EPA's Decision to Deny Ozone Petition Based in Reality

Combating ozone pollution is really about time.  When I was back at Ohio EPA, we had countless meeting discussing how Ohio could (or whether it could) accelerate progress dramatically in reducing ozone pollution.  During that time we would discuss "on-the-books controls" versus new state initiatives.  

"On-the-book controls" referred to a suite of federal air pollution regulations that were put in place to help combat air pollution, including ozone.  The regulations target the two largest contributors to ozone pollution-vehicles and power plants.  The "on-the-books controls" include:

All of these federal air regulations will continue to be phased in over time greatly reducing the precursors that lead to the creation of ozone (smog). The full benefit of some of these major regulations won't be seen for another 15 years as the vehicle fleet turns over. In addition, CSAPR has just emerged from litigation and the full reductions have not taken place.

What we learned in our discussions eight years ago was that the state's had almost no ability to significantly reduce ozone pollution beyond what would be attributable to these federal regulations. At the time, the deadlines for compliance simply didn't match up with the process for phasing in the federal regulations.  The states needed time.  

Flash forward almost 8 years later and it appears those federal regulations are having a dramatic effect on reducing ozone.  The picture above is taken from a story on Gizmodo regarding improvements to air quality in the last decade.  (Click here to see the very cool video showing reductions).

EPA Denies Request for Redesignation of Attainment Areas for Ozone Standard

On August 14, 2014, EPA Administrator Gina McCarthy denied the 2013 Sierra Club petition that requested U.S. EPA to redesignate as nonattainment 57 areas for violations the 2008 national ambient air quality standards (NAAQS) of ozone.  

Under EPA regulations, ozone levels are based on a three year average of the 8-hour ozone concentration.  The concentrations are averaged because weather plays an important role in the creation of ozone (i.e. hot summers = more ozone).  The averaging is intended to smooth out the variations that may occur due to weather.  

In the Administrator's McCarthy's letter denying the petition, she says one of the reason for the denial is to give the states more time.  She specifically cites forthcoming reductions due to federal regulations already in place.  

EPA states that emissions of the ozone precursors are expected to decline significantly:

  • NOx is expected to decline by 29 percent from 2011 through 2018; and
  • VOCs are expected to decline by 10 percent from 2011 through 2018

(Click here for EPA's extended response setting forth the reasons for denying the petition)

EPA's decision to deny the petition was sharply criticized by environmental groups.  However, redesignation to nonattainment would force the states to adopt additional reductions beyond these federal "on-the-books" controls.  Those state regulations are no where near as cost effective at reducing ozone pollution and would likely not significantly improve air quality.

EPA decision to give time to the states to allow federal regulations to take hold is based upon practical reality.  The last decade has shown dramatic improvements.  More reductions are locked in and the states would have little ability to accelerate those improvements.

 

Is U.S. EPA Finally Moving Toward a Stricter Ozone Standard

The Obama Administrative continues to be heavily criticized by industry for its aggressive development of greenhouse gas regulations.  In contrast to the dizzying pace of new greenhouse gas regulations stands finalization of a new ozone standard...something the President promised to do after being elected to his first term. 

Under the Clean Air Act, EPA is required to review the ozone standard every five years. In 2008, the Bush Administration set the new ozone limit at 75 parts per billion (ppb). That was tighter than the existing regulations, but considerably weaker than the 60 to 70 ppb recommended by the Clean Air Science Advisory Committee (CASAC- a science advisory panel which advises EPA in settings National Ambient Air Quality Standards).

Litigation ensued over the Bush standard. However, a cease fire was called when the Obama Administration took office and called the 75 ppb indefensible. The EPA promised to revisit the standard and set it somewhere between the 60 to 70 ppb recommended by CASAC.

After two prior deadlines passed without a new standard, the Administration identified August of 2012 as the final date.  That date came and the Administration again said they would delay final standards until 2013.  Yet nothing happened last year.  Now, it appears the Administration may be making progress toward finalizing the standard.

On February 3rd, EPA release two reports-  its draft risk and exposure assessment and the Second External Review Policy Assessment for the New Ozone Standard.  Both of these reports confirm what was known five years ago-  the recommendation is to lower the standard to somewhere between 60 to 70 ppb.  

Clearly the Administration still has cold feet about finalizing a revised standard.  In fact, we have now gone more than five years since a review of the old standard.  

This is all good news to State's like Ohio with a heavy manufacturing base, larger populations and fossil fuel reliant power base.  As discussed in my last post on this topic, the longer the delay the more time existing federal regulations have to take effect to reduce ozone precursors.  In reality, the States have very little ability to significantly reduce ozone pollution through state specific regulation.

The lengthy delay may mean that ozone levels will be reduced down to where a 70 ppb standard would be realistically attainable, something that seemed impossible even five years ago. 

What Does a Second Term for President Obama Mean for Environmental Regulation?

Through out the long and contentious election process the focus of the debate was getting America back to work.  Much of the debate centered on tax policy and budget cuts.  However, the President was accused of "over-regulation" which Mitt Romney argued cooled the economic recovery.

As part of the debate over regulation, environmental regulation was discussed.  The President was accused of waging "a war on coal."  Governor Romney also asserted that the President's climate change regulations represented an over-reach.

Now that the election is over and the President has won a second term, what does a second term really mean for forthcoming environmental regulation.  Most observers believe the President will be more emboldened in terms of environmental regulation now that he doesn't need to worry about re-election. 

Below are some of the areas in terms of environmental regulation that the Obama Administration will likely push forward with:

  1. Climate Change-  Some of environmental groups supporting President Obama hope that he will push forward with a major piece of legislation on climate change.  In the President's first term, Democrats came close to passing a cap-and-trade bill that would have put in place the largest new environmental program since creation of the EPA and the early environmental statutes (Clean Air Act, Clean Water Act, Superfund).  In reality, new legislation on climate change looks very unlikely.  The Re publican's still control the House and the margin is thin for the Democrats in the Senate.  Instead, the Administration will continue to implement climate change regulations under EPA's existing authority under the Clean Air Act.  This will likely mean lowering the carbon emission thresholds that trigger New Source Review and Title V permitting utilizing the Tailoring Rule.  It also means establishing emission standards for new major sources (i.e. New Source Performance Standards).
  2. Ozone-  The President came into office promising to undo the Bush era ozone standard of .75 ppm stating the standard was not based on science.  While the EPA proposed lowering the ozone standard it ended up punting on four separate occasions due to pressure from the business community.  Now it appears almost a certainty that the EPA will finally move forward with a lower standard of .70 ppm.
  3. Coal-Fired Power Plant Emission Reductions-  This past August the D.C. Circuit Court vacated U.S. EPA's Cross-State Air Pollution Rule (CSAPR) also known at the "Transport Rule." The Transport Rule was the second attempt by EPA to establish emission standards for existing coal-fired power plants.  The Transport Rule was blamed for potentially forcing the closure of a significant number of existing power plants threatening to driving up energy prices.  CSAPR was the Obama's Administration's effort to fix the issues the predecessor Bush era program known as the Clean Air Interstate Rule (CAIR) which was also struck down by the Courts.  In the Obama Administrations second term, EPA will once again attempt to fix this massive regulation.
  4. Fracking Regulation-  The natural gas industry continue to boom in Pennsylvania, Ohio and West Virginia.  The massive reserves found in the Marcellus and Utica Shale formations promise to provide home grown energy for a century.  Fracking is used to access these deep reserves that were previously not accessible.  Fracking uses deep wells and then breaks up the rock to release the gas.  Environmentalists are very concerned with the air emissions, water pollution and potential to contaminate groundwater from the fracking process. The Obama Administration moved slowly in putting in place new regulations in his first term.  EPA did establish federal air permitting requirements for new wells.  The Obama Administration also created a federal agency fracking working group to look at the process and recommend new regulations and coordinate between federal agencies.  It is very likely that in a second term will be proactive developing new regulation.
  5. Support for Renewable Energy-  The Obama Administration is likely to continue its strong support for renewable energy like wind, solar and biomass.  Its possible the President will explore a federal renewable energy standard similar to the renewable energy portfolio standards (RPS) imposed in many states.  An RPS mandates a certain percentage of power production must be provided by renewable energy sources.  It is possible the President will try and impose such a mandate nationally.  This still seems unlikely given the make up of Congress.  More likely is that the Obama Administration will continue financial support for the industry through tax breaks, grants and loans.
  6. Boiler MACT- In a second term, President Obama is likely to implement long-delayed emissions regulations for industrial boilers that apply to a whole array of industry. The  Boiler MACT (Maximum Achievable Control Technology), was proposed in 2004  before being delayed by litigation in the Courts.  EPA issued a new proposal in 2011 which was again delay due to controversy surrounding the sweeping new standards.  EPA may issue the final rules as soon as December.
  7. The Role of the Courts-  Many of the areas of regulation discussed above are involved in protracted litigation.  Challenges to climate change regulation are still pending.  EPA's re-write of CASPR will be challenged again.  There could be more challenges to the final boiler MACT rule.  The final ozone rule will almost certainly be challenged.  The petroleum industry will likely challenge any new fracking regulation.  Overall, the second term will not only see significant new regulation but major uncertainty as proposals, both new and old, will be challenged in the Courts.  Businesses like certainty.  In the world of environmental regulation that almost never seems to be the case.
     

