mechanical integrity of the injection well, ground water monitoring, and tracking of the location of the injected CO2 to ensure protection of underground sources of drinking water;
• Extended post-injection monitoring and site care to track the location of the injected CO2 and monitor subsurface pressures; and
• Financial responsibility requirements to assure that funds will be available for well plugging, site care, closure, and emergency and remedial response.

While the regulations and permitting of CCS are moving forward, not everyone is embracing CCS. In recent testimony before the U.S. House of Representatives Energy and Commerce Subcommittee on Environment and Hazardous Materials, serious concerns were raised by the American Water Works Association (AWWA) about the potential effect CCS technology may have on the nation's underground sources of drinking water.  Strong regulations and successful pilot tests will go a long way to addressing these concerns.

• Email This
• Print
• Comments
• Trackbacks

As reported in various newspapers, several states have moved forward with the next round of climate change litigation. The States have sued U.S. EPA arguing that the Agency illegally refused to regulate greenhouse gas emissions (GHG) from refineries. 

Thelen's Climate Law Update, had a recent post discussing the lawsuit:

New York, California and 10 other states launched the latest lawsuit this week in the U.S. Court of Appeals for the District of Columbia Circuit. Although the document itself was bare-bones, officials said it's focused on the failure of the U.S. Environmental Protection Agency to adopt regulations known as New Source Performance Standards to control pollutants blamed for causing global warming.

Lawyers working for California Attorney General Jerry Brown told Climate Law Update the case would draw legal support from last year's landmark Massachusetts v. EPA decision last year. In that ruling the Supreme Court held the EPA had the authority under the Clean Air Act to regulate greenhouse gases if it found they endangered human health or welfare.

So far, as Climate Law Update has reported, government officials have balked at such a move, calling the law "ill-suited" to controlling such emissions, and they have launched a lengthy effort to study the issue.

U.S. EPA pronounced that the Clean Air is "ill-suited" for regulation of GHGs when it issued its proposed rulemaking on regulation of greenhouse gases under the Act.   U.S. EPA's rulemaking is an analysis of the whether and how GHGs could be effectively controlled under the Clean Air Act. 

In U.S. EPA's latest action, refusal to regulate GHG emissions under the NSPS (new source performance standards), U.S. EPA asserted:

1. The Clean Air Act does not mandate U.S. EPA regulate GHGs under the standard
2. The Agency should be allowed to proceed with a more deliberate and thoughtful process in developing greenhouse gas regulations, then simply incorporating regulations as it develops source specific rules
3. Regulating GHG under NSPS could require the Agency to develop regulations for other categories of sources and under several other parts of the Act.

While U.S. EPA may prefer a more deliberative process and a comprehensive approach, it does not prevent Courts from interpreting the Act to require regulation and force application on a case by case basis. As an example, we have already had one Court determine the Clean Air requires analysis of greenhouse gases during the permit process.

There is no doubt the wave of climate change litigation has not even crested. It is also certain that the Clean Air Act structure does not mesh well with regulation of greenhouse gases.  In fact, some of the most complicated provisions in the Clean Air Act, such as New Source Review, are overly complicated when applied to criteria pollutants (SO2, NOx, PM)  However, as long as Congress and U.S. EPA delay comprehensive action on climate change, we are likely to construct climate change regulation by default and in piecemeal fashion. 

• Email This
• Print
• Comments
• Trackbacks

On August 20th, the Public Utilities Commission of Ohio proposed rules governing greenhouse gas reporting and carbon dioxide control planning.  Parties wishing to file comments have until September 6th to file comments.

The most interesting aspect of the rule is it proposes to mandate all electric generating facilities in Ohio become participating members in the Climate Registry.  It also mandates electric generating facilities to report report greenhouse gas emissions according to protocols approved by the Climate Registry.  While Senate Bill 221 provided discretion to the PUCO to establish the level of participation in the Climate Registry, the Commission has decided to mandate participation.

I'm sure the Commission will receive comments on their definition of "electric generating facility" covered by the mandatory reporting requirement.  The definition is as follows:

"Electric generating facility" means an electric generating plant and associated facilities capable of producing electricity.

There is no minimum size requirement specified in the proposed rule.  Therefore, it would appear an electric generating facility of virtually any size under PUCO's jurisdiction faces a mandatory reporting requirement.

I would also expect comments from the Utilities that the mandatory reporting requirements should wait until U.S. EPA proposes its mandatory greenhouse gas reporting rule in September.  U.S. EPA's reporting rule will specify required reporting as well as include limitations on the size of the generating unit covered by the mandatory reporting requirement. 