 

As Dust Settles After Ozone Announcement the States Emerge as the Big Winners

The Obama Administration had already delayed issuance of a revised ozone standard three times.  EPA had said repeatedly that it would it would finally promulgate the new standard by this  August.  Then last week, President Obama shocked many by announcing that EPA would not issue a new ozone standard until 2013.

A Little History on Ozone

Under the Clean Air Act, EPA is required to review the ozone standard every five years.   In 2008, the Bush Administration set the new ozone limit at 75 parts per billion (ppb). That was tighter than the existing regulations, but considerably weaker than the 60 to 70 ppb recommended  by the Clean Air Science Advisory Committee (CASAC- a science advisory panel which advises EPA in settings National Ambient Air Quality Standards).

Litigation ensued over the Bush standard.  However, a cease fire was called when the Obama Administration took office and called the 75 ppb indefensible.  The EPA promised to revisit the standard and set it somewhere between the 60 to 70 ppb recommended by CASAC.

Since EPA made its early pronouncements, the economy has not improved causing the EPA to delay issuance of a new standard on three different occasions.  The final arbitrary deadline was set for this August to finally announce the new standard.  But on the eve of the announcement, the Obama Administration issued a statement that it would wait until 2013 to review the standard.

Internet Blisters with Commentary

The media and internet has been awash in debate regarding the delay in the ozone standard.   Time wrote a piece titled "Is President Obama Bad for the Environment."  The backlash from environmental groups and clean air advocates has been dramatic. Industry has heralded the decision.  Here is a sampling from the various perspectives:

  • MoveOn.org said they don't know how they can support the President's re-election after such an announcement. 
  • Sierra Club- "Had the EPA smog pollution regulations come into effect as anticipated, it would have prevented 12,000 deaths, 5,300 heart attacks, and tens of thousands of asthma attacks.  Its time we stop pitting the false promise of jobs from a desperate-albeit wealthy and powerful-industry against the best interests of the American People."
  • National Petrochemical & Refiners Association- "President Obama acted in the best interests of the American people last Friday when he blocked the Environmental Protection Agency from imposing unrealistic, unjustified and unneeded new ozone standards on our nation. The president should now follow up by stopping EPA from imposing other extreme regulations that will cost our economy billions of dollars and wipe out millions of American jobs, without providing any significant environmental benefits."
  • Business Roundtable-  Calls the ozone standard the single most expensive environmental regulation in U.S. History.  In an op-ed piece, Governor Engler says that 85% of U.S. counties would be in "nonattainment" with the new standard triggering a cascade of federal and state controls.  EPA estimates the new standards could cost between $20 to $90 billion annually.

For some additional perspectives on both sides of the debate I would recommend reviewing the National Law Journal's Energy & Environment Blog- "Sizing Up Obama's Ozone Standard Delay"

Implications for Ohio

In my former role as Director of Ohio EPA, I got to see first hand how the state's dealt with meeting new federal air quality standards, including the ozone standard.  From that experience I concur with the business groups who were concerned with the new standard's impacts on a struggling economy.  This is particularly true for states like Ohio with high population, heavy reliance on manufacturing and where coal is the main source of power generation.

A "nonattainment" designation for a metropolitan area is a massive impediment to economic development.  Particularly metropolitan areas that rely on a growing manufacturing base to attract new jobs.   Air permitting requirements under nonattainment New Source Review places these areas at a competitive disadvantage to areas that meet the standard. 

Even more importantly, I learned that the states, in reality, have far less ability to institute regulations that reduce smog then the federal EPA.  This is because much of the nonattainment problem is attributable to interstate pollution.  Also, much of it comes from vehicles for which there is very little ability to reduce emissions through state regulation. The last decade has demonstrated that federal regulations directed at vehicles and interstate pollution are much more effective in reducing ozone levels than negligible benefits achieved through state regulation.

Existing Federal Regulations Will Continue to Reap Clean Air Benefits

While new state air pollution regulations have little impact in improving air quality, federal regulations have resulted in dramatic improvements.  Areas that five years ago were thought never to reach attainment with the old 1997 ozone standard (like Cleveland) have been able to reach attainment.

Here is a chart of exceedences of the ozone standard in Ohio going back to 2000.  Recently, there are no exceedences of the old 1-hr standard (.0125 ppm) and very few of the 1997 8-hr standard. Over the last five years the major benefits of the federal air regulations discussed above have been realized.

However, what is not shown is the number of exceedences that would occur under a 8-hr standard within the CASAC range of .070 to .060 ppm.  It would be pretty dramatic.

These existing federal regulations will continue to improve air quality because they are phased in over time.  These regulations include:

All of these federal air regulations will continue to be phased in greatly reducing the precursors that lead to the creation of ozone (smog). The full benefit of some of these major regulations won't be seen for another 20 years as the vehicle fleet turns over.  In addition,  CSAPR is just on the books and will dramatically reduce power plant pollution.

Bottomline- Air Quality Improves While States Get Some Breathing Room

Even though the ozone standard will not be revised until 2013, air quality will continue to  improve as a result of these major federal air quality regulations.  Meanwhile, the states will not be saddled with non-attainment designations under a new standard during a tough economic period. 

When the ozone standard is revised, the States will have benefited from the greater reductions achieved from these federal regulations. These air quality benefits will make it much more realistic that the states can achieve the new standard. 

 

What the Debt Deal Means for EPA....Staff Cuts and Lawsuits

It is no secret that EPA and its wave of recent and forthcoming regulations have stirred up much angst among Republicans in Congress. Many industry groups argue that EPA's rulemaking, especially its anticipated announcement of a much stricter ozone standard, will have a devastating impact on our fragile economy.

While plenty of bills have been floated since the start of the Obama Administration to try and stop EPA from enacting rules, in particular climate change related regulations, those efforts have been unsuccessful. So long as there is a power split between the House and Senate, any proposal to rein in EPA is a non-starter

The best the Republican controlled House has been able to do is call in EPA to testify before House Subcommittees to put pressure on EPA directly. Those efforts have had little success as the regulations continue to emerge from the Agency.

Now comes the debt deal and its initial $1 trillion in budget cuts. Due to political wrangling the cuts come almost entirely from discretionary spending which makes up approximately one-fifth of the total federal budget. Republicans see the cuts an opportunity to push forward their anti-regulatory agenda through significant funding reductions that will effectively prevent EPA from being able to act.

EPA and Renewable Energy Programs on the Chopping Block

Both Republican and Democrat lawmakers have indicated that funding for EPA and other federal agency programs that benefit the environment and renewable energy are surely to get hit and get hit hard.  EPA staffing cuts in programs implementing climate regulations, air programs and water infrastructure will result from the first round of the $917 billion in cuts called for in the debt-ceiling deal.  The Department of Energy will likely see less funding for grants, loans and other programs for renewable energy.

Time Magazine said the hidden Republican agenda in the debt-deal battle was to "gut the EPA."

It was lost in the endless drama of the debt-ceiling negotiations, but last week, the Republicans in charge of the House of Representatives launched an unprecedented attack on the U.S.'s environmental protections. GOP Representatives added rider after rider to the 2012 spending bill for the Environmental Protection Agency and the Interior Department, tacking on amendments that would essentially prevent those agencies -- charged with protecting America's air, water and wildlife -- from doing their jobs.

While the riders were unsuccessful, the dramatic budget cuts seem inevitable.  This from Politico discussing likely cuts to EPA and renewable energy programs:

“These guys are looking at 20 percent real cuts in the next two or three or four years,” said GOP strategist Mike McKenna said. “That’s a big, big hit for an agency to take.”

 Lawmaker Says Cuts will Mean More Lawsuits

While the EPA will have less staff to implement its programs and develop new regulations, EPA still faces statutory mandates to enact rules.  EPA routinely is sued by environmental groups trying to enforce these statutory deadlines.  One such example is the ozone standard which EPA is under a Court order to act.  

Jim Moran, D-Va., ranking Democrat on the House Interior-Environment spending subcommittee predicted an avalanche of new suits seeking to compel EPA to act.

"The irony is that the law isn’t going to change, it’s just that the people whose job it is to implement the law won’t be able to do that, so the environmental issues will play out in the courts instead of administratively or over a negotiating table," Moran told National Journal. "It’s more costly, it’s more time-consuming, and usually it’s less satisfying." 

While reducing funding can slow down EPA's ability to act, its a much messier then changing the law.  As long as the law remains the same, the regulatory environment really won't change for industry.

 

EPA Will Likely Propose a 70 ppb Ozone Standard

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

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

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

Background on EPA's Selection of a Revised Ozone Standard

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

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

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

Costs Cannot Be Considered

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

Delays Already Have Avoided Implementation During Economic Downturn

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

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

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

All Signs Point to a 70 ppb Ozone Standard

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

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

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

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

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

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

 

EPA's Delay Tactic Avoids Real Change

On Monday, EPA announced it was delaying its proposed rules that would apply greenhouse gas emission standards to power plants. EPA said it would push the proposal back from July to September to allow more time to consider comments. EPA still expects to finalize the rule by May 2012.  

Its no secret that EPA regulations have been the focus of intense scrutiny due to the costs and the potential impacts on the country's struggling economic recovery.  Over the last several months EPA has delayed rule after rule.  The delays include:

  • Greenhouse gas rules for power plants (NSPS)
  • Industrial/Commercial boiler rule (MACT)
  • Ozone Federal Air Quality Standards (NAAQS)
  • Fine Particle Air Quality Standards (NAAQS)

Each time EPA delays one of the major rules, it claims the delay is to consider more information or to allow for more public comment.  Yet the frequency of the announced delays coupled with the timing suggests the Obama Administration is concerned with protecting the fragile economic recovery or it is simply responding to intense political pressure.

Debate Pitting Economy Versus the Environment Intensifies

EPA's regulatory actions are under intense pressure on Capitol Hill.  Republicans and some conservative Democrats have targeted the EPA rules, in particular those that impact power plants due to their potential to raise energy prices or de-rail the recovery. 

While the announced delays may temporarily reduce the pressure on the Agency, in reality the delays have done nothing to cool down the rhetoric used on both sides.  For example, Lisa Jackson testified before the Senate and disparaged lobbyists who had advocated against the new EPA rules:

“While Americans across the country suffer from this pollution, special interests who are trying to gut long-standing public health protections are now going so far as to claim that these pollutants aren't even harmful. These myths are being perpetrated by some of the same lobbyists who have in the past testified before Congress about the importance of reducing mercury and particulate matter. Now on behalf of their clients, they're saying the exact opposite.”

On the other side, AEP highlighted potential impacts to the economy last week by announcing the potential closure of a number of power plants and huge new compliance costs if the EPA rules moved forward.  AEP said it would retire nearly 6,000 megawatts (MW) of coal-fueled power generation and switch to natural gas at many of its plants at an estimated cost of $6 billion to $8 billion by the end of the decade.This from a Press Release issued by AEP:

"We have worked for months to develop a compliance plan that will mitigate the impact of these rules for our customers and preserve jobs, but because of the unrealistic compliance timelines in the EPA proposals, we will have to prematurely shut down nearly 25 percent of our current coal-fueled generating capacity, cut hundreds of good power plant jobs, and invest billions of dollars in capital to retire, retrofit and replace coal-fueled power plants. The sudden increase in electricity rates and impacts on state economies will be significant at a time when people and states are still struggling,” said Michael G. Morris, AEP chairman and chief executive officer.

EPA Delays Are Simply a Pyrrhic Victory

Each time EPA announces a delay, the Agency claims it will take a second look at its proposals.  Yet, EPA seems very unlikely to make any fundamental changes.  While some may view the announced delays as victories, it is only so long before either the rules will be released by EPA or  EPA will be compelled by the courts to act. 

A popular political strategy has been to attack the science behind EPA's proposals in hopes of deflecting the proposal entirely.  This "all or nothing" approach is unlikely to ultimately succeed given the 60 votes needed in the Senate to make changes to the statutes that shape the rules. 

Rather than challenge the science in hopes of avoiding regulations altogether, it would be good to see meaningful policy discussion around the regulatory approach behind these major proposals:

  1. Ozone and Fine Particle-  Time frames for compliance need to be reasonable and should be properly coordinated with existing federal rules that will drive down emissions.  Also, as our air gets cleaner, improvements become more difficult.  Do we cross a threshold where costs should be part of the equation in setting standards? 
  2. Greenhouse gas-  Application of the New Source Review program to greenhouse gas emissions is a recipe for disaster.  While Cap and Trade became a dirty word, it offered a far more flexible approach than command and control regulations.
  3. Commercial/Industrial Boilers-  EPA's method for establishing the standards was based upon cherry picking the best emission rates for each individual pollutant from units across the country.  A real effort needs to be made at looking at what is realistically achievable.

Unfortunately, meaningful discussion seems unlikely in today's political environment. 

Ozone Standard Inconsistent with President's Executive Order on Cost of Regulation

Back in 2007, U.S. EPA was sued by some States and environmental groups who challenged the legitimacy of the ozone standard -75 parts per billion (ppb)- selected by the Bush Administration.  In 2009, the Obama Administration announced that it was reconsidering the 75 ppb standard.

U.S. EPA is likely to revise the standard to somewhere between 60 ppb to 70 ppb. (See the map for the implications of a revised standard on the Midwest)

Back in September 16, 2009, U.S. EPA filed a pleading informing the Court that it would finalize the new standard by August 31, 2010. 

 

In curious timing, the U.S. EPA announced it needed two more months and could not finalize the ozone standard until late October. 

Some questioned, including me, whether the delay was a calculated move to make the controversial announcement after the election. (See, prior post)  Now U.S. EPA has announced, once again, it would delay the finalization of the standard.  Only this time the delay would be nearly six months.

On December 8, 2010, U.S. EPA filed a Motion declaring it would need until the July 29, 2011 to complete its review of the ozone standard.  The U.S. EPA said it needed to consult its science advisory board (Clean Air Scientific Advisory Committee- CASAC) due to the significant number of comments and new information it received. 

In the motion, U.S. EPA sets forth its process for finalizing the ozone standard.

  1. U.S. EPA will develop a set of questions for CASAC for its review asking the Committee to review scientific evidence and other information before U.S. EPA
  2. CASAC will hold public meetings to discuss its response to the questions;
  3. CASAC will provide additional written advice to U.S. EPA regarding the new ozone standard; and
  4. New public comment period to provide comments on CASAC review and to U.S. EPA

President's Executive Order

On January 18th, President Obama's issued an executive order requiring all federal agencies to evaluate the economic impacts on business of its rulemakings. The executive order directs federal agencies developing regulations to “use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible.”  At its core, the order is intended to force federal agencies to provide greater attention to the potential costs and burden of new regulations on businesses.  

While the motion delaying finalization of the ozone standard was filed prior to the executive order, U.S. EPA's actions are consistent with the Obama Administration's overall goal of giving greater scrutiny to the impact on economic growth from regulation.  Only problem is that the U.S. Supreme Court has already ruled that the Clean Air Act prohibits U.S. EPA from considering costs and economic impact when setting the ozone standard. 

U.S. Supreme Court determined in Whitman v American Trucking that U.S. EPA could not consider costs in setting the standard. The Court held EPA can only consider costs if its expressly granted that authority by Congress:

Section 109(b) [of the Clean Air Act] does not permit the Administrator to consider implementation costs in setting NAAQS. Because the CAA often expressly grants the EPA the authority to consider implementation costs, a provision for costs will not be inferred from its ambiguous provisions.

Rather than continuing to manipulate the process by constantly delaying the final ozone standard, perhaps the Administration needs to realize that ozone standards and the National Ambient Air Quality Standards (NAAQS) have huge impacts on the economy. 

Some sort of cost-benefit analysis that allows considerations of costs in setting standards just makes sense. We can't continue to ignore the impacts of new controls and the Clean Air Act's restrictions on economic growth imposed on areas that do no meet the standard. 

State's Face Huge Air Quality Workload During Budget Crisis

Many of the Midwest states, including Ohio, face significant state budget shortfalls- Ohio faces a projected $8 billion dollar hole in its next budget.  With the shortfalls, is very unlikely additional revenue will be available to support existing programs.