U.S. EPA propose rule will also shine light on the interplay between the Climate Registry and mandatory federal reporting requirements. Perhaps the Commission left themselves some wiggle room by inserting "or as otherwise directed by the Commission" right after the mandate to participate in the Climate Registry.

The rule also requires each owner and operator of a electric generating facility to file an annual report specifying its control plan for both criteria pollutants (NOx, SO2) and for carbon dioxide.  However, the rule lacks any specificity as to what elements must be included in the plan.  The proposed rule requires the environmental control plan include:

"...all relevant technical information on current conditions, goals, and potential actions based upon the current scientific and engineering design capability of any facility...to control emissions of criteria pollutants and carbon dioxide within the parameters of economically feasible best technology."

• Email This
• Print
• Comments
• Trackbacks

Here is a sampling of sustainable practices that can directly improve  your company's bottom line. As you can see from the descriptions, these practices involve large Fortune 500 companies.  However, there is no reason they can't be implemented by smaller companies.  The examples in this post can help save fuel and reduce energy costs.  With ever increasing prices for both the incentives and advantages of thinking proactively continue to grow.

Plastic or Wood Pallets?  The Wall Street Journal reported that using plastic pallets instead of wood for trucks is not only more environmentally friendly, but also a money saver. The Journal reported:

They last longer, they weigh less, and they don’t need paint or chemical treatments. Since a plastic pallet can easily handle 100 trips—versus two trips for a single-use wooden pallet—the difference in greenhouse-gas emissions is stark: 45,000 kilograms of carbon dioxide for the plastic pallets, compared with 300,000 kilograms for the wooden pallets. Most importantly, says iGPS, you don’t have to chop down trees to get plastic pallets: A Virginia Tech study found that 40% of the U.S. hardwood harvest goes to wooden pallet production.

On the iGPS website (a manufacturer of plastic pallets) even has a calculator which lets shipping companies tally how much fuel they’d save by switching from wood to plastic.

Retailers Discovering Energy Efficiency-  Another Wall Street Journal article covered the increased usage by major big box retailers and supermarkets to energy efficient heating, cooling and lighting. Stores like Office Depot, Kroger and Walmart are saving energy and money by adopting advanced energy efficient designs in their stores.  In Ohio, a state that will be facing significant increases in energy prices, smaller retailers and commercial store owners are wise to take heed.  Here are some of the changes being implemented:

• Skylights that have reflective mirror that tracks the sun to provide natural lighting throughout the store thereby reducing energy costs
• Intelligent lighting systems that automatically adjusts the fluorescent lighting based on the availability of natural light in the store
• Parking lots use concrete not tar to reduce heat generated around the store
• LEDs (light-emitting diodes) rather than incandescent bulbs in freezer units

The article notes that construction costs increased by 10% to add these energy efficient technologies, but each store is projected to save 25% in energy costs.  This will allow recovery of their upfront costs within a matter a few years.  I am certain those calculations don't even take into account the likelihood of increased energy prices.

Smartway the "smartway" to reduce diesel costs-  U.S. EPA's Smartway program is an innovative brand that represents environmentally cleaner, more fuel efficient transportation options.  Smartway can help finance equipment that can significantly save fuel costs.  For example, Auxiliary Power Units (APUs) allow truckers to power their truck without idling.  Smartway also rates vehicles based upon their emissions.  Perhaps one of the most useful tools you can find on U.S. EPA's website is the Smartway calculator.

• The SmartWay calculator allows you to compare your costs with various technologies, by letting you enter different values for fuel use, fuel cost, and other critical factors.  By trying different combinations you can identify the combination of technologies that help you save the most money.

• Email This
• Print
• Comments
• Trackbacks

MSNBC reported today that the Interior Department has proposed changes to the rules governing required reviews under the Endangered Species Act (ESA).  From the news report is appears the two most significant proposed changes are:

• Removal of the requirement  to "consult" with Fish and Wildlife or other federal experts as part of the required review under Section 7 of the ESA.  The proposed rules would allow federal agencies on their own, without consultation with sister federal agencies, to determine if project  will have an impact on endangered species. To give you an idea of the breadth of projects being reviewed, the article states that Fish and Wildlife performed 300,000 consultations between 1998 and 2002.
   
• Prevent the ESA to be used as tool to regulate greenhouse gases.  This change was proposed after the Department of Interior proposed listing the polar bear as a "threatened" species. When the listing action was announced, Secretary Kempthorne clarified that the Department of the Interior (DOI) intends to act “to make certain the ESA isn’t abused to make global warming policies.”  Today's announcement appears to be the action referenced by Secretary Kempthorne.  It would bar federal agencies from assessing the emissions from projects that contribute to global warming and the corollary effect on species and habitats.