The state budget crisis occurs at the same time U.S. EPA has been very active in revising federal air quality standards (National Ambient Air Quality Standards- NAAQS).  As a result of changes to federal standards, states face a massive workload in the next few years on air quality issues. 

Below is a chart showing all of the revised federal air quality standards.  In response to each new standards, the states must develop plans for reducing emissions to show compliance with the revised standards (State Implementation Plans- SIPs).  In the next four years, States will be required to develop at least five new SIPs.

Preparation of SIPs is important work that can have wide ranging impacts on the economy.   If additional regulations to reduce air pollution are necessary, these new regulations increase compliance costs for businesses. 

In determining whether additional regulatory programs are needed, states and U.S. EPA rely upon air quality modeling.  Using air qualify modeling to evaluate alternatives is complex work and sometimes modeling can be inaccurate.

When Ohio EPA evaluated options for Cleveland to attain the 1997 ozone standard (85 ppt), modeling predicted no combination of controls could bring the area into compliance. After an intensive effort by multiple parties (locals, Ohio EPA and U.S. EPA) it was determined Cleveland did not need to adopt aggressive controls to comply because the modeling was either:

  1. Underestimating the benefits of some existing pollution reduction programs; or
  2. Data regarding emissions from existing sources in the modeling was outdated.

With states facing budget shortfalls and unprecedented amounts of air quality work, one has to question whether a similar effort could be undertaken in the next couple of years.  If that is not the case, decisions on costly new controls could be based on inaccurate or incomplete data. 

EPA Plays Politics By Delaying Ozone Rule

Back in 2007, U.S. EPA was sued by some States and environmental groups who challenged the legitimacy of the ozone standard -75 parts per billion (ppb)- selected by the Bush Administration.  In 2009, the Obama Administration announced that it was reconsidering the 75 ppb standard.

Ostensibly 75 ppb remains on the table. However, U.S. EPA is likely to revise the standard to somewhere between 60 ppb to 70 ppb.  Back in September 16, 2009, U.S. EPA filed a pleading informing the Court that it would finalize the new standard by August 31, 2010.

As the election looms and the economy's lack of a strong recovery is playing a bigger role, U.S. EPA's revised ozone standard has been sharply criticized as raising costs on industry.  U.S. EPA estimated the cost of compliance at between $19 billion to $90 billion a year by 2020, which will be largely imposed on manufacturers, oil refiners and utilities. 

The U.S. Supreme Court determined in Whitman v American Trucking that U.S. EPA could not consider costs in setting the standard.  The Court held EPA can only consider costs if its expressly granted that authority by Congress:

Section 109(b) [of the Clean Air Act] does not permit the Administrator to consider implementation costs in setting NAAQS. Because the CAA often expressly grants the EPA the authority to consider implementation costs, a provision for costs will not be inferred from its ambiguous provisions. 

The Bush Administration standard of 75 ppb was criticized as not meeting the standard established by the Court because it was inconsistent with recommendations by the EPA's science advisory panel.

While EPA may not be able to consider costs, it apparently can consider politics.  On August 20th, EPA filed a brief with the U.S. Court of Appeals District of Columbia informing the Court that it will take longer to finalize the new standard.

"EPA expects that this process will take approximately two months longer than initially estimate. Thus, EPA's current schedule is to sign a final rule on the reconsideration of the 2008 Ozone standard on or about the end of October 2010."

End of October...or may sometime after November 2, 2010? 

EPA Transport Rule- State Budgets Explained

U.S. EPA has released its CAIR replacement program called the "Transport Rule."  In a previous post I discussed EPA's efforts under the Transport Rule to address the Court's ruling striking down the CAIR rule.  After listening to a presentation by EPA, the structure of the Transport Rule is a little clearer.

The major issue identified by the Court was that CAIR failed to ensure that upwind states significant contribution to the air quality issues in downwind states would truly be eliminated.  The court ruled that utilities in a state could make no actual reductions, they simply could satisfy their regulatory obligations by purchasing allowances (pollution permits) under the cap and trade program. 

After two years of development, EPA has released its proposed Transport Rule and is very confident it can withstand legal challenge.  They stated in the presentation that their lawyers are confident the structure of the Transport Rule will meet the Courts mandate by ensuring elimination of "significant contribution."

Here is how the program works.  Each state has a firm budget which serves as a state specific  cap on emissions.  At the end of the trading year, U.S. EPA will review emissions information from each state and see if any exceeded their caps.  If a state is below the cap, nothing happens.  If the state is above, EPA will embark on a more extensive review to determine which companies within the state were responsible for exceeding the cap. 

Companies responsible for exceeding the state cap by failing to actually reduce emissions significantly enough, will be required to turn in extra allowances based upon their pro rata share of the amount the State's cap was exceeded.  Perhaps an oversimplified example would help:

 Assuming the state of Ohio has only three utilities companies operating in the State.  Hypothetically, it has a State budget under the Transport Rule of 90 tons.  In 2014, actual emissions in the State (120 tons) exceed its  budget by 30 tons. 

The slide shows that two companies will be required to surrender extra allowances equivalent to the amount the Ohio exceeded its budget.

Certainly this is far more complicated than the original CAIR rule struck down by the Courts.  Let's hope the Transport Rule can withstand legal challenges. Otherwise, States will face a complex mess in trying to meet federal air quality standards.  Also, utilities will face tremendous uncertainty preventing them from making long term choices.

Has EPA left a window open for environmental groups who may not like the Transport Rule to successfully challenge the rule?  In essence, EPA is penalizing companies who caused the state to exceed its budget (which represents it significant contribution to downwind states). 

Will the courts deem this adequate to meeting the Clean Air Act obligation to eliminate actual significant contribution?  Or will the courts still maintain the view that the utilities will be able to meet their obligations through purchasing allowances and not by actual reductions?  In other words, what is the assurance each state's significant contribution will be actually eliminated?

EPA Releases "No Trade" CAIR Replacement Rule

U.S. EPA released is long awaited replacement rule for the Clean Air Interstate Rule (CAIR) which was the controversial cap and trade program for coal-fired utilities.  In December of 2008, the U.S. Court of Appeals for the D.C. Circuit ruled CAIR exceeded EPA's regulatory authority and ordered the Agency to develop an new proposal.

Originally, the Court planned on throwing out the CAIR rule entirely.  However, it was embedded in so many other State air pollution control plans, the Court allowed CAIR to remain in place temporarily while EPA worked to finalize the replacement rule proposed today.

EPA is calling its new proposal the “Transport Rule."   It represents a significant revision from CAIR for a number of reasons including:

  • Steeper reductions of NOx and SO2 than proposed under CAIR
  • Virtual elimination of the cap and trade mechanism, by assigning each State a firm emission budget which it may not exceed
  • Accelerating the time frame for reductions to coincide with the attainment deadlines faced by the States

The Transport Rule proposes a hard 2014 deadline for meeting reduction requirements- it appears the ability to bank allowances ("pollution permits") will no longer be permitted.  Overall, the rule would reduce power plant emissions of sulfur dioxide (SO2) by 71 percent over 2005 levels and nitrogen oxides (NOx) by 52 percent.  SO2 and NOx react in the atmosphere to form fine particle pollution and ground-level ozone (smog).

The agency puts the expected annual cost of compliance to power plant operators at $2.8 billion in 2014.   However, elimination of original cap & trade program set forth in CAIR can only mean significantly increased compliance costs.  The real benefit of cap & trade is to utilized market mechanisms to achieve more cost effective emission reductions.

State Budgets Based On "Contribution" to Downwind Air Quality Problems

The Court's big issue with CAIR, was EPA inability to ensure that the rule would eliminate each State's contribution to downwind air quality issues.  The Court pointed out that all the utilities in any given State, could in theory, meet their compliance obligations by buying allowances and electing not to install pollution controls.

While this is in theory true, that is the point of a cap & trade program designed to utilize cost effective reductions.  The power plants that can reduce pollution in the most cost effective manner will aggressively reduce emissions and sell excess reductions to those plants facing higher compliance costs.

A quick skim of the 1,300 page rule suggests the absence of a real market mechanism to achieve reductions.  Sure EPA says interstate and intrastate trading can remain under its preferred option.  However, States now have imposed hard emission budgets. 

Perhaps this will mean limited intrastate trading, but far less interstate trading.  With a smaller market to trade allowances, EPA makes it more difficult to leverage cost effective reductions. 

Of course, EPA had to address the legal flaws identified by the Court.  The real solution was to get better authority from Congress.  Otherwise, we are left with a shell of a cap & trade program resulting in higher utility compliance costs (aka as higher utility bills).

EPA will take public comment on the proposal for 60 days after the rule is published in the Federal Register. The agency also will hold public hearings. Dates and locations for the hearings will be announced shortly.
 

EPA Announces Tighter Ozone Standard; Big Implications for Ohio

Today, U.S. EPA announced it has officially thrown out the .075 ppm ozone standard proposed in 2008 by the Bush Administration.  The Bush proposal would have reduced the standard from .08 ppm to .075 ppm.  Now the EPA is proposing to set a new revised ozone standard somewhere between .06 ppm to .07 ppm.  This from the Washington Post regarding the proposed new ozone standard:

Ozone standards have been the center of a political and legal battle since the spring of 2008, when the EPA set a looser limit than what its own scientific advisers had suggested and President Bush himself intervened to scale back the agency's proposal at the last minute. The new proposal mirrors what EPA's Clean Air Scientific Advisory Committee unanimously recommended in 2007.

What are the implications for Ohio?  To say they are significant would be a gross understatement.  The following chart from Ohio EPA demonstrates that significant progress has been made in reducing ozone levels in the State.

 However, it becomes more and more difficult to achieve standards as they become more stringent.  Many businesses have already been squeezed hard to reduce their emissions.  The cost to achieve additional reductions will be greater. 

Ohio has been able to redesignate much of the state into attainment with the old .08 ppm standard.  Even Cleveland, the highest ozone levels in the State, was able to achieve the standard barely in time and was redesignated. 

As discussed above, the Bush Administration had previously proposed lowering that standard to .075 ppm. Based upon recent ozone data for major cities, this standard was going to be difficult to achieve.  The chart below show Cleveland monitors just came barely below the .084 ppm standard required to demonstrate compliance.  (EPA allow up to .084 ppm to meet the old standard.  Also note, the chart is in parts per billion).  Cincinnati and Columbus also barely achieved the old standard.

Achieving the .075 ppm standard would be very difficult based upon this data.  However, now comes the news today that EPA has elected to throw out the .075 ppm standard established by the Bush Administration as inconsistent with the scientific recommendations provided to EPA.   This from EPA's press release:

In September 2009 Administrator Jackson announced that EPA would reconsider the existing ozone standards, set at 0.075 ppm in March 2008. As part of its reconsideration, EPA conducted a review of the science that guided the 2008 decision, including more than 1,700 scientific studies and public comments from the 2008 rulemaking process. EPA also reviewed the findings of the independent Clean Air Scientific Advisory Committee, which recommended standards in the ranges proposed today.

Today's announcement indicates the standard will be set some where between .06 to .07 ppm.  What are the implications of the high end of that spectrum, .07 ppm standard, on Ohio? 

  • Under the .075 ppm standard 23 out of Ohio EPA's 49 air monitors show non-attainment
  • Under the .07 ppm standard 49 out of 49 monitors show non-attainment

Designations could happen this fall, which means virtually every county that touches any major metropolitan area (Toledo, Columbus, Cleveland, Akron, Canton and Youngstown) will be designated non-attainment.  EPA estimates 32 Ohio counties would be out of compliance with the .07 ppm standard.  Non-attainment designations brings with it restrictions on new or expanding businesses.  It also brings with it more stringent air pollution control requirements. 

 

Grim News Follows Good News For Northeast Ohio on Ozone

The Obama Administration announced it would review the revised ozone standard of .75 ppb that was previously established by the Bush Administration.   The Obama Administration has said if they decide to revise the ozone standard below .75 ppb they will announce it by December of 2009 and finalize the standard by August 2010. 

As reported in the article, other actions make it appear almost certain that U.S. EPA will revise the standard lower. 

The Justice Department, in a brief filed Wednesday in a federal appeals court, went further, saying that the EPA believes the revision made by the Bush administration does not adhere to federal air pollution law. The brief is part of a lawsuit by environmental groups against the Bush-era rule.

The news of a much tighter ozone standard follows great news for Northeast Ohio that it had achieved the original 8-hour standard of .85 ppb (see, Improving Air Quality Great News for Cleveland Business)  This past week U.S. EPA announced it was granting Ohio's request to redesignate Northeast Ohio Counties (Ashtabula, Cuyahoga, Geauga, Lake, Lorain, Medina, Portage and Summit) attainment . 

An "attainment" status has significant benefits to a community trying to re-build its economy.   It is much easier for businesses looking to relocate or expand to obtain the air permits they will need. Unfortunately, if the standard is reset to something like .70 ppb, Northeast Ohio brief attainment window will close and it will be facing a tremendous obstacle to see an "attainment" status anytime in the near future. 

The above chart is the monitoring data from Ohio EPA's air pollution control plan submitted to U.S. EPA.  It shows the Ashtabula monitor is averaging 84.3 ppb, just slightly below the .85 ppb current standard.  But very, very far away from a possible .70 ppb.  As the Ashtabula monitor goes, so does all the counties in Northeast Ohio.  All eight counties will be in non-attainment if the Ashtabula monitor is not below .70 ppb.

Rather than focus on the economic costs of a revised standard or the difficulty of obtaining that standard, the Cleveland Plain Dealer focused on the future of E-check:

But it doesn't mean that you won't have to E-check your car anymore. Ohio has renewed its contract with Envirotest Systems to conduct the unpopular - though free to drivers - emission tests through June 2011.
 

Such a limited focus fails to recognize the wider implications of the tighter ozone standard.  Businesses that are located outside "non-attainment counties" should pay attention as well. In what has become a re-occurring theme on this blog, tighter ozone standards will have a dramatic impact on the cost of electricity for coal dependent states. 

Roughly 1/3 of all ozone causing pollutants are attributable to coal-fired power plants.  In fact, the progress in achieving the old standard was in large part attributable to federal control programs requiring reductions of these pollutants (NOx SIP Call and CAIR).  To achieve much tighter ozone standards, U.S. EPA will be forced once again to look to tightening emission requirements for coal plants.  Tighter emission requirements translates to higher compliance costs passed on to utility customers.

Ohio really needs to focusing intently on diversifying its energy portfolio to mitigate these increases.  Otherwise, businesses will be looking toward escalating operating costs making Ohio businesses non-competitive.  If you are a business who has opportunities to generate your own power, it would be a strategic advantage to give serious consideration to those plans.

 

What U.S. EPA's Formal Recognition of Cleveland's Improved Air Quality Means for Businesses

Yesterday, U.S. EPA announced a proposed rulemaking to formally recognize Cleveland and nearby counties as achieving the 1997 8-hour ozone standard (.085ppb).  As discussed in a previous post, this is very good news for Northeast Ohio businesses in any of the following counties: Ashtabula, Cuyahoga, Geauga, Lake, Lorain, Medina, Portage, and Summit.  U.S. EPA is taking comments on the proposed action until July 13th.

Three years ago the best experts thought it was impossible for Northeast Ohio to achieve the ozone standard by the 2010 deadline.  As a result, draconian measures were suggested by U.S. EPA, including "bumping up" to the next higher non-attainment classification "serious."  Such an action would have made economic growth in the area much more difficult.  It would also have increased environmental compliance costs for area businesses. 

The chart to the left shows the various federal pollution reduction programs that are mandated based upon non-attainment classification.  The chart shows the higher the classification of non-attainment the more federal mandates that will apply.

Northeast Ohio has been at a distinct disadvantage relative to other areas of the state due to its ozone non-attainment status.  It is the only "moderate" non-attainment are in the State.  This results in increased compliance costs for area businesses and also placed restrictions on economic growth not applicable to the rest of the State.  These disadvantages would have been magnified if the Cleveland-Akron-Lorain area was forced to have "bumped up" to serious non-attainment.

Once U.S. EPA finalizes the redesignation to attainment, these disadvantage disappear.  Cleveland-Akron-Lorain will be able to compete equally for new business growth opportunities.  All of this should be really good news for business and the citizens in Northeast Ohio.

The Plain Dealer failed to capture this fact in its coverage of the U.S. EPA ozone announcement.  Instead it focused on the temporary nature of the Cleveland-Akron-Lorain attainment status.  U.S. EPA has adopted a stricter ozone standard (.075ppb) which will likely be applied in 2010.  Current air monitoring shows Northeast Ohio around .084 ppb for ozone which means the same eight counties will once again be deemed "non-attainment" for ozone.   

While it is true the attainment status is temporary, concentrating only on this aspect of the story misses the broader picture.  If the area failed to achieve the 1997 ozone standard it would have faced more regulation and impediments to growth.  Now it appears unlikely that Cleveland-Akron-Lorain will receive a higher non-attainment classification than other major metropolitan areas in the State.  This means it will be able to compete equally with Columbus and Cincinnati for new jobs in the future even if it is once again considered "non-attainment."