Section 7 of the ESA required federal agencies to consult with FWS (or other federal agencies) to ensure that any action they authorize through permitting or other means are not likely to jeopardize the continued existence of any listed species or result in the destruction or adverse modification of designated critical habitat.  Some developers have complained that Section 7 results in long delays and unnecessary expenses associated with projects. 

The proposal to overhaul the Section 7 process is controversial and will be challenged if it moves forward. On its website, the Department of Interior characterizes the proposal as "narrow changes" to the ESA..  Whether you support ending the consultation process or not, it is simply not accurate to describe it this a narrow change.  More importantly, the proposal and surrounding controversy detracts from the legitimate concern over the use of the ESA to regulate greenhouse gas emissions.

The real issue is taking steps necessary to prevent the use of a myriad of federal and state regulations to leverage reviews of an individual project's contribution to global warming. Global warming by its very nature is a global issue.  Unlike other pollutants, emission of greenhouse gases themselves do not have local impacts.  The impacts stem from the overall increase in temperature associated with the accumulation of gases in the atmosphere. 

The best way to address global warming is through comprehensive federal legislation establishing a cap and trade program that lowers emissions in a cost effective manner.  Use of the ESA or portions of the Clean Air Act to combat global warming is like fitting round holes with square pegs.  Unfortunately, the Department of Interior actions and announcement detracts from this important policy debate. 

(photo: from flickr, Frank Wouters)

• Email This
• Print
• Comments
• Trackbacks

Surprised? I was after hearing the old reports of China building a new coal plant once a week.  China has long been the favorite scapegoat for those arguing the United States shouldn't address climate change without their participation.  But it appears China may be changing direction. 

As reported in the Guardian, the Climate Group released a study that concludes China is the world's leading producer of energy from renewable sources. 

 Here are some of the fun (and surprising) facts reported in the Study:

1. China leads the world in installed renewable capacity at 152 gigawatts
2. Approximately 820 solar PV were produced in China in 2007, second only to Japan
3. It is the leading world exporter of wind turbines
4. China investments in renewable energy as a percentage of GDP are almost equal to Germany's, the world leader
5. China's energy efficiency standards for cars is 40% higher than in the United States
6. China is the third largest producer of ethanol

Clearly, the goal of the Climate Group was to produce a study to combat the arguments raised in the United States that support inaction on climate change without India or China.  However, one statistic highlighted in the Study deserves some additional discussion. 

In 2007, China emitted 5.1 tons of CO2 per capita compared to 19.4 tons for the United States.  While the United States per capita number justifies action, so does the potential for China to grow its emissions. 

China has 1.2 billion people compared to the United States 300 million.  China has already overtaken the US in total emissions with 1/3 of the emissions per capita because it has four times more people.  Without mandatory caps, what will China's emissions be once 1/2 their population drives cars, purchases more of latest electronics, and have more income to travel?

• Email This
• Print
• Comments
• Trackbacks

In my last post I discussed corporations that are using a vast array of accounting methods to calculate carbon footprints.    An article in the Seattle-Post-Intellegencer discussed variations found in outputs from household on-line carbon footprint calculators.

While US EPA's forthcoming rule will address measuring emissions of greenhouse gases from large industrial sources, it certainly appears there are more areas needing standardization.  I should not be able to cut in half my personal carbon footprint simply by using a different calculator. 

The article was triggered by a University Washington study of household carbon footprint calculators commonly found and used on the web:

A recent University of Washington study found that when the same values were used with 10 different online calculators, the results varied greatly. In one category, the bottom line for a typical American homeowner varied by more than 32,800 pounds of carbon produced per year.

The variation suggests tallies of carbon emissions have been oversimplified to produce a "one-click" solution to an extremely complicated problem -- global warming. Some experts fear calculators suggesting a person plant a few trees to offset driving a gas guzzler may actually discourage needed lifestyle changes that can benefit the planet.

"Everyone assumes that every calculator they use will produce an accurate result, but in reality, there are vast inconsistencies between the calculations being done," said Anne Steinemann, a UW civil and environmental engineering professor who headed the research. "I was really surprised by the magnitude of inconsistency."

The newspaper also did its own research and included a chart showing the dramatic variations.

• Email This
• Print
• Comments
• Trackbacks

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

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

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

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

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

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

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

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

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

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

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

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

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

• Email This
• Print
• Comments (1)
• Trackbacks (2)

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks (2)

Dave Douglas, Chief Sustainability Officer for Sun Microsystems, recently wrote an article in which he predicts the United State's hit peak carbon in 2007 (meaning emissions will now trend downward).  Here is a quote from his article:

  So, now my prediction: Peak Carbon occurred in the US in 2007.