The temporary attainment status may present a short window of opportunity for area businesses.  If a business was looking to expand its facility or construct a new facility that would be considered  a "major source" of air pollution, it may be able to obtain requisite permits easier than previously.  But businesses will have to be quick to take advantage if such a window presents itself.  U.S. EPA is set to make formal designation under the new .075 ppb ozone standard in 2010.  At most this means businesses could have a year to act.

Improving Air Quality Good News to Cleveland Area Businesses

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

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

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

 

 

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

Below is additional background on the recent Ohio EPA submittals.

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

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

Here is additional detail regarding the two submissions:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Here are some of the significant implications of this decision. 

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


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


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

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

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

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

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

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

 

U.S. EPA Ozone Rule Shows Potential For More Flexibility in the Future

On January 12, 2009, U.S. EPA proposed a major revision to its rules implementing the 1997 8-hour ozone standard.

In yesterday's post, I discussed the possibility of E-check expanding in Ohio as a result of U.S. EPA's proposed revisions to implementation of the 1997 8-hour ozone standard (.08 ppm).  Today I want to discuss the larger ramifications of the proposed rule.  The proposal provides a crystal ball type glimpse into how U.S. EPA may implement the 2008 8-hour ozone standard (.075 ppm). 

Depending upon how EPA builds off this proposed rulemaking when developing an implementation rule for the new .075 ppm ozone standard, there could be good news for many areas in the Country, including areas in Ohio.  This is especially true for Cleveland which has been under the most stringent ozone requirements in the State. 

As discussed in yesterday's post, the rigidness of U.S. EPA's requirements is largely dependent upon how areas are classified under the Clean Air Act. The short version- Subpart I good...Subpart II bad.  The chart below captures how EPA requirements ratchet up the more severe your ozone problem.  With each higher classification Subpart II piles on more federal mandates.  Subpart I areas don't carry these same mandates.  In addition, there is no classification system-all areas area considered "basic" non-attainment areas.

In recognition that Subpart II carries with it far more regulatory baggage, in 2004 U.S. EPA tried to expand the scope of Subpart I. In order to expand the scope of Subpart I, U.S. EPA drew a line in the sand at a 1-hour design values of .121 ppm.  Areas below .121 ppm were placed in Subpart I. Using this dividing line, there were 126 areas in country designated "non-attainment" for ozone, 84 were under Subpart I and 42 were under Subpart II.  Cleveland was the only Subpart II area in Ohio.

However, legal challenges resulted in the Court throwing out EPA's dividing line of .121 ppm.  The D.C. Circuit Court said that the Supreme Court required .09 ppm on the 8-hour scale as the level for determining which areas would be subject to Subpart II.  In its latest proposal, EPA acknowledges it has discretion to place areas with an 8-hour design value of less than .09 ppm into Subpart I. EPA is proposing to forgo this option and place all areas under a Subpart II classification because it does not want to delay implementation of the 8-hour ozone standard any further. 

I would predict they will not forgo this option when it comes to implementation of the 2008 8-hour ozone standard of .075 ppm.  I believe they will put all areas with design values less than .09 ppm into Subpart I in order to provide maximum flexibility to the States designing their control plans to meet the standard (referred to as SIPs- State Implementation Plans). 

What is the ozone status in Ohio right now?  Based upon 2005-2008 Air Quality Data here are the current ozone design values for the highest ozone areas in the state.

CINCINNATI- .085 ppm

COLUMBUS- .08 ppm

CLEVELAND- .084 ppm

Based on current air quality Ohio should have no areas close to the .09 ppm cut off for placing areas into Subpart II of the Clean Air Act.  This would include Cleveland which is currently under Subpart II. This is good news for the States.  This approach would give Ohio EPA and other States the maximum flexibility in putting together their SIPs to attain the .075 ppm ozone standard.

E-Check May Come Back to Cincinnati Under EPA Proposed Rule

[NOTE: THIS POST WAS REVISED BASED UPON ADDITIONAL REVIEW AND INFORMATION]  The unpopular automobile tail pipe test known as E-check may resurface in Cincinnati under a U.S. EPA proposed rule.  Right now, Cleveland is the only area in Ohio with E-check because the area is under a federal mandate to operate the test.  That federal mandate could expand under a recent U.S. EPA proposal.

E-Check has operated in Ohio since 1995.  It operated for 10 years in Cleveland, Cincinnati and Dayton.  The program was always very unpopular with the general public.  Efforts to discontinue the program were instituted in the Ohio General Assembly on numerous occasions.  Finally, improving air quality and expiration of the 10 year contract allowed both Cincinnati and Dayton to get rid of E-Check back in 2006.  In November 2008 U.S. EPA issued final approval of the removal of E-Check as a control measure for both Cincinnati and Dayton

Now E-check may see a resurgence.

U.S. EPA has proposed modifications to the implementation rule for the 1997 8-hour ozone standard.  The implementation rule was issued back in 2004.  The rule was challenged by a group of environmentalists.  In 2006, in response to the challenge, a federal court vacated certain portions of the rule.  U.S. EPA has now issued a revision to the implementation rule in response to the Court decision.

One of the main components of the rule vacated by the Court was the manner in which U.S. EPA classified certain areas under the 1997 8-hour ozone standard.  Some areas with lower ozone levels were classified as Subpart I areas and higher ozone areas were placed under Subpart 2 of the Clean Air Act.  The distinction between Subpart 1 and 2 areas greatly affects the amount of flexibility these areas have in designing the air pollution control plans to comply with the 8 hour ozone standard. 

U.S. EPA attempted to place as many areas under Subpart 1 to provide the greatest degree of flexibility.  Of the 126 areas designated nonattainment, 84 were classified as under Subpart 1, and the remaining 42 as under Subpart 2.  Areas under Supart 2 are further broken down by severity of ozone.  The higher the ozone the higher the classification,  The higher the non-attainment classification the more federally mandated control programs and restrictions will apply to the area. (see next post for a chart on Subpart 2)

Under the old rule, Cleveland fell under Subpart 2 and was classified as a "moderate" non-attainment areas.  "Moderate" non-attainment areas are federally mandated to operate a basic vehicle inspection and maintenance program (I/M program).  Dayton, Cincinnati, Columbus and other areas of the state were classified under Subpart I which carried no federal mandate to run an I/M program like E-check.

Under the proposed rule, all areas designated non-attainment with the 1997 8-hour ozone standard will be classified under and subject to the requirements of Subpart 2 of the Clean Air Act.  If an area has already reached attainment with the 1997 8-hour standard the rule will not apply.  This means Dayton will not be covered under the rule as it has already achieved compliance.  However, areas like Columbus and Cincinnati which have yet to comply with the 1997 8-hour ozone standard risk being reclassified as Subpart 2 non-attainment areas.

Under the proposed rule, EPA would make retroactive classifications based upon 2001-2003 air quality data, not the latest readings which show notable improvement in ozone levels.  If EPA maintains this aspect of this proposal, some areas of the Country will be playing a game of high stakes poker with regard to meeting the 1997 8-hour ozone standard.  EPA states:

Marginal nonattainment areas would have a maximum statutory attainment date of June 15, 2007 and moderate areas a maximum date of June 15, 2010.  Since the marginal area attainment date has passed, EPA proposes that any area that would be classified under the proposal as marginal, and that did not attain by June 15, 2007...would be reclassified immediately as moderate under the rule.

What EPA doesn't specifically address but flows from the statement above is that areas that do not meet the June 15, 2010 deadline as a moderate areas face being bumped up to the "serious" nonattainment classificaiton.  This would not only bring E-check, but a host of stringent federal requirements.

Appendix A to the proposed rule identifies the proposed Subpart 2 Classification for areas likely covered by the rule.  Under the proposal, both Columbus and Cincinnati will be classified as "moderate" non-attainment areas.  The "moderate" designation carries with it the federal mandate to operate an I/M program.

Columbus and Cincinnati could avoid I/M programs if they can fully attain the 1997 8-hour ozone standard before this rule would become effective.  How do things look? 

Columbus:  Ohio EPA has submitted a redesignation request for Columbus which is still under review by U.S. EPA.  Ohio EPA says that the current air quality data from 2005-2008 shows Columbus with a .08 ppm ozone design value.  This is well under the .084 ppm necessary to show compliance.  If recent ozone trends continue Columbus could be redesignated before U.S. EPA finalizes its proposal thereby avoiding any of the complications brought on by the proposed rule.  

Cincinnati:  Ohio EPA submitted a redesignation request for Cincinnati.  However, unlike Columbus, Ohio EPA relies on modeling and not real air quality data in its request for redesignation.  Real air quality data in the SIP submittal shows a design value of .086 ppm.  Even the updated air quality information for 2005-2008 shows Cincinnati with a .085 ppm design value.  While modeling may show  .084 ppm, real air quality data does support the modeling estimates.  The 2009 ozone season could really be make or break for Cincinnati.  If its a bad ozone season, Cincinnati may not only face the return of E-check but a "serious" non-attainment classification which would bring a host of consequences.

 

Ohio Will Solicit Second Round of Diesel Grant (DERG) Applications

DERG Round Two Schedule:  Tentatively, Ohio will begin soliciting grant applications on December 15th for the second round of funding under the Diesel Emission Reduction Grant (DERG) program administered by the Ohio Department of Development (ODOD).  DERG will have approximately $11.2 million in available funding in the second round.  The grants pay for retrofits of emission controls, engine rebuilds, and a portion of the purchase price of new diesel vehicles.  Here are the tentative dates as discussed in a meeting with ODOD last week: 

  • Monday, Dec. 15: release of the RFP with a press event, media release and posting of application documents on the website.
  • Monday, Jan. 12 at 10 a.m.: first of two bidders conferences
  • Monday, Feb. 9 at 10 a.m., second bidders conference
  • Monday, March 2, applications due
  • The selection team will take up to 60 days to review, score and forward successful applications to the Federal Highway Administration. Projects selected for funding will be notified by May 1, 2009

Grants are available to both public and private entities.  Because the source of funding is the federal Congestion Mitigation Air Quality (CMAQ) program, private companies must enter into a contract (called a Public Private Partnership- PPP) with a public entity.  The money follows from the state to the the public entity who then reimburses the company. 

What Does DERG Pay For? Diesel grants are a great way to pay for fuel saving equipment, like auxiliary power units (APUs), that reduce idling.  Engine or vehicle replacements can be partially funded through the DERG program.  Also, companies who want a greener fleet for contract bidding or as part of the company's sustainability efforts can pay for retrofits that dramatically reduce emissions from their diesel engines.  All applications require a twenty percent (20%) match.

Issues With Round One of DERG:  As discussed in prior posts, the DERG program experienced significant problems and delays in the Round One of funding. Most notable, 42 applications were filed in round one, but only 10 applications were deemed complete- all of which received funding.  As a member of the Ohio Diesel Coalition, we have advocated for a series of improvements to the grant application process to ensure a transparent and competitive grant process.

Improvements to DERG Round Two:  Last week, representatives of the Ohio Diesel Coalition, including myself, met with members of an inter-agency team working on the DERG program to review changes to the program. The State's inter-agency team is composed of officials with the Ohio EPA, Ohio Department of Development and Ohio Department of Transportation.  To help improve the overall application process and to ensure complete applications are submitted, the inter-agency team will put in place the following changes for Round Two:
 

  1. A concisely written Request for Proposals (RFP) will be released by ODOD
  2. template of the Public Private Partnership agreement (a major stumbling block for many in round one) has been posted on the DERG website
  3. All successful round one applications have been posted on the website
  4. Applicants are given more time to prepare applications (up to 2 months)
  5. Two separate bidders conferences (in person, by telephone or over the web) will be offered in advance of the application due date to answer questions
  6. The State developed a consolidated application form to cover all types of projects (retrofits, repowers and replacements)
  7. A checklist will be included in the application packet to ensure applicants include all required information

Other Developments:  ODOD made a policy decision to set aside $5 million of the remaining $11.2 million in funding for public transit projects. However, if total transit requests are below $5 million, all other fleets can compete for these funds. There is no ceiling on project amounts, but the minimum amount that could be requested is $20,000 per project.
 

When To Look For The New Application:  The new RFP has not yet been posted on ODOD's web page.  I imagine all the documents, including the RFP, checklist and other documents will be posted on the release date of the RFP (December 15th).  Keep an eye on ODOD's website for this information.  In the meantime, it may be a good idea to evaluate projects and approach a public entity about a PPP contract

(Photo: Flickr terinea/everystockphoto.com)

CAIR: EPA's Path Forward Slow and Unclear

I participated today in a Midwest Air Quality Workshop in Chicago. At the workshop, Bill Harnett from U.S. EPA's Office of Air Quality Planning and Strategy (OAQPS) gave an interesting presentation regarding U.S. EPA's reaction to the vacatur of CAIR by the D.C. Circuit Court of Appeals. Here are a couple of the key issues discussed or observations made:

Chances of Rehearing Appear Slim- U.S. EPA is not very optimistic about their chances to get rehearing from the D.C. Circuit. Apparently only 5 of the 10 justices who sit on the Court do not recuse themselves from U.S. EPA's cases involving the utilities. This means that instead of a full panel of justices, U.S. EPA is requesting reconsideration to only five justices, three of which decided to vacate CAIR already. This means U.S. EPA will have to get one of the Justices to change their previous opinion just to get rehearing...an outcome that does not appear likely.

Even if Rehearing is Granted the Best Hope is Restoring Only a Portion of CAIR- As discussed in my prior post on the brief U.S. EPA filed for rehearing, U.S. EPA seems to have thrown in the towel already on getting all of CAIR restored- meaning the second phase of reductions in 2015 are out of the picture. Even if U.S. EPA gets a rehearing it is already saying the best possible outcome will be to restore the first phase (2009) of CAIR reductions.

No Short Term Legislative Fix- This was apparent with Congress going into recess for the elections. Time simply ran out on a quick fix that could have restored the first phase of the CAIR reductions in 2009. The ramifications are significant because, as discussed below, any path forward will involve at least a two or three year process.

A Fix is at least 2-3 Years Away- While U.S. EPA is already evaluating options for a new federal rule and also hoping for legislation, either approach will be lengthy. U.S. EPA is going to have to wait until a new administration comes into office. Appointments won't happen until at least the Spring. This means a new rule proposal or even rules following legislation won't happen until the summer of 2009 at the earliest. However, even after the rule is proposed this just starts the long rulemaking process. Therefore, U.S. EPA is saying a final rule is 2-3 years away and reductions may be 4-5 years away.

U.S. EPA Wants to Develop a "Safe" or "Bullet Proof" Rule- It is clear U.S. EPA does not want to risk losing the entire CAIR program a second time. To try an ensure that won't happen, U.S. EPA says they will push for a rule that addresses the issues raised by the Court. What this means exactly is unclear, but I doubt the utilities will be happy with the outcome. One option discussed was to craft a federal rule that does not "address" interstate transport, but only "reduces" transport. Under CAIR, U.S. EPA said the states didn't have to do anything more to "address" transport because CAIR solved interstate transport issues. In a new rule, U.S. EPA says they won't go that far leaving additional reductions to solve interstate transport up to the States.

How? U.S. EPA would leave it up to the states to certify in the State Implementation Plans (SIPs) that they have reduced emissions from sources in the State to such a degree they addressed all transport issues. This helps U.S. EPA because if one State's finding that they addressed interstate transport is overturned by the Courts the whole federal rule does not crumble.

For Trading to Survive U.S. EPA Can't Solve Transport, Some Reductions Will Come From the States- This builds upon the notion U.S. EPA will only strive to "reduce" transport and not "address" it . A federal rule that solves interstate transport could not include a cap and trade component. A principle reason the Court vacated CAIR was because with a cap and trade program there were no assurance reductions would occur in any given state. All the sources in a state could satisfy their obligations by purchasing allowances and avoiding controls. As a result, the Court said U.S. EPA illegally concluded in the CAIR rulemaking that it solved interstate transport of emissions from power plants.

Without CAIR State's will attain Ozone but not PM 2.5 - Each of the five LADCO States (Ohio, Indiana, Illinois, Wisconsin and Michigan) gave presentations on their air quality plans. All of the State's a planning to restore the NOx SIP Call in response to the CAIR decision. From the reductions under the NOx SIP Call all the states said they can attain the 1997 ozone standard.

However, without CAIR, attaining the fine particulate (PM 2.5) standard is nearly impossible. CAIR brought huge reductions in SO2 that will be lost without CAIR. LADCO modeling shows we go from 3 to 20 monitors in the Midwest reading nonattainment with the P.M. 2.5 standard without CAIR by 2009. Unless the States get very aggressive and proceed with old command and control enforcement/permitting against these sources it appears unlikely they can get enough reductions to attain the P.M 2.5 standard by their 2010 deadline.