 Yep, I’m predicting that annual GHG emissions in the US will now drop regularly going forward, with only minor setbacks every once in awhile. My rationale is that there are short-term, medium-term and long-term drivers in place which are capable of, together, sustaining reductions over decades:

His article generated a lot of responses and criticism from many who believe the U.S. will continue to trend higher in emissions until meaningful federal greenhouse legislation passes Congress.  I actually agree with his prediction. 

$4 dollar gas is not going away.  From recent car sale reports, the American consumer is switching from SUV and pickups to compact cars.  Even if people are not buying a new car they are driving less.   The transportation sector makes up roughly one-third of total greenhouse gas emissions in the United States.  Therefore, these consumer trends will translate into significant reductions.

Also, the switch toward renewable energy, the corporate sustainability movement, and greenhouse gas programs passed at the state level will all continue the trend downward.  Finally, federal legislation is inevitable, with many predicting a cap and trade program starting in 2012. 

In April, U.S. EPA released its greenhouse gas inventory report that analyzes emissions trends.  The main take away from the report...greenhouse gas emissions decreased by 1.1 from 2005 to 2006.  U.S. EPA concludes the decrease was attributable to the following:

• compared to 2005, 2006 had warmer winter conditions, which decreased consumption of heating fuels, as well as cooler summer conditions, which reduced demand for electricity;
• restraint on fuel consumption caused by rising fuel prices, primarily in the transportation sector; and
• increased use of natural gas and renewables in the electric power sector.

  We have a long way to go, but it does appear that peak carbon is not such an outlandish prediction.

• Email This
• Print
• Comments
• Trackbacks

Everyday we are bombarded with stories of rising gas and energy prices.  The USA Today recently had a front page article on the increases in electricity rates due to the rise in fuel costs.  The article said utilities are raising rates up to 29% due to soaring fuel cots.   Its not just oil that has skyrocketing prices, natural gas and coal have experienced dramatic increases as well.  Since the beginning of the year coal prices have gone from around $60 per ton to well over $100 per ton (depending on the type of coal purchased). 

Ohio businesses have yet to experience the impacts from what is happening in the energy markets.  Until recent passage of Senate Bill 265, Ohio had frozen its electric rates so recent fuel cost spikes have not been taken into account in rates.  As reported by John Funk in the Cleveland Plain Dealer, the utilities have begun meeting with the State to discuss price increases. 

Ohio better brace itself for even a larger jolt in prices attributable to CO2 regulation.  Federal legislation such as S. 2191 (the Lieberman-Warner Bill), which would regulate carbon emissions, had a quick death a few weeks ago in the Senate.  However, it is inevitable that federal legislation that establishes a carbon cap and trade program will pass soon after we have a new President (both McCain and Obama support the cap and trade approach). 

With 87% of Ohio's power coming from coal, what impact would such a cap and trade program have on Ohio?  Most understand there will be an impact, but I'm not sure most understand the magnitude.  To illustrate the impact, I attached a chart from U.S. EPA's modeling of the impact of the Lieberman-Warner bill on electricity generation.  The two charts project the amount of electricity generation from various sources (blue = coal, yellow = nuclear, green = other sources).

The chart to the left (click to enlarge image) is the status quo- no greenhouse gas regulation.  It projects coal-fired power would continue to dominate generation in the US. The chart on the right shows what will happen if something close to Warner-Lieberman passes. 

Not only does the amount of coal power shrink relative to nuclear and other sources like renewables, the composition of generation from coal dramatically shifts. The change from blue to red in the chart project the conversion of coal to carbon capture and sequestration (CCS).  U.S. EPA projects that ALL coal plants will institute CCS by the year 2035.  Why?  Because the cost of emitting carbon will be so high that the economics will drive utilities to institute CCS. 

Even U.S. EPA notes in its analysis that this projection is "optimistic."  That certainly is an overstatement given the fact there are no successful CCS projects currently being implemented.  So what does it mean if CCS is unrealistic in that time frame?  It means huge cost increases for coal-fired utilities because the price of allowances under the cap and trade program will rise.  

With fewer reductions there is a corresponding increase in the value of the C02 reduction credits used to offset emissions.  Higher costs for C02 credits translates into larger compliance costs for coal-fired utilities. Those huge costs will be passed on to consumers in the form of electricity price increases. 

Seems to me Ohio business and officials better start seriously considering the implications of federal regulation of CO2.  I am not advocating against passage of greenhouse gas regulation.   Ohio better start planning for a carbon constrained world and how electricity prices tied to coal generation may affect Ohio's competitiveness.

• Email This
• Print
• Comments
• Trackbacks