(Note: Once the visuals from the various presentations are available next week I will post the best illustrations of the issues I have discussed above)

 

CAIR: EPA's Petition for Rehearing Concedes "Major Flaws"

On September 24, 2008 U.S EPA filed its petition to the D.C. Circuit Court of Appeals for rehearing En Banc on the vacatur of the Clean Air Interstate Rule (CAIR).  While focus may be on EPA's request for rehearing, a significant concession was made in EPA's brief that has major implications regardless of whether rehearing is granted. 

EPA Concedes CAIR Phase Two Reductions Are Not Aggressive Enough

EPA elected to not seek review of the Court's holding that the 2015 deadline for Phase II reductions is unlawful because it is inconsistent with the shorter compliance deadlines for ozone and p.m. 2.5 contained in the Clean Air Act.  The Court held EPA must require reductions as "expeditiously as practical" but no later than the deadlines established in the Clean Air Act (typically 2010).  In the Court's words:

EPA did not make any effort to harmonize CAIR's Phase Two deadline for upwind contributors to eliminate their significant contribution with the attainment deadlines for downwind areas North Carolina v. EPA slip op. at 25

EPA's concession on the Phase Two deadline runs counter to the Bush Administration's position that a legislative fix of CAIR must preserve the entire program.  To the extent EPA's concedes this point in its rehearing is somewhat puzzling as it was unnecessary at this stage of legal maneuvering.  Perhaps this concession paves the way for a Congressional compromise over a short term legislative fix that preserves Phase I of the program.   Certainly this concession means a rewrite of CAIR that includes more aggressive reductions seems inevitable.

EPA's Arguments in Support of Rehearing

EPA's brief appears to try and lay a guilt trip on the Court as its justification for a rehearing.  EPA rightfully points out the major benefits of CAIR that will be lost if at least Phase I of the program is not preserved:

Most significantly, vacatur will jeopardize massive emission reductions...and accompanying improvements in public health.  EPA estimated that CAIR would prevent 13,000 deaths annually by 2010 and 17,000 premature deaths annually by 2015.

Vacatur will also destroy or reduce the value of banked allowances that companies generated through early emission reductions...6.9 million tons of banked Title IV allowances have lost over three billion dollars in value [since the Court's decision]

There is no doubt the courts decision to throw out the CAIR program has resulted in chaos both in the trading markets and with State's struggling to reach attainment with federal air quality standards.  We will see if the Court agrees that these dire consequences satisfy the standard for review that the matter involve a question of "exceptional importance." 

As a second basis justifying review of the decision, EPA argues that the Court has been inconsistent in its review of the NOx SIP Call and CAIR.  The EPA argues the Court previously upheld the NOx SIP Call in Michigan v. EPA and CAIR uses the "same fundamental approach approved in Michigan."  Both air pollution control programs use economic factors to determine the amount of contribution to downwind state nonattainment upwind states must eliminate.  The economic factor being "highly cost effective controls."

This is the crux of the legal issue and has significant implications for the design of any cap and trade program to control air pollution.  Does the Clean Air Act call for elimination of contribution to downwind air quality issues based upon cost of controls or does it require reductions based upon a State's actual contribution to downwind nonattainment?  If it is ultimately decided that actual contribution must be eliminated, it may prove very difficult to craft a valid cap and trade program without new legislative authority.

EPA's strategy to argue inconsistency appears pretty risky given the fact the Court raises questions regarding legality of the NOx SIP Call.  Specifically, the Court states:  "In Michigan we never passed on the lawfulness of the NOx SIP Call's trading program."  The Court's decision appears to suggest it would have thrown out the NOx SIP Call as well if proper challenges had been made.  

The EPA appears to face a steep climb to ultimately win its appeal.   The Court was unanimous in its finding that basing required reductions on cost effective controls does not comply with the Clean Air Act.

What's Next For CAIR?

Through legal maneuvering, U.S. EPA can effectively delay the effectiveness of the Court's decision to vacate CAIR.  The rehearing petition will likely delay it for a couple months while the Court considers the petition including allowing comment by other parties.  Even if the rehearing is denied, which appears likely given the original decision was unanimous, U.S. EPA can file a motion to stay the effectiveness of the decision while it seeks appeal to the Supreme Court.  By Court rules a stay, if granted or not challenged by the other parties, is good for 90 days.

While EPA delays the effect of the Court's vacatur of the program, efforts will focus on a legislative fix that can preserve at least the immediate future of the program.  However, time is running out on this "quick fix" option as Congress adjourns for the election.

 

CAIR III: Creating Key Legal Precedent on Cap and Trade

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

 

 

 

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

 

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

 

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

 

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

 

CAIR Part II: Update on Short Term/Long Term Impacts

In my previous post on the CAIR decision, I discussed the environmental and practical ramifications of the Court's decision vacating the program.  While speaking at a large permitting seminar for manufacturer's, I had a chance to discuss the conclusions of my prior post with some State officials.  While I was correct that the CAIR decision complicates the State pollution control plans for ozone and soot, the environmental consequences discussed in my prior post need to be adjusted to account for additional factors. 

It is unclear how U.S. EPA will treat State air pollution control plans (SIPs) that rely on CAIR.  However, in the short term, not all the CAIR controls will be scuttled or switched off.  AEP and First Energy have entered into major settlements with U.S. EPA stemming from New Source Review (NSR) violations. 

These settlements require installation and operation of billions of dollars in new air pollution controls on power plants in Ohio.  The consent orders will act as a backstop now that CAIR is gone.  Perhaps some additional state actions will be needed to put additional backstops in place where no federal decree covers the plant.  In summary, it appears the Ohio may have the tools to deal with the short term issues presented by the absence of CAIR for sources within the State. 

The longer term consequences still remain and by 2015 will be felt if Congress does not act by replacing CAIR quickly.  CAIR was designed to drive a second wave of major reductions that will be very difficult to replace without some new federal program.  This second wave of reductions are essential for state's trying to meet the tougher ozone standard (.075 ppm) and soot standard (fine particle- pm 2.5).  If State's fail to meet either the ozone or soot standards, then existing businesses will likely be squeezed for additional air pollution reductions.  Also, economic development is more difficult in areas not attaining federal air quality standards.

Another consequence of the absence of a CAIR like program will be a lot more litigation between the states. It won't just be North Carolina or the East Coast suing upwind sources.  Even Ohio may be suing its neighbors like Indiana to try and force additional reductions.  

Why?  Ozone is truly a regional issue.  Even City's that some may think have no one to blame for their air pollution, such as Cleveland, in fact receive a substantial contribution from upwind sources. Take a look at the figures to the left.  They demonstrate how both ozone and P.M 2.5 are regional issues.  The majority of pollution in these major cities is from regional not local sources.

All this points to the need for Congressional action to replace CAIR to avoid a serious and costly problem for the State's and businesses.  Unfortunately, any action is very unlikely until we have a new President.

CAIR Decision Will Have Many Aftershocks

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

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

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

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

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

 

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

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

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

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

 

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

 

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

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

 

 

Ohio Diesel Program Stuck In Neutral

As part of the 2008-2009 State budget, Ohio set aside $19.8 million to be used for diesel grants to achieve reductions in air pollution from the transportation sector.  The set aside represents the largest dedicated pool of funds to diesel emission reductions in the Midwest. The grants could be used to pay for pollution control retrofits and anti-idling technology for diesel engines in public and private fleets across the state.

The Ohio Department of Development (ODOD) is charged with implementing the program.  In February 2008 it solicited its first applications.  However, there was a lack of guidance to applicants in the rush to get the program up and running.  As a result, those who still submitted applications did so without knowing whether their application would be deemed sufficient.

Awards were scheduled to be made in early Spring with a second round of applications to follow in late Spring.  Unfortunately, the Federal Highway Administration has raised concerns with the details of the Ohio program that has stopped the program in its tracks.  No announcement has been made regarding the first round of applications and now the second grant round in fiscal year 2008 has been shelved according to ODOD's website. 

Last year I wrote an op-ed piece in Crain's Cleveland Business that made the strong case for reducing emissions from the transportation sector

Unfortunately, I couldn't include a graphic with my article because I think this chart prepared by Ohio EPA sums it all up (click on the chart to see a larger version).  The majority of the pollution causing our ozone problems in Northeast Ohio are from the transportation sector, not area businesses.  With Ohio's economy hurting, achieving greater reductions from the transportation community is essential to reducing costs for Ohio businesses and allowing them to compete.  Hopefully, the impediments that have stalled this program can quickly be removed as it has become apparent Ohio will likely have one year to spend the $19.8 million.